Cambridge IGCSE Accounting 0452 — 2012 May/June Paper 1 · Variant 1

This document consists of 19 printed pages and 1 blank page. IB12 06_0452_11_8RP © UCLES 2012 [Turn over *2937408438* For Examiner's Use 1 2 3 4 5 6 Total UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING 0452/11 Paper 1 May/June 2012 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 2012 0452/11/M/J/12 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) In which book of prime (original) entry are invoices issued by a trader recorded? A purchases journal B purchases returns journal C sales journal D sales returns journal [1] (b) Where are the personal accounts of customers who buy goods on credit found? A purchases journal B purchases ledger C sales journal D sales ledger [1] (c) A trader has received a bank statement and brought his cash book up to date. Which item will be included in the trader’s bank reconciliation statement? A bank charges B bank interest C direct debits D unpresented cheques [1]

3 © UCLES 2012 0452/11/M/J/12 [Turn over For Examiner's Use (d) K Lain owns a bakery shop. Which of the following are capital expenditure? 1 motor vehicle 2 petrol for motor vehicle 3 shop fixtures 4 wages of bakers A 1 and 3 B 1, 2 and 3 C 2 and 4 D 2, 3 and 4 [1] (e) What is the effect of providing for depreciation? A It increases profit. B It reduces profit. C It extends the life of non-current assets. D It increases the cash balance. [1] (f) On which basis should inventory be valued? A the higher of cost and net realisable value B the lower of cost and net realisable value C the higher of selling price and net realisable value D the lower of selling price and net realisable value [1]

4 © UCLES 2012 0452/11/M/J/12 For Examiner's Use (g) In December 2010 Imran wrote off Ahmed’s debt of $50. On 30 April 2012 Ahmed sent a cheque for $50. Which journal entry would Imran make on 30 April 2012? debit $ credit $ A Ahmed bank 50 50 B bad debts recovered Ahmed 50 50 C bad debts recovered bank 50 50 D bank bad debts recovered 50 50 [1] (h) Which would appear in an income statement? A bank overdraft B capital introduced C motor vehicle expenses D trade receivables [1] (i) Which is a current liability for a business? A accrued interest charges on loan from bank B provision for depreciation of non-current assets C five-year loan from bank D insurance premium prepaid [1] (j) Paul is preparing his financial statements. What should he do to observe the principle of prudence? A include all foreseeable losses B include all foreseeable revenue C show expenses as low as possible D show prepayments as expenses [1] [Total: 10]

5 © UCLES 2012 0452/11/M/J/12 [Turn over For Examiner's Use 2 (a) Name the document issued by a supplier of goods on credit to the customer. [1] (b) State the purpose of preparing a balance sheet. [1] (c) In the table below, place a tick (
) under the correct heading to show whether the item is an asset or a liability. Asset Liability Inventory Rent receivable prepaid Trade payables [3] (d) Explain why it is necessary for a manufacturing business to prepare a manufacturing account at the end of the financial year. [2] (e) (i) Name the accounting principle which states that transactions must be expressed in terms of money. [1] (ii) Which accounting policy requires that financial information should be included only if it affects business decisions? [1]

6 © UCLES 2012 0452/11/M/J/12 For Examiner's Use (f) Smart ordered 300 computer components from Raj. The price of each component was $10.30. Raj allowed a trade discount of 4%. Calculate the total of the invoice Smart received. Show your workings. [2] (g) Give two examples of a non-current asset. (i) (ii) [2] (h) Explain the business entity principle. [2] (i) Tapac Limited has issued 200 debentures of $100 each. Interest at the rate of 3% per annum is payable in two equal instalments on 30 June and 31 December each year. Calculate the amount of interest to be paid on the debentures on 30 June 2012. Show your workings. [2]

7 © UCLES 2012 0452/11/M/J/12 [Turn over For Examiner's Use (j) On 1 April 2011 Parmi had an unpaid electricity bill of $350. In the year ended 31 March 2012 he paid a total of $2100 for electricity. On 31 March 2012 he received an electricity bill for $470 which he paid in April. Calculate the amount Parmi charged for electricity in his income statement for the year ended 31 March 2012. Show your workings. [3] [Total: 20]

