Cambridge IGCSE Accounting 0452 — 2010 Oct/Nov Paper 1 · Variant 1

This document consists of 19 printed pages and 1 blank page. IB10 11_0452_11/7RP © UCLES 2010 [Turn over *2010* For Examiner's Use 1 2 3 4 5 6 Total *3070533224* UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING 0452/11 Paper 1 October/November 2010 1 hour 45 minutes Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen. You may use a soft pencil for any diagrams or graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. You may use a calculator. Where layouts are to be completed, you may not need all the lines for your answer. The businesses mentioned in this Question Paper are fictitious. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question.

2 © UCLES 2010 0452/11/O/N/10 For Examiner's Use 1 There are 10 parts to question 1. For each of the parts (a) to (j) below there are four possible answers A, B, C and D. Choose the one you consider correct and place a tick (✓) in the box to indicate the correct answer. (a) Why should a trader record all the financial information about her business? A to calculate her bank balance B to calculate her trade receivables (debtors) C to calculate her drawings D to calculate her profit [1] (b) Which entries are made in Xanthe’s ledger to record the payment by a customer of money owing to Xanthe? account to be debited account to be credited A cash creditor B cash debtor C creditor cash D debtor cash [1] (c) Which error will require a correcting entry in a suspense account? A cash paid to Gideon debited to Gibson’s account B motor vehicles account omitted from the trial balance C purchase of fixtures for cash debited to the purchases account D no entry made for cash paid for stationery [1]

3 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use (d) Maria maintains a provision for doubtful debts at 5% of the trade receivables (debtors) at the end of each financial year. On 31 December 2008 the trade receivables (debtors) owed $25 000 and on 31 December 2009 the trade receivables (debtors) owed $20 000. How much will appear in Maria’s income statement (profit and loss account) for the year ended 31 December 2009? A $250 credit B $250 debit C $1000 credit D $1000 debit [1] (e) Karl’s trial balance for 31 December 2009 includes the following balances. $ sales 3 200 inventory (stock) at 1 January 2009 200 purchases 1 800 expenses 800 Karl’s inventory (stock) at 31 December 2009 was $300. What is Karl’s net profit for the year? A $400 B $500 C $700 D $1500 [1] (f) Which is not a current asset? A cash in hand B money owed by a customer C prepaid bill for electricity D unpaid invoice from a supplier [1]

4 © UCLES 2010 0452/11/O/N/10 For Examiner's Use (g) Which group contains only tangible fixed assets? A bank, cash, trade receivables (debtors), inventory (stock) B bank, trade receivables (debtors), loan, prepaid expenses C equipment, goodwill, machinery, vehicles D equipment, machinery, premises, vehicles [1] (h) Joe and Paul are partners sharing profits in the ratio 3:2, after paying Paul an annual salary of $15 000. For the year ended 31 March, the partnership’s net profit was $55 000. How much was credited to Paul’s current account for the year ended 31 March? A $15 000 B $22 000 C $31 000 D $37 000 [1] (i) A business provided the following information. year 1 year 2 year 3 gross profit as a percentage of sales 37 % 37 % 37 % net profit as a percentage of sales 12 % 10 % 7 % What does this show? A control over expenses is getting better B control over expenses is getting worse C sales have reduced D sales have increased [1]

5 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use (j) The same accounting treatment should be applied to similar items at all times. Which accounting principle is being applied? A consistency B duality C money measurement D prudence [1] [Total: 10]

6 © UCLES 2010 0452/11/O/N/10 For Examiner's Use 2 (a) Name two business documents used to make entries in the accounting records of a business. (i) (ii) [2] (b) In the table below, place a tick (
) under the correct heading to show whether the item is income or expense. Income Expense Bad debt recovered Interest charged to customers on overdue accounts Discount allowed [3] (c) The total of the purchases journal is posted to the purchases account in the ledger. In the table below, place a tick (
) to show whether this entry is a debit or a credit. Debit Credit [1] (d) Which accounting policy requires information to represent actual events and to be free from error and bias? [1] (e) A cheque from Hipham was credited to Bipham’s account in the sales ledger. What type of error has been made? [1] (f) Explain what is meant by a shareholder of a company having limited liability. [2]

