Accounting (0452) · Oct/Nov 2016 · Question paper 13

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

* 9 1 8 5 2 3 3 7 4 8 *

0452/13

ACCOUNTING

October/November 2016

Paper 1

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 22 printed pages and 2 blank pages.
DC (RCL (KM)) 116460/5
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There are 10 parts to Question 1.
For each of the parts (a) to (j) below there are four possible answers A, B, C and D. Choose the one
you consider correct and place a tick (✓) in the box to indicate the correct answer.
1

(a) What is the purpose of accounting?
A

to check the arithmetical accuracy of the double entry

B

to control inventory levels

C

to ensure that all transactions are recorded

D

to prepare financial statements

[1]

(b) Alice had owed Brian $120 for a long time. Brian decided to write off the balance on Alice’s
account but in error entered $210 in the bad debts account.
Which entries correct this error?
debit entry

credit entry

A

Alice

$90

bad debts

$90

B

bad debts

$90

Alice

$90

C

bad debts

$90

suspense

$90

D

suspense

$90

bad debts

$90

[1]

(c) A trader’s cash book had a debit balance of $50. When the bank statement arrived he saw
that a customer’s cheque for $80 had been dishonoured, and that the bank had charged him
$10 in bank charges.
What was the balance on the cash book when it had been updated?
A

$20 credit

B

$40 credit

C

$120 debit

D

$140 debit

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(d) Where are bad debts recorded in the control accounts?
A

on the credit side of the purchases ledger control account

B

on the credit side of the sales ledger control account

C

on the debit side of the purchases ledger control account

D

on the debit side of the sales ledger control account

[1]

(e) Which statements are true about capital employed?

(f)

1

It equals non-current assets plus net current assets.

2

It equals owner’s capital less non-current liabilities.

3

It represents total funds invested in the business.

A

1 only

B

1 and 3

C

2 and 3

D

3 only

[1]

A partnership had a profit for the year of $60 000.
Interest on capital was
Jamila

$4 000

Kate

$2 000

Drawings were
Jamila $18 000
Kate

$10 000

Profits were shared equally.
What was the total amount credited to Jamila’s current account at the end of the year?
A

$13 000

B

$27 000

C

$29 000

D

$31 000

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(g) A company provided the following information.
$
profit for the year

85 000

dividend paid

15 000

transfer to general reserve

10 000

proceeds of share issue

30 000

By how much did total equity (shareholders’ funds) increase during the year?
A

$60 000

B

$90 000

C

$100 000

D

$105 000

[1]

(h) Why did the trade receivables collection period of a trader decrease from 32 days to 21 days?

(i)

A

He increased the rate of cash discount.

B

He increased the rate of trade discount.

C

His credit sales decreased.

D

His credit sales increased.

[1]

A trader provided the following information.
$
Cash sales for the year

6 000

Credit sales for the year

84 000

Trade receivables at the year end

7 400

Bad debts to be written off at the year end

1 300

What was the trade receivables collection period?
A

25 days

B

27 days

C

31 days

D

33 days

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(j)

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The directors of a company ensured that the financial statements represented actual events.
Which accounting objective was applied?
A

comparability

B

relevance

C

reliability

D

understandability

[1]
[Total: 10]

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(a) Complete the following sentences using the words ‘debit’ and ‘credit’.
A decrease in a non-current asset account requires a entry.
An increase in a liability account requires a entry.
An increase in an expense account requires a entry.

[3]

(b) Give one example of a liability.
[1]
(c) State how a book-keeper records a depreciation charge for the year.
debit entry

credit entry

[2]
(d) State one reason why a business uses books of prime (original) entry.

[1]
(e) Name two books of prime (original) entry which a business may maintain. In each case name
a source document which would be recorded in that book.
book of prime (original) entry

source document

1
2
[4]
(f)

State the difference between a trading business and a service business.

