0452/M/J/18 Examiner Report – Accounting May/June 2018

Cambridge Accounting (0452) examiner report, May/June 2018 — 0452/M/J/18, file 0452_s18_er.pdf.

Loading the paper…

Text of this paper

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/11
Paper 11
Key messages
It is important to read through each question very carefully before attempting an answer. This ensures that
an important piece of information is not overlooked and that instructions are followed precisely.
Where appropriate supporting calculations should always be shown. Even if the final answer is incorrect,
some credit may be earned for some of the figures in the calculation.
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 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 “b/d” for “Balance” in ledger
accounts and “GP” and “C of S” for gross profit and cost of sales in income statements.
General comments
In general candidates dealt reasonably well with the paper. Candidates seemed to be less proficient at the
written explanations and definitions than the calculation aspects.
Comments on specific questions
Question 1
The majority of candidates attempted all questions. Many candidates found (e) to be challenging.
Question 2
(a)

Candidates scored very well in this question as they categorised a range of items. The main item
which caused a problem was the ‘rent receivable accrued’.

(b)

Candidates performed well on this question and gave a correct advantage and disadvantage of
being a partner rather than a sole trader. Only a small number of candidates referred to aspects of
a partnership agreement being an advantage.

(c)

The most common responses to this question were ‘the bank’, ‘suppliers’ and ‘the government’ with
appropriate reasons for their interest in financial statements. However, some candidates who
named the bank as an interested party did not make it clear that they would look at the financial
statements for the ability of repaying a new loan or overdraft. The bank would clearly know if they
were repaying a current loan or overdraft. A small number of candidates named the owner or
shareholders as an interested party despite the question stating to name three parties other than
the owner.

(d)

Most candidates were able to give two causes of depreciation. A small number gave two methods
of depreciation e.g. straight line (equal instalments) and reducing (diminishing) balance. Others
referred to damaged inventory.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
(e)

This question covered features of depreciation and generally it was well attempted with many
candidates gaining full marks. Most candidates followed the instructions by identifying ‘true’ or
‘false’.

(f)

Many candidates did not understand an ‘accounting’ objective and suggested ‘making a profit’ or
‘preparing financial statements’.

(g)

Generally this question was well attempted.

Question 3
(a)

There were many good answers with the majority citing that the reason for maintaining a petty cash
book was to free up space in the main cash book. Some candidates, however, did not give a
reason but cited what the petty cash book was used for e.g. recording items of relatively low
expense.

(b)

This question was not answered well with many repetitions of (a). Many just said that each month
you started with the imprest amount rather than an advantage of the imprest system.

(c)

The petty cash book, on the whole, was very well attempted. A number of candidates lost marks for
poor narratives and the wrong analysis column. Each entry needed the correct narrative, entered in
the total column and in the correct analysis column.

(d)

There were many good answers with a large number awarded 3 marks. A small number lost marks
through wrong labels and incorrect amounts.

(e)

This question saw a very small number of candidates being awarded a mark. There seemed little
understanding that what had been correctly posted to the computer supplies column in (c) should
come through to the posting from the petty cash book to the ledger account at the end of the
month.

(f)

Candidates provided many good reasons for preparing a bank statement suggested. Weaker
candidates, however, although making suggestions, did not give a full reason. It is not enough to
say there may be errors. Candidates must be encouraged to give a full answer. Candidates also
mentioned ‘to identify differences’ without stating what these differences may be or a purpose was
to ensure that the cash book and the bank statement balance are equal or the same.

(g)

The updated cash book was generally well-attempted by a large number of candidates with many
achieving full marks. Some candidates, however, lost marks for not writing the appropriate details
in the cash book, even though they arrived at the correct final balance. It was common to see
‘dishonoured cheque’ without a reference to Jabir, or ‘direct debit’ with no reference to rates. A
number of candidates did not refer to the cash book error, but described this as ‘undercast’.
Weaker candidates included the cheque received from Shadya and the cheque paid to Abasi.

(h)

Stronger candidates, who achieved near or full marks in (g) had no problem with the bank
reconciliation statement. There were many candidates who struggled with the statement, merely
listing the adjustments with no starting or ending point.

