0452/M/J/17 Examiner Report – Accounting May/June 2017

Cambridge Accounting (0452) examiner report, May/June 2017 — 0452/M/J/17, file 0452_s17_er.pdf.

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Cambridge International General Certificate of Secondary Education
0452 Accounting June 2017 www.dynamicpapers.com
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/11
Paper 11

Key messages
Candidates should avoid using abbreviations such as BBD and BD when preparing ledger accounts. Ideally
balance b/d or c/d should be written.
Labelling items is extremely important when preparing income statements or statements of financial position.
Again, abbreviations such as COGS for cost of goods sold or GP and NP for gross profit and profit should
not be used.
Candidates should always indicate where they may have re-written an answer if they have written in a
different section of the answer booklet.
General comments
The paper was well attempted by a number of candidates.
Comments on specific questions
Question 1
Candidates found parts (a), (f) and (h) challenging. These have been discussed below.
(a)

This question involved correcting an entry of discount received. Candidates should be encouraged
to write the entry which took place and then to correct it.

(f)

Candidates in the main opted for B without considering the apportionment of ‘interest on capital’.
Some opted for D which included, incorrectly ‘drawings’.

(h)

Candidates did not perform well in this question. Candidates should practice writing a condensed
manufacturing account indicating an increase in closing work in progress. This will show the effect
on cost of production and consequently the effect on the transfer of the cost of production to the
trading account.

Question 2
(a)

This was well answered, although some candidates used abbreviations, and others confused the
signs – for example a common incorrect answer was ‘assets = capital – liabilities’.

(b)

Many candidates scored two of the available three marks here for stating reasonable meanings for
liability and inventory. Only a relatively small number of candidates achieved a mark for correctly
and fully defining an asset. The vast majority of candidates offered ‘something that a business
owns’ but omitted ‘owed to a business’. A small number of candidates described inventory as
goods bought and sold and not the stock available to be sold.

(c)

Responses to this question were excellent with almost all candidates recognising ‘duality’ or ‘dual
aspect’. Less confident candidates offered other principles or repeated ‘double entry’

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(d)

This question was generally well answered with candidates being awarded four marks. There were
relatively few reversals of entries and the other problem lay with naming Taha as the account to be
credited.

(e)

While most candidates answered this question correctly, a small number confused sales with
purchases and others named the ‘sales journal’ or ‘nominal ledger’.

(f)

The only statement candidates were weak on was in thinking that changes to provision for doubtful
debts involved movement of cash and bank balance.

(g)

This question was very well answered with the majority being awarded full marks. Only a small
number of candidates could not work out that the chairs must total $750, and if there were 10 of
them then they must be $75 each.

(h)

Most candidates did identify the correct figure, although a number did state $1750.

(i)

This was well answered, although some candidates thought the document was a debit note, and
others misread the question and stated the book of prime entry.

(j)

Candidates generally stated that a trading business sells goods and then went on to say that a
service business doesn’t, without expanding it. Some went into detail about Andy holding inventory
but the service business doesn’t. Many candidates tried to draw out the differences between the
financial statements prepared by each type of business. A few candidates believed that a service
business was a ‘not for profit’ organisation.

Question 3
(a)

This question proved challenging to a large number of candidates. Common responses were
‘purchases are assets’, ‘because Zameer buys on credit’ or ‘amounts paid in advance’. Candidates
may have thought this was a more difficult question than it was rather than an ‘expense/cost to the
business’.

(b)

This question was answered correctly in the majority of cases.

(c)

Many candidates found preparation of ledger accounts challenging. In the Purchases account the
common mistake was in entering three individual transactions rather than the total purchases for
the week and then went on to carry a balance down rather than closing the account off with a
transfer to the income statement. Candidates must read the question carefully to be sure they
understand what they are being asked. The rent payable account was answered slightly better, the
main problem being the calculation of the prepayment - $600 was common and the transfer to the
income statement. In majority of cases candidates correctly entered dates of the transactions.

(d)

This question was correctly answered by a large number of candidates.

(e)

The most common answer for revenue receipt was correctly ‘sales of inventory’ but for capital
receipt candidates offered ‘sale of a fixed asset’ rather than the ‘proceeds from the sale of a fixed
asset’. A number of candidates misread the question and answered in terms of payments.

Question 4
(a)

This question was very well answered. A few candidates misunderstood the question by stated
where inventory would occur in the financial statements.

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(b)

Only a small number of candidates gained full marks in this question. The mistake that most
candidates made was in incorrectly calculating the sales made at $60. Having correctly calculated
the sales at $40 they did not deduct this off the total sales for the year and hence used 1920 clocks
resulting in sales of $117200. Many did not use the opening and closing inventory. Few candidates
calculated the ‘number of clocks held’ but did not turn this into a monetary amount, clearly
misunderstanding the question.

