Accounting (0452) · May/June 2009 · Question paper 3

www.dynamicpapers.com

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
International General Certificate of Secondary Education

*9912995356*

0452/03

ACCOUNTING

May/June 2009

Paper 3

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 a soft pencil for any diagrams or graphs.
Do not use staples, paper clips, highlighters, 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 the 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.

For Examiner's Use
1
2
3
4
5
Total

This document consists of 20 printed pages and 4 blank pages.
IB09 06_0452_03/3RP
© UCLES 2009

[Turn over

www.dynamicpapers.com
2
1

Tony and Alice Mundondo started a business on 1 March 2007 supplying and repairing
computers. On that date they purchased a motor vehicle, $9500, on credit from Valley
Motors. They purchased a further motor vehicle, $10 800, on 1 July 2008 and paid by
cheque.
They decided to depreciate the motor vehicles at 20 % per annum using the straight line
(equal instalment) method. The depreciation was to be calculated from the date of
purchase. No depreciation was to be charged in the year of disposal of a motor vehicle.
REQUIRED
(a) Write up the following accounts in the ledger of Tony and Alice Mundondo for each of
the years ended 29 February 2008 and 28 February 2009:
(i) Motor vehicles account
(ii) Provision for depreciation of motor vehicles account
Where traditional “T” accounts are used they should be balanced at the end of each year,
and the balance brought down on the first day of the following financial year. Where three
column running balance accounts are used the balance column should be up-dated after
each entry.
(i)

© UCLES 2009

Motor vehicles account

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
3
(ii)

Provision for depreciation of motor vehicles account

For
Examiner's
Use

[9]

(b) Prepare the relevant extract from the fixed assets section of Tony and Alice
Mundondo’s balance sheet at 28 February 2009.
Tony and Alice Mundondo
Extract from Balance Sheet at 28 February 2009

[3]

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
4
On 31 March 2009 Tony and Alice Mundondo decided that the motor vehicle purchased in
2007 was too small. On that date they purchased a larger motor vehicle from Valley Motors
who agreed to accept the original motor vehicle in part exchange.
Tony and Alice Mundondo opened an account in the ledger to record the disposal of the
motor vehicle.
REQUIRED
(c) Complete the following table to indicate the ledger accounts to be debited and credited
to record the disposal of the motor vehicle on 31 March 2009.
account to be debited
(i)

eliminating original cost
of motor vehicle from
ledger

(ii)

eliminating accumulated
depreciation from ledger

(iii)

recording part exchange
allowance made by
Valley Motors

account to be credited

[6]
Tony and Alice Mundondo have heard of the revaluation method of depreciation but do not
understand how it is applied.
REQUIRED
(d) (i) Explain the revaluation method of depreciation.

[2]
(ii) State one type of fixed asset which is suitable for depreciation using the
revaluation method.
[1]
[Total: 21]

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
5
BLANK PAGE

Question 2 is on the next page.

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
6
2

Morag MacDonald provides a range of business services for small retail organisations. Her
financial year ends on 31 December.
She provided the following information for the year ended 31 December 2008.
$
75 050
1 800
2 930
2 750
45 000
1 790
1 680

Fees from clients
Property tax paid
Repairs and maintenance
Rent received from tenant
Wages
Stationery and office supplies
Insurance
Additional information
1

On 31 December 2008:
Fees due from clients (debtors)
Wages owing
Insurance prepaid
Stock of stationery and office supplies
Rent prepaid by tenant

2

$
9000
2000
240
35
150

Office equipment is depreciated using the reducing (diminishing) balance method at
50 % per annum.
On 1 January 2008 the office equipment account had a balance of $10 800 and the
provision for depreciation of office equipment account had a balance of $8100.

3

A provision for doubtful debts is maintained at 2 ½ % of the fees due from clients
(debtors) at the end of each financial year.
On 1 January 2008 the provision for doubtful debts amounted to $250.

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
7
REQUIRED
(a) Prepare the profit and loss account of Morag MacDonald for the year ended
31 December 2008.

