0452/12/M/J/14 Question Paper – Accounting May/June 2014 Paper 12

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Cambridge Accounting (0452) question paper for paper 12, May/June 2014 — 0452/12/M/J/14, file 0452_s14_qp_12.pdf.

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

*0356364028*

ACCOUNTING

0452/12
May/June 2014

Paper 1

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.
IB14 06_0452_12/8RP
© UCLES 2014

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2
There are 10 parts to Question 1.
For each of the parts (a) to (j) below there are four possible answers A, B, C and D. Choose the
one you consider correct and place a tick () in the box to indicate the correct answer.

(a) Which task would an accountant perform?
A

analysing financial information

drawing up a trial balance

preparing sales and purchases ledger accounts

writing up the books of prime entry

[1]

(b) Which statement is not correct?
A

Accounting can help to control costs.

Accounting can help to identify profit trends.

Accounting can help to measure the motivation of workers.

Accounting can help to monitor liquidity.

[1]

(c) A flower shop receives an invoice for 200 plants at $5 each, less 20% trade discount, from
A. Field. The plants were bought on credit and for resale.
Which entry records the transaction in the flower shop’s books?
account to be debited

account to be credited

purchases

1000

A. Field

1000

A. Field

1000

purchases

1000

purchases

800

A. Field

800

A. Field

800

purchases

800

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[1]

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3
(d) A bank reconciliation statement is drawn up starting with the debit balance shown in the cash
book.
The difference between the balance in the cash book and that shown on the bank statement
is caused by a bank error overstating bank charges and a cheque not yet presented.
How are these items shown in the bank reconciliation statement?
bank error overstating bank
charges

cheque not yet presented

added

deducted

added

deducted

[1]

(e) A trader provided the following information.

1 April
30 April

sales ledger control account balance

$
9 600 debit

totals for the month:
credit sales

11 300

sales returns

800

cheques received from debtors

8 700

What was the balance on the sales ledger control account on 30 April?
A

$6200

$7800

$11 400

$13 000

[1]

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4
(f) The following information is extracted from the rent account of a business.
$
owing at 1 January 2013

400

rent paid in year ended 31 December 2013

1700

rent paid in advance at 31 December 2013

250

How much rent was payable for the year ended 31 December 2013?
A

$1050

$1550

$1850

$2350

[1]

(g) A business maintains a provision for doubtful debts.
Which two accounting principles are being applied?
A

accruals (matching) and prudence

business entity and duality

consistency and realisation

money measurement and going concern

[1]

(h) Emily is a trader. She provided the following information on 30 April 2014.

non-current assets

$
25 000

current assets

15 000

current liabilities

12 000

Her capital on 1 May 2013 was $20 000. She did not make any drawings during the year.
What was Emily’s profit for the year ended 30 April 2014?
A

$8000

$23 000

$32 000

$48 000

[1]

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5
(i) The table shows information relating to two businesses trading in the same type of goods.
business

rate of inventory turnover

quick ratio

3 times a year

1.5 : 1

9 times a year

0.7 : 1

Which statement is correct?
A

Business Y has a good rate of inventory turnover but has poor liquidity.

Business Y has a poor rate of inventory turnover and has poor liquidity.

Business Z has a good rate of inventory turnover but has poor liquidity.

Business Z has a poor rate of inventory turnover and has poor liquidity.

[1]

(j) What will not be found in the financial statements of a business?
A

the amount the business owes to suppliers

the income and running costs of the business

the skill and experience of the employees

the value of the assets owned by the business

[1]
[Total: 10]

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2

(a) Explain the meaning of the following terms.

1 asset

2 liability

3 owner’s capital
[3]

(b) Complete the table below using a tick () to indicate if each item is an asset or a liability. The
first has been completed as an example.
Asset
Inventory

Liability

Motor vehicle
Creditor
Debtor
Bank loan
Cash
[5]

Archie is a trader with a year end of 31 December. During the year he made the following
transactions.
1

On 1 January paid $10 000 of his own money into the business bank account.

On 1 January bought plant and equipment, $6000, paying half by cheque and paying
half with a loan from ABC Finance.

On 30 June took $500 in cash as drawings.

On 31 December paid by bank transfer $210 interest on the loan from ABC Finance.

On 31 December paid $1000 by cheque as the first repayment of the loan.

On 31 December provided $600 depreciation on the plant and equipment.

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REQUIRED
(c) Complete the table below, showing the double entry recording each of these transactions.
The first has been completed as an example.
Debit entry

Credit entry
$

Bank account

10 000

Capital account

10 000

2
3
4
5
6
[11]
(d) Calculate the annual rate of interest Archie was paying on the loan.

[2]

(e) Explain how a bank overdraft can arise.

[2]

(f) The cheque issued by Archie on 31 December did not appear on the bank statement until
6 January. State the term given to this cheque in Archie’s bank reconciliation statement on
31 December.
[1]
[Total: 24]

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3

(a) (i) Name one ledger account which might be found in the nominal (general) ledger.
[1]
(ii) Name one other type of ledger which a business might maintain.
[1]
(iii) Explain why dividing the ledger into sections makes it easier to use.

[2]
(b) Complete the table below to indicate in which financial statement each item would appear.
State to which type of business each item relates.
The first has been completed as an example.

