0452/M/J/10 Examiner Report – Accounting May/June 2010

Cambridge Accounting (0452) examiner report, May/June 2010 — 0452/M/J/10, file 0452_s10_er.pdf.

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Cambridge International General Certificate of Secondary Education
0452 Accounting June 2010 www.dynamicpapers.com
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/11
Paper 11

General comments
This was the first question paper set in the revised format incorporating some multiple choice items as well
as the more familiar short form and longer form questions. The syllabus had changed to include some
aspects of company accounting and although a specimen question paper had been published it appeared
that some candidates found the new syllabus challenging.
Overall, there was a considerable range of answers, with less well prepared candidates able to gain some
lower level marks on the question paper whilst the more able candidates were able to demonstrate their
abilities on the higher level parts of the questions.
Most of the multiple choice questions in Question 1 were well answered but candidates found some of the
items challenging. Candidates performed well on Question 2 and in particular gave good answers to the
calculation parts of the question. However, many candidates had difficulty with part (h), the calculation of
the total amount paid out by a company in dividends. All the parts to Question 3 were well answered,
although some candidates were unable to construct the journal entry to correct an error accurately.
Candidates found the first part of Question 4 difficult and although giving good answers to parts (b) and (c),
a large number were unable to earn many marks at all in part (d). Question 5 on non-current assets and
depreciation was not well answered and candidates seem to find this part of the syllabus particularly hard.
Candidates also found part (a) of Question 6 difficult, but gave good answers to the rest of the question,
and were given credit for incorrect figures carried forward.
Most candidates completed all the questions and there did not seem to be evidence of time pressure. There
was space allocated on the question paper for candidates to show their workings, where these were
required, and as previously commented, it is not possible to give credit to candidates who do not show their
workings. It is recommended that Centres always encourage their candidates to show how they worked out
the answers to numerical questions. It appeared that some candidates did not have access to a calculator
and needed to work out some calculations by hand.
Comments on specific questions
Question 1
This comprised ten multiple choice questions, and performance varied. The best answers were given to
items (i) and (j), whilst the items with the least number of correct answers were (c) and (e).
The correct answers to the questions are shown below:
Question 1
(a)

Why does the owner of a business need to know how much profit he has made?
A
B
C
D

to calculate interest payable on a bank loan
to calculate cost of sales
to calculate the return on capital
to calculate total expenses

;

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(b)

Which business document shows all the transactions that have taken place with a customer during
a month?
A
B
C
D

(c)

;

bad debts
bank
drawings
sales

bank interest received
payments made directly into the trader’s bank account
standing order for property tax paid directly by the bank
unpresented cheque

;

What is an income statement (profit and loss account)?
A
B
C
D

(g)

;

cash book
nominal (general) ledger
sales journal
sales ledger

The cash book showed a balance in the bank of $1000 Dr. On the same date, the bank statement
showed a balance in the bank of $900 Dr. Which could be the reason for this difference?
A
B
C
D

(f)

;

Which account could appear in either the debit column or the credit column of a trial balance?
A
B
C
D

(e)

A shop makes all its sales for cash. Where does the sales account appear?
A
B
C
D

(d)

credit note
debit note
invoice
statement

A list of all the assets and liabilities of a business
at a particular date.
A list of all the balances in the ledger accounts of a business
at a particular date.
A statement of receipts and payments of a business
during a particular period.
A summary of income and expenditure of a business
during a particular period.

;

Which entry is made to reduce a provision for doubtful debts?
account to be debited

account to be credited

income statement
(profit and loss account)

provision for doubtful debts

income statement
(profit and loss account)

provision for doubtful debts

trade receivables (debtors)

provision for doubtful debts

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(h)

The total of the sales returns journal is posted to the sales returns account.
Where will the double entry appear?
A
B
C
D

(i)

How is working capital calculated?
A
B
C
D

(j)

;

bank account
creditors’ accounts
debtors’ accounts
sales account

current assets – current liabilities
current assets + current liabilities
non-current (fixed) assets + current assets – current liabilities
non-current (fixed) assets + current assets + current liabilities

;

A sole trader compares his results with those of a similar business.
Which shows how well expenses are being controlled?
A
B
C
D

;

bank balance
cost of sales
gross profit
net profit

Question 2
This consisted, as in previous sessions, of a number of short answer questions from across the syllabus. It
was quite well answered, although candidates had difficulty with items (b), (c) and (h).
(a)

Acceptable examples of non-current (fixed) assets would include land, buildings, plant, equipment,
machinery, fixtures, vans and other motor vehicles.

