Cambridge IGCSE Accounting 0452 — 2014 Oct/Nov Paper 1 · Variant 2

This document consists of 22 printed pages and 2 blank pages. IB14 11_0452_12/RP © UCLES 2014 [Turn over *6489769094* Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/12 Paper 1 October/November 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/O/N/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) Why does the owner of a business need to measure profit? A to calculate the total sales and purchases for the year B to discover if his business is doing better than in previous years C to find out how much money he has left in the bank D to know how much money is owed to suppliers [1] (b) Yasmin sold goods to Zebedee. She sent an invoice for goods but later discovered that she had undercharged for the goods sold. Which document will Yasmin issue to correct her mistake? A cheque B credit note C debit note D statement [1] (c) Udoka bought goods on credit from Francis, $1000. Udoka paid Francis by cheque after deducting 3% cash discount. Which entries record this payment in Udoka’s books? account debited $ account credited $ A bank discount allowed 970 30 Francis 1000 B Francis 1000 bank discount allowed 970 30 C bank discount received 970 30 Francis 1000 D Francis 1000 bank discount received 970 30 [1]

3 © UCLES 2014 0452/12/O/N/14 [Turn over (d) A business provided the following information. $ revenue (sales) 10 000 purchases 8 000 opening inventory 1 000 closing inventory 1 500 sales returns 200 purchases returns 300 What was the cost of sales? A $2000 B $2100 C $7200 D $8200 [1] (e) Which statement is correct? A A service business can never sell goods. B A service business does not aim to make a profit. C A trading business aims to make a profit. D A trading business never holds an inventory of goods. [1] (f) Beta Limited made a profit of $482 460 for the year. $96 000 was transferred to general reserve. A dividend on ordinary shares of $168 000 was paid. What was the retained profit for the year? A $218 460 B $314 460 C $386 460 D $554 460 [1]

4 © UCLES 2014 0452/12/O/N/14 (g) A sports club provided the following information. $ subscriptions for the year 26 800 profit on sale of refreshments 4 200 depreciation 1 500 rent and insurance 12 600 wages 3 200 What was the total income for the year? A $15 800 B $17 300 C $22 600 D $31 000 [1] (h) Two businesses, X and Y, are of a similar size and are in the same industry. They provide the following information. X Y % % gross profit as a percentage of sales 27 30 net profit as a percentage of sales 14 11 What does this show? A X controlled expenses better than Y. B Y controlled expenses better than X. C X’s sales were greater than Y’s. D Y’s sales were greater than X’s. [1]

5 © UCLES 2014 0452/12/O/N/14 [Turn over (i) Why might a government department be interested in the financial statements of a company? A to check that the company is paying the correct amount of tax B to decide whether to invest in the company C to ensure that the company continues to receive supplies D to see if the company could repay a loan [1] (j) Which accounting objective states that the information in financial statements must be free from error and bias? A comparability B relevance C reliability D understandability [1] [Total: 10]

6 © UCLES 2014 0452/12/O/N/14 2 (a) State the accounting equation. [1] Samir started a business on 1 January. The following transactions took place. 1 Samir paid $10 000 of his own money into the business bank account. 2 He transferred his own vehicle to the business at a valuation of $6500. 3 He bought goods for resale, $2000, on credit from Zed. 4 He paid rent, $3000, by cheque. REQUIRED (b) Complete the following table showing how these transactions were recorded in Samir’s books of account. The first has been completed as an example. Transaction Debit entry Credit entry $ $ 1 Bank account 10 000 Capital account 10 000 2 3 4 [6] (c) Explain why there could be a credit balance on a bank account but not on the cash account. [2]

7 © UCLES 2014 0452/12/O/N/14 [Turn over Arun sells goods to Rupa and also buys goods from her. On 1 October Arun’s books showed the following balances. Rupa account in sales ledger $180 Rupa account in purchases ledger $37 It was agreed that these balances should be set off against one another. REQUIRED (d) Prepare the journal entry to record the set-off in Arun’s books. A narrative is not required. Arun Journal Debit $ Credit $ ………………………………………………………… …………….. …………….. ………………………………………………………… …………….. …………….. ………………………………………………………… …………….. …………….. ………………………………………………………… …………….. …………….. [2] (e) Explain why Arun and Rupa decided to make the set-off. [2] (f) Complete the table below, naming the accounting principles being applied in the following situations. The first has been completed as an example. Applying the same accounting treatment to similar items at all times Consistency Assuming a business will continue to operate indefinitely Expressing transactions in monetary terms [2]

8 © UCLES 2014 0452/12/O/N/14 (g) Complete the following table indicating with a tick (
) on which side of a trial balance each item would appear. The first has been completed as an example. Debit Credit Rent received
Sales returns Inventory Discount allowed Provision for depreciation [4] [Total: 19]

9 © UCLES 2014 0452/12/O/N/14 [Turn over Question 3 is on the next page.

