Accounting (0452) · May/June 2014 · Mark scheme 23

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CAMBRIDGE INTERNATIONAL EXAMINATIONS
International General Certificate of Secondary Education

MARK SCHEME for the May/June 2014 series

0452 ACCOUNTING
0452/23

Paper 2, maximum raw mark 120

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 2014 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.

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Page 2
1

(a)

Mark Scheme
IGCSE – May/June 2014

Syllabus
0452

Nasir Manufacturing Limited
Manufacturing Account for the year ended 31 January 2014
$
$
Cost of materials used
Opening inventory of raw materials
23 500
Purchases of raw materials
124 600
148 100
Closing inventory of raw materials
26 100
122 000
Direct wages (136 000 + 2 200)
138 200
Direct expenses
16 300
Prime cost
276 500
Factory overheads
Wages of factory supervisors
31 400 }
General factory expenses
19 208 }(1)
Rates & insurance (¾ × (6 360 – 120))
4 680 (2)
Depreciation Plant & machinery
(20% × (94 000 – 33 840)
12 032 (1)
Loose tools
(2 650 + 310 – 2 740)
220 (1)
67 540
344 040
Opening work in progress
11 020
355 060
Closing work in progress
12 060
Cost of production
343 000

Paper
23

(1)
(1)
(1)
(1)
(1)

(1)OF
(1)
(1)
(1)OF

Horizontal format acceptable
(b)

[14]

Nasir Manufacturing Limited
Income Statement for the year ended 31 January 2014
$
$
Revenue
Cost of sales
Opening inventory finished goods
Cost of production
Purchases finished goods
Less Returns
Less Closing inventory finished goods
Gross profit

$
539 000

18 100 (1)
343 000 (1)OF
16 900 (1)
200 (1)

16 700
377 800
19 300 (1)

Horizontal format acceptable

358 500
180 500 (1)OF
[6]
[Total: 20]

© Cambridge International Examinations 2014

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Page 3
2

Mark Scheme
IGCSE – May/June 2014

(a)

Syllabus
0452

Paper
23

Leroy Smith
Stationery account
$
2013
April 1 Balance b/d
June 30 Bank

$

144 (1)
368 (1)

2013
Aug 1
2014
Mar 31

___
512
2014
April 1 Balance b/d

Drawings
Income
statement
Balance c/d

26 (1)
394 (1)
92 (1)
512

92 (1)

Three column running balance format acceptable

[6]

(b) The business entity principle has been applied when the stationery taken for personal use
was transferred from the stationery account to the drawings account.
[2]
(c)
2013
April 1
2014
Mar 31

2014
April 1

Leroy Smith
Rent and rates account
$
2013
Balance (rates) b/d 380 (1)
April 1
2014
Bank (rates)
2470 } (1)
Mar 31
Bank (rent)
3380 }

6230
Balance b/d

$
Balance (rent) b/d

260 (1)

Income
statement
5400 (1)
Balance (rates) c/d 570 (1)
6230

570 (1)

Three column running balance format acceptable

[6]

(d) The accruals principle has been applied when only the expense for the year was transferred
to the income statement.
[2]
(e) Capital receipts
Amounts received which do not form part of the day-to-day trading activities. (1)
Capital expenditure
Money spend on acquiring improving and installing non-current assets. (1)
Revenue receipts
Amounts received in the day-to-day trading activities from revenue and other items of
income. (1)
Revenue expenditure
Money spent on running a business on a day-to-day basis. (1)

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[4]

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Page 4

Mark Scheme
IGCSE – May/June 2014

Syllabus
0452

Paper
23

(f)
non-current assets
at 31 March 2014
Overstated

(1)

Understated

profit for the year ended
31 March 2014
Overstated

Understated

(1)
[2]
[Total: 22]

3

(a) (i) The straight line method of depreciation uses the same amount of depreciation each
year.
[1]
(ii) This method is used where each year is expected to benefit equally from the use of the
asset.
[1]
(b) (i) The reducing balance method of depreciation uses the same percentage rate of
depreciation each year, but it is calculated on the book value at the end of each year.
[1]
(ii) This method is used where the greater benefits from the use of the asset will be gained
in the early years of its life.
[1]
(c) 1 Computer equipment – reducing balance method (1)
2 Buildings – straight line method (1)
3 Motor vehicle – reducing balance method (1)

[3]

(d) (i) The asset is valued at the end of each year and the difference between the opening and
closing value is the depreciation for the year.
[1]
(ii) This method is used where it is impractical or difficult to maintain detailed records of the
asset.
[1]
(iii) Loose tools, packing cases, small items of equipment
Or other suitable example
Any 1 example (1)

© Cambridge International Examinations 2014

[1]

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Page 5

Mark Scheme
IGCSE – May/June 2014

(e)

Syllabus
0452

Paper
23

Tony Yeo
Equipment account
$
2013
May 1 Balance b/d
Nov 1 New2You

$

8 600
3 400 (1)

2013
Oct 31 Disposals
2014
Apl 30 Balance c/d

2 000 (1)
10 000
12 000

12 000
2014
May 1 Balance b/d 10 000 (1)OF

[3]