(b)

Most candidates were able correctly to select the debit side of the ledger but some selected both
sides in error:
Debit entry
Sales returns account

Credit entry

(c)

The accounting principle of consistency states that the same accounting treatment should be
applied to similar items at all times. Other examples were often given but were not correct.

(d)

Net book value is defined as cost less accumulated depreciation. Some candidates knew there
was a relationship between cost, depreciation and net book value but had difficulty expressing it
clearly.

(e)

Carriage inwards is shown in the income statement, or the trading account. Candidates needed to
include the word “trading” in answers giving the Profit and Loss account.

(f)

Including an accrued expense is an example of the accounting principle of matching or accruals.
Prudence was not accepted.

(g) (i)

Tamara’s percentage of gross profit to sales
= (75 000 – 52 500 = 22 500) / 75 000 x 100% = 30.00%
Most candidates correctly calculated this, but some used the cost of sales instead of profit, and
some made calculation errors.

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(ii) Tamara’s percentage of net profit to sales
= (22 500 – 7 500 = 15 000) / 75 000 x 100% = 20.00%
Again most candidates correctly calculated this but some used the figure for expenses as net profit.
It is most important for candidates to read the question carefully.
(h)

This question, asking candidates to calculate the total amount of dividend paid to shareholders,
was not well answered. Many candidates did not seem to realise that share capital is divided into a
number of shares and that a dividend is declared on each share. It is therefore necessary to find
the number of shares and multiply that number by the amount of the dividend declared per share to
find the total amount to be paid out. Candidates should be prepared for questions involving
dividends paid by companies.
The calculation is:

Number of shares
Total dividend

= $5 000 / $0.50 = 10 000 shares
= 10 000 shares x $0.15 per share
= $1 500

Question 3
Part (a) to this question, requiring entries in the debit side of a cash book, was well answered and many
candidates earned all the available marks. In part (b), most candidates correctly gave the sales account,
although some called it the sales ledger and lost marks. Part (c) required candidates to give a journal entry
to correct an error of original entry and although some gave a correct answer, many were confused as to
whether the entries were debits or credits and what the correct amounts should be; they gave a variety of
narratives to accompany their entry. Any narrative referring to correcting an error was accepted. In part (d),
candidates were asked for suggestions as to how a trader may encourage his customers to pay him and
most candidates gave at least one acceptable answer.
(a)

The correct entries to be made on the debit side of the cash book are as follows.
Sumaru
Cash book, April 2010
Cash
Dr
$

April

(b)

Bank
Dr
$

Ahar

1 500

Cash sales

Bannu

2 000

Dooly

1 650

Eduardo

4 000

900

The correct entry for the transaction on 9 April is shown below.
Name of account
Sales

Dr
$

Cr
$
4000

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(c)

The correct journal entry to correct the error is
Date

Dr
$

30 April

Suspense

Cr
$

360

Cash book (bank)

360

To correct incorrect balance entered at 1 April 2010
(d)

Acceptable examples of ways to encourage customers to pay their invoices would be to
●
●
●
●
●

Send a regular statement of account
Offer cash discount (not trade discount)
Limit the customer’s credit (no more credit sales)
Charge interest on overdue amounts
Use debt collection methods

Some candidates referred to giving small gifts to customers as they paid their accounts. This was
treated as a form of cash discount and marked accordingly.
Question 4
This question dealt with the basis of inventory valuation in part (a), required the preparation of a company
balance sheet in part (b) after adjusting the value of inventory, and then in part (c) asked candidates to
decide on the outcome of proposed actions to enable the company to repay its bank loan. Finally,
candidates were asked in part (d) to state the accounting principle which states that a business is to
continue indefinitely, and to state the value at which assets should be valued if the business is not expected
to continue. Many candidates found this last part very difficult.
In part (a), most candidates gave the correct basis of inventory valuation, but few realised that the company
should use the lower inventory amount given in the question in its balance sheet, and fewer still understood
that reducing the closing inventory amount would reduce the company’s profit for the year by the same
amount. This principle is important and is clearly not well understood.
The correct answers to part (a) are therefore
(i)
Inventory is valued at the lower of cost and net realisable value
(ii) Inventory should be valued at $2700 in the company’s balance sheet at 31 March 2010
(iii) Profit for the year is reduced (not overstated or understated) by $300
Most candidates performed well in preparing the company balance sheet in part (b), but few used the lower
figure of inventory from part (a), and many showed the bank loan as a long term liability, not realising that it
was repayable within one year and was therefore a current liability. Few candidates reduced the profit for
the year for the reduced inventory valuation, and as a result many balance sheets did not balance, with
candidates attempting incorrect balancing entries. Candidates should note that where they are to prepare a
balance sheet, they should follow a recognised layout with headings, and should not just give a list of
balances.
The correct balance sheet is:
Timpani Limited
Balance Sheet at 31 March 2010
$
Non-current (fixed) assets
Plant and equipment at cost
Accumulated depreciation
Net book value
Current assets
Inventory (stock)
Trade receivables (debtors)
Bank

