0452/O/N/17 Examiner Report – Accounting Oct/Nov 2017

Cambridge Accounting (0452) examiner report, Oct/Nov 2017 — 0452/O/N/17, file 0452_w17_er.pdf.

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Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/11
Paper 11

Key messages
Candidates need a good understanding of the principles of double entry. This includes using clear narratives
which in the case of ledger accounts needs to be the name of the other account involved.
If a candidate does not use the allocated space they should clearly state which page they have attempted
the answer on.
It is better to cross through and re-write incorrect material rather than attempt to overwrite on the top of the
previous answer.
Candidates should avoid the use of inappropriate abbreviations such as ‘bbd’ for ‘balance’ in ledger accounts
or ‘PDD’ for ‘Provision for Doubtful debts’ in financial statements.
Candidates are expected to be familiar with International Accounting Terminology and avoid the use of ‘old’
terminology such as ‘stock’ and ‘net profit’ etc.
General comments
All the questions on the paper were compulsory and covered various topics on the syllabus.
Overall, the paper was well attempted by a number of candidates.
Comments on specific questions
Question 1
Generally (c), (e), (f), (g), (h), and (j) were well answered. Parts (a), (b), (d) and (i) warrant more detailed
comments.
(a)

There was some confusion here over the purpose of accounting. The other three options all relate
to book-keeping activities whereas the calculation of profit is a purpose of accounting.

(b)

The trade discount needs subtracting first so 30% from $1000 is $700. This will be the amount
listed as the sale. What the customer will actually pay is $630 after the cash discount but this is not
the question.

(d)

If Ann receives an amount for a service before she has actually provided it, option 2, then this
money does not actually belong to her until the service is provided. She effectively owes the
customer and so it is categorised as a current liability with any ‘other payables’ such as option 3 the
value of a service which has been received but for which no payment has yet been made.

(i)

There are several approaches to this question. The most straightforward is to subtract the inventory
increase of $400 from the purchases of $3400 to leave $3000. Then divide this by 0.7 to represent
the margin of 30% which is $4286 to the nearest dollar.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
Question 2
(a)

Answers varied with some candidates simply referring to capital or producing the formula which
was not required. Some candidates referenced separate identity or the owner’s account without
making the link that it is either money owed to the owner or the funds contributed by the owner.

(b)

There were a good range of marks on this question. There were some candidates who used the
phrase double entry rather than duality.

(c)

The most common incorrect response was ‘purchases ledger’.

(d)

This was not answered well with many candidates answering partnerships or clubs and societies.

(e)

Generally well answered although some candidates answered with both assets and liabilities or
wrote current assets rather than simply assets.

(f)

There were many good answers. It was necessary for candidates to clarify who would issue each
document. Incorrect answers gave reasons connected with different documents or were incorrect
because direction of travel for document was wrong. Sometimes the definition of the statement of
account could have been for an invoice and was not clear that it is a summary of transactions and
not simply a demand for payment.

(g)

This was answered reasonably well.

Question 3
(a)

This was answered reasonably well. However, some responses were vague or described the bank
reconciliation statement. Other candidates could have been describing the cash book and did not
emphasise the bank view.

(b)

This was well answered by many candidates. Common errors included poor narrative for Insurance
$320 (just stating error), narratives stating credit transfer or standing order but not the account
affected etc.

(c)

Stronger responses usually gained full marks. Some candidates used poor narratives for the cash
balance and bank statement balance, or did not use the updated balance from the cash book or
showed a balance as a negative when it was actually positive. Some candidates attempted to use
a ledger account layout.

(d)

This was not answered well with many candidates simply describing loans and overdrafts and not
noting differences. Some repeated themselves by stating that an overdraft is short term and a loan
usually long term and then that overdrafts are current liability and loans are usually non-current
liabilities. Many stated that overdrafts had no interest, there may be a daily charge instead but
overdrafts are not completely fee free.

(e)

This question was generally well answered.

Question 4
(a)

A common error was to use accumulated depreciation to calculate the percentage rather than the
change between the two years. Candidates often calculated two percentages and then were
unsure of which to use in 4(c).

(b)

Very varied answers. Common errors included listing too many day books, referring to ledger
accounts and to ledgers instead of day books.

(c)

In this question it was necessary to use the depreciation rate calculated in 4(a) to calculate
depreciation using the straight-line method. Weaker candidates did not realise this or used the
depreciation rate incorrectly. Errors included starting with incorrect figures for fixtures and fittings at
cost 2015 and 2016, not using their own calculated depreciation rate, attempting to use the
reducing balance method and not deducting $4000 for fixtures and fittings sold for the final figure.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(d)

Mixed responses here with many using depreciation instead of income statement and the word
provision was often missing.

(e)

Some candidates used the non-current asset account, rather than the disposal account.

