0452/22/F/M/19 Question Paper – Accounting Feb/March 2019 Paper 22

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Cambridge Accounting (0452) question paper for paper 22, Feb/March 2019 — 0452/22/F/M/19, file 0452_m19_qp_22.pdf.

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Cambridge Assessment International Education
Cambridge International General Certificate of Secondary Education

* 8 2 7 4 5 7 8 9 5 8 *

0452/22

ACCOUNTING

February/March 2019

Paper 2

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 (SC) 160950/3
© UCLES 2019

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2
1

Narinder is a wholesaler who trades in handicrafts. He purchases all goods from local producers,
paying by cheque at the time of purchase. Some goods are sold on credit terms to large retail
stores and some goods are sold for cash to smaller stores. Narinder maintains a full set of
accounting records.
The following entries were made in Narinder’s cash book, sales journal and sales returns journal
in January 2019.
Narinder
Cash Book

2019
Jan 1 Balance b/d
10 Amrik
28 Noor
30 Sales
31 Balance c/d

Discount
Allowed
$
26

Cash
$
60
1620
1680

Bank
$
540
1274
2036
3850

2019
Jan 1 Balance b/d
5 Purchases
17 Amrik(Dis. Chq)*
31 Wages
Drawings
Balance c/d

* Dis. Chq = Dishonoured cheque
Narinder
Sales Journal
2019
Jan

1 Amrik

Goods
Less Trade discount

720
180

540

16 Noor

Goods
Less Trade discount

1800
360

1440
1980

31 Total for month
Narinder
Sales Returns Journal
2019
Jan 18 Noor

Goods
Less Trade discount

175
35

140
140

31 Total for month

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Cash

Bank

$
1420
1890
540

1334
120
226
1680

3850

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3
REQUIRED

(a) Enter the transactions for January 2019 in the following ledger accounts. It is not necessary
to total or balance any of the accounts.
Narinder
General Ledger
Purchases account
Date

Details

Date

Details

Sales account
Date

Details

Date

Wages account
Date

Details

Date

Drawings account
Date

Details

Date

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Sales returns account
Date

Details

Date

Details

Discount allowed account
Date

Details

Date

Details

Sales Ledger
Amrik account
Date

Details

Date

Noor account
Date

Details

Date

[13]

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Narinder’s financial year ends on 31 January. He maintains a provision for doubtful debts account.
The following account appeared in his ledger.
Provision for doubtful debts account
Date
2019
Jan 31

Details
Balance c/d

$
155
155

Date
2018
Feb 1
2019
Jan 31

Details

Balance b/d

136

Income statement

19
155

REQUIRED
(b) Explain the following entries in the provision for doubtful debts account.
Name the account in which the double entry would be made for each item.
State whether the account would be debited or credited.
1 February 2018 Balance b/d
Explanation

Name of account
Debit or credit
31 January 2019 Balance c/d
Explanation

Name of account
Debit or credit
(c) (i)

[4]

Explain the following entry in the provision for doubtful debts account.
31 January 2019 Income statement

[1]

(ii)

State how this entry affected Narinder’s profit for the year ended 31 January 2019.
[1]
[Total: 19]

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6
2

Aysha trades in children’s shoes. Her financial year ends on 31 January.
Aysha rents a warehouse at an annual rent of $6 000. She sublets part of the premises to a tenant.
The following information is available.
2018
February 1

Aysha had paid two months’ rent in advance
The tenant owed $600 rent

March

Cash received for rent, $800

April

Aysha paid six months’ rent by bank transfer

May

Cheque received for rent, $2000

October 31

Aysha paid seven months’ rent by cheque

2019
January 31

Transfer to the income statement from the rent receivable account, $2400

REQUIRED
(a) Prepare the rent payable account and the rent receivable account in the ledger of Aysha for
the year ended 31 January 2019. Balance the accounts and bring down the balances on
1 February 2019.
Aysha
Rent payable account
Date

Details

Date

Details

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7
Aysha
Rent receivable account
Date

Details

Date

Details

[9]

Aysha sells on credit to Ravi.
The following information relates to the month of February 2019.
February

Ravi owed $400

Credit sales to Ravi, list price $700, less 20% trade discount
Carriage charged on goods sold, $25

Ravi requested to be allowed to return some of the goods purchased on
6 February, list price $220