$
20 000
12 000
8 000

2 700
1 000
500

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4 200
Current Liabilities
Trade payables (creditors)
Bank loan

700
2 800
3 500

Net current assets
Total assets

700
8 700

Share capital
Profit for the year

5 000
3 700
8 700

In part (c) candidates should have considered whether the suggested action would have increased or
reduced the company’s bank balance. Reducing the dividend would conserve funds, reducing depreciation
has no effect, and reducing trade payables would reduce the balance at the bank.
Many candidates were able to answer this question well, but there were some guesses and some candidates
clearly were not able to make the connection between the courses of action and the company’s bank
balance and gave inconsistent answers.
The correct entries in the table are
Successful
Reduce dividend

Not Successful

Reduce depreciation

Reduce trade payables (creditors)

The correct answers to part (d) were
(i) The going concern principle (the continuity principle was acceptable)
(ii) Assets in a business which is not expected to continue should be valued at their expected sale
values (net realisable value was acceptable, but net book value was not.)
Few candidates were able to give acceptable answers to either section of this part.
Question 5
This question dealt with the difference between capital and revenue expenditure, calculating depreciation
and the net book value of a non-current asset, showing the accounting entries on the sale of the asset, and
considering whether the basis of depreciating the asset is appropriate.
Candidates performed well in part (a), and most showed a good understanding of the difference between
capital and revenue expenditure. Some answered by guesswork, and some appeared not to understand the
question, in some cases giving both capital and revenue as their incorrect answer. The correct answer is
Capital

Revenue

Hire charges

Cash discount received from motor dealer for prompt
payment for new car

Part exchange value of used car

In part (b), candidates were asked to calculate depreciation for a given year and then to show the net book
value of the asset at the end of that year. Most candidates correctly calculated the depreciation in part (i),

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but many showed two years depreciation, not following the dates in the question, and many showed the net
book value in their answer to (i) as well as, or instead of, in part (ii). Candidates often find questions
involving depreciation to be challenging but if they read the question and the requirement carefully, and are
well prepared, they will earn the available marks.
The answers to part (b) are
(i)
(ii)

Depreciation
= cost $12 000 @ 30% per annum
= $3 600
Net book value = cost $12 000 less depreciation $3 600 = $8 400

Part (c) required the preparation of the disposals account on the scrapping of the asset. The question asked
for an account, and those candidates who showed just a calculation did not earn any marks. Accounts in
running balance format or the traditional T format were acceptable, but candidates who reversed debit and
credit entries did not earn marks. Candidates should have showed the transfer to income statement (profit
and loss account) as the balance required to close the account and should not have carried any balance
forward. The account is
2010

Disposal of motor vehicles
$
2010

1 April Motor vehicle

12 000

1 April

Depreciation
Bank (Insurance)
Income statement
(Profit & loss account)

3 600
5 000
3 400
12 000

12 000
Note that although dates are shown in the account, they were not required for the marks.

In part (d), candidates were asked to comment on the annual rate of depreciation where the part exchange
value of the asset is less than the net book value and to suggest a different method of charging depreciation.
Very few candidates realised that the annual rate of depreciation should be increased if the reducing
balance method continued to be used, and although most offered the straight line method as an alternative,
few were able to give a convincing reason for their answer. Acceptable answers would have included:
(i)

The reducing balance rate may be too low as a large loss arose on scrapping the car.
Increasing the rate up to 60% per annum would reduce the loss.

(ii)

Straight line method over life of car (three years), or using scrap value, or
Depreciation based on estimated mileage over three years.

