Accounting (0452) · Oct/Nov 2003 · Question paper 1

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CAMBRIDGE INTERNATIONAL EXAMINATIONS
International General Certificate of Secondary Education

0452/01

ACCOUNTING
Paper 1 Multiple Choice

October/November 2003
1 hour
Additional Materials:

Multiple Choice Answer Sheet
Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST
Write in soft pencil.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Write your name, Centre number and candidate number on the answer sheet in the spaces
provided unless this has been done for you.
There are forty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C, and D.
Choose the one you consider correct and record your choice in soft pencil on the separate answer sheet.
Read the instructions on the answer sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 11 printed pages and 1 blank page.
Ó CIE 2003

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3

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Why does the owner of a business calculate profit?
A

to reconcile the cash book balance with the balance on the bank statement

B

to find out how much he owes to creditors

C

to find out how much debtors owe him

D

to know how much money may be taken as drawings without reducing capital

What does the owner of a business discover from the Profit and Loss Account?
A

bank account balance

B

how much has been spent on fixed assets

C

how much she withdrew from the business

D

whether gross profit has exceeded expenses

Which is a business asset?
A

loan from a bank

B

creditors

C

debtors

D

owner’s capital

A business purchases a motor vehicle on credit. What is the effect of this?
A

It increases fixed assets.

B

It increases owner's capital.

C

It reduces net profit.

D

It reduces the bank balance.

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5

The following balances appear in Hussein's books.
$
Fixtures

6000

Stock

3300

Debtors

3000

Creditors

4500

Accruals

300

Prepayments

500

Loan to Imran

1000

Bank overdraft

1400

What is the total of the liabilities?
A
6

$4800

B

$6200

C

$6400

D

$7200

The owner of a business wishes to know the amount of her capital.
Which will provide this information?

7

A

Balance Sheet

B

cash book

C

Profit and Loss Account

D

sales ledger

Which appears in a Balance Sheet of a sole trader?
A

drawings

B

equipment repairs

C

gross profit

D

opening stock

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8

X rents part of his premises to Y. At the end of X's financial year Y owes $200 rent.
What adjustments should X make in preparing his final accounts?

9

A

decrease expenses

$200

increase current liabilities

$200

B

decrease income

$200

increase current liabilities

$200

C

increase expenses

$200

increase current assets

$200

D

increase income

$200

increase current assets

$200

The owner of a business should not include his personal assets and liabilities in the business
Balance Sheet.
Which accounting principle is being applied?
A

business entity

B

consistency

C

money measurement

D

realisation

10 A business's expenses include $300 for electricity used in the owner's home.
What adjustment is necessary?
account debited

account credited

A

electricity

$300

Profit and Loss

$300

B

Profit and Loss

$300

electricity

$300

C

drawings

$300

electricity

$300

D

electricity

$300

drawings

$300

11 What is meant by duality?
A

Every entry in the cash book must have a corresponding entry in the bank statement.

B

For every debtor there must be a creditor.

C

There are two aspects to every transaction.

D

There are two sides to every Balance Sheet.

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12 Which of the following should not be recorded in books of account?
A

canteen costs

B

maintenance of office buildings

C

wages of staff

D

workers' skills

13 What is the use of a credit note?
A

It is received from a supplier and increases the amount owed to him.

B

It is received from a supplier and reduces the amount owed to him.

C

It is sent to a supplier and increases the amount owed to him.

D

It is sent to a supplier and reduces the amount owed to him.

14 Starting with the first, in which sequence are documents used for the purchase of goods on
credit?
A

cheque, invoice, order

B

cheque, order, invoice

C

order, invoice, cheque

D

invoice, order, cheque

15 Henrick sent Jan an invoice for goods supplied on credit.
In which of Jan's prime (original) entry books will the invoice be entered?
A

cash book

B

journal

C

purchases journal

D

sales journal

16 What is another name for a copy of a customer’s account in the sales ledger when it is sent to the
customer?
A

credit note

B

debit note

C

invoice

D

statement

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17 Maria, a seller, allows cash discount to Sara. What is the double entry for this in Sara's ledger?
account debited

account credited

A

cash

discount received

B

Maria

discount received

C

discount allowed

cash

D

discount allowed

Maria

18 The list price of a product is $10 000 and a trade discount of 20 % is offered to the customer.
The customer pays his invoice within 14 days and claims a cash discount of 5 %.
How much is paid by the customer?
A

$7600

B

C

$8000

$8400

D

$9500

19 A trader keeps a full set of accounting records. Why should he prepare a trial balance?
A

to calculate his capital

B

to calculate the net profit

C

to identify errors of omission

D

to check the arithmetical accuracy of the books

20 The purchase of a motor vehicle is posted to the Motor Expenses account.
What type of error is this?
A

commission

B

omission

C

original entry

D

principle

21 How would the balances of the Carriage Inwards and Carriage Outwards accounts be recorded in
the trial balance?
Carriage inwards

