Cambridge IGCSE Accounting 0452 — 2014 May/June Paper 1 · Variant 2

This document consists of 20 printed pages. IB14 06_0452_12/8RP © UCLES 2014 [Turn over *0356364028* Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/12 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 0452/12/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 would an accountant perform? A analysing financial information B drawing up a trial balance C preparing sales and purchases ledger accounts D writing up the books of prime entry [1] (b) Which statement is not correct? A Accounting can help to control costs. B Accounting can help to identify profit trends. C Accounting can help to measure the motivation of workers. D Accounting can help to monitor liquidity. [1] (c) A flower shop receives an invoice for 200 plants at $5 each, less 20% trade discount, from A. Field. The plants were bought on credit and for resale. Which entry records the transaction in the flower shop’s books? account to be debited account to be credited $ $ A purchases 1000 A. Field 1000 B A. Field 1000 purchases 1000 C purchases 800 A. Field 800 D A. Field 800 purchases 800 [1]

3 © UCLES 2014 0452/12/M/J/14 [Turn over (d) A bank reconciliation statement is drawn up starting with the debit balance shown in the cash book. The difference between the balance in the cash book and that shown on the bank statement is caused by a bank error overstating bank charges and a cheque not yet presented. How are these items shown in the bank reconciliation statement? bank error overstating bank charges cheque not yet presented A added added B added deducted C deducted added D deducted deducted [1] (e) A trader provided the following information. $ 1 April sales ledger control account balance 9 600 debit 30 April totals for the month: credit sales 11 300 sales returns 800 cheques received from debtors 8 700 What was the balance on the sales ledger control account on 30 April? A $6200 B $7800 C $11 400 D $13 000 [1]

4 © UCLES 2014 0452/12/M/J/14 (f) The following information is extracted from the rent account of a business. $ owing at 1 January 2013 400 rent paid in year ended 31 December 2013 1700 rent paid in advance at 31 December 2013 250 How much rent was payable for the year ended 31 December 2013? A $1050 B $1550 C $1850 D $2350 [1] (g) A business maintains a provision for doubtful debts. Which two accounting principles are being applied? A accruals (matching) and prudence B business entity and duality C consistency and realisation D money measurement and going concern [1] (h) Emily is a trader. She provided the following information on 30 April 2014. $ non-current assets 25 000 current assets 15 000 current liabilities 12 000 Her capital on 1 May 2013 was $20 000. She did not make any drawings during the year. What was Emily’s profit for the year ended 30 April 2014? A $8000 B $23 000 C $32 000 D $48 000 [1]

5 © UCLES 2014 0452/12/M/J/14 [Turn over (i) The table shows information relating to two businesses trading in the same type of goods. business rate of inventory turnover quick ratio Y 3 times a year 1.5 : 1 Z 9 times a year 0.7 : 1 Which statement is correct? A Business Y has a good rate of inventory turnover but has poor liquidity. B Business Y has a poor rate of inventory turnover and has poor liquidity. C Business Z has a good rate of inventory turnover but has poor liquidity. D Business Z has a poor rate of inventory turnover and has poor liquidity. [1] (j) What will not be found in the financial statements of a business? A the amount the business owes to suppliers B the income and running costs of the business C the skill and experience of the employees D the value of the assets owned by the business [1] [Total: 10]

6 © UCLES 2014 0452/12/M/J/14 2 (a) Explain the meaning of the following terms. 1 asset 2 liability 3 owner’s capital [3] (b) Complete the table below using a tick (
) to indicate if each item is an asset or a liability. The first has been completed as an example. Asset Liability Inventory
Motor vehicle Creditor Debtor Bank loan Cash [5] Archie is a trader with a year end of 31 December. During the year he made the following transactions. 1 On 1 January paid $10 000 of his own money into the business bank account. 2 On 1 January bought plant and equipment, $6000, paying half by cheque and paying half with a loan from ABC Finance. 3 On 30 June took $500 in cash as drawings. 4 On 31 December paid by bank transfer $210 interest on the loan from ABC Finance. 5 On 31 December paid $1000 by cheque as the first repayment of the loan. 6 On 31 December provided $600 depreciation on the plant and equipment.