8 © UCLES 2012 0452/11/M/J/12 For Examiner's Use 3 The following balances were taken from the books of Hans Lee, a sole trader, at 30 April 2012. $ Revenue 110 000 Purchases 65 000 Inventory 1 May 2011 11 500 Trade receivables 1 300 Trade payables 1 900 Machinery 7 400 Expenses 31 600 Bank (overdraft) 3 100 Capital 11 500 Drawings 7 600 Hans Lee’s inventory at 30 April 2012 was $12 100. REQUIRED (a) State one reason for preparing a trial balance. [1] (b) Complete the following trial balance for Hans Lee at 30 April 2012. Show any difference you find as a balance in an appropriate account. Hans Lee Trial Balance at 30 April 2012 Dr $ Cr $ Revenue Purchases Inventory Trade receivables Trade payables Machinery Expenses Bank (overdraft) Capital Drawings [7]

9 © UCLES 2012 0452/11/M/J/12 [Turn over For Examiner's Use After the trial balance had been prepared, the following errors were discovered. 1 The purchases journal had been undercast by $1600. 2 $150 received from John Tan, a credit customer, had been debited to his account. 3 No entry had been made in the drawings account for $200 cash taken by Hans Lee. REQUIRED (c) Prepare the entries in Hans Lee’s journal to correct the above errors. Narratives are not required. Hans Lee Journal Debit $ Credit $ 1 2 3 [6] (d) In the following table place a tick (✓) under the correct heading to show how correcting each of the above errors would change the profit for the year. Increase Decrease No effect Error 1 Error 2 Error 3 [3]

10 © UCLES 2012 0452/11/M/J/12 For Examiner's Use (e) Using your answer to (b), state whether you consider that all the errors on Hans Lee’s books have been discovered. Give a reason for your answer. [2] [Total: 19]

11 © UCLES 2012 0452/11/M/J/12 [Turn over Question 4 is on the next page.

12 © UCLES 2012 0452/11/M/J/12 For Examiner's Use 4 Theba maintains a petty cash book using the imprest system. REQUIRED (a) State one reason why Theba maintains a petty cash book in addition to her main cash book. [2] (b) Explain what is meant by the imprest system of petty cash. [2] Theba’s imprest amount is $200. On 1 April 2012 she had $97 in the petty cash box. On the same day she made a transfer from the business bank account to restore the petty cash to the imprest amount. On 30 April 2012 Theba had the following petty cash vouchers. $ April 4 Postage stamps 24 12 Stationery 36 17 Fuel for motor vehicle 38 21 Refund from stationery supplier 4 24 Catering supplies 12 29 Cleaning 70 REQUIRED (c) Prepare Theba’s petty cash book for the month of April 2012. Balance the book on 30 April 2012 and carry down the balance. Make the entry on 1 May 2012 to restore the petty cash to the imprest amount. [12]

13 © UCLES 2012 0452/11/M/J/12 [Turn over For Examiner's Use Cleaning $ Catering supplies $ Motor expenses $ Postages & Stationery $ Total Paid $ Details Date Theba – Petty Cash Book Total Received $

14 © UCLES 2012 0452/11/M/J/12 For Examiner's Use (d) From the entries in the petty cash book, record the transactions for the month in Theba’s ledger. Postage and Stationery account Motor expenses account Catering supplies account Cleaning account [5] (e) State the amount of petty cash which would be included in Theba’s balance sheet prepared on 30 April 2012. [1] [Total: 22]

15 © UCLES 2012 0452/11/M/J/12 [Turn over For Examiner's Use 5 Raoul and Hassan agreed to form a partnership from 1 April 2011 to sell mobile telephones. (a) State two advantages of trading in partnership. (i) (ii) [2] (b) State two disadvantages of trading in partnership. (i) (ii) [2] On 1 April 2011, Raoul introduced capital of $6000 which was paid into the partnership bank account. Hassan introduced inventory valued at $4000. On the same day, the partnership paid rent on a shop of $600 and bought shop fittings for $750. Both payments were made by cheque. REQUIRED (c) Prepare journal entries to record the setting up of the partnership. Narratives are not required. Raoul and Hassan Journal Debit $ Credit $ [8]

16 © UCLES 2012 0452/11/M/J/12 For Examiner's Use Raoul and Hassan agreed that they would allow interest on capital at 3% per annum and that Raoul would have a partnership salary of $3000 per annum. It was agreed that they would share profits and losses in the ratio Raoul 2/5 and Hassan 3/5. In the year ended 31 March 2012 the partnership made a profit of $8800. REQUIRED (d) Prepare the profit and loss appropriation account of the partnership for the year ended 31 March 2012. Raoul and Hassan Profit and Loss Appropriation Account for the year ended 31 March 2012 [8] (e) Prepare Raoul’s current account for the year ended 31 March 2012. Raoul Current account [4] (f) State one way in which the partnership agreement could be changed to recognise the fact that Raoul makes more sales than Hassan. [2] [Total: 26]

17 © UCLES 2012 0452/11/M/J/12 [Turn over Question 6 is on the next page.

