Cambridge IGCSE Accounting 0452 — 2016 Feb/March Paper 1 · Variant 2

This document consists of 19 printed pages and 1 blank page. DC (NH) 112075/3 © UCLES 2016 [Turn over * 0 7 3 6 6 1 6 2 5 3 * ACCOUNTING 0452/12 Paper 1 February/March 2016 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. Cambridge International Examinations Cambridge International General Certificate of Secondary Education

2 0452/12/F/M/16 © UCLES 2016 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) A trader prepares his financial statements. Which explanations correctly describe his reasons? 1 to be able to calculate his closing inventory 2 to know if he is receiving a return on his investment 3 to make sure that all financial transactions are recorded 4 to measure the progress of his business from year to year A 1 and 2 B 2 and 4 C 3 and 4 D 4 only [1] (b) When does a trader send a credit note? A when he purchases goods on credit B when he receives a return of goods sold on credit C when he returns goods he purchased on credit D when he sells goods on credit [1] (c) A trader compared his bank statement with his cash book. He found that the bank statement had included the bank charges twice in error and that one deposit had not yet been credited. How are these items treated in a bank reconciliation statement which starts with the cash book balance? bank charges in error uncredited deposit A added added B added subtracted C subtracted added D subtracted subtracted [1]

3 0452/12/F/M/16 © UCLES 2016 [Turn over (d) Which statement is true about a sales ledger control account? A Discount allowed appears on the credit side. B Discount allowed appears on the debit side. C Discount received appears on the credit side. D Discount received appears on the debit side. [1] (e) Agatha depreciates her fixtures and fittings at the rate of 10% per annum. On 1 January 2015 she bought new fixtures and fittings costing $800. In error she debited the repairs account with the purchase. What was the effect of this error on the profit for the year ended 31 December 2015? A $720 overstated B $720 understated C $880 overstated D $880 understated [1] (f) A company prepares a statement of changes in equity. Which statement is true? A It explains the changes in the non-current liabilities. B It indicates if there has been a transfer to the general reserve. C It is similar to the receipts and payments account in a club. D It reconciles opening and closing balances on non-current assets. [1]

4 0452/12/F/M/16 © UCLES 2016 (g) A club has the following assets and liabilities. $ equipment 1200 cash at bank 800 subscriptions in advance 300 subscriptions in arrears 410 accrued wages 85 What is the accumulated fund? A $1805 B $1975 C $2025 D $2195 [1] (h) Which items may appear in the income statement (trading account section) of a manufacturing business? A cost of production and inventories of finished goods only B cost of production and inventories of work in progress and finished goods C purchases of raw materials and inventories of finished goods only D purchases of raw materials and inventories of raw materials only [1] (i) An income statement shows the following. $ $ Revenue 6000 Inventory at start of year 300 Purchases 3100 3400 Inventory at end of year 700 2700 Gross profit 3300 What is the rate of inventory turnover? A 5.4 times B 6.2 times C 13.5 times D 15.5 times [1]

5 0452/12/F/M/16 © UCLES 2016 [Turn over (j) Users of a financial report are able to grasp the meaning of the data provided. Which accounting policy has been applied? A comparability B relevance C reliability D understandability [1] [Total: 10]

6 0452/12/F/M/16 © UCLES 2016 2 (a) Complete the following sentences using either the word ‘plus’ or the word ‘less’. Assets … liabilities equals capital. Current assets … current liabilities equals working capital. Owner’s capital … non-current liabilities equals capital employed. [3] Sara is a trader. She paid her home telephone invoice from her business bank account. REQUIRED (b) State how this payment was recorded in Sara’s books of account. account debited account credited [2] (c) Name and explain the accounting principle Sara has applied in recording this payment. Name … Explanation … …[2] Alice maintains a ledger account for insurance which has a debit balance brought down at the start of the year. REQUIRED (d) State what the balance on the insurance account represents. …[1] (e) Name and explain the accounting principle Alice has applied in the preparation of the insurance account. Name … Explanation … …[3]