(c)

Many candidates were very confident with this question. Using their own revenue figure calculated
in (b) allowed many candidates to gain full marks. A number of candidates calculated the correct $
purchases but used quantity figures for opening and closing inventories.

(d)

A large number of candidates found this question challenging. Many candidates did not recognise
this question as a control account. There was little recognition of the relationship between the
revenue figure calculated in (a) and the need to use it in this question. A large number calculated a
figure of $1400 but were unaware of what it represented or what they were trying to calculate. The
question asked for a calculation so credit was given for using figures in the correct way. In this
situation where candidates are not confident they should be encouraged to prepare a ‘T’ account
which may prompt realising the entries needed and hence the figure required.

(e)

This question was also poorly answered as it seemed that many candidates did not understand the
question. A large number believed they had calculated trade receivables despite having been given
those figures. Very few candidates attempted to describe matching concept.

(f)

This question was generally well answered. A small number offered discount received.

(g)

This question was generally well answered.

Question 5
(a)

This was probably the question that candidates were strongest with many achieving full or near full
marks. The most common mistake was entering the gross profit and general reserve as a debit.
Most candidates did realise that retained earnings was the balancing figure.

(b)

For the most part this question was also well answered. Marks were lost due to omissions of some
of the expenses (particularly distribution costs) or the inclusion of the dividend.

(c)

A number of candidates were clearly well prepared in Statements of changes in Equity with many
gaining full marks using their own figure of retained profit from (a). Marks were lost mainly due to
poor narratives and the omission of dividends. Weaker candidates, having calculated a debit
balance for retained earnings, did not carry this through as a debit to the statement. There were
also marks lost due to not cross checking the statement numerically.

(d)

The majority of candidates knew the formula for ROCE but unfortunately only a small number were
awarded full marks for this question principally due to the omission of debentures in the
denominator. Other candidates did not use their profit figure from (b) but the retained earnings from
(a). Some candidates did not calculate to two decimal places.

(e)

There were very good responses here with many able to give suitable suggestions for the low
ROCE. There was some repetition over the two points as many did not comment on the numerator
and denominator.

(f)

Following on from (e) there were very good suggestions for ways to increase ROCE. Some
candidates did not achieve full marks for not commenting on both profit and capital employed.
Weaker candidates suggested increasing profit without specifying how this could be done. A small
number of candidates misinterpreted the question and suggested methods of improving cash flow.

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Question 6
(a)

A large number of candidates acknowledged that this was subscriptions paid in advance or
subscriptions prepaid. A small number were a bit too vague with just ‘payments in advance’ and
others that it was an unpaid amount.

(b)

Candidates did not answer this part well. It appeared that some candidates did not absorb all the
information given in the question in order to use it in this part. Candidates must be encouraged to
re-read all the information given and to understand what is being asked. The common mistakes
included reversing subscriptions in advance and in arrears and the stating cash/bank as $6100
being the opening balance in the receipts and payments or as $52905/$52950 from the
subscriptions account. Many candidates did, however recognise the shop inventory.

(c)

Many candidates were awarded full marks for this question. They were clearly confident in
producing a trading account and in the allocation of the correct portion of rent to the shop to
calculate a correct loss for the shop. A minority of candidates included other club expenses in the
calculation.

(d)

Following on from (c) this question was answered very well by the majority of candidates. Many
scored full or almost full marks. The most common omission in this question being the bad debts
which required candidates to re-read all the information available to understand all the elements
needed. The other common mistake was in the calculation of depreciation where candidates
omitted the addition of new club equipment and calculated depreciation as $2800.

(e)

Candidates appeared very confident with this question and were able to give two good reasons as
to why the club continued to run the shop despite making a loss. Mostly they offered ‘it was a not
for profit organisation’ and that they were ‘serving members’. Some mentioned selling off the stock
and others that they were hoping to make a profit in the future. Most candidates correctly
transferred the shop’s loss to the income and expenditure account.

(f)

This question was poorly addressed and it seemed as though candidates did not understand what
was required and / or were confused between the shop’s loss and the club’s financial statements.
Many did, however, appreciate that the shop’s loss would decrease if it were not charged with rent
but then seemed to think that this would reduce the club’s surplus.

