Cambridge IGCSE Accounting 0452 — 2016 May/June Paper 1 · Variant 1

This document consists of 19 printed pages and 1 blank page. DC (CW) 114563/4 © UCLES 2016 [Turn over Cambridge International Examinations Cambridge International General Certificate of Secondary Education * 2 0 2 1 1 9 4 6 5 0 * ACCOUNTING 0452/11 Paper 1 May/June 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.

2 0452/11/M/J/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) An amount received from Alice, a credit customer, was credited to the account of Alison in error. Which error was made? A commission B compensating C original entry D principle [1] (b) Maneck had a draft profit of $10 500. He then discovered that the total of the discount allowed column of the cash book, $200, had been entered on the credit side of the discount received account. What was the profit once this error had been corrected? A $10 100 B $10 300 C $10 700 D $10 900 [1] (c) How do discount received and sales ledger contras appear in a purchases ledger control account? discount received contras A as a credit as a credit B as a credit as a debit C as a debit as a credit D as a debit as a debit [1]

3 0452/11/M/J/16 © UCLES 2016 [Turn over (d) Which statement is true about capital expenditure? A It consists of the purchase of goods for resale. B It includes the costs of operating a non-current asset. C It involves the buying of an asset to be used in the business for more than a year. D It should be written off during the year in which the expenditure arises. [1] (e) Nusswan’s rates are $100 a month. He pays six months’ rates in advance, on 1 January and 1 July each year. He also receives six months’ rent of $150 a month in advance on the same dates. Which amounts appear in the statement of financial position on 31 January? in current assets in current liabilities A $100 $150 B $500 $750 C $750 $500 D $1250 nil [1] (f) A trader has an increasing level of trade receivables and maintains the same rate of provision for doubtful debts over the years. One year he forgets to update his provision for doubtful debts account. Which effect does this have on his financial statements? profit for the year current assets A overstated overstated B overstated understated C understated overstated D understated understated [1] (g) What is meant by the term net realisable value? A selling price B selling price less costs of completion C selling price less costs of completion less selling expenses D selling price less selling expenses [1]

4 0452/11/M/J/16 © UCLES 2016 (h) FD Paints Limited started trading on 1 January 2015. The company provided the following information for the year ended 31 December 2015. $ Profit for the year 80 000 Dividend paid 4 200 Dividend proposed 10 400 Transfer to general reserve 5 000 What were the retained earnings at 31 December 2015? A $60 400 B $70 800 C $75 800 D $89 200 [1] (i) A club records its equipment at valuation. How does it calculate its depreciation? A value at start of year – equipment purchased – value at end of year B value at start of year – equipment purchased + value at end of year C value at start of year + equipment purchased – value at end of year D value at start of year + equipment purchased + value at end of year [1] (j) Which statements are true about the current ratio? 1 It can be higher than the quick ratio. 2 It can be lower than the quick ratio. 3 It differs from the quick ratio because of bank overdraft. 4 It differs from the quick ratio because of inventories of goods. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4 [1] [Total: 10]

5 0452/11/M/J/16 © UCLES 2016 [Turn over 2 (a) Complete the following sentence using the words ‘plus’ and ‘minus’. capital at start of year … profit for the year … capital introduced … drawings = capital at end of year [1] Lewis had the following transactions. 1 Bought goods, $1000, on credit from Pamela. 2 Bought delivery van, $17 000, from AM Motors, paying $12 000 by cheque with the balance to be paid after six months. 3 Paid wages, $250, by cheque. 4 Sold goods, cost $600, for $960 on credit to Ali. 5 Withdrew $110 cash from the business bank account to increase cash in hand. REQUIRED (b) Complete the following table showing how each of these transactions was recorded in Lewis’s books of account. The first has been completed as an example. Account(s) debited $ Account(s) credited $ 1 Purchases 1000 Pamela 1000 2 3 4 5 [9] (c) Identify the transaction which decreased Lewis’s capital. Transaction number … [1] (d) Identify the transaction which increased Lewis’s capital. State the amount by which it was increased. Transaction number … Amount … [2] (e) Identify the transaction which would be classified as a contra. Transaction number … [1] (f) State how capital employed is calculated. …[1]