Question 6
Part (a) of this question required candidates to compute the amount of credit sales of a business from
information about movements in the bank account, opening and closing trade receivables and other items.
There was in fact additional information given which would be used later in the question and candidates
needed to select the appropriate items for their calculation.
This part of the question was not well done. Most candidates realised they needed to start with deposits to
the bank for the year, but few correctly adjusted the opening and closing trade receivables, some adding
both amounts, some subtracting both, some adding one and subtracting the other, but not often the correct
ones. Some incorrectly included the opening and closing bank balances and lost marks. Most realised it
was necessary to adjust for the cash sales but many were not sure of the correct adjustment.
The credit sales could be found as follows:
Deposits to bank
Less: cash sales
Less:

receivables at 1 April 2009

Add:
receivables at 31 March 2010
Credit sales

$
15 270
2 680
12 590
3 140
9 450
4 080
13 530

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Candidates should note that where a figure is found which is to be used in a later part of the question, they
will only lose marks for any error they make in the first part: Examiners give credit for correctly using figures
found earlier in the question. This is the case with parts (b) and (c) of this question.
Part (b) required candidates to prepare a trading account from information given and using the sales figure
from part (a). Most candidates earned most of the available marks and gave good answers to this part. The
trading account was
Wilma
Trading account for the year ended 31 March 2010
$
Revenue (sales) – credit
- cash
Inventory (stock) at 1 April 2009
Purchases
Carriage inwards

$
13 530
2 680
16 210

1 780
9 560
280
11 620
1 920

Inventory (stock) at 31 March 2010
Cost of goods sold
Gross profit

9 700
6 510

In part (c), candidates were asked to calculate two measures of business performance, the rate of inventory
turnover and the collection period for trade receivables. The first calculation was done well, with many
candidates earning all the available marks. The second calculation was done less well, with many
candidates being confused as to which figure of receivables should be used in the calculation. Some added
the opening and closing amounts together, some subtracted one from the other, some used an average, but
the correct figure is the closing receivables. The calculations are
(i)

Rate of inventory (stock) turnover = Cost of goods sold / average inventory (stock)
= 9 700 / [(1 780 + 1 920)/2 = 1 850]
= 5.24 times (note: not %, days, or any other description)

(ii)

Collection period for trade receivables (debtors)
= (Debtors / credit sales) x 365 days
= (4 080 / 13 530) x 365 days
= 110 days (note: not %, times, or any other description)

In part (d), candidates were asked to decide the effect on gross profit, the percentage of gross profit to
sales, and the rate of inventory turnover of omitting to bank some cash sales and using the money to pay for
additional purchases, which had not been recorded in the books.
This required candidates to realise that sales and purchases had been understated by the same amount and
to understand the effect of this error on the measures. If sales and purchases have both been understated
by the same amount, the gross profit will not be affected. The percentage of gross profit to sales will be
reduced, and as the cost of sales has been understated, the rate of inventory turnover will be increased.
This was a higher level question, and few candidates earned all the marks, although some correctly
answered that the gross profit would not be affected. The correct table is
Increase

Decrease

Gross profit

Percentage of gross profit to sales
Rate of inventory (stock) turnover

No change

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ACCOUNTING
Paper 0452/12
Paper 12

General comments
Most candidates seemed to have coped well with the changes to the structure of the examination paper in
this session. There was a wide spread in candidates’ performance and many candidates achieved high
marks. Well prepared candidates were able to gain most of the available marks; the paper also offered less
well prepared or weaker candidates the opportunity to gain some marks. All the questions were split into
sections which covered the whole ability range, with better candidates able to demonstrate their evaluation
and analysis skills in some sections of each question. The multiple choice questions at the start of the paper
proved the most difficult for the majority of candidates.
Most of the multiple choice questions in Question 1 were poorly answered and in many cases candidates
had struggled to choose between 2 or 3 of the options available; the petty cash imprest in part (d) and
inventory (stock) valuation in part (g) proved particularly difficult. Candidates also struggled with the
selection of treatment of dishonoured cheques in Question 2 and the double entry of accrued wages in part
(h) was not well answered. The treatment of interest on partners’ drawings in Question 3 was a problem for
many candidates but the calculations of interest on capital and drawings in part (a) and (b) of the question
were very well answered. Candidates’ strongest question was invariably Question 4 and a good
understanding of trial balance and income statements was shown by most candidates. Candidates’ answers
for Question 5 generally showed a good knowledge of bad debts but there were weaknesses in both the
understanding and recording of a provision for bad/doubtful debts. Most of the sections in Question 6 were
well answered but many candidates struggled to explain why depreciation should not be charged on land in
part (d).
Most candidates completed all the questions and there did not seem to be evidence of time pressure
although there were a number of candidates who did not attempt some of the questions at all.
Comments on specific questions
Question 1
This was a new section for the paper and consisted of 10 multiple choice questions from across the syllabus
and tested the full range of skills. Many scripts showed that candidates had crossed out and amended
answers, which suggests that candidates found this type of question quite challenging. Marks awarded
varied considerably and there seemed to be little correlation between the marks gained on this section and
overall marks for the whole paper. It may well be that candidates had difficulty with this type of question due
to lack of familiarity.
Question 2
This question tested candidates’ understanding of the accounting ratios, double-entry techniques and
accounting principles.
Part (a) required candidates to give two ratios used to measure the profitability of a business. Acceptable
answers were return on capital employed, percentage of gross profit to sales or GP margin or GP%,
percentage of net profit to sales or NP margin or NP%.
A very significant number of candidates gave liquidity ratios as the answer to this question.
In part (b) candidates were asked to identify whether items were current assets or current liabilities; this was
very well answered with nearly all candidates correctly identifying inventory (stock) and other receivables
(prepayments) as current assets and trade payables (creditors) as current liabilities.

