Cambridge IGCSE Accounting 0452 — 2016 May/June Paper 1 · Variant 3

This document consists of 18 printed pages and 2 blank pages. DC (LK) 125280 © UCLES 2016 [Turn over Cambridge International Examinations Cambridge International General Certificate of Secondary Education * 4 7 9 8 1 1 0 6 5 5 * ACCOUNTING 0452/13 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 0452/13/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) How is profit for the year calculated? A closing capital + drawings – opening capital B closing capital – drawings – opening capital C opening capital + drawings – closing capital D opening capital – drawings – closing capital [1] (b) Vikram received $100 from Sasha, a credit customer. He credited bank and debited the account of Sally. Which entries correct this error? account debited $ account credited $ A bank 100 Sally 100 B bank 200 Sally Sasha 100 100 C Sasha 100 Sally 100 D suspense 200 Sally Sasha 100 100 [1] (c) A bank statement balance and a cash book balance do not agree. Which items arise from timing differences? 1 bank charges 2 bank errors 3 uncredited deposits 4 unpresented cheques A 1 and 2 only B 1, 2, 3 and 4 C 2, 3 and 4 only D 3 and 4 only [1]

3 0452/13/M/J/16 © UCLES 2016 [Turn over (d) Which item appears on the debit side of a sales ledger control account? A discount received B dishonoured cheque from customer C provision for doubtful debts D sales returns [1] (e) The purchase of a motor vehicle for business use has been treated as revenue expenditure. Which item in the statement of financial position was understated? A capital B current assets C current liabilities D non-current liabilities [1] (f) Omar’s financial year ended on 30 September 2015. He had paid $2000 on 31 March 2015 for ten identical advertisements to run monthly from April 2015 to January 2016. How did this appear in his financial statements? income statement statement of financial position A $800 expense $1200 current asset B $800 expense $1200 current liability C $1200 expense $800 current asset D $1200 expense $800 current liability [1]

4 0452/13/M/J/16 © UCLES 2016 (g) A trader provided the following information. at 31 March 2015 at 31 March 2016 trade receivables $40 000 $46 000 rate of provision for doubtful debts 5% 4% Which entry for provision of doubtful debts appeared in his income statement for the year ended 31 March 2016? A $160 as an expense B $160 as an income C $240 as an expense D $240 as an income [1] (h) Edison expects to sell the goods he holds in inventory at a mark up of 40%. How should he value inventory in his statement of financial position? A at cost B at cost less selling expenses C at selling price D at selling price less selling expenses [1] (i) Benjamin and Cody’s partnership agreement states that Benjamin is to receive an annual salary of $10 000 and that profits and losses are to be shared in the ratio 3:2. The partnership’s profit for the year is $45 000. What is Benjamin’s total allocation of profit? A $14 000 B $23 000 C $27 000 D $31 000 [1]

5 0452/13/M/J/16 © UCLES 2016 [Turn over (j) Ajith manufactures all the goods he sells. He provided the following information for the year. $ Opening inventory of raw materials 4 000 Closing inventory of raw materials 6 200 Opening inventory of work-in-progress 8 100 Closing inventory of work-in-progress 10 050 Purchases 121 700 Carriage inwards 3 500 Carriage outwards 4 900 What was the cost of raw materials consumed? A $119 500 B $121 050 C $123 000 D $124 400 [1] [Total: 10]

6 0452/13/M/J/16 © UCLES 2016 2 (a) State the accounting equation. …[1] Saeed is a trader. He took cash from the business for his own use. REQUIRED (b) State how the taking of the cash was recorded in Saeed’s books of account. account debited account credited [2] (c) State whether this transaction increased or decreased Saeed’s capital. …[1] (d) Name one form (other than in cash or from the bank) in which a business owner might take drawings. …[1] (e) State how capital employed is calculated. …[1] (f) State what is meant by the term book-keeping. … …[1] (g) State one advantage of maintaining books of prime (original) entry. … …[1]

7 0452/13/M/J/16 © UCLES 2016 [Turn over (h) Complete the following table naming one source document for each book of prime (original) entry. The first has been completed as an example. book of prime (original) entry source document cash book cheque counterfoil sales journal sales returns journal purchases journal petty cash book [4] (i) State one transaction recorded in the general journal. …[1] (j) Name the accounting principle applied when the double entry system of book-keeping is used. …[1] [Total: 14]

8 0452/13/M/J/16 © UCLES 2016 3 (a) Define an income statement. … …[2] (b) State one reason why a business owner prepares an income statement. …[1] (c) Name one user of the financial statements (other than the owner) who would be interested in them. State one reason why that user would be interested. User … Reason … …[2] (d) State one reason why a book-keeper would prepare a trial balance. … …[1] (e) Complete the following table, indicating with a tick (✓) whether each account would appear on the debit side or the credit side of a trial balance. debit side credit side machinery bank overdraft inventory capital purchases discount received carriage outwards trade receivables [4]

