0452/21/O/N/18 Question Paper – Accounting Oct/Nov 2018 Paper 21

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Cambridge Accounting (0452) question paper for paper 21, Oct/Nov 2018 — 0452/21/O/N/18, file 0452_w18_qp_21.pdf.

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Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

* 2 9 6 9 2 3 0 9 1 4 *

0452/21

ACCOUNTING

October/November 2018

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 23 printed pages and 1 blank page.
DC (KN) 172749
© UCLES 2018

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2
1

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Thato opened a wholesale shoe business on 1 August 2018. He buys and sells on credit terms.
REQUIRED
(a) (i)

State the purpose of a debit note received by Thato from Abebe, a credit customer.

[1]

(ii)

Complete the following table by placing a tick () to indicate how Thato would record this
debit note in the account of Abebe.
credit Abebe account

debit Abebe account

no entry
[1]

(b) (i)

State the purpose of a statement of account issued by Thato to Abebe.

[1]

(ii)

State why Thato did not record this in his ledger.

[1]

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Thato received the following invoice from Nyack, a credit supplier.
Invoice
Nyack
Low Road
Anytown

Thato
Lot 14 Industrial Estate
Somecity
100 pairs
50 pairs

4 August 2018

Men’s shoes assorted sizes and styles
Ladies’ shoes assorted sizes and styles

$ per unit
40
45

Less 20% trade discount

$
4000
2250
6250
1250
5000

Terms: 2½% discount for payment in 30 days
REQUIRED
(c) (i)

State one reason why Nyack allowed Thato trade discount.
[1]

(ii)

State one reason why Nyack offered Thato cash discount.
[1]

(iii)

Calculate the amount of the cheque Thato gave to Nyack on 31 August 2018 to settle the
account.

[1]

(iv)

Name the ledger in which Thato would maintain Nyack’s account.
[1]

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In addition to the invoice received from Nyack on 4 August, Thato received the following
documents.
August 9
13

Invoice received from Gaby, a new supplier for goods, $2600 less 20% trade discount.
Credit note received from Gaby for goods returned, list price $100.

On 30 August Thato paid Gaby the amount owing by cheque less 2% cash discount.
REQUIRED
(d) Prepare Thato’s purchases journal and purchases returns journal for the month of August
2018.
Total each journal and indicate the ledger account to which the total would be transferred.
Thato
Purchases journal
Date

Details

………

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5
Purchases returns journal
Date

Details

………

[5]

(e) Prepare the following accounts in Thato’s ledger for the month of August 2018. It is not
necessary to balance any of the accounts.
Thato
Purchases account
Date

Details

Date

Details

………

Purchases returns account
Date

Details

Date

Details

………

Gaby account
Date

Details

Date

Details

………

………
[6]

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6
(f)

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Name the accounting principle which Thato did not apply in each of the following.
Principle
Thato debited the wages account with $400 withdrawn from the
bank for personal use.
Thato revalued his premises by $20 000 when the premises next
door were offered for sale for $20 000 more than Thato paid for
his.
Thato credited the sales account with $1000 after a customer
promised to purchase shoes, selling price, $1000, next month.
[3]
[Total: 22]

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7
2

Sara maintains a petty cash book. The monthly imprest of $120 is restored on the first day of each
month.
The entries in Sara’s petty cash book for July 2018 were as follows.
Sara
Petty Cash Book
Total
received

Date

Details

Total
paid

Cleaning Postages Sundries Ledger
accounts

July 1

Balance b/d
Cash

Stamps

4
25

Parcel post

Cleaning materials

Sabeena (credit
supplier)

Sundry expenses

Refund for faulty
cleaning materials

55
19

REQUIRED
(a) State one advantage to Sara of maintaining a petty cash book.