For
Examiner's
Use

Morag MacDonald
Profit and Loss Account for the year ended 31 December 2008

[9]

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
8
On 31 December 2008 Morag MacDonald had money in the bank but her working capital
was lower than it was at the start of the year.
REQUIRED
(b) Explain why it is important for Morag MacDonald to have an adequate amount of
working capital.

[2]

(c) State two ways in which Morag MacDonald could increase her working capital.
(i)

[1]

(ii)

[1]

(d) State and explain the effect of
Morag MacDonald’s working capital.

each

of

the

following

transactions

on

The first one has been completed as an example.
(i) Office equipment, $10 000, was purchased by cheque.
Effect

working capital decreases by $10 000

Explanation The current assets decrease by $10 000 as the bank balance
decreases. There is no change in the current liabilities.
(ii) An increase in the provision for doubtful debts of $50.
Effect
Explanation
[2]

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
9
(iii) Payment of $200 by a debtor in cash.

For
Examiner's
Use

Effect
Explanation
[2]
(iv) Payment of $96 by cheque to a creditor in full settlement of $100 owing.
Effect
Explanation
[2]
[Total: 19]

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
10
3

Mohammed Hanif maintains a full set of books of prime (original) entry and prepares a
sales ledger control account and a purchases ledger control account at the end of every
month.
He provided the following information for the month of April 2009.
$
4100 debit
72 credit

April 1 Sales ledger balances
Sales ledger balances

April 30 Totals for the month:
Sales journal
5300
Sales returns journal
320
Cash sales
3900
Cheques received from debtors
3850
Cheque received from a debtor (included
65
in the cheques received shown above)
later dishonoured
Cash received relating to a bad debt
250
written off in September 2007
Discount allowed
150
Increase in provision for doubtful debts
60
Transfer from a purchases ledger account
240
to a sales ledger account

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
11
REQUIRED
(a) Select the relevant figures and prepare Mohammed Hanif’s sales ledger control
account for the month ended 30 April 2009. There is only one balance on the account
at the end of the month.

For
Examiner's
Use

Where a traditional “T” account is used it should be balanced and the balance brought
down on 1 May 2009. Where a three column running balance account is used the
balance column should be up-dated after each entry.
Mohammed Hanif
Sales ledger control account

[10]

(b) State one reason why it is possible to have a credit balance brought down on a sales
ledger control account.

[1]

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
12
(c) State where each of the following items will appear in a purchases ledger control
account. If the item will not appear in a purchases ledger control account write “No
entry”.
The first one has been completed as an example.
Entry in purchases ledger
control account

Item
(i)

Purchases returns

(ii)

Cash purchases

(iii)

Discount received

(iv)

Interest charged by supplier
on overdue account

debit

[3]

Mohammed Hanif’s accountant advised him that it is necessary to make decisions in
relation to accounting policies. He informed Mohammed Hanif that one of the four
objectives he must consider is “relevance”.
REQUIRED
(d) Explain to Mohammed Hanif what is meant by the term “relevance”.

[2]

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
13
Mohammed Hanif’s accountant informed him that the accounting statements prepared at
the end of the financial year provide only a limited amount of information about the
business.

For
Examiner's
Use

REQUIRED
(e) State how each of the following may be regarded as a limitation of accounting
statements.
The first one has been completed as an example.
(i) Historic cost
All transactions are recorded at the actual cost price.
It is difficult to compare transactions taking place at different times.

(ii) Money measurement

[2]
(iii) Time factor

[2]
[Total: 20]

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
14
4

The Lobatse Rugby Club had the following assets and liabilities on 1 April 2008.
$
4400
3700
100
50
8050

Equipment at book value
Cash at bank
Subscriptions prepaid by members
Subscriptions owed by members
Accumulated fund

The treasurer of the club prepared the following receipts and payments account for the year
ended 31 March 2009.
2008
April 1
2009
Mar 31

Balance b/d
Subscriptions
Interest received
Entrance fees for
sports day

$
3700

2009
Mar 31

2250
100
520

$
Transfer to bank
deposit a/c
Equipment
Secretarial expenses
Advertising
General expenses
Rent
Sports day expenses
Balance c/d

6570
2009
April 1

Balance b/d

2000
1800
210
40
490
1530
370
130
6570

130

The treasurer supplied the following additional information.
1

On 31 March 2009:
Subscriptions owing by members
Rent accrued
General expenses prepaid

2

$
200
30
20

The equipment is depreciated by 10 % per annum on the value of equipment held at
the end of each financial year.

