Cambridge IGCSE Accounting 0452 — 2011 May/June Paper 1 · Variant 2

This document consists of 15 printed pages and 1 blank page. IB11 06_0452_12_FP © UCLES 2011 [Turn over For Examiner's Use 1 2 3 4 5 6 Total *2045970841* UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING 0452/12 Paper 1 May/June 2011 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 2011 0452/12/M/J/11 For Examiner's Use 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. 1 (a) Which business documents are used to write up the sales returns journal? A credit notes issued to customers B credit notes received from suppliers C invoices issued to customers D invoices received from suppliers [1] (b) What is cash discount? A an allowance given to a customer for paying in cash B an allowance given to a customer for prompt payment C a deduction from the list price of goods bought by a customer D a deduction from the list price of goods for bulk buying by a customer [1] (c) Which type of error is corrected using a suspense account? A complete reversal B omission C principle D single entry [1] (d) A business receives a bank statement and updates its cash book. Which item will increase the bank balance in the cash book? A bank charges B credit transfers received C interest charges D standing orders paid [1]

3 © UCLES 2011 0452/12/M/J/11 [Turn over For Examiner's Use (e) Adam’s debt is to be written off as bad. What entries are required? account to be debited account to be credited A Adam bad debts B Adam income statement C bad debts Adam D bad debts income statement [1] (f) Which is an intangible asset? A goodwill B inventory C other receivables D trade receivables [1] (g) A trader took goods costing $100 for his own use. How is this recorded in the ledger? A debit drawings, credit inventory B debit drawings, credit purchases C debit inventory, credit drawings D debit purchases, credit drawings [1] (h) Which is a factory overhead? A carriage on finished goods B carriage on raw materials C wages of factory supervisors D wages of machine operators [1]

4 © UCLES 2011 0452/12/M/J/11 For Examiner's Use (i) How is the collection period for debtors calculated? A credit sales / debtors x 100 B credit sales / debtors x 365 C debtors / credit sales x 100 D debtors / credit sales x 365 [1] (j) At which point is revenue considered to be earned by a business? A when an invoice is sent to the customer B when ownership of the goods passes to the customer C when the customer orders the goods D when the customer pays for the goods [1] [Total: 10]

5 © UCLES 2011 0452/12/M/J/11 [Turn over For Examiner's Use 2 (a) Name two books of prime (original) entry. (i) (ii) [2] (b) State the purpose of preparing an income statement. [1] (c) In the table below, place a tick (
) under the correct heading to show whether the item is income or an expense. Income Expense Carriage outwards Bad debt recovered Discount received [3] (d) Explain what is meant by the imprest system of petty cash. [2] (e) (i) Name the accounting principle which requires that the same accounting treatment should be applied to similar items at all times. [1] (ii) Name the accounting policy which states that accounting information should represent actual events and be free from error and bias. [1] (f) Complete the following statement: working capital is defined as less [2]

6 © UCLES 2011 0452/12/M/J/11 For Examiner's Use (g) Bailee’s trial balance at 31 March 2011 included the following items: Trade payables Trade receivables Bank (Dr) Drawings Inventory Provision for depreciation $ 1800 1300 3500 4700 2900 3300 (i) Calculate Bailee’s working capital. Show your workings. [3] (ii) Calculate Bailee’s quick ratio. Show your workings and give your answer to two decimal places. [3] (h) Name two types of shares which may be issued by a limited company. (i) (ii) [2] [Total: 20]

7 © UCLES 2011 0452/12/M/J/11 [Turn over For Examiner's Use 3 Alcazar has a clothing business and sells for cash and on credit. A summary of his cash book for the year ended 31 March 2011 shows the following: Deposits for the year (cash and credit amounts from customers) Payments for the year (to suppliers, expenses and drawings) $ 15 270 13 950 You are given the following additional information: Cash sales for the year deposited at the bank $2680 1 April 2010 $ 31 March 2011 $ Trade receivables 3 140 4 080 Inventory 1 780 1 920 An analysis of Alcazar’s payments shows: Purchases from suppliers Carriage inwards Rent Electricity Insurance Wages paid to staff Drawings $ 9 560 280 600 360 580 1 370 1 200 13 950 REQUIRED (a) Calculate Alcazar’s credit sales for the year. Show your workings. [4]

8 © UCLES 2011 0452/12/M/J/11 For Examiner's Use (b) Prepare Alcazar’s income statement (showing the trading account) for the year ended 31 March 2011. Alcazar Income Statement for the year ended 31 March 2011 [12] (c) (i) Calculate Alcazar’s percentage of gross profit to sales for the year. Show your workings and give your answer to two decimal places. [3]

9 © UCLES 2011 0452/12/M/J/11 [Turn over For Examiner's Use (ii) Calculate Alcazar’s percentage of net profit to sales for the year. Show your workings and give your answer to two decimal places. [3] (d) Alcazar did not bank additional cash sales of $2500 which were, therefore, not included in his income statement. (i) Recalculate the new percentage of gross profit to sales. Show your workings and give the calculation to two decimal places. [3] (ii) State whether including these cash sales has increased or decreased the percentage of gross profit to sales. [1] [Total: 26]