(i)

Many candidates did not seem to appreciate that the figure to appear in the financial statements
should be the adjusted cash book balance as calculated in (g) and not the bank statement balance
from (h). Most candidates did identify the correct section of the statement of financial position.

(j)

Many candidates suggested good reasons why Jabir’s cheque may have been dishonoured.

Question 4
(a)

Some candidates answered this question well and achieved full marks. A number of candidates did
not attempt this question at all, or did not attempt all of the ledger accounts. There were varied
attempts at the AX account with the most common error being in the entries of the purchases and
purchases returns gross. The most common error was to omit the settlement discount. In the FM
account some candidates did not identify the correct amount needed to settle the account with
bringing down a balance of $2127. The purchases and purchases returns account seemed to

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
cause the most problems for candidates. Many did not appreciate that the accounts needed to be
closed with a transfer to the income statement.
(b) (i)

There were many good answers from the majority of candidates with the most common answer for
receiving trade discount being purchasing in bulk. A small number of candidates suggested trade
discount was received for paying promptly.

(ii)

Most candidates calculated the correct trade discount with only a few reversing the answer to 80%.

(c)

Most candidates attempted (i) and (iii) well. Many did not identify sales invoice in (i) but ‘just’
invoice was accepted. In part (ii) debit notes were confused with credit notes and for (iii) weaker
candidates named financial statements instead of statement of account. It may be helpful to
candidates in this type of question to draw a diagram as to who is where the transaction originates.

Question 5
(a) (i)(ii)(iii) This question required candidates to define raw materials, work in progress and finished goods.
Most candidates addressed the definition in a suitable manner and an appropriate example.
However, it was clear that a number of candidates did not read the question carefully and did not
give a suitable example relevant to Addae’s business. A small number of candidates offered
‘buying in goods’ for ‘finished goods’, again not reading the requirements of the question.
(b)

Some candidates produced good and well laid out manufacturing accounts and were awarded full
marks. Weaker candidates simply produced lists of expenses. Whilst depreciation of machinery
was correctly calculated marks were lost to incomplete narrative. Closing inventory was sometimes
included in the calculation and many candidates did not extract a sub-total before deducting closing
work in progress. A small number of candidates deducted indirect costs from Prime Cost.

(c)

There were some very good responses to this question with two very valid reasons to reduce the
cost of production. Some candidates, however, did not focus on reducing the cost of production
and offered increasing sales, reducing expenses without being more specific and also buying in
goods.

(d)&(e)

Both these questions were correctly calculated. Some candidates lost marks as they did not show
the answer to two decimal places.

(f)

Some candidates did not address their responses to improving the profit for the year. Commonly
reducing costs were suggested without being more specific to the administration or selling costs.

Question 6
(a)

A large number of candidates were able to provide two good reasons for opening a suspense
account. To ‘locate errors’ and to ‘balance the trial balance’ were the most common responses.

(b)

Many candidates found this task challenging. The ability to use the suspense account to correct a
range of errors appeared weak. Error 2 (carriage) was dealt with correctly by many candidates but
in error 3 entries were often reversed and the name of the account was often referred to as sales
journal. In error 4, again, entries were often reverse and amount were a combination of $460 and
$640.

(c)

Most candidates recognised that not all errors had been discovered although they were not always
able to say why. A number made reference to errors that would not affect the balancing of the trial
balance.

(d)

This question was very well attempted by a large number of candidates. Some candidates lost
their final corrected profit figure through not calculating correctly or through reversing the increase
or decrease.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/12
Paper 12

Key messages
It is essential to lay down a good grounding in the principles of double entry including the use of journals and
ledgers and have clear narratives.
Where appropriate supporting calculations should always be shown. Even if the final answer is incorrect,
some credit may be earned for some of the figures in the calculation. It is better to cross out incorrect
answers and write separately rather than over the top of the previous answer. If an answer is allocated a
small space then this is indication that the answer should be brief.
Multiple choice answers should be annotated in the boxes provided and not directly next to the letter.
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 candidates who were
clearly well-prepared.
Comments on specific questions
Question 1
Generally (b), (d), (e), (g) and (i) were well answered. Parts (a), (c), (f), (h) and (j) require more detailed
comments.
(a)

The common error here was to confuse debit note with credit note. It is the person who has been
supplied the goods who requests a debit note and it is the supplier who issues the credit note.