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Candidates were once again asked to tick the appropriate entry in a box in part (c) to show where the entry
for a dishonoured cheque would be made in a cash book. This was very poorly answered as few candidates
selected the correct answer of the credit side in the bank column. The most common error was due to
incorrect interpretation of the question as many candidates tried to show how both debit and credit entries
would be made, which was impossible to do as the question did not state who the cheque was from and both
entries would not appear in the cash book anyway. Some candidates may also have tried to make the entry
as if they were the bank and not the business.
When asked in part (d) which final account discount allowed would be shown in some candidates lost marks
by stating trading account rather than income statement, although the answers of trading and profit/loss
account were acceptable.
Well prepared candidates were able to correctly name an error of principle as the type of error when entering
a new machine in the repairs account in part (e) and matching/prudence as the principle being followed for
making a provision for doubtful debts in part (f). These two questions did produce a wide range of incorrect
answers from weaker candidates.
Part (g) required candidates to calculate the rate of inventory (stock) turnover and payment period for trade
payables (creditors). Both parts were generally quite well answered but some candidates lost marks by not
following the instructions in the question and giving their answer to two decimal places in (i) and whole days
in (ii).
The correct calculations were
(i)

rate of inventory (stock) turnover
= (4 000 + 45 500 + 2 500 – 5 600) = 46 400
(4 000 + 5 600)/2 = 4 800
= 9.66 times

(ii)

Payment period for trade payables
= 3 750 / 45 500 x 365 days
= 30 days(to nearest whole day)

Candidates were asked to write up the wages account to show the effect of outstanding wages in part (h).
This was poorly answered and candidates frequently put the entries on the wrong side or gave inappropriate
descriptions.

Bank (Cash)
Balance c/d
or Accruals)

Hooper – Wages account
$
32 800
Balance b/d
(or Accruals)
450
Income statement

(Profit and Loss account)
33 250
Balance b/d

$
300
32 950

33 250
450

Question 3
This question tested candidates’ understanding of various aspects relating to partnerships. Candidates were
required to calculate interest on capital and interest on drawings before showing the balance of net profit for
a partnership. They were then asked to write up the current account for one of the partners and finally show
the effect of reducing the rate of interest would have on drawings.
Part (a) and (b) (the calculations) were very well answered and many candidates obtained all, or very nearly
all, the available marks.
(a) (i)
(ii)
(b) (i)
(ii)

Arthur
Nancy
Arthur
Nancy

$30 000 x 3%
$40 000 x 3%
$35 000 x 4%
$15 000 x 4%

=
$900
= $1200
= $1400
=
$600

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Part (c) was also quite well answered but not all candidates realised that the figures calculated in part (a)
and (b) were to be included in the calculation of the balance of net profit for the year.
$
Net profit
Interest on drawings
Less salary
Interest on capital
Residual profit

15 000
2 100

(Shared 2:3 Arthur: Nancy)
Arthur
Nancy

29 560
44 340

$
89 000
2 000
91 000
17 100
73 900

73 900

A number of candidates failed to read the question correctly in part (d) and attempted to write up a combined
current account for both partners rather than just Arthur; in other cases candidates again failed to realise that
the interest on drawings and interest on capital figures from part (a) and (b) were to be included in this
section as well.