7 © UCLES 2014 0452/12/M/J/14 [Turn over REQUIRED (c) Complete the table below, showing the double entry recording each of these transactions. The first has been completed as an example. Debit entry Credit entry $ $ 1 Bank account 10 000 Capital account 10 000 2 3 4 5 6 [11] (d) Calculate the annual rate of interest Archie was paying on the loan. [2] (e) Explain how a bank overdraft can arise. [2] (f) The cheque issued by Archie on 31 December did not appear on the bank statement until 6 January. State the term given to this cheque in Archie’s bank reconciliation statement on 31 December. [1] [Total: 24]

8 © UCLES 2014 0452/12/M/J/14 3 (a) (i) Name one ledger account which might be found in the nominal (general) ledger. [1] (ii) Name one other type of ledger which a business might maintain. [1] (iii) Explain why dividing the ledger into sections makes it easier to use. [2] (b) Complete the table below to indicate in which financial statement each item would appear. State to which type of business each item relates. The first has been completed as an example. Financial statement Type of organisation Ordinary share capital Statement of financial position Limited company Accumulated fund Interest on capital Ordinary share dividends paid Debenture interest [8] (c) State two differences between debentures and ordinary shares. 1 2 [4]

9 © UCLES 2014 0452/12/M/J/14 [Turn over (d) Explain why a limited company might decide not to distribute all of its profit for the year in the form of a dividend. [2] [Total: 18]

10 © UCLES 2014 0452/12/M/J/14 4 (a) Matsumi was inexperienced in book-keeping and drew up a trial balance which failed to balance. Name the account she could have opened to enable the trial balance to balance. [1] The trial balance which she drew up, and which contained errors, was as follows. Matsumi Trial Balance at 30 April 2014 Dr Cr $ $ Bank overdraft 2 320 Cash 100 Fixtures and fittings at cost 6 800 Provision for depreciation at 1 May 2013 1 360 Fees receivable 28 105 Interest payable 200 Rent payable 6 000 Advertising 430 Wages 8 005 Loan account 3 000 Capital at 1 May 2013 2 950 Drawings _____ 16 200 39 095 36 375

11 © UCLES 2014 0452/12/M/J/14 [Turn over REQUIRED (b) Prepare a corrected trial balance at 30 April 2014. Matsumi Trial Balance at 30 April 2014 Dr Cr $ $ Bank overdraft ……….. ……….. Cash ……….. ……….. Fixtures and fittings at cost ……….. ……….. Provision for depreciation at 1 May 2013 ……….. ……….. Fees receivable ……….. ……….. Interest payable ……….. ……….. Rent payable ……….. ……….. Advertising ……….. ……….. Wages ……….. ……….. Loan account ……….. ……….. Capital at 1 May 2013 ……….. ……….. Drawings _____ _____ _____ _____ [6] (c) Explain why the capital account balance in the trial balance is that of 1 May 2013. [2] (d) Suggest the line of business in which Matsumi may be working. [1]

12 © UCLES 2014 0452/12/M/J/14 (e) Matsumi depreciates her fixtures and fittings at the rate of 20% per annum using the reducing (diminishing) balance method. Calculate the depreciation charge for the year ended 30 April 2014. [2] (f) Prepare the provision for depreciation account for the year ended 30 April 2014. Balance the account and bring down the balance on 1 May 2014. Provision for depreciation account [4] [Total: 16]

13 © UCLES 2014 0452/12/M/J/14 [Turn over 5 (a) Complete the sentences below, using the terms current assets direct labour finished goods inventory raw materials work in progress A manufacturing business is one which purchases and by using converts them into If some units of production are only partially complete they are known as These appear as under the heading in the statement of financial position. [6] Randeep provided the following information. $ At 1 April 2013 Inventory of raw materials 16 200 Inventory of finished goods 9 100 For the year ended 31 March 2014 Purchases of raw materials 159 000 Carriage on raw materials 4 800 Wages of factory workers 72 000 Salary of factory supervisor 20 000 Factory rent 30 000 Depreciation of factory machinery 38 000 Total administration and selling costs 64 600 Revenue 410 000 At 31 March 2014 Inventory of raw materials 17 500 Inventory of finished goods 8 200

14 © UCLES 2014 0452/12/M/J/14 REQUIRED (b) (i) Prepare the manufacturing account for the year ended 31 March 2014 Randeep Manufacturing Account for the year ended 31 March 2014 [9]

15 © UCLES 2014 0452/12/M/J/14 [Turn over (ii) Prepare the income statement for the year ended 31 March 2014. Randeep Income Statement for the year ended 31 March 2014 [6]

16 © UCLES 2014 0452/12/M/J/14 (c) Name one indirect cost from the information on page 13. [1] (d) Suggest two items which might be included in the total of administration and selling costs. 1 2 [2] [Total: 24]

