Accounting (0452) · Oct/Nov 2017 · Question paper 11

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

* 4 8 9 8 1 9 9 4 1 5 *

0452/11

ACCOUNTING

October/November 2017

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 19 printed pages and 1 blank page.
DC (SC) 153408
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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 (3) in the box to indicate the correct answer.
1

(a) Which statement describes a purpose of accounting?
A

to check the arithmetical accuracy of the double entry

B

to ensure that all transactions are recorded

C

to know the balances on individual customers’ and suppliers’ accounts

D

to provide a calculation of profit

[1]

(b) A credit customer buys goods with a list price of $1000. Trade discount is 30% and cash
discount is 10%.
Which amount is entered in the customer’s account to record the sale?
A

$600

B

$630

C

$700

D

$900

[1]

(c) Where is discount allowed recorded?
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]

(d) Ann’s statement of financial position includes the following:
1

an amount paid by Ann for a service which has not yet been received

2

an amount received by Ann for a service which Ann has not yet provided

3

the value of a service received by Ann for which payment has not yet been made

Which item(s) are included in ‘other payables’?
A

1 and 2

B

1 only

C

2 and 3

D

3 only

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(e) Hiro wishes to increase his provision for doubtful debts at the end of the year.
How does he record this increase?
debit entry

credit entry

A

bad debts

provision for doubtful debts

B

provision for doubtful debts

bad debts

C

income statement

provision for doubtful debts

D

provision for doubtful debts

income statement
[1]

(f)

Thang bought goods costing $20 each. At the end of the year Thang valued inventory of
unsold goods at the selling price of $30 each.
What is the effect of this valuation?
A

profit is overstated

B

profit is understated

C

purchases are overstated

D

purchases are understated

[1]

(g) The directors of a limited company increased the general reserve.
Which item decreased?
A

balance at bank

B

ordinary share capital

C

preference share capital

D

retained earnings

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(h) A trader provided the following information at the end of the first year of trading.
$
5000
500
1400
800

revenue
profit for the year
expenses
closing inventory
What were the purchases for the year?

(i)

A

$2300

B

$3900

C

$4900

D

$6700

[1]

A trader had a percentage of gross profit to revenue (gross profit margin) of 30%.
His purchases for the year were $3400 and his inventory increased by $400.
What was his revenue for the year (to the nearest dollar)?

(j)

A

$3900

B

$4286

C

$4940

D

$5429

[1]

When is financial information considered to be relevant?
A

when it affects business decisions

B

when it can be compared with other periods

C

when it can be understood by the users

D

when it is free from error and bias

[1]
[Total: 10]

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(a) State the meaning of owner’s equity.

[1]
(b) Name the accounting principle applied in each of the following situations.
Principle
A trader withdraws goods for his own use and
records this in the drawings account.
A book-keeper writes off debts which will not be
paid to the business.
An accountant does not include staff morale as
an asset in the statement of financial position.
A business uses the double entry system of
book-keeping to record transactions.
[4]
(c) Name the ledger in which the purchases account is found.
[1]
(d) Name the type of organisation which would prepare a statement of changes in equity.
[1]
(e) Complete the following sentence.
Items which a business owns or which are owed to the business are known as
.

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Jake manufactures CD players. He has a credit customer, Rashida. They have exchanged an
invoice, a debit note, a credit note and a statement of account.
REQUIRED
(f)

Complete the following table for the documents exchanged between Jake and Rashida. The
first item has been completed as an example.
document

invoice

reason for issue

name of person issuing document

to record goods sold on
credit

Jake

debit note

credit note

statement of account
[6]
(g) Complete the following table by writing True or False against each statement.
True or False
Work in progress may appear in Jake’s manufacturing account.
Prime cost appears in Jake’s income statement.
Jake’s business is a service business.
[3]
[Total: 17]

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3

The bank columns of Kang-Dae’s cash book had a debit balance brought down of $1310 on
1 June 2017. The bank statement at the same date showed a credit balance of $790.
When Kang-Dae compared the cash book with the bank statement he found the following.
Items on the bank statement not in the cash book
bank charges, $60
credit transfer, $540, from Nigel, a credit customer
standing order for rent payable, $1000
direct debit paid to electricity company, $400
Items in the cash book not on the bank statement
cheque to Hachiro, a supplier, $700
cash paid in, $620
Kang-Dae also discovered that a payment, $320, for insurance had been entered in the cash book
twice in error.
REQUIRED
(a) State what is meant by a ‘bank statement’.

[1]
(b) Update the bank columns of Kang-Dae’s cash book on 1 June 2017. Balance the cash book
and bring down the balance.
Kang-Dae
Cash book (bank columns only)
Date

Details

$

Date

Details

$

[7]

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(c) Prepare the bank reconciliation statement at 1 June 2017.
Kang-Dae
Bank reconciliation statement at 1 June 2017

[6]
(d) State two differences between a bank overdraft and a bank loan.
1

2
[2]
(e) Name the section of the statement of financial position where a 5-year bank loan would
appear.
[1]
[Total: 17]

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Bayani depreciates his fixtures and fittings using the straight line (equal instalment) method of
depreciation. He provides a full year’s depreciation in the year of purchase and none in the year of
disposal. He provided the following information.
fixtures and fittings
accumulated
depreciation
$
$
42 600
12 780
42 600
17 040
cost

at 31 December 2013
at 31 December 2014

There were no additions or disposals during the year ended 31 December 2014.
REQUIRED
(a) Calculate the rate of depreciation Bayani is applying.