(f)

This was well answered. Some candidates referred to the reducing method rather than the
reducing balance method, there was some confusion over the net book value and often for the
revaluation method there was no mention of the need to adjust for purchases and disposals in
relation to the calculation.

(g)

Mostly correct but some candidates thought the number plates were revenue expenditure.

(h)

This was answered poorly as many candidates stated sale of non-current assets rather than the
proceeds from the sale of non-current assets. The other common error was to state a revenue
receipt instead of a capital receipt.

Question 5
(a)

Very few candidates performed well on this question. There were frequent reversal of entries and
inclusion of irrelevant entries. Some candidates did calculate $100 for purchases but then reversed
the entry.

(b) (i)

Stronger responses frequently gained full marks. Some candidates confused the table with far too
many entries, there was lack of recognition of the effect of errors on profit, incorrect totals for each
error and miscalculations of corrected gross profit using own figures.

(ii)

It was necessary here to use the corrected gross profit from 5(b)(i) as the starting point. Some
candidates wasted time by attempting a new calculation to ascertain gross profit rather than using
what they had already calculated. Some missed out depreciation or included the accumulated
depreciation which not what they had calculated earlier and resulted in the loss of own figure for
the profit for the year.

(c)

There was a wide variation of marks with stronger responses gaining 8–10 marks. Some
candidates incorrectly attempted a trial balance or an income statement, depreciation was recorded
as $3000 rather than the $4500 it should be and bank figure of $600 credit was included as a
current asset rather than a current liability. Inventory and trade receivables were not always
adjusted. There were various issues with the capital section with many candidates not showing the
additional capital of $2000 as a separate entry, not adjusting the drawings and then not using the
profit for the year from 5(b)(ii).

Question 6
(a)

This was answered reasonably well. Some candidates incorrectly referenced companies or
shareholders. There had to be the essence of shared ownership or view to profit rather than just
working together.

(b)

Many candidates answered this question correctly. The most common error was the incorrect
calculation of interest on capital for Amina due to her change in capital during the year. There were
also several aliens included such as interest on drawings, current or capital account balances or
drawings. Some candidates started with an incorrect profit or did not share the profit correctly
according to the profit share.

(c)

There was a wide range of marks here with weaker responses gaining very few marks. In terms of
the capital account there were often alien items such as drawings and interest on capital and the
narrative for the $10 000 cash was sometimes incorrectly labelled as bank. With the current
account there were often entries missing, capital account balances were present and the balances
b/d were incorrectly labelled. Items were sometimes reversed in both ledger accounts.

(d)

Some candidates clearly demonstrated the impact on the financial statements by making the link to
the increase in non-current liabilities and the impact on the increased expenses for the loan interest
causing profit for the year to fall. There were also some vague answers.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(e)

There were some very vague answers to this question which sometimes repeated the question, or
made an attempt at a point but then little or no development. Many candidates cited the unfairness
of the actions of Samara but they were unable to pinpoint the impact on both the partnership and
Amina.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/12
Paper 12

Key messages
As always, when preparing ledger accounts labels such as BBD and BD are unacceptable. Ideally balance
b/d or c/d should be written.
Labelling items is extremely important when preparing income statements or statements of financial position.
Again, abbreviations such as COGS for cost of goods sold or GP and NP for gross profit and profit are not
acceptable.
Candidates should always indicate where they may have re-written an answer in a different section of the
answer booklet or on additional pages.
General comments
The paper was well attempted by a number of candidates.
Comments on specific questions
Question 1
This question comprised ten multiple choice items. There were only a few instances where candidates made
no attempt at a particular answer.
Specific questions caused more difficulty than others. They are discussed below.
(d)

A question relating to value of inventory. Many candidates did not appear to understand the
principle of valuing inventory at the lower of ‘cost’ or ‘net realisable value’. The adjusted valuation
for the 3 damaged radios seemed to prove challenging. In this situation the 3 damaged radios need
to be valued at ‘net realisable’ value but with the cost of the repair deducted.

(g)

In questions concerning accounts where some information is given and the requirement is to find a
missing figure candidates should be encouraged to prepare a ‘T’ account to enable the extraction
of the missing figure.

(h)

More positive responses would have been obtained if candidates had worked through this question
logically by preparing the manufacturing account using opening and closing inventories with a
$4000 difference to extract cost of production and then transferring this cost to the trading account.
This figure should then be used with opening and closing inventories with a difference of $9000 to
extract the cost of sales.

Question 2
(a)

Generally this question was very well attempted with only a small number of candidates attempting
to explain double entry rather than the principle.

(b)

This question was very well attempted by most candidates.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(c)

This question was also very well answered. Where there were incorrect answers it was not clear
whether the candidate understood the adjustment for prepayments or did not read the question
correctly.

