Cambridge IGCSE Accounting 0452 — 2012 Oct/Nov Paper 1 · Variant 2

This document consists of 20 printed pages. IB12 11_0452_12/2RP © UCLES 2012 [Turn over *5861359039* 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 October/November 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/O/N/12 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 sole trader record all the financial information about her business? A because she is required to do so by law B because she needs to pay her creditors on time C so that she can prepare final accounts D so that she knows how much her debtors owe her [1] (b) Ace Motors sold a delivery van on credit to M. Johnson. Which entries will be made in the books of Ace Motors? account debited account credited A M. Johnson motor vehicles B M. Johnson sales C motor vehicles M. Johnson D sales M. Johnson [1] (c) A business has a suspense account. It is found that the amount in the suspense account is in respect of a cash sale to Tahir, which was omitted from the sales account. Which entries will correct the error? account debited account credited A sales suspense B suspense sales C suspense Tahir D Tahir suspense [1]

3 © UCLES 2012 0452/12/O/N/12 [Turn over For Examiner's Use (d) A trader purchases a supply of office paper on credit. How should this transaction be recorded? debit credit A office equipment supplier B supplier office equipment C stationery supplier D supplier stationery [1] (e) Amounts owed by a trader for electricity are given below. $ 1 January 2 000 31 December 2 500 The charge for electricity shown in the income statement for the year ended 31 December was $15 500. What was the amount paid for electricity during the year? A $15 000 B $15 500 C $16 000 D $20 000 [1] (f) Amina lists her current assets in order of liquidity. In which order will the current assets appear? A bank, cash, inventory, trade receivables B cash, bank, trade receivables, inventory C inventory, trade receivables, bank, cash D trade receivables, inventory, bank, cash [1]

4 © UCLES 2012 0452/12/O/N/12 For Examiner's Use (g) How will partners’ interest on drawings be shown in the partnership’s financial statements? A debit income statement B credit income statement C debit appropriation account D credit appropriation account [1] (h) Which term describes the balancing figure in a receipts and payments account? A excess of expenditure over income for the period B excess of income over expenditure for the period C the profit or loss for the year D total cash and bank balances at the end of the year [1] (i) A trader sets his selling price by adding a profit figure on to the cost price. How does he do this? A by applying margin B by applying mark-up C by using the current ratio D by using the quick ratio [1] (j) Miriam supplies goods on credit to Anna. Applying the realisation principle, when does Miriam recognise the sales revenue? A when Anna acquires legal ownership of the goods B when Anna orders the goods C when Anna pays for the goods D when Anna receives a statement from Miriam [1] [Total: 10]

5 © UCLES 2012 0452/12/O/N/12 [Turn over Question 2 is on the next page.

6 © UCLES 2012 0452/12/O/N/12 For Examiner's Use 2 (a) Sheva returned faulty goods to her supplier, Limpo Limited. Name the business document which Limpo Limited issued to Sheva: (i) when the goods were supplied [1] (ii) when the goods were returned. [1] (b) Give two examples of accounts in the nominal (general) ledger which would be entered in the trading account section of the income statement. 1 2 [2] (c) Naomi bought goods on credit from Ruth for $560. Ruth offers 2½% discount for payment within ten days. Naomi paid her account within this period. Calculate the amount of the discount which Naomi received. [1] (d) Janni has been told that he must use the same method of providing depreciation from one year to the next. Name the accounting principle which is being applied. [1] (e) Lynch bought goods, $100, on credit, but he recorded this as $1000. Name the type of error which has been made. [1] (f) Mubara keeps his petty cash book on the imprest system with an imprest amount of $120. At 31 October there were vouchers for petty cash expenditure totalling $74.50 in the petty cash box. He had not claimed for a train fare of $17.50. State the amount which will remain in the petty cash box after he has claimed his train fare. [1]

7 © UCLES 2012 0452/12/O/N/12 [Turn over For Examiner's Use (g) (i) Explain what is meant by a bad debt. [2] (ii) Explain what is meant by a provision for doubtful debts. [2] (iii) Mary maintains a provision for doubtful debts at 3% of her trade receivables. On 1 September 2011 Mary’s provision for doubtful debts was $1350. On 31 August 2012 Mary’s trade receivables amounted to $48 000. How much would be charged in Mary’s income statement for the year ended 31 August 2012? [2] (h) Pringle Limited has an issued share capital of $40 000 divided into ordinary shares of $0.50 each. The company declared a dividend of $0.30 per share. What was the total amount of the dividend paid to shareholders? [2] [Total: 16]

