Cambridge International Examinations Cambridge International General Certificate of Secondary Education

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1 * * Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/11 Paper 1 May/June 2014 Candidates answer on the Question Paper. No Additional Materials are required. 1 hour 45 minutes 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. IB14 06_0452_11/6RP UCLES 2014 [Turn over

2 2 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 is carried out by a book-keeper? A B C D analysing information assessing information interpreting information recording information (b) Joe is about to supply goods to some new customers. Why would Joe want to examine their financial statements? A B C D to check the amount of trade receivables to check the cash position to check the value of the inventory to check how much profit was made (c) In March, Wahid had the following transactions with Yussuf, a new customer. $ 4 March Goods invoiced to Yussuf March Credit note issued to Yussuf March Goods invoiced to Yussuf March Cheque received from Yussuf 2100 How much did Yussuf owe Wahid on 31 March? A $3000 B $3300 C $5100 D $5700 UCLES /11/M/J/14

3 3 (d) Which is a compensating error? A B C D credit sales debited to the sales account and credited to the customer s account purchases of fixtures on credit debited to the repairs to fixtures account sales account and sales returns account undercast by the same amount Yeung s account credited with a cheque received from Yang, another customer (e) The following is a list of a builder s expenditure for the year. $ motor vehicle purchases wages rent of offices machinery petrol What is the amount of capital expenditure? A $ B $ C $ D $ UCLES /11/M/J/14 [Turn over

4 4 (f) A business uses the straight line method of depreciation. The following information is provided. motor vehicles at cost $ anticipated life 4 years residual value $2000 What is the annual depreciation charge for motor vehicles? A $2000 B $5000 C $7000 D $7500 (g) How should inventory be valued in the statement of financial position? A B C D at an amount determined by professional valuation at historic cost at net book value at the lower of cost and net realisable value (h) At 1 January 2013 a trader owed wages of $1000. During the year ended 31 December 2013 wages of $4000 were paid. At 31 December 2013 wages of $1200 were owed. How much should have been entered in the income statement for wages for the year ended 31 December 2013? A $3800 B $4000 C $4200 D $6200 UCLES /11/M/J/14

5 5 (i) The following information was extracted from the financial statements of Bob. $ bank overdraft inventory trade payables trade receivables How much extra capital would Bob have to invest to make the value of his working capital $24 000? A $8000 B $ C $ D $ (j) Which statement about financial statements is correct? A B C D They provide an accurate profit for the past year, if the double entry system is followed. They provide financial information about a business s past performance, based on historic cost. They provide information about a business s performance in the market. They provide information about the future profits of the business. [Total: 10] UCLES /11/M/J/14 [Turn over

6 6 2 (a) Yuri keeps a full set of accounting records. Name the ledger in which each of the following accounts is found. Account Ledger Insurance Sales Purchases Lottie, a credit supplier Matthew, a credit customer Capital [6] (b) Yuri maintains a sales journal, a sales returns journal, a purchases journal and a purchases returns journal. Name one other book of prime entry which he may maintain. (c) State why it is useful for a business to maintain a sales journal. [2] On 1 April Susan and Elinor owe Yuri $260 and $120 respectively. Yuri s sales journal and sales returns journal for the month showed the following. Sales journal $ April 4 Susan Elinor Sales returns journal $ April 12 Susan Elinor UCLES /11/M/J/14

7 7 REQUIRED (d) Prepare the following ledger accounts for the month of April. Balance the accounts where necessary and bring down the balances on 1 May. Elinor account Sales account Sales returns account [8] On 8 April Susan paid the amount she owed on 1 April, after taking 5% cash discount. REQUIRED (e) Calculate the amount which Yuri received from Susan. [2] UCLES /11/M/J/14 [Turn over

8 8 Yuri employs a book-keeper to maintain the accounts of his credit customers. REQUIRED (f) Name the account which Yuri prepares to check for fraud or error in the book-keeper s work. [Total: 20] UCLES /11/M/J/14

9 3 Highfield Manufacturing Limited provided the following information. On 1 March 2013 the balance on the provision for doubtful debts account was $2966. On 28 February 2014 trade receivables totalled $ This total includes an amount of $1100 due from a debtor who has gone bankrupt and which will not be recovered. During the year $200 was received as part settlement of a debt of $400 which had been written off 18 months earlier. The provision for doubtful debts is maintained at 5%. REQUIRED (a) Prepare the following ledger accounts for the year ended 28 February Show the transfers to the income statement. Bring down any balances remaining on 1 March Highfield Manufacturing Limited Bad debts account Bad debts recovered account Provision for doubtful debts account [9] UCLES /11/M/J/14 [Turn over