Carriage outwards

A

credit column

debit column

B

credit column

credit column

C

debit column

debit column

D

debit column

credit column

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22 A trader purchased stationery for office use. This was entered in the ledger as purchase of goods
for resale.
Which journal entry will correct this error?
account debited

account credited

A

Purchases

Stationery

B

Stationery

Purchases

C

Stationery

Sales

D

Sales

Purchases

23 Sales returns of $90 were incorrectly credited to the Sales Returns account. A Suspense
account was opened as a result of this error.
Which journal entry will correct this error?
account debited
$

account credited
$

A

Sales Returns

90 Suspense

90

B

Suspense

90 Sales Returns

90

C

Sales Returns

180 Suspense

180

D

Suspense

180 Sales Returns

180

24 On 31 December, Z’s bank statement shows a balance in hand of $5500, and the cash book
shows a balance in hand of $5200. There is a receipt in the cash book of $700 which does not
appear on the bank statement.
What is the amount of unpresented cheques?
A

$300

B

C

$400

D

$700

$1000

25 A bank statement shows a balance of $2104 (debit) at 30 June. The following items did
not appear in the bank statement during the month although they were recorded in the
books of account:
$
cheques issued

633

cheques deposited

921

What was the balance in the cash book at 30 June?
A

$1816 debit

B

$1816 credit

C

$2392 debit

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D

$2392 credit

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26 On 1 April 2001, a firm rented premises at a yearly rent of $20 000 payable quarterly in arrears.
The following payments were made:
$
2001
July

5000

October

5000

2002
January

5000

April

5000

What was the figure for rent in the Profit and Loss Account for the year ended 31 December
2001?
A

$5000

B

$10 000

C

$15 000

D

$20 000

27 Which is capital expenditure for a business which sells computers?
A

annual insurance premium

B

purchase of a new computer for the business

C

purchase of computers for resale

D

purchase of printer ink for the business

28 X deals in two products, A and B.
On 31 December stocks were as follows.
Cost
$

Net realisable value
$

Product A

2000

1500

Product B

3500

3800

At what value should the total unsold stock be shown?
A

$5000

B

$5300

C

$5500

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D

$5800

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29 A business discovers that two errors have been made.
Office expenses paid were debited in the Office Equipment account.
Purchase of a machine was debited in the Purchases account.
How do these errors affect the value of fixed assets shown in the Balance Sheet?
office equipment

machinery

A

too high

too low

B

too low

too low

C

too high

too high

D

too low

too high

30 A business buys a machine for $20 000. It will be used for 5 years and the estimated residual
value is $5000.
What is the annual depreciation charge using the straight line method?
A

$1000

B

$3000

C

$4000

D

$5000

31 A computer system costing $100 000 is bought on 31 December 2000. It is depreciated by the
reducing balance method at 20 % per annum.
What is the depreciation charge for the year ended 31 December 2002?
A

$16 000

B

$20 000

C

$36 000

D

$40 000

32 Why is depreciation entered in the Profit and Loss Account?
A

to provide cash to replace assets when they are worn out

B

to show the assets in the Balance Sheet at their market values

C

to show when the assets need to be replaced

D

to spread the cost of the assets over their useful lives

33 A trader takes cash drawings from the business.
How will this affect the net profit and the current assets?
net profit

current assets

A

increase

no effect

B

decrease

no effect

C

no effect

decrease

D

no effect

increase
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34 The following information is available for a sole trader for the year ended 31 December 2002.
$
Sales in year

59 200

Stock at 1 January 2002

2 500

Stock at 31 December 2002

3 800

Purchases in year

28 600

What is the gross profit for the year?
A

B

$24 300

$29 300

C

D

$30 600

$31 900

35 What does the capital of a business equal?
A

fixed assets + current assets + current liabilities

B

fixed assets + current assets – current liabilities

C

fixed assets – current assets – current liabilities

D

fixed assets – current assets + current liabilities

36 Joe and Paul are partners sharing profits in the ratio 3:2, after paying Paul an annual salary of
$15 000. For the year ended 31 March, the partnership’s net profit was $55 000.
How much was credited to Paul’s current account for the year ended 31 March?
A

B

$15 000

$22 000

C

D

$31 000

$37 000

37 A business provided the following information.
$
Opening stock
Purchases

2 000
10 000

Closing Stock

4 000

Gross Profit

8 000

What were the sales?
A

$12 000

B

$16 000

C

$20 000

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D

$24 000

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38 A trader supplies the following information about his business.
$
capital at beginning of the year

30 000

capital at end of the year

50 000

drawings during the year

12 000

additional capital introduced during the year

18 000

What is the net profit for the year?
A

$12 000

B

$14 000

C

$20 000

D

$26 000

39 What has an effect on the amount of working capital?
A

cheque received from a debtor

B

payment of a creditor by cash

C

purchase of equipment by cheque

D

purchase of stock by cash

40 The Trading Account of SB for the year ended 31 December was:
$
Opening stock

10 000

Add purchases for year

40 000

$
Sales

60 000

50 000
Less closing stock

14 000
36 000

Gross profit

24 000
60 000

60 000

What is the rate of stock turnover?
A

1.5 times

B

2.5 times

C

3 times

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D

5 times

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