(d)

Most candidates were able to state a purpose of accounting with the most common answer offered
‘to prepare financial statements’ or ‘to calculate profit’.
However some gave a definition of book-keeping for example ‘to record business transactions’.

(e)

On the whole this question was well attempted. A small number offered the financial statements
prepared by the organisations and some gave the type of business, e.g. service or trading for the
first and last item.

(f)

This was generally well attempted with some candidates offering the cash book for the financial
statement.

(g)

This was addressed very well by many candidates. Some candidates only gave half the answer
e.g. the income statement calculates profit the statement of financial statement ‘doesn’t’. Other
candidates made reference to capital and revenue expenditure or the statement of financial
position deals with the financial position.

(h)

Most candidates understood their answers should be related to a club or society. Where this was
not understood common answers included the owner, the government or a shareholder.

(i)

The most common answers were time factor or non-financial aspects. Many, however, referred to
understandability, relevance and the incidence of errors and omissions.

Question 3
(a)

It was encouraging that many candidates gave very valid reasons as to why a trader keeps books
of prime entry with the most common answer ‘to reduce the number of entries in the ledger’.
However, a number of candidates described what a book of prime entry is, e.g. a list of
transactions and not the purpose of maintaining a book of prime entry. Candidates must read the
questions carefully as the question asked ‘why’ a trader maintains books of account not ‘what’ are
books of account.

(b)

On the whole candidates answered the question well.

(c)

Some candidates did not understand the term source document and referred to purchases journal
or purchases returns journal. The document for May 4 was often considered to be a debit note and
the issuer referred to as either the supplier or customer. Candidates should be encouraged to use
the paper to make notes of what is actually happening in the question.

(d)

Most candidates brought down the correct balances on May 1 but then followed this by entering all
the invoices or credit notes individually having been given the totals in the journals in the question.
There was also a lead into this question in (a) where one reason for maintaining books of prime
entry is ‘to reduce the number of entries in the ledger’. However, many candidates correctly
transferred the total to the income statement. A small number of candidates showed a balance
carried down instead of the transfer despite this being asked specifically.

(e)

This question was reasonably well attempted with a number of candidates awarded full marks.
Common errors included omitting the purchase on May 19 so the brought down balance was $295.
It was pleasing to see that a large number of candidates calculated the bank payment and discount
received correctly.

(f)

Many candidates, in this question, referred to debit and credit transactions and the need to balance
the account. Those candidates that did refer correctly to ledger balances then did not refer to when
the trial balance is extracted from the books of account.

(g)

Candidates were confident in naming errors that do not affect the balancing of the trial balance with
the most common being omission and commission. Explanations of the errors were mixed and in
many cases it was not clear whether it was wrong account due to error of principle or commission.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(h)

On the whole this question was not well attempted. Many candidates referred to the advantages of
control accounts rather what they are used for and how they help in locating errors.

Question 4
(a)

This question seemed to prove to be the most challenging of the paper. However, there were many
candidates that did achieve full marks. Many chose to start the question from 2014 as a whole
transfer of $2163 to the income statement in order to bring down the balance on 1 January 2015.
Many candidates achieved the transfer to income statement for 2015 but did not adjust the
calculation for 2016 by the bad debt of $1400 so a common answer for the balance brought down
at 1 January 2017 was $1666. Weaker responses included the trade receivables and the bad debt
in the account. It was disappointing that a small number of candidates misnamed the transfer to
income statement as ‘provision’.

(b)

Most candidates understood the year on which they had to comment. Many chose to say that
because the rate of provision decreased then profit increased rather than looking at the actual
figure. However in many cases it was not possible to comment as (a) had not been completed or
were unable to interpret was they had done in (a).

(c)

This was very well attempted by the majority of candidates. There were some reversals and a few
trade receivables instead of Eddie.

(d)

Most candidates answered this question well. Common mistakes were general ledger, cash book,
sales ledger and sales journal.

(e)

Many scored well here using their own figures from (a). However, many candidates, again,
struggled to interpret what they had produced in (a) and included the balance brought down on
1 January 2017 as the transfer to the income statement. A small number of candidates attempted
to produce an extract of the statement of financial position rather than the income statement.

(f)

This was very well answered.

Question 5
(a)

This question was answered very well in the majority of cases. Common errors were in omitting
receipts from the share issue and hence an answer of $438 000 overdrawn and other candidates
omitted the share receipts and the capital purchases resulting in an answer of $17 000.

(b)

Candidates were clearly well prepared in the preparation of accounts and although only a small
number were awarded full marks. Some candidates omitted the adjustments for trade receivables
and payables. The calculations for the provision for depreciation of the three non-current assets
were very well addressed by many candidates.

(c)

Similarly the preparation of the statement of financial position was very well answered. Some
candidates omitted the bank balance calculated from (a). Presentation of the non-current assets
was good. Weaker candidates omitted the prepayment in the current assets and the equity section
of the statement.