Interest on drawings
Drawings
Balance c/d

Arthur – Current account
$
1 400
Interest on capital
35 000
Salary
Residual profit
9 060
45 460
Balance b/d

$
900
15 000
29 560
45 460
9 060

Part (e) required candidates to identify the effect reducing the rate of interest would have on the partners’
drawings. This produced the weakest response in Question 3 and many candidates clearly failed to
recognise that reducing the rate of interest would increase the earnings for the partnership.
Question 4
This question on trail balances and income statements was found to be very easy by many candidates, and
a significant number of completely correct answers were given. This was the best answered section in the
whole paper.
Part (a) required candidates to provide one reason for preparing a trial balance. The main reason expected
to be put forward was to help trace or identify errors but marks were also awarded where candidates
suggested helping to prepare final accounts.
A list of accounts was provided in part (b) which required the candidate to prepare a trial balance and
show differences as a suspense account. This was very well answered but some candidates omitted
to include the suspense account figure, so lost marks unnecessarily.
$
Revenue (sales)
Inventory (stock)
Purchases
Bank (overdraft)
Equipment
Trade receivables (debtors)
Trade payables (creditors)
Expenses
Capital
Drawings
Suspense

$
125 000

14 500
76 000
2 300
9 000
1 700
2 800
37 500
15 500
8 000
146 700

1 100
146 700

For part (c) candidates were asked to show how the error would be entered in the journal to correct
the error; whilst many candidates did show the correct entries, marks were often lost because the
narrative provided failed to explain that the entries were to correct a previous error.

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Suspense

Dr
$
1 100

Revenue (sales)

Cr
$
1 100

Sales previously omitted from the ledger
Part (d) required candidates to complete a pro forma extract from a summary income statement to calculate
net profit. Common errors in this part were failing to include the sales previously omitted and referred to in
Part (c) or confusing the opening and closing inventory (stock). A small number of candidates also added
cost of sales to sales in an attempt to calculate gross profit.
Deali
Summary Income Statement (Trading and Profit and Loss Account)
for the year ended 31 March 2010
$

$
126 100

Revenue (sales)
Inventory (stock) at 1 April 2009

14 500

Purchases

76 000
90 500

Inventory (stock) at 31 March 2010

18 000

Cost of sales

72 500

Gross profit

53 600

Expenses

37 500

Net profit

16 100

Question 5
This question involved bad debts and provisions for bad/doubtful debts. Candidates were asked to provide
some definitions of the terms used and also show the double-entry treatment of both items. It was clear that
this was an area that candidates were not always well versed in, and this question was the lowest scoring in
the paper.
In part (a), candidates were asked to provide definitions of bad debts and a provision for doubtful debts. The
answer required for bad debts should have shown some recognition that a debt was an amount owed to the
business and that this debtor involved was unable or unwilling to pay. This section was fairly well answered.
The second part required a definition of provision for doubtful debts that included reference to it being an
estimate and that it was an amount likely to be lost through future bad debts. This section was much weaker
as candidates often failed to recognise that it was either an estimate or that it referred to future bad debts.
Part (b) required the candidate to show the journal entry used to write off bad debts owed by 2 debtors.
Most candidates often got the amounts and the accounts correct but entries were often on the wrong side.
Some candidates made the entries as bad debts and income statement. The correct entries were:

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Dr
$
Bad debts (income statement)
( or profit and loss account)
Veeku
or Debtors

Cr
$

850
300

Wlanda

550

Part (c) requested candidates to calculate the provision for doubtful debts. This was generally performed
well and most candidates correctly deducted the bad debts from part (b) before calculating the amount due
for the provision for bad debts. Some marks were still awarded to those candidates who ignored the bad
debts for correctly carrying out the calculation even though their final figure was incorrect.
$
12 600
850
11 750

Balance on sales ledger
Less: bad debts written off
Provision for doubtful debts @ 4% =

$470

In part (d), candidates were asked to show the journal entry to create a provision for doubtful debts to record
the amount calculated in part (c). Even if candidates had made an incorrect calculation in part (c) the marks
awarded in this section were based on the candidates’ own figures. Even so, this section was generally
poorly answered as few candidates were able to identify the correct accounts involved. A very common error
was to show provision for doubtful debts as Dr and bad debts as Cr.
Dr
$
Income statement
(Profit and Loss account)

Cr
$

470

Provision for doubtful debts

470

The question further tested candidates understanding of bad debts and provision for doubtful debts in part
(e). In part (e)(i) candidates were required to show the transfer to the income statement from the bad debts
account. Once again candidates were not penalised if they used the incorrect figures they had previously
calculated in part (b). Despite this candidates often had the entries posted on the opposite side or did not
make reference to the income statement (profit/loss account) even thought the question made specific
reference to this account. The correct entries should be:

