Cambridge IGCSE Accounting 0452 — 2012 May/June Paper 1 · Variant 2

This document consists of 20 printed pages. IB12 06_0452_12_9RP © UCLES 2012 [Turn over *6100309263* For Examiner's Use 1 2 3 4 5 6 Total UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING 0452/12 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 0452/12/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) Beth sold goods on credit to Peter. It was later discovered that Peter had been overcharged. Which document will Beth send to Peter to correct the error? A credit note B debit note C invoice D statement [1] (b) Where are the balances of carriage inwards and carriage outwards shown in the trial balance? debit column credit column A carriage inwards carriage outwards B carriage outwards carriage inwards C carriage inwards carriage outwards – D – carriage inwards carriage outwards [1] (c) A trader purchased stationery for office use. This was entered in the ledger as purchase of goods for resale. Which entry will correct this error? account debited account credited A purchases stationery B stationery purchases C stationery sales D sales purchases [1]

3 © UCLES 2012 0452/12/M/J/12 [Turn over For Examiner's Use (d) A trader maintains a sales ledger control account. From which books of prime (original) entry would he obtain the totals for cash discounts and goods returned? discounts goods returned A cash book – discount allowed column purchases returns journal B cash book – discount allowed column sales returns journal C cash book – discount received column purchases returns journal D cash book – discount received column sales returns journal [1] (e) David owes $1000 to Parvinder. He pays 90% of the debt. Parvinder writes off the remaining debt. What entry will Parvinder make to write off the bad debt? account to be debited $ account to be credited $ A bad debts 100 David 100 B David 100 bad debts 100 C bad debts 900 David 900 D David 900 bad debts 900 [1] (f) Which is a current asset? A accrued wages B bank loan C motor vehicles at cost D prepaid insurance [1]

4 © UCLES 2012 0452/12/M/J/12 For Examiner's Use (g) Susan receives a cheque from a tenant on 10 December 2011. This is rent due to the business for the period 1 January to 31 March 2012. How is this treated in Susan’s financial statements for the year ended 31 December 2011? A accrued expense B accrued income C prepaid expense D prepaid income [1] (h) In partnership accounts, which item appears in both the profit and loss appropriation account and in the partners’ current accounts? A current account balances B drawings C interest on drawings D interest on loans [1] (i) A business has not kept full accounting records. Which of the following are used to calculate the profit for the year? A bank reconciliation statements B control accounts C statement of affairs D suspense account [1] (j) What is meant by the money measurement principle? A accounts are kept on the double entry basis B accounts contain only items which have a monetary value C non-current assets are shown at cost less depreciation D profits are calculated by deducting cash paid from cash received [1] [Total: 10]

5 © UCLES 2012 0452/12/M/J/12 [Turn over For Examiner's Use 2 (a) In which ledger would a supplier’s account be found? [1] (b) Inventory is valued at the lower of and [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 Bad debt recovered Carriage inwards Discount received [3] (d) (i) Explain what is meant by an error of principle. Give an example of this type of error. [4] (ii) Explain what is meant by a compensating error. Give an example of this type of error. [4]

6 © UCLES 2012 0452/12/M/J/12 For Examiner's Use (e) Hassiq decided to create a provision of doubtful debts of 4% of his trade receivables. His trade receivables are $28 000. Calculate the amount of the provision. [1] (f) Simone keeps her petty cash on the imprest system with an imprest of $120. On 30 April she had vouchers in the petty cash box for expenses of $87.60. (i) What was the amount of petty cash remaining at 30 April? [1] (ii) How much cash was required to restore the imprest at 1 May? [1] (g) On 1 January 2012 Themba’s business had an unpaid electricity bill for $240 for electricity used in December 2011. In the period ended 31 March 2012 he paid $715 to the electricity company and had received bills as follows: $ 4 February 285 5 March 190 On 7 April he received a bill for $320 for electricity used in March. Calculate the amount Themba charged in his income statement for electricity for the three months ended 31 March 2012. [3]

7 © UCLES 2012 0452/12/M/J/12 [Turn over For Examiner's Use (h) Shazeem owns 6000 3% preference shares with a nominal value of $1.50 each in Linga Limited. The company pays the dividend on the preference shares in two equal instalments on 30 April and 30 November. How much preference dividend did Shazeem receive on 30 April 2012? [2] [Total: 21]

