Cambridge IGCSE Accounting 0452 — 2013 May/June Paper 1 · Variant 2

This document consists of 20 printed pages. IB13 06_0452_12/3RP © UCLES 2013 [Turn over *5051368355* UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING 0452/12 Paper 1 May/June 2013 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 2013 0452/12/M/J/13 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 book of prime (original) entry is written up from copies of invoices issued? A purchases journal B purchases ledger C sales journal D sales ledger [1] (b) John Smith provided the following information: $ balance on purchases ledger control account on 1 May 2013 3920 credit total of purchases journal on 31 May 2013 8380 total of purchases returns journal on 31 May 2013 270 cheques paid to creditors in May 2013 7660 What was the balance on the purchases ledger control account on 1 June 2013? A $2930 credit B $4370 credit C $2930 debit D $4370 debit [1] (c) The revaluation method of depreciation is most suitable for which non-current asset? A computers B delivery van C filing cabinets D loose tools [1]

3 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use (d) Joe allows his debtors one month’s credit. He provides the following information at the end of his financial year on 31 May 2013. Ann owes $100 for goods supplied on 1 April 2013. Bill owes $50 for goods supplied on 1 June 2011 and Joe has been unable to contact Bill. Carl owes $200 for goods supplied on 1 May 2013, but Carl has said he will not be able to pay before July 2013. How much should Joe write off as bad debts on 31 May 2013? A $50 B $150 C $250 D $350 [1] (e) How should inventory be valued? A higher of selling price and cost B higher of net realisable value and cost C lower of selling price and cost D lower of net realisable value and cost [1] (f) The following information is provided. $ revenue 220 000 purchases 130 000 opening inventory 10 000 closing inventory 12 000 What is the cost of goods sold? A $90 000 B $92 000 C $128 000 D $132 000 [1]

4 © UCLES 2013 0452/12/M/J/13 For Examiner's Use (g) Amy and Beth are in partnership, sharing profits equally. No salaries are paid to the partners. They provided the following information for the financial year ended 31 December 2012. $ profit for the year 100 000 interest charged on partners' drawings Amy 6 000 Beth 4 000 How much was credited to Beth's current account for the year ended 31 December 2012? A $50 000 B $51 000 C $55 000 D $59 000 [1] (h) What does a receipts and payment account show? A accumulated fund B opening and closing cash balances C surplus or deficit for the year D value of assets owned [1] (i) The table shows the performance of two businesses, X and Y, in a financial year. business gross profit as a % of sales net profit as a % of sales X 33.5 8.6 Y 28.0 11.5 What is revealed by comparing the ratios for X and Y? A X controls its overhead expenses better than Y. B Y controls its overhead expenses better than X. C X’s cost of sales is higher than Y’s. D Y’s cost of sales is higher than X’s. [1]

5 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use (j) Which accounting principle is applied when non-current assets are depreciated? A accruals (matching) B consistency C duality D realisation [1] [Total: 10]

6 © UCLES 2013 0452/12/M/J/13 For Examiner's Use 2 (a) State the accounting equation. [1] (b) Explain the difference between book-keeping and accounting. [4] The following balances are taken from Teresa’s books of account on 31 January 2013. $ Drawings 29 100 Vehicles 16 200 Rent 3 400 Inventory at 1 February 2012 19 100 Equipment 12 100 Trade payables 16 600 Trade receivables 19 300 Sales 210 100 Purchases 131 600 Carriage inwards 400 Discount received 1 100 Bank overdraft 17 000 Wages 21 800 General expenses 11 200 Capital ?

7 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use (c) Complete Teresa’s trial balance at 31 January 2013 showing her capital account balance. Teresa Trial Balance at 31 January 2013 $ $ Drawings Vehicles Rent Inventory at 1 February 2012 Equipment Trade payables Trade receivables Sales Purchases Carriage inwards Discount received Bank overdraft Wages General expenses Capital [8] (d) Name and explain two errors which would not affect the balancing of a trial balance. Name of error Explanation Name of error Explanation [6]

8 © UCLES 2013 0452/12/M/J/13 For Examiner's Use (e) Teresa’s profit for the year ended 31 January 2013 was $48 200. Prepare Teresa’s capital account. Balance the account on 31 January 2013 and bring down the balance on 1 February 2013. Teresa Capital account [4] (f) State two ways in which Teresa can use her accounting information. 1 2 [2] [Total: 25]

