Accounting (0452) · Feb/March 2016 · Question paper 22

www.dynamicpapers.com

Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

* 2 4 2 6 1 5 2 9 7 2 *

0452/22

ACCOUNTING
Paper 2

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.

This document consists of 20 printed pages.
DC (LK) 111775/5
© UCLES 2016

[Turn over

www.dynamicpapers.com
2
1

Abhinav maintains a petty cash book using the imprest system. The imprest amount of $120 is
restored on the first day of each month.
The petty cashier entered the transactions in the petty cash book for the first week of
February 2016 in the total column of the petty cash book as shown on the opposite page. He was
then taken ill and was away from the office for the rest of the month.
The following transactions took place.
$
February 10 Received refund from stationery supplier for
overcharge on 7 February
13 Paid train fare
15 Paid Office Supply Limited, a credit supplier
21 Paid taxi fare
26 Paid window cleaner

4.00
9.50
29.00
9.90
17.00

REQUIRED
(a) Complete the entries for the transactions on 4 February and 7 February in Abhinav’s petty
cash book on the page opposite.
Enter the transactions for 10 February to 26 February in the petty cash book.
Balance the petty cash book on 29 February and bring down the balance on 1 March 2016.
[10]

The petty cash book is printed on the next page.

© UCLES 2016

0452/22/F/M/16

© UCLES 2016

0452/22/F/M/16

7

4

96.00

b/d

Details

Copy paper and cartridges

Stamps

Bank

Feb 1 Balance

2016

$

24.00

Date

Total
received

33.00

14.00

$

Total
paid

Abhinav – Petty Cash Book

$

Postage and
stationery

$

Travel

$

Cleaning
expenses

$

Ledger
accounts

3

www.dynamicpapers.com

[Turn over

www.dynamicpapers.com
4
(b) (i)

State the amount which would have been received on 1 March 2016 when the petty cash
was restored to the imprest amount.
[1]

(ii)

State the double entry for restoring to the imprest amount.
debit

credit

[2]

(c) Show the entries which would be made in the postage and stationery account in
February 2016.
It is not necessary to close the account.
Abhinav
Postage and stationery account
Date

Details

$

Date

Details

$

[2]

(d) Name the accounting principles which Abhinav ignored in each of the following.
(i)

Abhinav decided that the profit would increase if he changed the method of depreciation
on fixtures from the straight line method to the reducing (diminishing) balance method.
[1]

(ii)

Abhinav decided that the retirement of the manager would adversely affect the business,
so he reduced the profit for the year by $5000.
[1]

(iii)

Abhinav recorded a sale of goods to Wahid who had seen goods on display in the shop
window and promised to return the following week with the cash.
[1]

(iv)

Abhinav intends to trade for several years but decided to record his motor vehicle at the
possible sale value rather than the book value.
[1]
[Total: 19]

© UCLES 2016

0452/22/F/M/16

www.dynamicpapers.com
5
2

The cash book of Aireville Limited was balanced on 31 December 2015 and showed an overdraft
of $ 3420. On the same date, the bank statement showed an overdraft of $1800.
A comparison of the cash book and the bank statement revealed the following.
$
1

Items appearing only on the bank statement
Bank charges
Dishonoured cheque, PB Limited

2

190
330

Items appearing only in the cash book
Cash sales paid into bank 28 December 2015
Cheque paid to M Raja, a credit supplier

3

1560
2700

Debit side of the cash book being undercast

1000

REQUIRED
(a) Update the cash book of Aireville Limited.
Bring down the updated bank balance on 1 January 2016.
Aireville Limited
Cash book (bank columns only)
Date

Details

$

Date

2016
Jan 1

Details

Balance

$

b/d

3420

[4]

© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
6
(b) Prepare a bank reconciliation statement for Aireville Limited at 31 December 2015.
Aireville Limited
Bank Reconciliation Statement at 31 December 2015
$

[6]

The financial year of Aireville Limited ends on 31 December.
The following information is available.
At 1 January 2015

$

Ordinary share capital – 600 000 shares of $0.50 each
General reserve
Retained earnings

300 000
24 000
45 000

During the year ended 31 December 2015
Issue of ordinary shares – 100 000 shares of $0.50 each
Payment of final dividend relating to the financial year ended
31 December 2014
Payment of interim dividend relating to the financial year ended
31 December 2015

