Accounting (0452) · Oct/Nov 2018 · Question paper 11

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

* 3 7 3 3 9 3 1 1 9 5 *

0452/11

ACCOUNTING

October/November 2018

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 20 printed pages.
DC (SLM) 170897
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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) Which task would an accountant perform?
A

drawing up a trial balance

B

entering transactions in the ledger

C

preparing financial statements

D

writing up the cash book

[1]

(b) Amina returned goods to Nadia.
Which document did Amina issue?
A

credit note

B

debit note

C

invoice

D

statement of account

[1]

(c) Arissa purchased a motor vehicle costing $23 000 on 1 August 2016. She decided to
depreciate the motor vehicle using the straight line (equal instalment) method at 20% per
annum.
Depreciation on the motor vehicle of $4600 was charged to the income statement for the year
ended 31 July 2017.
How much was charged to the income statement for the year ended 31 July 2018 for
depreciation on the motor vehicle?
A

$3680

B

$4600

C

$8280

D

$9200

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(d) A trader provided the following information on 1 October 2018.
Non-current assets
Inventory
Bank overdraft
Trade receivables
Trade payables
Loan repayable 30 September 2020

$
121 000
35 000
9 000
29 000
25 000
70 000

How much was the capital employed?
A

$30 000

B

$81 000

C

$151 000

D

$185 000

[1]

(e) Which is an intangible asset?

(f)

A

goodwill

B

inventory

C

office fixtures

D

trade receivables

[1]

Mahendra designs computer systems. He provided the following information.
Fees prepaid by clients at the start of the year
Fees received from clients during the year
Fees owing by clients at the end of the year

$
2 120
42 150
2 840

How much would be entered for fees in the income statement?
A

$37 190

B

$41 430

C

$42 870

D

$47 110

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4

(g) Amy and John are in partnership. Amy is entitled to an annual partnership salary of $9000.
Profits and losses are shared 2:1. The profit for the year ended 31 August 2018 was $14 700.
On 1 September 2017 Amy’s current account had a debit balance of $2100.
What was the credit balance on Amy’s current account on 1 September 2018?
A

$10 700

B

$14 900

C

$16 700

D

$20 900

[1]

(h) A sports club purchased sports equipment.
Where will this be entered in the financial statements at the year end?
receipts and payments
account

income and
expenditure account

statement of financial
position

A







B





C
D






[1]

(i)

How is cost of production calculated?
A

direct material + direct labour

B

direct material + direct labour + factory overheads

C

direct material + direct labour + factory overheads + increase in work
in progress

D

direct material + direct labour + factory overheads – increase in work
in progress

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(j)

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A business provided the following information.
year 1

year 2

percentage of gross profit to revenue

30%

25%

percentage of profit for the year to revenue

12%

8%

The revenue was the same in both years.
Which statements are correct?
1 Cost of sales was higher in year 2.
2 Cost of sales was lower in year 2.
3 Expenses were higher in year 2.
4 Expenses were lower in year 2.
A

1 and 3

B

1 and 4

C

2 and 3

D

2 and 4

[1]
[Total: 10]

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2

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

[1]
(b) Complete the following table stating the double entry necessary to record each transaction in
the ledger of Evie, who sells computers and computer accessories.
transaction

account to be
debited

account to be
credited

obtained loan from bank
purchased office fixtures by cheque
sold computer for cash
took printer for personal use

[8]

(c) State one reason why a trial balance is prepared.