(d)

Only a minority of candidates could name the statement of changes in equity with many referring to
profit and loss appropriation account.

(e)

Candidates must read the question carefully as many gave how each was calculated and what
each measure represented rather than why each was higher or lower than the industry average.
There was often reference to lower sales activity or higher purchases rather than being specific
about lower selling prices or higher purchase prices.

Question 6
(a)

This was very well answered with only a small number of candidates misreading the question and
rather than how working capital is calculated gave how working capital ratio is calculated.

(b)

This was also very well answered. Weaker candidates included the non-current assets in the
numerator which was disappointing.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(c)

Candidates were very confident in this question with no problem naming a suitable liquidity ratio.

(d)

This question proved challenging for a large number of candidates with many marks not awarded
due to either no development of their suggestions or repetition of their answers. In the main
candidates were only able to suggest two benefits of maintaining sufficient working capital.
Candidates should be encouraged to look at the figures they are dealing with, i.e. the figures for
current assets and liabilities given in the question and their calculation from (b) to support their
reasons.

(e)

Only few candidates were awarded full marks for this question. In questions where changes
concerning the statement of financial position are involved candidates should be encouraged to
write out a basic statement of financial position, apply the changes asked in the question which
should result in candidates being able to give a more informed answer.

(f)

This question was generally well answered.

(g)

There were some good answers to this question, the most common being to ‘know the return on
$100 of capital invested’. Other candidates were too vague and offered ‘to know the profitability’.
Candidates, again, must be encouraged to read the question more than once to understand what is
being asked. The question was ‘why’ would Tyler calculate his return on capital employed not
‘what’ is calculated.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/13
Paper 13

There was some confusion here over the purpose of accounting. The other three options all relate
to book-keeping activities whereas the calculation of profit is a purpose of accounting.

(b)

(d)

(i)

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
Question 2
(a)

(b)

There were a good range of marks on this question. There were some candidates who used the
phrase double entry rather than duality.

(c)

The most common incorrect response was ‘purchases ledger’.

(d)

This was not answered well with many candidates answering partnerships or clubs and societies.

(e)

Generally well answered although some candidates answered with both assets and liabilities or
wrote current assets rather than simply assets.

(f)

(g)

This was answered reasonably well.

Question 3
(a)

(b)

(c)

(d)

(e)

This question was generally well answered.

Question 4
(a)

(b)

Very varied answers. Common errors included listing too many day books, referring to ledger
accounts and to ledgers instead of day books.

(c)

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(d)

Mixed responses here with many using depreciation instead of income statement and the word
provision was often missing.

(e)

Some candidates used the non-current asset account, rather than the disposal account.

(f)

(g)

Mostly correct but some candidates thought the number plates were revenue expenditure.

(h)

Question 5
(a)

(b) (i)

(ii)

(c)

Question 6
(a)

(b)

(c)

(d)

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(e)

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/21
Paper 21

Key messages
Candidates should read through a question very carefully before attempting an answer. This ensures that an
important piece of information is not overlooked and that instructions are followed precisely. A factually
correct statement, which is not the answer to the question being asked, cannot be awarded credit.
Where appropriate, candidates are advised to provide supporting calculations. This ensures that some credit
may be earned even though the final answer may be incorrect.
The spaces provided on the question paper for candidates’ answers should be adequate. Sometimes it may
be necessary for a candidate to cross out all or part of their answer and provide another answer elsewhere
on the question paper. It is very important that candidates indicate that this has been done. A note ‘Please
refer to Page ’ or ‘Continued on page ’ would ensure that this additional work is not overlooked when the
script is being marked.
Candidates should avoid the use of inappropriate abbreviations such as ‘b/d’ for ‘balance’ in ledger accounts
and ‘PFDD’ for ‘Provision for doubtful debts’
Candidates are expected to be familiar with International Accounting Terminology and avoid the use of ‘old’
terminology such as ‘stock’ and ‘net profit’ etc.
It is also important that candidates present their figures clearly and that that their written work is legible.
General comments
All the questions on the paper were compulsory and covered a wide range of syllabus topics. Most
candidates attempted to answer all questions and were familiar with the correct format of financial
statements.
It is important that candidates present accounting statements in the correct format and that appropriate
descriptions are used in both financial statements and in ledger accounts. The written answers produced in
some of the narrative questions were vague and lacked clarity. Accounting is a subject in which precision is
extremely important.
All the day to day records of a business are based on double entry bookkeeping. Candidates must have a
good knowledge of double entry and must be able to apply this to the various scenarios. In addition to the
figures in the account, attention must be given to the words entered in the details column and to the dates.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
Comments on specific questions
Question 1
(a)

