Cambridge IGCSE Accounting 0452 — 2015 Oct/Nov Paper 1 · Variant 3

This document consists of 22 printed pages and 2 blank pages. IB15 11_0452_13/5RP © UCLES 2015 [Turn over *5285040115* Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/13 Paper 1 October/November 2015 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 2015 0452/13/O/N/15 There are 10 parts to Question 1. For each of the parts (a) to (j) there are four possible answers A, B, C and D. Choose the one you consider correct and place a tick (3) in the box to indicate the correct answer. 1 (a) Which statement describes the purpose of a trial balance? A It checks the arithmetical accuracy of the double entry. B It ensures the ledger accounts contain no errors. C It indicates areas where errors have arisen. D It prevents errors from occurring. [1] (b) A statement of financial position showed the following. $ Non-current assets 190 000 Non-current liabilities 27 000 Current assets 56 000 Current liabilities 71 000 What was the owner’s capital? A $90 000 B $148 000 C $178 000 D $232 000 [1]

3 © UCLES 2015 0452/13/O/N/15 [Turn over (c) A receipt of $800 from Jamal, a credit customer, was recorded as a receipt of $880 in the account of James. Which entries are needed to correct this error? Account(s) debited $ Account(s) credited $ A Jamal Suspense 800 80 James 880 B Jamal 880 James Suspense 800 80 C James Suspense 800 80 Jamal 880 D James 880 Jamal Suspense 800 80 [1] (d) What is true about a bank reconciliation statement? A It forms part of the double entry system. B It is a statement prepared by the bank. C It is prepared to look for errors in the cash book and the bank statement. D It reconciles the opening and closing cash book balances. [1]

4 © UCLES 2015 0452/13/O/N/15 (e) Jane maintains a provision for doubtful debts at 5% of her trade receivables. The following account appeared in her ledger. Jane Provision for doubtful debts account 2015 $ 2014 $ 30 June Income statement 50 1 July Balance b/d 600 Balance c/d 550 600 600 2015 1 July Balance b/d 550 Which statement is correct? A Bad debts recovered during the year amounted to $50. B Bad debts written off during the year amounted to $50. C Total trade receivables decreased during the year. D Total trade receivables increased during the year. [1] (f) An item of inventory has an original cost of $18 and a replacement cost of $13. The costs of packing and delivery when the item is sold will amount to $3. It is expected to be sold for $20. At which value should it be included in the financial statements? A $13 B $16 C $17 D $18 [1]

5 © UCLES 2015 0452/13/O/N/15 [Turn over (g) On 1 January 2014 Lionel had a debit balance on his current account of $2000. During the year the following were recorded in his current account. $ Interest on capital 12 500 Interest on drawings 840 Share of residual profit 18 000 Drawings 25 600 What was the balance on Lionel’s current account on 1 January 2015? A $2060 credit B $3740 credit C $6060 credit D $7740 credit [1] (h) Which statement about debentures is correct? A They carry a fixed rate of dividend. B They carry a fixed rate of interest. C They carry a variable rate of dividend. D They carry a variable rate of interest. [1] (i) The activities of the Wilhelm Archery club include the running of an equipment shop. On 1 January the accumulated fund of the club amounted to $16 200 and on 31 December $18 000. What does this increase mean? A The non-current assets increased by $1800. B There was a surplus for the year of $1800. C There was a trading profit from the shop of $1800. D The subscriptions received amounted to $1800. [1]

6 © UCLES 2015 0452/13/O/N/15 (j) A manufacturing business provided the following information about its first year of trading. $ Purchases of raw materials 128 000 Closing inventory of raw materials 13 000 Purchases of finished goods 65 000 Closing inventory of finished goods 29 000 Factory direct wages 77 000 Supervisor’s salary 21 000 Depreciation of machinery 19 000 What was the prime cost? A $38 000 B $74 000 C $152 000 D $192 000 [1] [Total: 10]