10 10 (b) Explain how accounting for bad debts and providing for doubtful debts applies the following accounting principles. (i) accruals (matching) [2] (ii) prudence [2] (c) Explain the term prime cost which appears in the financial statements of Highfield Manufacturing Limited. [2] (d) All the goods sold by Highfield Manufacturing Limited are produced in its factory. Name the term which replaces ordinary goods purchased in its trading section of the income statement. (e) The company s statement of financial position contains entries for ordinary share capital, preference share capital, debentures and a bank loan. Explain one difference (i) between ordinary shares and preference shares [2] UCLES /11/M/J/14

11 11 (ii) between ordinary shares and debentures. [2] (f) The 6% bank loan of $ was taken out on 1 July Calculate the interest charged in the income statement for the year ended 28 February [2] (g) Name two interested parties who would use the financial statements of Highfield Manufacturing Limited. 1 2 [2] [Total: 24] UCLES /11/M/J/14 [Turn over

12 4 (a) State what is meant by the term subscription in a club s accounts. 12 (b) Speedy Runner Sports Club maintains a subscriptions account. Explain why this account can have two opening balances. [2] (c) The first column in the table below gives a term used in the financial statements of a sole trader. Complete the table by entering in the second column the equivalent term in the financial statements of a club or society. Sole trader Club or society Capital Profit for the year Loss for the year [3] (d) Complete the table below. Put two ticks ( ) in each row to indicate whether the item would appear on the debit side or credit side of the receipts and payments account or the income and expenditure account. The first one has been completed as an example. Debit Credit Receipts and payments account Income and expenditure account Depreciation charge Proceeds of sale of equipment Loss on disposal of equipment Unpaid subscriptions written off Purchase of new equipment Profit on sale of refreshments [10] UCLES /11/M/J/14

13 13 Speedy Runners Sports Club provided the following information. $ Payments made to suppliers of refreshments for the year ended 31 December Amounts owing to suppliers for refreshments - at 31 December at 31 December REQUIRED (e) Complete the income statement (trading account) below. Speedy Runners Sports Club Income Statement (Trading Account) for the year ended 31 December 2013 $ $ Revenue 6150 Inventory 1 January 380 Purchases Inventory 31 December Cost of sales Gross profit 3610 [5] (f) Explain why there are no drawings in a club or society. [2] (g) Explain what is meant by the accounting policy of comparability. [2] [Total: 25] UCLES /11/M/J/14 [Turn over

14 14 5 Miguel reconciles the balance on his cash book with the balance on his bank statement. (a) Complete this sentence. Items in the cash book which do not appear on the bank statement are usually caused by differences. Miguel s cash book (bank columns only) showed the following entries $ 2014 $ May 2 Cash sales 4216 May 1 Balance b/d Alice David Bertram Vehicle repairs Cash sales Edward Charles Wages Balance c/d Francis May 8 Balance b/d 2720 His bank statement for the same period showed the following. Dr Cr Balance $ $ $ May 1 Balance 1168 Dr 2 Insurance Dr 5 Cash Cr 5 Alice Cr 5 Bertram Cr 5 Wages Cr 6 Interest Cr 6 David Dr 7 Edward Dr 7 Gordon Dr UCLES /11/M/J/14

15 15 REQUIRED (b) Update the cash book and bring down the balance on 8 May Miguel Cash book (bank columns only) Date Details $ Date Details $ May 8 Balance b/d 2720 [5] (c) Prepare the bank reconciliation statement at 8 May Miguel Bank reconciliation statement at 8 May 2014 [8] UCLES /11/M/J/14 [Turn over

16 16 Miguel also maintains a petty cash book with an imprest amount of $100 which is restored at the start of each month. On 31 March the total of vouchers in the petty cash book was $66. REQUIRED (d) Calculate the amount the chief cashier gave to the petty cashier on 1 April. [Total: 15] UCLES /11/M/J/14 [Turn over

17 17 6 Anton and Belle have been in partnership for some years. From the start of trading their fixed capital has been $ and $ respectively. Their partnership agreement allows for interest on capital of 10% a year, a salary to Anton of $ a year and a profit sharing ratio of 2:1 respectively. Other information is as follows. At 1 January 2013 Current account Anton Current account Belle $ Dr Cr REQUIRED For the year ended 31 December 2013 Drawings - Anton Drawings - Belle Interest on drawings - Anton Interest on drawings - Belle 500 Profit for the year (a) Prepare the partnership appropriation account for the year ended 31 December Anton and Belle Appropriation Account for the year ended 31 December 2013 [8] UCLES /11/M/J/14 [Turn over

18 18 (b) Prepare Anton s current account for the year ended 31 December Bring down the balance on 1 January [8] Additional information $ At 31 December 2013 Non-current assets Inventory Other net current assets Long-term loan (taken out in 2009 and to be repaid in 2019) REQUIRED (c) Calculate the capital employed at 31 December [3] (d) Using your answer from (c), calculate to two decimal places the return on capital employed for the year ended 31 December Question 6(e) is on the next page. [3] UCLES /11/M/J/14