8 © UCLES 2012 0452/12/M/J/12 For Examiner's Use 3 Amanda’s cash book for the month of April 2012 is shown below. Amanda Cash Book Date Details Discount Cash Bank Date Details Discount Cash Bank April $ $ $ April $ $ $ 1 Balances b/d 60 100 6 Mitchell 120 9 Julian 6 194 21 Sylvia (Dis. chq) 180 14 Sylvia 180 26 Equipment 2000 28 Sales 1300 29 Bank 1100 29 Cash 1100 30 Balance c/d 140 30 Balance c/d 606 6 1360 2180 1360 2180 May May 1 Balance b/d 140 1 Balance b/d 606 REQUIRED (a) Explain the following entries in the above cash book. April 6 Mitchell [1] April 9 Julian [2] April 14 Sylvia [1] April 21 Sylvia [1]

9 © UCLES 2012 0452/12/M/J/12 [Turn over For Examiner's Use April 26 Equipment [1] April 28 Sales [1] (b) Explain the transaction which took place on 29 April. [2] (c) (i) Explain the significance of the cash balance and the bank balance on 1 May. [2] (ii) State the section of Amanda’s balance sheet on 30 April in which the balances shown in the cash book would appear. Cash balance Bank balance [2] (iii) State why the cash column of a cash book can never have a balance brought down on the credit side. [2]

10 © UCLES 2012 0452/12/M/J/12 For Examiner's Use (d) Using the information in the extract from Amanda’s cash book above, write up the following accounts in her ledger for April. Amanda Mitchell account Julian account Sylvia account Equipment account Sales account Discount allowed account [9] [Total: 24]

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

12 © UCLES 2012 0452/12/M/J/12 For Examiner's Use 4 Bamber is a manufacturer. He knows that it is important to distinguish between capital expenditure and revenue expenditure. REQUIRED (a) (i) Explain the effect on Bamber’s income statement of recording capital expenditure as revenue expenditure. [2] (ii) Explain the effect on Bamber’s balance sheet of recording capital expenditure as revenue expenditure. [2] On 1 April 2011 Bamber bought a new computer for his business costing $4800. He also bought a new laser printer costing $750. On 1 January 2012 Bamber replaced the hard disk in the computer as the existing one had failed. The cost was $450. REQUIRED (b) In the table below, place a tick (
) under the most appropriate heading to show whether the item is capital or revenue. Capital expenditure Revenue expenditure Purchase of new computer Purchase of new laser printer Replacement of hard disk in computer [3]

13 © UCLES 2012 0452/12/M/J/12 [Turn over For Examiner's Use Bamber decided to depreciate the capital items using the straight line method. He considered the useful life of the items would be three years and that they would have a total scrap value of $600 at the end of this time. REQUIRED (c) (i) Calculate the depreciation for the year ended 31 March 2012. Show your workings. [4] (ii) Calculate the net book value of the assets at 31 March 2012. Show your workings. [2] When preparing his balance sheet, Bamber wishes to show his assets in the correct category. REQUIRED (d) In the following table, place a tick (
) under the heading to show the correct category of each asset. Non-current tangible asset Non-current intangible asset Current asset Office building Motor vehicle Goodwill Work in progress [4] [Total: 17]

14 © UCLES 2012 0452/12/M/J/12 For Examiner's Use 5 The following is the trial balance of Rachel Smith at 31 March 2012. $ $ Bank 5280 Cash 160 Purchases 42 500 Revenue 63 100 Inventory at 1 April 2011 3 100 Carriage inwards 1 050 Carriage outwards 540 Purchase returns 1 900 Premises 38 600 Equipment 9 600 Provision for depreciation of equipment 3 840 Trade receivables 5 000 Trade payables 3 900 Bad debts 190 General expenses 1 620 Property tax 6 000 Wages 7 100 Capital 48 000 120 740 120 740 The following additional information is available at 31 March 2012. 1 Inventory was valued at $3750. 2 A bonus of $180 is to be accrued in the wages account. 3 Property tax includes $1200 paid in advance. 4 Depreciation of $1920 is to be provided for the year. 5 A provision for doubtful debts of 3% of the trade receivables is to be created. REQUIRED (a) Prepare the income statement for the year ended 31 March 2012.

