Cambridge IGCSE Accounting 0452 — 2010 Oct/Nov Paper 1 · Variant 3

This document consists of 19 printed pages and 1 blank page. IB10 11_0452_13/6RP © UCLES 2010 [Turn over *6351257674* For Examiner's Use 1 2 3 4 5 6 Total UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING 0452/13 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 0452/13/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) What is shown as a liability in a balance sheet? A bank overdraft B fixtures and fittings C inventory (stock) D prepaid rent [1] (b) Rent is paid to J. Perigo in cash. How is this recorded? account to be debited account to be credited A cash rent B J. Perigo rent C rent cash D rent J. Perigo [1] (c) When is a suspense account opened? A when a balance sheet fails to balance B when a trial balance fails to balance C when an error of omission is corrected D when an error of principle is corrected [1]

3 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use (d) Which item on a bank statement would cause the balance on the bank statement to be more than the balance in the cash book? A bank charges B bank interest credited C dishonoured cheque D standing orders paid [1] (e) Why should costs be matched with revenues at the end of an accounting period? A so that profit may be calculated B so that the trial balance will balance C to calculate the amount owed to trade creditors D to calculate the bank balance [1] (f) Peter sold goods on credit to Ann in 2009. In October 2010 Peter wrote off the amount owed by Ann as a bad debt. What entries must Peter make in his ledger to write off the bad debt? account to be debited account to be credited A Ann bad debts B Ann sales C bad debts Ann D sales Ann [1]

4 © UCLES 2010 0452/13/O/N/10 For Examiner's Use (g) The following information is available for a sole trader for the year ended 30 September 2010. $ sales in year 59 200 inventory (stock) at 1 October 2009 2 500 inventory (stock) at 30 September 2010 3 800 purchases in year 28 600 What is the gross profit for the year? A $24 300 B $29 300 C $30 600 D $31 900 [1] (h) Which of the following appears in the income statement (profit and loss account) of a partnership? A a partner’s drawings B a partner’s salary C interest on a partner’s capital D interest on a partner’s loan [1]

5 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use (i) A business has calculated the following ratios: percentage of gross profit to sales percentage of net profit to sales Year 1 40 % 19 % Year 2 40 % 25 % Why did the percentage of net profit to sales increase in Year 2? A cost of sales decreased B cost of sales increased C expenses decreased D expenses increased [1] (j) Which of the following should not be recorded in the books of account? A canteen costs B maintenance of office buildings C wages of staff D workers' skills [1] [Total: 10]

6 © UCLES 2010 0452/13/O/N/10 For Examiner's Use 2 (a) Name the business document which is sent to the purchaser by a supplier of goods to record the value of the goods purchased. [1] (b) In the table below, place a tick (
) under the correct heading to show whether the item is capital or revenue expenditure. Capital expenditure Revenue expenditure Purchase of shop Repairs to shop windows Purchase of new lock for shop door [3] (c) Name the financial statement (final account) in which the provision for doubtful debts should be shown. [1] (d) Explain what is meant by a business preparing its financial statements (final accounts) on the going concern basis. [2] (e) A payment for a new motor car has been debited to the motor expenses account in the ledger. Name the type of error which has been made. [1] (f) Dio owns 5000 shares of $2 each in Diomedes Limited. The company declares a dividend of $0.25 per share. State how much Dio will receive as a dividend. [2]

7 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use (g) On 1 July 2010 Helia paid a premium of $600 for a new insurance policy for 12 months to 30 June 2011. Calculate the amount for insurance in her income statement (profit and loss account) for the financial year ended 30 September 2010. Show your workings. [3] (h) Beja’s balance sheet at 31 July 2010 included the following: $ non-current (fixed) assets 30 000 inventory (stock) 15 000 trade receivables (debtors) 14 500 balance at bank 16 000 Dr trade payables (creditors) 18 200 Calculate Beja’s working capital at 31 July 2010. Show your workings. [4]