[1]
(b) Show the entries which would be made in the cleaning account in July 2018. It is not
necessary to close or balance the account.
Sara
Cleaning account
Date

Details

Date

Details

………

[2]

[2]
© UCLES 2018
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(d) State the double entry for restoring the imprest on 1 August 2018.
debit

credit
$

[3]

Sara’s financial year ends on 31 July.
Hannah pays Sara a commission on goods purchased from her by Sara’s customers. The
commission is paid six monthly in arrears.
Sara provided the following information.
2017
Aug 1
3
2018
Feb 1
July 31

Commission outstanding
Cheque received for commission outstanding

$
190
190

Cheque received for commission
Commission outstanding

200
220

REQUIRED
(e) Complete the commission receivable account for the year ended 31 July 2018. Balance the
account and bring down the balance on 1 August 2018.
Sara
Commission receivable account
Date

Details

Date

Details

2017
Aug 1

Balance

b/d

190

………

………
[4]

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Sara maintains one combined account for rates and insurance.
On 1 August 2017 two months’ rates, $800, were outstanding and three months’ insurance, $570,
was prepaid.
During the year ended 31 July 2018 the following payments were made by cheque.
2017
Sept 1

Rates for 13 months to 30 June 2018

$
5200

Nov 1

Insurance for 12 months to 31 October 2018

3400

On 31 July 2018 it was found that $1000 of the insurance paid on 1 November 2017 related to
Sara’s private house.
REQUIRED
(f)

Complete the rates and insurance account for the year ended 31 July 2018. Balance the
account and bring down the balances on 1 August 2018.
Sara
Rates and insurance account
Date
2017
Aug 1

Details
Balance
(insurance) b/d

Date

570

2017
Aug 1

Balance (rates) b/d

Details

800

………

[8]

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Sara understands that certain objectives must be considered when selecting accounting policies.
REQUIRED
(g) State what is meant by the objective of ‘reliability’.

[2]
(h) Name three other objectives which should be considered when selecting accounting policies.
1
2
3

[3]
[Total: 25]

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12
3

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Sadia runs a secretarial agency. Her financial year ends on 30 September.
She provided the following information.
$

At 1 October 2017
Office equipment at cost
Provision for depreciation of office equipment
Office furniture at valuation
Rent prepaid to 30 November 2017
Fees owing from clients
Provision for doubtful debts

26 000
9 360
11 100
190
2 880
144

During the year ended 30 September 2018
Receipts
Fees from clients

42 100

Payments
Wages
Advertising for 15 months to 31 December 2018
Rent for 12 months to 30 November 2018
General expenses
Office furniture

29 800
3 150
1 200
1 775
1 450

Additional information
1

At 30 September 2018 fees owing by clients amounted to $3120.

Office equipment is depreciated at 20% per annum using the reducing (diminishing) balance
method.

Office furniture is depreciated using the revaluation method. The office furniture was valued
at $11 400 on 30 September 2018.

The provision for doubtful debts is to be maintained at the same rate as the previous year.

Cash, $3500, taken by Sadia during the year for personal use, was debited to the wages
account.

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REQUIRED
(a) Prepare the income statement for the year ended 30 September 2018.
Sadia
Income Statement for the year ended 30 September 2018
$

[13]

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(b) Name three items which may appear in the income statement of a trading business but which
would not appear in Sadia’s income statement.
1
2
3 [3]
(c) Suggest two reasons why Sadia’s bank manager would be interested in her financial
statements.
1

2
[2]
(d) Name two other interested parties who may wish to see Sadia’s financial statements.
1
2 [2]
[Total: 20]

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15
4

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Rizwan is a motor trader. His financial year ends on 30 September. On 30 September 2018
Rizwan opened a suspense account.
REQUIRED
(a) Suggest two reasons why it was necessary for Rizwan to open a suspense account.
1

2
[2]
Rizwan later discovered the following errors in his accounting records.
1

Rent received, $560, had been debited to the rent payable account.

The purchase of office equipment, $890, had been entered in the purchases account.

The balance of the petty cash book, $21, had been omitted from the trial balance.

REQUIRED
(b) Prepare journal entries to correct these errors. Narratives are required.
Rizwan
Journal

Debit
$

Credit
$

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[10]
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After correcting the errors, Rizwan prepared financial statements for the year ended 30 September
2018.
He provided the following information.