10 © UCLES 2011 0452/12/M/J/11 For Examiner's Use 4 (a) Explain what is meant by the term ‘other payable’ (accrued expense). [2] Khalim has a furniture business and pays the fuel expenses of running a motor van. At 1 May 2010 he had accrued fuel expenses of $30. For the year ended 30 April 2011 he paid fuel expenses of $340 by cheque and at 30 April 2011 he had an unpaid bill for fuel of $50. REQUIRED (b) Write up Khalim’s fuel expenses account for the year ended 30 April 2011. Show the transfer to the income statement for the year and any balance carried down at 1 May. Khalim Fuel expenses account [6] (c) In the following table, place a tick (
) under the heading to show the correct category of each asset shown on Khalim’s balance sheet. Non-current tangible asset Non-current intangible asset Current asset Warehouse Goodwill Motor van Trade receivables [4]

11 © UCLES 2011 0452/12/M/J/11 [Turn over For Examiner's Use Khalim sells three types of chair and provides the following information about his inventory at 30 April 2011. Chair type Units in stock Cost per unit $ Selling price per unit $ Armchair 15 55 65 Dining chair 36 25 20 Folding chair 60 15 18 REQUIRED (d) State the basis on which Khalim will value his inventory on 30 April 2011. [3] (e) Calculate the value of Khalim’s inventory at 30 April 2011. Show all your workings. [8] [Total: 23]

12 © UCLES 2011 0452/12/M/J/11 For Examiner's Use 5 Piranha Limited is planning to buy a computer system costing $4500 for use in its business. It estimates the computer system will have a useful life of three years and will have a scrap value of $750 after that time. The company decides it will depreciate the computer system on the reducing balance method at the rate of 40% per annum. REQUIRED (a) State two other methods of calculating depreciation. (i) (ii) [2] (b) Calculate the depreciation to be charged on the computer system for each of the three years of its useful life. Show your workings for each year. (i) Year 1 (ii) Year 2 (iii) Year 3 [9] (c) Complete the following extract from the company’s balance sheet at the end of the third year. Piranha Limited Balance Sheet at end of third year (extract) Cost $ Provision for depreciation $ Net book value $ Non-current assets Computer system [3]

13 © UCLES 2011 0452/12/M/J/11 [Turn over For Examiner's Use (d) Piranha Limited compared the calculated net book value of the computer system after three years with its expected scrap value after three years, $750. State whether you consider the percentage rate the company should be using to calculate the depreciation should be higher or lower. Give a reason for your answer. [2] (e) Piranha Limited is proposing to take a three year bank loan. In the table below, place a tick (
) under the correct heading to show the effect of taking the bank loan on the item. Increase Decrease No effect Net profit Working capital Return on capital employed [6] [Total: 22]

14 © UCLES 2011 0452/12/M/J/11 For Examiner's Use 6 Monica has a shop. She writes up the books of account herself but is not an experienced bookkeeper. Her financial year ends on 28 February. The trial balance she prepared on 28 February 2011 showed a shortage on the debit side of $720. Monica entered this in a suspense account and then prepared a draft income statement showing a profit for the year of $3600. The following errors were later discovered. 1 A cheque payment of $460 to repay a loan from Carlo has been correctly entered in the cash book but $640 has been debited to his loan account. 2 Cash sales of $850 have been completely omitted from the books. 3 A cheque payment for $900 for goods has been entered in the cash book but no other entry has been made. 4 The purchase of new display shelves for $1200 has been debited to the repairs account. REQUIRED (a) Show the journal entries required to correct the above errors. The date and narrative are not required. Error 1 Dr $ Cr $ Error 2 Error 3 Error 4 [8]

15 © UCLES 2011 0452/12/M/J/11 For Examiner's Use (b) Write up the suspense account in Monica’s ledger from the above journal entries. Dates are not required. Monica Suspense account [6] (c) Prepare a statement to show Monica’s profit for the year after correcting the errors 1 - 4. Monica Statement of corrected profit for the year ended 28 February 2011 [5] [Total: 19]

16 Copyright Acknowledgements: 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. 0452/12/M/J/11 BLANK PAGE

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June 2011 question paper for the guidance of teachers 0452 ACCOUNTING 0452/12 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. • Cambridge will not enter into discussions or correspondence in connection with these mark schemes. Cambridge is publishing the mark schemes for the May/June 2011 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 – May/June 2011 0452 12 © University of Cambridge International Examinations 2011 1 Key (a) A [1] (b) B [1] (c) D [1] (d) B [1] (e) C [1] (f) A [1] (g) B [1] (h) C [1] (i) D [1] (j) B [1] [Total: 10] 2 (a) Cash book, petty cash book, sales day book (journal), sales returns day book (journal), purchases day book (journal), purchases returns day book (journal), journal. (Any two, 1 mark each). [2] (b) To calculate the [net] profit [or loss] [for the year] – not gross profit. [1] (c) Income Expense Carriage outwards
(1) Bad debt recovered
(1) Discount received
(1) [3] (d) The petty cashier has a fixed amount of money (the imprest) (1) and is reimbursed the amount of the actual expenses each period (1) to maintain this amount. [2]