6 0452/11/M/J/16 © UCLES 2016 (g) Name the book of prime (original) entry used when a trader brings cash into the business as capital introduced. …[1] (h) Name the book of prime (original) entry used when a trader transfers his private vehicle to the business. …[1] (i) Complete the following table. Indicate with a tick (✓) whether each item is an asset, a liability, an expense or an income. asset liability expense income premises accrued wages decrease in provision for doubtful debts bank loan depreciation charge carriage outwards [3] [Total: 20]

7 0452/11/M/J/16 © UCLES 2016 [Turn over 3 (a) Complete the following table by writing ‘True’ or ‘False’ against each comment about a statement of account. It contains details of the quantity and price of goods supplied. It shows the value of trade discount given. It shows the balance owing at the start of the period. It is sent to remind the customer of the amount owed. [4] Dilip is a trader. He sells goods to James, a credit customer. REQUIRED (b) Complete the following table indicating with a tick (✓) who would issue each document. Dilip James invoice credit note debit note [3] (c) Name the book of prime (original) entry where each trader would record a credit note. Dilip … James …[2] (d) State when each of the following documents is usually sent. Invoice … Credit note … Statement of account …[3]

8 0452/11/M/J/16 © UCLES 2016 On 1 March 2016 James owed Dilip $300. During March the following transactions took place. March 3 James paid, by cheque, the balance owing less 3% cash discount. 6 James bought on credit goods, list price $620, after taking 20% trade discount. 13 James returned goods, list price $180. REQUIRED (e) Prepare James’s account in the books of Dilip for the month of March 2016. Balance the account and bring down the balance on 1 April 2016. Dilip James account Date Details $ Date Details $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [7] (f) State where James’s account would be included in Dilip’s statement of financial position. Name the item and the section. Item … Section …[2] (g) State why James was entitled to cash discount. … …[1] [Total: 22]

9 0452/11/M/J/16 © UCLES 2016 [Turn over 4 (a) Complete the following table. Fill in the gaps so that the name of each accounting principle or policy is paired with an explanation. The first has been completed as an example. Name of accounting principle or policy Explanation Duality Every transaction has a two-fold aspect. … Profits should not be overstated. … Financial statements only include items which can be expressed in monetary terms. Going concern … … … … Business entity … … … … … Accounting information should be free from error and bias. Consistency … … … … [6] (b) State two reasons why two business owners might find it difficult to compare their financial statements. 1 … 2 …[2]

10 0452/11/M/J/16 © UCLES 2016 (c) Complete the following table giving one reason why each of the users of financial statements might be interested in them. User Reason Bank manager … … Credit supplier … … Investor … … [3] (d) State how prime cost is calculated in a manufacturing business. … …[2] (e) Complete the following table, indicating with a tick (✓) where each item appears in the financial statements of a manufacturing business. manufacturing account income statement depreciation of factory machinery depreciation of delivery van royalties factory rent salesman’s commission factory supervisor’s salary sales returns closing inventory of work in progress [4]

11 0452/11/M/J/16 © UCLES 2016 [Turn over (f) State what is meant by the term work in progress. … …[1] (g) State one reason why work in progress is more likely to appear in the financial statements of a boat builder than those of a business making bread rolls. … …[1] [Total: 19]