15 © UCLES 2012 0452/12/M/J/12 [Turn over For Examiner's Use Rachel Smith Income Statement for the year ended 31 March 2012 [16]

16 © UCLES 2012 0452/12/M/J/12 For Examiner's Use (b) (i) From your answer to (a), calculate the percentage of gross profit to revenue. Show your workings and give your answer to two decimal places. [2] (ii) Suggest one way in which Rachel Smith could improve this percentage. [2] (c) (i) From your answer to (a), calculate the percentage of profit for the year to revenue. Show your workings and give your answer to two decimal places. [2] (ii) Suggest one way in which Rachel Smith could improve this percentage. [2] [Total: 24]

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

18 © UCLES 2012 0452/12/M/J/12 For Examiner's Use 6 Hart is a trader. His balance sheet at 30 April 2012 was as follows. Balance Sheet at 30 April 2012 $ $ $ Tangible non-current assets (at book value) 9 500 Current assets Inventory 3 900 Trade receivables 6 600 Other receivables 780 Cash 120 11 400 Current liabilities Trade payables 9 700 Bank overdraft 4 100 13 800 Net current assets (2 400) 7 100 Financed by Capital Opening balance 10 000 Profit for the year 400 10 400 Less drawings 3 300 7 100 REQUIRED (a) State what is meant by a business being a going concern. [2] (b) (i) State the formula for the calculation of the current ratio. [1] (ii) Calculate Hart’s current ratio at 30 April 2012. Show your workings and give your answer to two decimal places. [2]

19 © UCLES 2012 0452/12/M/J/12 [Turn over For Examiner's Use (iii) State and explain whether Hart will be satisfied with his current ratio. Will he be satisfied? Reason [3] Hart believes that he could make more profit if he increased his sales. He decided to ask the bank for a long-term loan of $10 000 to help him buy additional inventory. If the bank agreed to the loan, interest at 5% per annum would be charged. Hart intended to use the loan to repay the bank overdraft and to purchase additional inventory. REQUIRED (c) In the table below, place a tick (
) under the correct heading to show the effect taking the loan will have on the following items. Increase Decrease No effect Capital Current assets Current liabilities Non-current liabilities [4] (d) State two reasons why the bank would want to see Hart’s financial statements before agreeing to the loan. (i) (ii) [4]

20 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. © UCLES 2012 0452/12/M/J/12 For Examiner's Use (e) The bank decided to refuse Hart’s application for a loan. Suggest two reasons for the bank’s decision. (i) (ii) [4] (f) Suggest two other possible sources of finance for Hart’s business. (i) (ii) [4] [Total: 24]

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 0452/12 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 2012 question papers for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses. www.theallpapers.com

Page 2 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 12 © University of Cambridge International Examinations 2012 1 Key (a) A [1] (b) C [1] (c) B [1] (d) B [1] (e) A [1] (f) D [1] (g) D [1] (h) C [1] (i) C [1] (j) B [1] [Total: 10] 2 (a) Purchases (ledger)/Trade Payables / Creditors [1] (b) Cost and net realisable value [1] (c) Income Expense Bad debt recovered ✓(1) Carriage inwards ✓(1) Discount received ✓(1) [3] (d) (i) When a transaction is entered using the correct amount and on the correct side (1), but in the wrong class of account. (1) Example – Motor Vehicles debited to the account of Motor Expenses Any suitable example of an error of principle (2) (ii) Compensating errors occur when two or more errors cancel each other out (2) Example – sales account undercast and wages account undercast Any suitable example of a compensating error (2) [8] www.theallpapers.com

Page 3 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 12 © University of Cambridge International Examinations 2012 (e) 4% × $28 000 = $1120 [1] (f) (i) $120 – $87.60 = $32.40 (1) (ii) $87.60 (1) [2] (g) Payments $715 Less opening accrual 240 (1) 475 Plus closing accrual 320 (1) Charge for the year 795 (1) [3] (h) (6000 × $1.50) or $9000 (1) × 3% × ½ = $135 (1) [2] [Total: 21] 3 (a) Mitchell April 8 Amanda paid $120 in cash to Mitchell (1) Julian April 9 Amanda received a cheque, $194, from Julian (1) Julian was allowed $6 cash discount for prompt payment (1) Sylvia April 14 Amanda received a cheque, $180 from Sylvia (1) Sylvia April 21 The cheque, $180, previously received from Sylvia was dishonoured by the bank (1) Equipment April 26 Amanda purchased equipment, $2000, by cheque (1) Sales April 28 Amanda sold good for cash $1300 (1) [7] (b) This is a contra entry. (1) Office cash was paid into the bank (1) [2] (c) (i) The cash balance represents the cash in hand (1) The bank balance represents a bank overdraft (1) [2] (ii) Cash balance – current asset (1) Bank balance – current liability (1) [2] (iii) It is not possible to take out more cash than is available [2] www.theallpapers.com