9 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use 3 (a) Complete the table below giving the name of each accounting principle described. Principle The same accounting treatment should be applied to similar items at all times. Every transaction has a two-fold aspect. Transactions must be expressed in money terms. Profit should not be overstated by ignoring foreseeable losses. Financial statements assume that a business will continue to operate indefinitely. [5] A sales invoice sent by Gordon to Jacqui in February showed the following. Quantity Description Unit price Total price $ $ 10 Cans of cooking oil 7.50 75.00 Less: 20% trade discount 15.00 60.00 (b) State why Gordon allowed Jacqui a trade discount. [2]

10 © UCLES 2013 0452/12/M/J/13 For Examiner's Use (c) (i) Jacqui was entitled to a 5% cash discount. Calculate the value of the cash discount. [1] (ii) Show how the cash discount would be recorded in Gordon’s books of account. Account to be debited Account to be credited [2] (iii) State why Gordon allowed Jacqui a cash discount. [2] (d) Indicate by placing a tick (
) in the table below to indicate whether each business is a trading or a service business. The first has been completed as an example. Trading business Service business Clothing retailer
Accountant Hairdresser Car dealer Computer component manufacturer [2] [Total: 14]

11 © UCLES 2013 0452/12/M/J/13 [Turn over Question 4 is on the next page.

12 © UCLES 2013 0452/12/M/J/13 For Examiner's Use 4 Clothilde Manufacturing Limited provided the following information. At 1 February 2012 At 31 January 2013 $ $ Raw materials 3 600 6 200 Work-in-progress 5 800 6 100 Finished goods 19 600 26 600 For the year ended 31 January 2013 $ Purchases of raw materials 190 800 Direct wages 86 000 Salary of factory supervisor 15 000 Carriage on raw materials 1 100 Other sales and administration costs 59 000 Depreciation of machinery 3 000 Rent 30 000 Power 25 000 Insurance 5 000 The costs of rent, power and insurance are apportioned 80% to the factory and 20% to the office.

13 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use (a) Prepare the manufacturing account for the year ended 31 January 2013. Clothilde Manufacturing Limited Manufacturing Account for the year ended 31 January 2013 [16]

14 © UCLES 2013 0452/12/M/J/13 For Examiner's Use (b) Calculate the cost of sales as it would appear in the income statement for the year ended 31 January 2013. [3] (c) All goods are sold using a mark-up of 50%. Calculate the revenue (sales) for the year ended 31 January 2013. [2] [Total: 21]

15 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use 5 (a) Complete the following sentence. The cash book is a book of prime entry and also a [2] Riaz is a trader in clothing. The following balances were taken from his books of account at 1 January 2012. $ Rent 6000 Dr Commission payable 1700 Cr Stationery 120 Dr He made the following payments. 2012 $ February 28 rent for six months to 31 August 2012 18 000 September 1 rent for six months to 28 February 2013 19 800 Total payments to the salesmen for commission 18 100 Total payments for stationery 1 880 Other information is as follows. 1 Commission due on 31 December 2012 amounted to $1150. 2 The charge for stationery in the income statement for the year ended 31 December 2012 was $1910.

16 © UCLES 2013 0452/12/M/J/13 For Examiner's Use (b) Prepare the following ledger accounts for the year ended 31 December 2012. Balance the accounts and bring down the balances on 1 January 2013. Rent account [6] Commission payable account [5] Stationery account [5]

17 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use (c) Complete the table below. The first item has been completed as an example. Ledger account Balance sheet Heading Item Rent Current assets Other receivables Commission payable Stationery [4] It was discovered that the cash balance in the cash book was $250 higher than the cash actually in hand. It was later found that Riaz had taken goods with a cost of $150 and a selling price of $250 for his own use. This had been recorded in the books of account as a cash sale. (d) Prepare the journal entries to correct this error. Narratives are not required. Debit $ Credit $ [4] [Total: 26]

