Cambridge IGCSE Accounting 0452 — 2014 May/June Paper 1 · Variant 1

This document consists of 19 printed pages and 1 blank page. IB14 06_0452_11/6RP © UCLES 2014 [Turn over *7159834754* Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/11 Paper 1 May/June 2014 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 an HB pencil for any diagrams or graphs. Do not use staples, paper clips, 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 2014 0452/11/M/J/14 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 task is carried out by a book-keeper? A analysing information B assessing information C interpreting information D recording information [1] (b) Joe is about to supply goods to some new customers. Why would Joe want to examine their financial statements? B to check the cash position C to check the value of the inventory D to check how much profit was made [1] (c) In March, Wahid had the following transactions with Yussuf, a new customer. $ 4 March Goods invoiced to Yussuf 2400 16 March Credit note issued to Yussuf 300 23 March Goods invoiced to Yussuf 3000 28 March Cheque received from Yussuf 2100 How much did Yussuf owe Wahid on 31 March? B $3300 C $5100 D $5700 [1] A to check the amount of trade receivables A $3000

3 © UCLES 2014 0452/11/M/J/14 [Turn over (d) Which is a compensating error? B purchases of fixtures on credit debited to the repairs to fixtures account C sales account and sales returns account undercast by the same amount D Yeung’s account credited with a cheque received from Yang, another customer [1] (e) The following is a list of a builder’s expenditure for the year. $ motor vehicle 10 000 purchases 25 000 wages 20 000 rent of offices 6 000 machinery 7 000 petrol 3 000 What is the amount of capital expenditure? B $17 000 C $54 000 D $71 000 [1] A credit sales debited to the sales account and credited to the customer’s account A $10 000

4 © UCLES 2014 0452/11/M/J/14 (f) A business uses the straight line method of depreciation. The following information is provided. motor vehicles at cost $30 000 anticipated life 4 years residual value $2000 What is the annual depreciation charge for motor vehicles? B $5000 C $7000 D $7500 [1] (g) How should inventory be valued in the statement of financial position? B at historic cost C at net book value D at the lower of cost and net realisable value [1] (h) At 1 January 2013 a trader owed wages of $1000. During the year ended 31 December 2013 wages of $4000 were paid. At 31 December 2013 wages of $1200 were owed. How much should have been entered in the income statement for wages for the year ended 31 December 2013? B $4000 C $4200 D $6200 [1] A $2000 A at an amount determined by professional valuation A $3800

5 © UCLES 2014 0452/11/M/J/14 [Turn over (i) The following information was extracted from the financial statements of Bob. $ bank overdraft 3 000 inventory 7 000 trade payables 12 000 trade receivables 18 000 How much extra capital would Bob have to invest to make the value of his working capital $24 000? B $11 000 C $14 000 D $20 000 [1] (j) Which statement about financial statements is correct? B They provide financial information about a business’s past performance, based on historic cost. C They provide information about a business’s performance in the market. D They provide information about the future profits of the business. [1] [Total: 10] A $8000 A They provide an accurate profit for the past year, if the double entry system is followed.

6 © UCLES 2014 0452/11/M/J/14 2 (a) Yuri keeps a full set of accounting records. Name the ledger in which each of the following accounts is found. Account Ledger Insurance Sales Purchases Lottie, a credit supplier Matthew, a credit customer Capital [6] (b) Yuri maintains a sales journal, a sales returns journal, a purchases journal and a purchases returns journal. Name one other book of prime entry which he may maintain. [1] (c) State why it is useful for a business to maintain a sales journal. [2] On 1 April Susan and Elinor owe Yuri $260 and $120 respectively. Yuri’s sales journal and sales returns journal for the month showed the following. Sales journal $ April 4 Susan 600 16 Elinor 320 920 Sales returns journal $ April 12 Susan 105 17 Elinor 46 151

7 © UCLES 2014 0452/11/M/J/14 [Turn over REQUIRED (d) Prepare the following ledger accounts for the month of April. Balance the accounts where necessary and bring down the balances on 1 May. Elinor account Sales account Sales returns account [8] On 8 April Susan paid the amount she owed on 1 April, after taking 5% cash discount. REQUIRED (e) Calculate the amount which Yuri received from Susan. [2]

8 © UCLES 2014 0452/11/M/J/14 Yuri employs a book-keeper to maintain the accounts of his credit customers. REQUIRED (f) Name the account which Yuri prepares to check for fraud or error in the book-keeper’s work. [1] [Total: 20]