10 © UCLES 2014 0452/12/O/N/14 3 Omprakash is a trader with a financial year end of 31 August. He advertises in a monthly trade magazine. He provided the following information. 1 November 2013 Paid a total of $450 for an advertisement in the January, February and March 2014 editions. 1 May 2014 Paid a total of $620 for an advertisement in the June, July, August and September 2014 editions. REQUIRED (a) Prepare Omprakash’s advertising account for the year ended 31 August 2014. Balance the account and bring down the balance on 1 September 2014. Advertising account [6] (b) Complete the following table, naming one source document from which each book of prime entry is completed. Book of prime entry Source document Sales journal Purchases journal Sales returns journal Purchases returns journal Petty cash book Cash book [6]

11 © UCLES 2014 0452/12/O/N/14 [Turn over (c) State one advantage of using a book of prime entry. [2] A sales journal for July shows the following. July $ 2 Amber Retail 100 10 Business Supplies 65 18 Custom Print 22 31 Total 187 REQUIRED (d) Complete the following table, showing how these transactions are recorded in the ledger accounts. Account(s) to be debited $ Account(s) to be credited $ [4] [Total: 18]

12 © UCLES 2014 0452/12/O/N/14 4 A book-keeper drew up a trial balance and found that it did not balance. He opened a suspense account with a debit balance of $60. The following errors were then discovered. 1 Sales returns, $80, have been credited to the purchases returns account, although correctly recorded in the debtor’s account. 2 Vehicle repairs, $150, have been debited to the motor vehicles account. 3 The purchases journal has been overcast by $100. 4 Goods taken by the owner for his own use, $55, have not been recorded in the books. REQUIRED (a) Prepare journal entries to correct these errors. Narratives are not required. Journal Debit $ Credit $ ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… ……………………………………………………….. ……………… ……………… [9]

13 © UCLES 2014 0452/12/O/N/14 [Turn over (b) Prepare the suspense account, showing the necessary corrections. Suspense account Details $ Details $ ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... ………………………. ……... [3] (c) Name the type of error made in error 2 on page 12. [1] [Total: 13] Difference on trial balance 60 ………

14 © UCLES 2014 0452/12/O/N/14 5 Ashvar provided the following information. $ At 1 July 2013 Total trade receivables 4 100 Total trade payables 3 161 For the year ended 30 June 2014 Cash sales 14 803 Credit sales 48 610 Returns of credit sales 1 001 Credit purchases 39 101 Returns of credit purchases 910 Receipts from credit customers 45 702 Payments to credit suppliers 37 691 Discount allowed 890 Discount received 663 Bad debts written off 274 Interest charged by Ashvar on overdue accounts 77 REQUIRED (a) Prepare the sales ledger control account and the purchases ledger control account for the year ended 30 June 2014. Balance the accounts and bring down the balances on 1 July 2014. Sales ledger control account

15 © UCLES 2014 0452/12/O/N/14 [Turn over Purchases ledger control account [14] (b) Complete the table below, naming the book of prime entry which provided the following information. Book of prime entry Credit sales Returns of credit purchases Receipts from credit customers Bad debts written off Interest charged on overdue accounts [5]

16 © UCLES 2014 0452/12/O/N/14 Ashvar provides for doubtful debts at the rate of 5%. REQUIRED (c) Prepare his provision for doubtful debts account for the year ended 30 June 2014. Balance the account and bring down the balance on 1 July 2014. Provision for doubtful debts account [4] (d) Comment on the adequacy or otherwise of the rate of Ashvar’s provision for doubtful debts. [2] [Total: 25]

17 © UCLES 2014 0452/12/O/N/14 [Turn over Question 6 is on the next page.

18 © UCLES 2014 0452/12/O/N/14 6 Dina and Lee have been in partnership for some years. Lee receives a partnership salary of $15 000 per annum and both partners receive interest on capital of 10% per annum. They share profits and losses equally. They provided the following information. $ At 1 January 2013 Capital account balances - Dina 100 000 - Lee 60 000 Current account balances - Dina 5 200 Dr - Lee 4 800 Dr During the year ended 31 December 2013 Drawings - Dina 18 000 - Lee 17 000 At 31 December 2013 Fixtures and fittings at cost 100 000 Provision for depreciation on fixtures and fittings 10 000 Delivery van at cost 40 000 Provision for depreciation on delivery van 12 000 Inventory 56 400 Trade receivables 19 000 Bank 6 600 Cr Trade payables 25 400 REQUIRED (a) Suggest one reason how the debit balances on the current accounts on 1 January 2013 could have arisen. [2]