8 © UCLES 2012 0452/12/O/N/12 For Examiner's Use 3 Walek sells goods for cash and on credit. He puts the cash receipts in a box and pays the total into his bank account each month. He pays the cheques received from his credit customers into the bank on the day he receives them. On 1 September 2012 Walek’s cash book showed a debit balance at the bank of $2400. Walek had the following transactions in September 2012. September $ 3 Cheque received from Lashki 640 4 Sold goods on credit to Sharon 420 9 Purchased goods on credit from Bruton 1980 14 Paid two weeks’ wages by cheque 250 16 Cheque received from Yovell 370 28 Paid two weeks’ wages by cheque 280 29 Paid cheque to Bruton 1980 30 Cash sales for the month 3560 On 21 September the bank returned Yovell’s cheque dishonoured. REQUIRED (a) Make the necessary entries in the bank columns of Walek’s cash book to record the above transactions. Balance the cash book and bring down the balance on 1 October 2012. Walek Cash Book (bank columns only) Date Details $ Date Details $ [8]

9 © UCLES 2012 0452/12/O/N/12 [Turn over For Examiner's Use (b) From the information given on page 8 and the entries in the cash book, make the entries in the following accounts in Walek’s ledger to record the transactions for September 2012. Walek Sales account Purchases account Wages account Lashki account Sharon account Yovell account Bruton account [11]

10 © UCLES 2012 0452/12/O/N/12 For Examiner's Use At 30 September Walek had recorded the cash sales in his cash book, but had not deposited the money in the bank. The cheque payable to Bruton dated 29 September was not cleared by the bank until 6 October. The bank statement at 30 September showed a balance at the bank of $2510. REQUIRED (c) Prepare a bank reconciliation statement for Walek at 30 September 2012. Walek Bank Reconciliation Statement 30 September 2012 [4] (d) Explain why items are recorded on the opposite side of the cash book to that on which they appear on the bank statement. [4] [Total: 27]

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

12 © UCLES 2012 0452/12/O/N/12 For Examiner's Use 4 Mbane sells craft items from a market stall. He sells for cash and buys his goods on credit. He prepared the following trial balance at 31 October 2012. Although the trial balance totals were equal, Mbane had made some errors. Mbane Trial Balance at 31 October 2012 Dr Cr $ $ Capital 2 600 Motor vehicle 4 400 Purchases 12 400 Trade payables 3 200 Revenue 30 800 Inventory 31 October 2012 3 300 General expenses 600 Cash at bank 5 200 Motor vehicle expenses 860 Drawings 8 640 36 000 36 000 Mbane had inventory on 1 November 2011 of $4500. REQUIRED (a) Prepare a corrected trial balance at 31 October 2012. Mbane Corrected Trial Balance at 31 October 2012 Dr $ Cr $ [7]

13 © UCLES 2012 0452/12/O/N/12 [Turn over For Examiner's Use (b) From your answer to (a) and the other information shown, prepare Mbane’s income statement for the year ended 31 October 2012. Mbane Income Statement for the year ended 31 October 2012 [8] (c) (i) State the formula for the calculation of working capital. [1] (ii) Calculate Mbane’s working capital at 31 October 2012. [2]

14 © UCLES 2012 0452/12/O/N/12 For Examiner's Use Mbane wishes to know the effect on his working capital of changes in his business. REQUIRED (d) In the table below, place a tick (✓) under the correct heading to show the effect on Mbane’s working capital of each of the following. Increase Decrease No change Increased revenue Increased trade payables Increased motor expenses Reduced drawings [4] (e) (i) State the formula for the calculation of the current ratio. [1] (ii) Calculate Mbane’s current ratio at 31 October 2012. Give your answer to one decimal place. [2] [Total: 25]

15 © UCLES 2012 0452/12/O/N/12 [Turn over Question 5 is on the next page.

16 © UCLES 2012 0452/12/O/N/12 For Examiner's Use 5 Agricola bought a tractor, $6400, on 1 January 2010 for use on his farm. The tractor will have a useful life of four years and is expected to have a scrap value of $800 after that time. REQUIRED (a) State two methods used to calculate depreciation of a non-current asset. 1 2 [2] Agricola decided to use the most suitable method to depreciate his tractor. REQUIRED (b) Calculate the following. Show your workings. (i) Depreciation for each of the two years ended 31 December 2010 and 31 December 2011. [3] (ii) Net book value at 31 December 2011. [2] (c) Agricola sold the tractor on 1 January 2012 for $2600. Prepare the disposal account. Agricola Disposal of tractor account [5]