Provision for depreciation of equipment account
$
$
2013
2013
Oct 31 Disposals
800 (2)
May 1 Balance b/d
3 260
2014
2014
Apl 30 Balance c/d 4 120
Apl 30 Income statement
20% × 6600
1 320 (1)
20% × 3400 × ½
340 (1)
4 920
4 920
2014
May 1 Balance b/d
4 120 (1)OF

[5]

Disposal of equipment account
$
2013
Oct 31 Equipment

$

2013
2 000 (1)OF Oct 31 Prov for dep
Cash
2014
Apl 30 Income statement
2 000

800 (1)OF
750 (1)
450 (1)OF
2 000

[4]

Three column running balance format acceptable
[Total: 22]

4

(a) $30 000 × 5% = $1 500 (1)
$50 000 × 6% = $3 000 (1)
$70 000 × 8% = $5 600 (1)

[3]

(b) To indicate that part of the profit is for long term use within the company and is not available
for distribution.
[1]
(c)

$
Profit before interest and dividends
Less Debenture interest
Preference share dividend
Ordinary share dividend
Transfer to general reserve
Profit retained in the year

1 500
3 000
5 600
4 000

$
18 600
(1)
(1)
(1)
(1)

14 100
4 500 (1)OF

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[5]

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Page 6
(d)

Mark Scheme
IGCSE – May/June 2014

Syllabus
0452

LWS Ltd
Extract from Statement of Financial Position at 30 April 2014
$
Capital and reserves
140 000 Ordinary shares of $0.50 each
70 000 }
50 000 6% Preference shares of $1 each
50 000 }(1)
General reserve
4 000 (1)
Retained profits (7 500 (1) + 4 500 (1)OF)
12 000

Paper
23

[4]

(e) Non-current liabilities

[1]

(f)

(i) Current liabilities

[1]

(ii) $750

[1]
[Total: 16]

5

(a) To ensure that the totals of the trial balance agree (1)
To allow draft financial statements to be prepared (1)

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[2]

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Page 7

Mark Scheme
IGCSE – May/June 2014

(b)

Syllabus
0452

Paper
23

Uzma Khan
Journal
Debit
$
1

2

3

4

4

Suspense
Rent
Correction of error of transposition

270

Drawings
Wages
Correction of error, drawings
debited to wages

400

Credit
$
270

400

(1)
(1)
(1)
(1)
(1)
(1)

43

Discount allowed
Suspense
Correction of error, discount not
transferred to ledger
Mona
Suspense
Amina
Correction of error, receipt from
Amina $2000 entered as $200 in
Mona’s account

43

(1)
(1)
(1)

200
1800
2000

(1)
(1)
(1)
(1)

Alternative presentation
Mona
Suspense
Suspense
Amina
Correction of error, receipt from
Amina $2000 entered as $200 in
Mona’s account

200
200
2000
2000

(1)
}
} (1)
(1)
(1)
[13]

(c)
Effect on profit for the year
Error

Overstated
$

2
3
4

Understated
$

No effect

400 (2)
43 (2)
No effect (2)
[6]
[Total: 21]
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Page 8
6

Mark Scheme
IGCSE – May/June 2014

Syllabus
0452

Paper
23

(a)
Ratio

Year ended 31 March
2014

percentage of gross profit to revenue (sales)

31.11 %

(2)

percentage of profit for the year to revenue (sales)

7.78 %

(2)OF

current ratio

1.09 : 1

(2)

quick ratio

0.69 : 1

(2)
[8]

Calculations
Percentage of gross profit to revenue
450 000 − 310 000 (1) 100
×
= 31.11% (1)
450 000
1
Percentage of profit for the year to revenue
140 000 O/F − 105 000 (1)OF 100
×
= 7.78% (1)OF
450 000
1
Current ratio
(21 500 + 100 + 37 400) : (36 800 + 12 200 + 5 000) (1) = 1.09 : 1 (1)
Quick ratio
(100 + 37 400) : (36 800 + 12 200 + 5 000) (1) = 0.69 : 1 (1)
(b) Increase in selling price
Reduction in trade discount allowed to customers
Selling at a higher mark-up
Decrease in cost price
Increase in trade discount allowed by suppliers
Taking advantage of bulk buying
Or other suitable reason based on answer to (a)
Any 2 reasons (1) each

[2]

(c) Year ended 31 March 2013 (1)
In 2013 the expenses were 17.85% of revenue: in 2014 the expenses were 23.33% of
revenue. (2)
Or suitable answer based on answers to (a)
[3]

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Page 9

Mark Scheme
IGCSE – May/June 2014

Syllabus
0452

Paper
23

(d)
Increase

Decrease

No effect

Cheque paid to credit supplier
Goods taken for own use

(1)

Purchase of non-current asset
on credit

(1)

(1)

[3]
(e) Unsatisfied (1)
The ratio of liquid assets to current liabilities has fallen from 0.90:1 to 0.69:1. (1)
She cannot pay immediate liabilities from liquid assets. (1)
Or suitable answer based on answer to (a)

[3]
[Total: 19]

© Cambridge International Examinations 2014