50 000
25 000
15 000

At 31 December 2015
Profit for the year
Transfer to general reserve

© UCLES 2016

49 000
10 000

0452/22/F/M/16

www.dynamicpapers.com
7
REQUIRED
(c) Prepare the statement of changes in equity for the year ended 31 December 2015.
Aireville Limited
Statement of Changes in Equity for the year ended 31 December 2015
Ordinary
share
capital
$

General
reserve

Retained
earnings

Total

$

$

$

[7]
The profits of Aireville Limited have decreased over the last few years and the directors have
decided on a policy of modernisation. The directors considered raising the extra funds required
from the issue of debentures but decided to issue additional ordinary shares instead.
REQUIRED
(d) Suggest two disadvantages to the ordinary shareholders of issuing debentures instead of
ordinary shares.
1

2
[2]
[Total: 19]

© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
8
3

Daksha is a trader. Her financial year ends on 31 January. She does not maintain a full set of
accounting records but was able to provide the following information at 1 February 2015.
$
90 000
22 000
2 750
2 160
330
3 000
1 940
20 000
97 200

Premises at cost
Fixtures and fittings at cost
Trade receivables
Trade payables
Other payables
Inventory
Bank
Long-term loan
Capital

debit

During the year ended 31 January 2016:
Capital introduced amounted to $12 000
Drawings amounted to $4200
Fixtures and fittings costing $5200 were purchased
A motor vehicle costing $8000 was purchased
A further long-term loan of $10 000 was obtained
In addition to providing this information, Daksha compared her assets and liabilities on
31 January 2016 with those on 1 February 2015 and found:

Trade receivables had increased by
Trade payables had decreased by
Other payables amounted to
Other receivables amounted to
Bank balance had reduced by
Petty cash amounted to

$
1150
210
160
327
2300
100

Inventory had increased by 10%.
On 31 January 2016 it was decided to:
1
2

Create a provision for doubtful debts of 3% of trade receivables.
Provide for depreciation of fixtures and fittings and the motor vehicle at 20% per annum
(based on cost of assets held at the end of the financial year).

REQUIRED
(a) Prepare a statement of affairs at 31 January 2016 showing the total capital at that date.

© UCLES 2016

0452/22/F/M/16

www.dynamicpapers.com
9
Daksha
Statement of Affairs at 31 January 2016
$

$

$

[15]
© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
10
(b) Prepare the capital account of Daksha for the year ended 31 January 2016 to show the profit
or loss for the year.
Daksha
Capital account
Date

Details

$

Date

Details

$

[5]
[Total: 20]

© UCLES 2016

0452/22/F/M/16

www.dynamicpapers.com
11

Question 4 is on the next page.

© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
12
4

The Lodi Sports Club was formed some years ago.
The club has 150 members. The annual subscription is $100.
The club rents a sports centre at a monthly rent of $300.
A few years ago the club took out a bank loan of $5000 at 4% per annum interest.
The amounts received and paid during the year ended 31 January 2016 were as follows.
$
200
14 000
500
3 600
300
1 454
1 550
7 200
275
1 400

Subscriptions:

for the year ended 31 January 2015 (2 members)
for the year ended 31 January 2016 (140 members)
for the year ending 31 January 2017 (5 members)
Rent for the year ended 31 January 2016
Rent for the year ending 31 January 2017
General expenses
Insurance
Purchase of new sports equipment
Proceeds of sale of old sports equipment (book value $400)
Bank interest and repayment of one quarter of the loan
REQUIRED

(a) Prepare the receipts and payments account for the year ended 31 January 2016.
Balance the account and bring down the balance on 1 February 2016.
Lodi Sports Club
Receipts and Payments Account for the year ended 31 January 2016
Date

Details

$

Date

2015
Feb 1

Details

Balance

$

b/d

210

[9]
© UCLES 2016

0452/22/F/M/16

www.dynamicpapers.com
13
(b) Calculate the total subscriptions which will appear in the income and expenditure account for
the year ended 31 January 2016.