7 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use (g) Sasha has a shop which sells fashion clothing. She bought 50 dresses for $13.00 each and paid total carriage inwards of $50.00. She sold 30 dresses for $20.00 each. The price at which she can sell the dresses has now fallen to $13.50 each. At what amount will Sasha value the remaining dresses in her balance sheet? [3] (h) Tamara keeps her petty cash on the imprest system with an imprest of $150. She paid expenses in the month of October of $80.50. (i) What was the amount of petty cash remaining at 31 October? (ii) How much cash was transferred to restore the imprest at 1 November? [4] (i) Kishu’s business had inventory (stock) on 1 July 2009 of $6000 and on 30 June 2010 of $9000. His cost of goods sold for the year ended 30 June 2010 was $45 000. Calculate his rate of inventory (stock) turnover. Show all your workings. [4] [Total: 21]

8 © UCLES 2010 0452/11/O/N/10 For Examiner's Use 3 Ottoman compared his cash book with the statement from his bank at 30 September 2010 and found the balance shown on the bank statement did not agree with the balance in the bank column of his cash book. REQUIRED (a) Give two reasons why the balance shown in a cash book might not agree with the balance shown on a bank statement at the same date. (i) (ii) [4] On 30 September 2010 the balance on Ottoman’s cash book (bank column) was $850 Dr. The balance shown on his bank statement was $1660. The cash book was checked against the bank statement and the following differences were found. 1 Cheques totalling $250 issued to creditors had not been presented for payment. 2 Rent received of $800 paid directly into the bank on 30 September did not appear in the cash book. 3 Bank charges of $60 were shown on the bank statement but had not been entered in the cash book. 4 Cash sales recorded as $1200 were shown on the bank statement correctly as $1500. 5 A cheque received from Hans for $480 and deposited at the bank on 28 September has been entered in the cash book but has not yet been shown on the bank statement.

9 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use REQUIRED (b) Make any additional entries which are required in Ottoman’s cash book. Balance the cash book at 30 September 2010 and find the adjusted balance carried down. Ottoman - Cash Book (bank columns) Date Detail Dr $ Date Detail Cr $ [8] (c) Prepare a bank reconciliation statement to reconcile the adjusted cash book balance with the bank statement balance at 30 September 2010. Ottoman Bank Reconciliation Statement at 30 September 2010 [7]

10 © UCLES 2010 0452/11/O/N/10 For Examiner's Use (d) (i) Name the heading under which bank will be shown in Ottoman’s balance sheet on 30 September 2010. (ii) State the amount which will be entered for bank in Ottoman’s balance sheet on 30 September 2010. [4] [Total: 23]

11 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use 4 Sam Sumo received a statement of his account with the Eastern Commercial Company at 30 September 2010. REQUIRED (a) Give one purpose of sending a statement of account to a customer. [2] Sam’s statement was as follows. EASTERN COMMERCIAL COMPANY STATEMENT OF ACCOUNT Sam Sumo 30 September 2010 Date Detail Dr $ Cr $ Balance $ Sept 1 Balance b/f 400.00 400.00 7 Sales – invoice 301 56.50 456.50 12 Sales – invoice 330 217.00 673.50 19 Sales returns – credit note 29 16.50 657.00 28 Bank – Sam Sumo 392.00 265.00 30 Balance c/f 265.00 Terms: 2% discount for settlement within 21 days.

12 © UCLES 2010 0452/11/O/N/10 For Examiner's Use REQUIRED (b) (i) State why Sam paid $392 on 28 September when the balance brought forward on 1 September was $400. [1] (ii) State whether this payment was for the correct amount. Give a reason for your answer. [3] On 19 October 2010 Sam deducted the discount offered from the balance on the statement dated 30 September 2010 and paid the net amount which he considered was due. REQUIRED (c) (i) Calculate the amount Sam deducted from the balance due at 30 September. Show your workings. [3] (ii) State the net amount which Sam paid on 19 October. [3]

13 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use (d) Show the entries in the Eastern Commercial Company’s accounts for the month of September to record each of the transactions shown in the statement of account on page 11. Balance Sam Sumo’s account at 30 September. Sam Sumo account Sales account Sales returns account Cash book – bank columns [10]