17 © UCLES 2014 0452/12/M/J/14 [Turn over 6 (a) Explain the difference between capital expenditure and revenue expenditure. [2] (b) Complete the table below, indicating with a tick (
) how each item would be classified. The first has been completed as an example. Capital expenditure Revenue expenditure Salesman’s commission
Carriage of raw materials Purchases of goods for resale Purchases of plant and equipment Payment of insurance Legal fees on purchase of property [5]

18 © UCLES 2014 0452/12/M/J/14 Morwenna provided the following information about her assets and liabilities at 30 April 2014. $ Motor vehicles at cost 18 000 Provision for depreciation of motor vehicles 6 200 Fixtures and fittings at cost 15 000 Provision for depreciation of fixtures and fittings 4 500 Goodwill 10 000 Inventory 41 000 Trade receivables 28 000 Bank 2 200 Cr Trade payables 44 000 REQUIRED (c) Calculate to two decimal places Morwenna’s current ratio at 30 April 2014. [2] When Morwenna’s accountant checked her figures he discovered the following. 1 The goodwill figure represented Morwenna’s estimate of the value of the good reputation of her business. 2 Inventory had been calculated at selling price, after applying a mark up of $10 250. 3 During the year motor vehicle repairs, $800, had been debited to the motor vehicle account. This did not affect the depreciation for the year. 4 During the year new fixtures and fittings, $1000, had been debited to the stationery account. No depreciation was charged on non-current assets purchased during the year. 5 On 30 April 2014, Morwenna was two months in arrears in paying her rent of $1500 a month.

19 © UCLES 2014 0452/12/M/J/14 [Turn over REQUIRED (d) Prepare Morwenna’s statement of financial position at 30 April 2014 showing her capital at that date. Morwenna Statement of Financial Position at 30 April 2014 [14]

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 0452/12/M/J/14 (e) Calculate to two decimal places Morwenna’s current ratio at 30 April 2014 based on her statement of financial position figures. [2] (f) Comment on the liquidity of Morwenna’s business. [3] [Total: 28]

CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June 2014 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 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 12 © Cambridge International Examinations 2014 1 (a) A (b) C (c) C (d) C (e) C (f) A (g) A (h) A (i) C (j) C (1) each [10]

Page 3 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 12 © Cambridge International Examinations 2014 2 (a) Asset – anything owned by or owed to the business (1) Liability – anything owed by the business (1) Owner’s capital – funds and resources provided by the owner OR amount owed by the business to the owner (1) [3] (b) Asset Liability Inventory ✓ Motor vehicle ✓(1) Creditor ✓ (1) Debtor ✓(1) Bank loan ✓ (1) Cash ✓(1) [5] (c) Debit entry Credit entry $ $ 1 Bank account 10 000 Capital account 10 000 2 Plant and equipment 6 000 (1) Bank ABC Finance 3 000 (1) 3 000 (1) 3 Drawings 500 (1) Cash 500 (1) 4 Interest payable 210 (1) Bank 210 (1) 5 ABC Finance 1 000 (1) Bank 1 000 (1) 6 Income statement 600 (1) Provision for depreciation 600 (1) [11] (d) } (1) } 3000 210 × 100 = 7% (1) [2] (e) A business has paid out more from the bank than it has paid in (2) [2] (f) Unpresented cheque (1) [1] [Total: 24]

Page 4 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 12 © Cambridge International Examinations 2014 3 (a) (i) Any non-current asset, any expense, any income, purchases, sales, returns, inventory, loan, capital, drawings, etc. Any 1 example (1) [1] (ii) Sales ledger Purchases ledger Any 1 example (1) [1] (iii) Work can be shared between several people Easier for reference Same type of accounts are kept together Any 1 point (2) [2] (b) Financial statement Type of organisation Ordinary share capital Statement of financial position Limited company Accumulated fund Statement of financial position (1) Club or society (1) Interest on capital Appropriation account (1) Partnership (1) Ordinary share dividends paid Appropriation account (1) Limited company (1) Debenture interest Income statement (1) Limited company (1) [8] (c) Debentures Ordinary shares 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 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 Any 2 comparative statements (2) marks each [4] (d) For reinvestment in the business To plough back profits For allocating dividends in the future If there is not enough actual cash available to pay a dividend Any 1 reason (2) [2] [Total: 18]

