0452/M/J/21 Examiner Report – Accounting May/June 2021

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Cambridge Accounting (0452) examiner report, May/June 2021 — 0452/M/J/21, file 0452_s21_er.pdf.

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ACCOUNTING
Paper 0452/11
Paper 11

Question
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Key

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Key

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Key

Key messages
Candidates should be familiar with all the topics on the syllabus and have a thorough understanding of
accounting.
It is important that candidates read each question very carefully to ensure that they have a clear
understanding of what is required before selecting an option on the answer sheet.
General comments
Those candidates who possessed a good understanding of double entry bookkeeping were able to select the
correct key to many questions on the paper. In many questions, drafting a ‘T’ account could have assisted
candidates to calculate the correct key.
Comments on specific questions
Question 3
The vast majority of candidates understood that the drawings account is debited when the owner of a
business takes goods for personal use, but many did not appreciate that these goods would be taken at cost
price. The Key was D.

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Question 5
When goods are returned, the amount of the credit note is equal to the original amount charged for the
returned items, which is the list price less any trade discount. The Key was B.
Question 6
Any transaction which is not recorded in another book of prime entry is recorded in the general journal before
being posted to the ledger. The purchase of flour would be recorded in the purchases journal and the returns
from a customer would be recorded in the sales returns journal. Correction of an error and the purchase of a
non-current asset on credit would be recorded in the general journal.
Question 7
A credit note is received when goods previously purchased are returned, so it is recorded in the purchase
returns journal. At the end of the month the total is transferred to the credit of the purchases returns account.
Question 9
Candidates had to select the incorrect statement about a purchases ledger control account. The statistics
indicate a degree of guesswork. Options B, C and D are correct statements. The Key was A as the
purchases ledger control account acts as a check on the accounts in the purchases ledger not on the
purchases account.
Question 11
If capital expenditure is treated as revenue expenditure, the cost of the non-current assets will be
understated. This will also affect the depreciation for the year as the calculation would be made on an
incorrect figure. The Key was D.
Question 12
One of the reasons for charging depreciation on non-current assets is to apply the matching principle so that
the cost is spread over the expected life of the asset. One of the consequences of this is that the non-current
assets appear at book value in the statement of financial position: but that is an outcome of charging
depreciation, not a reason for charging it.
Question 13
This required an understanding of a disposal account. The preparation of a ‘T’ account would have assisted
candidates to calculate the ‘missing’ figure of depreciation of $3774 on the credit side.
Question 14
The majority of candidates calculated that the rent receivable for the year was $3400. Those candidates with
an understanding of double entry understood that this would be debited to the rent receivable account and
credited to the income statement (Option A).
Question 18
A service business does not buy and sell goods and does not earn a gross profit, so the trading section of an
income statement cannot be prepared. Such a business may, however, earn a profit for the year. The Key
was C.
Question 26
The majority of candidates understood that the trader had earned a profit but were unsure how to treat the
drawings for the year. The preparation of a capital account would have shown a credit entry of $60 500 for
the opening balance and debit entries of the $3900 (drawings) and $72 275 (closing balance carried down).
The ‘missing’ figure on the credit side of $15 675 represented the profit for the year.

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Question 27
The preparation of a ‘T’ account for the total trade receivables would have assisted in the calculation of the
‘missing’ figure for credit sales for the year. The opening balance should appear on the credit side and the
cheques received, discount allowed and closing balance carried down would appear on the credit side. The
difference between the debit and credit sides ($30 700) would represent the credit sales.
Question 28
The preparation of the trading section of an income statement would have assisted candidates to calculate
the purchases for the year. Where a mark-up of 25 per cent is applied the revenue must represent 125 per
cent. This means that the gross profit was $24 000 and the cost of sales was $96 000. The cost of sales is
calculated by adding the purchases to the opening inventory and deducting the closing inventory. The
purchases amounted to $96 600.
Question 30
The formula for the calculation of rate of inventory turnover is cost of sales divided by average inventory. The
correct amount of average inventory was $250 ($100 + $400 ÷ 2). Many candidates did not appreciate that if
the value of the closing inventory increased the cost of sales would decrease. The cost of sales was $2300.
The Key was C.
Question 31
The current ratio compares the current assets with the current liabilities. Option A is incorrect as this refers to
liabilities, not just current liabilities. Y may have fewer current assets than X but may also have fewer current
liabilities, so Option C is incorrect. Y may have more inventory than X but may have lower trade
receivables/cash/bank and more current liabilities, so Option D is incorrect. The Key was B.
Question 33
Many candidates did not appreciate that this question was based on the going concern principle. Usually,
non-current assets are shown at their net book value in the statement of financial position. However, when it
is known that the business will cease to operate in the near future, the asset values are adjusted so that they
represent their expected sale value. The Key was B.