19 19 Anton and Belle had a return on capital employed of 20% in the year ended 31 December 2012 and are surprised by the change. Investigation showed that the inventory at 31 December 2013 should have been recorded at a value of $15 000, not $ REQUIRED (e) Calculate the correct profit for the year ended 31 December [4] [Total: 26] UCLES /11/M/J/14

20 20 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. UCLES /11/M/J/14

21 * * Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/12 Paper 1 May/June 2014 Candidates answer on the Question Paper. No Additional Materials are required. 1 hour 45 minutes 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. IB14 06_0452_12/8RP UCLES 2014 [Turn over

22 2 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 B C D analysing financial information drawing up a trial balance preparing sales and purchases ledger accounts writing up the books of prime entry (b) Which statement is not correct? A B C D Accounting can help to control costs. Accounting can help to identify profit trends. Accounting can help to measure the motivation of workers. Accounting can help to monitor liquidity. (c) A flower shop receives an invoice for 200 plants at $5 each, less 20% trade discount, from A. Field. The plants were bought on credit and for resale. Which entry records the transaction in the flower shop s books? account to be debited account to be credited $ $ A purchases 1000 A. Field 1000 B A. Field 1000 purchases 1000 C purchases 800 A. Field 800 D A. Field 800 purchases 800 UCLES /12/M/J/14

23 3 (d) A bank reconciliation statement is drawn up starting with the debit balance shown in the cash book. The difference between the balance in the cash book and that shown on the bank statement is caused by a bank error overstating bank charges and a cheque not yet presented. How are these items shown in the bank reconciliation statement? bank error overstating bank charges cheque not yet presented A added added B added deducted C deducted added D deducted deducted (e) A trader provided the following information. $ 1 April sales ledger control account balance debit 30 April totals for the month: credit sales sales returns 800 cheques received from debtors What was the balance on the sales ledger control account on 30 April? A $6200 B $7800 C $ D $ UCLES /12/M/J/14 [Turn over

24 4 (f) The following information is extracted from the rent account of a business. $ owing at 1 January rent paid in year ended 31 December rent paid in advance at 31 December How much rent was payable for the year ended 31 December 2013? A $1050 B $1550 C $1850 D $2350 (g) A business maintains a provision for doubtful debts. Which two accounting principles are being applied? A B C D accruals (matching) and prudence business entity and duality consistency and realisation money measurement and going concern (h) Emily is a trader. She provided the following information on 30 April $ non-current assets current assets current liabilities Her capital on 1 May 2013 was $ She did not make any drawings during the year. What was Emily s profit for the year ended 30 April 2014? A $8000 B $ C $ D $ UCLES /12/M/J/14

25 5 (i) The table shows information relating to two businesses trading in the same type of goods. business rate of inventory turnover quick ratio Y 3 times a year 1.5 : 1 Z 9 times a year 0.7 : 1 Which statement is correct? A B C D Business Y has a good rate of inventory turnover but has poor liquidity. Business Y has a poor rate of inventory turnover and has poor liquidity. Business Z has a good rate of inventory turnover but has poor liquidity. Business Z has a poor rate of inventory turnover and has poor liquidity. (j) What will not be found in the financial statements of a business? A B C D the amount the business owes to suppliers the income and running costs of the business the skill and experience of the employees the value of the assets owned by the business [Total: 10] UCLES /12/M/J/14 [Turn over

26 2 (a) Explain the meaning of the following terms. 6 1 asset 2 liability 3 owner s capital [3] (b) Complete the table below using a tick ( ) to indicate if each item is an asset or a liability. The first has been completed as an example. Inventory Motor vehicle Creditor Debtor Bank loan Cash Asset Liability [5] Archie is a trader with a year end of 31 December. During the year he made the following transactions. 1 On 1 January paid $ of his own money into the business bank account. 2 On 1 January bought plant and equipment, $6000, paying half by cheque and paying half with a loan from ABC Finance. 3 On 30 June took $500 in cash as drawings. 4 On 31 December paid by bank transfer $210 interest on the loan from ABC Finance. 5 On 31 December paid $1000 by cheque as the first repayment of the loan. 6 On 31 December provided $600 depreciation on the plant and equipment. UCLES /12/M/J/14

27 7 REQUIRED (c) Complete the table below, showing the double entry recording each of these transactions. The first has been completed as an example. Debit entry Credit entry $ $ 1 Bank account Capital account [11] (d) Calculate the annual rate of interest Archie was paying on the loan. [2] (e) Explain how a bank overdraft can arise. [2] (f) The cheque issued by Archie on 31 December did not appear on the bank statement until 6 January. State the term given to this cheque in Archie s bank reconciliation statement on 31 December. [Total: 24] UCLES /12/M/J/14 [Turn over