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0452 Accounting June 2017 www.dynamicpapers.com
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/12
Paper 12

Key messages
A good grounding in the principles of double entry and the importance of narratives and dates in ledger
accounts is essential. There are no ‘goods’ accounts which candidates frequently refer to rather than sales,
purchases, sales returns and purchases returns.
Abbreviations should not be used particularly in financial statements such as the income statement.
It is expected that candidates will use International Accounting Terminology.
General comments
All the questions on the paper were compulsory and covered various topics on the syllabus.
Overall, the paper was well attempted by a number of candidates. There were some scripts where
candidates had clearly been well prepared.
Comments on specific questions
Question 1
Generally a, b, c, e, h, i, j were well answered. Parts d, f and g warrant more detailed comments.
(d)

The question here asks for the accumulated depreciation at the end of the year. Many candidates
correctly calculated this year’s depreciation, $1530, but then they missed adding it to the
accumulated depreciation at the start of $1800 to get the correct answer of $3330 which was B.

(f)

Candidates often missed that this question is about the total equity and not just the retained
earnings column. This meant that the transfer made to general reserve needed ignoring as it was
simply moving from one part of the equity section to another so did not affect the total equity at the
end of the year.

(g)

If club members have paid in advance this is a credit balance as essentially the club owes the
members. The amount the members actually paid is the bank amount and not the income and
expenditure account. Subscriptions in arrears indicate the balance b/d on the debit side which has
actually increased during the year. Response D was correct as each member has a fee of $100
and this should be shown in the income and expenditure account regardless of whether they owe it
or have paid ahead.

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Question 2
(a)

This should have been a simple process of allocating the four phrases into the appropriate places
within the two sentences. Many candidates scored four marks and most candidates at least two
marks. Candidates frequently matched the income statement with a particular date and the
statement of financial position with a period of time.

(b)

This was generally well answered. Candidates just need reminding not to tick more than one box
per item unless the question requires tick(s) as this then means no marks.

(c)

Not many candidates could apportion the $6000 into expenses ($1500) and prepaid expenses
($4500). There were many combinations of the numbers given but very few fully correct answers.

(d)

This was generally well answered. The most common answers related to dividing tasks between
different people or easier reference. A common misconception was that errors were reduced.

(e) (i)

Mainly answered well, though some candidates incorrectly gave revenue or expense related
accounts. A common error was to name the sales and purchases accounts.

(ii)

This was answered well but errors included reference to depreciation accounts rather than
provision for depreciation accounts, trade receivables and trade payables.

(f)

This was generally well answered but errors included, referring to ledgers, accounts or financial
statements rather than the actual books of prime entry.

(g)

The correct answer was false since the definition refers to book-keeping rather than accounting.

Question 3
(a) (i)(ii) Many candidates gained full marks. Some candidates referred to goods instead of sales or
purchases and some reversed the entries.
(b)

This was generally well answered. However, credit note was sometimes stated rather than invoice.
Invoice alone was accepted but purchases invoice was incorrect.

(c)

There were some very mixed responses here with common errors including complete reversal,
references to discount received, use of cash rather than bank, reference to sales and incorrect
amounts. Candidates needed to specify which type of discount was involved and not simply state
discount.

(d)

A common error for d(i) was to state the cash book which showed that the candidates had misread
the question and were answering about which book of prime entry would be used rather than the
account. Many candidates provided the correct answer to d(ii).

(e)

Many candidates achieved the full 2 marks here. There were some candidates who put the two
documents the other way around so, debit note followed by credit note and others put credit note
for both.

(f)

This question saw a big variation in answers with some achieving full marks and others none.
Common errors included: omitting entries, reversal of entries, mixing up balances b/d with balances
c/d, the presence of inappropriate entries such as bad debts or trade receivables in the provision
for doubtful debts account, incorrect dates and repeating items on both sides of the account.
Candidates struggled to calculate the new provision for doubtful debts and were then unsure where
to place the amount with many putting it as the income statement amount instead of the closing
balance. It is the change in provision which goes to the income statement with the new total moving
onto the statement of financial position. Many candidates had little idea of how the accounts then
related to the income statement at the end of the year.

(g)

There were mixed responses here with the vast majority of candidates being unable to adjust the
trade receivables for the bad debt. Most did gain marks for using their own figure for provision for
doubtful debts and subtracting it to give net trade receivables.

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Question 4
(a)

This was answered reasonably well. Some candidates merely rearranged the sentence to say it
was a statement by the bank, whilst others confused it with the bank reconciliation.

(b)

Most candidates gained the mark here but a common error seemed to be to choose items 2 and 3.
Candidates should be encouraged to provide the number of the item in such a question as some
tried to summarise the item and not always successfully.

(c)

This was a calculation, so no labels were needed but workings must be presented clearly for marks
to be awarded. Many candidates did not know how to deal with the error from overstating the credit
transfer by $90 or subtracted the amount rather than adding it. A surprisingly many included entries
which were for the bank reconciliation, the unpresented cheque of $400 and the outstanding
lodgement of $180 as they were already in the cash book so they were essentially including them
twice. Some candidates did not start with the original cash book balance or treated it as a credit
amount.