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ACCOUNTING
Paper 0452/12
Paper 12

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Key

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Comments on specific questions
Question 4
Machinery costing $12 000 had been purchased on credit during the year. Abdul owed machinery suppliers
$19 000 at the start of the year and paid them a total of $25 000 during the year. This meant that the amount
owing at the year-end was $6000. A significant number of candidates incorrectly deducted the amount paid
from the closing balance on the machinery account.
Question 6
When goods are returned, the amount of the credit note is equal to the original amount charged for the
returned items, which is the list price less any trade discount. The Key was B.
Question 8
The cash book has a dual function: it acts as a book of prime entry and as a ledger account for cash and
bank. Statements 1 and 3 are correct. The Key was B. The discount columns in the cash book are not part of
the double entry system, they are used for convenience to make a note of discount at the time an account is
paid or received.
Question 9
A trial balance is a list of ledger balances at a certain date which can assist in finding arithmetical errors and
is useful in preparing financial statements. The trial balance is not part of the double entry system. The Key
was C.
Question 11
The statistics indicate a degree of uncertainty on the journal entry required to correct an error. A cheque
received from Shakeel was credited to the account of Shamz. To correct this error, it is necessary to credit
Shakeel’s account and debit Shamz’s account (Option D).
Question 12
The bank statement showed an overdraft. On that date there were unpresented cheques so the cash book
would show a larger overdraft, as these cheques had already been credited in the business’s cash book. The
cash book would show a smaller overdraft as amounts deposited had been debited to the cash book. The
cash book would show a credit balance brought down on 1 May of $1590.
Question 15
Capital expenditure consists of amounts spent on non-current assets and these will appear in the statement
of financial position. Any costs of acquiring these assets such as legal costs, carriage and installation costs
are also regarded as capital expenditure. Expenses relating to non-current assets include the costs of
maintaining and operating the non-current assets: these are regarded as revenue expenditure.
Question 16
Crediting the sales account with the proceeds of selling equipment means that the gross profit is overstated
by $250 and the profit for the year would be overstated by the same amount. No record was made of the
profit on sale: this would not affect the gross profit, but the profit for the year would be understated by $50.
The overall effect would be that the gross profit was overstated by $250 and the profit for the year overstated
by $200. The Key was C.
Question 17
One of the reasons for charging depreciation on non-current assets is to apply the matching principle so that
the cost is spread over the expected life of the asset. One of the consequences of this is that the non-current
assets appear at book value in the statement of financial position: but that is outcome of charging
depreciation not a reason for charging it.