19 © UCLES 2014 0452/12/O/N/14 [Turn over (b) Calculate the value of the net assets of the partnership on 31 December 2013. [6] (c) Calculate the profit for the year made by the partnership in the year ended 31 December 2013. [4]

20 © UCLES 2014 0452/12/O/N/14 (d) Prepare the appropriation account for the partnership for the year ended 31 December 2013. Dina and Lee Appropriation Account for the year ended 31 December 2013 [6]

21 © UCLES 2014 0452/12/O/N/14 [Turn over (e) Prepare the current accounts for Dina and Lee for the year ended 31 December 2013 in columnar format. Balance the accounts and bring down the balances on 1 January 2014. Current accounts Date Details Dina $ Lee $ Date Details Dina $ Lee $ … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... … ………………………. ……... ……... ……... ………………………. ……... ……... ……... ………………………. ……... ……... ……... ………………………. ……... ……... ……... ………………………. ……... ……... [7]

22 © UCLES 2014 0452/12/O/N/14 (f) Calculate the following, to two decimal places, at 31 December 2013. 1 Current ratio 2 Quick ratio (acid test ratio) [6] In the previous year the quick ratio (acid test ratio) was 1.45 : 1. REQUIRED (g) (i) Suggest two reasons for the change. 1 2 [2] (ii) Suggest a consequence of the change in quick ratio (acid test ratio). [2] [Total: 35]

23 © UCLES 2014 0452/12/O/N/14 BLANK PAGE

24 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/O/N/14 BLANK PAGE

nH * 5799259301 * IU Cambridge International Examinations Cambridge International General Certificate of Secondary Education Cambridge IGCSE CANDIDATE NAME CENTRE CANDIDATE NUMBER NUMBER ACCOUNTING 0452/12 Paper 1 October/November 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. This document consists of 22 printed pages and 2 blank pages. . 1B14 11_0452_12/RP Li CAMBRIDGE © UCLES 2014 | International Examinations [Turn over L i “|

® IGCSE is the registered trademark of Cambridge International Examinations. CAMBRIDGE INTERNATIONAL EXAMINATIONS Cambridge International General Certificate of Secondary Education MARK SCHEME for the October/November 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 October/November 2014 series for most Cambridge IGCSE®, Cambridge International A and AS Level components and some Cambridge O Level components.

Page 2 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 1 (a) B (b) C (c) D (d) C (e) C (f) A (g) D (h) A (i) A (j) C (1) each [10]

Page 3 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 2 (a) Capital = assets – liabilities (1) OR other acceptable version of formula [1] (b) Debit entry Credit entry 1 Bank account $ 10 000 Capital account $ 10 000 2 Motor vehicles account 6 500 (1) Capital account 6 500 (1) 3 Purchases account 2 000 (1) Zed account 2 000 (1) 4 Rent account 3 000 (1) Bank account 3 000 (1) [6] (c) Can withdraw more from bank than put in/can have overdraft (1) Cannot take more cash than is physically present (1) [2] (d) Arun Journal Debit $ Credit $ Rupa (account in purchases ledger) Rupa (account in sales ledger) 37 37 (1) (1) [2] (e) Save on administration costs (1) The debt can be settled by using one cheque only (1) [2] (f) Applying the same accounting treatment to similar items at all times Consistency Assuming a business will continue to operate indefinitely Going concern (1) Expressing transactions in monetary terms Money measurement (1) [2]

Page 4 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 (g) Debit Credit Rent receivable
Sales returns
(1) Inventory
(1) Discount allowed
(1) Provision for depreciation (1) [4] [Total: 19]

Page 5 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 3 (a) Advertising account $ $ 2013 2014 Nov 1 Bank/cash 450 (1) Aug 31 Income Statement 915 (1)OF 2014 Balance c/d 155 (1)CF May 1 Bank/cash 620 (1) 1070 1070 2014 Sept 1 Balance b/d 155 (1)OF + (1) dates [6] (b) Book of prime entry Source document Sales journal Sales invoice (1) Purchases journal Purchases invoice (1) Sales returns journal Credit note issued (1) Purchases returns journal Credit note received (1) Petty cash book Voucher/receipt (1) Cash book Cheque counterfoil/cheque/receipt/paying-in slip (1) [6] (c) Reduces the number of entries in the ledger Acts as an aid for posting to the ledger Helps to gather and summarise accounting information/facilitate preparation of control accounts Groups together similar types of transactions Allows work to be divided between several people Any 1 reason (2) [2] (d) [4] [Total: 18] Account(s) to be debited Account(s) to be credited $ $ Amber Retail 100 (1) Sales 187 (1) Business Supplies 65 (1) Custom Print 22 (1)