28 3 (a) (i) Name one ledger account which might be found in the nominal (general) ledger. 8 (ii) Name one other type of ledger which a business might maintain. (iii) Explain why dividing the ledger into sections makes it easier to use. [2] (b) Complete the table below to indicate in which financial statement each item would appear. State to which type of business each item relates. The first has been completed as an example. Ordinary share capital Accumulated fund Interest on capital Ordinary share dividends paid Debenture interest Financial statement Statement of financial position Type of organisation Limited company [8] (c) State two differences between debentures and ordinary shares. 1 2 [4] UCLES /12/M/J/14

29 9 (d) Explain why a limited company might decide not to distribute all of its profit for the year in the form of a dividend. [2] [Total: 18] UCLES /12/M/J/14 [Turn over

30 10 4 (a) Matsumi was inexperienced in book-keeping and drew up a trial balance which failed to balance. Name the account she could have opened to enable the trial balance to balance. The trial balance which she drew up, and which contained errors, was as follows. Matsumi Trial Balance at 30 April 2014 Dr Cr $ $ Bank overdraft Cash 100 Fixtures and fittings at cost Provision for depreciation at 1 May Fees receivable Interest payable 200 Rent payable Advertising 430 Wages Loan account Capital at 1 May Drawings UCLES /12/M/J/14

31 11 REQUIRED (b) Prepare a corrected trial balance at 30 April Matsumi Trial Balance at 30 April 2014 Dr Cr $ $ Bank overdraft.... Cash.... Fixtures and fittings at cost.... Provision for depreciation at 1 May Fees receivable.... Interest payable.... Rent payable.... Advertising.... Wages.... Loan account.... Capital at 1 May Drawings [6] (c) Explain why the capital account balance in the trial balance is that of 1 May [2] (d) Suggest the line of business in which Matsumi may be working. UCLES /12/M/J/14 [Turn over

32 12 (e) Matsumi depreciates her fixtures and fittings at the rate of 20% per annum using the reducing (diminishing) balance method. Calculate the depreciation charge for the year ended 30 April [2] (f) Prepare the provision for depreciation account for the year ended 30 April Balance the account and bring down the balance on 1 May Provision for depreciation account [4] [Total: 16] UCLES /12/M/J/14

33 13 5 (a) Complete the sentences below, using the terms current assets direct labour finished goods inventory raw materials work in progress A manufacturing business is one which purchases converts them into are only partially complete they are known as under the of financial position. and by using If some units of production These appear as heading in the statement [6] Randeep provided the following information. At 1 April 2013 $ Inventory of raw materials Inventory of finished goods For the year ended 31 March 2014 Purchases of raw materials Carriage on raw materials Wages of factory workers Salary of factory supervisor Factory rent Depreciation of factory machinery Total administration and selling costs Revenue At 31 March 2014 Inventory of raw materials Inventory of finished goods UCLES /12/M/J/14 [Turn over

34 14 REQUIRED (b) (i) Prepare the manufacturing account for the year ended 31 March 2014 Randeep Manufacturing Account for the year ended 31 March 2014 [9] UCLES /12/M/J/14

35 (ii) Prepare the income statement for the year ended 31 March Randeep Income Statement for the year ended 31 March 2014 [6] UCLES /12/M/J/14 [Turn over

36 16 (c) Name one indirect cost from the information on page 13. (d) Suggest two items which might be included in the total of administration and selling costs. 1 2 [2] [Total: 24] UCLES /12/M/J/14

37 6 (a) Explain the difference between capital expenditure and revenue expenditure. 17 [2] (b) Complete the table below, indicating with a tick ( ) how each item would be classified. The first has been completed as an example. Capital expenditure Revenue expenditure Salesman s commission Carriage of raw materials Purchases of goods for resale Purchases of plant and equipment Payment of insurance Legal fees on purchase of property [5] UCLES /12/M/J/14 [Turn over

38 18 Morwenna provided the following information about her assets and liabilities at 30 April $ Motor vehicles at cost Provision for depreciation of motor vehicles Fixtures and fittings at cost Provision for depreciation of fixtures and fittings Goodwill Inventory Trade receivables Bank Cr Trade payables REQUIRED (c) Calculate to two decimal places Morwenna s current ratio at 30 April [2] When Morwenna s accountant checked her figures he discovered the following. 1 The goodwill figure represented Morwenna s estimate of the value of the good reputation of her business. 2 Inventory had been calculated at selling price, after applying a mark up of $ During the year motor vehicle repairs, $800, had been debited to the motor vehicle account. This did not affect the depreciation for the year. 4 During the year new fixtures and fittings, $1000, had been debited to the stationery account. No depreciation was charged on non-current assets purchased during the year. 5 On 30 April 2014, Morwenna was two months in arrears in paying her rent of $1500 a month. UCLES /12/M/J/14

39 19 REQUIRED (d) Prepare Morwenna s statement of financial position at 30 April 2014 showing her capital at that date. Morwenna Statement of Financial Position at 30 April 2014 [14] UCLES /12/M/J/14 [Turn over