[1]
(d) Complete the following table, indicating with a tick () where each account would appear in a
trial balance.
debit
column

credit
column

capital
drawings
provision for depreciation
carriage inwards
carriage outwards
rent received
stationery
sales returns

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(e) Give one example of each of the following errors which will not be revealed by a trial balance.
Error of commission

Error of omission

Compensating error
[3]
(f)

Complete the following sentences.
Money spent on purchasing or improving non-current assets is known as

Money spent on the day-to-day running of a business is known as

[2]

(g) Complete the following table by placing a tick () to indicate where each item will appear in
the financial statements of Anwar, who owns a food store.
Income Statement

Statement of
Financial Position

purchase of motor vehicle
charge for delivering motor vehicle
insurance for motor vehicle
fuel for motor vehicle

[4]
[Total: 23]

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Lefika is a trader. He maintains a three column cash book.
Lefika had the following transactions in August 2018.
August 5

8

Received a cheque from Tabia, $441, in settlement of her account less 2% cash
discount
Paid Tebago’s account of $280 by cheque after deducting a cash discount of 2½%

16

Received a cheque from Nyack, $282, in full settlement of his debt of $290

28

Cash sales, $243, of which $153 was paid directly into the bank

30

Received $250 cash from the disposal of a non-current asset

31

Lefika took cash, $200, for personal use

31

Paid all the cash into the bank except $20

REQUIRED
(a) Complete Lefika’s cash book on the page opposite.
Balance the cash book and bring down the balances on 1 September 2018.

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………

………

………

………

………

………

………

………

………

………

………

b/d

Balance

Details

2018
Aug 1

Date

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Discount
allowed
$

30

Cash
$

Bank
$

………

………

………

………

………

………

………

………

………

………

………

2018
Aug 1

Date

Lefika
Cash Book

b/d

Balance

Details

Discount
received
$

Cash
$

1253

Bank
$

9

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On 31 August Lefika’s bank statement showed a bank overdraft of $812. He compared the cash
book with the bank statement and found that the bank had not recorded the transactions entered
in the bank columns of the cash book on the following dates.
August 8
16
28
31
REQUIRED
(b) Prepare a bank reconciliation statement at 31 August 2018.
Lefika
Bank Reconciliation Statement at 31 August 2018

[6]
Lefika’s ledger is divided into a sales ledger, a purchases ledger and a nominal (general) ledger.
REQUIRED
(c) State one advantage of dividing the ledger into these three sections.

[1]
(d) Name the ledger in which each of the following accounts would appear.
(i)

Nyack (a credit customer) account ledger

(ii) Purchases account ledger
(iii) Discount received account ledger
(iv) Tebago (a credit supplier) account ledger

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[Total: 23]

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4

Ava operates a secretarial agency. Her financial year ends on 31 July.
She provided the following information on 31 July 2018.
1

A cheque for $194 was received from Wilma, a credit customer, whose account had been
written off in 2016.

2

Gary, a credit customer, paid one third of the amount he owed in cash. The balance is
regarded as irrecoverable and should be written off.

3

The provision for doubtful debts should be increased by $150.

4

The discount allowed for July 2018 of $144 should be transferred to the discount allowed
account.

5

The office equipment cost $16 000 and is being depreciated using the straight line (equal
instalment) method at 20% per annum. No office equipment had been bought or sold during
the year.

REQUIRED
(a) Record this information in the following accounts in Ava’s ledger at 31 July 2018.
Close the accounts by balancing or by making a transfer to an appropriate account.
Some entries have already been made in the accounts during the year.
Ava
Bad debts recovered account
Date

Details

$

Date

Details

$

………

………

………

………

………

………

Date

Details

$

Bad debts account
Date
2018
July 1

Details
Total to date

$
218

………

………

………

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Gary account
Date
2018
July 1

Details

$

Date

Details

$

270

………

……… ………

………

……… ………

………

……… ………

………

Balance

b/d

Provision for doubtful debts account
Date

Details

$

Date
2017
……… ……… Aug 1

Details
Balance

b/d

$
310

……… ………

………

……… ………

………

……… ………

………

……… ………

………

Discount allowed account
Date
2018
July 1

Details

$

Date

Details

$

1495

………

……… ………

………

……… ………

………

……… ………

………

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Provision for depreciation of office equipment account
Date

Details

$

Date
2017
Aug 1

Details
Balance

$

b/d

9600

………

………

………

………

[14]

(b) Name two accounting principles Ava is applying by maintaining a provision for doubtful debts.
1
2 [2]
Ava allows her trade receivables a credit period of 30 days. She provided the following information.
Trade receivables collection period

At 31 July 2017
32 days

At 31 July 2018
28 days

REQUIRED
(c) Comment on Ava’s collection period for trade receivables.