9 © UCLES 2014 0452/11/M/J/14 [Turn over 3 Highfield Manufacturing Limited provided the following information. On 1 March 2013 the balance on the provision for doubtful debts account was $2966. On 28 February 2014 trade receivables totalled $76 200. This total includes an amount of $1100 due from a debtor who has gone bankrupt and which will not be recovered. During the year $200 was received as part settlement of a debt of $400 which had been written off 18 months earlier. The provision for doubtful debts is maintained at 5%. REQUIRED (a) Prepare the following ledger accounts for the year ended 28 February 2014. Show the transfers to the income statement. Bring down any balances remaining on 1 March 2014. Highfield Manufacturing Limited Bad debts account Bad debts recovered account Provision for doubtful debts account [9]

10 © UCLES 2014 0452/11/M/J/14 (b) Explain how accounting for bad debts and providing for doubtful debts applies the following accounting principles. (i) accruals (matching) [2] (ii) prudence [2] (c) Explain the term ‘prime cost’ which appears in the financial statements of Highfield Manufacturing Limited. [2] (d) All the goods sold by Highfield Manufacturing Limited are produced in its factory. Name the term which replaces ‘ordinary goods purchased’ in its trading section of the income statement. [1] (e) The company’s statement of financial position contains entries for ordinary share capital, preference share capital, debentures and a bank loan. Explain one difference (i) between ordinary shares and preference shares [2]

11 © UCLES 2014 0452/11/M/J/14 [Turn over (ii) between ordinary shares and debentures. [2] (f) The 6% bank loan of $50 000 was taken out on 1 July 2013. Calculate the interest charged in the income statement for the year ended 28 February 2014. [2] (g) Name two interested parties who would use the financial statements of Highfield Manufacturing Limited. 1 2 [2] [Total: 24]

12 © UCLES 2014 0452/11/M/J/14 4 (a) State what is meant by the term ‘subscription’ in a club’s accounts. [1] (b) Speedy Runner Sports Club maintains a subscriptions account. Explain why this account can have two opening balances. [2] (c) The first column in the table below gives a term used in the financial statements of a sole trader. Complete the table by entering in the second column the equivalent term in the financial statements of a club or society. Sole trader Club or society Capital Profit for the year Loss for the year [3] (d) Complete the table below. Put two ticks (✓) in each row to indicate whether the item would appear on the debit side or credit side of the receipts and payments account or the income and expenditure account. The first one has been completed as an example. Debit Credit Receipts and payments account Income and expenditure account Depreciation charge ✓ ✓ Proceeds of sale of equipment Loss on disposal of equipment Unpaid subscriptions written off Purchase of new equipment Profit on sale of refreshments [10]

13 © UCLES 2014 0452/11/M/J/14 [Turn over Speedy Runners Sports Club provided the following information. $ Payments made to suppliers of refreshments for the year ended 31 December 2013 2480 Amounts owing to suppliers for refreshments - at 31 December 2012 200 - at 31 December 2013 220 REQUIRED (e) Complete the income statement (trading account) below. Speedy Runners Sports Club Income Statement (Trading Account) for the year ended 31 December 2013 $ $ Revenue 6150 Inventory – 1 January 380 Purchases Inventory – 31 December Cost of sales Gross profit 3610 [5] (f) Explain why there are no drawings in a club or society. [2] (g) Explain what is meant by the accounting policy of comparability. [2] [Total: 25]

14 © UCLES 2014 0452/11/M/J/14 5 Miguel reconciles the balance on his cash book with the balance on his bank statement. (a) Complete this sentence. Items in the cash book which do not appear on the bank statement are usually caused by differences. [1] Miguel’s cash book (bank columns only) showed the following entries. 2014 $ 2014 $ May 2 Cash sales 4216 May 1 Balance b/d 1168 3 Alice 420 2 David 3112 3 Bertram 280 3 Vehicle repairs 180 4 Cash sales 2132 4 Edward 1181 5 Charles 111 5 Wages 1112 7 Balance c/d 2720 6 Francis 3126 9879 9879 May 8 Balance b/d 2720 His bank statement for the same period showed the following. Dr Cr Balance $ $ $ May 1 Balance 1168 Dr 2 Insurance 120 1288 Dr 5 Cash 4216 2928 Cr 5 Alice 420 3348 Cr 5 Bertram 280 3628 Cr 5 Wages 1112 2516 Cr 6 Interest 65 2451 Cr 6 David 3112 661 Dr 7 Edward 1181 1842 Dr 7 Gordon 920 922 Dr

15 © UCLES 2014 0452/11/M/J/14 [Turn over REQUIRED (b) Update the cash book and bring down the balance on 8 May 2014. Miguel Cash book (bank columns only) Date Details $ Date Details $ May 8 Balance b/d 2720 [5] (c) Prepare the bank reconciliation statement at 8 May 2014. Miguel Bank reconciliation statement at 8 May 2014 [8]