(c)

Carriage inwards is calculated separately to the valuation of inventory using net realisable value.

(f)

There was confusion here with the difference between capital and revenue expenditure. If an
expenditure involves repairing or renewing or is a recurring cost for the non-current asset then it is
revenue expenditure. Legal fees for purchasing a factory are a one-off cost so can be capitalised.

(h)

This question involved working backwards from the final figure of $285 000 to discover the starting
figure for the retained earnings. The correct answer was $232 500 which involved adding back the
transfer and dividends to the starting point of $285 000 and then subtracting the profit for the year.

(j)

There were several stages to this calculation. First the provision for doubtful debts had to be
calculated by subtracting the bad debt of $750 from the trade receivables and then finding 2 per
cent which is $1885. This needed subtracting from the trade receivables figure of $95 000 along
with the bad debt to leave a net trade receivables figure of $92 365.

Question 2
(a)

Some candidates answered this question well. The following types of errors were common among
other candidates: reference to accounts, reference to fraud or errors and reference to preparing

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
financial statements. The two most common correct answers were division of labour and fewer
entries in the ledgers.
(b)

Well-prepared candidates usually gained three marks but others made some errors including:
reference to accounts or ledgers, reference to sales journal rather than cash book for transaction 1
and reference to purchase journal rather than general journal for transaction 3.

(c)

There was a wide range of marks. Better prepared candidates frequently gained eight or nine
marks. The most common error was to use the narrative ‘road tax’ rather than ‘motor vehicle
expenses’. Other common errors included: using purchases rather than purchases returns for
credit entry in transaction 1 or inventory or goods rather than purchases for the credit entry in
transaction 5, incorrect totals for items in transactions 2 and 3, discount allowed shown as cash
discount, reversal of entries or omission of totals or narratives.

(d)

Most candidates gained at least one mark however entries were often confused by the presence of
many irrelevant items. Common mistakes included referring to only one of the items to be added
either $220 or $392, not starting with the opening balance $838 credit, incorrect totalling of figures
such as not recognising that the opening balance is a negative/credit balance.

(e) (i) and (ii) Answered reasonably well by many candidates. Some candidates referred to wrong ledgers or
journals/accounts/control accounts. The most common error for part (ii) was purchases ledger.
Question 3
(a)

Well-prepared candidates gained seven or eight marks. Errors included: reversal of some items or
all items, inclusion of extraneous items such as discount allowed and cash purchases, incorrect
narrative for bank, incorrect calculation of missing figure for the bank and entries omitted such as
the contra for the sales ledger.

(b)

Answered well by most candidates, however errors seen included: omission of × 365 and
sometimes 360 used instead, multiplying by 100 and purchases rather than credit purchases used.

(c)

Generally well answered if the candidates knew the formula. Some did not round to the next whole
day as instructed.

(d)

This answer depended on own figure answer from 3(c). The first part was generally very well
answered but sometimes the reason given was vague. Occasionally candidates got both parts
wrong because they were considering the situation from Kumu’s point of view.

(e)

This was generally answered well. However, answers sometimes linked to current liabilities and
liquidity which was not rewarded. Candidates needed to be specific about cash discounts being
missed out on rather than discounts in general.

(f)

The majority of candidates gained full marks.

(g)

Candidates scored a wide range of marks on this question. More able candidates frequently gained
three marks. Common errors included: attempting to include profit in the calculation, omitting cash
purchases, omitting purchases and gaining a total of $240 000 for opening inventory.

(h)

Generally well answered but candidates need reminding not to use abbreviations such as COS in
place of cost of sales.

(i)

This was answered reasonably well but weaker candidates often showed no response. Common
errors included: not calculating the average inventory and using either just the opening or just the
closing inventory, poor rounding of ratios as needed to be to 2 decimal places or adding % or
stating the ratio: 1 instead of times.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
Question 4
(a)

Most candidates gained some marks on this question with very able candidates gaining five or six
marks. Candidates did not always follow the instructions on how to indicate the correct answer. In
addition if they changed their mind it was often difficult to understand which their answer was.
Candidates should take a little time to read instructions.