40 20 (e) Calculate to two decimal places Morwenna s current ratio at 30 April 2014 based on her statement of financial position figures. [2] (f) Comment on the liquidity of Morwenna s business. [3] [Total: 28] Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. UCLES /12/M/J/14

41 * * Cambridge International Examinations Cambridge International General Certificate of Secondary Education ACCOUNTING 0452/13 Paper 1 May/June 2014 Candidates answer on the Question Paper. No Additional Materials are required. 1 hour 45 minutes 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. IB14 06_0452_13/2RP UCLES 2014 [Turn over

42 2 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 is carried out by a book-keeper? A B C D analysing information assessing information interpreting information recording information (b) Joe is about to supply goods to some new customers. Why would Joe want to examine their financial statements? A B C D to check the amount of trade receivables to check the cash position to check the value of the inventory to check how much profit was made (c) In March, Wahid had the following transactions with Yussuf, a new customer. $ 4 March Goods invoiced to Yussuf March Credit note issued to Yussuf March Goods invoiced to Yussuf March Cheque received from Yussuf 2100 How much did Yussuf owe Wahid on 31 March? A $3000 B $3300 C $5100 D $5700 UCLES /13/M/J/14

43 3 (d) Which is a compensating error? A B C D credit sales debited to the sales account and credited to the customer s account purchases of fixtures on credit debited to the repairs to fixtures account sales account and sales returns account undercast by the same amount Yeung s account credited with a cheque received from Yang, another customer (e) The following is a list of a builder s expenditure for the year. $ motor vehicle purchases wages rent of offices machinery petrol What is the amount of capital expenditure? A $ B $ C $ D $ UCLES /13/M/J/14 [Turn over

44 4 (f) A business uses the straight line method of depreciation. The following information is provided. motor vehicles at cost $ anticipated life 4 years residual value $2000 What is the annual depreciation charge for motor vehicles? A $2000 B $5000 C $7000 D $7500 (g) How should inventory be valued in the statement of financial position? A B C D at an amount determined by professional valuation at historic cost at net book value at the lower of cost and net realisable value (h) At 1 January 2013 a trader owed wages of $1000. During the year ended 31 December 2013 wages of $4000 were paid. At 31 December 2013 wages of $1200 were owed. How much should have been entered in the income statement for wages for the year ended 31 December 2013? A $3800 B $4000 C $4200 D $6200 UCLES /13/M/J/14

45 5 (i) The following information was extracted from the financial statements of Bob. $ bank overdraft inventory trade payables trade receivables How much extra capital would Bob have to invest to make the value of his working capital $24 000? A $8000 B $ C $ D $ (j) Which statement about financial statements is correct? A B C D They provide an accurate profit for the past year, if the double entry system is followed. They provide financial information about a business s past performance, based on historic cost. They provide information about a business s performance in the market. They provide information about the future profits of the business. [Total: 10] UCLES /13/M/J/14 [Turn over

46 6 2 (a) Yuri keeps a full set of accounting records. Name the ledger in which each of the following accounts is found. Account Ledger Insurance Sales Purchases Lottie, a credit supplier Matthew, a credit customer Capital [6] (b) Yuri maintains a sales journal, a sales returns journal, a purchases journal and a purchases returns journal. Name one other book of prime entry which he may maintain. (c) State why it is useful for a business to maintain a sales journal. [2] On 1 April Susan and Elinor owe Yuri $260 and $120 respectively. Yuri s sales journal and sales returns journal for the month showed the following. Sales journal $ April 4 Susan Elinor Sales returns journal $ April 12 Susan Elinor UCLES /13/M/J/14

47 7 REQUIRED (d) Prepare the following ledger accounts for the month of April. Balance the accounts where necessary and bring down the balances on 1 May. Elinor account Sales account Sales returns account [8] On 8 April Susan paid the amount she owed on 1 April, after taking 5% cash discount. REQUIRED (e) Calculate the amount which Yuri received from Susan. [2] UCLES /13/M/J/14 [Turn over

48 8 Yuri employs a book-keeper to maintain the accounts of his credit customers. REQUIRED (f) Name the account which Yuri prepares to check for fraud or error in the book-keeper s work. [Total: 20] UCLES /13/M/J/14

49 3 Highfield Manufacturing Limited provided the following information. On 1 March 2013 the balance on the provision for doubtful debts account was $2966. On 28 February 2014 trade receivables totalled $ This total includes an amount of $1100 due from a debtor who has gone bankrupt and which will not be recovered. During the year $200 was received as part settlement of a debt of $400 which had been written off 18 months earlier. The provision for doubtful debts is maintained at 5%. REQUIRED (a) Prepare the following ledger accounts for the year ended 28 February Show the transfers to the income statement. Bring down any balances remaining on 1 March Highfield Manufacturing Limited Bad debts account Bad debts recovered account Provision for doubtful debts account [9] UCLES /13/M/J/14 [Turn over