7 © UCLES 2015 0452/13/O/N/15 [Turn over 2 (a) State the purpose of each of the following business documents. debit note credit note statement of account [3] (b) State one reason why a trader’s ledger might be divided into different sections. [1] (c) Complete the following table, naming the ledger in which each account appears. The first one has been completed as an example. Account Ledger Delivery van Nominal/general Sales Susan, a credit customer Carriage inwards Drawings Adam, a credit supplier [5] (d) Name the section of a statement of financial position in which inventory is recorded. [1] (e) State how Ivy would record the purchase of goods for resale on credit from Alice. Account debited Account credited [2]

8 © UCLES 2015 0452/13/O/N/15 (f) Indicate with a tick (9) in which account cash discount is recorded in the books of both Ivy and Alice. Discount allowed Discount received in the books of Ivy in the books of Alice [2] (g) Name the business document issued by Alice on which the cash discount is recorded. [1] [Total: 15]

9 © UCLES 2015 0452/13/O/N/15 [Turn over 3 (a) Give two examples of items which might appear as non-current assets in the statement of financial position of a manufacturing business. 1 2 [2] (b) Explain how a non-current asset differs from a current asset. [2] (c) Give one example of a capital receipt. [1] (d) Complete the following table using a tick (9) to indicate if each item is capital or revenue expenditure. Capital expenditure Revenue expenditure Purchase of inventory Purchase of stationery Legal fees on purchase of land Construction costs of factory [4] (e) Name the account which is opened when a non-current asset is sold. [1] (f) Name the accounting principle applied when the same rate of depreciation is maintained each year. [1] (g) State one limitation of financial statements. [1] [Total: 12]

10 © UCLES 2015 0452/13/O/N/15 4 Esme provided the following information. $ At 1 January 2014 Trade payables 7 000 Trade receivables 9 500 For the year ended 31 December 2014 Sales (all credit) 95 100 Sales returns 1 050 Purchases (all credit) 63 600 Purchases returns 1 950 Receipts from credit customers 92 750 Payments to credit suppliers 59 000 Refund to credit customer 450 Discount allowed 2 100 Discount received 850 Bad debt written off 300 Additional information at 31 December 2014 1 Esme owed $100 to a supplier who also owed $180 to Esme. It was agreed to record this as a setoff in the control accounts. 2 Esme owed $50 to a credit customer who had overpaid.

11 © UCLES 2015 0452/13/O/N/15 [Turn over REQUIRED (a) Prepare the sales ledger control account and the purchases ledger control account for the year. Balance the accounts and bring down the balances on 1 January 2015. Esme Sales ledger control account Date Details $ Date Details $ ….…. …………………………. ………. ……… ……………………..… ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ……….

12 © UCLES 2015 0452/13/O/N/15 Purchases ledger control account Date Details $ Date Details $ ….…. …………………………. ………. ……… ……………………..… ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. [18] (b) State one reason why Esme maintains a sales ledger control account. [1] (c) State why the discount allowed was given. [1] [Total: 20]

13 © UCLES 2015 0452/13/O/N/15 [Turn over Question 5 is on the next page.

14 © UCLES 2015 0452/13/O/N/15 5 Elliott started a business selling machinery on 1 May 2015. He opened a business bank account with $12 000 of his own money and transferred his own vehicle to be retained and used in the business at a valuation of $1800. He provided the following summary of the transactions in the first month of trading. Paid $3000 by standing order for three months’ rent. Bought 6 machines at $300 each and 8 machines at $400 each, paying by credit transfer. Sold 5 of the cheaper machines for $450 each in cash. Sold 6 of the more expensive machines for $700 each receiving the funds by cheque. Withdrew $3600 from the bank as drawings. Paid sundry expenses, $150, in cash. Paid cash, $2000, into the bank. Used, but did not pay for, electricity, $80. REQUIRED (a) Prepare Elliott’s cash book for May 2015. Balance the cash book and bring down the balances on 1 June 2015. The cash book is on the opposite page. [11]

15 © UCLES 2015 0452/13/O/N/15 [Turn over Elliott Cash book Bank $ Cash $ Details Date Bank $ Cash $ Details Date

