Accounting (0452) · Oct/Nov 2014 · Question paper 23

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

*9157846789*

ACCOUNTING

0452/23
October/November 2014

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 20 printed pages.
IB14 11_0452_23/6RP
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2
1

Peter Pickard maintains a petty cash book. The monthly imprest of $250 is restored on the last
day of the month.
REQUIRED
(a) State two reasons for maintaining a petty cash book.
1

2
[2]

(b) Explain the imprest system of petty cash.

[2]

(c) State one advantage of the imprest system of petty cash.

[1]

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The entries in Peter Pickard’s petty cash book for August 2014 were as follows.
Peter Pickard
Petty Cash Book
Total
Received

Date

$

2014

250

Details

Total
Paid

Postage

Cleaning

Sundries

Ledger
Accounts

$

$

$

$

$

Aug 1 Balance b/d
4 Window cleaner

25

10 Stamps

30

16 B Smith

36

21 Donation to charity

15

29 Office cleaner

83

31 W Jones

18

25
30
36
15
83
18

REQUIRED
(d) Calculate how much the petty cashier will receive on 31 August 2014 to restore the imprest.

[1]

(e) Complete the following table to show the double entry to restore the imprest on
31 August 2014.
Debit

Credit

[2]
(f) State how the double entry is completed on 31 August 2014 for the items recorded in the
cleaning column of the petty cash book.

[1]

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(g) State how the double entry is completed on 31 August 2014 for the items recorded in the
ledger accounts column of the petty cash book.

[2]
Additional Information
Peter Pickard’s transactions for August 2014 included the following.
Aug

5
13
19

Sold goods on credit to S Bower, list price $1480, less 20% trade discount
Sold goods on credit to C Brooke, list price $1340, less 15% trade discount
S Bower returned goods, list price $160, purchased on 5 August

REQUIRED
(h) Make the necessary entries in Peter Pickard’s sales journal, sales returns journal, sales
ledger and nominal (general) ledger for the month of August 2014.
It is not necessary to balance the accounts.
Peter Pickard
Sales Journal
Date

Details

$

$

[3]

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Sales Returns Journal
Date

Details

$

$

[2]

Sales Ledger
S Bower account
Date

Details

$

Date

Details

$

[2]

C Brooke account
Date

Details

$

Date

Details

$

[1]
Nominal (General) Ledger
Sales account
Date

Details

$

Date

Details

$

[1]
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Sales Returns account
Date

Details

$

Date

Details

$

[1]

Additional Information
Peter Pickard sells on both cash and credit terms. He allows his credit customers a period of
30 days in which to pay their accounts.
The sales for the year ended 31 August 2014 were:
Cash sales
Credit sales

$
4 100
29 600

On 31 August 2014 the trade receivables amounted to $2340.
REQUIRED
(i) Calculate the collection period for trade receivables. Your answer should be rounded up to
the next whole day.

[2]

(j) State whether Peter Pickard would be satisfied with the collection period for trade
receivables.
[1]

(k) Explain how Peter Pickard’s payment period for trade payables may be affected by the
collection period for trade receivables.

[2]
[Total: 26]
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2

Alina Tan is a trader. She maintains a full set of accounting records. Her financial year ends on
31 October. She has written off a number of bad debts during the year.
REQUIRED
(a) Suggest two ways in which Alina Tan could reduce the possibility of bad debts.
1

2
[2]
On 30 October 2014 Alina Tan wrote off $66 which had been outstanding from Yeung for 2 years.
REQUIRED
(b) Prepare a journal entry to record this transaction. A narrative is required.
Alina Tan
Journal
Debit
$

Credit
$

[3]
Additional Information
Alina Tan maintains a provision for doubtful debts at 3% of her trade receivables at the end of
each year.
On 1 November 2013 the provision for doubtful debts was $450. On 31 October 2014 the trade
receivables amounted to $13 500.
REQUIRED
(c) Explain the term ‘provision for doubtful debts’.

[2]

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(d) Name two accounting principles which are applied when a provision for doubtful debts is
maintained.
1
2

[2]

(e) Prepare a journal entry on 31 October to record the adjustment to the provision for doubtful
debts. A narrative is required
Alina Tan
Journal
Debit
$

Credit
$

[3]
(f) Explain the term ‘bad debt recovered’.

[2]

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(g) Explain the following terms.
Capital expenditure

Revenue expenditure

Capital receipts

Revenue receipts

[4]

On 31 October 2014 Alina Tan discovered that an item of capital expenditure had been recorded
as revenue expenditure.
REQUIRED
(h) Complete the following table by putting a tick (
) in the correct columns to indicate the effect
of this error on the non-current assets and the profit for the year.
non-current assets
at 31 March 2014
Overstated

profit for the year ended
31 March 2014

Understated

Overstated

Understated

[2]
[Total: 20]

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3

(a) State two advantages of being a partner rather than a sole trader.
1

2
[2]
Shahid and Hamza Hussain are in partnership as gardeners. Their financial year ends on 31 July.
They provided the following information on 31 July 2014.