50 10 (b) Explain how accounting for bad debts and providing for doubtful debts applies the following accounting principles. (i) accruals (matching) [2] (ii) prudence [2] (c) Explain the term prime cost which appears in the financial statements of Highfield Manufacturing Limited. [2] (d) All the goods sold by Highfield Manufacturing Limited are produced in its factory. Name the term which replaces ordinary goods purchased in its trading section of the income statement. (e) The company s statement of financial position contains entries for ordinary share capital, preference share capital, debentures and a bank loan. Explain one difference (i) between ordinary shares and preference shares [2] UCLES /13/M/J/14

51 11 (ii) between ordinary shares and debentures. [2] (f) The 6% bank loan of $ was taken out on 1 July Calculate the interest charged in the income statement for the year ended 28 February [2] (g) Name two interested parties who would use the financial statements of Highfield Manufacturing Limited. 1 2 [2] [Total: 24] UCLES /13/M/J/14 [Turn over

52 4 (a) State what is meant by the term subscription in a club s accounts. 12 (b) Speedy Runner Sports Club maintains a subscriptions account. Explain why this account can have two opening balances. [2] (c) The first column in the table below gives a term used in the financial statements of a sole trader. Complete the table by entering in the second column the equivalent term in the financial statements of a club or society. Sole trader Club or society Capital Profit for the year Loss for the year [3] (d) Complete the table below. Put two ticks ( ) in each row to indicate whether the item would appear on the debit side or credit side of the receipts and payments account or the income and expenditure account. The first one has been completed as an example. Debit Credit Receipts and payments account Income and expenditure account Depreciation charge Proceeds of sale of equipment Loss on disposal of equipment Unpaid subscriptions written off Purchase of new equipment Profit on sale of refreshments [10] UCLES /13/M/J/14

53 13 Speedy Runners Sports Club provided the following information. $ Payments made to suppliers of refreshments for the year ended 31 December Amounts owing to suppliers for refreshments - at 31 December at 31 December REQUIRED (e) Complete the income statement (trading account) below. Speedy Runners Sports Club Income Statement (Trading Account) for the year ended 31 December 2013 $ $ Revenue 6150 Inventory 1 January 380 Purchases Inventory 31 December Cost of sales Gross profit 3610 [5] (f) Explain why there are no drawings in a club or society. [2] (g) Explain what is meant by the accounting policy of comparability. [2] [Total: 25] UCLES /13/M/J/14 [Turn over

54 14 5 Miguel reconciles the balance on his cash book with the balance on his bank statement. (a) Complete this sentence. Items in the cash book which do not appear on the bank statement are usually caused by differences. Miguel s cash book (bank columns only) showed the following entries $ 2014 $ May 2 Cash sales 4216 May 1 Balance b/d Alice David Bertram Vehicle repairs Cash sales Edward Charles Wages Balance c/d Francis May 8 Balance b/d 2720 His bank statement for the same period showed the following. Dr Cr Balance $ $ $ May 1 Balance 1168 Dr 2 Insurance Dr 5 Cash Cr 5 Alice Cr 5 Bertram Cr 5 Wages Cr 6 Interest Cr 6 David Dr 7 Edward Dr 7 Gordon Dr UCLES /13/M/J/14

55 15 REQUIRED (b) Update the cash book and bring down the new balance. Miguel Cash book (bank columns only) Date Details $ Date Details $ May 8 Balance b/d 2720 [5] (c) Prepare the bank reconciliation statement at 8 May Miguel Bank reconciliation statement at 8 May 2014 [8] UCLES /13/M/J/14 [Turn over

56 16 Miguel also maintains a petty cash book with an imprest amount of $100 which is restored at the start of each month. On 31 March the total of vouchers in the petty cash book was $66. REQUIRED (d) Calculate the amount the chief cashier gave to the petty cashier on 1 April. [Total: 15] UCLES /13/M/J/14

57 17 6 Anton and Belle have been in partnership for some years. From the start of trading their fixed capital has been $ and $ respectively. Their partnership agreement allows for interest on capital of 10% a year, a salary to Anton of $ a year and a profit sharing ratio of 2:1 respectively. Other information is as follows. At 1 January 2013 Current account Anton Current account Belle $ Dr Cr REQUIRED For the year ended 31 December 2013 Drawings - Anton Drawings - Belle Interest on drawings - Anton Interest on drawings - Belle 500 Profit for the year (a) Prepare the partnership appropriation account for the year ended 31 December Anton and Belle Appropriation Account for the year ended 31 December 2013 [8] UCLES /13/M/J/14 [Turn over

58 18 (b) Prepare Anton s current account for the year ended 31 December Bring down the balance on 1 January [8] Additional information $ At 31 December 2013 Non-current assets Inventory Other net current assets Long-term loan (taken out in 2009 and to be repaid in 2019) REQUIRED (c) Calculate the capital employed at 31 December [3] (d) Using your answer from (c), calculate to two decimal places the return on capital employed for the year ended 31 December Question 6(e) is on the next page. [3] UCLES /13/M/J/14