(d)

There was a wide variation in candidate responses and was a weak area for many candidates.
They struggled to determine which items should be included, then, whether to add or deduct the
item from the starting balance. Common errors included: inadequate description of balances, not
including the total from 4(c)) several started with the original cash book balance of $2890, including
the dishonoured cheque and bank charges and incorrect layout with some attempting to use a
ledger account.

(e)

Most candidates gained one mark for stating current assets, but often lost the other mark because
the amount was incorrect. Many assumed that the statement of financial position shows the bank
statement total instead of the updated cash book total which was the answer from 4(c)).

(f)

This was generally well answered and the most common answer concerned insufficient funds in
the account concerned. Candidates need to be aware that cheques can still be accepted if the
account has an overdrawn amount as long as this has been authorised by the bank.

(g)

Mainly correct responses here and just a minority thought a suspense account or journal was the
answer.

Question 5
(a)

Some candidates misread the question and thought it was about disadvantages. Generally, it was
well answered with the most common errors being sharing profit and having limited liability.

(b) (i)

A lot of candidates found this challenging and either over complicated their answer or were vague
with their answers. There was some confusion between the function of the capital account and that
of the current account.

(b) (ii)

This was not answered well with candidates either mixing up the partners or making reference to
the amount of capital invested which is not part of the current account. Some candidates discussed
positive and negative balances which was insufficient.

(c)

The majority of candidates gained some marks in this question and used an appropriate layout.
The main errors involved: starting with the wrong profit figure, lack of names for appropriation
items, adding the interest on capital and or adding the salary, inclusion of wrong items such as
capital and drawings accounts and finally not then calculating the profit share.

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(d)

Where candidates had performed well in Part (c) they tended to in Part (d) as well. Many
candidates forgot to include the opening balances, or got an item on the wrong side. Most used
their own profit or loss figures from Part (c).

(e)

Many candidates found this question challenging. A large number of candidates incorrectly either
wrote understated or had incorrect figures. Some attempted to calculate cumulative figures which
were not awarded.

(f)

Reasonable answers overall but some explanations were too vague. Many candidates simply
stated assets rather than current assets and were not awarded marks.

(g)

This proved more difficult than (f) and candidates were not sure which items were being matched.
They are more used to matching expense items to income so were unsure of the treatment of
inventory.

Question 6
(a)

This was well answered and the only common error was to sometimes identify the repair of delivery
vehicles as an administrative expense.

(b) (i)

This question broke down the traditional manufacturing account into sections and overall
candidates responded very well to the layout. They did not need to label their calculations but some
often did which seemed to help them follow the process..

(b) (ii)

A common error here was to assume prime cost was $82 000 which was just the direct labour.

(b) (iii)

This was answered well by well prepared candidates. Common errors were to miss out
depreciation and deducting the indirect costs instead of adding.

(c)

The majority of candidates were familiar with the layout required. Candidates who found Part (b)
challenging seemed not to include cost of production in this part. They did not seem to see the link
between the calculation and its position in the income statement. Other errors included: incorrect
treatment of inventory, no label for gross profit, and including distribution costs in the calculation of
gross profit. It was an accessible question as no other adjustments were needed.

(d)

This was well answered with most candidates identifying the reason as cheaper than
manufacturing themselves or in order to meet excessive demand.

(e)

There were a notable number of no responses for this question which could be due to time as it is
the last question or because the candidates struggled with a slightly different type of question.
There were some full marks but common errors included incorrect calculation of amounts, for
example the change in raw materials or listing savings as costs and vice versa. Sometimes it was
unclear whether an item was being added or subtracted as sometimes brackets appeared in both
sections. The answer being a positive or negative was sufficient to indicate an increase or
decrease as it was very rare that candidates indicated this by deleting either the increase or
decrease in the label.

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ACCOUNTING
Paper 0452/13
Paper 13

(f)

(g)

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Question 2
(a)

(b)

This was generally well answered. Candidates just need reminding not to tick more than one box
per item unless the question requires tick(s) as this then means no marks.

(c)

Not many candidates could apportion the $6000 into expenses ($1500) and prepaid expenses
($4500). There were many combinations of the numbers given but very few fully correct answers.

(d)

This was generally well answered. The most common answers related to dividing tasks between
different people or easier reference. A common misconception was that errors were reduced.

(e) (i)

Mainly answered well, though some candidates incorrectly gave revenue or expense related
accounts. A common error was to name the sales and purchases accounts.

(ii)

This was answered well but errors included reference to depreciation accounts rather than
provision for depreciation accounts, trade receivables and trade payables.