16 © UCLES 2015 0452/13/O/N/15 (b) Calculate the following for May 2015. Cost of sales Expenses Profit for the month [9]

17 © UCLES 2015 0452/13/O/N/15 [Turn over (c) Prepare Elliott’s statement of financial position at the end of the first month of trading. Elliott Statement of Financial Position at 31 May 2015 $ $ ………………………………………………………. …………….. …………….. ………………………………………………………. …………….. …………….. ………………………………………………………. …………….. …………….. ………………………………………………………. ………….…. …………….. ……………………………………………………… ………….…. ………….…. …………………………………………………..…... ………….…. ………….…. …………………………………………………….… …………….. …………….. ………………………………………………………. …………….. ……….……. ……………………………………………………… …………….. …………….. ………………………………………………………. …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. [9] (d) Suggest one reason, based on your answer to (c), why Elliott might face financial difficulties in the future. [1] [Total: 30]

18 © UCLES 2015 0452/13/O/N/15 BLANK PAGE

19 © UCLES 2015 0452/13/O/N/15 [Turn over 6 On 1 January 2014 General Stores Limited had fixtures and fittings which had cost $31 500. On 1 March 2014 it paid by cheque for new fixtures and fittings, $17 400, and sold old fixtures and fittings with an original cost of $6000. There was no profit or loss on this disposal. General Stores Limited provides for depreciation on fixtures and fittings at a rate of 30% per annum on the straight-line basis. It provides a full year’s depreciation in the year of purchase and none in the year of disposal. REQUIRED (a) Prepare the fixtures and fittings account for the year ended 31 December 2014. Balance the account and bring down the balance on 1 January 2015. General Stores Limited Fixtures and fittings account Date Details $ Date Details $ ….…. …………………………. ………. ……… ……………………..… ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. ….…. …………………………. ………. [5] (b) Calculate the depreciation charge for the year ended 31 December 2014. [2]

20 © UCLES 2015 0452/13/O/N/15 The company provided the following additional information for the year ended 31 December 2014. $ Revenue 227 000 Purchases 129 000 Sales assistants’ wages 15 900 Office salaries 12 060 Rent 24 000 Other operating expenses 6 220 Dividend paid 10 000 Interest paid 15 000 Transfer to general reserve 5 000 Inventory values were as follows. $ 1 January 2014 41 200 31 December 2014 44 520

21 © UCLES 2015 0452/13/O/N/15 [Turn over REQUIRED (c) Prepare the income statement for the year ended 31 December 2014. General Stores Limited Income Statement for the year ended 31 December 2014 $ $ ………………………………………………………. …………….. …………….. ………………………………………………………. …………….. …………….. ………………………………………………………. …………….. …………….. ………………………………………………………. ………….…. …………….. ……………………………………………………… ………….…. ………….…. …………………………………………………..…... ………….…. ………….…. …………………………………………………….… …………….. …………….. ………………………………………………………. …………….. ……….……. ……………………………………………………… …………….. …………….. ………………………………………………………. …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. ……………………………………………………… …………….. …………….. [10]

22 © UCLES 2015 0452/13/O/N/15 (d) Complete the following statement of changes in equity for the year ended 31 December 2014. General Stores Limited Statement of Changes in Equity for the year ended 31 December 2014 Details Share capital $ General reserve $ Retained earnings $ Total $ On 1 January 2014 100 000 20 000 4 810 124 810 Profit for the year … … … … Dividend paid … … … … Transfer to general reserve … … … … On 31 December 2014 … … … … [5] (e) Calculate to two decimal places the net profit margin. [2] (f) Explain why the ratio for General Stores Limited is lower than that of the neighbouring shop. [6]

23 © UCLES 2015 0452/13/O/N/15 (g) Suggest three ways in which General Stores Limited might improve its net profit margin. 1 2 3 [3] [Total: 33]

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. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after the live examination series. 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 2015 0452/13/O/N/15 BLANK PAGE

