Accounting (0452) · May/June 2017 · Question paper 23

www.dynamicpapers.com

Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

* 0 0 8 0 0 2 8 0 7 8 *

0452/23

ACCOUNTING

May/June 2017

Paper 2

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 19 printed pages and 1 blank page.
DC (NH) 144211
© UCLES 2017

[Turn over

www.dynamicpapers.com

2
1

Shiromi is a trader in office equipment. She maintains a full set of accounting records. Shiromi
made the following entries in her cash book, purchases journal and purchases returns journal in
April 2017.

April
1 Balances b/d
21 Sales
30 Balance c/d

Cash

Bank

$
90
600

$
2 954
6 000
3 785

690

April

5 Lincy
Goods
Less Trade discount
16 Gail
Goods
Less Trade discount

12 739

Shiromi
Cash Book
April
4
10
18
24
26
30

Rent and rates
Motor vehicle
Lincy
Gail
Drawings
Balance c/d

Shiromi
Purchases Journal
$

7 Lincy
Goods
Less Trade discount

156

$
3860

4800
1200

3600
7460

Shiromi
Purchases Returns Journal
$
700
140

30 Total for month

© UCLES 2017

66
90

4825
965

30 Total for month

April

Discount
Received
$

$
560
560

0452/23/M/J/17

Cash

Bank

$

$
495
5 500
3 234
3 510

150
540
690

12 739

www.dynamicpapers.com

3
REQUIRED

(a) Enter the transactions for April in the following ledger accounts. It is not necessary to balance
or total any of the accounts.
Shiromi
General Ledger
Rent and rates account

Date

Details

$

Date

Details

$

Motor vehicle account
Date

Details

$

Date

Details

$

Sales account
Date

Details

$

Date

Details

$

Drawings account
Date

Details

$

Date

Details

$

© UCLES 2017

0452/23/M/J/17

[Turn over

www.dynamicpapers.com

4
Purchases account
Date

Details

$

Date

Details

$

Purchases returns account
Date

Details

$

Date

Details

$

Discount received account
Date

Details

$

Date

Details

$

Purchases Ledger
Lincy account
Date

Details

$

Date

Details

$

Gail account
Date

Details

$

Date

Details

$

[13]

© UCLES 2017

0452/23/M/J/17

www.dynamicpapers.com

5

Shiromi’s financial year ends on 30 April. She provided the following information.
Current ratio

At 30 April 2016
1.49 : 1

At 30 April 2017
0.92 : 1

All purchases are made on credit terms and all sales are made for cash.
REQUIRED
(b) Suggest two reasons for the change in the current ratio.
1

2
[2]
(c) Suggest two problems Shiromi may encounter because her working capital is inadequate.
1

2
[2]
Shiromi is hoping to increase her working capital and is considering four courses of action.
REQUIRED
(d) Complete the table by placing a tick (✓) in the correct column to show how each course of
action would affect Shiromi’s working capital.
Increase

Decrease

No effect

Take out a short-term bank loan
Repay a long-term bank loan
Sell goods on credit terms instead of for
cash
Obtain a higher rate of cash discount
[4]

© UCLES 2017

0452/23/M/J/17

[Turn over

6

www.dynamicpapers.com

Shiromi bought office equipment on credit.
REQUIRED
(e) State why this transaction increased Shiromi’s current assets.

[1]
(f)

Suggest two reasons why Shiromi’s return on capital employed (ROCE) was lower on
30 April 2017 than it was on 30 April 2016.
1

2
[2]
[Total: 24]

© UCLES 2017

0452/23/M/J/17

www.dynamicpapers.com

7
2

Waheed is a trader. He maintains a full set of accounting records and prepares control accounts at
the end of each month.
REQUIRED
(a) Name the book of prime (original) entry which Waheed would use to obtain the following
information when preparing his sales ledger control account.
Book of prime (original) entry
Discount allowed
Bad debts
Contra
Returns
[4]
(b) State the meaning of a contra entry in connection with control accounts.
State why Waheed may make such an entry.
Meaning

Reason
[2]
The sales journal for March 2017 was destroyed, but Waheed was able to provide the following
information.
2017
March 1
March 31