[2]
Ava is proposing to ask clients to pay cash instead of offering credit terms.
(d) Suggest two effects of this proposal.
1

2
[2]
[Total: 20]
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5

Khalid is a furniture wholesaler. His financial year ends on 30 September.
All purchases and sales are made on credit terms.
Khalid does not maintain a full set of accounting records but was able to provide the following
information.
$

On 1 October 2017
Inventory
Trade receivables

3 100
4 620

During the year ended 30 September 2018
Cheques received from trade receivables
Discount allowed
Bad debts written off
Total purchases

47 970
1 230
115
39 200

On 30 September 2018
Trade receivables

3 305

After the warehouse was closed on 30 September a fire broke out and a quantity of the inventory
was destroyed. The undamaged inventory was valued at $1500.
The profit mark-up is 25%.
REQUIRED
(a) Calculate the sales for the year ended 30 September 2018.

[6]

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(b) Prepare an income statement (trading account section) to calculate the value of the inventory
which was destroyed.
Khalid
Income Statement (Trading Account section) for the year ended 30 September 2018
$

$

$

[7]

(c) (i)

Calculate the rate of inventory turnover. The calculation should include the total inventory
before the fire broke out on 30 September 2018.
The calculation should be correct to two decimal places.

[2]

(ii) State what is measured by the rate of inventory turnover.

[1]

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Khalid decided that in future he would maintain a full set of double entry records and prepare
control accounts at the end of each month.
REQUIRED
(d) Complete the table by using a tick () to show where each of the following items would appear
in Khalid’s purchases ledger control account.
debit

credit

opening balance owed to credit suppliers
credit purchases
cheques paid to credit suppliers
cash discount received
contra between sales and purchases ledgers

[5]
[Total: 21]

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The financial year of FW Limited ends on 30 September.
The following information is available.
At 1 October 2017
Ordinary share capital of $1 shares
5% Debentures (repayable 2024)
General reserve
Retained earnings
On 30 September 2018
Issue of $1 ordinary shares
Profit for the year
Transfer to general reserve
Payment of ordinary share dividend

$
100 000
140 000
115 000
117 000
$
50 000
28 000
15 000
19 000

REQUIRED
(a) Prepare an extract from the statement of financial position at 30 September 2018 to show the
equity and reserves and non-current liabilities.
FW Limited
Extract from Statement of Financial Position at 30 September 2018

[7]

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(b) Define each of the following terms.
i(i) Shareholders

[1]
(ii) Limited liability

[1]
(c) i(i) State one difference between ordinary shares and preference shares.
ordinary shares

preference shares

[2]

(ii) State two similarities between preference shares and debentures.
1

2
[2]

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The directors of FW Limited want to raise $60 000 to purchase additional premises.
The directors are considering two proposals:
Proposal 1

Issuing 5% debentures (repayable 2030)

Proposal 2

Issuing ordinary shares

It is anticipated that the ordinary share dividend will be 6% per annum.
REQUIRED
(d) State how each proposal would affect the profit of FW Limited in the next financial year (if at
all). Give a reason for your answer in each case.
Proposal 1
Effect on profit
Reason
[2]
Proposal 2
Effect on profit
Reason
[2]

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The following information was available on 30 September 2018.
Inventory
Trade receivables
Trade payables
Cash at bank
Loan repayable on 1 January 2019

$
42 000
34 000
35 000
36 000
30 000

REQUIRED
(e) Calculate the current ratio.
The calculation should be correct to two decimal places.

[2]
(f)

Complete the table by placing a tick () in the correct column to indicate the effect each
would have on the current ratio.
effect on current ratio
increase

decrease

no effect

use the bank balance to repay the loan
purchase non-current assets on credit
sell half the inventory at cost price to cash
customers
pay amount owed to trade payables by
cheque
[4]
[Total: 23]

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