Debtors
or Veeku
Wland

300
550

Bad debts account
$
Income statement
850
(Profit and loss)

$
850

In part (e)(ii) candidates were asked to show how transfers to the income statement from the provision for
doubtful debts account. This was very poorly understood and few candidates were able to show a good
understanding of the treatment for provision for doubtful debts. The correct answer should have been:

Balance c/d

Provision for doubtful debts account
$
Income statement (Profit and loss)
470
Balance b/d

$
470
470

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Once again “Own Figures” were accepted from previous calculations but many candidates failed to
recognise that there would be a balance on this account or inappropriately made the Cr entry to bad debts; in
both cases showing a lack of understanding of the nature of provisions.
The answers to part (f) were the weakest in the whole paper and although many candidates recognised that
the Cr entry could be bank, cash or Veeku very few realised that the Dr entry would be income statement as
the transaction had moved into a different year for income purposes.
Bad debts recovered account
$
Bank (Cash/Veeku)
Income statement
300
(Profit and loss)

$
300

Question 6
This question covered a range of topics including users of accounting information, capital and revenue
expenditure and depreciation.
Part (a) required candidates to provide two examples of parties interested in the accounts of a business.
This section was answered extremely well and the only candidates who lost marks were those that ignored
the instructions in the question and quoted owners or shareholders. Suitable answers were Managers, Bank
or other lender, Creditors, Customers, Suppliers, Employees, Government, Competitor or potential investors.
Capital and revenue expenditure was tested in part (b) and most candidates were able to correctly
categorise at least 3 of the 4 items. Architects’ fees and repainting the old factory were the most frequent
errors. The correct answers were:
Capital
9

New factory extension
Repainting old factory
Architects’ fees for designing extension
New plant and equipment for extension

Revenue
9

9
9

Candidates were asked to calculate depreciation using the straight line basis for two items in part (c)(i) and
(ii). The first calculation caused some problems and errors as candidates had to add architects’ fees to the
cost of the factory extension in order to determine the full cost of the asset. Those candidates who had
incorrectly specified the architects’ fees as revenue expenditure in the previous section obviously failed to
add the extra $3000 onto the cost of the building. Some marks were lost for this but these candidates were
still able to gain marks if the rest of their calculations were correct.
(i)

Factory cost $30 000 + Architects’ fees $3 000
Total cost
Over useful life 20 years

(ii)

$33 000
20

= $1 650

Plant and equipment $6 000 - residual value $800 = $5200
Over useful life

$5 200
4 years

= $1 300

In the final section, part (d), candidates were asked to suggest two reasons why depreciation should not be
charged on land. This produced a wide range of answers and more able candidates responded well but
weaker candidates struggled to apply their knowledge to this concept. Good answers made comments such
as land has an indefinite expected life, land does not wear out, land is not consumed by use and land
increases in value over time. Whilst many candidates had obviously been taught about the reasons why
assets are depreciated only the more competent candidates were able to apply these reasons to land and
appreciate why land does not normally depreciate.

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ACCOUNTING
Paper 0452/13
Paper 13

rate of inventory (stock) turnover
= (4 000 + 45 500 + 2 500 – 5 600) = 46 400
(4 000 + 5 600)/2 = 4 800
= 9.66 times

(ii)

Payment period for trade payables
= 3 750 / 45 500 x 365 days
= 30 days(to nearest whole day)

Bank (Cash)
Balance c/d
or Accruals)

Hooper – Wages account
$
32 800
Balance b/d
(or Accruals)
450
Income statement

(Profit and Loss account)
33 250
Balance b/d

$
300
32 950

33 250
450

Arthur
Nancy
Arthur
Nancy

$30 000 x 3%
$40 000 x 3%
$35 000 x 4%
$15 000 x 4%

=
$900
= $1200
= $1400
=
$600

15 000
2 100

(Shared 2:3 Arthur: Nancy)
Arthur
Nancy

29 560
44 340

$
89 000
2 000
91 000
17 100
73 900

73 900

Interest on drawings
Drawings
Balance c/d

Arthur – Current account
$
1 400
Interest on capital
35 000
Salary
9 060
Residual profit
45 460
Balance b/d

$
900
15 000
29 560
45 460
9 060

$
125 000

14 500
76 000
2 300
9 000
1 700
2 800
37 500
15 500
8 000
146 700

1 100
146 700

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Suspense

Dr
$
1 100

Revenue (sales)