7 0452/12/F/M/16 © UCLES 2016 [Turn over (f) Complete the following table. Name the ledger in which each account is found. The first has been completed as an example. Account Ledger Premises Nominal/general Sales Drawings Amit, a credit customer Purchases returns Discount allowed Enoch, a credit supplier [3] Harry is a trader who maintains a full set of accounting records. REQUIRED (g) State one reason why Harry maintains accounts in different ledgers. … …[1] (h) State how Harry’s credit sales are posted at the end of the month. … …[2] (i) Name two other books of prime entry which Harry may maintain. In each case give an example of a transaction which might be recorded in it. 1 Name … Example … … 2 Name … Example … …[4] [Total: 21]

8 0452/12/F/M/16 © UCLES 2016 3 (a) State two reasons why a trader may prepare a trial balance. 1 … … 2 … …[2] Deepa is a trader. She extracted the following balances from her books of account on 31 December 2015. $ Fixtures and fittings 17 000 Provision for depreciation of fixtures and fittings 7 500 Sales 72 000 Sales returns 3 100 Purchases 36 800 Purchases returns 2 260 Drawings 5 200 Bank 2 700 debit Inventory 12 450 Rent paid 2 400 Wages 21 810 Discount allowed 1 000 Other operating expenses 10 100 Ali (a credit customer) 600 Kelvin (a credit customer) 970 Jules (a credit supplier) 4 210 Capital ?

9 0452/12/F/M/16 © UCLES 2016 [Turn over REQUIRED (b) Prepare Deepa’s trial balance at 31 December 2015. Deepa Trial Balance at 31 December 2015 Debit $ Credit $ Fixtures and fittings Provision for depreciation of fixtures and fittings Sales Sales returns Purchases Purchases returns Drawings Bank Inventory Rent paid Wages Discount allowed Other operating expenses Ali (a credit customer) Kelvin (a credit customer) Jules (a credit supplier) Capital [9]

10 0452/12/F/M/16 © UCLES 2016 Deepa’s percentage of gross profit to revenue (gross profit margin) is 40%. REQUIRED (c) Calculate, using figures from her trial balance, (i) Deepa’s cost of sales for the year ended 31 December 2015. … … … …[3] (ii) The value of Deepa’s inventory at 31 December 2015. … … … … … … … …[3]

11 0452/12/F/M/16 © UCLES 2016 [Turn over In January 2016 the following transactions took place between Ali and Deepa. January 6 Ali bought goods, list price $1000, after taking a trade discount of 20%. 8 Ali paid by cheque the amount owing on 31 December after deducting 3% cash discount. 10 Ali returned goods, list price $150, bought on 6 January. REQUIRED (d) Prepare Ali’s account in Deepa’s ledger for the month of January 2016. Balance the account and bring down the balance on 1 February 2016. Deepa Ali account Date Details $ Date Details $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [7] (e) State one advantage and one disadvantage to a business of reducing its level of inventory. Advantage … … Disadvantage … …[2] (f) Name the section of the statement of financial position where inventory is shown. …[1] (g) Name one item which might appear in the non-current liabilities section of a statement of financial position. …[1] [Total: 28]

12 0452/12/F/M/16 © UCLES 2016 4 (a) State how maintaining a provision for doubtful debts account is an application of the accounting principle of prudence. … … …[2] Nesbit Limited has an accounting year end of 31 December. It was decided to create a provision for doubtful debts on 31 December 2014 at the rate of 5% and to maintain it at that rate in the future. Its trade receivables were as follows: $ At 31 December 2014 38 000 2015 45 000 The trade receivables on 31 December 2015 included a balance of $1000 owed by a customer who was not expected to pay. This balance was to be written off. REQUIRED (b) Prepare Nesbit Limited’s provision for doubtful debts account for each of the two years ended 31 December 2014 and 31 December 2015. Balance the account at the end of each year and bring down the balances. Nesbit Limited Provision for doubtful debts account Date Details $ Date Details $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [6]