Page 5 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 12 © Cambridge International Examinations 2014 4 (a) Suspense (1) [1] (b) Matsumi Trial balance at 30 April 2014 Dr Cr $ $ Bank overdraft 2 320 Cash 100 Fixtures and fittings at cost 6 800 Provision for depreciation at 1 May 2013 1 360 Fees receivable 28 105 Interest payable 200 Rent payable 6 000 Advertising 430 Wages 8 005 Loan account 3 000 Capital at 1 May 2013 2 950 Drawings 16 200 37 735 37 735 Any 2 correct items (1) [6] (c) The trial balance was drawn up before the preparation of the income statement/before profit for the year has been calculated (2) [2] (d) A service business OR accept an example of a service business (1) [1] (e) (6800 – 1360) × 20% = 1088 (2) [2] (f) Provision for depreciation account 2014 $ 2013 $ Apl 30 Balance c/d 2448(1) May 1 Balance b/d 1360(1) 2014 Apl 30 Income Statement 1088(1)OF 2448 2448 2014 Mar 1 Balance b/d 2448(1)OF [4] [Total: 16]

Page 6 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 12 © Cambridge International Examinations 2014 5 (a) Raw materials (1) Direct labour (1) Finished goods (1) Work in progress (1) Inventory (1) Current assets (1) [6] (b) (i) Randeep Manufacturing Account for the year ended 31 March 2014 $ $ Cost of materials consumed Opening inventory of raw materials 16 200 *(1)both Purchases of raw materials 159 000} Carriage on raw materials 4 800}(1) 163 800 180 000 Closing inventory of raw materials 17 500 * 162 500 (1) Direct wages 72 000 (1) Prime cost 234 500 (1)OF Factory overheads Supervisor’s salary 20 000 (1) Factory rent 30 000 (1) Depreciation – factory machinery 38 000 (1) 88 000 Cost of production 322 500 (1)OF [9] (ii) Randeep Income Statement for the year ended 31 March 2014 $ $ Revenue 410 000 (1) Cost of sales Opening inventory finished goods 9 100 *(1)both Cost of production 322 500 (1)OF 331 600 Closing inventory of finished goods 8 200* 323 400 Gross profit 86 600 (1)OF Administration and selling costs 64 600 (1) Profit for the year 22 000 (1)OF [6] (c) Salary of factory supervisor Factory rent Depreciation of factory machinery Administration and selling costs Any 1 indirect cost (1) [1]

Page 7 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 12 © Cambridge International Examinations 2014 (d) Office rent/rates Office salaries Office general expenses Office insurance Salaries/commission of sales staff Advertising expenses Any example of office or sales expense Any 2 examples (1) each [2] [Total: 24]

Page 8 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 12 © Cambridge International Examinations 2014 6 (a) Capital expenditure Revenue expenditure Purchase of non-current asset Provides benefit for over 1 year Appears in statement of financial position Day-to-day running expense Provides benefit for less than 1 year Appears in income statement Any 1 comparative statement (2) [2] (b) Capital expenditure Revenue expenditure Salesman’s commission ✓ Carriage of raw materials ✓(1) Purchases of goods for resale ✓ (1) Purchases of plant and equipment ✓(1) Payment of insurance ✓(1) Legal fees on purchase of property ✓(1) [5] (c) (41 000 + 28 000) : (44 000 + 2200) (1) whole formula 1.49 : 1 (1) [2]

Page 9 Mark Scheme Syllabus Paper IGCSE – May/June 2014 0452 12 © Cambridge International Examinations 2014 (d) Morwenna Statement of Financial Position at 30 April 2014 $ $ $ Non current assets Cost Depreciation to date Net book value Fixtures and fittings (15 000 (1) + 1000 (1)) 16 000 4 500 11 500 (1)OF Motor vehicles (18 000 (1) – 800 (1)) 7 200 6 200 11 000 (1)OF 33 200 10 700 22 500 Current assets Inventory (41 000 (1) – 10 250 (1)) 30 750 Trade receivables 28 000 (1) 58 750 Current liabilities Trade payables 44 000 (1) Other payables 3 000 (1) Bank 2 200 (1) 49 200 9 550 32 050 Financed by Capital 32 050 (2) OF for capital if no goodwill (1) OF for capital if goodwill included [14] (e) 58 750 OF : 49 200 OF (1) whole formula 1.19 : 1 (1) OF [2] (f) Actual current ratio below that originally calculated Shortage of liquid funds/there is an overdrawn bank balance Trade payables higher than trade receivables Rather a lot of money is tied up in inventory Can only just meet current liabilities from current assets Cannot take advantage of business opportunities which may arise May have difficulty in paying trade payables May depend on receipts from trade receivables to pay trade payables Comments to be based on answer to (e) Any three comments (1) each [3] [Total: 28]