Accounting (0452) · Oct/Nov 2015 · Question paper 21

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

*8253469929*

ACCOUNTING

0452/21
October/November 2015

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 18 printed pages and 2 blank pages.
IB15 11_0452_21/2RP
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2
1

Shahid Ayub is a trader who maintains a full set of accounting records including a three column
cash book.
On 1 August 2015 Shahid Ayub had the following balances in his cash book:

Cash
Bank overdraft

$
50
7150

Shahid Ayub’s transactions for August 2015 included the following.
August 9

A cheque received in July for $362 from El Nil Supply Company was dishonoured
by the bank

18

Paid $54 by cheque for fuel of private motor vehicle

24

Received a cheque from Mariam Soliman to settle her debt of $520, less 2½%
cash discount

30

Cash sales, $3224

31

Paid all the remaining cash into the bank except $100

REQUIRED
(a) Complete Shahid Ayub’s cash book on the page opposite.
Balance the cash book and bring down the balances on 1 September 2015.
[9]

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Details

Date

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$

$

Cash

Discount
allowed

$

Bank

Date

Shahid Ayub - Cash Book

Details

$

Discount
received

$

Cash

$

Bank

3

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4
The following incomplete statement of account was available on 31 August 2015.
STATEMENT OF ACCOUNT
Shahid Ayub
44 Narrow Lane, Anytown
Mariam Soliman
The Avenue
Weston

Date

31 August 2015

Debit
$

Reference

2015
August 1
9
13
24

Balance due
Goods
Returns
Payment
Discount

Credit
$

Balance
$

24
507
13

520
860
?
?
?

340

REQUIRED
(b) (i) Calculate the balance due on 31 August.
[1]
(ii) State the name of the trader who owes the balance at 31 August.
[1]

(c) State the business document and the book of prime (original) entry Shahid Ayub would use
to record the following transactions which appear on the statement of account.
Document

Book of prime (original)
entry

13 Returns

24 Payment

Transaction
August 9 Goods

[6]

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(d) Prepare the account of Shahid Ayub as it would appear in the ledger of Mariam Soliman.
Balance the account and bring down the balance on 1 September 2015.
Mariam Soliman
Shahid Ayub account
Date

Details

$

Date

Details

$

………

[6]
[Total: 23]

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2

Grace Zindi runs a secretarial agency. Her financial year ends on 31 July.
She provided the following information on 31 July 2015.

Capital 1 August 2014
Cash drawings
Fees from clients
Wages
Rates and insurance
General expenses
Heat and light
Commission receivable
Motor vehicles at cost 1 August 2014
Provision for depreciation of motor vehicles 1 August 2014
Office equipment at valuation 1 August 2014

$
85 000
15 500
28 500
21 600
3 900
990
710
7 600
12 500
4 500
11 400

Additional information
1

At 31 July 2015
Insurance prepaid amounted to $300
Commission receivable of $250 was outstanding
Fees from clients of $3400 was outstanding.

2

Grace Zindi lives in a flat above the business premises. One quarter of the rates and
insurance relate to the flat.

3

On 31 July 2015 Grace Zindi decided to create a provision for doubtful debts of 1% of the
amount owed by clients.

4

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

5

The office equipment was valued at $14 500 on 31 July 2015.
Additional office equipment costing $6900 was purchased during the year.
No office equipment was disposed of during the year.

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REQUIRED
(a) Prepare Grace Zindi’s income statement for the year ended 31 July 2015.
Grace Zindi
Income Statement for the year ended 31 July 2015
$

$

[16]

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(b) Prepare the capital account for Grace Zindi for the year ended 31 July 2015.
Balance the account and bring down the balance on 1 August 2015.
Grace Zindi
Capital account
Date

Details

$

Date

Details

$

………

[6]

(c) State the meaning of the accruals (matching) principle. Give one example of how this
principle was applied in the preparation of the income statement in (a).
Meaning

Example
[2]

(d) State the meaning of the business entity principle. Give one example of how this principle
was applied in the preparation of the income statement in (a).
Meaning

Example
[2]
[Total: 26]

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3

(a) State two causes of depreciation of non-current assets.
1
2

[2]

(b) Explain the straight line method of depreciation.

[2]

(c) Explain the reducing (diminishing) balance method of depreciation.

[2]

(d) Explain how charging depreciation is an example of the application of the principle of
prudence.

[2]

(e) Name one other accounting principle which is applied when charging depreciation.
[1]

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On 1 October 2013 Natasha Salim started a business altering and mending clothes. On that date
she purchased a machine, $4000, paying by cheque.
On 1 January 2014 she purchased another machine, $6000, on credit from ABC Machines.
She decided to depreciate the machines using the reducing (diminishing) balance method at 20%
per annum. A whole year’s depreciation was to be charged in the year of purchase, but no
depreciation in the year of sale.
On 1 February 2015 Natasha Salim decided that the machine purchased on 1 October 2013 was
no longer required. She sold it for $2100, cash.
REQUIRED
(f) Prepare the following accounts in the ledger of Natasha Salim for each of the two years
ended 30 September 2014 and 30 September 2015.
Balance the accounts and bring down the balances on 1 October 2014 and 1 October 2015.
Natasha Salim
Machinery account
Date

Details

$

Date

Details

$

………

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Provision for depreciation of machinery account
Date

Details

$

Date

Details

$

………

[12]

(g) Calculate the profit or loss on the disposal of the machine on 1 February 2015.