12 0452/11/M/J/16 © UCLES 2016 5 Rohinton started trading on 1 January 2016. His cash book (bank columns only) for the first month of trading was as follows. Rohinton Cash book (bank columns only) 2016 $ 2016 $ Jan 1 Capital 10 000 Jan 1 Rent (3 months) 3 000 10 Cash sales 1 600 7 Fixtures and fittings 4 000 18 Freddie 180 8 Amitav 605 28 Ling 195 21 Arun 402 29 Charles 780 31 Balance c/d 3 188 11 975 11 975 Feb 1 Balance b/d 3 188 His bank statement for the same period was as follows. Date Details Debit Credit Balance 2016 $ $ $ Jan 1 Opening deposit 10 000 10 000 Cr 1 Standing order (12 months’ insurance) 720 9 280 Cr 5 Cheque 0002 4 000 5 280 Cr 10 Deposit 1 600 6 880 Cr 11 Cheque 0001 3 000 3 880 Cr 12 Cheque 0003 605 3 275 Cr 20 Deposit 180 3 455 Cr REQUIRED (a) Update the cash book and bring down the amended balance. Rohinton Cash book (bank columns only) 2016 $ 2016 $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [3]

13 0452/11/M/J/16 © UCLES 2016 [Turn over (b) Prepare the bank reconciliation statement at 31 January 2016. Rohinton Bank reconciliation statement at 31 January 2016 … … … … … … … … …[7] Question 5(c) is on the next page.

14 0452/11/M/J/16 © UCLES 2016 Further information is as follows. 1 On 31 January $ Cash in hand 710 Amount owing by credit customer 70 Amount owing to credit supplier 550 Inventory 1211 Rent prepaid ? Insurance prepaid ? 2 Depreciation at the rate of 15% per annum on the straight line basis is provided monthly. REQUIRED (c) Prepare a statement of affairs showing the net assets and the capital of the business on 31 January 2016. Rohinton Statement of Affairs at 31 January 2016 … … … … … … … … … … … … … … … …[10]

15 0452/11/M/J/16 © UCLES 2016 [Turn over (d) Calculate Rohinton’s profit for the month of January 2016. Use the capital you calculated in part (c). … … … …[3] [Total: 23]

16 0452/11/M/J/16 © UCLES 2016 6 David and Harold are in partnership. The partnership agreement states that David is to receive an annual salary of $12 000 and that profits and losses are to be shared in the ratio 2:1. The following balances were extracted from the partnership books on 31 March 2016. $ Capital accounts – David 80 000 – Harold 25 000 Current accounts – David 8 100 debit – Harold 6 200 credit Fixtures and fittings at cost 37 200 Provision for depreciation of fixtures and fittings 11 160 Inventory at 1 April 2015 36 000 Trade receivables 7 000 Trade payables 6 140 Bank 12 100 debit Sales (Revenue) 142 000 Purchases 83 100 Rent 12 000 Other operating expenses 11 800 Wages 16 500 Drawings – David 32 000 – Harold 14 700 Additional information 1 Other operating expenses included $500 for insurance which was paid in advance at 31 March 2016. 2 Inventory on 31 March 2016 amounted to $26 800. 3 Fixtures and fittings are depreciated at the rate of 10% per annum on the straight line basis. A full year’s depreciation is provided in the year of purchase. The current year’s depreciation has not yet been provided. 4 All the fixtures and fittings were purchased when the partnership was formed. REQUIRED (a) Calculate how many years’ depreciation had been charged. … … … …[3]

17 0452/11/M/J/16 © UCLES 2016 [Turn over (b) Prepare the income statement for the year ended 31 March 2016. David and Harold Income Statement for the year ended 31 March 2016 $ $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [8]

18 0452/11/M/J/16 © UCLES 2016 (c) Prepare the appropriation account for the year ended 31 March 2016. David and Harold Appropriation Account for the year ended 31 March 2016 $ $ … … … … … … … … … … … … … … … … … … … … … … … … [3] (d) Calculate David’s total income entitlement from the business for the year. … … … …[3] (e) State why it might be useful if the partnership agreement contained a provision for interest on drawings. … …[1] (f) Calculate the percentage of gross profit to revenue for the year ended 31 March 2016. … …[2]

19 0452/11/M/J/16 © UCLES 2016 David and Harold were surprised to see that inventory had fallen during the year. In previous years the percentage of gross profit to revenue had been 45% and they believed that this had been maintained. REQUIRED (g) Calculate the value of inventory at 31 March 2016 with which the percentage of gross profit to revenue would have been constant. … … … … … … … …[5] (h) Suggest one reason for the lower inventory value. … …[1] [Total: 26]

20 0452/11/M/J/16 © UCLES 2016 BLANK PAGE 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.