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Question 18
Preparing a disposal account would have assisted candidates to calculate the cash received from the sale of
a machine. The cost price of $10 000 would appear on the debit, the depreciation ($2000) and the loss on
disposal ($700) on the credit. The ‘missing’ figure of $7300 represents the proceeds of sale. The net
decrease in the cash was $5100 (cost of the new machine less the proceeds of sale).
Question 19
There was a considerable degree of uncertainly on this question. Using the principle of materiality, a bakery
business would regard the cost of stationery purchased during the financial year as an expense. It would not
be cost-effective to value the stationery left at the end of the financial year and record it as an asset.
Question 22
This question proved to be much more difficult than anticipated. Most candidates appreciated that a sole
trader would not have retained earnings. However, many candidates did not appreciate that James, an
accountant, would not have any trade payables at the end of the financial year as he does not buy and sell
goods. Only the long-term loan would appear in James’s statement of financial position.
Question 26
This question should have been straightforward. The residual profit was $11 000 (profit for the year less the
interest on capital) so Ben’s share was $5500. Some candidates divided the profit for the year between the
partners. A few candidates added the interest on capital to the profit for the year instead of deducting it. A
significant number of candidates incorrectly added the drawings to the profit for the year before deducting
the interest on capital. Interest on drawing is added to the profit for the year but drawings are not recorded in
the appropriation account.
Question 27
A receipts and payments account includes all monies paid and received during the financial year and the
balance represents cash and bank balances. It does not show the surplus for the year. The Key was B.
Question 29
The majority of candidates understood that the trader had earned a profit but were unsure how to treat the
drawings for the year. The preparation of a capital account would have shown a credit entry of $60 500 for
the opening balance and debit entries of the $3900 (drawings) and $72 275 (closing balance carried down).
The ‘missing’ figure on the credit side of $15 675 would represent the profit for the year.
Question 32
A short-term loan and an increase in the bank overdraft will not improve the working capital position. The
introduction of extra capital or a long-term loan will improve the working capital position. The Key was D.
Question 33
The information does not state the amounts of profit and cost of sales, so Options A and D are incorrect.
Option B is incorrect as Company X has the better gross margin. The percentage of expenses to revenue of
Company X was 31.3 per cent and the percentage of expenses to revenue of Company Y was 37.2 per cent
so the Key was C.
Question 34
The current ratio compares the current assets with the current liabilities. Option A is incorrect as this refers to
liabilities, not just current liabilities. Y may have fewer current assets than X but may also have fewer current
liabilities, so Option C is incorrect. Y may have more inventory than X but may have lower trade
receivables/cash/bank and more current liabilities, so Option D is incorrect. The Key was B.

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ACCOUNTING
Paper 0452/13
Paper 13

There were too few candidates for a meaningful report to be produced.

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ACCOUNTING
Paper 0452/21
Paper 21

Key messages
Candidates are reminded that it is important to read through each question very carefully before attempting
an answer. This ensures that a vital piece of information is not overlooked and that instructions can be
followed precisely. Marks cannot be awarded for a factually correct statement which is not the answer to the
question being asked.
It is very important that candidates write their answers clearly. There were a significant number of scripts
which were very difficult to read as words and figures were badly written.
Calculations should be shown where it is appropriate such as calculating ratios. Some of the available marks
may be awarded for these calculations even though the final answer is not correct.
The spaces provided on the question paper for candidates’ answers should be adequate. Most of the
candidates who required additional space correctly gave the page number where the rest of the answer was
to be found. This ensured that the additional work was not overlooked when the script was marked.
Candidates should avoid the use of inappropriate abbreviations such as GP, COGS, C of P in financial
statements and b/d and BBD in ledger accounts.
Most candidates seemed to be familiar with International Accounting Terminology but were not penalised if
‘old’ terminology was used.
General comments
All the questions on the paper were compulsory and covered a wide range of syllabus topics. It is therefore
important that candidates have studied all the topics on the syllabus.
All the day-to-day financial records of a business are based on double entry bookkeeping. Those candidates
who had a good knowledge of double entry were able to apply this to various scenarios. It is important to
remember that entries must contain the correct dates and details in addition to the figures.
Candidates are expected to use the correct format for year-end financial statements. Those candidates who
understood the format required for financial statements were able to earn high marks. Some candidates did
not seem familiar with partnership appropriation accounts and manufacturing accounts.
The paper contained three questions where candidates were required to discuss a given scenario and
recommend a course of action. Candidates are advised to think carefully before attempting this type of
question and consider the points they want to make in order to construct a coherent response. The good
answers set out the points in favour of the course of action, the points against, and provided a clear
recommendation.

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Comments on specific questions
Question 1
(a)

Candidates were required to prepare the cash book of a trader. Many candidates were able to earn
reasonable marks. Common errors included –
•
•
•
•
•
•
•

Inappropriate details such as ‘paid insurance’ rather than the name of the account where the
double entry would be made.
Inaccurate entries for the cash sales paid into the bank.
Incorrect details for the proceeds of disposal of equipment which would have been credited to
the disposal account and not the account of Burgess.
Omission or incorrect calculation of the two items of discount received.
Balancing or incorrectly totalling the discount column.
Not considering the opening balances when calculating the month-end balances.
Not appreciating that it is impossible to have a credit balance on the cash column.