Double entry book keeping continues to prove challenging to candidates. This question revealed
some weaknesses in candidates’ knowledge of this topic.
Many candidates used incorrect wording in the details column particularly in the rent account.
Common errors included:
•
•
•
•
•
•
•
•
•

Not appreciating that accounts should be closed by balancing, transferring to another ledger
account, or transferring to income statement.
In Brian’s account details for the cash received was often given as ‘bad debt’, ‘cash’ or even
‘balance carried down’.
Reversal of the entries in the bad debts recovered account
Provided incorrect calculations and details for the entry for drawings in the rent account
Not recognising that the balance on the drawings account should be transferred to the capital
account; it regularly remained as a closing balance
Included the closing balance carried down on the debit side of the commission receivable
account resulting in an incorrect value transferred to the income statement. Some candidates
also omitted to bring down the closing balance.
Incorrectly posted the depreciation to the debit side of the provision for depreciation account.
Depreciation charge based on the straight line method rather than the reducing balance
method.
Mislabelled the amount transferred to the income statement as depreciation.

(b)

This was well answered with many candidates earning full marks.

(c)

This was reasonably well answered with many candidates earning the one mark available. Some
candidates however, simply wrote ‘based on past experience’ which was insufficient as they did not
clarify ‘what’ past experience they were referring to.

(d)

A common error was to reverse the entries. Other incorrect answers included trade receivables
instead of income statement, bad debts written off and bad debts recovered in lieu of provision for
doubtful debts.

(e)

In this question, many candidates only earned one mark as they only focused on profit not being
overstated and ignored the trade receivables/current assets. Where candidates did write about the
assets they did not specify which type of assets would be affected.

(f)

Many candidates earned one mark as they commented that ‘expenses are matched with revenue
generated in the same financial year’ but only the better candidates earned the second mark and
these were in the minority. Several candidates incorrectly stated ‘expenses are matched against
profit for the year’.

(g)

Many candidates knew at least one way in which a trader could reduce the amount of bad debts.
The better candidates were able to earn two marks. Candidates were not always specific enough
in their responses and lost valuable marks as a consequence. Common errors included:
•
•
•
•
•

‘Fix a credit limit’ but they did not mention that, to be effective, this had to be done ‘for each
customer’.
Duplicating their response i.e. ‘reduce credit sales’ and ‘sell on a cash basis’.
‘Charge interest’ but didn’t clarify that this would apply to late payments.
‘Issuing invoices and monthly statements’ but didn’t clarify that this needed to be done
promptly to be effective.
‘Extend payment period’.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
Question 2
(a)

Candidates were asked to identify where items would appear in the sales ledger control account
and to indicate if the item would not appear. There were many good answers. The items often
incorrectly treated were the cash received from credit customers, trade discount allowed to credit
customers and the provision for doubtful debts.

(b)

Many candidates were unable to correctly name the books of prime entry. Common errors
included:
•
•
•

(c)

Purchases returns ledger, sales returns journal and credit note received for ‘returns to credit
suppliers’
Instead of cash book, candidates wrote general journal, purchases journal and general ledger
Instead of journal for the last two entries, candidates wrote, sales journal, purchases journal
and cash book.

Many candidates found it difficult to state the meaning of a contra entry in connection with control
accounts and to provide a reason for making such an entry.
Some candidates confused the meaning with the reason and vice versa .
A significant number of candidates described the contra entries made in a cash book even though
the question specifically referred to contra entries in connection with control accounts. Others
incorrectly stated that contra entry was necessary ‘to ensure no fraud had been committed’ or ‘to
reduce number of payments or entries’.

(d)

Most candidates made a reasonable attempt at this question. However, candidates should ensure
their answers include enough detail. When asked for a reason why the purchases ledger control
account had a debit balance, it is not sufficient to write that the company returned goods. The
candidate needs to make it clear that the returns were after the balance was paid.
Some candidates incorrectly wrote about customers paying in advance suggesting they were
referring to a sales ledger account.

(e)

The majority of candidates were able to correctly state the formula for the trade receivables
collection period and calculate it.
However, some candidates lost the mark because their formula multiplied by 30 or 100 or simply
omitted the 365. Others incorrectly identified their denominator as sales (not specifying credit
sales) or they used revenue as the numerator.
Candidates performed the calculation well but had not read the question carefully and did not round
up to the next whole day; the most frequent incorrect answer was 40 days. Alternatively candidates
incorrectly calculated their collection period as 33 days where they had used $229 000 (total sales)
as the denominator.

(f)

Candidates were asked to state how the trader might improve their trade receivables collection
period.
This was reasonably well answered. However, some candidates thought that ‘reducing credit
sales/sell on cash basis’ could improve the collection period.

(g)

Most candidates were able to correctly state the formula for the trade payables payment period but
there were candidates who incorrectly multiplied by 30 or 100 or completely omitted the 365.
Alternatively, some candidates did not specify ‘credit’ purchases as their denominator or they used
gross profit as the numerator.