April 1

© UCLES 2017

Debit balances in sales ledger
Credit balances in sales ledger
Totals for the month
Cheques received from credit customers
Cheques paid to credit suppliers
Cheque received from credit customer (included
in the cheques received), later dishonoured
Discount allowed
Discount received
Returns by credit customers
Returns to credit suppliers
Contra entry
Bad debts written off
Debit balances in sales ledger
Credit balances in sales ledger

0452/23/M/J/17

$
2346
140
2145
3013
350
55
90
276
198
182
62
2670
86

[Turn over

www.dynamicpapers.com

8
REQUIRED

(c) Select the relevant figures and prepare the sales ledger control account for the month of
March 2017. Insert a figure for credit sales.
Balance the account and bring down the balances on 1 April 2017.
Waheed
Sales ledger control account
Date

Details

$

Date

Details

$

[10]

(d) Suggest two reasons why the sales ledger control account had a credit balance on
1 April 2017.
1

2
[2]

© UCLES 2017

0452/23/M/J/17

9

www.dynamicpapers.com

Waheed’s financial year ends on 31 March. He provided the following information.
All goods are bought and sold on credit terms. A cash discount is received from credit suppliers
if payment is made within 45 days. A cash discount is allowed to credit customers if payment is
made within 30 days.
At 31 March 2016

At 31 March 2017

33 days
44 days

29 days
46 days

Trade receivables collection period
Trade payables payment period
REQUIRED

(e) State whether Waheed would be satisfied with the change in the collection period for trade
receivables. Give a reason for your answer.
Satisfied?
Reason
[2]
(f)

State one advantage to Waheed’s suppliers of the change in the payment period.

[1]

(g) State one disadvantage to Waheed’s suppliers of the change in the payment period.

[1]
(h) Comment on how a collection period of 29 days and a payment period of 46 days may affect
Waheed’s liquidity position.

[2]
[Total: 24]

© UCLES 2017

0452/23/M/J/17

[Turn over

10
3

www.dynamicpapers.com

The A1 Sports Club was formed some years ago.
The club has 100 members. The annual subscription is $70.
A few years ago the club borrowed $3000 from a member at 3% per annum interest.
In addition to providing sporting facilities, the club also has a café for members. All supplies for the
café are purchased on credit terms, and all sales are made for cash.
The following information was available for the year ended 30 April 2017.
$

At 1 May 2016
Amount owing to café suppliers
Café inventory
Loan from member (interest charged at 3% per annum)
Subscriptions in arrears
Bank overdraft

311
298
3000
560
3180

Receipts and payments during the year ended 30 April 2017
Subscriptions for the year ended 30 April 2016
for the year ended 30 April 2017
for the year ending 30 April 2018
Café sales
Payments to café suppliers
Rates of club premises
General club expenses
Café wages
Loan interest and repayment of half of the loan
Purchase of new sports equipment
Proceeds of sale of old sports equipment (book value $580)

560
6300
280
?
3796
960
910
1040
1590
4000
430

At 30 April 2017
Bank overdraft
Café inventory
Subscriptions in arrears
Amount owing to café suppliers

2626
216
700
393

© UCLES 2017

0452/23/M/J/17

www.dynamicpapers.com

11
REQUIRED

(a) Prepare the receipts and payments account for the year ended 30 April 2017. Insert a figure
for receipts from café sales.
Balance the account and bring down the balance on 1 May 2017.
A1 Sports Club
Receipts and Payments Account for the year ended 30 April 2017
Date

Details

$

2016
May 1

Balance

Date

Details
b/d

$
3180

[12]

© UCLES 2017

0452/23/M/J/17

[Turn over

12

www.dynamicpapers.com

(b) Prepare the café income statement for the year ended 30 April 2017.
A1 Sports Club
Café Income Statement for the year ended 30 April 2017
$

$

[8]

(c) State the amount of subscriptions which will appear in the income and expenditure account
for the year ended 30 April 2017. Give a reason for your answer.
Amount $
Reason

[2]
(d) List five items included in the receipts and payments account which will not appear in the
income and expenditure account for the year ended 30 April 2017.
1
2
3
4
5 [5]
© UCLES 2017

0452/23/M/J/17

[Total: 27]

13

www.dynamicpapers.com

Question 4 is on the next page.