(b)

Most candidates were able to earn three of the four available marks by correctly identifying whether
items would be used to update the cashbook or would appear in the bank reconciliation statement

(c)

Candidates were required to advise a trader whether or not to apply for a bank loan which could be
used to pay off the bank overdraft and purchase new office furniture. Some candidates merely
explained the difference between a loan and an overdraft. Many repeated the data in the question
relating to paying off the overdraft and purchasing new furniture. The better candidates listed the
disadvantages of interest charged and the repayment of the loan. Many candidates did not identify
any advantages. A significant number of candidates did not provide a clear recommendation of
whether or not the trader should apply for a loan

Question 2
(a)

Using the data provided, candidates were required to prepare an income statement for a
partnership. Many candidates earned high marks. Common errors included –
•
•
•
•
•
•

(b)

This required the preparation of a partnership appropriation account. It appears that many
candidates were unfamiliar with such an account and offered current accounts and statement of
financial position extracts. Many other candidates were able to earn most of the available marks.
Common errors included –
•
•
•
•

(d)

Use of inappropriate abbreviations such as COGS, GP and so on.
Cost of sales items listed in the wrong order.
Commission incorrectly adjusted, omitted or listed in the expenses.
Omission of discount allowed and loan interest.
Incorrect calculation of rates and insurance, and depreciation.
Inclusion of extraneous items such as assets, liabilities and appropriation account items.

Not starting with the profit for the year calculated in the income statement.
Including extraneous items such as loan interest and current account balances.
Use of inappropriate abbreviations such as I on C.
Omission of the names of the partners.

The majority of candidates understood the purpose of charging interest on drawings. Some
incorrectly stated that interest would prevent partners making drawings.
Only a small number of candidates recognised interest on loan as being a reward to John for
lending money to the business. Many believed it was to encourage partners to make loans to the
business and some incorrectly believed that the partnership had given the loan to John
Candidates were required to complete a table indicating which statements described advantages of
being in a partnership. Most candidates earned good marks.

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Question 3
(a)

Using data provided, candidates were required to prepare the rent and rates account of a
manufacturing business. The majority of candidates did not appear to be familiar with preparing the
account of an expense which had to be split between the factory and the office. The principles are
exactly the same as those applied when preparing a ledger account for an office expense, except
that the year-end transfer is split between the manufacturing account and the income statement.
Common errors included –
•
•
•
•

(b)

A manufacturing account had to be prepared. It appears that many candidates were unfamiliar with
such an account and either did not attempt an answer or produced an incoherent list of items
copied from the question or attempted a trial balance. Other candidates earned high marks.
Common errors included –
•
•
•
•
•
•
•

(c)

Not appreciating that the amount paid already included the $3600.
Omitting to bring down the prepaid amount of $1200.
Not dividing the expense for the year between the manufacturing account and the income
statement.
Including extraneous items which were not connected to the rent and rates such as
inventories, wages and depreciation.

Not listing the direct material items in the correct order.
Omission of labels such as prime cost and cost of production or the use of inappropriate
abbreviations.
Including extraneous items such as overheads in the prime cost section and office expenses
and factory equipment in the overheads section.
Not distinguishing between the two types of wages and incomplete labels such as ‘factory
Supervisors’ without any indication that the figure represented wages.
Omitting depreciation of factory equipment or including an incorrect figure.
Including work in progress in the factory overheads.
Either not showing the total of the prime cost and the overheads, or deducting the overheads
from the prime cost.

Candidates were required to advise the directors whether or not depreciation should be provided
on low-value items of office equipment. This proved to be difficult for many candidates. A large
number of candidates discussed depreciation in general terms. Many incorrectly believed that
these items were for re-sale and concentrated on the effect on customers, and others discussed
the profit or loss on disposal.
The answer should have explained that as these are non-current assets they should be
depreciated as the other non-current assets (consistency) and their cost should be spread over
their useful life (matching). However, as these are low-value items the cost of depreciating would
outweigh any benefits (materiality). Many candidates mentioned prudence. This was not accepted
as it actually would be more prudent to write off these low-value items in the year of purchase
rather than to depreciate over a number of years.
A significant number of candidates did not provide a clear recommendation of whether or not
depreciation should be applied.

Question 4
(a)

An incorrect trial balance was provided and candidates were required to prepare a correct version.
Many candidates earned good marks. Some did not appreciate that only the opening inventory
appears in the trial balance. The main problem was the entry required in the account of the
purchaser for a non-current asset on credit. This should have been debited to an account for other
receivables: many candidates included it in the trade receivables or opened a suspense account.