9 0452/13/M/J/16 © UCLES 2016 [Turn over (f) State which accounts from the table in (e) are (i) assets … … (ii) liabilities … …[3] (g) Name the account which is opened when a trial balance fails to agree. …[1] (h) Name and explain two errors which would not affect the balancing of the trial balance. Error 1 Name … Explanation … … … Error 2 Name … Explanation … … …[4] [Total: 18]

10 0452/13/M/J/16 © UCLES 2016 4 Virginia depreciates motor vehicles at the rate of 25% per annum using the reducing (diminishing) balance method. She provides a full year’s depreciation in the year of purchase and none in the year of disposal. Her accounting year end is 31 December. She purchased a motor vehicle, cost $10 000, on 1 April 2013, and sold it on 28 May 2015 for $7210 cash. On the same date she bought a new motor vehicle for $17 000, paying by cheque. REQUIRED (a) Calculate the depreciation which had been provided on the old motor vehicle at the date of disposal. … … … …[3] (b) Prepare the following ledger accounts for the year ended 31 December 2015. Virginia Motor vehicles account Date Details $ Date Details $ ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. Provision for depreciation of motor vehicles account Date Details $ Date Details $ ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ………..

11 0452/13/M/J/16 © UCLES 2016 [Turn over Motor vehicle disposal account Date Details $ Date Details $ ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. [14] (c) Name the financial statement in which the provision for depreciation appears. State in which section it appears. Name of financial statement … Section …[2] (d) State how providing depreciation is an application of the accounting principle of accruals (matching). … … …[2] (e) Name one other accounting principle which is applied when depreciation is provided. …[1] (f) State the type of asset for which the revaluation method of depreciation is suitable. …[1] [Total: 23]

12 0452/13/M/J/16 © UCLES 2016 5 (a) State three reasons why a sole trader might wish to turn his business into a limited company. 1 … 2 … 3 …[3] (b) State the term used to describe each of the following. definition term the value of shares which a company has requested from its shareholders …………………. the value of shares for which the company has received cash …………………. [2] AC Industries Limited provided the following information. $ At 31 March 2015 Ordinary shares of $1 each 100 000 General reserve 20 000 Retained earnings 36 800 During the year ended 31 March 2016 Profit for the year 19 300 Transfer to general reserve 5 000 Interim dividend paid 7 000 New shares issued 10 000 Long-term bank loan received 15 000 At 31 March 2016 Inventory 17 800 Trade receivables 8 000 Bank overdraft 2 500 Trade payables ? Current ratio 1.2 : 1

13 0452/13/M/J/16 © UCLES 2016 [Turn over REQUIRED (c) Complete the following statement of changes in equity for the year ended 31 March 2016. AC Industries Limited Statement of Changes in Equity for the year ended 31 March 2016 Details Share capital $ General reserve $ Retained earnings $ Total $ On 1 April 2015 Share issue Profit for the year Dividend paid Transfer to general reserve On 31 March 2016 … … … … … … … … … … … … … … … … … … … … … … … … [6]

14 0452/13/M/J/16 © UCLES 2016 (d) Prepare the statement of financial position at 31 March 2016 in as much detail as possible. (Non-current assets will be the balancing figure.) AC Industries Limited Statement of Financial Position at 31 March 2016 … … … … … … … … … … … … … … … … … … … … … … … $ … … … … … … … … … … … … … … … … … … … … … … … $ … … … … … … … … … … … … … … … … … … … … … … … [10]

15 0452/13/M/J/16 © UCLES 2016 [Turn over (e) Suggest one reason why the directors might have taken out the loan. … …[1] (f) Name and calculate one ratio (other than the current ratio given) which would help the directors assess the liquidity position of the company. Your calculation should be to two decimal places. Name of ratio … Calculation … … … …[4] (g) Comment on the liquidity position of the company on 31 March 2016. … … … … … …[4] [Total: 30]

16 0452/13/M/J/16 © UCLES 2016 6 The Cambridge Club is a football club which also runs a shop for members. It provided the following information. $ At 31 March 2015 Bank balance 6 100 debit Subscriptions in arrears 200 Amount due to suppliers for shop goods 350 Inventory of shop 710 Sports equipment at valuation 3 600 During the year ended 31 March 2016 Subscriptions received 10 100 Receipts from shop sales 3 550 Payments to suppliers for shop goods 2 800 Payment for purchases of new sports equipment 3 920 Rent paid for sports ground 2 400 Wages of football coach paid 2 750 Other operating expenses paid 1 880 At 31 March 2016 Bank balance ? Subscriptions in arrears 100 Amount due to suppliers for shop goods 510 Inventory of shop 560 Sports equipment at valuation 5 920 REQUIRED (a) Calculate the closing balance on the receipts and payments account for the year ended 31 March 2016. … … … … … … … …[4]