16 © UCLES 2014 0452/11/M/J/14 [Turn over Miguel also maintains a petty cash book with an imprest amount of $100 which is restored at the start of each month. On 31 March the total of vouchers in the petty cash book was $66. REQUIRED (d) Calculate the amount the chief cashier gave to the petty cashier on 1 April. [1] [Total: 15]

17 © UCLES 2014 0452/11/M/J/14 [Turn over 6 Anton and Belle have been in partnership for some years. From the start of trading their fixed capital has been $100 000 and $80 000 respectively. Their partnership agreement allows for interest on capital of 10% a year, a salary to Anton of $12 000 a year and a profit sharing ratio of 2:1 respectively. Other information is as follows. $ At 1 January 2013 Current account – Anton 10 400 Dr Current account – Belle 1 500 Cr For the year ended 31 December 2013 Drawings - Anton 32 000 Drawings - Belle 14 000 Interest on drawings - Anton 1 600 Interest on drawings - Belle 500 Profit for the year 72 900 REQUIRED (a) Prepare the partnership appropriation account for the year ended 31 December 2013. Anton and Belle Appropriation Account for the year ended 31 December 2013 [8]

18 © UCLES 2014 0452/11/M/J/14 (b) Prepare Anton’s current account for the year ended 31 December 2013. Bring down the balance on 1 January 2014. [8] Additional information $ At 31 December 2013 Non-current assets 146 000 Inventory 51 000 Other net current assets 13 000 Long-term loan (taken out in 2009 and to be repaid in 2019) 12 000 REQUIRED (c) Calculate the capital employed at 31 December 2013. [3] (d) Using your answer from (c), calculate to two decimal places the return on capital employed for the year ended 31 December 2013. [3] Question 6(e) is on the next page.

19 © UCLES 2014 0452/11/M/J/14 Anton and Belle had a return on capital employed of 20% in the year ended 31 December 2012 and are surprised by the change. Investigation showed that the inventory at 31 December 2013 should have been recorded at a value of $15 000, not $51 000. REQUIRED (e) Calculate the correct profit for the year ended 31 December 2013. [4] [Total: 26]

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. 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 2014 0452/11/M/J/14 BLANK PAGE

CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June 2014 series 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 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 2014 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 2014 0452 11 © Cambridge International Examinations 2014 1 (a) D (b) B (c) A (d) C (e) B (f) C (g) D (h) C (i) C (j) B (1) each [10]

Page 3 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 11 © Cambridge International Examinations 2014 2 (a) Account Ledger Insurance nominal/general (1) Sales nominal/general (1) Purchases nominal/general (1) Lottie, a supplier purchases (1) Matthew, a credit customer sales (1) Capital nominal/general (1) [6] (b) Cash book Petty cash book General journal Any one (1) [1] (c) To reduce number of entries/detail in sales account Allows work to be shared between several people Provides list of credit sales Any 1 reason (2) [2] (d) Elinor account $ $ Apl 1 Balance b/d 120 (1) Apl 17 Returns 46 (1) 16 Sales 320 (1) 30 Balance c/d 394 (1) 440 440 May 1 Balance b/d 394 (1)OF Sales account $ Apl 30 Credit sales for month 920 (1) Sales returns account $ Apl 30 Sales returns for month 151 (1) + (1) dates [8] (e) 260 × 0.95 (1) = $247 (1) OR 260 – 13 (1) = $247 (1) OR 260 – 5% = $247 (2) [2] (f) Sales ledger control account. (1) [1] [Total: 20]

Page 4 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 11 © Cambridge International Examinations 2014 3 (a) Highfield Manufacturing Limited Bad debts account 2014 $ 2014 $ Feb 28 Debtor 1100 (1) Feb 28 Income Statement 1100 (1) 1100 1100 Bad debts recovered account 2014 $ 2014 $ Feb 28 Income Feb 28 Bank/cash/ Statement 200 (1) debtor 200 (1) 200 200 Provision for doubtful debts account 2014 $ 2014 $ Feb 28 Balance c/d 3755 (1) Mar 1 Balance b/d 2966 (1) 2015 Feb 28 Income ____ Statement (1) 789 (1)OF 3755 3755 2015 Mar 1 Balance b/d 3755 (1)OF [9] (b) (i) Any expense/loss for the financial year (1) is matched/set against the revenue for that same period (1) [2] (ii) Ensures that the profit for the year is not overstated (1) Ensures that the trade receivables/ current assets are not overstated (1) [2] (c) Direct materials plus direct labour (1) plus direct expenses (1) OR Cost of production excluding overheads (2) [2] (d) Cost of production (1) [1] (e) (i) Ordinary shares Preference shares Variable rate of dividend Carry voting rights Rank after preference shares for payment of dividend Rank after preference shares in a winding up Fixed rate of dividend Do not carry voting rights Rank before ordinary shares for payment of dividend Rank before ordinary shares in a winding up Any 1 comparative statement (2) [2]