Equipment at valuation 1 August 2013
Equipment purchased during year
Motor vehicles at cost
Provision for depreciation of motor vehicles 31 July 2013
Receipts from customers
Wages
Insurance
General expenses

$
2 900
1 150
25 000
9 000
76 400
41 600
1 232
3 090

Additional information
1

The wages include $1500 for work done in Shahid’s private garden.

2

On 31 July 2014 general expenses accrued amounted to $94.

3

The insurance represents cover for 14 months to 30 September 2014.

4

The motor vehicles are being depreciated at 20% per annum on the reducing (diminishing)
balance method.

5

The equipment was valued at $3150 on 31 July 2014.

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REQUIRED
(b) Prepare the income statement of Shahid and Hamza Hussain for the year ended
31 July 2014.
Shahid and Hamza Hussain
Income Statement for the year ended 31 July 2014

[11]
Additional Information
The partnership agreement of Shahid and Hamza Hussain provides for:
Interest on capital at 5% per annum
Interest on drawings at 3% per annum
An annual salary of $9000 per annum for Shahid Hussain
Sharing of residual profits and losses equally
On 1 August 2013 the balances on the partners’ capital and current accounts were as follows.

Capital account
Current account

© UCLES 2014

Shahid
Hussain
$
80 000
2 340 Cr

Hamza
Hussain
$
60 000
1 960 Dr

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On 1 February 2014 Shahid Hussain withdrew $20 000 of his capital from the business.
Drawings and interest on drawings for the year ended 31 July 2014 were as follows.

Drawings
Interest on drawings

Shahid
Hussain
$
10 000
300

Hamza
Hussain
$
8 000
240

REQUIRED
(c) Prepare the profit and loss appropriation account of Shahid and Hamza Hussain for the year
ended 31 July 2014.
Start with the profit for the year calculated in (b)
Shahid and Hamza Hussain
Profit and Loss Appropriation Account for the year ended 31 July 2014

[7]

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(d) Prepare the current account of Hamza Hussain for the year ended 31 July 2014.
Balance the account and bring down the balance on 1 August 2014.
Hamza Hussain
Current account

[5]
[Total: 25]

Question 4 is on the next page.

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4

Grace Mhando started a business on 1 October 2013.
accounting records.

She did not maintain a full set of

All goods are bought and sold on credit terms.
She provided the following information.
$
For the year ended 30 September 2014
Payments to credit suppliers
Receipts from credit customers
Discount allowed to credit customers
Returns to credit suppliers
Bad debts written off
Interest charged by credit supplier on overdue account
Carriage inwards
On 30 September 2014
Amount owed to credit suppliers
Amount owed by credit customers

31 600
35 100
900
2 100
100
40
1 090

1 990
3 950

REQUIRED
(a) Calculate the credit purchases for the year ended 30 September 2014.

[6]

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(b) Calculate the credit sales for the year ended 30 September 2014.

[6]

Grace Mhando did not value her inventory on 30 September 2014. Her gross profit margin was
20%.
REQUIRED
(c) Calculate the value of the inventory on 30 September 2014 by means of an income
statement (trading account section).
Grace Mhando
Income Statement (Trading Account Section) for the year ended 30 September 2014

[7]

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(d) State two reasons why Grace Mhando’s credit suppliers would be interested in her financial
statements.
1

2
[2]

(e) Name two other business people who would be interested in Grace Mhando’s financial
statements.
1
2

[2]
[Total: 23]

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5

The financial year of Zilani Limited ends on 30 September.
The following information is available.
$
For the year ended 30 September 2014
Revenue (sales)
Cost of sales
Expenses

$
480 000
310 000
94 000

On 30 September 2014
Capital employed
Inventory
Trade receivables

30 800
56 000

86 800

Trade payables
Bank overdraft
Short term loan

51 500
15 300
5 000

71 800

635 000

REQUIRED
(a) Calculate the percentage of gross profit to revenue (sales).
The calculation should be correct to two decimal places.

[2]

The percentage of gross profit to revenue (sales) is lower than in 2013.
(b) Suggest two reasons why it is lower.
1

2
[2]

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(c) Calculate the percentage of profit for the year to revenue (sales).
The calculation should be correct to two decimal places.

[2]

(d) Suggest two ways in which the percentage of profit for the year to revenue (sales) could be
improved.
1

2
[2]

(e) Calculate the return on capital employed (ROCE).
The calculation should be correct to two decimal places.

[2]

(f) Explain the importance of the return on capital employed (ROCE) to Zilani Limited.

[2]

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(g) Calculate the current ratio.
The calculation should be correct to two decimal places.

[2]

(h) Calculate the quick (acid test) ratio.
The calculation should be correct to two decimal places.

[2]

(i) Explain why the quick (acid test) ratio is more reliable than the current ratio as an indicator of
liquidity.

[2]

Question 5(j) and (k) are on the next page.

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(j) Complete the table by placing a tick (
) in the correct column to show how each of the
following transactions would affect the working capital of Zilani Limited.
Increase

Decrease

No effect

Issue of additional shares
Cheque paid to credit supplier
Repayment of long term loan
Purchase of goods on credit
Sale of unused non-current asset
Cheque paid for repairs to non-current
asset
[6]

(k) Suggest two problems Zilani Limited may encounter if its working capital is inadequate.
1

2
[2]
[Total: 26]

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