(b)

A list of errors was provided and candidates were required to correct journal entries. Many
candidates produced some good answers and earned high marks. There were some candidates
who produced one-sided journal entries and some who did not show correct account names.

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(c)

Candidates were required to complete a table indicating how the correction of the errors (listed
before Part (b)) would affect the trader’s capital. There was a wide range of marks, but the more
able candidates earned high marks.

Question 5
(a)

Using data provided, the trade receivables turnover and the trade payables turnover had to be
calculated. Many candidates earned full marks. A common error was rounding the trade payables
down to 21 days rather rounding up to 22 days.

(b)

Ratios for a rival business were provided and candidates were required to suggest why the trader’s
trade receivables turnover and trade payables turnover were different to those of a rival business.
There were some suitable suggestions, but many candidates were unable to provide appropriate
reasons. Common errors included –
•
•
•
•
•

(c)

Making generic statements without reference to the two named traders.
Making imprecise statements such as ‘he offered discount’, which did not specify cash
discount and did not state why this may be offered, and did not specify the trader to which this
statement referred.
Re-stating the answers given in (a) and a giving a comment on which trader received money
earlier from credit customers/paid his credit suppliers earlier, without attempting to answer the
questions which required reasons for the differences.
Suggesting that Omer had less credit sales and Ahu had more trade receivables as an answer
to (i) and that Ahu had less purchases and Omer had more trade payables as an answer to
(ii).
Incorrectly stating that the ratios were affected by differences in the amount of credit sales
and/or trade receivables and differences in the amount of credit purchases and/or trade
payables.

Candidates were required to advise a trader whether or not to employ a marketing manager. There
was a wide range of marks. Those who provided correct answers focused on the advantages of
improvement in market share and the manager’s skills and the disadvantages of the salary
increasing the expenses and the possibility of the manager not being effective.
A common error was to assume the marketing manager was a general manager or even a partner.
Only a few managed to explain that the task of the marketing manager would be to increase sales
and so increase the profit of the business.

(d)

Three ways of reducing the possibility of an increase in irrecoverable debts were required. Many
candidates earned at least one of the available marks. Common correct answers included offering
cash discount for prompt payment and reducing credit sales.
Common errors included giving answers which were not specific, such as omitting to mention
prompt payment in connection with cash discount, or mentioning discount for prompt payment
without specifying cash discount. Some incorrectly suggested increasing the credit period allowed
and charging interest on overdue accounts.

(e)

Candidates were required to state why a trader should apply four named accounting principles.
Many answers were very imprecise and lacked detail. Some candidates were distracted by the
opening statement and tried to relate their answers solely to irrecoverable debts.
Many understood that the matching principle requires the costs to be set against the revenue, but
most did not qualify this by reference to the same accounting period.
Many candidates managed to state one aspect of prudence but did not provide a complete
explanation. This principle ensures that profits and assets are not overstated. An alternative
acceptable answer would be that it ensures losses and liabilities are not understated.
Some candidates seemed to confuse consistency with continuity. Candidates often provided vague
answers. They could have explained that when an accounting method is selected it must be
applied year-on-year to allow useful comparisons to be made. Some referred to applying the same
method but did not relate the method to accounting and did not refer to year-on-year.

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Many candidates managed to earn a mark for a comment about the business being treated
separately from the owner of the business. Some candidates incorrectly referred to the business
owner having a separate legal entity from that of the business.

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ACCOUNTING
Paper 0452/22
Paper 22