[3]

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(g) Complete the following table. Indicate with a tick (✓) whether each item can appear in the
financial statements of a trading business, a service business, or both.
trading business
only

service business
only

both

cost of sales
gross profit
discount allowed
profit for the year
[4]
(h) Complete the following table, naming each accounting principle being described.
principle
the same accounting treatment should be applied to
similar items at all times
transactions should be expressed in monetary terms
financial statements should assume that a business
will continue to operate indefinitely
[3]
[Total: 21]

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Winston is a manufacturer who rents his premises.
Until 31 December 2015 the rent was $1000 a month. From 1 January 2016 the rent was $1200 a
month.
REQUIRED
(a) Calculate the rent for the year ended 31 August 2016.

[1]
The balance on Winston’s rent account on 1 September 2015 was $1000 credit. During the year
he made three payments of rent, by cheque, as follows.
$
4 September 2015

6000

1 March 2016

7400

9 July 2016

3600

REQUIRED
(b) State what the balance on 1 September 2015 represented.

[1]

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(c) Prepare Winston’s rent account for the year ended 31 August 2016. Balance the account and
bring down the balance on 1 September 2016.
Winston
Rent account
Date

Details

$

Date

Details

$

[5]

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Jared buys goods from Winston. On 1 August 2016 Jared owed Winston $300.
During August 2016 the following took place.
August 3

Jared bought goods, list price $600, after deducting 20% trade discount.

6

Jared returned goods, list price $50.

9

Jared paid, by cheque, the balance due on 1 August after deducting 3% cash
discount.

18

Jared purchased further goods, list price $400, after deducting trade discount as
before.

REQUIRED
(d) Prepare Jared’s account in Winston’s sales ledger for the month of August 2016. Balance the
account and bring down the balance on 1 September 2016.
Winston
Sales ledger
Jared account
Date

Details

$

Date

Details

$

[8]

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Winston also buys goods from Jared and on 31 August 2016 he owed Jared $40. Winston decided
to make a contra entry on 1 September 2016 to set off the accounts in the sales and purchases
ledgers.
REQUIRED
(e) State the double entry needed to set off the accounts.
account debited

account credited

[2]
(f)

Name the accounting term Winston uses for his partially finished products.
[1]

(g) Complete the following table, indicating with a tick (✓) where each item would appear in
Winston’s financial statements. The first has been completed as an example.
manufacturing account
purchases of raw materials

income statement

✓

salesmen’s wages
carriage outwards
purchases of finished goods
machine operators’ wages
factory supervisor’s salary
inventory of raw materials
carriage inwards
inventory of finished goods
[4]
[Total: 22]

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Arun, a trader, admitted Rajiv as a partner on 1 July 2015.
REQUIRED
(a) State one advantage to Arun of admitting a partner.

[1]
(b) State one reason why it was useful for Arun and Rajiv to have a partnership agreement.

[1]
(c) State two items which might be included in a partnership agreement.
1
2 [2]
On 1 August 2015 Rajiv withdrew $1000 from the business bank account for his own use.
REQUIRED
(d) State the double entry needed to record the withdrawal.
debit entry

credit entry

[2]
Rajiv made further drawings during the year and at the year end the balance on his drawings
account was $7500.
REQUIRED
(e) State the double entry needed at the year end to account for Rajiv’s drawings.
debit entry

credit entry

[2]

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Friedrich and Graham were also in partnership as accountants with a year end of 31 July.
On 31 July 2016 the balances in their books of account were as follows.
Bank
Cash
Fees received
Rent paid
Wages
Administration costs
Drawings – Friedrich
– Graham
Equipment
Provision for depreciation
Trade receivables
Other payables
Capital account – Friedrich
– Graham
Current account – Friedrich
– Graham

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$
4 800 debit
200
81 000
12 000
6 800
19 500
25 000
16 100
24 200
6 500
17 400
1 100
20 000
15 000
?
3 300 credit

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REQUIRED
(f)

Prepare the partnership’s trial balance at 31 July 2016.
Friedrich and Graham
Trial Balance at 31 July 2016
$