[2]
(c) Complete the following table to show the entries in the statement of financial position on
31 January 2016.
Statement of financial position
section

amount ($)

Bank loan
Interest on bank loan
Rent
[6]
[Total: 17]

© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
14
5

Mohan is a trader. His financial year ends on 31 December.
Mohan depreciates his motor vehicles at 20% per annum on cost, calculated from the date of
purchase.
The following information was available on 1 January 2014.
Cost

Accumulated
depreciation
$
7 200
3 900

$
12 000
13 000

Motor vehicle A
Motor vehicle B

On 1 July 2014 Motor vehicle C was purchased for $15 000, by cheque.
REQUIRED
(a) Prepare the following accounts for each of the two years ended 31 December 2014 and
31 December 2015.
Balance the accounts and bring down the balances on 1 January 2015 and 1 January 2016.
Mohan
Motor vehicles account
Date
2014
Jan 1

Details

$

Date

Details

$

Balance b/d
A – 12 000
B – 13 000

25 000

© UCLES 2016

0452/22/F/M/16

www.dynamicpapers.com
15
Provision for depreciation of motor vehicles account
Date

Details

$

Date

Details

2014
Jan 1

Balance b/d
A – 7200
B – 3900

$

11 100

[11]

© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
16
(b) Prepare an extract from the statement of financial position on 31 December 2015 to show the
entries for motor vehicles.
Mohan
Extract from Statement of Financial Position at 31 December 2015
Non-current assets

[2]
On 1 January 2016 Motor vehicle B was sold for $2900, cash.
REQUIRED
(c) Calculate the depreciation on Motor vehicle B up to the date of disposal.

[2]
(d) Complete the following table to name the ledger accounts to be debited and credited to record
the disposal of the motor vehicle.
account debited

account credited

transferring the original cost of
the motor vehicle from the asset
account
transferring the accumulated
depreciation on the motor vehicle
from the provision account
recording the proceeds of sale of
the motor vehicle
[6]
[Total: 21]

© UCLES 2016

0452/22/F/M/16

www.dynamicpapers.com
17

Question 6 is on the next page.

© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
18
6

Annie is a wholesaler of ladies’ clothing, selling to retail stores on credit terms. She provided the
following information at the end of her second year of trading on 31 December 2015.

Revenue
Cost of sales
Profit for the year
Inventory 1 January 2015
Inventory 31 December 2015
Capital employed 1 January 2015
Trade receivables at 31 December 2015

$
40 000
30 500
3 800
3 600
4 800
92 000
4 350

Annie decided to compare her results with those of her two brothers, Mark and Tony, who formed
a partnership six years ago to operate a wholesale food business.
REQUIRED
(a) Complete the table on the opposite page to show the ratios for Annie’s business for the year
ended 31 December 2015.
You may use the space below for your workings.
Workings

© UCLES 2016

0452/22/F/M/16

www.dynamicpapers.com
19

Ratio

Annie

Percentage of gross profit to revenue
Percentage of profit for the year to revenue

Mark and Tony

23.75%

16.50%

9.50%

11.35%

Rate of inventory turnover (to two decimal
places)

times

20.15 times

Percentage of profit for the year to opening
capital employed (ROCE) (to two decimal
places)

%

10.35%

Trade receivables collection period
(rounded up to the next whole day)

days

34 days
[6]

(b) Explain one reason for the difference between the percentages of gross profit to revenue of
Annie and her brothers.

[2]
(c) Comment on the possible effects of Annie increasing the selling price of her goods.

[2]
(d) State whose business had better control over its expenses. Give a reason for your answer.
Business
Reason
[2]
(e) Explain one reason for the difference in the rate of inventory turnover.

[2]

© UCLES 2016

0452/22/F/M/16

[Turn over

www.dynamicpapers.com
20
(f)

Suggest one way in which Annie could increase her rate of inventory turnover.

[1]

(g) Suggest one way in which Annie could improve her return on capital employed (ROCE).

[1]
(h) State whose business had the better collection period for trade receivables. Give a reason for
your answer.
Business
Reason
[2]
(i)

Suggest two factors, excluding those provided in the question, which should be considered
when comparing Annie’s results with those of her brothers.
1
2 [2]

Annie has a bank overdraft but believes that her current ratio could be improved. She is considering
four courses of action.
REQUIRED
(j)

Complete the following table by placing a tick (✓) in the correct column to show how each of
the courses of action would affect Annie’s current ratio.
Increase

Decrease

No effect

Create a provision for doubtful debts
Delay payments to credit suppliers
Obtain a long-term loan
Obtain permission from the bank to increase the overdraft
[4]
[Total: 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 2016

0452/22/F/M/16