Accounting (0452) · Oct/Nov 2021 · Question paper 21

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Cambridge IGCSE™

* 8 6 6 8 6 6 0 1 5 4 *

ACCOUNTING

0452/21
October/November 2021

Paper 2 Structured Written Paper

1 hour 45 minutes
You must answer on the question paper.
No additional materials are needed.
INSTRUCTIONS
●
Answer all questions.
●
Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
●
Write your name, centre number and candidate number in the boxes at the top of the page.
●
Write your answer to each question in the space provided.
●
Do not use an erasable pen or correction fluid.
●
Do not write on any bar codes.
●
You may use a calculator.
●
International accounting terms and formats should be used as appropriate.
●
You should show your workings.

INFORMATION
●
The total mark for this paper is 100.
●
The number of marks for each question or part question is shown in brackets [ ].
●
Where you are asked to complete a layout, you may not need all the lines for your answer.

This document has 20 pages.
DC (RW) 222134
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Shiv is a trader. His financial year ends on 31 August. He does not maintain a full set of accounting
records but was able to provide the following information for the year ended 31 August 2021.
Total revenue
Mark-up

$320 000
25%
Bank account summary for the year ended 31 August 2021

Balance b/d
Cash sales
Receipts from trade receivables

$
49 000
3 700
312 400
365 100

Expenses
Drawings
Payments to trade payables
Equipment
Balance c/d

$
34 000
4 200
257 700
16 000
53 200
365 100

Assets and liabilities

Inventory at cost
Trade receivables
Expenses owing
Trade payables
Equipment at net book value
Premises at cost

1 September 2020
$
23 500
22 000
–
32 600
–
90 000

31 August 2021
$
?
25 900
400
29 600
12 800
90 000

Shiv had withdrawn $900 for a family holiday during the year. He had included this in the expenses.
On 31 August 2021 Shiv decided to create a provision for doubtful debts of 3% of trade receivables.
REQUIRED
(a) Calculate the purchases for the year ended 31 August 2021.

[3]

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(b) Prepare the income statement for the year ended 31 August 2021. The inventory on
31 August 2021 should be clearly shown within the statement.
Shiv
Income Statement for the year ended 31 August 2021
$

$

[11]

(c) Name the accounting principle Shiv should apply when recording the $900 he had used for a
family holiday.
[1]

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Shiv has always valued his inventory at cost price. He is considering valuing the inventory on
31 August 2021 at selling price as he believes it would result in a higher profit for the year.
REQUIRED
(d) Discuss the implications of Shiv valuing the inventory on 31 August 2021 at selling price.

[5]
[Total: 20]

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Jas owns a printing business and has recently incurred various expenditures relating to her
premises.
REQUIRED
(a) Complete the table by inserting a tick (3) to show how each item of expenditure should be
classified. The first one has been completed as an example.
Capital
expenditure
Building new extension to warehouse

Revenue
expenditure

3

Rates on new extension
Carriage costs for roof tiles for new extension
Legal costs for new extension
Repairs to office roof
[4]

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Jas’s business is expanding rapidly and she needs more warehousing space.
Jas can rent an additional warehouse. The rent for the first six months would be $40 000.
Alternatively, Jas can purchase a warehouse for $900 000. She can obtain a long-term loan of
$700 000.
REQUIRED
(b) Advise Jas whether she should rent or purchase a warehouse. Justify your answer.

[5]

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An extract from Jas’s statement of financial position at 31 December 2019 showed the following:
Cost

Accumulated
depreciation
$
77 625

$
115 000

Fixtures

Net book
value
$
37 375

During the year ended 31 December 2020 the following transactions took place.
On 1 January 2020 fixtures, $30 000, were purchased by cheque.
On 30 June 2020 fixtures were sold for $6000, which was received by cheque. These fixtures had
originally been purchased on 1 January 2018 for $20 000.
Jas depreciates fixtures on a straight-line basis. She assumes fixtures will have a useful life of four
years, at which time the residual value will be 10% of original cost. Depreciation is charged for
each part of the year for which the fixtures are owned.
REQUIRED
(c) Prepare the following accounts for the year ended 31 December 2020. Balance each account
and bring down the balance on 1 January 2021.
Jas
Fixtures account
Date
2020
Jan 1

Details

$

Date

Details

$

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Balance b/d

115 000

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Provision for depreciation of fixtures account
Date

Details

$

Date
2020
Jan 1

Details

$

Balance b/d

77 625

[8]
(d) Prepare the fixtures disposal account for the year ended 31 December 2020.
Jas
Fixtures disposal account
Date

Details

$

Date

Details

$

[3]

Workings:

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Anil is a trader. The totals of the trial balance he prepared on 31 December 2020 did not agree.
The debits exceeded the credits by $5140.
The following errors were later discovered.
1

The sales account had been undercast by $7100.