14 © UCLES 2010 0452/11/O/N/10 For Examiner's Use (e) Sam wishes to take advantage each month of the discount terms offered by the Eastern Commercial Company. Explain how Sam can ensure he obtains the discount each month. [2] [Total: 24]

15 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use 5 Martina started a business on 1 October 2008 printing designs on T-shirts and bought a printing machine for $3200. She decided to depreciate the printing machine on the straight line basis over 5 years and expected the machine to have a scrap value of $700 after that time. REQUIRED (a) State one reason for charging depreciation on non-current (fixed) assets in an income statement (profit and loss account). [2] (b) Calculate the depreciation charged in Martina’s income statement (profit and loss account) for each of the two years ended 30 September 2009 and 2010. Show all your workings. (i) year ended 30 September 2009 (ii) year ended 30 September 2010 [6] (c) Complete the following extract from Martina’s balance sheet at 30 September 2010. Martina Balance Sheet at 30 September 2010 (extract) Cost Provision for Net book depreciation value $ $ $ Non-current (fixed) assets [4]

16 © UCLES 2010 0452/11/O/N/10 For Examiner's Use A new and quicker method of electronic T-shirt printing became available on 1 October 2010 using a machine costing only $1500. Martina bought the new machine on 15 October 2010 and sold the existing machine for scrap for $400. REQUIRED (d) Prepare the Disposal of non-current (fixed) assets account in Martina’s ledger to show the scrapping of the old machine and the amount to be transferred to the income statement (profit and loss account). Disposal of machinery account [5] Martina expects the new machine to have a useful life of five years and to have no scrap value after that time. However, she does not wish to show a loss on disposal if she has to scrap the machine after three years. REQUIRED (e) Suggest which method and rate of depreciation Martina should use to depreciate the new machine. Give reasons for your answer. [3] [Total: 20]

17 © UCLES 2010 0452/11/O/N/10 [Turn over For Examiner's Use 6 Ricardo has a business selling spare parts for cars. He lost many of his financial records in a flood but has been able to provide the following information. 1 November 2009 $ 31 October 2010 $ Non-current (fixed) assets 12 000 14 000 Current assets 110 000 95 500 Current liabilities 26 000 24 000 Additional information: 1 Ricardo introduced additional capital of $50 000 on 1 January 2010. 2 He took drawings of $7500 each month. 3 He decided to increase the provision for doubtful debts by $1500 on 31 October 2010. REQUIRED (a) Prepare Ricardo’s statement of affairs on 1 November 2009 showing his total capital at that date. Ricardo – Statement of Affairs at 1 November 2009 [6]

18 © UCLES 2010 0452/11/O/N/10 For Examiner's Use (b) Prepare Ricardo’s statement of affairs on 31 October 2010 showing his total capital at that date. Ricardo – Statement of Affairs at 31 October 2010 [6] (c) Prepare Ricardo’s capital account for the year ended 31 October 2010. Show his net profit for the year and the balance carried down. Ricardo – Capital account [6]

19 © UCLES 2010 0452/11/O/N/10 For Examiner's Use Ricardo has decided to take a 5-year business loan from the bank. The money will be paid in to his business bank account. REQUIRED (d) In the table below, place a tick (
) under the correct heading to show the effect which taking the loan will have on each of the following items. Increase Decrease No change Current assets Long term liabilities Revenue (sales) Working capital [4] [Total: 22]

20 Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. © UCLES 2010 0452/11/O/N/10 BLANK PAGE

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the October/November 2010 question paper for the guidance of teachers 0452 ACCOUNTING 0452/11 Paper 1, maximum raw mark 120 This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the details of the discussions that took place at an Examiners’ meeting before marking began, which would have considered the acceptability of alternative answers. Mark schemes must be read in conjunction with the question papers and the report on the examination. • CIE will not enter into discussions or correspondence in connection with these mark schemes. CIE is publishing the mark schemes for the October/November 2010 question papers for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 11 © UCLES 2010 1 (a) D [1] (b) B [1] (c) B [1] (d) A [1] (e) C [1] (f) D [1] (g) D [1] (h) C [1] (i) B [1] (j) A [1] [Total: 10] 2 (a) [Sales] invoice ) but only 1 mark for “invoice” [Purchase] invoice ) Credit note Debit note Cheque, receipt Petty cash voucher NOT: statement, bank statement, cash book, journals, day books any two, 1 mark each [2] (b) Income Expense Bad debt recovered
(1) Interest charged to customers on overdue accounts
(1) Discount allowed
(1) [3]