(f)

This was generally well answered but errors included, referring to ledgers, accounts or financial
statements rather than the actual books of prime entry.

(g)

The correct answer was false since the definition refers to book-keeping rather than accounting.

Question 3
(a) (i)(ii) Many candidates gained full marks. Some candidates referred to goods instead of sales or
purchases and some reversed the entries.
(b)

This was generally well answered. However, credit note was sometimes stated rather than invoice.
Invoice alone was accepted but purchases invoice was incorrect.

(c)

(d)

(e)

Many candidates achieved the full 2 marks here. There were some candidates who put the two
documents the other way around so, debit note followed by credit note and others put credit note
for both.

(f)

(g)

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Question 4
(a)

This was answered reasonably well. Some candidates merely rearranged the sentence to say it
was a statement by the bank, whilst others confused it with the bank reconciliation.

(b)

(c)

(d)

(e)

(f)

(g)

Mainly correct responses here and just a minority thought a suspense account or journal was the
answer.

Question 5
(a)

Some candidates misread the question and thought it was about disadvantages. Generally, it was
well answered with the most common errors being sharing profit and having limited liability.

(b) (i)

(b) (ii)

(c)

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(d)

(e)

(f)

Reasonable answers overall but some explanations were too vague. Many candidates simply
stated assets rather than current assets and were not awarded marks.

(g)

This proved more difficult than (f) and candidates were not sure which items were being matched.
They are more used to matching expense items to income so were unsure of the treatment of
inventory.

Question 6
(a)

This was well answered and the only common error was to sometimes identify the repair of delivery
vehicles as an administrative expense.

(b) (i)

(b) (ii)

A common error here was to assume prime cost was $82 000 which was just the direct labour.

(b) (iii)

This was answered well by well prepared candidates. Common errors were to miss out
depreciation and deducting the indirect costs instead of adding.

(c)

(d)

This was well answered with most candidates identifying the reason as cheaper than
manufacturing themselves or in order to meet excessive demand.

(e)

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ACCOUNTING
Paper 0452/21
Paper 21

Key messages
All the questions on this structured paper were compulsory. The paper covered a wide range of syllabus
topics.
Candidates are reminded of the importance of reading through a question very carefully before attempting an
answer. This ensures that an important piece of information is not overlooked and that instructions are
followed precisely. For example, to earn full marks candidates were expected to follow an instruction to
calculate the current ratio correct to two decimal places.
Credit cannot be given to a factually correct statement which is not the answer to the question being asked.
For example, stating the formula for the trade receivables collection period is not an acceptable answer to a
question asking for reasons for the change in the trade receivables collection period.
Candidates are advised to provide supporting calculations where appropriate. This ensures that at least
some credit may be earned even though the final answer may be incorrect.
The spaces provided on the question paper for candidates’ answers should be adequate. Sometimes it may
be necessary to cross out all or part of the answer and provide another answer elsewhere on the question
paper. It is very important that candidates indicate that this has been done. A note “Please refer to page «”
or “Continued on page «” would ensure that this additional work is not overlooked when the script is being
marked.
Candidates should avoid the use of inappropriate abbreviations such as “GP” “C of P” in financial statements
and “bbd” for balance brought down in ledger accounts.
Candidates are expected to be familiar with International Accounting Terminology and avoid the use of “old”
terminology such as “stock” and “net profit” etc.
General comments
Candidates are expected to present accounting statements in the correct format and use appropriate
descriptions in both financial statements and in ledger accounts. The written answers produced in some of
the narrative questions were vague and lacked clarity. Accounting is a subject in which precision is extremely
important.
It is important that candidates have a thorough knowledge of double entry book-keeping and can apply this
knowledge to the various scenarios on the question paper. In addition to the actual entries in the account,
attention must be paid to the words entered in the details column and to the dates.
Attention must be paid to handwriting to ensure that the words and figures are legible. There were a large
number of scripts which were extremely difficult to read.

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Comments on specific questions
Question 1
(a)

Candidates were required to explain why the balance on a bank statement was on the opposite
side to that shown in a cash book. The best responses explained that these are prepared from
different viewpoints. The bank statement is a copy of the account of the trader in the books of the
bank and the cash book is prepared from the viewpoint of the trader.

(b)

Using information provided candidates were required to complete the cash book of a trader. A
number of candidates used incorrect narratives such as “Furniture” instead of “Furniture Store”,
and “Existing office equipment” instead of “repairs to office equipment”. The wording in the details
column should be the name of the account in which the double entry will be made.
A common error was omitting to update the cash book with the items appearing on the bank
statement. Where these were included they were often dated 21 March rather than 31 March.
Most candidates balanced the cash book but many did not include the pre-printed opening
balances in their calculations.