Page 6 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 4 (a) [9] (b) Suspense Account $ $ Difference on Sales returns 80 (1) Trial balance 60 Purchase returns 80 (1) Purchases 100 (1) 160 160 [3] (c) Error of principle (1) [1] [Total: 13] Journal Debit $ Credit $ Sales returns Purchases returns Suspense 80 80 160 (1) (1) (1) Motor vehicle expenses Motor vehicles 150 150 (1) (1) Suspense Purchases 100 100 (1) (1) Drawings Purchase 55 55 (1) (1)

Page 7 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 5 (a) Sales ledger control account $ $ 2013 2014 July 1 Balance b/d 4 100 (1) June 30 Sales returns 1 001 (1) 2014 Cash/bank 45 702 (1) June 30 Sales 48 610 (1) Discount allowed 890 (1) Interest 77 (1) Bad debts 274 (1) Balance c/d 4 920 52 787 52 787 2014 July 1 Balance b/d 4 920 (1)OF Purchases ledger control account $ $ 2014 2013 June 30 Purchases returns 910 (1) July 1 Balance b/d 3 161 (1) Cash/bank 37 691 (1) 2014 Discount received 663 (1) June 30 Purchases 39 101 (1) Balance c/d 2 998 42 262 42 262 2014 July 1 Balance b/d 2 998 (1)OF [14] (b) Book of prime entry Credit sales Sales journal (1) Returns of credit purchases Purchases returns journal (1) Receipts from credit customers Cash book (1) Bad debts written off Journal (1) Interest charged on overdue accounts Journal (1) [5] (c) Provision for doubtful debts account $ $ 2014 2013 June 30 Balance c/d 246 (1)OF July 1 Balance b/d 205 (1) (5%×4920) 2014 June 30 Income statement 41 (1)OF 246 246 2014 July 1 Balance b/d 246 (1)OF [4] (d) The provision was $246 OF but the actual bad debts were higher. (1) The provision may not be adequate. (1) Comment to be based on OF provision in (c) [2] [Total: 25]

Page 8 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 6 (a) The partnership was making losses The drawings exceeded the partners’ profit share, interest and salary Any 1 reason (2) [2] (b) $ $ Fixtures and fittings (100 000 – 10 000) 90 000 (1) Delivery van (40 000 – 12 000) 28 000 (1) Inventory 56 400 } Trade receivables 19 000 }(1) 193 400 Bank 6 600 (1) Trade payables 25 400 (1) 32 000 Net assets at 31 December 2013 161 400 (1)CF [6] (c) $ $ Net assets at 31 December 2013 161 400 (1)OF Add Drawings – Dina 18 000 }(1) Lee 17 000 } 35 000 196 400 Less Net assets 1 January 2013 150 000 (1) Profit for the year 46 400 (1)OF [4] (d) Dina and Lee Appropriation Account for the year ended 31 December 2013 $ $ Profit for the year 46 400 (1)OF Less interest on capital: Dina 10 000 (1) Lee 6 000 (1) 16 000 Salary: Lee 15 000 (1) 31 000 15 400 Share of profit: Dina 7 700 (1)OF Lee 7 700 (1)OF 15 400 [6]

Page 9 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2014 0452 12 © Cambridge International Examinations 2014 (e) Current Accounts Dina Lee Dina Lee $ $ $ $ 2013 2013 Jan 1 Balance b/d (1) 5 200 4 800 Dec 31 Interest on capital (1)OF 10 000 6 000 Dec 31 Drawings (1) 18 000 17 000 Salary (1) 15 000 Balance c/d 6 900 Share of Profit (1)OF 7 700 7 700 Balance c/d 5 500 23 200 28 700 23 200 28 700 2014 2014 Jan 1 Balance (1)OF 5 500 Jan 1 Balance b/d (1)OF 6 900 [7] (f) 1 (56 400 + 19 000) (1) : (6600 + 25 400) (1) = 75 400 : 32 000 = 2.36 : 1 (1)OF 2 19 000 (1) : (6600 + 25 400) (1) = 19 000 : 32 000 = 0.59 : 1 (1)OF [6] (g) (i) Holding excessive inventory/increase in inventory (1) Reduction in bank balance because of one of the following (1) Purchase of non-current assets OR increase in partners’ drawings OR repayment of long term loan Answer to be appropriate to ratio calculated in (f) Part 2 [2] (ii) Cannot meet debts when due Cannot take advantage of cash discounts Cannot take advantage of business opportunities as they arise May have difficulty in obtaining further supplies Or other suitable comments based on answer to (f) Part 1 Any 1 comment (2) [2] [Total: 35]