© UCLES 2017

0452/23/M/J/17

[Turn over

www.dynamicpapers.com

14
4

Virat is a trader. His financial year ends on 31 January. He does not maintain a full set of accounting
records. He was able to provide the following information at 1 February 2016.
$
58 500
9 400
9 700
7 100
8 120
15 000
5 300

Premises at cost
Fixtures and fittings at cost
Inventory
Trade payables
Trade receivables
Loan from A Singh
Bank overdraft
REQUIRED
(a) Calculate Virat’s capital at 1 February 2016.

[1]
During the year ended 31 January 2017:
Virat’s drawings amounted to $11 320.
Virat’s personal motor vehicle, valued at $15 200, was transferred into the business.
One third of the loan was repaid and it was agreed that the balance should be repaid in 2019.
Virat compared his assets and liabilities on 31 January 2017 with those on 1 February 2016 and
found:
Trade payables had increased by 6%
Trade receivables had increased by $3310
Inventory was valued at the selling price of $12 900 after a mark-up of 20%
Bank overdraft had increased by $3100
Cash in hand amounted to $100
On 31 January 2017 it was decided to:
Write off $130 as irrecoverable from the amount owed by trade receivables at that date.
Make a provision for doubtful debts of 2% of the remaining amount.
Provide for depreciation of fixtures and fittings at 20% per annum on cost.
Provide for depreciation of the motor vehicle at 25% on the valuation when transferred into
the business.
Maintain the premises at cost.
© UCLES 2017

0452/23/M/J/17

www.dynamicpapers.com

15
REQUIRED

(b) Prepare a statement of affairs at 31 January 2017 showing the total capital at that date.
Virat
Statement of Affairs at 31 January 2017
$

$

$

[14]

© UCLES 2017

0452/23/M/J/17

[Turn over

www.dynamicpapers.com

16

(c) Prepare the capital account of Virat for the year ended 31 January 2017 to show the profit or
loss for the year.
Virat
Capital account
Date

Details

$

Date

Details

$

[5]

Virat was disappointed with the results of his business for the year ended 31 January 2017. He
decided to try to obtain the financial statements of other businesses so that he could compare
their results with those of his own business.
REQUIRED
(d) Explain two factors Virat should consider when comparing his results with those of another
business.
1

2

[4]
[Total: 24]

© UCLES 2017

0452/23/M/J/17

17

www.dynamicpapers.com

Question 5 is on the next page.

© UCLES 2017

0452/23/M/J/17

[Turn over

18
5

www.dynamicpapers.com

Heng is a wholesaler. He maintains a full set of double entry accounting records.
REQUIRED
(a) Name the accounting principle Heng is applying in his accounting records.
[1]
Heng’s financial year ends on 31 December. He opened a suspense account on
31 December 2016 and entered a debit balance of $430.
REQUIRED
(b) State two reasons why it was necessary for Heng to open a suspense account.
1

2
[2]
Heng discovered that the following errors had been made in his accounting records.
1

Repairs to office equipment, $281, had been correctly entered in the cash book, but had been
entered in the office equipment account.

2

A sales invoice issued to AB Stores had been overcast by $100.

3

The balance of the petty cash book, $150, had not been entered in the trial balance.

4

General expenses, $1120, had been correctly entered in the cash book, but had been entered
in the general expenses account as $1210.

5

The total of the discount allowed column in the cash book, $1024, had not been transferred to
the discount allowed account in the ledger.

6

A cheque, $2060, paid to AK Suppliers, had been debited in the cash book (which had a
positive balance) and credited to the account of AK Suppliers.

7

The total of the purchases returns account, $454, had not been entered in the trial balance.

© UCLES 2017

0452/23/M/J/17

www.dynamicpapers.com

19
REQUIRED

(c) Prepare the suspense account in Heng’s ledger to show the required entries.
The account should be balanced or totalled as necessary.
Heng
Suspense account
Date

Details

$

Date

Details

$

[6]

(d) State whether all the errors in Heng’s books have been discovered.
Give a reason for your answer.
Have all errors been discovered?

Reason
[2]
(e) Complete the table to show the effect of each of the errors. Where an error has no effect,
write ‘No effect’.
The first one has been completed as an example.
Error

Profit for the year
$

Non-current assets
$

Current assets
$

Current liabilities
$

1

281 overstated

281 overstated

No effect

No effect

2
3
4
5
6
7
[10]
[Total: 21]
© UCLES 2017

0452/23/M/J/17

20

www.dynamicpapers.com

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International
Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at www.cie.org.uk after
the live examination series.
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.

© UCLES 2017

0452/23/M/J/17