(c)

A bank reconciliation statement was required. A number of candidates incorrectly used $2750 (the
opening balance) for either the cash book balance or the bank statement balance. A common error
was to include the extraneous items of bank charges, payment by direct debit and amount received
by credit transfer. Some candidates used incorrect descriptions of the items.

(d) (i)

Generally candidates found it difficult to explain why historical cost should be considered when
comparing financial statements. Many did not recognise that all transactions are recorded at cost
and because of this it is difficult to compare transactions taking place at different times.

(ii)

Many candidates were able to provide examples of non-financial aspects but were not able to
explain why such items were not recorded in the accounting records and how they may affect the
business.

Question 2
(a)

The source document for goods sold on credit and the return of goods had to be named. Despite
the question clearly asking for the names of documents a number of answers related to books of
prime entry and ledger accounts. Many candidates corrected referred to a sales invoice (or an
invoice issued) and a credit note.

(b)

Two books of prime entry had to be named. Once again some candidates gave completely
incorrect responses such as the name of a ledger account, the names of ledgers, or just “general”
or “nominal”. Other candidates correctly named the cash book and the journal.

(c)

Using information provided the ledger account of a credit customer had to be prepared. This was
often well-attempted with many candidates making only one error and writing “dishonoured
cheque” instead of “bank”. Some candidates incorrectly included trade discount and others referred
to purchases and purchases returns or reversed the account.

(d)

Most candidates were able to suggest ways in which bad debts may be reduced. A few answers
were too imprecise such as “offer discount” (instead of referring specifically to cash discount) and
“set credit limit” (instead of referring to setting a credit limit for each customer).

(e)

Candidates were required to name the accounts to be debited and credited to correct three errors.
Many candidates were able to earn good marks. A number of candidates did not appreciate that to
correct an error when discount received has been debited in the discount allowed account it is
necessary to credit both discount accounts and make a corresponding debit in the suspense
account.

(f)

Three accounting objectives had to be listed. There were many wholly correct responses but a
number of candidates appear to have misunderstood the question and listed three accounting
principles.

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Question 3
(a)

Most candidates were able to provide a well- presented appropriation account, with the items being
correctly treated. The calculation of the interest on capital for Rafah and the salary for Meena
caused a few problems. A few candidates included extraneous items such as capital and drawings.

(b)

Most candidates correctly used their figures from Part (a) and prepared the current account of one
of the partners. A few incorrectly included the partner’s capital and some showed the loss as a
minus figure on the credit side. A number of candidates did not include the pre-printed opening
balance when balancing the account.

(c)

Most candidates understood that in calculating the quick ratio inventory is excluded, but many
candidates did not extend the answer to an explanation of what this ratio actually shows.

(d)

Two reasons for the change in the current ratio were required. Many earned a mark for identifying
the fact that there was an increase in either the trade payables or the bank overdraft. A common
incorrect answer was that current assets had decreased. This was not the case as the change in
the quick ratio indicated an increase in inventory.

(e)

Candidates found this question challenging and there were very few wholly correct responses.
Some candidates managed to make a correct adjustment to either the numerator or the
denominator of the formula but very rarely amended both figures correctly. When a cheque is
received from a credit customer the trade receivables will decrease and the bank overdraft will also
decrease by the same amount. The calculation should have been shown as
(19 400 + 15 100) : (17450 + 2300) = 1.75 : 1

(f)

Candidates were required to suggest two problems the partners could encounter if the working
capital was inadequate. Most candidates managed to earn at least one of the available marks.

(g)

Two ways of increasing the working capital were required. A significant number of candidates
incorrectly suggested reducing the trade payables or bank overdraft, increasing sales or buying
cheaper goods.

Question 4
(a)

Many candidates attempted to state how prime cost is calculated but often omitted one of the three
elements. It was rare to find an answer which also included the key factor that these direct costs
are traceable to a unit of production.

(b) (i)

An explanation of the term factory overheads was required. A number of candidates managed to
explain that these are the factory expenses but only a small minority explained that these cannot
be traced to the product being manufactured.

(ii)

A wide range of examples of factory overheads was provided, but the examples were often far too
vague and were not limited to the factory. Common incorrect responses included wages, factory
wages and depreciation. Candidates should have been specific and suggested items like salary of
factory supervisor, factory rent, depreciation of factory machinery, and so on.

Most candidates were able to state the meaning of the term work in progress and correctly stated
that the closing work in progress was greater than the opening work in progress in the example
provided.

(d)

The income statement of a manufacturing business had to be prepared. Some candidates earned
full marks. Common errors included omitting cost of production, omitting purchases of finished
goods, incorrect treatment of goods taken for personal use, incorrect figures for loan interest and
depreciation, and extraneous items such as accumulated depreciation.

