Accounting (0452) · Oct/Nov 2015 · Question paper 23

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

*7045330115*

0452/23

ACCOUNTING
Paper 2

October/November 2015
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.
IB15 11_0452_23/5RP
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1

Paul Chew is a trader. He made the following entries in his cash book in September 2015.
Paul Chew
Cash Book for September 2015

Sept
1
11
27
30

Discount
$
Balances b/d
Bank
Sales
Yeung & Co

Cash
$

Bank
$

30
70
20

117
560
267

3

Sept
4 W Law
(dishonoured
cheque)
11 Cash
19 General
expenses
24 K Tan

Discount
$

Cash
$

Bank
$

90
70
80
13

507

REQUIRED
(a) (i) Suggest one reason why the cheque on 4 September was dishonoured.

[1]
(ii) Explain the entry on 11 September.

[2]
(iii) Explain the entry on 27 September.

[1]
(iv) Calculate the percentage of the discount on 24 September.

[1]

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(v) State how the total of the discount column on the debit side of the cash book would be
entered in the ledger on 30 September.

[2]
(vi) Calculate the bank balance on 30 September.

[1]
On 30 September 2015 Paul Chew’s bank statement showed an overdrawn balance of $43.
On comparing the bank statement and the cash book it was found that the bank had not recorded
the transactions shown in the cash book on the following dates:
24 September
27 September
30 September
REQUIRED
(b) Prepare a bank reconciliation statement at 30 September 2015.
Paul Chew
Bank Reconciliation Statement at 30 September 2015

[5]

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Paul Chew sells goods on credit terms to Kim Chan.
REQUIRED
(c) Complete the table to name the business document and the books of prime (original) entry
for each of the following transactions.
If the document is not recorded in a book of prime (original) entry write “No entry”.
The first transaction has been completed as an example.

Paul Chew received
payment from Kim Chan

Document

Paul Chew’s book
of prime (original)
entry

Kim Chan’s book
of prime (original)
entry

Cheque

Cash book

Cash book

Paul Chew sold goods on
credit to Kim Chan

Kim Chan notified Paul
Chew of an overcharge
Paul Chew notified Kim
Chan that he agreed the
overcharge
Paul Chew sent Kim Chan
a summary of the month’s
transactions
[12]
[Total: 25]

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2

Ishmael Makumbo runs a general store. His financial year ends on 31 August.
He sublets part of his premises for an annual rent of $8400, payable quarterly in advance.
On 1 September 2014 the tenant owed $2100.
Ishmael Makumbo received cheques for rent as follows:
$
4200
2100
2100

2 September 2014
3 January 2015
4 May 2015
REQUIRED

(a) Prepare the rent receivable account for the year ended 31 August 2015.
Balance the account and bring down the balance on 1 September 2015.
Ishmael Makumbo
Rent receivable account
Date

Details

$

Date

Details

$

………

[6]

(b) State the section of Ishmael Makumbo’s statement of financial position at 31 August 2015 in
which the balance of the rent receivable account would appear.
Give a reason for your answer.
Section of statement of financial position

[1]

Reason
[1]
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On 1 September 2014 Ishmael Makumbo owed $274 for motor expenses. He paid this by cheque
on 7 September 2014.
On 1 February 2015 Ishmael Makumbo paid $96 in cash for motor expenses.
On 30 August 2015 Ishmael Makumbo received an invoice for motor expenses, $113. He paid
this invoice in September 2015.
REQUIRED
(c) Prepare the motor expenses account for the year ended 31 August 2015.
Balance the account and bring down the balance on 1 September 2015.
Ishmael Makumbo
Motor expenses account
Date

Details

$

Date

Details

$

………

[6]

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During the year ended 31 August 2015 Ishmael Makumbo took goods, cost $300, for his own
use. This was not entered in the accounting records.
The telephone expenses for the year ended 31 August 2015 amounted to $432. It was estimated
that one quarter of this was for Ishmael’s personal use. No adjustment had been made for this.
REQUIRED
(d) Prepare the journal entries Ishmael Makumbo would make to record the above.
Narratives are required.
Ishmael Makumbo
Journal
Debit
$

Credit
$

[6]
[Total: 20]

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Sally Rickard is a trader. Despite having little knowledge of book-keeping, she decided to prepare
a trial balance at the end of her financial year on 31 October 2015. The trial balance she
prepared was as follows.
Revenue
Purchases
Wages
Motor expenses
General expenses
Premises at cost
Equipment and fixtures at cost
Motor vehicle at cost
Provision for depreciation of equipment and fixtures
Provision for depreciation of motor vehicle
Trade receivables
Provision for doubtful debts
Trade payables
Cash
Bank overdraft
Loan from AB Loans
Drawings
Capital (balancing figure)

$
160 400

99 300
27 000
1 600
7 250
80 000
10 000
13 930
1 050
5 750
26 800
670
8 150
350

328 000
Inventory 1 November 2014
Inventory 31 October 2015

$

4 810
10 000
12 500
186 440
328 000

$7100
$8300

In addition to the obvious errors in the trial balance, the following errors were also discovered.
1

General expenses paid in cash, $150, had not been recorded.

2

Motor expenses, $430, had been debited to the motor vehicles account.

3

A cheque, $260, received from a credit customer had been credited to the bank account and
debited to the customer’s account.