(h)

Most candidates found it difficult to make appropriate comments on the reaction of the trader’s
credit suppliers to the change in the ratio. Answers were often limited to a basic comment about
credit suppliers being unhappy or dissatisfied with the change in the ratio.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
Question 3
(a)

This part was generally very well answered with many candidates correctly calculating the
subscriptions for the year and earning all the available marks. A minority of treated the accrued and
prepaid subscriptions incorrectly.

(b)

This was well answered by many candidates. Common errors were:
•
Entered the amounts for the purchases and revenue of the sportswear without netting them to
show the profit for the shop.
•
Entered the open day expenses and receipts as two separate amounts rather than show them
as a net expense.
•
Did not use their answer from (a) for their subscriptions figure and incorrectly used $12 540
(amount of receipts in the year).
•
Depreciated the equipment based on NBV rather than cost ($5120).
•
Omitted depreciation and loan interest entirely from their expenses.
•
Deducted insurance prepaid at the start of the year rather than adding it to their insurance
figure.
•
Included extraneous items in the income and expenditure account, such as the purchase of
new equipment $8000.
•
Incorrectly labelled the deficit for the year as ‘loss’ or ‘profit’ or ‘accumulated fund’.

(c)

Candidates were required to prepare the statement of financial position. Very few candidates
scored the maximum marks available. Common errors included not adjusting the cost of equipment
for the purchase made during the year and omitting to add $4400 to the depreciation charge
calculated in 3(b). Subscriptions owed of $240 were often omitted from current assets. The
accumulated fund was sometimes mislabelled as capital and candidates did not realise that the
opening balance should have been calculated from the information given in the question and
incorrectly used their own ‘balancing’ figure. Current liabilities were often omitted altogether. The
bank was often shown in current assets as candidates did not appreciate that the closing balance
on the receipts and payments account represented an overdraft.

(d)

Stronger responses were able to explain why the outstanding loan interest should not be credited
to the loan account. However, some candidates stated that the loan interest accrued was a liability,
omitting the word current. Some candidates’ answers were restricted to a comment about interest
and made no mention of the loan.

Question 4
(a)

Most candidates were able to correctly calculate the current ratio. However, some candidates did
not correctly round to two decimal places as required. The most common incorrect answer was
0.69:1 where the numerator and denominator were reversed. A few candidates gave 0.57:1 as their
answer which was the quick ratio.

(b)

Most candidates earned one mark on this part with the majority stating that current assets were
greater than current liabilities. Some candidates did not specify ‘current’ and only wrote about
assets and liabilities and did not get a credit.

(c)

Most candidates were able to correctly calculate the quick ratio. The most common incorrect
answer was 0.69:1 where the candidates only took trade receivables and trade payables into
account.

(d)

This was well answered with most candidates earning at least one mark and many earning two
marks. Some candidates incorrectly thought that ‘less sales in the year’ was a valid reason for the
change in the quick ratio.

(e)

Another well answered question but some candidates did reverse the movement in the trade
payables and trade receivables so lost the marks. In addition, some candidates wrote about a
decrease in current assets without specifying which current assets.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(f)

Candidates were asked to complete a table showing how two transactions would affect the current
and quick ratios. For ‘obtaining a short-term loan’ most candidates incorrectly thought this would
decrease both the current ratio and the quick ratio not appreciating that both current assets and
current liabilities remained unchanged by the transaction due to the bank overdraft.

(g)

Most candidates were able to correctly state the formula for the calculation of the rate of inventory
turnover. Some candidates reversed the equation or multiplied by 365 or 100. Other incorrect
answers included revenue divided by average inventory and gross profit divided by average
inventory.

(h)

A common error was using $95 250 as the denominator because they had added the $15 500
rather than deducting it to establish their opening inventory.

(i)

This was reasonably well answered. Some candidates knew that sales activity and levels of
inventory would affect the rate but incorrectly wrote ‘higher’ sales and ‘lower’ inventory levels and
many incorrectly mentioned cost of sales.

Question 5
(a)

Candidates were asked to calculate the return on capital employed. Many candidates found this
challenging. A variety of figures were used as the denominator such as the debentures ($75 000),
share capital ($500 000) instead of capital employed. In addition, there were a few candidates who
divided $43 000 by $600 000 but did not multiply by 100 so the answer was not expressed as a
percentage.

(b)

The most common incorrect answer was 25%, calculated either by $10 000 divided by $400 000 or
$25 000 divided by $100 000.

(c)

This another difficult challenging question for the candidates with few of them earning the
maximum three marks available. Candidates confused the dates that the dividends were paid and
the years that they related to. Common incorrect answers included $15 000 divided by $600 000,
$40 000 divided by $600 000 and $70 000 divided by $600 000.