Ordinary share capital

Financial statement

Type of organisation

Statement of financial
position

Limited company

Accumulated fund
Interest on capital
Ordinary share dividends paid
Debenture interest
[8]
(c) State two differences between debentures and ordinary shares.
1

[4]

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(d) Explain why a limited company might decide not to distribute all of its profit for the year in the
form of a dividend.

[2]
[Total: 18]

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4

(a) Matsumi was inexperienced in book-keeping and drew up a trial balance which failed to
balance. Name the account she could have opened to enable the trial balance to balance.
[1]

The trial balance which she drew up, and which contained errors, was as follows.
Matsumi
Trial Balance at 30 April 2014
Dr
$
Bank overdraft

2 320

Cash

100

Fixtures and fittings at cost

6 800

Provision for depreciation at 1 May 2013

1 360

Fees receivable

28 105

Interest payable

200

Rent payable

6 000

Advertising

430

Wages
Loan account

8 005
3 000

Capital at 1 May 2013
Drawings

Cr
$

2 950

16 200

39 095

36 375

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11
REQUIRED
(b) Prepare a corrected trial balance at 30 April 2014.
Matsumi
Trial Balance at 30 April 2014
Dr
$

Cr
$

Bank overdraft

Cash

Fixtures and fittings at cost

Provision for depreciation at 1 May 2013

Fees receivable

Interest payable

Rent payable

Advertising

Wages

Loan account

Capital at 1 May 2013

Drawings

[6]
(c) Explain why the capital account balance in the trial balance is that of 1 May 2013.

[2]

(d) Suggest the line of business in which Matsumi may be working.

[1]

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12
(e) Matsumi depreciates her fixtures and fittings at the rate of 20% per annum using the
reducing (diminishing) balance method. Calculate the depreciation charge for the year ended
30 April 2014.

[2]

(f) Prepare the provision for depreciation account for the year ended 30 April 2014. Balance the
account and bring down the balance on 1 May 2014.
Provision for depreciation account

[4]
[Total: 16]

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13
5

(a) Complete the sentences below, using the terms
current assets
inventory

direct labour
raw materials

finished goods
work in progress

A manufacturing business is one which purchases
converts them into

and by using
If some units of production

are only partially complete they are known as

These appear as

under the

heading in the statement

of financial position.
[6]
Randeep provided the following information.
$
At 1 April 2013
16 200
9 100

Inventory of raw materials
Inventory of finished goods
For the year ended 31 March 2014
Purchases of raw materials
Carriage on raw materials
Wages of factory workers
Salary of factory supervisor
Factory rent
Depreciation of factory machinery
Total administration and selling costs
Revenue

159 000
4 800
72 000
20 000
30 000
38 000
64 600
410 000

At 31 March 2014
Inventory of raw materials
Inventory of finished goods

17 500
8 200

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REQUIRED
(b) (i) Prepare the manufacturing account for the year ended 31 March 2014
Randeep
Manufacturing Account for the year ended 31 March 2014

[9]

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15
(ii) Prepare the income statement for the year ended 31 March 2014.
Randeep
Income Statement for the year ended 31 March 2014

[6]

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16
(c) Name one indirect cost from the information on page 13.
[1]

(d) Suggest two items which might be included in the total of administration and selling costs.
1

[2]
[Total: 24]

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6

(a) Explain the difference between capital expenditure and revenue expenditure.

[2]

(b) Complete the table below, indicating with a tick () how each item would be classified. The
first has been completed as an example.

Capital expenditure

Revenue expenditure

Salesman’s commission
Carriage of raw materials
Purchases of goods for resale
Purchases of plant and
equipment
Payment of insurance
Legal fees on purchase of
property

[5]

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18
Morwenna provided the following information about her assets and liabilities at 30 April 2014.

Motor vehicles at cost
Provision for depreciation of motor vehicles
Fixtures and fittings at cost
Provision for depreciation of fixtures and fittings
Goodwill
Inventory
Trade receivables
Bank
Trade payables

$
18 000
6 200
15 000
4 500
10 000
41 000
28 000
2 200
44 000

REQUIRED
(c) Calculate to two decimal places Morwenna’s current ratio at 30 April 2014.

[2]

When Morwenna’s accountant checked her figures he discovered the following.
1
2
3
4
5

The goodwill figure represented Morwenna’s estimate of the value of the good
reputation of her business.
Inventory had been calculated at selling price, after applying a mark up of $10 250.
During the year motor vehicle repairs, $800, had been debited to the motor vehicle
account. This did not affect the depreciation for the year.
During the year new fixtures and fittings, $1000, had been debited to the stationery
account. No depreciation was charged on non-current assets purchased during the
year.
On 30 April 2014, Morwenna was two months in arrears in paying her rent of $1500 a
month.

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REQUIRED
(d) Prepare Morwenna’s statement of financial position at 30 April 2014 showing her capital at
that date.
Morwenna
Statement of Financial Position at 30 April 2014

[14]

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20
(e) Calculate to two decimal places Morwenna’s current ratio at 30 April 2014 based on her
statement of financial position figures.

[2]

(f) Comment on the liquidity of Morwenna’s business.

[3]
[Total: 28]

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.
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.

0452/12/M/J/14

Accounting (0452) · May/June 2014 · Question paper 12

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