® IGCSE is the registered trademark of Cambridge International Examinations. This document consists of 9 printed pages. © UCLES 2016 [Turn over Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/11 Paper 1 May/June 2016 MARK SCHEME Maximum Mark: 120 Published 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 2016 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 – May/June 2016 0452 11 © Cambridge International Examinations 2016 1 (a) A (b) A (c) D (d) C (e) B (f) A (g) C (h) B (i) C (j) B 2 (a) capital at start of year plus profit for the year plus capital introduced minus drawings [1] = capital at end of year (1) (b) Account(s) debited$ Account(s) credited$ 1 Purchases 1 000 Pamela 1 000 2 Delivery van 17 000 (1) Bank AM Motors 12 000 (1) 5 000 (1) 3 Wages 250 (1) Bank 250 (1) 4 Ali 960 (1) Sales 960 (1) 5 Cash 110 (1) Bank 110 (1) [9] (c) Transaction 3 (1) [1]

Page 3 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 11 © Cambridge International Examinations 2016 (d) Transaction 4 (1) [2] $360 (1) (e) Transaction 5 (1) [1] (f) capital employed = owner’s capital + non-current liabilities (1) [1] OR capital employed = total assets – current liabilities (1) (g) cash book (1) [1] (h) general journal (1) [1] (i) asset liability expense income premises
accrued wages
decrease in provision for doubtful debts
bank loan
depreciation charge
carriage outwards
Any two items correct for (1) mark [3] [Total: 20] 3 (a) It contains details of the quantity and price of goods supplied. False (1) It shows the value of trade discount given. False (1) It shows the balance owing at the start of the period. True (1) It is sent to remind the customer of the amount owed. True (1) [4]

Page 4 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 11 © Cambridge International Examinations 2016 (b) Dilip James invoice
(1) credit note
(1) debit note
(1) [3] (c) Dilip – sales returns journal (1) James – purchases returns journal (1) [2] (d) Invoice – when goods are sold (1) Credit note – when goods are returned (1) Statement of account – at end of the period, usually a month (1) [3] (e) Dilip James account 2016 $ 2016 $ Mar 1 Balance b/d 300 (1) Mar 3 Bank 291 (1) 6 Sales 496 (1) Discount allowed 9 (1) 13 Sales returns 144 (1) 31 Balance c/d 352 796 796 Apr 1 Balance b/d 352 (1of) +(1) for dates [7] (f) Item – trade receivables (1) Section – current assets (1) [2] (g) For early payment (1) [1] [Total: 22]

Page 5 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 11 © Cambridge International Examinations 2016 4 (a) Name of accounting principle or policy Explanation Duality Every transaction has a two-fold aspect Prudence (1) Profits should not be overstated Money measurement (1) Financial statements only include items which can be expressed in monetary terms Going concern Accounting assumes that a business will continue to operate indefinitely (1) Business entity A distinction is made between the financial transactions of a business and those of its owner(s) (1) Reliability (1) Accounting information should be free from error and bias Consistency The same accounting treatment should be applied to similar items at all times (1) [6] (b) different accounting policies different locations different capital structures different type of business different type of goods sold different year end non-monetary items different size of business Accept other reasonable answer Any two for (1) mark each [2] (c) User Reason Bank manager To make decision regarding loan or overdraft (1) Credit supplier To ensure credit worthiness of customer (1) To establish credit limit (1) Investor To see the return on his investment (1) Other reasonable answers accepted. [3]

