Accounting (0452) · Oct/Nov 2016 · Question paper 22

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

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

0452/22

ACCOUNTING

October/November 2016

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 17 printed pages and 3 blank pages.
DC (AL) 132554
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1

Amira’s financial year ends on 30 September. She buys and sells on both cash and credit terms
and maintains a full set of accounting records.
Control accounts are prepared at the end of each month.
REQUIRED
(a) Name the book of prime (original) entry which Amira would use to obtain the following
information when preparing her sales ledger control account.
Book of prime (original) entry
Cheque refund to credit customer
Bad debts written off
Returns by credit customers
Interest charged on customer’s overdue account
[4]
(b) State two reasons why Amira prepares a purchases ledger control account.
1

2

[2]
Amira provided the following information for September 2016.

September 1

Debit balances in purchases ledger
Credit balances in purchases ledger

$
93
4210

September 30

Totals for the month
Credit purchases
Cash purchases
Cheques paid to credit suppliers
Cheques received from credit customers
Discount allowed
Discount received
Returns to credit suppliers
Interest charged by supplier on overdue account
Cash refund received from credit supplier
Contra entry

5366
1469
3705
6102
204
95
197
12
150
494

October 1

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Debit balances in purchases ledger
Credit balances in purchases ledger

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REQUIRED

(c) Select the relevant figures and prepare the purchases ledger control account for the month of
September. Balance the account and bring down the balances on 1 October 2016.
Amira
Purchases ledger control account

Date

Details

$

Date

Details

$

[12]

(d) Suggest one advantage of paying credit suppliers before the due date.

[1]
(e) Suggest one disadvantage of paying credit suppliers before the due date.

[1]
[Total: 20]

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Diane is a trader. She buys goods on credit from Udomo. On 1 October 2016 Diane owed Udomo
$720.
Several transactions took place between the traders in October 2016.
REQUIRED
(a) Complete the following table. Name the book of prime (original) entry in which each document
would be recorded by each trader.
If the document is not entered in a book of prime (original) entry, write “No entry”.
Date

Document

Book of prime entry
used by
Diane

Book of prime entry
used by
Udomo

Oct
8

Invoice $560

12

Debit note $115

16

Credit note $100

24

Cheque $720

31

Statement of account $460

[10]

(b) Name the person who issued each of the following documents. In each case suggest one
reason for the issue of that document.
(i)

Debit note 12 October
Name of person issuing the document
Reason for the issue of the document

[2]

(ii)

Credit note 16 October
Name of person issuing the document
Reason for the issue of the document

[2]

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(iii)

Statement of account 31 October
Name of person issuing the document
Reason for the issue of the document

[2]

(c) Prepare the account of Diane as it would appear in the ledger of Udomo for October 2016.
Balance the account and bring down the balance on 1 November 2016.
Udomo
Diane account
Date
2016
Oct 1

Details
Balance

b/d

$

Date
2016

720

………

………

Details

$

[4]
[Total: 20]

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The Bolton Road Music Club was formed on 1 September 2015. The club has 60 members and
the annual subscription is $100. The club provides musical instruments for members to use. In
addition the club also has a shop selling CDs.
The treasurer provided the following information for the year ended 31 August 2016.
Amounts received
Subscriptions
Revenue from shop

$

Amounts paid

6 300 Purchases of CDs for shop
15 520 Wages of shop assistant

Loan from Music4all received
on 1 March 2016

Insurance
20 000 Rent and rates
Purchase of musical instruments
Repairs to musical instruments
General expenses of club

$
12 422
1 850
1 200
3 300
4 800
197
2 293

At 31 August 2016
1

The shop suppliers were owed $1112.

2

Shop inventory was valued at $1964.

3

Five members had paid their subscription for the following financial year.

4

Two members had not paid their subscription for the current financial year.

5

10% of the insurance relates to the shop.

6

Rent and rates accrued amounted to $300. Half of the rent and rates relates to the shop.

7

A loan of $100 to the shop assistant is included in the wages.

8

Interest of 4% per annum was accrued on the loan from Music4all.

9

Musical instruments are to be depreciated at 15% per annum on cost.

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REQUIRED
(a) State the meaning of the following terms.
Subscriptions

Accumulated fund

Receipts and payments account

[3]
(b) Prepare the shop income statement for the year ended 31 August 2016.
Bolton Road Music Club Shop
Income Statement for the year ended 31 August 2016
$

$

[8]

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(c) Prepare the income and expenditure account for the year ended 31 August 2016.
Bolton Road Music Club
Income and Expenditure Account for the year ended 31 August 2016
$

$

[11]
[Total: 22]

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Question 4 is on the next page.