Aysha agreed that Ravi could return goods, list price $200

Ravi paid the balance due on 1 February 2019 by bank transfer after deducting
2½% cash discount

REQUIRED
(b) Name the document which would be issued on each of the following dates.
Name the person who issued this document.
February

Document
Person issuing the document

Document
Person issuing the document [6]

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(c) Name the document Aysha would issue on 28 February 2019.
Suggest one reason why Aysha may issue this document.
Document
Reason for issue
[2]
(d) Write up the account of Aysha as it would appear in the ledger of Ravi for the month of
February 2019. Balance the account and bring down the balance on 1 March 2019.
Ravi
Aysha account
Date

Details

Date

Details

[6]

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Ravi sells goods to Aysha in addition to purchasing goods from her.
On 1 March 2019 it was agreed that the balance of Aysha’s account in Ravi’s sales ledger of $230
should be transferred to her account in Ravi’s purchases ledger.
REQUIRED
(e) Prepare a journal entry to record the transfer of the balance of the sales ledger account to the
purchases ledger account in the books of Ravi.
A narrative is required.
Ravi
Journal
Debit
$

Credit
$

[3]
[Total: 26]

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10
3

Bari and Nada are in partnership. Their financial year ends on 31 December.
Their partnership agreement provides for residual profits to be shared in proportion to capital
invested.
The balances on their accounts on 1 January 2018 were:
Bari
$
150 000
950 credit

Capital account
Current account

Nada
$
100 000
150 debit

During the year ended 31 December 2018 the partners made the following drawings:
Bari
$
11 000

Nada
$
13 000

The following is an extract from the draft appropriation account for the year ended
31 December 2018.
Bari and Nada
Draft Appropriation Account for the year ended 31 December 2018
Profit for the year
Interest on drawings
Interest on capital

$
Bari
Nada

660
780

Bari
Nada

7 500
5 000
12 500
20 000

Partner’s salary
Bari
Profit available for distribution

$
35 590
1 440
37 030

32 500
4 530

The following additional information is available at 31 December 2018.
Premises at 1 January 2018
Premises purchased on 1 July 2018
Other non-current assets
Trade payables
Trade receivables
Other payables
Other receivables
Provision for doubtful debts
Bank
Loan (repayable 2025)

$
120 000
100 000
92 650
17 250
25 500
800
910
510
21 890 debit
80 000

REQUIRED
(a) Prepare the draft statement of financial position at 31 December 2018.
The details of the partners’ current accounts should be shown within the statement.

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Bari and Nada
Draft Statement of Financial Position at 31 December 2018
$

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12
$

[13]
Bari and Nada’s receipts and payments during the financial year ended 31 December 2018
included both capital and revenue items.
REQUIRED
(b) State the meaning of each of the following terms and give an example of each.
Capital expenditure
Meaning

Example
Capital receipt
Meaning

Example
Revenue expenditure
Meaning

Example
Revenue receipt
Meaning

Example [8]

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After the preparation of the draft financial statements for the year ended 31 December 2018 the
accounting records were checked.
The amount debited to the premises account on 1 July 2018 consisted of the following:
Cost of premises
Legal fees (including $250 legal fees for recovery of a bad debt)
Decoration costs (half of which related to the original premises)
Insurance of new premises (for 12 months from 1 July 2018)

$
89 000
5 300
3 300
2 400
100 000

REQUIRED
(c) (i)

Calculate the amount which should have been debited to the premises account on
1 July 2018.
$
89 000

Cost of premises

Correct amount to debit to premises account
(ii)

[3]

Calculate the correct profit for the year ended 31 December 2018.
$
35 590

Profit for the year

Corrected profit for the year ended 31 December 2018

[4]
[Total: 28]

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14
4

Jai’s financial year ends on 31 December. He has little knowledge of book-keeping but decided to
prepare a trial balance on 31 December 2018.
The trial balance he prepared, which contains errors, was as follows.
Revenue
Purchases
Inventory 1 January 2018
Purchases returns
Premises at cost
Fixtures and fittings at cost
Motor vehicle at cost
Provision for depreciation of fixtures and fittings
Provision for depreciation of motor vehicle
Bank overdraft
Trade receivables
Trade payables
Office expenses
Discount received
Discount allowed
Drawings
Capital 1 January 2018

$
116 500
4 500
110 500
12 000
16 190
1 180
18 000
16 121
1 900
296 891

$
196 000
9 410

4 320
7 000
9 383
2 100
3 100
79 100
310 413

In addition to the obvious errors in the trial balance the following errors were also discovered.
Error 1

Repairs to motor vehicle, $190, had been debited to the motor vehicle account.