(b)

A common incorrect answer was $360 which was the amount for the lessons which the pupils had
received and not the amount which had been prepaid which was required here.

(c)

Answers varied here. Marks were awarded for correct figures or own figure from 4(b). Sometimes
there was no reference to the total receipts from lessons, $20 200, the figure carried forward was
not from 4(b) or the $240 or own figure was added to $20 200 rather than subtracted.

(d)

A range of marks were awarded. Some answers were vague but most candidates knew that
adjustments were necessary for accruals and prepayments. Chandra is a new business and
lessons were all paid for in advance so there was no accrued lesson income. Candidates are
generally more confident when dealing with prepaid expenses rather than prepaid revenue.

(e)

Well-prepared candidates gained six marks for a well presented answer using the increase and
decrease columns for amounts and the final column for one total the revised profit of $8349.
Weaker candidates lost marks for various reasons including: reversal of entries in
increase/decrease columns, putting answer for an error on the wrong row, too many entries in the
table that contradicted each other and poor calculation of revised profit with candidates mixing up
the increase and decrease columns. Candidates need more practice at using tables correctly and
using the information available in the question appropriately.

(f)

Most candidates were awarded the full two marks.

(g)

Most candidates gained at least one mark. The best answers were concise, for example, Chandra
is a sole trader while LQ is a limited company or that the businesses are of different sizes. Just
stating that the businesses were of different types was insufficient and suggested that the product
or service was different which was incorrect as they are both driving schools.

Question 5
(a)

There were some good answers here with correct narratives, amounts, dates and sides of the
accounts. Weaker responses had a variety of errors including: incorrect dates (years are needed
as well as months and days), incorrect narratives which was mainly stating income statement
instead of income and expenditure account, incorrect amounts for income and expenditure and
partial reversal or complete reversal of account.

(b)

Most candidates gained good marks on this question with well-prepared candidates gaining nine or
ten marks. Marks were lost most frequently for omitting subscriptions from the receipts side. Other
common errors included: labelling sports equipment as purchases, netting-off competition income
and prizes, placing some items on the wrong side, incorrect figure for subscriptions etc.

(c)

A wide range of marks were given here. The ideal answer was set out clearly with subheadings,
precise labels and correct totals gaining seven marks. Weaker candidates gained zero for no
response or attempting an income and expenditure account. Common errors included: incorrect
figure for sports equipment, prepayment labelled as rent rather than rent prepaid or other
receivables, accrual labelled as general expenses rather than general expenses accrued or other
payables, surplus in wrong section or labelled as profit, omission of subscriptions owing and bank
account and using capital as a heading rather than accumulated fund. Candidates needed to use
their bank figure from 5(b) but sometimes they used the opening balance instead.

(d)

There was some misunderstanding by many candidates of the word arisen so examples of how the
accumulated fund increases were allowed. No marks were awarded for reference to profit, or
capital or the owners investing funds.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
Question 6
(a)

A wide range of marks were achieved. An excellent answer added assets and deducted liabilities
taking into account adjustments with clear presentation. Most candidates gained some marks but
these were limited by the following kinds of error: poor adjustment for depreciation, omission of the
capital introduced in the form of non-current assets, no adjustment or incorrect adjustment of trade
receivables, omission of prepaid rent $120, addition of liabilities rather than deductions and
inclusion of opening capital of $20 300. Candidates should make it clear in such questions whether
an item is to be added or subtracted.

(b)

Many weak responses gained no marks. Only a few candidates arrived at the answer of $452 for
profit, a few gained five marks based on their own figure from 6(a). These answers tended to start
with closing capital or use the capital account with a ledger format. Most candidates made mistakes
and there were many different types of presentation. Typical errors included: attempting to use an
income statement format sometimes with the inclusion of drawings, repeating many figures from
6(a) for example inventory, omission of new capital $5500 and incorrect addition or subtraction of
drawings. Some candidates used the capital account format from the statement of financial position
but then altered the format incorrectly to find the missing profit figure and did not note the figure
was a loss based on own figure.

(c)

This was generally answered well. Weak answers referred to returns or money earned rather than
profit.

(d)

The majority of candidates gained the mark. The main errors were lack of multiplication by 100 or
stating revenue rather than profit for the year.