® 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 2015 series 0452 ACCOUNTING 0452/13 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 2015 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 2015 0452 13 © Cambridge International Examinations 2015 1 (a) A (b) B (c) D (d) C (e) C (f) C (g) A (h) B (i) B (j) D (1) mark each [Total: 10]

Page 3 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2015 0452 13 © Cambridge International Examinations 2015 2 (a) Debit note: a document from a customer asking for a reduction in the value of an invoice received by them. (1) Credit note: a document sent to the customer showing the reduction of an invoice. (1) Statement of account: to summarise a customer’s transactions for the month. (1) [3] (b) So that accounts of the same type can be kept together To allow division of work To allow easier reference To allow checking procedures to be introduced Any one reason (1) [1] (c) Account Ledger Delivery van/Motor vehicles Nominal/general Sales Nominal/general (1) Susan Sales (1) Carriage inwards Nominal/general (1) Drawings Nominal/general (1) Adam Purchases (1) [5] (d) Current assets (1) [1] (e) Account debited Account credited Purchases (1) Alice (1) [2] (f) Discount allowed Discount received in the books of Ivy
(1) in the books of Alice
(1) [2] (g) Statement of account (1) [1] [Total: 15]

Page 4 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2015 0452 13 © Cambridge International Examinations 2015 3 (a) Any two for (1) each e.g. plant and equipment, factory premises, office premises, delivery vehicle [2] (b) non-current asset current asset lasting more than 12 months lasting less than 12 months bought to keep and use in the business bought to resell/expected to turn into cash within 12 months depreciated not depreciated Any one comment (1), comparison comment (1) [2] (c) Amount received when a non-current asset is sold Receipt of a loan Share issue/capital introduced Any one example (1) [1] (d) Capital expenditure Revenue expenditure Purchase of inventory
(1) Purchase of stationery
(1) Legal fees on purchase of land
(1) Construction costs of factory
(1) [4] (e) Disposal (1) [1] (f) Consistency (1) [1] (g) Historical/only deals with the past Difficulties of definition Non-financial aspects Unable to predict future Doesn’t identify the cause of a problem Any one for (1) mark [1] [Total: 12]

Page 5 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2015 0452 13 © Cambridge International Examinations 2015 4 (a) Esme Sales ledger control account $ $ 2014 2014 Jan 1 Balance b/d 9 500 (1) Dec 31 Sales returns 1 050 (1) Dec 31 Sales 95 100 (1) Bank/Cash 92 750 (1) Bank 450 (1) Discount allowed 2 100 (1) Balance c/d 50 Bad debt 300 (1) PLCA/Contra 100 (2)* Balance c/d 8 800 105 100 105 100 2015 2015 Jan 1 Balance b/d 8 800 (1of) Jan 1 Balance b/d 50 (1) Note * (2) for 100, (1) for 180 Esme Purchases ledger control account $ $ 2014 2014 Dec 31 Purchases rets 1 950 (1) Jan 1 Balance b/d 7 000 (1) Bank/Cash 59 000 (1) Dec 31 Purchases 63 600 (1) Discount received 850 (1) SLCA/Contra 100 (1of) Balance c/d 8 700 70 600 70 600 2015 Jan 1 Balance b/d 8 700 (1of) [18] (b) Provide total of trade receivables Check for the arithmetical accuracy of the sales ledger Reduce fraud To check for errors or fraud Provide summary of transactions involving debtors Enable financial statements to be prepared quickly Any one for (1) mark [1] (c) Payment before specified date (1) [1] [Total: 20]

Page 6 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2015 0452 13 © Cambridge International Examinations 2015 5 (a) Elliott Cash Book Date Details Cash $ Bank $ Date Details Cash $ Bank $ 2015 2015 May 1 Capital 12 000 (1) May 31 Rent 3 000 (1) May 31 Sales 2 250 (1) 4 200 (1) Purchases 5 000 (1) Cash 2 000 (1) Drawings 3 600 (1) Sundry expenses 150 (1) Bank 2 000 (1) Balance c/d 100 6 600 2 250 18 200 2 250 18 200 June 1 Balance b/d 100 (1of) 6 600 (1of) [11] (b) Cost of sales Purchases 5000 (1of) – closing inventory 1100 (1) = 3900 (1of) OR (5 × 300) (1) + (6 × 400) (1) = 3900 (1of) Expenses Rent 1000 (1) + other expenses (150 + 80) (1) = 1230 (1of) Profit for the month Sales 6450 (1of) – (3900 + 1230) (1of) = 1320 (1of) [9]