Error 2

No entry had been made for bank charges, $34.

Error 3

A debt of $100 should have been written off as irrecoverable.

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REQUIRED
(a) Prepare a corrected trial balance at 31 December 2018. If the trial balance does not balance
insert a balancing figure in a suspense account.
Jai
Corrected Trial Balance at 31 December 2018
Debit
$

Credit
$

Revenue

Purchases

Inventory 1 January 2018

Purchases returns

Premises at cost

Fixtures and fittings at cost

Motor vehicle at cost

Provision for depreciation of fixtures and fittings

Provision for depreciation of motor vehicle

Bank overdraft

Trade receivables

Trade payables

Office expenses

Discount received

Discount allowed

Drawings

Capital 1 January 2018

[13]

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After the trial balance had been corrected draft financial statements were prepared.
Additional errors were then discovered.
REQUIRED
(b) Complete the table to show the entries required to correct each error.
The first one has been completed as an example.
Entry required to correct the error
Error

Debit
Account

Error 4

Error 5

Error 6

Error 7

The total of the office expenses
column, in the petty cash book,
$21, had not been transferred to
the ledger
Discount allowed to Meena, $9,
had not been entered in her
ledger account
A monthly total of the purchases
returns journal, $490, had been
transferred to the purchases
returns account as $940
Cash sales, $300, had been
correctly entered in the cash
book but debited to the account
of K Limited

Office
expenses

Credit
$

Account

Suspense

[7]

(c) Complete the table by placing a tick (✓) in the correct columns to indicate the effect of errors
4–7 on the profit for the year and on the assets.
error

effect on the profit for the year
overstated understated

no effect

effect on assets
overstated understated

no effect

Error 4
Error 5
Error 6
Error 7
[8]
[Total: 28]

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18
5

The financial year of LW Limited ends on 31 January.
The following information is available.
Ratio

31 January 2018

31 January 2019

9.45 times

8.17 times

Trade payables payment period

40 days

53 days

Trade receivables collection period

29 days

33 days

Current ratio

2.54:1

Quick (acid test) ratio

1.44:1

Rate of inventory turnover

At 31 January 2019
Inventory
Trade receivables
Trade payables
Short-term bank loan
Cash at bank
Cash

$
31 200
30 900
32 000
10 000
14 000
100

All goods are bought and sold on credit terms. If credit customers pay their accounts within 30
days they are allowed a cash discount. If the accounts of credit suppliers are paid within 45 days
LW Limited is entitled to a cash discount.
REQUIRED
(a) Comment on the change in the rate of inventory turnover.

[2]
(b) State two effects of the change in the trade payables payment period.
1

2
[2]

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[2]
(d) (i)

Calculate the current ratio at 31 January 2019.
The calculation should be correct to two decimal places.

[2]

(ii)

Calculate the quick (acid test) ratio at 31 January 2019.
The calculation should be correct to two decimal places.

[2]

(e) Suggest one reason for the change in the quick (acid test) ratio.

[1]

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The directors of LW Limited are concerned at the change in the quick (acid test) ratio. One of the
directors has made four proposals which he believes would increase the quick (acid test) ratio.
REQUIRED
(f)

Complete the table by placing a tick (✓) in the correct column to indicate the effect of each
proposal on the quick (acid test) ratio.
increase

decrease

no effect

Proposal 1
Buy a new non-current asset on credit
terms
Proposal 2
Sell on cash terms only rather than
on credit
Proposal 3
Arrange for the short-term loan to be
changed into a long-term loan
Proposal 4
Pay the credit suppliers more quickly
in order to obtain a cash discount
(g) (i)

[4]

Explain how Proposal 3 would affect the current ratio.

[2]

(ii)

Explain how Proposal 4 would affect the current ratio.

[2]
[Total: 19]

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
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

0452/22/F/M/19

Accounting (0452) · Feb/March 2019 · Question paper 22

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