18 © UCLES 2013 0452/12/M/J/13 For Examiner's Use 6 Jarvis Limited provided the following information about its assets and liabilities: At 31 March 2012 2013 $ $ Machinery at book value 95 000 76 000 Fixtures and fittings at book value 11 000 36 000 Vehicle at book value 4 000 26 000 Inventory 19 000 27 000 Trade receivables 16 000 18 000 Bank 8 000 - Trade payables 14 000 21 000 Bank overdraft - 6 000 Long term loan 10 000 15 000 (a) (i) Calculate to two decimal places the current ratio at both 31 March 2012 and 31 March 2013. [4] (ii) Suggest one reason for the change in the current ratio. [1]

19 © UCLES 2013 0452/12/M/J/13 [Turn over For Examiner's Use (b) (i) Calculate to two decimal places the quick ratio (acid test ratio) at both 31 March 2012 and 31 March 2013. [4] (ii) Suggest one possible effect of the change in the quick ratio (acid test ratio). [2] (c) Suggest two reasons for the change in the company’s bank balance [2]

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 2013 0452/12/M/J/13 For Examiner's Use The equity section of Jarvis Limited’s balance sheets showed the following: At 31 March 2012 2013 $ $ Ordinary shares of $0.50 each 100 000 100 000 Retained earnings 29 000 31 000 General reserve - 10 000 The profit for the year ended 31 March 2013 was $26 000. On 1 June 2012 the directors paid a dividend of $0.03 per share. On 15 January 2013 they paid a further dividend of 8%. (d) Prepare the appropriation account for the year ended 31 March 2013. Jarvis Limited Appropriation Account for the year ended 31 March 2013 [7] (e) Explain why Jarvis Limited created a general reserve. [2] (f) Explain the difference between authorised and issued share capital. [2] [Total: 24]

CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June 2013 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 May/June 2013 series for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.

Page 2 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 1 (a) C (b) B (c) D (d) A (e) D (f) C (g) C (h) B (i) B (j) A (1) Mark each [Total: 10] 2 (a) Asset – Liabilities = Capital [1] (b) Bookkeeping – detailed recording of all financial transactions of a business (2) Accounting – preparing financial statements at regular intervals from the bookkeeping records (2) [4] (c) Teresa Trial Balance at 31 January 2013 $ $ Drawings 29 100 (1) Vehicles 16 200 Rent 3 400 Inventory at 1 February 2012 19 100 (1) Equipment 12 100 Trade payables 16 600 (1) Trade receivables 19 300 (1) Sales 210 100 Purchases 131 600 Carriage inwards 400 (1) Discount received 1 100 (1) Bank overdraft 17 000 Wages 21 800 General expenses 11 200 Capital 19 400 (1) OF 264 200 264 200 (1) CF [8]

Page 3 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 (d) Any two from – Omission (1) A transaction is completely omitted from the books (2) Commission (1) A transaction is posted to the wrong account of the same class (2) Principle (1) A transaction is posted to an account of the wrong class (2) Original entry (1) An incorrect figure is used when the transaction is first recorded (2) Reversal (1) A debit entry is posted on the credit side and vice versa (2) Compensating (1) Two or more errors cancel each other out (2) Naming any 2 errors (1) each Describing the two named errors (2) each [6] (e) Teresa Capital account $ $ 2013 2012 Jan 31 Drawings 29 100 (1) Feb 1 Balance b/d 19 400 (1) OF Balance c/d 38 500 2013 Jan 31 Profit for year 48 200 (1) 67 600 67 600 2013 Feb 1 Balance b/d 38 500 (1) OF [Dates and narratives not required] [4] (f) To monitor progress (1) using accounting ratios (1) For decision-making (1) for future planning (1) For comparison purposes (1) with previous years or other businesses (1) [2] [Total: 25] 3 (a) Consistency (1) Duality (1) Money measurement (1) Prudence (1) Going concern (1) [5]

Page 4 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 (b) One from – Jacqui made bulk purchases Jacqui is in the same trade Jacqui is a regular customer Any one reason (2) [2] (c) (i) 5% × $60 = $3 [1] (ii) Account to be debited Account to be credited Discount allowed (1) Jacqui (1) [2] (iii) One from – Jacqui made prompt payment Jacqui paid before the due date Any one reason (2) [2] (d) Trading business Service business Accountant ✓} for both Hairdresser ✓} Car dealer ✓} for both Computer component manufacturer ✓} [2] [Total: 14]