8 © UCLES 2010 0452/13/O/N/10 For Examiner's Use (i) Khanu’s financial statements showed the following: $ cash sales 46 500 credit sales 126 000 cash received from trade debtors 122 800 trade receivables (debtors) 13 800 Calculate his collection period for trade receivables (debtors) to the nearest whole day. Show your workings. [4] [Total: 21]

9 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use 3 Moma keeps full accounting records and makes up her financial statements (final accounts) to 31 October in each year. Extracts from her accounting records for October 2010 show the following: Purchases Journal $ October 5 Summa 320 17 Carter 500 29 Summa 270 Purchases Returns Journal $ October 8 Summa 100 Cash Book (credit side) Discount Bank $ $ October 30 Summa 220 31 Carter 15 485 REQUIRED (a) Write up the accounts of Summa and Carter in Moma’s purchases ledger for the month of October 2010. Show any balances carried and brought down. Purchases Ledger Summa account [7]

10 © UCLES 2010 0452/13/O/N/10 For Examiner's Use Carter account [5] At 1 October Moma had 200 units of inventory (stock) which had cost $2.80 per unit. In the month of October her purchases were: October Units Cost per unit $ 5 100 3.20 10 130 3.10 27 120 2.90 REQUIRED (b) Calculate the following. Show your workings. (i) The value of inventory (stock) at 1 October. [2] (ii) The total cost of purchases for October. [6]

11 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use (c) Stock is sold in the order in which it is received. At 31 October Moma had 250 units in stock. The net realisable value of each unit was $3.00. Calculate the value of inventory (stock) at 31 October. [5] [Total: 25]

12 © UCLES 2010 0452/13/O/N/10 For Examiner's Use 4 Gorman Limited has prepared the following trial balance from the company’s accounting records for the year ended 30 September 2010. Gorman Limited Trial Balance at 30 September 2010 $ $ Bank (overdrawn) 2 200 Revenue (sales) 92 000 Ordinary goods purchased (purchases) 70 300 Carriage inwards 600 Inventory (stock) at 1 October 2009 13 900 Rent payable 2 600 Property tax 1 500 Electricity 850 Wages and salaries 5 250 Equipment and office fittings 17 000 Provision for depreciation on equipment and office fittings 1 700 Repairs and maintenance 1 100 Administrative expenses 4 000 Retained profit at 1 October 2009 28 000 Share capital 9 000 Trade receivables (debtors) 17 600 Trade payables (creditors) 1 800 134 700 134 700 Additional information 1 Inventory (stock) at 30 September 2010 was $14 300. 2 Wages accrued but unpaid were $500. 3 Property tax prepaid was $300. 4 The bank statement for 30 September showed bank charges of $120. This has not been entered in the books. 5 Depreciation of $1700 is to be provided for the year. REQUIRED (a) Define a trial balance. [3]

13 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use (b) Prepare Gorman Limited’s income statement (trading and profit and loss account) for the year ended 30 September 2010. Gorman Limited Income Statement (Trading and Profit and Loss Account) for the year ended 30 September 2010 [13]

14 © UCLES 2010 0452/13/O/N/10 For Examiner's Use (c) Name the accounting principle which has been applied to the amount included in the income statement (trading and profit and loss account) for each of the following. (i) Inventory (stock) (ii) Property tax [4] (d) From your answer to (b) calculate Gorman Limited’s rate of inventory (stock) turnover. Show your workings. [5] (e) Gorman Limited had a bank overdraft at 30 September 2010. Suggest one way in which the company could reduce or eliminate the overdraft. [2] [Total: 27]