13 0452/12/F/M/16 © UCLES 2016 [Turn over (c) Prepare an extract from Nesbit Limited’s income statement for the year ended 31 December 2015 showing the entries for bad debts and doubtful debts. Nesbit Limited Income Statement (extract) for the year ended 31 December 2015 … … … …[2] (d) Prepare an extract from Nesbit Limited’s statement of financial position at 31 December 2015 showing the entries for trade receivables. Nesbit Limited Statement of Financial Position (extract) at 31 December 2015 … … … … …[3] (e) Name another provision which Nesbit Limited maintains and which allocates the cost of a non-current asset over its useful life. …[1] Question 4(f) is on the next page.

14 0452/12/F/M/16 © UCLES 2016 Nesbit Limited bought some new machinery. The invoice total included a number of different costs. REQUIRED (f) Complete the following table indicating with a tick (✓) which costs are capital expenditure and which are revenue expenditure. The first has been completed as an example. cost capital expenditure revenue expenditure cost of machinery ✓ delivery charges installation costs supply of cleaning materials machine oil [4] (g) Give one example of a capital receipt. …[1] [Total: 19]

15 0452/12/F/M/16 © UCLES 2016 [Turn over 5 Sumit and Theo have been in partnership for some years running a manufacturing business. REQUIRED (a) Complete the following table indicating with a tick (✓) where each item would appear in their financial statements. prime cost section of the manufacturing account overheads section of the manufacturing account income statement office rent factory supervisor’s salary carriage on raw materials purchase of finished goods salesman’s commission [5] (b) State one advantage and one disadvantage of Sumit and Theo being in a partnership. Advantage … … Disadvantage … …[2] (c) State one reason why it is helpful for a partnership agreement to be prepared. … …[1] (d) State one reason why each of the following might be included in a partnership agreement. Interest on capital … … Interest on drawings … …[2]

16 0452/12/F/M/16 © UCLES 2016 Sumit receives a salary of $7000 a year from the partnership. Interest on capital is paid at the rate of 10% and profits are split in the ratio 3:2. The partnership agreement also provided for interest on drawings. On 1 January 2015 their balances were as follows. Sumit $ Theo $ Capital accounts 100 000 150 000 Current accounts 2 100 credit 6 900 debit The following further information was available for the year ended 31 December 2015. Profit for the year $64 000 Sumit $ Theo $ Drawings 19 000 12 000 Interest on drawings 1 800 1 200 REQUIRED (e) Prepare the partnership’s appropriation account for the year ended 31 December 2015. Sumit and Theo Appropriation Account for the year ended 31 December 2015 $ $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [6]

17 0452/12/F/M/16 © UCLES 2016 [Turn over (f) Prepare Theo’s current account for the year ended 31 December 2015. Balance the account and bring down the balance on 1 January 2016. Theo Current account Date Details $ Date Details $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [6] [Total: 22]

18 0452/12/F/M/16 © UCLES 2016 6 Akira, a trader in engine components, prepared his draft financial statements. He then found the following errors. 1 A sale on credit, $3000, to Leonardo, was completely omitted from the books of account. 2 A receipt, $1500, from J Jones, a credit customer, was posted to the account of D Bones, another credit customer. 3 Bank charges, $110, were entered in the cash book as $11. 4 A purchase of stationery, $35, was debited in the petty cash book and credited in the stationery account. 5 The transfer of Akira’s private vehicle, value $2500, to the business had not been recorded. REQUIRED (a) Complete the following table showing how the correction of each error affected the working capital and the owner’s capital. Where a correction has no effect, write No Effect. The first has been completed as an example. error working capital owner’s capital 1 Increase $3000 Increase $3000 2 3 4 5 [8] (b) Name the type of error in each of the errors 2 to 5. Error 2 … Error 3 … Error 4 … Error 5 … [4]

19 0452/12/F/M/16 © UCLES 2016 (c) Prepare journal entries to correct each of the errors 2 to 5. Narratives are not required. Akira Journal Error number Details Debit $ Credit $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] [Total: 20]

20 0452/12/F/M/16 © UCLES 2016 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. 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 March 2016 series 0452 ACCOUNTING 0452/12 Paper 12, 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 March 2016 series for most Cambridge IGCSE® and Cambridge International A and AS Level components.