Page 6 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 11 © Cambridge International Examinations 2016 (d) Prime cost = direct materials plus direct labour (1) plus direct expenses (1) [2] (e) manufacturing account income statement depreciation of factory machinery
depreciation of delivery van
royalties
factory rent
salesman’s commission
factory supervisor’s salary
sales returns
closing inventory of work in progress
(1) mark for any two items correct [4] (f) Items of production which are partial completed (1) [1] (g) Because a boat takes longer to make than a bread roll (1) [1] [Total: 19] 5 (a) Rohinton Cash book (bank columns only) 2016 $ 2016 $ Feb 1 Balance b/d 3 188 (1) Feb 1 Insurance 720 (1) Balance c/d 2 468 3 188 3 188 Feb 1 Balance b/d 2 468 (1of) [3]

Page 7 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 11 © Cambridge International Examinations 2016 (b) Rohinton Bank reconciliation statement at 31 January 2016 $ $ Balance per updated cash book (1) 2 468 (1of) Add: unpresented cheques – Arun 402 (1) – Charles 780 (1) 1 182 3 650 Less: uncredited deposit – Ling (195) (1) Balance per bank statement (1) 3 455 (1) OR Rohinton Bank reconciliation statement at 31 January 2016 $ $ Balance per bank statement (1) 3 455 (1) Less: unpresented cheques – Arun 402 (1) – Charles 780 (1) (1 182) 2 273 Add: uncredited deposit – Ling 195 (1) Balance per updated cash book (1) 2 468 (1of) [7] (c) Rohinton Statement of affairs at 31 January 2016 $ $ Non-current assets Fixtures and fittings – cost 4 000 (1) – depreciation4000 × 0.15 ÷ 12 (50) (1) 3 950 Current assets Inventory 1 211 (1) Trade receivable 70 (1) Other receivables – rent 2 000 (1) – insurance 660 (1) 2 660 Bank 2 468 (1of) Cash 710 (1) 7 119 Current liabilities Trade payable (550) (1) Net assets 10 519 Capital 10 519 (1of) [10]

Page 8 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 11 © Cambridge International Examinations 2016 (d) $ Capital – at 31 January 2016 10 519 (1of) – at 1 January 2016 10 000 (1) Profit for the month 519 (1of) [3] [Total: 23] 6 (a) Annual depreciation $3720 (1) 11 160(1) / 3720 = 3 years (1) [3] (b) David and Harold Income Statement for the year ended 31 March 2016 $ $ Revenue (sales) 142 000 (1) Inventory at 1 April 2015 36 000 Purchases 83 100 (1) 119 100 Inventory at 31 March 2016 26 800 Cost of sales 92 300 (1) Gross profit 49 700 (1of) Depreciation 3 720 (1of) Rent 12 000 } Wages 16 500 }(1) Other operating expenses 11 300 (1) 43 520 Profit for the year 6 180 (1of) [8] (c) David and Harold Appropriation Account for the year ended 31 March 2016 $ Profit for the year 6 180 (1of) Salary – David (12 000) (1) (5 820) Share of residual loss – David (3 880) – Harold (1 940) (5 820) (1of) [3]

Page 9 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 11 © Cambridge International Examinations 2016 (d) $ Salary 12 000 (1of) Share of loss (3 880) (1of) Total 8 120 (1of) [3] (e) Interest on drawings might encourage partners to reduce drawings. (1) [1] (f) 49700 100 35% 142000 1 × = (1of) (1of) [2] (g) Cost of sales = [142 000 (1) × (1 – 0.45)(1)] = $78 100 (1) (36 000 + 83 100) (1) – 78 100 = 41 000 (1) OR $ Opening inventory 36 000 } Purchases 83 100 }(1) Cost of sales (78 100)* (3) Expected closing inventory 41 000 (1of) *142 000 (1) – 63 900 (1) = $78 100 (1) [5] (h) Any reasonable answer for (1) mark [1] E.g. Theft, pilferage, damage, obsolescence, more/higher sales activity [Total: 26]