Accounting (0452) · May/June 2019 · Question paper 22

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Cambridge Assessment International Education
Cambridge International General Certificate of Secondary Education

* 9 0 2 3 2 2 0 6 5 7 *

0452/22

ACCOUNTING

May/June 2019

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 (LT) 161808/2
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Annabel is a wholesaler. She maintains a three column cash book.
The following transactions took place in April 2019.
April 8

Received a cheque from Ellie in full settlement of her account of $450 after deducting
2% cash discount

15

Paid Ed $468 by bank transfer to settle his account after deducting 2 12 % cash discount

21

Received a cheque from Caleb, $310

25

Withdrew cash from bank for business use, $200

27

Paid operating expenses in cash, $296

Annabel received her bank statement for April 2019.
The following items appeared on her bank statement but had not been recorded in her accounting
records.
1

The cheque received from Caleb on 21 April had been dishonoured.

2

Carly, a credit customer, had paid $294 by credit transfer to settle her account of $300.

3

Bank charges for the month amounted to $82.

REQUIRED
(a) Complete Annabel’s cash book on the page opposite.
Balance the cash book and bring down the balances on 1 May 2019.

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b/d

Balance

Details

April 1

2019

Date

0452/22/M/J/19

Discount
allowed
$

150

$

Cash

$

Bank

April 1

2019

Date

Annabel
Cash Book

b/d

Balance

Details

Discount
received
$

$

Cash

988

$

Bank

3

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Annabel purchases goods on credit from Ed. They exchanged various business documents during
April 2019.
REQUIRED
(b) Name the person who issued each of the following documents.
document

person issuing the document

invoice

debit note

credit note

statement of account

[4]

(c) Explain the difference between a debit note and a credit note.

[4]
(d) State one purpose of issuing a statement of account.

[1]
[Total: 22]

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The financial year of the NS Musical Society ends on 31 January.
On 31 January 2019 it was confirmed that the treasurer had disappeared and had taken some
money belonging to the NS Musical Society.
The new treasurer was able to provide the following information relating to the financial year ended
31 January 2019.
The Society has 60 members. The annual subscription is $50.
$

On 1 February 2018
Subscriptions accrued
Subscriptions prepaid
Bank overdraft
Musical instruments at book value

100
250
780
3600

During the year ended 31 January 2019
Payment of rates of premises covering 10 months to 30 November 2018
Payment of insurance for 14 months to 31 March 2019
Receipts from sales of concert tickets
Concert expenses paid
Proceeds of sale of old musical instruments (book value $120)
Cost of musical instruments purchased
(Half of this amount was paid immediately and the balance was
payable in February 2019)

2000
700
2560
1610
100
2100

At 31 January 2019
Bank overdraft
Subscriptions prepaid

2430
200

Musical instruments are depreciated at 10% per annum based on the value of instruments owned
at the end of each financial year.

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REQUIRED

(a) Prepare the subscriptions account for the year ended 31 January 2019 to show the
subscriptions received during the year.
Balance the account and bring down the balance on 1 February 2019.
NS Musical Society
Subscriptions account
Date

Details

$

Date

Details

$

[7]

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(b) Prepare the receipts and payments account for the year ended 31 January 2019 to calculate
the amount of money which is missing from Society funds.
Balance the account and bring down the balance on 1 February 2019.
NS Musical Society
Receipts and Payments Account for the year ended 31 January 2019
Date

Details

$

Date

Details

$

[11]

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(c) Complete the following table to show the amount which would appear in the income and
expenditure account for the year ended 31 January 2019 for each item.
Item

$

Concert

Rates

Insurance

Depreciation of musical instruments

Sale of musical instruments

[6]

Workings

A member of the committee of the NS Musical Society has expressed concern about the bank
overdraft and has proposed that the annual subscription should be increased by $10.
REQUIRED
(d) Discuss the implications of increasing the annual subscription by $10.

[3]
[Total: 27]
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Jamal opened a toy factory on 1 March 2018.
On that date he purchased the following non-current assets.
$
100 000
44 000
1 650
15 450

Premises
Factory machinery
Loose tools for factory
Office fixtures and fittings
Jamal decided on the following depreciation policy.
1

No depreciation would be charged on premises.

2

Factory machinery and office fixtures and fittings would be depreciated by 20% per annum
using the straight line (equal instalment) method of depreciation.

3

Loose tools would be revalued at the end of each financial year.

Jamal provided the following information.
For the year ended 28 February 2019
Purchases of raw materials
Purchases of finished goods
Purchase returns of raw materials
Carriage on raw materials
Direct factory wages
Indirect factory wages
Office and sales staff wages
Operating expenses
Insurance (for 16 months to 30 June 2019)
Sales returns
Revenue

$
45 680
12 400
1 030
3 240
29 750
18 750
25 360
8 250
3 200
2 250
?

At 28 February 2019
Inventory of raw materials
Inventory of work in progress
Inventory of finished goods
Loose tools at valuation
Direct factory wages accrued
Operating expenses accrued

4 150
3 310
8 900
1 320
3 040
550

The operating expenses and the insurance are to be apportioned 75% to the factory and 25% to
the office.
Jamal’s mark-up is 25%.