[4]
[Total: 25]

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4

Moses and Tobias Iyambo are in partnership. Their financial year ends on 31 October. They
share profits and losses equally. A capital and a current account are maintained for each partner.
Despite having little accounting knowledge, Tobias prepared the following statement of financial
position on 31 October 2015.
Statement of Financial Position 31 October 2015
$
Premises at cost
Fixtures and equipment at book value 1 September 2014
Inventory
Trade receivables
Bank
Drawings – M Iyambo
T Iyambo

8 000
5 500

Trade payables
Provision for doubtful debts
Capital account 1 September 2014 – M Iyambo
T Iyambo

65 000
35 000

Current account 1 September 2014 – M Iyambo Debit
T Iyambo Credit

2 000
3 500

$
80 000
24 800
6 950
5 200
1 500
13 500
131 950
8 520
130

Balance

100 000

5 500
114 150
17 800
131 950

The following matters were then discovered.
1

The income statement included adjustments for the following which should have been
included in the statement of financial position:

Depreciation for the year on fixtures and equipment
Expenses accrued

$
3100
1130

2

Bank charges, $70, had been correctly recorded in the income statement but had not been
entered in the cash book.

3

Cash in hand, $500, had not been included in the statement of financial position.

4

Profit for the year was $18 000.

REQUIRED
(a) Prepare a corrected statement of financial position at 31 October 2015 showing the different
types of assets and liabilities, and the capital and current accounts of each partner.
The calculation of the current account balances may be shown within the statement of
financial position or as separate calculations in the space provided.

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Moses and Tobias
Corrected Statement of Financial Position at 31 October 2015
$

$

$

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You may use the space below for your workings.

[16]
(b) State two items which Moses and Tobias Iyambo could have included in their partnership
agreement in addition to profit-sharing ratios.
1
2

[2]

(c) State two ways in which Moses and Tobias Iyambo could obtain long-term funds to finance
expansion of the business.
1
2

[2]

(d) Complete the following table by placing a tick (
) in the correct column to show how each of
the following transactions would affect the working capital of Moses and Tobias Iyambo.
Increase

Decrease

No effect

Selling surplus equipment
Delay paying credit suppliers
Paying surplus cash into bank
Writing off a bad debt
[4]
[Total: 24]

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5

Kelbrook Limited provided the following information.
1

The issued share capital consists of 180 000 ordinary shares of $0.50 each.

2

On 1 October 2014:
General reserve
Retained earnings

3

$4000
$5500

The profit for the year ended 30 September 2015 was $9000.
$2000 of this was transferred to the general reserve.
An interim dividend of $4500 was paid during the year.
No dividends were proposed at the end of the year.

REQUIRED
(a) Prepare the equity and reserves section of the statement of financial position at
30 September 2015.
Kelbrook Limited
Extract from Statement of Financial Position at 30 September 2015

[5]

Question 5(b) is on the next page.

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Kelbrook Limited provided the following information at 30 September 2015.
$
102 200
6 100
5 100
8 500
4 300
1 400

Non-current assets at book value
Bank overdraft
Inventory
Trade receivables
Trade payables
Other payables
REQUIRED
(b) Complete the following table.

Current ratio
Workings

Answer to two
decimal places

Quick ratio
Workings

Answer to two
decimal places

Return on capital employed (ROCE)
Workings

Answer to two
decimal places

[6]

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The ratios calculated at 30 September 2014 were:
Current ratio
Quick ratio
Return on capital employed (ROCE)

2.51 : 1
1.57 : 1
12.55%

REQUIRED
(c) Comment on the change in the current ratio.

[2]

(d) Suggest one reason for the change in the quick ratio.

[1]

(e) Suggest two ways to improve the return on capital employed (ROCE).
1
2

[2]

Question 5(f) is on the next page.

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Kelbrook Limited provided the following information for the year ended 30 September 2015.

Credit sales
Cash sales

$
45 000
5 000

Credit customers are allowed 60 days credit.
REQUIRED
(f) (i) Calculate the collection period for trade receivables. Round up your answer to the next
whole day.

[2]
(ii) Comment on the collection period for trade receivables.

[2]

Kelbrook Limited is allowed 30 days credit by their credit suppliers. For the year ended
30 September 2015 the payment period was 52 days.
REQUIRED
(g) Comment on the payment period for trade payables.

[2]
[Total: 22]

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