Page 3 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 11 © UCLES 2010 (c) Debit Credit
(1) (d) Reliability / reliable [1] (e) Commission [1] (f) A shareholder’s liability for a company’s debts is limited to the amount they have paid for their shares. [2] Accept: shareholder’s assets are not available to pay company debts/losses (g) 50 dresses bought, 30 sold, 20 remaining Cost $13.00, carriage inwards $1.00 each, total $14.00 Net realisable value $13.50 Value in balance sheet 20 (1) × $13.50 (1) = $270 (1) [3] Correct figures only, not OF total (h) (i) $150.00 – $80.50 = $69.50 (2) (ii) $80.50 (2) [4] (i) Rate of stock turnover = Cost of goods sold / Average stock = 45 000 (1) / (6000 + 9000) (1) / 2 (1) = 6 times (1)OF [4] Or: = Average stock / Cost of goods sold × 365 = ( (6000 + 9000) (1) / 2 (1) ) / 45 000 (1) × 365 = 60.83 days (1)OF [4] Accept 61 or 60 days Note: calculation mark may be awarded if “times” or “days” not stated but not if any other description shown e.g. % [Total: 21] 3 (a) Items on bank statement not shown in cash book (accept individual items, bank charges, bank interest, etc.) Items in cash book not on bank statement (accept individual items, cheques not yet presented, etc.) Errors in cash book or made by bank (accept only one type of error) Dishonoured cheques any two, 2 marks each [4]

Page 4 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 11 © UCLES 2010 (b) Ottoman – Cash Book (bank columns) Date Detail Dr $ Date Detail Cr $ Sept 30 30 13 Balance b/d Rent [Cash] sales (not to correct error) 850.00 (1) 800.00 (2) 300.00 (2) 1950.00 …. Sept 30 30 Bank charges Balance c/d (no aliens, may award if account reversed) 60.00 (1) 1890.00 (2) 1950.00….. (Marks are for detail and amount, not date) Balance mark only for reversed cash book. [8] (c) Ottoman Bank Reconciliation Statement at 30 September 2010 Either: $ Balance on updated cash book [at 30 September 2010] (accept updated balance, balance b/d if agrees with (b)) 1890.00 (2)OF (must agree with (b) above) Add: cheques issued not yet paid (unpresented cheques) Less: cheque paid in not yet credited by bank (accept reasonable description) (marks are for description, amount and correct + or – ) 250.00 (2) (480.00) (2) Balance on bank statement [at 30 September 2010] 1660.00 (1) (must be correct figure) [7] Or: $ Balance on bank statement [at 30 September 2010] 1660.00 (1) (must be correct figure) Less: cheques issued not yet paid (unpresented cheques) Add: cheque paid in [not yet credited by bank] (accept reasonable description) (marks are for description, amount and correct + or – ) (250.00) (2) 480.00 (2) Balance on updated cash book [at 30 September 2010] (accept updated balance, balance b/d if agrees with (b)) 1890.00 (2)OF (must agree with (b) above) [7]

Page 5 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 11 © UCLES 2010 (d) (i) Current assets (2) accept current liabilities if overdrawn on OF (ii) $1890 (2)OF from (b) above, not (c) if different [4] [Total: 23] 4 (a) To inform or remind the customer of the amount due To confirm the settlement terms To ensure that no errors have been made by customer or supplier Other relevant comment any one [2] (b) (i) Sam had taken 2% discount ($8.00) [1] accept any mention of discount taken, whether entitled or not (ii) No, not correct amount (1) Sam did not pay the amount due within the 21 days / time limit allowed to earn any discount (2) [3] (c) (i) Amount due $265.00 (1) @ 2% (1) = $5.30 (1) [3] (correct figures only) (ii) Net amount due $265.00 (1) – $5.30 (1) = $259.70 (1) [3] (correct figures only) (d) Sam Sumo account September $ September $ 1 Balance b/d 400.00 (1) 19 [Sales][returns in][Cr note 29] 16.50 (1) 7 [Sales][invoice][301] 56.50 (1) 28 Bank 392.00 (1) 12 [Sales][invoice][330] 217.00 (1) 30 Balance c/d 265.00 (1) 673.50 673.50 (OF if no aliens, may award) if account reversed) Sales account September $ September $ 7 Sam Sumo 56.50 (1) not invoice or total sales 12 Sam Sumo 217.00 (1) not invoice or total sales Sales returns account September $ September $ 19 Sam Sumo 16.50 (1) not total sales returns