(d)

Many candidates earned full marks available for this. Where candidates made errors, these
included using the profit at 1 October $43 000 rather than $71 000 at 30 September 2017,
incorrectly calculating the debenture interest ($71 000 × 0.03, rather than $75 000 × 3%) and adding
the debenture interest to the profit figure ($71 000 + $2250).

(e)

There were some very well presented and correct answers for the statement of changes in equity.
However, there were also some very poor answers with the most common errors being:
•
•
•
•
•
•

The use of dates instead of narratives.
The use of incorrect narratives (retained profit instead of profit for the year).
Figures in incorrect columns.
The inclusion of erroneous items, namely debentures, debenture interest and proposed
dividends.
Reductions to equity incorrectly shown as positive figures.
Incorrectly totalled columns.

(f),(g)

This was reasonably well answered except some candidates omitted to mention ‘fixed’ when
writing about interest. Some candidates stated that a debenture is a loan without specifying that it
is ‘long term’. Also some candidates were confused as to which earned interest and which earned
dividend

(h)

Few candidates earned full marks available for this question. Some candidates simply placed a tick
in the increase and decrease columns even though the example provided showed a value. The
effect on non-current liabilities was often a tick in the no effect column as was the effect on profit on
the year. Some candidates thought that profit would be decreased by $300 000, the value of the
debentures, rather than by the interest payable. And the effect on equity was often shown as
$300 000 in the increase column as some candidates did not appreciate that debentures are a
long-term liability and not part of a company’s equity.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers

ACCOUNTING
Paper 0452/22
Paper 22

Key messages
Candidates are reminded of the importance of reading through a question very carefully before attempting an
answer. This ensures that an important piece of information is not overlooked and that instructions are
followed precisely.
Candidates are advised to provide supporting calculations where appropriate. This ensures that at least
some credit may be earned even though the final answer is incorrect.
The spaces provided on the question paper for candidates’ answers should be adequate. Sometimes it may
be necessary for a candidate to cross out all or part of their answer and provide another answer elsewhere
on the question paper. It is very important that candidates indicate that this has been done. A note ‘Please
refer to Page«’ or ‘Continued on page«’ would ensure that this additional work is not overlooked when the
script is being marked.
Candidates should avoid the use of inappropriate abbreviations such as ‘bbd’ for ‘balance’ in ledger accounts
or ‘PDD’ for ‘Provision for Doubtful debts’ in financial statements.
Candidates are expected to be familiar with International Accounting Terminology and avoid the use of ‘old’
terminology such as ‘stock’ and ‘net profit’ etc.
General comments
Candidates are expected to present accounting statements in the correct format and use appropriate
description in both financial statements and in ledger accounts. The written answers produced in some of the
narrative questions were vague and lacked clarity. Accounting is a subject in which precision is extremely
important.
It is essential that candidates have a thorough knowledge of double entry book-keeping and can apply this
knowledge to the various scenarios on the question paper. In addition to the actual entries in the account,
attention must be paid to the words entered in the details column, the dates and the order of the items.
Attention must be paid to handwriting to ensure that the words and figures are legible.
Comments on specific questions
Question 1
(a) (i)

(ii)

Candidates were required to select the appropriate transactions and enter them in a petty cash
book. There were some good responses. A few candidates incorrectly also included transactions
which related to the main cash book. The most common error was to omit the restoration of the
imprest amount on 1 September.
A three column cash book had to be prepared. This should have been a straightforward question.
Whilst there were some good responses, weaker responses contained avoidable errors. The
restoration of the petty cash imprest on 1 September was often omitted from the bank column. The
calculation of the two cash discounts proved challenging for a significant number of candidates.
Candidates are reminded of the importance of showing correct details. The name of the account in
which the double entry will be made should appear in the details column, so details such as

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
‘dishonoured cheque’ and ‘office machinery’ were not acceptable. Those candidates who did not
leave $40 of the amount received from sales in the cash column showed an ‘overdrawn’ cash
balance at the month-end, which, like the petty cash, is not possible. A small number did not take
the opening balances into account when calculating the closing balances
(b)

The bank statement balance was provided together with details of items which did not appear on
the bank statement. Candidates were required to prepare a statement to reconcile the bank
statement balance with that shown in their cash book prepared in Part (a) (ii). This proved to be a
challenging task for many candidates. Many candidates incorrectly treated the overdrawn bank
statement balance as a positive figure, which often resulted in incorrect treatment of the
adjustments. Once again, incorrect descriptions were provided. For example the cheque not
credited was incorrectly labelled (this cheque was one which was not presented). A bank
reconciliation statement should be presented in the form of a statement as it is not a ledger
account.