15 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use 5 Sohara has a shop and sells goods for cash and on credit. She keeps the cash book herself but her accountant writes up her ledger each month. Sohara puts her cash receipts in a till and enters them into her three-column cash book each week. She offers a cash discount of 3% to her debtors for payment within 15 days. She buys stock in bulk from Apollo for cash and receives trade discount of 5% for orders in excess of $1000. She pays wages each week in cash. On 1 September 2010 Sohara’s cash book showed cash in hand of $700 and cash at bank of $3000. Sohara had the following transactions in one week in September 2010. $ September 6 Cheque received from Juno for goods sold on 24 August 291 7 Sold goods on credit to Hercules 100 8 Paid cash to Apollo for goods purchased 1900 9 Cheque received from Minos for goods sold on 29 June 85 10 Cash sales for the week 1850 10 Wages paid for the week 350 REQUIRED (a) (i) State the type and amount of discount allowed to Juno by Sohara. [3] (ii) State the type and amount of discount received by Sohara on paying Apollo. [3] (b) Make the necessary entries in Sohara’s cash book to record the above transactions for the week ended 10 September 2010. You are not required to balance the cash book. The cash book is on the next page.

16 © UCLES 2010 0452/13/O/N/10 For Examiner's Use Sohara Cash Book September 2010 Date Details Discount Cash Bank Date Details Discount Cash Bank [12] $ $ $ $ $ $

17 © UCLES 2010 0452/13/O/N/10 [Turn over For Examiner's Use Sohara also keeps a petty cash book on the imprest system with an imprest of $300. On 30 September 2010 there was $20 in the petty cash box and vouchers for expenses totalling $270. REQUIRED (c) (i) State the amount of cash there should have been in the petty cash box. [2] (ii) Suggest one reason why there was a difference in the petty cash between the amount actually in the box and the expected amount. [2] (iii) State the amount which was transferred from the bank on 1 October to restore the imprest. [2] [Total: 24]

18 © UCLES 2010 0452/13/O/N/10 For Examiner's Use 6 Norman started a business on 1 July 2010 selling machines. On that day he bought inventory (stock) for $12 000 and office furniture for $1500. He paid an additional $2300 into a new business bank account and kept $200 on hand as a petty cash float. On 2 July his brother Peter paid $3000 into the business bank account as a loan to the business. REQUIRED (a) Show the journal entries to record these transactions. Narratives are not required. Norman Journal [8] Dr $ Cr $

19 © UCLES 2010 0452/13/O/N/10 For Examiner's Use Norman understands he should depreciate the office furniture. He decides his office furniture will have a useful life of four years and will have no scrap value. REQUIRED (b) Name two possible methods of depreciation he could use. (i) (ii) [2] (c) Select which method Norman should use. Give a reason for your answer. [3] [Total: 13]

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 0452/13/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 0452/13 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 13 © UCLES 2010 1 (a) A [1] (b) C [1] (c) B [1] (d) B [1] (e) A [1] (f) C [1] (g) D [1] (h) D [1] (i) C [1] (j) D [1] [Total: 10] 2 (a) (Sales) invoice [1] (b) Capital expenditure Revenue expenditure Purchase of shop
(1) Repairs to shop windows
(1) Purchase of new lock for shop door
(1) [3] (c) Balance sheet [1] (d) The business is expected to continue (1) for the foreseeable future (1) [2] (e) Error of principle [1] (f) 5000 shares (1) × $0.25 (1) = $1250 [2]

Page 3 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 13 © UCLES 2010 (g) Premium for year = $600 Period 1 July – 30 September is 3 months Expense = $600 (1) / 4 (1) = $150 (1)OF [3] (h) Current assets – current liabilities $15 000 + 14 500 (1) + 16 000 (1) – 18 200 (1) = $27 300 (1) [4] (i) Collection period = trade receivables / credit sales × 365 days = $13 800 (1) / $126 000 (1) = 39.97 = 40 OF (1) days (1) OF if Cash + Credit sales [4] [Total: 21] 3 (a) Summa account October October 8 Purchase returns 100 (1) 5 Purchases 320 (1) 30 Bank (not Cash) 220 (1) 29 Purchases 270 (1) 31 Balance c/d OF 270 (1) 590 350 November 1 Balance b/d 270 OF (1) + (1) for all correct dates [7] Carter account October October 31 Bank (not Cash) 485 (1) 17 Purchases 500 (1) 31 Discount 15 (2) 500 500 + (1) for all correct dates [5] (b) (i) 200 units (1) × $2.80 (1) = 560.00 [2] (ii) 100 units (1) × $3.20 (1) = 320.00 130 units (1) × $3.10 (1) = 403.00 120 units (1) × $2.90 (1) = 348.00 1071.00 [6] (c) 130 units (1) × $3.00 (NRV) (2) = 390.00 120 units (1) × $2.90 (cost) (1) = 348.00 250 738.00 Allow 2 if 250 × $3.00 [5] [Total: 25]