Page 5 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 11 © Cambridge International Examinations 2014 (ii) Ordinary shares Debentures Variable rate of dividend Holders receive dividend Holders are members of the company Are equity Carry voting rights Rank after debentures in a winding up Fixed rate of interest Holders receive interest Holders are creditors Are long term loans Do not carry voting rights Rank before ordinary shares in a winding up Any 1 comparative statement (2) [2] (f) $3000 (1) × 8/12 = $2000 (1) [2] (g) Shareholders Potential investors Lenders Bank Trade creditors Customers Employees Manager Accountant Government Tax authorities Any 2 parties (1) each [2] [Total: 24] 4 (a) An amount paid by a member for the right to use the facilities of a club (1) [1] (b) Some members of the club may be in arrears with their subscriptions (1) and other members may have prepaid their subscriptions (1) [2] (c) Sole trader Club or society Capital Accumulated fund (1) Profit for the year Surplus (1) Loss for the year Deficit (1) [3]

Page 6 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 11 © Cambridge International Examinations 2014 (d) Debit Credit Receipts and payments account Income and expenditure account Depreciation charge

Proceeds of sale of equipment
(1)
(1) Loss on disposal of equipment
(1)
(1) Unpaid subscriptions written off
(1)
(1) Purchase of new equipment
(1)
(1) Profit on sale of refreshments
(1)
(1) [10] (e) Speedy Runners Sports Club Income Statement (Trading Account) for the year ended 31 December 2013 $ $ Revenue 6150 Inventory – 1 January 380 Purchases (2480 (1) – 200 (1) + 220 (1)) 2500 2880 Inventory – 31 December 340 (1)OF Cost of sales 2540 (1) ____ Gross profit 3610 [5] (f) Members have not invested any capital (1) so there can be no drawings which represent amounts taken from the return on an investment (1) [2] (g) Financial statements are only useful if the information they contain can be compared with previous periods or other businesses (2) [2] [Total: 25] 5 (a) Timing (1) [1]

Page 7 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 11 © Cambridge International Examinations 2014 (b) Miguel Cash book (bank columns only) 2014 $ 2014 $ May 8 Gordon 920 (1) May 8 Balance b/d 2720 Balance c/d 1985 Insurance 120 (1) ____ Interest 65 (1) 2905 2905 2014 May 8 Balance b/d 1985 (2) CF (1) OF [5] (c) Miguel Bank reconciliation statement at 7 May 2014 $ $ Balance on bank statement (1) (922) (1) Add Amounts not yet credited Sales 2132 (1) Charles 111 (1) 2243 1321 Less Cheques not yet presented Vehicle repairs 180 (1) Francis 3126 (1) 3306 Balance in cash book (1) (1985) (1) OF Alternative presentation Miguel Bank reconciliation statement at 7 May 2014 $ $ Balance in cash book (1) (1985) (1) OF Add Cheques not yet presented Vehicle repairs 180 (1) Francis 3126 (1) 3306 1321 Less Amounts not yet credited Sales 2132 (1) Charles 111 (1) 2243 Balance on bank statement (1) (922) (1) [8] (d) $66 (1) [1] [Total: 15] 6 (a) Anton and Belle Appropriation Account for the year ended 31 December 2013 $ $ Profit for the year 72 900 (1) Interest on drawings – Anton 1 600 (1) Belle 500 (1) 2 100 75 000 Interest on capital – Anton 10 000 (1) Belle 8 000 (1) 18 000 Partner’s salary – Anton 12 000 (1) 30 000 45 000 Profit shares – Anton 30 000 (1) OF Belle 15 000 (1) OF 45 000 [8]

Page 8 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 11 © Cambridge International Examinations 2014 (b) Anton Current account 2013 $ 2014 $ Jan 1 Balance b/d 10 400 (1) Dec 31 Int on Cap 10 000 (1) OF 2014 Salary 12 000 (1) Dec 31 Drawings 32 000 (1) Profit share 30 000 (1) OF Int on drawings 1 600 (1) Balance c/d 8 000 52 000 52 000 2014 Jan 1 Balance b/d 8 000 (2) CF (1) OF [8] (c) $146 000 (1) + ($51 000 + $13 000) (1) = $210 000 (1) ($180 000 + $8000 + $10 000) (1) + $12 000 (1) = $210 000 (1) [3] (d) OF} (1) } 000 210 000 72 whole formula × 100 = 34.71% (2)CF/(1)OF [3] (e) $72 900 (1) – $51 000 (1) + $15 000 (1) = $36 900 (1) [4] [Total: 26]