Page 6 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 11 © UCLES 2010 Cash book – bank column September $ September $ 28 Sam Sumo 392.00 (1) (Marks are for detail, correct amount and correct Dr or Cr) [10] (d) Pay balance within 21 days / by due date / within terms / on time [2] (not pay more quickly, prompt payment, etc.) [Total: 24] 5 (a) To spread the cost of the asset over its useful life [2] (not to calculate profit or loss on sale etc.) (not causes of depreciation, but accept depletion, wear and tear, obsolescence and usage over time as reasons for need to depreciate.) (b) (i) $3200 (1) – $700 (1) = $2500 / 5 (1) = $500 (1)OF (Note: if answer then goes on to give NBV, do not award calculation mark, so max 3) (ii) Same amount – $500 (2) [OF only if agrees with (b) (i)] (if answer then goes on to give NBV, no marks) [6] (c) Martina Balance Sheet at 30 September 2010 (extract) Cost Provision for Net book Depreciation value $ $ $ Non-current (fixed) assets Equipment (machine) (1) 3 200 (1) 1 000 (1) 2 200 (1)OF [4] (no mark if other asset classes included) (accept OF from (b)) If answer laid out as two years separately, award only 1 mark for asset narrative and 1 mark for correct or OF final NBV (d) Disposal of machinery account October $ October $ 15 Machinery/equipment (accept cost, not price, balance) 3 200 (1) 15 15 15 [Provision for] Depreciation (OF from (c)) Bank/cash (not cash book) (not scrap/disposal) Income statement (accept profit/loss acc, loss) 1 000 400 1 800 (1)OF (1) (2)OF 3 200 3 200 [5]

Page 7 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 11 © UCLES 2010 (e) Straight line [method] (1) over three years (33⅓%) (1), to fully depreciate over that period (1), or [3] Reducing balance [method] (1) (not reducing method) at rate >75% (1) to fully depreciate over three years (1) [3] Revaluation [method] (1) only [Total: 20] 6 (a) Ricardo – Statement of affairs at 1 November 2009 $ $ Non-current (fixed) assets 12 000 (1) Current assets 110 000 (1) Less: current liabilities 26 000 (1) 84 000 Capital (1) 96 000 (2)OF [6] (mark for caption and amount, marks for capital amount if no aliens) (award marks for acceptable layouts) (b) Ricardo – Statement of affairs at 31 October 2010 $ $ Non-current (fixed) assets 14 000 (1) Current assets (95 500 (1) – 1 500 (1)) 94 000 (Provision for doubtful debts may be shown elsewhere) Less: current liabilities 24 000 (1) 70 000 Capital (1) 84 000 (1)OF [6] (mark for caption and amount, marks for capital amount if no aliens) (award marks for acceptable layouts) (c) Ricardo – capital account 2010 $ 2009 $ Oct 31 31 Drawings Balance c/d 90 000 84 000 (1) (1)OF Nov 1 2010 Jan 1 Oct 31 Balance b/fwd (OF mark only if amount from (a)) Bank[new][capital][cash] (not Ricardo) Net profit [or OF loss] (no aliens for OF mark) 96 000 50 000 28 000 (1)OF (1) (1)OF 174 000 174 000 +(1) for all correct dates [6] Mark is for detail and amount. If account reversed, award P/L OF mark only.

Page 8 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 11 © UCLES 2010 (d) Increase Decrease No change Current assets
(1) Long term liabilities
(1) Revenue (sales)
(1) Working capital
(1) [4] [Total: 22]