REQUIRED
(a) For each of the items 1-3 state the type of error that was made.
Error 1
Error 2
Error 3

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(b) Prepare a corrected trial balance at 31 October 2015.
Sally Rickard
Corrected Trial Balance at 31 October 2015
Debit
$

Credit
$

Revenue
Purchases
Wages
Motor expenses
General expenses
Premises at cost
Equipment and fixtures at cost
Motor vehicle at cost
Provision for depreciation of equipment and fixtures
Provision for depreciation of motor vehicle
Trade receivables
Provision for doubtful debts
Trade payables
Cash
Bank overdraft
Loan from AB Loans
Drawings
Capital

[13]

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After the trial balance was corrected, Sally Rickard attempted to prepare an income statement to
calculate her profit for the year, but made some errors.
REQUIRED
(c) Complete the table, by placing a tick (9) in the appropriate column, to show how correcting
each of the following errors would affect the profit for the year.
Name the accounting principle being applied.
The first one has been completed as an example.
Effect on profit
Increase
The depreciation charge had been
calculated at a lower rate than in
previous years.

Decrease
9

Accounting principle

Consistency

An amount owing by a credit customer
should have been written off.
General expenses included rates which
were prepaid until 31 December 2015.
Goods invoiced and despatched to a
customer were not recorded as the
customer did not receive them until
3 November 2015.
No record had been made of goods
taken for personal use.
[8]
[Total: 24]

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Sanchi and Syed Mirza are in partnership, sharing profits and losses equally.
Their summarised income statement for the year ended 31 July 2015 was as follows.
$
Revenue
Cost of sales
Opening inventory
Purchases
Closing inventory
Gross profit
Expenses
Profit for the year

5 500
33 500
39 000
6 500

$
45 000

32 500
12 500
3 500
9 000

REQUIRED
(a) (i) State the formula for the calculation of the rate of inventory turnover.

[1]
(ii) Calculate the rate of inventory turnover.
The calculation should be correct to two decimal places.

[2]
(iii) Suggest two reasons why the rate of inventory turnover is lower than it was in the
previous year.
1

2
[2]

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(b) (i) State the basis on which inventory should be valued.

[1]
(ii) Name the accounting principle which is being applied when inventory is valued on this
basis.
[1]
After the preparation of the appropriation account for the year ended 31 July 2015, Sanchi and
Syed Mirza updated their capital and current accounts.
At 31 July 2015 the partners’ accounts were as follows.
Capital accounts
Date

Details

Sanchi
$

Syed
$

Date

Details

Sanchi
$

Syed
$
60 000

2014
1 Aug

Balance b/d

20 000

2015
1 Feb

Current a/c

10 000

Details

Sanchi
$

Syed
$

Current accounts
Date

Details

Sanchi
$

2015
1 Feb

Capital a/c

10 000

31 Jul

Drawings

14 000

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Syed
$

6 000

Date
2014
1 Aug

Balance b/d

16 000

4 000

2015
31 Jul

Profit share

4 500

4 500

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REQUIRED

(c) Prepare an extract from the statement of financial position at 31 July 2015 to show the total
funds provided by the partners.
Extract from Statement of Financial Position at 31 July 2015

Capital account
Current account

Sanchi Mirza
$

Syed Mirza
$

Total
$

[5]

(d) (i) State the formula for the calculation of the return on capital employed (ROCE).

[1]
(ii) Calculate the return on capital employed (ROCE), using your answer to (c) and the profit
for the year.
The calculation should be correct to two decimal places.

[2]
(iii) Suggest one reason why the return on capital employed (ROCE) is lower than it was in
the previous year.

[1]
(e) (i) Suggest two reasons why Syed Mirza would like to have interest on capital included in
the partnership agreement.
1

2
[2]

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(ii) Suggest one reason why Syed Mirza would like to have interest on drawings included in
the partnership agreement.

[1]
(iii) Suggest one reason why Sanchi Mirza would like to have partner’s salary included in the
partnership agreement.

[1]
On 31 July 2015 the trade payables amounted to $4100. The period of credit allowed is 30 days.
The purchases for the year ended 31 July 2015 were:
$
Cash purchases
2 500
Credit purchases
31 000
REQUIRED
(f) (i) State the formula for the calculation of the payment period for trade payables.

[1]
(ii) Calculate the payment period for trade payables.
Round up your answer to the next whole day.

[2]
(iii) Comment on the payment period for trade payables.

[2]

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The period of credit allowed to trade receivables is 30 days. The collection period was 55 days.
REQUIRED
(g) Suggest two ways how this may affect the liquidity of Sanchi and Syed Mirza.
1

2
[2]
[Total: 27]

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5

The treasurer of the Hills Road Youth Club provided the following information at the end of the
financial year on 31 October 2015.
1

Receipts during the year
$
6180
3100

Subscriptions
Sale of refreshments
2

Payments during the year
Purchase of refreshments
Purchase of equipment
Repairs to equipment
Insurance for 15 months to 31 January 2016
Rent of premises for 11 months to 30 September 2015
General expenses

3

$
2650
2000
220
1350
1430
2540

Other information
1 November
2014
$
450
360
280
6000

Subscriptions paid in advance
Subscriptions accrued
Inventory of refreshments
Equipment at valuation

31 October
2015
$
270
310
6800

There were no sales of equipment during the year.
REQUIRED
(a) Calculate the subscriptions for the year ended 31 October 2015.

[5]

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(b) Prepare the refreshments income statement for the year ended 31 October 2015.
Hills Road Youth Club
Refreshments Income Statement for the year ended 31 October 2015
$

$

[5]

Question 5(c) is on the next page.

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(c) Prepare the income and expenditure account for the year ended 31 October 2015.
Hills Road Youth Club
Income and Expenditure Account for the year ended 31 October 2015
$

$

[9]

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(d) Suggest two reasons why the surplus or deficit shown in the income and expenditure
account is not equal to the bank balance.
1

2
[2]
(e) Explain why a club does not distribute a surplus to its members.

[2]
(f) State how a club’s accumulated fund arises.

[1]
[Total: 24]

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