(e)

Candidates were required to explain, with an example, how the actuals (matching) principle was
applied in the preparation of the income statement. There was a wide range of responses.
Candidates should have explained that the expenses for the year are matched against the revenue
of the same period. Examples could have included the adjustment on the commission for the

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amount not yet received, accrued loan interest being included in the expenses and depreciation for
the year being included in the expenses.
(f) (i)

(ii)

(g)

Most candidates correctly stated that if the selling price was increased the gross profit would
increase. Some did go on to mention that sales may actually reduce but did not consider the effect
of this on the gross profit.
Many candidates incorrectly stated that a reduction of factory wages would not affect the gross
profit. Some did go on to mention the possibility of a discontented workforce but did not consider
the effect of this on the gross profit.
The majority of candidates were able to suggest two ways in which the profit for the year could be
increased.

Question 5
(a)

Many candidates were able to prepare the account of motor vehicles. Some incorrectly described
the purchases of vehicles as “purchases” or put “bank” instead of the name of the supplier for the
second vehicle purchased.
The preparation of a provision for depreciation of vehicles account proved challenging for many
candidates, although the well-prepared candidates were able to earn good marks. Common errors
included incorrect details such as “depreciation” or “Vehicle A” etc. The depreciation for the year is
transferred to the income statement so that is what should appear in the details column. Showing
the annual depreciation for each vehicle separately would have ensured that some of the marks
could be awarded even where the total depreciation for the year was incorrect. Inevitably the lessable candidates incorrectly included depreciation in the asset account and the cost of vehicles in
the provision for depreciation account.

(b)

Journal entries had to be prepared to record the disposal of a vehicle. Some candidates used
incorrect account names such as “depreciation” for “provision for depreciation” and “vehicle C” for
“delivery vehicles”. The more able candidates extended the answer to provide entries for the profit
on disposal.

(c)

Two reasons for the change in the trade receivables collection period were required. Many
candidates incorrectly discussed the effects of the change rather than the reasons. The better
candidates correctly suggested the avoidance of interest charges on overdue accounts and the
advantage of cash discount for early payment.

(d)

Two effects of the change in the trade payables payment period were required. Again, some
candidates did not appear to understand what was required. Some candidates correctly suggested
that cash discount would be earned or interest charges on overdue accounts would be avoided.
Other candidates also correctly mentioned the improved relationship with suppliers.

(e)

Candidates were required to suggest two ways in which the trader may be affected by a reduction
in the credit period allowed by suppliers. Many candidates struggled to provide suitable responses.
Answers should have concentrated on the impact on the trader’s liquidity in the event of the credit
period being reduced.

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ACCOUNTING
Paper 0452/22
Paper 22

Key messages
Candidates should read through a question very carefully before attempting an answer. This ensures that an
important piece of information is not overlooked and that instructions are followed precisely. A factually
correct statement, which is not the answer to the question being asked, cannot be awarded credit.
Where appropriate, candidates are advised to provide supporting calculations. This ensures that some credit
may be earned even though the final answer may be incorrect.
The spaces provided on the question paper for candidates’ answers should be adequate. Sometimes it may
be necessary for a candidate to cross out all or part of their answer and provide another answer elsewhere
on the question paper. It is very important that candidates indicate that this has been done. A note “Please
refer to Page ” or “Continued on page ” would ensure that this additional work is not overlooked when the
script is being marked.
Candidates should avoid the use of inappropriate abbreviations such as “bbd” for “balance brought down” in
ledger accounts or “TR” for “Trade Receivables” and “PDD” for “Provision for Doubtful debts” in financial
statements.
Candidates are expected to be familiar with International Accounting Terminology and avoid the use of old
terminology such as “stock” and “net profit” etc.
General comments
All the questions on the paper were compulsory and covered a wide range of syllabus topics. Most
candidates attempted to answer all questions and were familiar with the correct format of financial
statements.
It is important that candidates present accounting statements in the correct format and that appropriate
descriptions are used in both financial statements and in ledger accounts. The written answers produced in
some of the narrative questions were vague and lacked clarity. Accounting is a subject in which precision is
extremely important.
All the day to day records of a business are based on double entry bookkeeping. Candidates must have a
good knowledge of double entry and must be able to apply this to the various scenarios. In addition to the
numbers in the account, attention must be given to the words entered in the details column and to the dates.
Comments on specific questions
Section A
Question 1
(a)

Using information provided, candidates were asked to enter the transactions in the ledger accounts
provided. They were also told that it was not necessary to balance or total any of the account
This question revealed some weaknesses in candidates’ knowledge of this double entry.