Key messages
Candidates need to read through each question carefully to ensure that they fully understand what is
required. Too often candidates would produce a very detailed and practised response which was not
answering the question.
It is very important to show related workings to answers so that marks can be awarded even if the final
answer is incorrect or incomplete. If extra space is required in order to record calculations, it is important that
page references are given, for example ‘please see page 16’, in order for all work to be considered.
There is a necessity to record information accurately and precisely into accounting systems. Candidates
should avoid the use of abbreviations such as ‘OI’ for opening inventory or ‘GP’ for gross profit. Whilst this
approach may appear to save time these answers are not acceptable in exams or accounting practice.
General comments
The paper consists of five compulsory questions of equal marks. Candidates were generally well prepared to
produce petty cash books, income statements and statements for changes in equity. Areas of weakness
continue to involve the preparation of ledger accounts and the ability to record adjustments and balances
brought or carried down within them. Often if correct amounts were recorded accurately the narrative
descriptions were imprecise or incorrect.
A firm grounding in the use of double entry book-keeping provides a firm basis for recording entries into both
manual and computerised systems and applies to all aspects of the syllabus.
The paper includes questions that require candidates to consider scenarios and to arrive at a recommended
course of action. A sequential approach that considers possible advantages and disadvantages resulting in a
balanced approach to problem solving is recommended. Better scripts had a well organised approach to this
type of question and linked to a firm understanding of financial statements and how they are constructed.
Comments on specific questions
Section A
Question 1
(a)

The preparation of a petty cash book is always popular with candidates as it represents a very
basic system for recording cash movements. It still requires regular practice as how to restore the
original ‘imprest’ amount is often forgotten. This will lead to incorrect balances being carried
forward. Common errors were the use of imprecise narratives. These should refer to ‘train ticket’
and ‘taxi fare’ and should not be preceded by ‘purchase of’. The entry for Hunter was regularly
posted incorrectly to the expenses side of the petty cash book resulting in the corruption of the
analysis column total for ledger accounts. Whilst this question was generally well answered, there
were surprisingly few examples of full marks being obtained.

(b) (i)

Generally well answered, common errors were to label as ‘journal’ or ‘cashbook’ instead of
purchase ledger.

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(ii)

Better responses recognised the correct principle as ‘duality’. The most common incorrect answer
given was ‘matching’.

(c)

Answers were varied and general knowledge of ‘statements of account’ were usually rewarded with
one mark. The purposes of using statements for checking transactions and for showing outstanding
balances owing was understood by most candidates.

(d)

As identified in the general comments, this question was not well answered. There were few valid
advantages and disadvantages given for changing to a credit transfer system of payments. The
obvious advantages of ‘time-saving’ and ‘increased security’ were often missed. The use of a bank
service would invariably increase bank charges, again not often mentioned or interest charges
were quoted incorrectly if this aspect was considered. The lack of understanding of this question
inevitably led to few good recommendations being made.

Question 2
(a)

This question required the preparation of a rent payable ledger account. It clearly distinguished
between the stronger responses, which often gained full marks, as and weaker responses that
received no marks at all. Common errors were the complete reversal of the entries, incorrect
narratives, the combining of the two cheque payments into one entry, and the inclusion of
extraneous items such as the opening and closing balances of trade receivables.

(b)

The preparation of the provision for doubtful debts account required two basic calculations of 4%
and 6% of opening and closing trade receivables. Recording the opening and closing balances into
a provision account was challenging to some candidates.

(c)

A straightforward knowledge question that many candidates identified correctly as ‘matching’ or the
alternative answer of ‘accruals’. A commonly seen incorrect answer was ‘prudence’.

(d) (i)

This was a challenging question and few answers could explain the realisation principle correctly.
Emphasis needed to be placed on ‘revenue as being earned when title to the goods is passed’, as
opposed to when ‘payment is received’.

(ii)

The prudence principle was generally much better understood and most candidates gained half
marks for ‘ensuring that profits/trade receivables are not overstated’. Few candidates were able to
link the effect of the increase or decrease to the provision upon profits/assets.

(e)

There was an improvement on the answers to this discussion type of question. Most answers
identified that if interest was charged on overdue accounts it would damage relationships with
customers, but result in improved liquidity. The lack of a balanced approach however indicated the
need to practice this type of question and to arrive at a clear recommendation. Weaker answers
would list a series of ‘bullet-points’ that were not sufficiently related to the question being asked.

Question 3
(a)

As identified in the general comments, the preparation of an income statement for a limited
company was well answered with candidates being well prepared. Financial statements were
accurately produced and presented to a high standard. Weaker answers tended to include items
that appear in the statement of financial position and regular omissions were charges for debenture
interest and related workings for rent and insurance.

(b)

The statement of changes in equity is a well established additional financial statement following on
from the income statement for limited companies. Candidates are well practised and the format
familiar to most candidates. The detail used in the statement is standard, but marks would be
missed for careless narratives or showing incorrect movements to the ordinary share capital
account instead of retained earnings.