Page 3 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2011 0452 12 © University of Cambridge International Examinations 2011 (e) (i) Consistency [1] (ii) Reliability [1] (f) Current assets (1) less Current liabilities (1) [2] (g) (i) Working capital = Trade receivables + bank + inventory – trade payables = (1300 + 3500 + 2900) (7700) (1) – 1800 (1) = 5900 (1)OF [3] (ii) Quick ratio = current assets less inventory / current liabilities = (7700 – 2900) (4800) (1) / 1800 (1) = 2.67 : 1 (1)OF (accept 2.66 : 1) [3] (h) Ordinary shares (equity shares), preference shares. [2] [Total: 20]

Page 4 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2011 0452 12 © University of Cambridge International Examinations 2011 3 (a) Alcazar – credit sales $ Bank deposits 15 270 (1) Less cash sales 2 680 (1) 12 590 Add trade receivables at 31 March 2011 4 080 Less trade receivables at 1 April 2010 3 140 940 (1) 13 530 (1)OF [4] (b) Alcazar Income Statement for the year ended 31 March 2011 $ $ Revenue – credit sales 13 530 (1)OF – cash sales 2 680 (1) 16 210 Less Cost of sales Inventory at 1 April 2010 1 780 (1) Purchases 9 560 (1) Carriage inwards 280 (1) 11 620 Inventory at 31 March 2011 1 920 (1) 9 700 Gross profit (must be correct caption) 6 510 (1)OF Rent 600 (1) Electricity 360 (1) Insurance 580 (1) Wages 1 370 (1) 2 910 [Net] Profit [for the year] (must have caption) 3 600 (1)OF [12] (c) (i) Gross profit / sales = 6510 (1)OF / 16210 (1)OF = 40.16% (1)OF [3] (ii) Net profit / sales = 3600 (1)OF / 16210 (1)OF = 22.21% (1)OF [3] (d) (i) New gross profit / new sales = 9010 (1)OF / 18710 (1)OF = 48.16% (1)OF [3] (ii) Increased (1)OF [1] [Total: 26]

Page 5 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2011 0452 12 © University of Cambridge International Examinations 2011 4 (a) An other payable (accrued expense) is an amount due and payable [in respect of expenses incurred in an accounting period] (1) which remains unpaid at the end of that period (1). [2] (b) Khalim Fuel expenses account 2011 30 April Bank 340 (1) Balance c/d 50 (1) 390 2010 1 May Balance b/d 30 (1) 2011 30 April Income statement 360 (1)OF (accept profit/loss acc) 000 390 1 May Balance b/d 50 (1) (+ 1 for all correct dates) [6] (c) Non-current tangible Non-current intangible Current Warehouse
(1) Goodwill
(1) Motor van
(1) Trade receivables
(1) [4] (d) At the lower (1) of cost (1) and net realisable value (1) [3] (e) Chair type Units in stock Cost or net realisable value per unit $ Total value $ Armchair 15 (1) 55 (1) 825 Dining chair 36 (1) 20 (2) 720 Folding chair 60 (1) 15 (1) 900 2 445 (1) [8] [Total: 23]

Page 6 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2011 0452 12 © University of Cambridge International Examinations 2011 5 (a) Straight line method, revaluation method (1 mark each) [2] (b) Depreciation (i) Year 1 4500 (1) @ 40% (1) = 1800 (1)OF (ii) Year 2 (4500 – 1800) = 2700 (2)OF @ 40% = 1080 (1)OF (iii) Year 3 (2700 – 1080) = 1620 (2)OF @ 40% = 648 (1)OF [9] (c) Piranha Limited Balance Sheet at end of third year (extract) Cost $ Provision for Depreciation $ Net book value $ Non-current assets Computer system 4500 (1) 3528 (1)OF 972 (1)OF [3] (d) Depreciation rate should have been higher (1) because net book value after three years ($972) is greater than expected scrap value after three years ($750) (1) [2] (e) Increase Decrease No effect Net profit
(2) Working capital
(2) Return on capital employed
(2) [6] [Total: 22]

Page 7 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2011 0452 12 © University of Cambridge International Examinations 2011 6 (a) Error 1 Dr Cr Suspense 180 (1) [Carlo] – [loan] 180 (1) Error 2 Cash [book] 850 (1) Sales 850 (1) Error 3 Purchases 900 (1) Suspense 900 (1) Error 4 Fixtures and fittings 1200 (1) Repairs 1200 (1) [8] (b) Monica Suspense account [Difference on] trial balance (1) Carlo – loan account (1) 720 (1) 180 (1) 900 Purchases (1) 900 (1) 000 900 [6]

Page 8 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2011 0452 12 © University of Cambridge International Examinations 2011 (c) Monica Statement of corrected profit for the year ended 28 February 2011 Draft profit 3600 (1) Error 1: no effect Error 2: add: sales 850 (1) Error 3: less: purchases (900) (1) Error 4: add: repairs 1200 (1) Corrected profit 4750 (1)OF [5] [Total: 19]