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4

The financial year of Nawaz ends on 31 August. He sells on credit terms and maintains a provision
for doubtful debts.
REQUIRED
(a) State the meaning of the following terms.
Bad debts

Bad debts recovered

Provision for doubtful debts

[3]
(b) Name two accounting principles which Nawaz is applying by maintaining a provision for
doubtful debts.
1

2

[2]

(c) Suggest two ways in which Nawaz could reduce the possibility of bad debts.
1

2

[2]

Nawaz provided the following information.
$
On 1 September 2015
Provision for doubtful debts

1 450

During the year ended 31 August 2016
Debts written off

2 064

On 31 August 2016
Trade receivables

79 650

On 31 August 2016 it was decided to write off $250 owed by Uzma. The provision for doubtful
debts was adjusted to 2% of the remaining trade receivables.

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REQUIRED
(d) Prepare journal entries on 31 August 2016 to record the following.
1
2
3

Writing off the bad debt
Closing the bad debts account
Adjusting the provision for doubtful debts.

Narratives are not required.
Nawaz
Journal
Debit
$
1

2

3

Credit
$

[6]

(e) Prepare an extract from the statement of financial position on 31 August 2016 to show the
trade receivables.
Nawaz
Extract from Statement of Financial Position at 31 August 2016
Current assets

[2]
[Total: 15]

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5

The financial year of Sandton Limited ends on 30 September.
During the year ended 30 September 2016 the following transactions took place.
1
2
3

The company made a profit for the year of $14 750.
An interim dividend of $4500 was paid on the ordinary shares.
A transfer of $5000 was made to general reserve.

REQUIRED
(a) Complete the following statement of changes in equity for the year ended 30 September 2016.
Sandton Limited
Statement of Changes in Equity for the year ended 30 September 2016
Details

Share
capital
$

General
reserve
$

Retained
earnings
$

Total

150 000

14 000

31 000

195 000

Profit for the year

Dividend paid

Transfer to general reserve

On 30 September 2016

On 1 October 2015

$

[4]
Sandton Limited provided the following information at 30 September 2016.
3% Debentures (repayable 2020)
Premises at cost
Fixtures and equipment at cost
Motor vehicles at cost
Provision for depreciation – fixtures and equipment
motor vehicles
Trade receivables
Trade payables
Other receivables
Other payables
Bank
Inventory
Provision for doubtful debts

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$
15 000
135 200
37 600
54 000
7 520
10 800
10 840
7 460
472
130
4 294 credit
12 613
271

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REQUIRED

(b) Prepare a statement of financial position at 30 September 2016.
Sandton Limited
Statement of Financial Position at 30 September 2016
$

$

$

[14]
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Sandton Limited sells and buys on both cash and credit terms. Credit customers are allowed
28 days in which to pay their accounts. The credit suppliers allow Sandton Limited 30 days in
which to pay their accounts.
The following information was available for the year ended 30 September 2016.

Cash
Credit

Sales
$
67 500
152 500

Purchases
$
28 600
95 000

REQUIRED
(c) (i)

Calculate the collection period for trade receivables. Use the amount of trade receivables
before the provision for doubtful debts.
Round up your answer to the next whole day.

[2]

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

[2]
(iii) Comment on your answers to (c)(i) and (c)(ii).

[2]
[Total: 24]

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Daniel’s financial year ends on 31 July.
He provided the following information for the year ended 31 July 2015.
Cost of sales
Profit for the year

$
285 000
36 000

Gross profit was 30% of cost of sales.
REQUIRED
(a) (i)

Calculate the gross profit.

[1]

(ii) Calculate the revenue.

[1]
(iii)

Calculate the percentage of gross profit to revenue. The calculation should be to two
decimal places.

[2]

(iv)

Calculate the percentage of profit for the year to revenue. The calculation should be to
two decimal places.

[2]

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(b) Suggest two reasons why the percentage of gross profit to revenue is higher than it was in
the previous financial year.
1

2

[2]
(c) Suggest two reasons why the percentage of profit for the year to revenue is lower than it was
in the previous financial year.
1

2

[2]
After the preparation of the draft financial statements for the year ended 31 July 2016 the
following errors were discovered.
1

No entry had been made for bank charges, $110.

2

Rent receivable, $780, had been recorded as $870.

3

The total of a page of the wages account, $10 050, had been carried forward as $10 500.

4

A credit customer who owed $500 had sent a cheque for 75 cents for each dollar owed. The
balance should have been written off as a bad debt.

5

The provision for doubtful debts, $650, should have been adjusted to 2% of the trade
receivables who owed $30 800.

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REQUIRED
(d) Complete the following statement to show the effect on the draft profit for the year of
correcting errors 1–5. Calculate the corrected profit for the year.
The first correction has been completed as an example.
Daniel
Statement of corrected profit for the year ended 31 July 2016
$
Draft profit for the year before corrections
Increase
in profit
$

41 000
Decrease
in profit
$

Error 1

110

Error 2

Error 3

Error 4

Error 5

Corrected profit for the year
[9]
[Total: 19]

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