(e)

This was answered reasonably well. If the formula in part 6(d) was incorrect however, some
candidates added the × 100 at this stage and then gained one or two marks. Candidates gained
one mark if closing capital was used rather than the requested opening capital. There was some
incorrect rounding to 2 decimal places.

(f)

The majority of candidates answered this correctly and referenced an increase in or poor control of
expenses. Candidates who gave answers which affected the gross profit had not read or
understood the information provided in the question.

(g)

A range of marks were rewarded. Excellent answers tended to be brief for example, easy
reference, helps prevent fraud and easier to prepare financial statements. Marks were often lost
due to too much reference to accuracy without mentioning check for errors or locating errors. Many
candidates thought that no errors would occur due to the use of double entry.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/13
Paper 13

The common error here was to confuse debit note with credit note. It is the person who has been
supplied the goods who requests a debit note and it is the supplier who issues the credit note.

(c)

Carriage inwards is calculated separately to the valuation of inventory using net realisable value.

(f)

(h)

(j)

Question 2
(a)

Some candidates answered this question well. The following types of errors were common among
other candidates: reference to accounts, reference to fraud or errors and reference to preparing

(c)

(d)

(b)

Answered well by most candidates, however errors seen included: omission of × 365 and
sometimes 360 used instead, multiplying by 100 and purchases rather than credit purchases used.

(c)

Generally well answered if the candidates knew the formula. Some did not round to the next whole
day as instructed.

(d)

(e)

(f)

The majority of candidates gained full marks.

(g)

(h)

Generally well answered but candidates need reminding not to use abbreviations such as COS in
place of cost of sales.

(i)

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
Question 4
(a)

(b)

A common incorrect answer was $360 which was the amount for the lessons which the pupils had
received and not the amount which had been prepaid which was required here.

(c)

(d)

(e)

(f)

Most candidates were awarded the full two marks.

(g)

Question 5
(a)

(b)

(c)

(d)

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
Question 6
(a)

(b)

(c)

This was generally answered well. Weak answers referred to returns or money earned rather than
profit.

(d)

The majority of candidates gained the mark. The main errors were lack of multiplication by 100 or
stating revenue rather than profit for the year.

(e)

(f)

(g)

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/21
Paper 21

Key messages
It is important to read through each question very carefully before attempting an answer. This ensures that
an important piece of information is not overlooked and that instructions are followed precisely.
Where appropriate supporting calculations should always be shown. Even if the final answer is incorrect,
some credit may be earned for some of the figures in the calculation.
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 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 “b/d” for “Balance” in ledger
accounts and “GP” and “C of S” for gross profit and cost of sales in income statements.
Candidates are expected to be familiar with International Accounting Terminology and avoid the use of “old”
terminology such as “stock” and “net profit”.
It is very important that candidates present figures clearly and that written work is legible.
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. Those candidates who had a good knowledge of the subject
were able to apply that knowledge to the scenarios presented on the question paper.
It is important that candidates know the correct form of presentation for financial statements and ledger
accounts. In any financial statement or ledger account attention must be given to the wording as well as the
figures.
Some of the answers to the theory questions were far too vague and lacked clarity. Accounting is a subject in
which precision is extremely important.
Comments on specific questions
Question 1
(a)

Candidates were required to identify two books of prime (original) entry. Most candidates correctly
identified the sales returns journal. There were various incorrect answers to the book in which bad
debts would appear, ranging from cash book, general ledger and nominal journal.

(b)

Using information provided a purchases ledger control account had to be prepared. A missing
figure representing the amounts paid to credit suppliers had to be inserted. This question presented
very few problems for the more able candidates. A number of candidates included extraneous
items such as cash purchases and items related to trade receivables. Some items were incorrectly
identified such as “carriage inwards” incorrectly described as “carriage outwards

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
(c)

Two reasons for the debit balance in the purchases ledger were required. Answers were
sometimes a little vague and not related to the particular scenario.

(d)

An explanation was required of how maintaining a provision for doubtful debts is an application of
the principle of prudence. The majority of candidates appreciated that this prevented the profit and
the trade receivables/current assets from being overstated. Some responses were too vague. “The
assets will not be overstated” was regarded as too general to merit the mark.