17 0452/13/M/J/16 © UCLES 2016 [Turn over (b) Prepare the subscriptions account for the year ended 31 March 2016. Bring down the balance on 1 April 2016. Cambridge Club Subscriptions account Date Details $ Date Details $ ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. ...……. …………………………. ……….. [5] (c) Calculate the shop profit for the year ended 31 March 2016. … … … … … … …[6]

18 0452/13/M/J/16 © UCLES 2016 (d) Prepare the income and expenditure account for the year ended 31 March 2016. Cambridge Club Income and Expenditure Account for the year ended 31 March 2016 … … … … … … … … … … … … … … $ … … … … … … … … … … … … … … $ … … … … … … … … … … … … … … [8] The committee of the Cambridge Club were disappointed with the profit earned by the shop. REQUIRED (e) Suggest two ways in which the shop profit could be increased. … … … …[2] [Total: 25]

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20 0452/13/M/J/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. This document consists of 10 printed pages. © UCLES 2016 [Turn over Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/13 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 13 © Cambridge International Examinations 2016 1 (a) A (b) B (c) D (d) B (e) A (f) C (g) B (h) A (i) D (j) C [10] 2 (a) Assets – liabilities = capital (1) [1] Or suitable alternative (b) account debited account credited drawings (1) cash (1) [2] (c) Decreased (1) [1] (d) Goods for own use [1] Private expenses paid by business Business asset taken over by owner Any one (1) mark

Page 3 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 (e) Capital employed = owner’s capital + non-current liabilities (1) [1] OR Capital employed = assets less current liabilities (1) (f) The recording of all financial transactions in the books of account (1) [1] (g) Any one of: [1] To avoid multiple entries in the ledger Different books of prime entry can be maintained by different people Acts as an aid for posting to the ledger by analysing a transaction into debit and credit entry Helps to reduce the amount of detail in the ledger as only totals are posted to the ledger Provides evidence of transactions since they are recorded from source documents Helps in the auditing/tracking process/facilitates cross referencing Easy reference to source of transaction Helps in gathering and summarising of accounting information Groups together similar types of transactions in one book in date order (h) book of prime (original) entry source document cash book cheque counterfoil sales journal sales invoice (1) sales returns journal credit note issued(1) purchases journal purchase invoice (1) petty cash book voucher (1) [4] (i) Any correct answer for (1) mark [1] E.g. depreciation, bad debt, creation of/increase in/decrease in provision for doubtful debts, correction of error, purchase/sale of non-current asset on credit, drawings of goods etc. (j) Duality / dual aspect (1) [1] [Total: 14]

Page 4 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 3 (a) A statement comprised of revenues and expenses (1) for a specific period (1) [2] (b) To know if he has made a profit/has an adequate return on his investment (1) [1] (c) User Reason credit supplier to check on likelihood of being paid manager to see efficiency and progress of the business bank/lender to check on suitability for loan government to use in tax calculation OR other suitable user (1) mark for any suitable user plus related reason for (1) mark [2] (d) To check the arithmetical accuracy of the double entry (1) [1] OR As a basis for the preparation of the financial statements (1) (e) debit side credit side machinery
bank overdraft
inventory
capital
purchases
discount received
carriage outwards
trade receivables
Any two correct answers = 1 mark [4] (f) (i) Machinery } [2] Inventory} Trade receivables} all 3 correct for (2) marks, any 2 correct for (1) mark

Page 5 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 (ii) Bank overdraft (1) [3] (g) Suspense (1) [1] (h) Any two for 2 marks: [4] Omission (1) transaction totally omitted from the books (1) Commission (1) transaction posted to wrong account of right class (1) Principle (1) transaction posted to account of wrong class (1) Original entry (1) transaction incorrectly recorded in book of prime entry (1) Reversal (1) debit entry posted on credit side and vice versa (1) Compensating (1) errors cancel one another out (1) [Total: 18] 4 (a) $ Year 1 10 000 × 0.25 2500 (1) Year 2 7500 × 0.25 1875 (1) Total 4375 (1) [3] (b) Virginia Motor vehicle account 2015 $ 2015 $ Jan 1 Balance b/d 10 000 (1) May 28 Disposal 10 000 (1) May 28 Bank 17 000 (1) Dec 31 Balance c/d 17 000 27 000 27 000 2016 Jan 1 Balance b/d 17 000 (1of) Provision for depreciation of motor vehicle account 2015 $ 2015 $ May 28 Disposal 4375 (1of) Jan 1 Balance b/d 4375 (1of) Dec 31 Balance c/d 4250 Dec 31 Income statement 4250 (1) 8625 8625 2016 Jan 1 Balance b/d 4250 (1of)