Page 2 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 1 (a) B (b) B (c) D (d) A (e) B (f) B (g) C (h) A (i) A (j) D (1) mark each [10] 2 (a) Assets less (1) liabilities equal capital Current assets less (1) current liabilities equal working capital Owner’s capital plus (1) non-current liabilities equals capital employed [3] (b) Account debited Account credited Drawings (1) Bank (1) [2] (c) Business entity (1) A distinction is made between the financial transactions of a business and those of its owner(s) (1) [2] (d) Prepaid amount (1) [1]

Page 3 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 (e) Accruals (matching) (1) Income should be matched with costs (1) in an accounting period (1) [3] (f) Account Ledger Premises Nominal/general Sales Nominal/general Drawings Nominal/general Amit, a credit customer Sales Purchases returns Nominal/general Discount allowed Nominal/general Enoch, a credit supplier Purchases Any two correct for (1) mark [3] (g) 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] (h) The total sales are credited to the sales account (1) Each sale is debited to the individual debtor's account on a daily basis (1) [2] (i) Sales returns journal – return of goods sold on credit Purchases journal – purchase of good bought on credit Purchases returns journal – return of goods bought on credit Cash book – cash sales/receipt from credit customer/any sort of payment Petty cash book – any minor expense General journal – correction of error/purchase of non-current asset on credit Any two books for (1) each and any two examples for (1) each Allow any reasonable example [4] [Total: 21]

Page 4 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 3 (a) To check the arithmetical accuracy of the double entry (1) As a basis for the preparation of the financial statements (1) [2] (b) Deepa Trial Balance at 31 December 2015 Debit $ Credit $ Fixtures and fittings 17 000 } Provision for depreciation of fixtures and fittings 7 500 }(1) Sales 72 000 } Sales returns 3 100 }(1) Purchases 36 800 } Purchases returns 2 260 }(1) Drawings 5 200 } Bank 2 700 }(1) Inventory 12 450 } Rent 2 400 }(1) Wages 21 810 } Discount allowed 1 000 }(1) Sundry expenses 10 100 } Ali (a credit customer) 600 }(1) Kelvin (a credit customer) 970 } Jules (a credit supplier) 4 210 }(1) Capital 28 160 (1of) 114 130 114 130 [9]

Page 5 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 (c) (i) $ Sales ( 72 000 – 3100 ) 68 900 (1) × 0.6 (1) Cost of sales 41 340 (1of) OR $ Sales 68 900 (1) Gross profit (at 0.4) 27 560 (1) Cost of sales 41 340 (1of) [3] (ii) $ $ Inventory at 1 January 2015 12 450 Purchases 36 800 Purchases returns (2 260) 34 540 (1) 46 990 Inventory at 31 December 2015 (5 650) (1of) Cost of sales 41 340 (1of) OR $ $ Cost of sales 41 340 (1of) Purchases 36 800 Purchases returns (2 260) (34 540) (1) 6 800 Inventory at 1 January 2015 (12 450) Inventory at 31 December 2015 (5 650) (1of) [3] (d) Deepa Ali account 2016 $ 2016 $ 1 Jan Balance b/d 600 (1) 8 Jan Bank 582 (1) 6 Jan Sales 800 (1) Discount allowed 18 (1) 10 Jan Sales returns 120 (1) 31 Jan Balance c/d 680 1 400 1 400 1 Feb Balance b/d 680 (1of) +1 for dates [7]