(e)

Candidates were required to discuss how an increase in the rate of cash discount would affect
liquidity and future profit. Most candidates appreciated that the cash would probably be received
earlier than previously. Some then explained that this would allow the trader to use that cash within
her business. Very few mentioned that the amount received would be reduced because of the
discount.
Many candidates understood that a higher cash discount would cause an increase in expenses and
a reduction in profit. A few also mentioned that the risk of bad debts may be reduced as a result of
customers paying earlier. A number of candidates incorrectly believed that the cost of sales would
be affected.

Question 2
(a)

An opening journal entry was required. Many candidates seemed unfamiliar with this type of entry
and produced separate journals entries for each of the items. It was expected that candidates
would be familiar with the format of a journal entry i.e. account(s) to be debited, account(s) to be
credited and a narrative. A journal should name the accounts in the ledger in which an entry is to
be made. For example “purchased premises” rather than “Premises” and “loan” rather than “AB
Loans” were not regarded as acceptable.

(b)

Two other uses of the general journal were required. Common correct responses included writing
off bad debts and correction of errors.

(b)

Candidates were presented with an incorrect trial balance together with details of additional errors
and a corrected trial balance had to be prepared. Many candidates incorrectly included both the
opening and closing inventories. Other common errors included omitting drawings and the petty
cash balance, and not making the appropriate adjustments for the purchases returns and the bank
charges. Where correct amendments were made to the items the totals of the trial balance agreed.
When the trial balance totals do not agree it is expected that candidates will understand that it is
necessary to open a suspense account.

Question 3
(a)

A number of partially completed ledger accounts were presented together with additional
information relating to these particular accounts. Candidates were required to make any necessary
entries in the accounts and to close or balance the accounts as appropriate. Those candidates who
had a good knowledge of double entry were able to earn good marks. Other candidates seemed to
be uncertain about when to balance an account and when to make a transfer to the income
statement. Where a transfer is made to income statement it should be shown as one figure in the
ledger account (not two individual transfers). A significant number of candidates transferred the
totals of the discount columns in the cash book to the incorrect discount accounts in the ledger
resulting in incorrect transfers to the income statement.

(b)

A disposal of motor vehicle account was provided and candidates were required to explain each
entry in the account and to state where the double entry would be made. Answers were often very
generic and completely unrelated to the account provided. For example “this is the cost of a motor”
was not an adequate explanation for the entry representing the original cost of the motor vehicle
which was being disposed of. A number of candidates did not appear to understand what the
entries in the disposal account represented. Despite the instruction about stating whether the
double entry account would be debited or credited, many candidates stated the name of an
account without any indication where the entry would be made in that account.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
Question 4
(a)

Candidates were provided with information at the end of the financial year and were required to
prepare an income statement of an advertising agency. A number of candidates did not seem to be
familiar with the preparation of an income account for a service business and attempted to
introduce revenue and cost of sales by using the figures representing capital and office equipment.
A common error was to include rent receivable as $10 400 instead of $4800. Those candidates
who included calculations for the items requiring adjustments were able to earn some of the
available marks for those items even though the final figures were incorrect. A provision for
doubtful debts had to be created. This should have been calculated at 2% on the amount of trade
receivables and not 2% on the fees for the year. Suitable descriptions should be shown for the
items in an income statement. For example “Dep MV” and “NP” are not regarded as adequate.

(b)

The formula for the calculation of the return on capital employed had to be stated. There were
many correct responses. In questions like this it is important to write the words out in full and to
include “x 100”.

(c)

Using the opening capital and the profit for the year (calculated in Part (a)) candidates were
required to calculate the return on capital employed. This was well done. Some candidates did not
display the answer as a percentage and others ignored the instruction to use the capital at the
beginning of the year.

(d)

Candidates were required to state two reasons why one business earned a higher return on capital
employed. Many correctly stated that Asim’s business had a higher profit for the year; others
incorrectly concentrated on higher sales or lower expenses. The other reason causing the
difference was that Asim had a smaller capital employed.

(e)

This proved to be quite difficult for many candidates. Only monetary items are recorded in the
financial statements, and, because of this, many important factors which affect the performance of
a business are not included in those statements.