59 19 Anton and Belle had a return on capital employed of 20% in the year ended 31 December 2012 and are surprised by the change. Investigation showed that the inventory at 31 December 2013 should have been recorded at a value of $15 000, not $ REQUIRED (e) Calculate the correct profit for the year ended 31 December [4] [Total: 26] UCLES /13/M/J/14

60 20 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. UCLES /11/M/J/14

61 Cambridge International Examinations Cambridge International General Certificate of Secondary Education * * ACCOUNTING 0452/21 Paper 2 May/June 2014 Candidates answer on the Question Paper. No Additional Materials are required. 1 hour 45 minutes 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. IB14 06_0452_21/7RP UCLES 2014 [Turn over

62 1 The financial year of Nasir Manufacturing Limited ends on 31 January. The following information is available. $ At 1 February 2013 Plant and machinery at cost Office fixtures and equipment at cost Loose tools at valuation Provision for depreciation of plant and machinery Provision for depreciation of office fixtures and equipment Inventories: Raw materials Work in progress Finished goods For the year ended 31 January 2014 Revenue Purchases: Raw materials Finished goods Purchases returns: Finished goods 200 Wages and salaries: Factory workers Factory supervisors Administrative and sales staff Expenses: Direct expenses General factory expenses General office expenses Rates and insurance Additional information 1 On 31 January 2014 Inventories: Raw materials Work in progress Finished goods Direct wages accrued Sales staff wages accrued 380 Rates prepaid The rates and insurance are to be apportioned ¾ to the factory and ¼ to the office. 2 3 The plant and machinery and office fixtures and equipment are being depreciated at 20% per annum using the reducing (diminishing) balance method. 4 During the year ended 31 January 2014 loose tools costing $310 were purchased. On 31 January 2014 loose tools were valued at $2740. UCLES /21/M/J/14

63 3 REQUIRED (a) Prepare the manufacturing account of Nasir Manufacturing Limited for the year ended 31 January Nasir Manufacturing Limited Manufacturing Account for the year ended 31 January 2014 UCLES /21/M/J/14 [Turn over [14]

64 4 (b) Prepare the trading account section of the income statement of Nasir Manufacturing Limited to show the gross profit for the year ended 31 January Nasir Manufacturing Limited Income Statement for the year ended 31 January [6] [Total: 20] UCLES /21/M/J/14

65 2 Leroy Smith is a trader. His financial year ends on 31 March. He provided the following information about stationery for the year ended 31 March $ April 1 Inventory of stationery 144 June 30 Purchased stationery and paid by cheque 368 Aug 1 Took stationery for personal use Mar 31 Inventory of stationery 92 REQUIRED 5 (a) Write up the stationery account as it would appear in Leroy Smith s ledger for the year ended 31 March Balance the account and bring down the balance on 1 April Leroy Smith Stationery account Date Details $ Date Details $ (b) Explain how the business entity principle has been applied in the preparation of the stationery account. [6] [2] UCLES /21/M/J/14 [Turn over

66 6 Leroy Smith maintains one combined account for rent and rates. He provided the following information for the year ended 31 March On 1 April 2013 two months rates, totalling $380, were prepaid and one month s rent, $260, was accrued. During the year ended 31 March 2014 the following payments were made by cheque: $ Rates 13 months to 30 June Rent 13 months to 31 March REQUIRED (c) Write up the rent and rates account as it would appear in Leroy Smith s ledger for the year ended 31 March Balance the account and bring down the balance on 1 April Leroy Smith Rent and rates account Date Details $ Date Details $ [6] (d) Explain how the accruals (matching) principle has been applied in the preparation of the rent and rates account. [2] UCLES /21/M/J/14

67 7 (e) Define the following terms. Capital receipts Capital expenditure Revenue receipts Revenue expenditure [4] (f) On 31 March 2014 Leroy Smith discovered that an item of revenue expenditure had been recorded as capital expenditure. Complete the following table by putting ticks ( ) in the correct columns to indicate the effect of this error on the non-current assets and the profit for the year. non-current assets at 31 March 2014 profit for the year ended 31 March 2014 Overstated Understated Overstated Understated [2] [Total: 22] UCLES /21/M/J/14 [Turn over

68 3 (a) (i) Describe the straight line method of depreciation. 8 (ii) State the circumstances when this method of depreciation may be used. (b) (i) Describe the reducing (diminishing) balance method of depreciation. (ii) State the circumstances when this method of depreciation may be used. (c) State which of the above methods of depreciation would be most appropriate to use for each of the following non-current assets. 1 Computer equipment 2 Buildings 3 Motor vehicle [3] (d) (i) Describe the revaluation method of depreciation. UCLES /21/M/J/14