18 © UCLES 2012 0452/11/M/J/12 For Examiner's Use 6 Cole Limited and Fanza Limited are both electrical wholesalers. They provided the following information at 31 March 2012. Cole Limited Fanza Limited $ $ Inventory 18 000 36 000 Trade receivables 36 000 60 000 Trade payables 21 000 63 000 Cash at bank 4 800 Bank overdraft 17 000 REQUIRED (a) Complete the following table to show the figures for Fanza Limited. In each case, state the formula and show your workings. Cole Limited Fanza Limited (i) Working capital $37 800 Formula Calculation (ii) Current ratio 2.8:1 Formula Calculation (iii) Quick (acid test) ratio 1.9:1 Formula Calculation [9]

19 © UCLES 2012 0452/11/M/J/12 For Examiner's Use (b) (i) State which company has the better current ratio. Give a reason for your answer. [3] (ii) State which company has the better quick (acid test) ratio. Give a reason for your answer. [3] Fanza Limited wishes to expand its business and needs to raise extra finance. It is considering issuing either preference shares or debentures. REQUIRED (c) State two features of preference shares. (i) (ii) [4] (d) State two features of debentures. (i) (ii) [4] [Total: 23]

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 2012 0452/11/M/J/12 BLANK PAGE

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June 2012 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. • Cambridge will not enter into discussions or correspondence in connection with these mark schemes. Cambridge is publishing the mark schemes for the May/June 2012 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 2012 0452 11 © University of Cambridge International Examinations 2012 1 Key (a) C [1] (b) D [1] (c) D [1] (d) A [1] (e) B [1] (f) B [1] (g) D [1] (h) C [1] (i) A [1] (j) A [1] [Total: 10] 2 (a) Invoice [1] (b) To show the financial position of a business on a certain date. [1] (c) Asset Liability Inventory ✓(1) Rent receivable prepaid ✓(1) Trade payables ✓(1) [3] (d) To calculate how much it has cost the business to manufacture the goods (1) produced in the financial year (1). [2]

Page 3 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 11 © University of Cambridge International Examinations 2012 (e) (i) Money measurement (1) (ii) Relevance (1) [2] (f) (300 × $10.30) (1) = $3090 – 4% = $3090 – $123.60 = $2966.40 (1) [2] (g) Land, buildings, machinery, equipment, fixtures, motor vehicles, goodwill Any 2 (1) each [2] (h) The business is treated as being completely separate from the owner. (1) The accounting records relate only to the business, (1) [2] (i) (200 × $100) (1) = $20 000 × 3% × ½ = $300 (1) [2] (j) Payments $2100 Less opening accrual 350 (1) 1750 Plus closing accrual 470 (1) Charge for the year 2220 (1) [3] [Total: 20] 3 (a) To assist in the preparation of financial statements To check for arithmetical accuracy/errors (must include arithmetical) Any 1 reason (1) [1]

Page 4 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 11 © University of Cambridge International Examinations 2012 (b) Hans Lee Trial Balance at 30 April 2012 Dr $ Cr $ Revenue 110 000 Purchases 65 000 Inventory (1 May 2011) 11 500 (1) Trade receivables 1 300 } Trade payables 1 900 }(1) Machinery 7 400 Expenses 31 600 Bank overdraft 3 100 (1) Capital 11 500 } Drawings 7 600 }(1) Suspense (1) 2 100 (1) OF 126 500 126 500 (1) [7] (c) Hans Lee Journal Debit $ Credit $ 1 Purchases Suspense 1 600 1 600 (1) (1) 2 Suspense John Tan 300 300 (1) (1) 3 Drawings Suspense 200 200 (1) (1) [6]