Page 7 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2015 0452 13 © Cambridge International Examinations 2015 (c) Elliott Statement of Financial Position at 31 May 2015 $ Non-current assets Vehicle 1 800 (1) Current assets Inventory 1 100 (1) Other receivable 2 000 (1) Bank 6 600 (1of) Cash 100 (1of) 9 800 Total assets 11 600 Capital at 1 May 2015 13 800 (1) Profit 1 320 (1of) 15 120 Drawings 3 600 (1) Capital at 31 May 2015 11 520 Current liabilities Other payable 80 (1) Total liabilities 11 600 [9] (d) Elliott’s drawings are greater than his profit (1) [1] [Total: 30]

Page 8 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2015 0452 13 © Cambridge International Examinations 2015 6 (a) General Stores Limited Fixtures and fittings account 2014 $ 2014 $ 1 Jan Balance b/d 31 500 (1) 1 Mar Disposal 6 000 (1) 1 Mar Bank 17 400 (1) 31 Dec Balance c/d 42 900 48 900 48 900 2015 1 Jan Balance b/d 42 900 (1of) +1 for dates [5] (b) 42 900 (1of) × 0.3 = $12 870 (1of) [2] (c) General Stores Limited Income Statement for the year ended 31 December 2014 $ $ Revenue 227 000 (1) Inventory 1 January 2014 41 200 Purchases 129 000 170 200 Inventory 31 December 2014 44 520 1 for both Cost of sales 125 680 (1of) Gross profit 101 320 (1of) Sales assistants’ wages 15 900 } Office salaries 12 060 } (1) Depreciation 12 870 (1of) Rent 24 000 (1) Sundry expenses 6 220 (1) 71 050 Profit from operations 30 270 Interest 15 000 (1) Profit for the year 15 270 (1of) [10]

Page 9 Mark Scheme Syllabus Paper Cambridge IGCSE – October/November 2015 0452 13 © Cambridge International Examinations 2015 (d) General Store Limited Statement of Changes in Equity for the year ended 31 December 2014 Details Share capital $ General reserve $ Retained earnings $ Total $ On 1 January 2014 100 000 20 000 4 810 124 810 Profit for the year .……… ……… 15 270 15 270 (1of) Dividend paid ……… ……… (10 000) (10 000) (1) Transfer to general reserve ……… 5 000 (5 000) – (1) On 31 December 2014 100 000 25 000 5 080 (1of) 130 080 (1of) [5] (e) 30 270/227 000 (1of) × 100 = 13.33% (1of) OR 15 270 / 227 000 (1of) × 100 = 6.73% (1of) [2] (f) Neighbouring shop may sell different mix of goods (1) with a higher gross profit margin (1). Neighbouring shop may have different policies (1) for instance for depreciation (1). Illustration with figures e.g. if depreciation rate was 10% then net profit margin would be 3.8% higher (1). Neighbouring shop controls expenses better (1). Neighbouring shop may own premises and avoid rent payment (1). Illustration with figures e.g. rent accounts for 10.57% of revenue (1). If using profit after interest also allow Neighbouring shop may have more equity/capital (1) and not have the interest cost (1). Illustration with figures e.g. interest amounts to 6.6% of sales (1). [Max 6] (g) Increase selling prices/increase gross profit margin/reduce cost of sales Reduce expenses/rent cheaper premises Find cheaper lenders of finance to reduce interest charges Review depreciation rate – do fixtures only have a life of 3 to 4 years Turn overdrafts and short term loans into long term loans to reduce interest rate Any 3 for (1) mark each. [3] [Total: 33]