[3]
Additional information
On 1 May 2015 Bayani bought new fixtures and fittings, cost $12 000, paying by cheque.
On 1 August 2016 he sold old fixtures and fittings, which had cost $10 000 and on which four
years’ depreciation had been provided. The purchaser paid Bayani in cash.
REQUIRED
(b) Name the books of prime (original) entry used on 1 May 2015 and 1 August 2016.
1 May 2015

1 August 2016

[3]

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(c) Complete the following table by inserting the amounts to be shown in the financial statements.
Show your workings in the spaces provided.
workings

$

fixtures and fittings at cost on
31 December 2015

fixtures and fittings at cost on
31 December 2016

depreciation charge for the year
ended 31 December 2015

accumulated depreciation at
31 December 2015

depreciation charge for the year
ended 31 December 2016

accumulated depreciation at
31 December 2016
[12]
(d) State the double entry needed to record the depreciation charge for the year ended
31 December 2015.
debit entry

credit entry

[2]
(e) State the double entry needed to eliminate the accumulated depreciation on the fixtures and
fittings sold on 1 August 2016.
debit entry

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(f)

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Name one method of depreciation, other than the straight line (equal instalment) method,
and explain how it is calculated.
Name of method
Method of calculation

[3]

Additional information
Bayani also bought a motor vehicle. The costs relating to the purchase were as follows:
cost of vehicle
number plates
fuel
insurance of vehicle

$
17 200
120
80
450

REQUIRED
(g) Complete the following table, indicating with a tick (3) whether each item is a capital
expenditure or a revenue expenditure.
capital expenditure

revenue expenditure

cost of vehicle
number plates
fuel
insurance of vehicle
[4]
(h) Give one example of a capital receipt.
[1]
[Total: 30]

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5

Satish has a financial year end of 30 June. On 30 June 2017 he prepared the following trial
balance.
Satish
Trial Balance at 30 June 2017

Revenue
Purchases
Fixtures and fittings
Provision for depreciation
on fixtures and fittings
Trade receivables
Trade payables
Inventory at 1 July 2016
Rent
Wages
Other operating expenses
Drawings
Capital
Bank

Debit
$
33 200
12 000
3 100
4 450
6 000
2 800
4 180
10 900

76 630

Credit
$
53 030

3 000
1 900

14 200
600
72 730

Additional information
1

Satish calculated a draft gross profit for the year ended 30 June 2017 of $20 000. This
calculation used a valuation of closing inventory of $4620.

2

Depreciation for the year, $1500, had yet to be provided.

The books of account contained errors and the totals of the trial balance did not agree. Satish
therefore opened a suspense account, and then discovered the following errors.
1

A sale on credit, $400, had been completely omitted from the books.

2

Closing inventory included $550 for inventory which had been damaged and now had no
value, but this had not been written off.

3

The purchases journal for June had been undercast by $100.

4

Capital introduced of $2000 had been correctly entered in the cash book but debited in the
drawings account.

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REQUIRED

(a) Prepare the suspense account, showing the opening balance and the entries correcting the
errors.
Satish
Suspense account
Date

Details

$

Date

Details

$

[4]

(b) (i)

Complete the following statement to calculate the correct gross profit for the year. Where
an error has no effect on gross profit, place a tick (3) in the No Effect column.
Satish
Statement of correction of gross profit for the year ended 30 June 2017
No Effect

Increase

Decrease

$

$

Draft gross profit

$
20 000

Error 1
Error 2
Error 3
Error 4

Corrected gross profit
[8]

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(ii)

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Calculate the profit for the year ended 30 June 2017.

[5]

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(c) Prepare Satish’s statement of financial position at 30 June 2017.
Satish
Statement of financial position at 30 June 2017
$

$

$

[10]
[Total: 27]

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Amina and Samara are in partnership. Their partnership agreement states that interest on capital
is paid at the rate of 10% per annum and that profits and losses are shared in the ratio of 3:2
respectively.
The following information is available.
$

At 1 July 2016
Capital accounts
Amina
Samara
Current accounts
Amina
Samara

50 000
20 000
4 000 credit
3 000 credit

For the year ended 30 June 2017
Profit for the year
17 500
Drawings
Amina
8 000
Samara
12 000
On 1 January 2017 Amina introduced additional capital of $10 000 into the partnership in the form
of cash.
REQUIRED
(a) State what is meant by a ‘partnership’.

[1]

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(b) Prepare the appropriation account for the year ended 30 June 2017.
Amina and Samara
Appropriation Account for the year ended 30 June 2017
$

$

[4]

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(c) Prepare the following ledger accounts for the year ended 30 June 2017. Balance the accounts
and bring down the balances on 1 July 2017.
Amina and Samara
Capital accounts
Date

Details

Amina
$

Samara
$

Date

Details

Amina
$

Samara
$

[3]

Current accounts
Date

Details

Amina
$

Samara
$

Date

Details

Amina
$

Samara
$

[5]

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(d) Explain how the financial statements would have been affected if Amina had made a loan to
the partnership instead of introducing additional capital.

[2]
Amina is not happy that Samara’s drawings are greater than hers. Samara says she is entitled
to take out of the business more drawings than Amina because she does a greater share of the
work.
REQUIRED
(e) Explain two reasons why Amina is not happy that Samara’s drawings are greater than hers.
1

2

[4]
[Total: 19]

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