Page 5 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 11 © University of Cambridge International Examinations 2012 (d) Increase Decrease No effect Error 1 ✓(1) Error 2 ✓(1) Error 3 ✓(1) [3] (e) All the errors have NOT YET been discovered. (1) There is a balance remaining on the suspense account/Trial Balance. (1) [2] [Total: 19] 4 (a) To avoid recording small cash payments in the main cash book (2) To reduce the number of entries in the main cash book (2) Any one reason (2) [2] (b) The petty cashier starts each month with the same amount of money. (1) At the end of the period the amount spent is reimbursed so the cash remaining is equal to the imprest amount. (1) [2] (c) Refer to next page [12] (d) Postages and stationery account 2012 $ 2012 $ April 30 Petty cash 60 (1) April 30 Petty cash 4 (1) Motor expenses account 2012 $ April 30 Petty cash 38 (1) Catering supplies account 2012 $ April 30 Petty cash 12 (1) Cleaning account 2012 $ April 30 Petty cash 70 (1) [5] (e) $24 (1) O/F from (c) [1] [Total: 22]

Page 6 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 11 © University of Cambridge International Examinations 2012 4 continued Theba – Petty Cash Book Total Received Date Details Total Paid Postages and stationery Motor expenses Catering supplies Cleaning $ 24 36 38 12 70 $ 24 (1) 36 (1) $ 38 (1) $ 12 (1) $ 70 (1) 60 38 12 70 $ 97 103 (1) 4 (1) 180 24 204 204 24 (1) 176 (1) O/F April 1 4 12 17 21 24 29 30 May 1 Balance b/d Bank Postage stamps Stationery Fuel Stationery refund Catering supplies Cleaning Balance c/d Balance b/d Bank/Cash Totals of analysis columns (1); Totals of total columns (1) Dates (1) [12]

Page 7 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 11 © University of Cambridge International Examinations 2012 5 (a) Additional finance Additional knowledge and skills Sharing of responsibilities Sharing of risks Discussions can take place before taking decisions Any 2 (1) each [2] (b) Profits have to be shared Decisions have to be recognised by all partners/disagreements may arise Decisions may take longer to put into effect One partner’s actions are binding on all partners All partners are responsible for the debts of the business Any 2 (1) each [2] (c) Raoul and Hassan Journal Debit $ Credit $ Bank Capital Raoul 6000 6000 (1) (1) Inventory Capital Hassan 4000 4000 (1) (1) Rent Shop fittings Bank ( or Cash Book ) 600 750 1350 (1) (1) (2) [8] (d) Raoul and Hassan Profit and Loss Appropriation Account for the year ended 31 March 2012 $ $ $ Profit for the year 8800 (1) Less Interest on capital – Raoul 180 (1) Hassan 120 (1) 300 Partner’s salary – Rauol 3000 (1) 3300 5500 Profit shares – Raoul 2200 (2)(1) OF Hassan 3300 (2)(1) OF 5500 [8]

Page 8 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 11 © University of Cambridge International Examinations 2012 (e) Raoul Current account 2012 $ 2012 $ Mar 31 Balance c/d 5380 Mar 31 Interest on cap 180 (1)O/F Salary 3000 (1) ____ Profit share 2200 (1)O/F 5380 5380 April 1 Balance b/d 5380 (1)O/F [4] (f) Increase Raoul’s salary Allow commission on sales Change the profit-sharing ratio Any 1 (2) [2] [Total: 26] 6 (a) (i) Current assets – current liabilities (1) (36 000 + 60 000) – (63 000 + 17 000) = 96 000 – 80 000 (1) = $16 000 (1) OF [3] (ii) Current assets : current liabilities (1) 96 000 : 80 000 (1) = 1.2 : 1 (1) OF [3] (iii) Current assets – inventory : current liabilities (1) 60 000 : 80 000 (1) = 0.75 : 1 (1) OF [3] (b) (i) Cole Limited (1) Cole Limited can pay the immediate liabilities from the current assets and/or Fanza Limited’s ratio is lower than is usually acceptable (2) [3] (ii) Cole Limited (1) Cole Limited can meet the immediate liabilities from the liquid assets but Fanza may have difficulty in paying current liabilities when they fall due/Fanza Limited’s ratio is lower than is usually acceptable (2) [3] (c) Receive a fixed rate of dividend The dividend is paid before ordinary share dividend Capital is returned before ordinary share capital in a winding up Do not usually carry voting rights Preference shares are part of the capital of the company Preference shareholders are members of the company Any 2 (2) each [4]

Page 9 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 11 © University of Cambridge International Examinations 2012 (d) Receive a fixed rate of interest Interest is paid irrespective of the profit of the company Are long term loans Are often secured on the assets of the company Debentures are repaid before share capital in a winding up Debenture holders are not members of the company Do not carry voting rights Any 2 (2) each [4] [Total: 23]