(c)

The calculation for a return on capital employed was based upon the answers from part (a) and (b)
and marks awarded for own figure calculations. Profit for the year required any interest charged to
be added back, many candidates gained this mark by default as the charge for debenture interest
had been previously omitted. Few candidates appreciated that the figure for capital employed was
available from the statement of earnings total (part (b)) after adding back the $30 000 of
debentures. Many answers set about recalculating a value for the capital employed and this

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demonstrated the lack of understanding of the purpose of the statement of changes in earnings
and how the total ultimately feeds into the statement of financial position.
(d)

The distinction between ordinary and preference shares should be a straightforward knowledge
question. Some candidates easily identified two differences. For other candidates, interest was
often used instead of dividends and general answers such as ‘preference shares are paid first’
without qualifying if it referred to the payment of dividends or repayment following a ‘winding up’
procedure.

Question 4
(a)

Club accounts is a challenging part of the syllabus. The subscriptions accounts did show
improvements although subscriptions in advance and arrears continues to pose problems. Too
often answers would include extraneous items such as shop purchases and balances at bank. The
transfer of the subscriptions account is made to the ‘income and expenditure’ account and weaker
answers would often see ‘income statement’ being used or omitting to bring the balances down on
the account.

(b)

The trading part of club accounts relates to any shop activities undertaken. The trade payables
account required the candidate to use control account techniques to determine the amount paid
through the bank to the shop trade payables. Weaker responses would reverse the book-keeping
or use incorrect labels such as ‘goods returned to suppliers’ instead of ‘purchases returns’.

(c)

The calculation of revenue from the shop was generally very well answered with all three marks
being gained. If marks were missed it was usually down to the calculation being ended at the cost
of sales of $32 490. Once this was determined a gross profit uplift of 20 per cent was calculated
and added back in order to arrive at an answer for revenue.

(d)

The discussion aspect of this question again proved difficult for many candidates. Many could
identify one benefit of renting out the premises. A far smaller number were able to identify
alternatives or disadvantages. Answers often referred to customers instead of members, and
suggestions focused upon the sale of non-current assets or taking up a loan which were
considered unrealistic under the circumstances.

Question 5
(a)

This question required a sound understanding of double entry book-keeping to correct a series of
errors through the journal. High marks were generally achieved. Common errors were the reversal
of sales and purchase returns, motor expenses and suspense figures of $72 or $172 and
purchases invoice of $102 instead of $204 were often posted.

(b)

Two to three marks were achieved easily through the posting of the error corrections for motor
expenses, drawings and one of the returns entries. There were few instances of maximum marks
being obtained however, often because the ‘trial balance difference’ was labelled incorrectly.

(c)

There were few instances of fully correct answers. Purchases were often given as $102, and office
expenses added instead of being deducted, and the sales returns of $105 incorrectly included
within the calculation.

(d)

The main challenge to answering this question was being able to give three reasons for not
recording the purchase of a calculator as a non-current asset. Marks were awarded for the cost of
the calculator being of ‘low value’ and stronger candidates quoted that the principle of ‘materiality
‘had been applied. The reasoning behind the decision is that the cost of calculating depreciation is
that it would have outweighed any benefit derived from the calculation. This final point was rarely
mentioned and should be considered as the starting point for a rationale supporting a discussion
around materiality.

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ACCOUNTING
Paper 0452/23
Paper 23

(b) (i)

Generally well answered, common errors were to label as ‘journal’ or ‘cashbook’ instead of
purchase ledger.

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(ii)

Better responses recognised the correct principle as ‘duality’. The most common incorrect answer
given was ‘matching’.

(c)

(d)

Question 2
(a)

(b)

(c)

A straightforward knowledge question that many candidates identified correctly as ‘matching’ or the
alternative answer of ‘accruals’. A commonly seen incorrect answer was ‘prudence’.

(d) (i)

(ii)

(e)

Question 3
(a)

(b)

(c)

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demonstrated the lack of understanding of the purpose of the statement of changes in earnings
and how the total ultimately feeds into the statement of financial position.
(d)

Question 4
(a)

(b)

(c)

(d)

Question 5
(a)

(b)

(c)

(d)

Accounting (0452) · May/June 2021 · Examiner report

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