69 (ii) State the circumstances when this method of depreciation may be used. 9 (iii) Suggest one non-current asset which may be depreciated using this method. Tony Yeo is in business. His financial year ends on 30 April. He depreciates his non-current assets each year. On 1 May 2013 the balances in Tony Yeo s ledger included the following: $ Equipment at cost 8600 Provision for depreciation of equipment 3260 The equipment is being depreciated at 20% per annum using the straight line method, calculated from the date of purchase. No depreciation is to be charged in the year of disposal. On 31 October 2013 equipment which had cost $2000 on 1 May 2011 was sold for $750 cash. On 1 November 2013 equipment costing $3400 was purchased on credit from New2You. REQUIRED (e) Write up the following accounts in the ledger of Tony Yeo for the year ended 30 April Balance the accounts where necessary and bring the balances down on 1 May Tony Yeo Equipment account [3] UCLES /21/M/J/14 [Turn over

70 10 Provision for depreciation of equipment account [5] Disposal of equipment account [4] [Total: 22] UCLES /21/M/J/14

71 11 4 The financial year of LWS Limited ends on 30 April. The following information was available on 30 April Paid-up share capital Loan capital ordinary shares of $0.50 each % preference shares of $1 each % debentures of $1 each On 1 May 2013 the retained profits amounted to $7500. On 1 November 2013 debenture interest for the period 1 May to 31 October 2013 was paid. On 29 April 2014 the annual preference share dividend was paid. On 30 April 2014 debenture interest for the period 1 November 2013 to 30 April 2014 was accrued. On 30 April 2014 the directors recommended a transfer of $4000 to a general reserve and a payment of an ordinary share dividend of 8%. The profit for the year ended 30 April 2014 before interest amounted to $ REQUIRED (a) Calculate the following. Total debenture interest for the year (in $) Preference share dividend paid (in $) Ordinary share dividend to be paid (in $) [3] (b) State why the company made a transfer to general reserve. UCLES /21/M/J/14 [Turn over

72 12 (c) Calculate the profit retained in the year. [5] (d) Prepare the capital and reserves section of the statement of financial position of LWS Limited at 30 April Capital and reserves LWS Limited Extract from Statement of Financial Position at 30 April 2014 [4] (e) Name the section of the statement of financial position of LWS Limited at 30 April 2014 in which debentures would appear. (f) (i) Name the section of the statement of financial position of LWS Limited at 30 April 2014 in which debenture interest would appear. (ii) State the amount of debenture interest which would appear in the statement of financial position of LWS Limited at 30 April [Total: 16] UCLES /21/M/J/14

73 13 Question 5 is on the next page. UCLES /21/M/J/14 [Turn over

74 14 5 Uzma Khan runs a dress-making business. She maintains a full set of accounting records. Her financial year ends on 28 February. On 28 February 2014 she opened a suspense account and entered a credit balance of $2027. REQUIRED (a) State two reasons why it was necessary for Uzma Khan to open a suspense account. 1 2 [2] Uzma Khan discovered the following errors had been made in her accounting records. 1 Rent of premises, $250, had been debited to the rent account as $ $400 withdrawn from the bank for personal use had been debited to the wages account. 3 The total of the discount allowed column in the main cash book, $43, had not been transferred to the discount allowed account in the ledger. 4 $2000 received from Amina had been credited to the account of Mona as $200. UCLES /21/M/J/14

75 15 REQUIRED (b) Prepare the entries in Uzma Khan s journal to correct the four errors on page 14. Narratives are required. Uzma Khan Journal Debit $ Credit $ [13] UCLES /21/M/J/14 [Turn over

76 16 (c) Complete the table below to show what effect each of the four errors on page 14 had on Uzma Khan s profit for the year ended 28 February The first one has been completed as an example. Error Overstated $ Effect on profit for the year Understated $ No effect [6] [Total: 21] UCLES /21/M/J/14

77 17 Question 6 is on the next page. UCLES /21/M/J/14 [Turn over

78 6 Maria Khumalo is a trader. Her financial year ends on 31 March. She provided the following summary of her assets and liabilities on 31 March $ $ Capital Profit for the year Trade payables Bank overdraft Short term loan Non-current assets Inventory Petty cash 100 Trade receivables For the year ended 31 March 2014: $ Revenue Cost of sales Expenses Maria Khumalo wishes to compare the performance of her business for the year ended 31 March 2014 with that of the previous financial year. REQUIRED (a) Complete the table below to show the ratios for Maria Khumalo s business for the year ended 31 March Calculations should be correct to two decimal places. You may use the space on the following page for your workings. Ratio Year ended 31 March percentage of gross profit to revenue (sales) 28.10% % percentage of profit for the year to revenue (sales) 10.25% % current ratio 1.95 : 1 quick ratio 0.90 : 1 [8] UCLES /21/M/J/14