Page 4 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 12 © University of Cambridge International Examinations 2012 (d) Amanda Mitchell account $ $ 2012 April 6 Cash 120 (1) Julian account $ $ 2012 April 9 Bank 194 (1) Discount 6 (1) Sylvia account $ $ 2012 2012 April 21 Bank (dis.chq 180 (1) April 14 Bank 180 (1) Equipment account $ $ 2012 April 26 Bank 2000 (1) Sales account $ $ 2012 April 28 Cash 1300 (1) Discount allowed account $ $ 2012 April 30 Total for month 6 (1) + (1) for dates [9] [Total: 24] 4 (a) (i) Expenses are overstated (1) Profit for the year is understated (1) [2] (ii) Non-current assets are understated (1) Owner’s capital (Profit )is understated (1) [2] www.theallpapers.com

Page 5 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 12 © University of Cambridge International Examinations 2012 (b) Capital expenditure Revenue expenditure Purchase of computer ✓(1) Purchase of laser printer ✓(1) Replacement of hard disc in computer ✓(1) [3] (c) (i) ($4800 + $750) (1) O/F based on answer to (b) – $600 (1) = $4950 (1) years 3 $4950 = $1650 (1) O/F [4] (ii) ($4800 + $750) O/F based on answer to (b) – $1650 (1) O/F = $3900 (1) O/F [2] (d) Non-current tangible asset Non-current intangible asset Current asset Office building ✓(1) Motor vehicle ✓(1) Goodwill ✓(1) Work in progress ✓(1) [4] [Total: 17] www.theallpapers.com

Page 6 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 12 © University of Cambridge International Examinations 2012 5 (a) Rachel Smith Income Statement for the year ended 31 March 2012 $ $ $ Revenue 63 100 (1) Less Cost of sales Opening inventory 3 100 (1) Purchases 42 500 (1) Less Purchases returns 1 900 (1) 40 600 Carriage inwards 1 050 (1) 41 650 44 750 Less Closing inventory 3 750 (1) 41 000 (1) OF Gross profit 22 100 (1) OF Less Carriage outwards 540 Bad debts 190 (1) Provision for doubtful debts 150 (1) Property tax (6000 – 1200) 4 800 (2) Wages (7100 + 180) 7 280 (2) General expenses 1 620 Depreciation – Equipment 1 920 (1) 16 500 Profit for the year 5 600 (1) OF [16] (b) (i) O/F (1) (1) } O/F} 35.02% 1 100 100 63 100 22 = × [2] (ii) Increase selling prices Reduce cost of purchases Any 1 comment (2) [2] (c) (i) O/F (1) (1) } O/F} 8.87% 1 100 100 63 600 5 = × [2] (ii) Reduce expenses Increase gross profit Increase other income Any 1 comment (2) [2] [Total: 24] 6 (a) The business will continue to operate for an indefinite period of time (1) and there is no intention to close down or significantly reduce the size of the business. (1) [2] (b) (i) Current assets : Current liabilities [1] (ii) 11 400 : 13 800 (1) = 0.83 : 1 (1) [2] www.theallpapers.com

Page 7 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2012 0452 12 © University of Cambridge International Examinations 2012 (iii) Unsatisfied (1) The business cannot meet the immediate liabilities from the immediate assets (2) [3] (c) Increase Decrease No effect Capital ✓(1) Current assets ✓(1) Current liabilities ✓(1) Non-current liabilities ✓(1) [4] (d) To assess whether the interest can be paid when due To assess whether the loan can be repaid when due To assess whether there is security for the loan Any 2 reasons (2) each [4] (e) There are not enough non-current assets for security of the loan There is not enough profit to cover the loan interest The business would not be able to re-pay the loan on time Drawings for the year exceed the profit for the year Any 2 reasons (2) each [4] (f) Introduce additional capital Admit a partner/form a limited company Mortgage Loans from other sources Sell surplus non-current assets Any 2 (2) each [4] [Total: 24] www.theallpapers.com