Question 5
(a)

Details about a business were provided. The purchases for the year had to be calculated by
preparing the trading section of an income statement. Many candidates earned good marks. It is
important to include a correct label for each item in the statement and avoid inappropriate
abbreviations such as “CS” for “cost of sales” and “GP” for “gross profit”. Items must be in the
correct position in an income statement. For example, the opening inventory should appear before
the purchases and the purchases returns should be deducted from the purchases. Some
candidates incorrectly applied margin rather than mark-up. Despite calculating an incorrect gross
profit, many were able to earn an own figure for the purchases.

(b)

The formula for the calculation of the rate of inventory turnover had to be stated. There were many
correct responses. In questions like this it is important to write the words out in full.

(c)

Candidates were required to state two reasons why the rate of inventory turnover for a named
business was lower than the average for that type of business. Most candidates correctly identified
one of the reasons as holding a higher inventory. The other reason is a lower sales activity.
Popular incorrect responses included reference to cost of sales and selling price.

(d)

The basis on which inventory should be valued had to be stated. The vast majority of candidates
correctly stated “at the lower of cost and net realisable value”.

(e)

Candidates had to name the accounting principle being applied by valuing inventory on the basis
named in Part (d). The vast majority of candidates correctly named prudence, but a few incorrectly
suggested matching or realisation.

(f)

A table had to be completed to indicate the effect of overvaluing closing inventory. There was a
wide range of responses.

(g)

A table had to be completed to indicate the effect of two proposals on the gross profit. There was a
wide range of responses.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
(h)

Candidates were required to comment on the effects of a proposal to increase mark-up. Many
candidates correctly stated that the profit would increase. Only a few went on to explain that if the
selling price increased customers may go elsewhere. Common incorrect responses included
decrease (or increase) in cost of sales.

Question 6
(a)

It was expected that candidates would be able to state two differences between debentures and
ordinary shares. Many candidates did earn full marks. Some candidates identified two features of
debentures and two completely unrelated features of ordinary shares, and did not attempt a
comparison. Some comments were imprecise. For example, a statement such as “debenture
holders are paid first” was deemed to be too vague.

(b)

Candidates were required to explain that the general reserve arises from annual transfers from the
retained earnings. There was a vast variety of incorrect responses. A few candidates
misinterpreted the question and tried to explain why the general reserve had increased.

(c)

Two reasons why a limited company retains some profit each year were required. There were only
a few acceptable responses. Most candidates seemed to incorrectly believe that a general reserve
is represented by actual money. Common incorrect responses included ensuring that cash was
available to purchase non-current assets, repay loans and pay dividends. It should have been
explained that profits may be retained when there is not enough cash to pay a dividend or to
ensure that cash is retained in the business rather than using it for the payment of a dividend.

(d)

A table had to be completed to indicate where (if at all) six items would appear in the financial
statements of a limited company. There was a wide range of answers, but most candidates earned
at least three marks.

(e)

Candidates were required to suggest one advantage to existing shareholders if a company raised
extra finance from issuing debentures. There were some imprecise and vague answers such as
“more dividend” which was not regarded as adequate. The responses provided by a few
candidates were from the viewpoint of the company not the effect on the ordinary shareholders.

(f)

Candidates were required to state one disadvantage to the ordinary shareholders if a company
issued debentures. Once again, some answers were too vague such as “debentures get interest”,
and sometimes answers were from the viewpoint of the company.

(g)

The formula for the calculation of the current ratio had to be stated. There were many correct
responses. In questions like this it is important to write the words out in full.

(h)

A table had to be completed to indicate the effect of five proposals on the current ratio of a
company. There was a wide range of responses, but most candidates earned two or three marks.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers

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 ‘b/d’ for ‘balance’ in ledger accounts
and ‘PFDD’ 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.
It is important that candidates present their figures clearly and that that their written work is legible.
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
figures in a ledger account, attention must be given to the words entered in the details column and to the
dates.
Comments on specific questions
Question 1
(a)
(i)

Candidates were provided with a business document and asked to name the document, calculate
the balance on the document, the percentage of the discount and to name the type of discount.
The better-prepared candidates were able to correctly identify the business document as a
statement of account. There were a variety of incorrect answers ranging from memo, debit note,
invoice, bank statement, receipt, etc.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
(ii)

This was well answered with most candidates correctly identifying the amount of discount allowed
being $335. Where candidates gave an incorrect answer, it was mostly due to errors in their
calculations.