Question 2
(a)

Using information provided, candidates were required to prepare a manufacturing account. Some
candidates produced very good answers but a small number seemed somewhat unprepared and
attempted an income statement or even a statement of financial position. It is important that items
are included in the correct position. For example the purchases should be adjusted for returns, then
the carriage inwards should be added and then the closing inventory should be deducted. It is
incorrect to insert the closing inventory before the purchases and the related adjustments.
The significant figures in a manufacturing account such as cost of materials consumed, prime cost
and cost of production should be labelled. A number of candidates incorrectly included the
supervisors’ wages in the calculation of the prime cost and included extraneous items such as
carriage outwards in the overheads. The two items of depreciation should have been labelled as
‘depreciation’ accompanied by the names of the assets concerned.

(b)

Candidates were required to use the cost of production calculated in Part (a) together with
information in the question, and calculate the cost of sales. This proved challenging task for many
with extraneous items such as sales being included in the calculation.

(c)

One disadvantage of a bank loan had to be stated. The majority of candidates gained the available
mark. The imposition of loan interest was the most popular answer.

(d)

Two other ways of raising long-term funds had to be stated. Many correctly suggested introducing
additional capital, taking a partner or mortgaging non-current assets. Those candidates who
suggested using shares and debentures did not seem to appreciate that the sole trader’s business
would have to be converted to a limited company before this was possible. A number of candidates
incorrectly suggested short-term measures such as reducing expenses and increasing selling
prices. Such measures are not suitable for raising long-term funds for expansion.

Question 3
(a)

Using the information provided, a commission receivable account had to be prepared. The wellprepared candidates earned high marks with the items on the correct sides of the account, correct
details and dates being provided. A significant number of candidates reversed the account. Other
errors include not transferring the income for the year to the income statement and not bringing
down a balance on the first day of the next financial year.

(b)

Candidates were required to prepare a rent account from the information provided. Once again
attention needed to be given to detail and dates. Again there were a number of reversed accounts.
Those candidates who read the question carefully correctly debited the rent account with two
payments of $4800. The expense for the year should have been transferred to the income
statement and a balance carried down to the debit of the account to state the following financial
year.

Cambridge International General Certificate of Secondary Education
0452 Accounting November 2017
Principal Examiner Report for Teachers
(c)

The entries in a stationery account had to be explained. Many of the answers were somewhat
vague. For example the explanation of the balance was ‘this is the balance’ was not adequate: it
should have been stated that this was the inventory of stationery held at that date. An explanation
of the item on 8 February should have stated that this recorded the purchase of stationery on credit
from XY Limited. The explanation of the drawings entry often incorrectly referred to the owner
withdrawing goods or cash. Many candidates correctly named the account where the double entry
would be made but did not state whether that entry would be a debit or a credit.

(d)

The expense for the year for stationery had to be calculated. Many candidates correctly stated the
figure of $205 as the expense for the year. A common incorrect figure was $281, which had not
been adjusted for the closing inventory of stationery of $76.

(e)

Most candidates correctly identified the current assets as being the section of the statement of
financial position in which the balance of the stationery account would appear.

(f)

A table had to be completed to indicate the effect of six errors on the gross profit and the profit for
the year. The first item was completed as an example. Items two, five and six seemed to prove
challenging. If the opening inventory is overvalued both the gross profit and the profit for the year
will be understated. Including carriage in the expenses will mean that the gross profit is overstated,
but will not have any effect on the profit for the year. Adding purchases returns to the purchases
means that the cost of sales is overstated so the gross profit and the profit for the year are both
understated.

Question 4
(a)

Using information provided, candidates were required to prepare an income statement for a sole
trader. There were some very good answers. As with Question 2(a) attention should have been
given to the presentation. Items were often shown in the wrong order, for example the closing
inventory was incorrectly shown before the purchases, and carriage inwards was incorrectly
inserted after the closing inventory. Subtotals such as net revenue, net purchases and cost of sales
were often omitted. In the expenses section it was common to find the bad debt was omitted. There
were several incorrect calculations of depreciation and loan interest. A number of candidates
included extraneous items such as office equipment and loan. Candidates are reminded of the
benefit of showing calculations for items which require adjustment such as loan interest and rates
and insurance.

(b)

Candidates were required to explain how the accruals (matching) principle was applied in the
preparation of the income statement and to provide a suitable example. Most candidates
understood that revenue should be matched with expenses but did not qualify this by adding ‘in the
same financial year’. Many candidates correctly offered the creation of a provision for doubtful
debts and the adjustment for loan interest accrued as examples.

(c)

An explanation was required of how the business entity principle had been applied and the
provision of a suitable example. Many candidates understood that the business is regarded as
being separate from the owner (though a few did state they were separate legal entities). Adjusting
the rates and insurance for the personal use was usually correctly identified as the example of this
application of this principle.

Accounting (0452) · Oct/Nov 2017 · Examiner report

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