Page 6 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 Motor vehicle disposal account 2015 $ 2015 $ May 28 Motor vehicle 10 000 (1) May 28 Provision for depreciation 4 375 (1of) Dec 31 Income statement (1) 1 585 (1of) Cash 7 210 (1) 11 585 11 585 +(1) for dates [14] (c) Statement of financial position (1) [2] Non-current assets (1) (d) The cost of the non-current asset and the revenues arising from its use are matched (1) in an accounting period (1) [2] OR The cost of the non-current asset is spread (1) over its useful life (1) (e) Prudence (1) [1] (f) Small items of equipment e.g. loose tools (1) [1] [Total: 23] 5 (a) Separate legal identity from its owner (1) [max 3] Limited liability (1) Can issue shares to raise capital (1) May find it easier to obtain loans/issue debentures (1) Continuity (1) Other reasonable answers acceptable (b) definition term the value of shares which a company has requested from its shareholders called up capital (1) the value of shares for which the company has received cash paid up capital (1) [2]

Page 7 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 (c) AC Industries Limited Statement of Changes in Equity for the year ended 31 March 2016 Details Share capital $ General reserve $ Retained earnings $ Total $ On 1 April 2015 Share issue Profit for the year Dividend paid Transfer to general reserve On 31 March 2016 100 000 10 000 … … … 20 000 … … … 5 000 36 800 … 19 300 (7 000) (5 000) 156 800 10 000 19 300 (7 000) – (1) (1) (1) (1) (1) 110 000 25 000 44 100 179 100 (1of) [6]

Page 8 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 (d) AC Industries Limited Statement of Financial Position at 31 March 2016 $ Non-current assets 189 800 (1of) Current assets Inventory 17 800 (1) Trade receivables 8 000 (1) 25 800 Total assets 215 600 Equity and reserves (1) Ordinary share capital 110 000 } General reserve 25 000 }(1of) Retained earnings 44 100 } 179 100 (1of) Non-current liabilities (1) Bankloan 15 000 (1) Current liabilities Trade payables 19 000 (1) Bank overdraft 2 500 (1) 21 500 Total liabilities 215 600 Accept alternative presentation [10] (e) To reduce the overdraft [1] To fund an increase in inventory To purchase new non-current assets Growth/expansion Any reasonable answer for (1) mark

Page 9 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 (f) Quick (acid test) ratio (1) [4] 8 000 (1) = 0.37: 1 (1of) 21 500 (1of) (g) Liquidity is poor (1) [Max 4] Both ratios appear low (1) There is insufficient cash to meet current liabilities as they fall due (1) Current assets do exceed current liabilities (1) There is already a bank overdraft (1) Too high a proportion of current assets is made up of inventory (1) Trade payables are much higher than trade receivables (1) Overdraft facilities could be withdrawn at any time (1) Relationship with credit suppliers could be damaged (1) Award OF for comments linked to (d) and (f) [Total: 30] 6 (a) $ Opening balance 6 100 (1) Receipts (10 100 + 3550) 13 650 (1) Payments (2800 + 3920 + 2400 + 2750 + 1880) (13 750) (1) Closing balance 6 000 (1of) [4] (b) Cambridge Club Subscriptions account 2015 $ 2016 $ Apr 1 Balance b/d 200 (1) Mar 31 Bank 10 100 (1) 2016 Mar 31 Income and expenditure account 10 000 (1of) Balance c/d 100 10 200 10 200 2016 Apr 1 Balance b/d 100 (1) +( 1) for dates [5]

Page 10 Mark Scheme Syllabus Paper Cambridge IGCSE – May/June 2016 0452 13 © Cambridge International Examinations 2016 (c) Cambridge Club Calculation of shop profit for the year ended 31 March 2016 $ $ Sales 3 550 (1) Opening inventory 710 * Purchases 2800 (1)– 350 (1) + 510 (1) 2 960 3 670 Closing inventory 560 *(1) both 3 110 Profit 440 (1of) Accept alternative formats [6] (d) Cambridge Club Income and Expenditure Account for the year ended 31 March 2016 $ $ Subscriptions 10 000 (1of) Shop profit 440 (1of) 10 440 Less: expenditure Rent paid for sports ground 2 400 (1) Wages of football coach 2 750 (1) Other operating expenses 1 880 (1) Depreciation on equipment ( 3600 + 3920 – 5920 ) 1 600 (2) 8 630 Surplus 1 810 (1of) [8] (e) Increase the selling price (1) [max 2] Buy cheaper goods (1) Other valid points acceptable [Total: 25]