17 © UCLES 2012 0452/12/O/N/12 [Turn over For Examiner's Use (d) (i) State one reason why there was a profit or loss on the sale of Agricola’s tractor. [2] (ii) Suggest one way in which a loss on a sale of a non-current asset may be reduced or avoided. [2] On checking his accounting records, Agricola discovered the following errors: 1 A cheque, $320, paid to Cattle Feeds Ltd had been debited to the account of Cattle & Co. 2 Repairs to farm machinery, $30, had been recorded in the farm machinery account. REQUIRED (e) Prepare journal entries to correct the above errors. Narratives are required. Agricola Journal Debit $ Credit $ [6] [Total: 22]

18 © UCLES 2012 0452/12/O/N/12 For Examiner's Use 6 Conrad has a supermarket and sells food and other groceries. Congo has a smaller shop and only sells fresh fruit and vegetables. The following information is available for the year ended 30 September 2012. Conrad Congo $ $ Revenue 120 000 48 000 Gross profit 42 000 26 400 Profit for the year 14 400 17 600 Capital at 1 October 2011 96 000 50 000 REQUIRED (a) (i) For each business, calculate the percentage of gross profit to revenue. Show your workings and give your answers to one decimal place. Conrad Congo [4] (ii) Give one reason for the difference in the percentage of gross profit to revenue between the two businesses. [2]

19 © UCLES 2012 0452/12/O/N/12 [Turn over For Examiner's Use (b) (i) For each business calculate the percentage of profit for the year to revenue. Show your workings and give your answers to one decimal place. Conrad Congo [4] (ii) State one reason for the difference in the percentage of profit for the year to revenue between the two businesses. [2] (c) (i) For each business calculate the return on the opening capital employed. Show your workings and give your answers to one decimal place. Conrad Congo [4]

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 0452/12/O/N/12 For Examiner's Use (ii) Give one reason for the difference in the return on opening capital employed between the two businesses. [2] (d) Conrad believes that he will increase his profit by increasing his sales. Explain why this may not be the case. [2] [Total: 20]

CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the October/November 2012 series 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 should be read in conjunction with the question paper and the Principal Examiner Report for Teachers. Cambridge will not enter into discussions about these mark schemes. Cambridge is publishing the mark schemes for the October/November 2012 series for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.

Page 2 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 1 Key (a) C [1] (b) B [1] (c) B [1] (d) C [1] (e) A [1] (f) C [1] (g) D [1] (h) D [1] (i) B [1] (j) A [1] [Total 10]

Page 3 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 2 (a) (i) [Sales] invoice [1] (ii) Credit note [1] (b) Revenue (sales), purchases, carriage inwards, Sales returns, purchase returns, inventory (any two) [2] (c) $14.00 [1] (d) Consistency [1] (e) Original Entry [1] (f) $28.00 [1] (g) (i) A bad debt is an amount owing/debtor (1) which they are unable or unwilling (1) to pay [2] (ii) An estimate (1) of the amount which a business will lose because of bad debts (1) [2] (iii) 3% x 48000 = $1 440 (1) $1440 – $1350 = $90 (1) [2] (h) 80000 shares (1) x $0.30 per share = $24000 OF (1) [2] [Total 16]

Page 4 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 3 (a) Walek – Cash Book (bank columns) September Detail Dr $ September Detail Cr $ 1 Balance b/d 2 400 14 Wages 250 (1) 3 Lashki 640 (1) 21 Yovell 370 (1) 16 Yovell 370 (1) 28 Wages 280 (1) 30 Sales 3 560 (1) 29 Bruton 1 980 (1) 30 Balance c/d 4 090 6 970 6 970 Oct 1 Balance b/d 4 090 (1) OF Mark for date, detail and amount. [8]

Page 5 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 (b) Sales account September $ 4 Sharon 420 (1) 27 Bank 3 650 (1) Do not accept Cash or Sales for the month Purchases account September $ 9 Bruton 1 980 (1) Wages account September $ 14 Bank 250 } 28 Bank 250 } (1) Lashki account September $ 3 Bank` 640 (1) Sharon account September $ 4 Sales 420 (1) Yovell account September $ September $ 21 Bank (dis chq) 370 (1) 16 Bank 370 (1) Bruton account September $ September $ 29 Bank 1 980 (1) 9 Purchases 1 980 (1) 1 mark for date [11]

Page 6 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 (c) Walek – Bank Reconciliation Statement at 30 September 2012 $ Balance shown on bank statement 2 510 (1) Add: amounts not yet credited – cash sales 3 560 (1) 6 070 Less Cheques not yet presented – Bruton 1 980 (1) Balance shown in cash book 4 090 (1) OF Marks for amounts not narratives Accept statements in reverse order [4] (d) The bank statement is a copy of the account of the business as it appears in the books of the bank. This is from the viewpoint of the bank (1) – the business depositing money is a creditor of the bank. (1) The bank account in the cash book is prepared from the viewpoint of the business (1) – the bank is a debtor of the business which has deposited the money (1). [4] [Total: 27]