30 September
2017
2018

Percentage of gross profit to revenue (gross profit margin)

30.88%

33.45%

Percentage of profit to revenue (net profit margin)

15.55%

14.35%

6.13%

8.27%

Return on capital employed
REQUIRED

2
[2]
(d) State the year in which Rizwan had a better control of his expenses. Give a reason for your
answer.
Year ended 30 September
Reason
[2]
(e) Suggest two ways in which the percentage of profit to revenue could be improved.
1

2
[2]
(f)

Suggest two reasons for the change in the return on capital employed.
1

2
[2]
[Total: 20]

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18
5

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Mark and Ella are in partnership. Their financial year ends on 31 August.
The partnership agreement provides for interest on capital, interest on drawings and an annual
salary for Ella. Profits and losses are shared equally.
A separate capital and current account is maintained for each partner.
The following is an extract from the profit and loss appropriation account of Mark and Ella for the
year ended 31 August 2018.
Mark and Ella
Extract from Profit and Loss Appropriation Account for the year ended 31 August 2018
Profit for the year
Interest on drawings

$
Mark
Ella

960
1 280

Interest on capital

Mark
Ella

Salary

Ella

6 000
4 000
10 000
15 000

$
38 600
2 240
40 840

25 000

The following additional information was available at 31 August 2018.
Capital accounts 1 September 2017
Current accounts 1 September 2017
Drawings

Mark
Ella
Premises at cost
Fixtures and equipment at book value
Motor vehicles at book value
Trade receivables
Trade payables
Inventory
Bank
Petty cash
Provision for doubtful debts

Mark
Ella
Mark
Ella

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$
120 000
80 000
1 800 debit
2 000 credit
12 000
16 000
165 000
24 400
14 750
16 800
19 240
14 950
5 590 credit
150
420

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19
REQUIRED

(a) Suggest two advantages of maintaining both a capital account and a current account for
each partner.
1

2
[2]
(b) Complete the current accounts of the partners for the year ended 31 August 2018. Balance
the accounts and bring down the balances on 1 September 2018.
Mark and Ella
Current accounts
Date

Detail

2017
Sep 1

Mark
$

Ella
$

Balance b/d

1800

………

Date

Detail

2017
Sep 1

Mark
$

Ella
$

Balance b/d

2000

………

…….

………

………
[7]

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(c) Prepare the statement of financial position at 31 August 2018.
You may insert the balances on the current accounts prepared in (b) as full details of the
current accounts are not required.
Mark and Ella
Statement of Financial Position at 31 August 2018
$

[6]

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Ella has proposed that the partnership agreement should be amended so that interest will no
longer be charged on drawings.
REQUIRED
(d) Explain why Mark is not in agreement with this proposal.

[2]
Mark and Ella are considering inviting their manager, Paul, to join the partnership.
REQUIRED
(e) Suggest two factors Paul should consider before accepting the invitation.
1

2
[2]
[Total: 19]

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22
6

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Josef manufactures computer accessories. His financial year ends on 31 August.
Josef does not have any work in progress.
His mark-up is 20%.
Josef provided the following information for the year ended 31 August 2018.
$
30 000
6 500
36 500

Prime cost
Factory overheads
Cost of production
Output

1 000 units

REQUIRED
(a) State the meaning of the term ‘prime cost’.

[1]
(b) Suggest two items which may be included in the factory overheads.
1
2 [2]
(c) Calculate the gross profit for the year ended 31 August 2018.

[1]
Josef is considering purchasing a new machine costing $15 000. He can invest additional capital
of $5000.
REQUIRED
(d) Suggest two ways in which Josef could obtain the additional finance required to purchase the
machine.
1
2 [2]

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Josef estimated that the purchase of the machine would result in the following:
1

Output would increase by 20%.

Prime cost would increase in direct proportion to output.

Factory overheads would increase by $1500.

Mark-up would have to be reduced to 18% in order to sell all the output.

REQUIRED
(e) Calculate the estimated gross profit for the year if the new machine is purchased.

[4]
(f)

State four disadvantages to Josef of purchasing the new machine.
1

[4]
[Total: 14]

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Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
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0452/21/O/N/18

Accounting (0452) · Oct/Nov 2018 · Question paper 21

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