Cr
$
1 100

$
126 100

Revenue (sales)
Inventory (stock) at 1 April 2009

14 500

Purchases

76 000

90 500
Inventory (stock) at 31 March 2010
Cost of sales

18 000
72 500

Gross profit

53 600

Expenses

37 500

Net profit

16 100

Cr
$

850
300

Wlanda

550

Balance on sales ledger
Less: bad debts written off
Provision for doubtful debts @ 4% =

$470

Cr
$

470

Provision for doubtful debts

470

Debtors
or Veeku
Wland

300
550

Bad debts account
$
850
Income statement
(Profit and loss)

$
850

Balance c/d

Provision for doubtful debts account
$
470
Income statement (Profit and loss)
Balance b/d

$
470
470

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0452 Accounting June 2010 www.dynamicpapers.com
Principal Examiner Report for Teachers
Once again “Own Figures” were accepted from previous calculations but many candidates failed to
recognise that there would be a balance on this account or inappropriately made the Cr entry to bad debts; in
both cases showing a lack of understanding of the nature of provisions.
The answers to part (f) were the weakest in the whole paper and although many candidates recognised that
the Cr entry could be bank, cash or Veeku very few realised that the Dr entry would be income statement as
the transaction had moved into a different year for income purposes.
Bad debts recovered account
$
Income statement
300
Bank (Cash/Veeku)
(Profit and loss)

$
300

New factory extension
Repainting old factory
Architects’ fees for designing extension
New plant and equipment for extension

Revenue

Factory cost $30 000 + Architects’ fees $3 000
Total cost
Over useful life 20 years

(ii)

$33 000
20

= $1 650

Plant and equipment $6 000 - residual value $800 = $5200
Over useful life

$5 200
4 years

= $1 300

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ACCOUNTING
Paper 0452/21
Paper 21

General comments
This was the first examination based on the new syllabus. All the questions were compulsory and covered
various topics on the syllabus. It was intended that all candidates should be able to attempt the structured
questions on this examination paper.
It was disappointing to find that a significant number of candidates were unable to produce appropriate
responses to questions on limited companies, as this topic is now included in the syllabus. Candidates are
reminded that questions can be asked on any aspect of the syllabus and that a thorough knowledge of the
subject is necessary in order to achieve a pass grade. When preparing for the examination, candidates are
advised to work through relevant questions on previous examination papers and appropriate exercises in
textbooks.
In any accounting examination it is important to show calculations where appropriate. A number of
candidates lost marks by providing an incorrect figure without supporting calculations. If calculations had
been provided those candidates may have been awarded some of the available marks.
Where a question specifies a number of items required, for example, “State two reasons ”, “Name
the accounting principle ”, candidates are expected to follow these instructions. It is not acceptable
to provide a list of several items and expect the Examiner to select the correct one(s).
Candidates are reminded of the importance of reading through each question very carefully before
attempting an answer. Marks may be lost if instructions are not followed. For example, marks were lost
when an instruction to provide narratives for journal entries was ignored. Similarly, failing to calculate a ratio
correct to two decimal places resulted in the loss of marks.
The following comments should be read in conjunction with the question paper and the published mark
scheme.
Comments on specific questions
Question 1
This question required candidates to answer various theory questions about petty cash and depreciation and
to do some simple calculations of depreciation. Most of these questions should have been relatively
straightforward and it was very disappointing to find that many candidates were unable to provide correct
answers to some of the theory questions.
(a)

Candidates were required to state two reasons why a trader maintains a petty cash book. Many
candidates described a petty cash book but seemed unable to suggest why a trader should use
one. A few correctly mentioned reducing the number of entries in the main cash book and the
ledger accounts.

(b)

An explanation of the imprest system was required. Many candidates seemed to understand that
this system involved a refund of the amount spent but appeared to find it difficult to explain this.

(c)

Only a few candidates were able to provide an acceptable advantage of the imprest system of petty
cash.

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(d)

Candidates were required to do a simple calculation to calculate the amount the petty cashier
would receive to restore the imprest. The total amount paid was $88, so the amount received from
the chief cashier should equal this figure: it was disappointing that a significant number of
candidates stated that $12 would be received.

(e) (i)

An explanation of the entry that would be made in the ledger for items recorded in the travelling
expenses column of the petty cash book was required. It was expected that candidates would be
able to state that the travelling expenses ac

Accounting (0452) · May/June 2010 · Examiner report

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