Page 5 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 4 (a) Clothilde Manufacturing Account for the year ended 31 January 2013 $ $ Opening inventory of raw materials 3 600 Purchases of raw materials 190 800 (1) Carriage on raw materials 1 100 (1) 195 500 Less Closing inventory of raw materials 6 200 Cost of materials consumed (1) 189 300 (1) OF Direct wages 86 000 (1) Prime cost (1) 275 300 (1) OF Factory overheads Supervisor’s salary 15 000 Factory rent 80% × 30 000 24 000 (1) Factory power 80% × 25 000 20 000 (1) Factory insurance 80% × 5000 4 000 (1) Depreciation of machinery 3 000 66 000 (1) CF 341 300 (1) OF Opening work in progress 5 800 (1) 347 100 Closing work in progress 6 100 (1) Production cost of goods completed (1) 341 000 (1) OF [16] (b) $ Production cost of goods completed 341 000 (1) OF Opening inventory of finished goods 19 600 360 600 Closing inventory of finished goods 26 600 (1) for both inventories Cost of sales 334 000 (1) OF [3] (c) $334 000 (1) OF + 50% = $501 000 (1) OF [2] [Total: 21]

Page 6 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 5 (a) Ledger account [2] (b) Rent account $ $ 2012 2012 Jan 1 Balance b/d 6 000 (1) Dec 31 Income Feb 28 Bank /Cash 18 000 (1) statement 37 200 (1) OF Sept 1 Bank /Cash 19 800 (1) Balance c/d 6 600 43 800 43 800 2013 Jan 1 Balance b/d 6 600 (1) OF + (1) dates [6] Commission payable account $ $ 2012 2012 Dec 31 Bank /Cash 18 100 (1) Jan 1 Balance b/d 1 700 (1) Balance c/d 1 150 Dec 31 Income ______ statement 17 550 (1) OF 19 250 19 250 2013 Jan 1 Balance b/d 1 150 (1) OF + (1) dates [5] Stationery account 2012 2012 Jan 1 Balance b/d 120 (1) Dec 31 Income Dec 31 Bank /Cash 1 880 (1) statement 1 910 (1) CF ____ Balance c/d 90 2 000 2 000 2013 Jan 1 Balance b/d 90 (1) OF + (1) dates [5] (c) Ledger account Balance sheet Heading Item Commission payable Current liabilities (1) Other payables (1) Stationery Current assets (1) Other receivables (1) [4]

Page 7 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 (d) Journal Debit $ Credit $ Sales Cash Drawings Purchases 250 150 250 150 (1) (1) (1) (1) [4] [Total: 26]

Page 8 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 6 (a) (i) At 31 March 2012 3.07 : 1 (2) CF At 31 March 2013 1.67 : 1 (2) CF [4] (ii) Any one from – Increase in trade receivables Increase in trade payables Change in bank balance to overdrawn Any one reason (1) [1] (b) (i) At 31 March 2012 1.71 : 1 (2) CF At 31 March 2013 0.67 : 1 (2) CF [4] (ii) Any one from – May have difficulty in paying debts when due May not be able to obtain further supplies on credit Cannot take advantage of cash discounts Cannot take advantage of business opportunities when they arise Any one effect (2) [2] (c) Any two from – Purchase of non-current assets Purchase of inventory Dividends paid/tax paid Increase in debtors/non payment by debtors Any two reasons (1) each [2]

Page 9 Mark Scheme Syllabus Paper IGCSE – May/June 2013 0452 12 © Cambridge International Examinations 2013 (d) Jarvis Limited Appropriation Account for the year ended 31 March 2013 $ $ Profit for the year 26 000 (1) Less Transfer to general reserve 10 000 (1) Ordinary share dividend paid (6000 (1) + 8000 (1)) 14 000 24 000 2 000 (1) OF Retained profit brought forward 29 000 (1) Retained profit carried forward 31 000 (1) [7] (e) Any one from – To set aside profit for re-investment To indicate that part of the profit is not available for distribution To set aside profit for payment of future dividends Any one reason (2) [2] (f) Authorised share capital The total share capital a company is allowed to issue (1) Issued share capital The amount of the share capital which a company has actually issued to shareholders (1) [2] [Total: 24]