$

Bank

Cash

Fees received

Rent paid

Wages

Administration costs

Drawings – Friedrich

– Graham

Equipment

Provision for depreciation

Trade receivables

Other payables

Capital account – Friedrich

– Graham

Current account – Friedrich
– Graham

[8]
[Total: 16]

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5

Boris did not maintain a full set of accounting records. He was able to provide the following
information.
$
300

Trade receivables at 1 July 2015
During the year ended 30 June 2016
Receipts from credit customers
Cash sales
Invoices issued to credit customers
Credit notes issued to credit customers
Bad debts written off

6800
2100
7770
480
250

REQUIRED
(a) Prepare the total trade receivables account for the year ended 30 June 2016 to determine the
amount owed by credit customers at the year end.
Boris
Total trade receivables account
Date

Details

$

Date

Details

$

[6]

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Boris provided the following additional information.
$
710

Trade payables at 1 July 2015
During the year ended 30 June 2016
Payments to credit suppliers
Invoices received

4320
4500

Trade payables at 30 June 2016

680

REQUIRED
(b) Prepare the total trade payables account for the year ended 30 June 2016 to determine the
discount received by Boris during the year.
Boris
Total trade payables account
Date

Details

$

Date

Details

$

[5]

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Boris provided the following additional information.
1

At 1 July 2015, the non-current assets which originally cost $7100 had accumulated
depreciation of $2800. Boris’s policy is to depreciate non-current assets at 10% per
annum using the reducing (diminishing) balance basis.

2

Boris’s capital on 1 July 2015 was $5010. During the year he made drawings of $2050.

3

On 30 June 2016
Inventory
Other operating expenses accrued
Bank overdraft
Trade receivables
Trade payables

$
700
100
300
from your answer to part (a)
from your answer to part (b)

REQUIRED
(c) Prepare Boris’s statement of financial position at 30 June 2016. Show both opening and
closing balances in the capital section. Insert profit for the year as a balancing figure.
Boris
Statement of Financial Position at 30 June 2016
$

$

$

[11]

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(d) Comment on Boris’s drawings policy.

[2]
[Total: 24]

Question 6 is on the next page.

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6

The Chess Club also runs a shop for its members. Its receipts and payments account for the year
ended 31 December 2015 is as follows.
Chess Club
Receipts and Payments Account for the year ended 31 December 2015
Balance b/d
Subscriptions
Shop sales

$
4 100
17 700
6 700

28 500

Rent
Purchases
Wages – shop
Wages – club
Club equipment
Club expenses
Balance c/d

$
4 800
5 700
1 200
8 400
3 800
4 300
300
28 500

Other information is as follows.

Subscriptions in arrears
Club equipment at valuation
Shop inventory
Amounts owed to shop suppliers

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1 January
2015
$
550
3100
580
170

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31 December
2015
$
950
5150
310
350

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REQUIRED
(a) Prepare the shop income statement for the year ended 31 December 2015.
Chess Club
Income Statement for the year ended 31 December 2015
$

$

[7]

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(b) Prepare the club’s income and expenditure account for the year ended 31 December 2015.
Chess Club
Income and Expenditure Account for the year ended 31 December 2015
$

$

[7]

(c) Calculate, to two decimal places, the mark-up being applied on the sale of goods in the shop.

[3]

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A member of the committee has suggested hiring a computerised system for use in the shop. This
would cost $500 a year. This would enable the shop staff to ensure that all goods were sold at a
standard mark-up of 40%. If this was implemented, staff would no longer be paid a set wage but
instead earn a commission of 20% of sales value.
REQUIRED
(d) Calculate the profit or loss which would be earned in the shop if the committee went ahead
with this suggestion. Assume sales volume is unchanged.
Chess Club
Statement of revised profit
$

$

[6]

(e) Suggest two other ways in which the committee might try to improve the financial position of
the club.
1
2
[2]
(f)

Explain why club members are not entitled to drawings.

[2]
[Total: 27]

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