2

Sales returns of $520 had been posted as a credit to the purchases account. The correct
entry had been made in the customer’s account.

3

Bank charges of $320 had been correctly entered in the cash book, but had not been entered
in the bank charges account.

4

A cheque refund of $600 for insurance overpaid had been entered on the wrong side of the
bank account and no entry had been made in the insurance account.

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REQUIRED
(a) Prepare journal entries to correct errors 1 to 4. Narratives are not required.
Anil
Journal
Error
number

Details

Debit
$

Credit
$

[12]

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(b) Complete the suspense account.
Anil
Suspense account
Date

Details

$

Date

Details

$

Difference on trial balance

5140

[6]

(c) Name two types of error not disclosed by a trial balance.
1
2
[2]
[Total: 20]

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Karishma runs her own business. The balances in her books on 1 October 2020 included the
following.
$
Insurance account
1700 prepaid
Electricity account
1800 owing
During the financial year ended 30 September 2021 Karishma made the following payments by
cheque.
Insurance payments
7 February 2021
13 August 2021
Electricity payments
14 October 2020
24 January 2021
26 May 2021

$
3400
3500
$
1800
1800
1800

A refund of $300 for insurance overpaid was received by bank transfer on 28 February 2021. The
insurance paid on 13 August 2021 covered a period of five months to 31 December 2021.
At 30 September 2021, an amount of $2000 was owing for electricity.

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REQUIRED

(a) Prepare the following accounts for the year ended 30 September 2021. Balance the accounts
and bring down the balances on 1 October 2021.
Karishma
Insurance account
Date

Details

$

Date

Details

$

Electricity account
Date

Details

$

Date

Details

$

[10]

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Karishma is considering changing her electricity supplier. The new supplier has offered Karishma
a two-year contract at a fixed monthly amount of $450 payable by direct debit.
REQUIRED
(b) Advise Karishma whether she should change to the new electricity supplier. Justify your
answer with two advantages and two disadvantages of changing supplier.

[5]

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On 1 October 2020 Karishma decided to rent out part of her premises to Noor at an annual rent of
$1965.
During the financial year ended 30 September 2021 Noor made the following payments to
Karishma by cheque.
1 October 2020
2 March 2021
8 August 2021

$
800
825
850

The amount received on 8 August 2021 included rent of $510 covering the period 1 October 2021
to 31 December 2021.
REQUIRED
(c) Prepare the rent receivable account for the year ended 30 September 2021. Balance the
account and bring down the balance on 1 October 2021.
Karishma
Rent receivable account
Date

Details

$

Date

Details

$

[4]

(d) Identify the section of the statement of financial position at 30 September 2021 in which the
balance on the rent receivable account would appear.
[1]
[Total: 20]

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5

The financial year of VL Sports Club ends on 31 December. The treasurer provided the following
information about receipts and payments for the year ended 31 December 2020.
Receipts
Subscriptions
Competition receipts
Dinner dance ticket sales

$
19 200
7 300
6 500

Payments
Competition prizes
Dinner dance costs
Equipment
General expenses

$
4 100
6 200
12 000
11 500

The treasurer also provided the following information.
1 January 2020
$
23 000
400
700
1 100

Equipment at net book value
General expenses owing
Subscriptions in arrears
Subscriptions in advance

31 December 2020
$
30 000
500
300
900

Of the subscriptions in arrears on 1 January 2020 an amount of $80 had not been paid by
31 December 2020 and is to be written off as irrecoverable.
REQUIRED
(a) Prepare the subscriptions account for the year ended 31 December 2020. Balance the
account and bring down the balances on 1 January 2021.
VL Sports Club
Subscriptions account
Date

Details

$

Date

Details

$

[8]

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REQUIRED
(b) Prepare the income and expenditure account for VL Sports Club for the year ended
31 December 2020.
VL Sports Club
Income and Expenditure Account for the year ended 31 December 2020
$

$

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The treasurer of VL Sports Club wants to encourage more members to pay their subscriptions in
advance by offering a 10% reduction in annual subscription fees.
(c) Advise the treasurer whether or not VL Sports Club should offer this reduction in annual
subscription fees to members who pay in advance. Justify your answer with one advantage
and one disadvantage.

[3]
[Total: 20]

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