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Many candidates used incorrect wording in the details column particularly in the purchases,
purchases returns and discount received accounts. The correct descriptor is ‘Total for month’ and
not the name of the creditor. Many candidates who correctly dealt with the purchases and purchase
returns did not recognise that the total from the discount received column in the cashbook should
be treated in the same way.
Common errors were:
•
•
•
•
(b)

Entering the gross purchases figure in the purchases ledger accounts rather than the net
amount after the deduction of trade discount
Including the trade discount allowed in the purchases, purchase returns and personal
accounts in the purchases ledger
Reversing the entries in the personal accounts of Lincy and Gail or using an incorrect
description such as ‘sales’ and ‘sales returns’
Omitting the date or year

Candidates were provided with current ratio figures for two years and asked to provide two reasons
for the change. Many candidates suggested that the change was due to an increase in current
liabilities and a decrease in current assets. This was not regarded as sufficient. Candidates should
have made reference to specific current liabilities that could have increased or current assets that
could have decreased.
Some candidates suggested that trade receivables decreased even though the question stated that
all sales were made for cash. This underlines the importance of reading the question carefully.

(c)

The question required candidates to suggest two problems that the trader may experience because
her working capital was inadequate.
Most gained good marks in this section. However, some candidates did not specify
current/immediate assets and current/immediate liabilities.

(d)

Candidates were required to state whether four courses of action would result in an increase,
decrease or have no effect on working capital. Most candidates were able to correctly identify how
‘selling goods on credit’ and ‘obtaining a higher rate of cash discount’ would impact on working
capital. However, very few were able to correctly identify the impact on working capital of ‘taking
out a short term bank loan’ or ‘repaying a long term bank loan’.

(e)

In this question, candidates were asked to state why a trader’s current assets would increase if
office equipment were purchased. Many candidates did not appear to appreciate that the business
traded in office equipment and, as such, purchasing office equipment would increase the inventory.
Most candidates incorrectly explained that they have bought the equipment on credit and have
therefore not yet paid for it, so the cash (current assets) had not decreased.
This question provided good differentiation, as the better-prepared students were able to correctly
identify the reason for the change

(f)

Many candidates stated the formula for the return on capital employed before correctly answering
the question.
This section was generally well answered with most candidates understanding that the return on
capital employed was lower because profit had decreased.
Some candidates then proceeded to provide reasons why the profit had decreased instead of
stating the other reason for the decrease in the return on capital employed which is the fact that the
capital employed increased.
Common incorrect answers tended to focus on ‘less sales’ or ‘higher expenses’.

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Question 2
(a)

Candidates were asked to name the book of prime entry that the trader would use to obtain four
pieces of information when preparing his sales ledger control account.
Many candidates were unable to correctly name the books of prime entry. Common errors
included:
•
•
•
•

(b)

Not being able to identify the journal as the book of prime entry from which the contra entry
would be obtained
Not being able to correctly name the book of prime entry that a contra entry would be shown
in.
Stating sales/purchase returns journal for the book of prime entry for ‘returns’ even though the
question clearly referred to the sales ledger control account.
Providing two answers for one element, in the hope that the examiner will choose the correct
answer.

Many candidates found it difficult to state the meaning of a contra entry in connection with control
accounts and to provide a reason for making such an entry.
Some candidates confused the meaning with the reason and vice versa resulting in valuable marks
being lost.
A significant number of candidates described the contra entries made in a cashbook even though
the question specifically referred to contra entries in connection with control accounts.

(c)

Candidates were asked to select the relevant figures from those provided and prepare the sales
ledger control account. Most candidates gained reasonable marks.
Common mistakes included:
•
•
•
•
•
•

Using incorrect narratives such as “dishonoured cheque” instead of “Bank”
Extraneous entries such as discount received, purchase returns and payments to credit
suppliers included in the sales ledger control account.
Deducting the dishonoured cheque amount from the amount received from the credit
customers.
Showing the contra entry of $182 on both sides of the account.
Showing the closing balances brought down but not including the carried down figures – either
in the totals of the account or omitting them altogether.
Not bringing down the balances.

(d)

Most candidates made a reasonable attempt at this question. However, candidates should ensure
their answers include enough detail. When asked for a reason why the sales ledger control account
had a credit balance, it is not sufficient to write that the customer returned goods. The candidate
needs to make it clear that the returns were after the balance was paid.

(e)

The majority of candidates were able to correctly state and provide a reason why the trader would
be satisfied with the change in collection period for trade receivables. Most candidates scored full
marks.

(f)

Many candidates did not appreciate that this question related to Waheed’s suppliers rather than
Wa

Accounting (0452) · May/June 2017 · Examiner report

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