Page 6 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 (e) Advantage Money can be used elsewhere Cash is not tied up Reduces risk of theft/deterioration/obsolescence/damage Reduces inventory holding cost e.g. insurances Any one advantage (1) mark Disadvantage If buying in smaller quantity risk of losing quantity discounts Risk of inventory running out Risk of not meeting customer demand Any one disadvantage (1) mark [2] (f) Current assets (1) [1] (g) Long term loan/debt (1) OR debentures (1) OR mortgage (1) [1] [Total: 28] 4 (a) A provision for doubtful debts stops current assets from being overstated (1) and profit from being overstated (1) [2] (b) Nesbit Limited Provision for doubtful debts account 2014 $ 2014 $ Dec 31 Balance c/d 1 900 Dec 31 Income statement 1 900 (1) 1 900 1 900 2015 2015 Jan 1 Balance b/d 1 900 (1) Dec 31 Balance c/d 2 200 (1) Dec 31 Income statement 300 (1) 2 200 2 200 2016 Jan 1 Balance b/d 2 200 (1of) +1 for dates [6] (c) Nesbit Limited Income Statement (extract) for the year ended 31 December 2015 Expenses $ Bad debts 1 000 (1) Increase in provision for doubtful debts 300 (1of) [2]

Page 7 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 (d) Nesbit Limited Statement of Financial Position (extract) at 31 December 2015 $ Current assets Trade receivables 44 000 (1) Provision for doubtful debts 2 200 (1of) 41 800 (1of) [3] (e) Provision for depreciation (1) [1] (f) cost capital expenditure revenue expenditure cost of machinery
delivery charges
(1) installation costs
(1) supply of cleaning materials
(1) machine oil
(1) [4] (g) Proceeds of sale of non-current asset Issue of shares/Capital introduced by owner Receipt of loan Any one for (1) mark [1] [Total: 19] 5 (a) prime cost section of the manufacturing account overheads section of the manufacturing account income statement office rent
(1) factory supervisor’s salary
(1) carriage on raw materials
(1) purchase of finished goods
(1) salesman’s commission
(1) [5]

Page 8 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 (b) Advantage – more capital introduced to business – more expertise available – responsibilities are shared e.g. holidays, sickness – risk is shared – losses are shared Any one for (1) mark Disadvantage – profits must be shared – decision making may be more difficult – disagreements may occur Any one for (1) mark [2] (c) To avoid disagreements in the future (1) [1] (d) Interest on capital – to reward partners who invest more (1) Interest on drawings – to discourage drawings (1) [2] (e) Sumit and Theo Appropriation account for the year ended 31 December 2015 $ $ Profit for the year 64 000 Interest on drawings – Sumit 1 800 } – Theo 1 200 3 000 }(1) 67 000 Salary – Sumit (7 000) (1) Interest on capital – Sumit (10 000) (1) – Theo (15 000) (25 000) (1) 35 000 Profit shares – Sumit 21 000 (1of) – Theo 14 000 35 000 (1of) [6] (f) Theo Current account 2015 $ 2015 $ Jan 1 Balance b/d 6 900 (1) Dec 31 Interest on capital 15 000 (1of) Dec 31 Drawings 12 000 (1) Share of profit 14 000 (1of) Interest on drawings 1 200 (1) Balance c/d 8 900 29 000 29 000 2016 Jan 1 Balance b/d 8 900 (1of) [6] [Total: 22]

Page 9 Mark Scheme Syllabus Paper Cambridge IGCSE – March 2016 0452 12 © Cambridge International Examinations 2016 6 (a) error working capital owner’s capital 1 Increase $3000 Increase $3000 2 No effect (1) No effect (1) 3 Decrease $99 (1) Decrease $99 (1) 4 Decrease $70 (1) Decrease $70 (1) 5 No effect (1) Increase $2500 (1) [8] (b) Error 2 commission (1) Error 3 original entry (1) Error 4 reversal (1) Error 5 omission (1) [4] (c) Akira Journal Error number Details Debit $ Credit $ 2 D Bones J Jones 1500 (1) 1500 (1) 3 Bank charges Bank 99 (1) 99 (1) 4 Stationery Petty cash 70 (1) 70 (1) 5 Motor vehicles Capital 2500 (1) 2500 (1) [8] [Total: 20]