Page 7 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 4 (a) Mbane - Trial Balance at 31 October 2012 Dr $ Cr $ Capital 2 600 (1) Motor Vehicle 4 400 Purchases 12 400 Trade payables 3 200 (1) Revenue 30 800 (1) Inventory at 1 November 2011 4 500 (1) General expenses 600 Cash at bank 5 200 (1) Motor expenses 860 Drawings 8 640 36 600 36 600 (2) CF (1) OF for matching totals if arithmetically correct; if both stock figures included then once counts as an alien [7] (b) Mbane Income statement for the year ended 31 October 2012 $ $ Revenue (sales) 30 800 (1) Cost of sales Inventory at 1 November 2011 4 500 (1) Purchases 12 400 (1) 16 900 Inventory at 31 October 2012 3 300 (1) 13 600 17 200 (1) OF Gross profit Expenses 600 (1) General expenses 860 (1) 1 460 Profit for the year 15 740 (1) OF [8] (c) (i) Working capital = current assets – current liabilities (CA-CL) [1] (ii) Working capital = $ 5 300 [2]

Page 8 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 (d) Increase Decrease No change Increased revenue (sales)
(1) Increased trade payables
(1) Increased motor expenses
(1) Reduced drawings
(1) [4] (e) (i) Current Assets : Current Liabilities (CA : CL) [1] (ii) 8500 : 3200 (1) = 2.7 : 1 (1) OF [2] [Total: 25] 5 (a) Straight line, reducing (diminishing) balance, revaluation (any two (1) each) [2] (b) (i) Depreciation = $ 6 400 – $ 800 4 years (1) for correct formula 2010 = $ 1 400 (1) OF 2011 = $ 1 400 (1) OF if same figure [3] (ii) Net book value = $6400 (1) – $2800 (1)OF = $3600 [2] (c) Agricola Disposal of Tractor Account 2012 $ 2012 $ Jan 1 Tractor 6 400 (1) Jan 1 Prov for Depr 2 800 (1) OF Bank/Cash 2 600 (1) Dec 31 Income Statement 1 000 (1) OF (Profit/Loss) 1 mark for date Accept P/L and IS for income statement [5] (d) (i) The sale proceeds were less than the net book value (worth) The expected life might have been shorter than assumed The expected scrap value was less than assumed Depreciation should have been higher Accept a valid non-accounting reason (eg: properly maintain asset) [2] (ii) Increase the rate of depreciation (NOT decrease/lower) Assume a shorter life Assume a lower scrap value Use a different method eg revaluation

Page 9 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 Accept a valid non-accounting reason (eg: properly maintain asset) [2] (e) Agricola Journal Debit $ Credit $ 1 Cattle Feeds Ltd 320 (1) Cattle & Co. 320 (1) Correction of error – Cattle & Co. wrongly debited (1) 2 Repairs to Machinery 30 (1) Machinery 30 (1) Correction of error –repairs to machinery entered in asset account (1) [6] [Total: 22] 6 (a) (i) Conrad’s supermarket Congo’s shop Percentage of gross profit to revenue (sales) = 35.0% (2) Accept 35 = 55.0% (2) Accept 55 [4] (ii) Supermarket/Conrad turnover is higher but gross profit percentage lower Supermarket prices may be lower than shop/Congo prices Different goods have different profit margins Customers may be willing to pay higher prices for fresh items Supermarket has to carry greater stock Any acceptable comment Any one comment (2) based on OF [2] (b) (i) Conrad’s supermarket Congo’s shop Percentage of net profit to revenue (sales) = 12.0% (2) Accept 12 = 36.7% (2) Accept 36.7 [4] (ii) Supermarket has higher expenses than shop Supermarket pays more rent than shop (or similar examples) Shop better at controlling expenses Any acceptable comment Any one comment (2) based on OF [2]

Page 10 Mark Scheme Syllabus Paper IGCSE – October/November 2012 0452 12 © Cambridge International Examinations 2012 (c) (i) Conrad’s supermarket Congo’s shop Return on Opening Capital employed = 15.0% (2) Accept 15 = 35.2% (2) Accept 35.2 [4] (ii) Supermarket made higher profit for the year on less capital Shop made better use of capital employed Any acceptable comment Any one comment (2) based on OF [2] (d) May reduce prices (1) so could be selling at a gross loss (1) May be selling at a lower profit margin (1) and not covering costs (1) May have higher expenses (1) which reduces profit (1) Any acceptable comment (1) for identification and (1) for expansion [2] [Total: 20]