(iii)

Most candidates calculated the percentage discount correctly. Where candidates made an error, it
was because they based their percentage on the net amount paid rather than the gross amount.

(iv)

Many candidates were unable to correctly identify the type of discount as ‘cash discount’. The most
common incorrect answers being trade discount, or discount received.

(b)

Many candidates did not realise that a statement of account is not recorded in the accounting
records. The most common incorrect answer was that the customer’s account should be debited.

(c)

Candidates were asked to refer to a transaction in a statement of account and name the document
issued, the person issuing the document and entries that would be made in the customer’s books.
Generally, this was well answered with many candidates earning full marks. A common mistake
was to think that W Jones was the supplier rather than the customer meaning the document issued
and name of the person issuing the document were incorrectly stated.

(d)

The question required candidates to name the book of prime (original) entry in which each of the
two traders would record a returns transaction and this was answered very well. Some candidates
did not realise that there was separate journal for returns and thought the entry would be recorded
in the sales and purchases journals respectively. Also, there were some candidates who thought
‘ledgers’ were books of prime entry.

(e)

Many candidates were able to correctly explain the meaning of ‘bad debts’ and ‘bad debts
recovered’. However, there were some candidates who confused trade receivables with trade
payables. Also, for bad debts some candidates did not explain that the debt would not be paid or
that amount owing would not be received. For ‘bad debts recovered’, candidates did not state that
the debt was either a bad debt or a debt that had previously been written off, even though they
stated that the customer had repaid some or all of the amount back.

(f)

This question was answered well. Many candidates were able to identify two ways that a trader
could reduce the risk of bad debts. However, candidates were not always specific enough in their
responses and no marks could be awarded. Common errors included:
•
•
•
•
•

not explaining that introducing a credit limit must apply to each individual customer for the
policy to be effective
suggesting a discount may be offered, but not stating or implying “cash discount”
suggesting ‘charging interest’ but not clarifying that this would apply to late payments
duplicating their response, i.e. ‘reduce credit sales’ and ‘sell on a cash basis’
incorrectly stating that extending the time allowed for the trade receivables to pay would
reduce the risk of bad debts.

(g)

Candidates were asked to explain how maintaining a provision for doubtful debts is an application
of the principle of prudence. Most candidates recognised that this prevented profits from being
overstated but many simply wrote ‘prevent assets’ from being overstated without specifying that it
was current assets or trade receivables.

(h)

Similar to part (g), candidates were asked to explain how maintaining a provision for doubtful debts
is an application of the principle of accruals/matching. The majority of candidates struggled to earn
the marks on this part as many wrote about matching income and expenses but omitted ‘for the
year/same period’. Very few candidates mentioned that the provision for doubtful debts is an
expense. Some candidates chose not to attempt it all.

(i)

Most candidates successfully calculated the rate of provision for doubtful debts.

Cambridge International General Certificate of Secondary Education
0452 Accounting June 2018 www.dynamicpapers.com
Principal Examiner Report for Teachers
(j)

The question required candidates to prepare a provision for doubtful debts account. There was a
clear division between candidates who were familiar with a provision for doubtful debts account,
often scoring full marks and those candidates who were not so well prepared.
Common errors included:
•
•
•

inclusion of the trade receivables amounts of $18 400 and $17 600 rather than provision for
doubtful debts’ balances
incorrect dates and narratives
opening balance entered as a debit balance

Question 2
(a)

This question required candidates to state the meaning of four terms and to provide an example of
each.
For the better-prepared candidates there were some very high marks earned on this part.
Candidates were better at providing good examples than defining the terms.
Many candidates lost marks for the explanation of capital expenditure as they included
‘repairing’/’maintenance of’ the non-current asset or expenses on non-current assets in their
explanation.
Many candidates were clearly unfamiliar with the terms capital and revenue receipts, sometimes
confusing these terms with source documents. F

Accounting (0452) · May/June 2018 · Examiner report

Popular subjects

Exam info

Help