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REQUIRED
(a) Prepare the manufacturing account for the year ended 28 February 2019.
Jamal
Manufacturing Account for the year ended 28 February 2019
$

$

[15]

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(b) Prepare the income statement (trading section) for the year ended 28 February 2019 to show
the revenue, cost of sales and gross profit for the year.
Jamal
Income Statement (Trading section) for the year ended 28 February 2019
$

$

[7]

After the preparation of the financial statements for the year ended 28 February 2019 it was
discovered that some errors had been made.
REQUIRED
(c) Complete the following table to indicate the effect of each of the errors.
The first one has been completed as an example.
Error

effect on
cost of
production

effect on
gross profit

effect on
profit for the
year

no effect

understated

understated

Operating expenses accrued were
$850 not $550

Salesman’s commission, $1 850,
had been included in indirect
factory wages

Returns of finished goods to the
supplier, $1 200, were omitted

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[6]
[Total: 28]

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4

Shen is a retailer of men’s clothes. His financial year ends on 31 January.
The annual rates of Shen’s shop are $960. On 1 February 2018 Shen owed rates, $240. He paid
rates by bank transfer on the following dates.
2018
March 31
October 31

$
640
720

Shen receives a commission from Wang, who owns a shoe shop, on goods purchased by Shen’s
customers.
Shen provided the following information.
2018
February 1
March
1
August 31
2019
January 31

$

Commission outstanding
Commission received by bank transfer
Commission received in cash

210
210
95

Commission outstanding

114

REQUIRED
(a) Prepare the following accounts in the ledger of Shen for the year ended 31 January 2019.
Balance the accounts and bring down the balances on 1 February 2019.
Shen
Rates account
Date

Details

$

Date

Details

$

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Commission receivable account
Date

Details

$

Date

Details

$

[9]
Shen’s rate of inventory turnover for the year ended 31 January 2018 was 11.50 times.
He provided the following information for the year ended 31 January 2019.
$
25 850
5 150
1 890
2 040

Revenue
Gross profit
Inventory 1 February 2018
Inventory 31 January 2019
REQUIRED

(b) Calculate the rate of inventory turnover for the year ended 31 January 2019. The calculation
should be correct to two decimal places.

[3]

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(c) State whether Shen would be satisfied with the change in the rate of inventory turnover. Give
a reason for your answer.
Satisfied?
Reason
[2]
(d) Suggest two ways in which Shen could improve the rate of inventory turnover.
1

2
[2]
(e) Suggest two reasons why Shen always values his inventory at the lower of cost and net
realisable value.
1

2
[2]
After the preparation of the income statement for the year ended 31 January 2019 Shen discovered
that the inventory at 31 January 2019 had been overstated.
REQUIRED
(f)

Complete the table by placing a tick (✓) in the correct column to indicate whether each item
would be overstated or understated as a result of the error.
The first one has been completed as an example.
overstated
current assets at 31 January 2019

understated

✓

gross profit for the year ended 31 January 2019
capital at 31 January 2019
cost of sales for the year ending 31 January 2020
profit for the year ending 31 January 2020
[4]
[Total: 22]

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5

Myra is a trader. Her financial year ends on 31 December.
Myra provided the following information.

$

For the year ended 31 December 2018
Sales (all on credit)
Purchases (all on credit)
Cost of sales
Profit for the year before interest
Profit for the year after interest

118 000
94 000
94 350
14 100
9 900

At 31 December 2018
Non-current assets at book value
Inventory
Trade receivables
Bank overdraft
Trade payables

266 000
8 500
7 250
4 150
6 600

Myra allows her credit customers 14 days credit. The trade receivables collection period calculated
at 31 December 2017 was 18 days.
Myra is allowed 28 days credit by her credit suppliers. The trade payables payment period
calculated at 31 December 2017 was 30 days.
REQUIRED
(a) (i)

Calculate the trade receivables collection period for the year ended 31 December 2018.
Round up your answer to the next whole day.

[2]

(ii)

Suggest two ways in which the trade receivables collection period may be improved.
1

2
[2]

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(b) (i)

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Calculate the trade payables payment period for the year ended 31 December 2018.
Round up your answer to the next whole day.

[2]

(ii)

Suggest two ways in which the change in the trade payables payment period may affect
Myra.
1

2
[2]

(c) Calculate the following to two decimal places.
(i)

Percentage of gross profit to revenue (gross profit margin)

[2]

(ii)

Profit for the year to revenue (net profit margin)

[2]

(iii)

Return on capital employed (ROCE)

[2]

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Myra’s brother, Raj, also has a business.
After he prepared his draft financial statements for the year ended 31 March 2019 the following
errors were discovered.
1

The total cost of an advertising campaign, $900, which covered a period of 15 months to
30 June 2019, had been charged to the income statement.

2

Discount allowed, $1200, had been recorded as discount received.

3

Depreciation on office equipment for the year ended 31 March 2019 had been calculated at
10% per annum using the reducing (diminishing) balance method instead of the straight line
(equal instalment) method. On 1 April 2018 the cost of the office equipment was $15 000 and
the accumulated depreciation was $3000.

REQUIRED
(d) Complete the following statement to show the effect on the draft profit for the year of
correcting errors 1–3. Calculate the corrected profit for the year.
Raj
Statement of corrected profit for the year ended 31 March 2019
Draft profit for the year before corrections
Increase
in profit
$

Decrease
in profit
$

Error 1

Error 2

Error 3

Corrected profit for the year

$
8550

[7]
[Total: 21]

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