Page 4 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 13 © UCLES 2010 4 (a) A trial balance is a list of balances (1) on the accounts in the books / ledgers / records (1) at a particular date (1) used to check the accuracy of accounts. Allow “check accuracy” if linked with “list of balances”. [Max 3] (b) Gorman Limited Income statement (trading and profit and loss account) Year ended 30 September 2010 $ $ Revenue (sales) 92 000 (1) Inventory (stock) at 1 October 2009 13 900 (1) Purchases 70 300 (1) Carriage inwards 600 (1) 84 800 Less: inventory (stock) at 30 Sept 2010 14 300 (1) Cost of goods sold 70 500 Gross profit 21 500 OF (1) Rent 2 600 } (1) Electricity 850 } Property tax (1500-300) 1 200 } (1) Wages and salaries 5 750 } (1) Repairs and maintenance 1 100 } (1) Administrative expenses 4 000 } Depreciation 1 700 } (1) Bank charges 120 } (1) 17 320 Profit for the year (net profit) 4 180 OF (1) [13] (c) (i) Prudence, consistency, lower of cost and net realizable value (any one) (2) (ii) Accruals, matching (any one) (2) [4] (d) (Rate of inventory (stock) turnover = cost of goods sold / average stock = 70 500 (1) / (13 900 + 14 300) (1) / 2 (1) = 5 (1) times (1) [5] (e) Collect receivables, reduce inventory, delay payment of payables, sell Fixed Assets (any one). [2] [Total: 27]

Page 5 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 13 © UCLES 2010 5 (a) (i) Cash discount (1), 3% (1) × $300 (1) = $9.00 [3] (or 3/97 × 291) (ii) Trade discount (1), 5% (1) × $2000 (1) = $100.00 [3] (or 5/95 × 1900) (b) Sohara Cash Book September 2010 Date Details Discount Cash Bank Date Details Discount Cash Bank $ $ $ $ $ $ 1 Balance b/down (1) 700 3000 6 Juno (1) 9 OF (1) *291 (1) 8 Apollo (1) 1900 (1) 9 Minos (1) 85 (1) 10 Wages (1) 350 (1) 10 Sales (1) 1850 (1) * OF if $300 – OF Discount [12] (c) (i) $300 (1) – $270 (1) = $30 [2] (ii) Lost or missing voucher Lost or stolen cash Error brought forward or in counting cash Amount not recorded (any one) [2] (iii) $300 (1) – $20 (1) = $280 [2] [Total: 24]

Page 6 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – October/November 2010 0452 13 © UCLES 2010 6 (a) Norman – Journal $ $ Office Furniture 1 500 (1) Inventory (stock) 12 000 (1) Bank 2 300 (1) Cash 200 (1) Capital – Norman (1) 16 000 (2) 3 000 (1) Bank Loan – Peter 3 000 (1) [8] (b) (i) Straight line (fixed instalment) method (1) (ii) Reducing (diminishing) balance method (1) Other methods e.g. revaluation method may be accepted. (c) Straight line method would be preferred (1) as furniture has an expected useful life and no scrap value (1) and cost would be fully written off consistently / evenly over the useful life (1). [3] [Total: 13]