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
15
REQUIRED
(a) Prepare the subscriptions account as it would appear in the ledger of the Lobatse
Rugby Club for the year ended 31 March 2009.

For
Examiner's
Use

Show the amount transferred to the income and expenditure account.
Where a traditional “T” account is used it should be balanced and the balance brought
down on 1 April 2009. Where a three column running balance account is used the
balance column should be up-dated after each entry.
Lobatse Rugby Club
Subscriptions account

[7]

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
16
(b) Prepare the income and expenditure account of the Lobatse Rugby Club for the year
ended 31 March 2009.
Lobatse Rugby Club
Income and Expenditure Account for the year ended 31 March 2009

[10]

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
17
(c) (i) Select one of the items appearing in the receipts and payments account which
should not be included in the income and expenditure account and explain why it
does not appear.

For
Examiner's
Use

Item
Explanation

[2]
(ii) Select one of the items appearing in the income and expenditure account which
does not appear in the receipts and payments account and explain why it does
not appear.
Item
Explanation

[2]
[Total: 21]

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
18
5

Kalpna Khan started a business on 1 April 2007. On that date she rented premises larger
than she required so that she had space for future expansion. She employs ten staff to
make exclusive hand-made sweets and chocolates, which are sold to department stores
and personal customers.
She provided the following information:
Year ended
31 March 2008

Year ended
31 March 2009

percentage of gross profit to sales

25 %

21 %

percentage of net profit to sales

10 %

9%

ratio

REQUIRED
(a) Suggest two reasons for the fall in the percentage of gross profit to sales.
(i)

(ii)
[2]

(b) Explain one way in which the percentage of net profit to sales could be increased.

[1]

Kalpna Khan is interested in the effect of expenses on her profitability.
REQUIRED
(c) Using the information in the table above, calculate the percentage of expenses to sales
for each year. Show your calculations.
(i) Year ended 31 March 2008

(ii) Year ended 31 March 2009

[2]
© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
19
(d) Explain how the change in the percentage of expenses to sales has affected the
efficiency of the business.

For
Examiner's
Use

[2]

Kalpna Khan is allowed a period of 60 days in which to pay her creditors. She allows her
debtors a period of 30 days in which to pay their accounts.
`

On 31 March 2009 Kalpna Khan owed $44 500 to her creditors and her debtors owed
$38 500.
Kalpna Khan’s purchases and sales for the year ended 31 March 2009 were:
Purchases – cash
credit
Sales
– cash
credit

$
4 000
320 000
50 000
400 000

REQUIRED
(e) Complete the table below to show the ratios for the year ended 31 March 2009.
Calculations should be rounded up to the next whole day.
Year ended
31 March 2008

ratio

Year ended
31 March 2009

payment period for creditors

61 days

days

collection period for debtors

29 days

days
[4]

Use the space below for your workings.

© UCLES 2009

0452/03/M/J/09

[Turn over

www.dynamicpapers.com
20
(f) Using the figures in the table above, explain the effect of the change in the ratios on the
liquidity of Kalpna Khan’s business.

[2]

(g) Explain two ways in which Kalpna Khan could improve the collection period for
debtors.
(i)

(ii)
[2]

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
21
Kalpna Khan wishes to compare her results with those of a similar business. She is aware
that there are problems in making such a comparison.
REQUIRED
(h) Explain how each of the following affects inter-firm comparison. Use examples to
illustrate your answers.
The first has been completed as an example.
(i) Different type of expenses
One business may own premises, another may rent premises. This affects the
expenses and the profit and the profitability ratios – making comparison difficult.
(ii) Non-monetary factors

(iii) Accounting policies

[4]
[Total: 19]

© UCLES 2009

0452/03/M/J/09

For
Examiner's
Use

www.dynamicpapers.com
22
BLANK PAGE

0452/03/M/J/09

www.dynamicpapers.com
23
BLANK PAGE

0452/03/M/J/09

www.dynamicpapers.com
24
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.
University of 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.

0452/03/M/J/09