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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

International General Certificate of Secondary Education
*0620144673*

ACCOUNTING 0452/23
Paper 2 October/November 2011
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 a soft pencil for any diagrams or graphs.
Do not use staples, paper clips, highlighters, 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. For Examiner's Use
The number of marks is given in brackets [ ] at the end of each question or part
question. 1

Total

This document consists of 18 printed pages and 2 blank pages.

IB11 11_0452_23/6RP
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1 Mai Wang is a sole trader who keeps a full set of double entry records including a three For
column cash book. Examiner's
Use

On 1 July 2011 Mai Wang had $250 cash in hand and a bank overdraft of $4500.

Mai Wang’s transactions for the month of July 2011 included the following:

July 2 Cash sales, $342, of which $300 was paid into the bank on that date

9 Received a cheque from Mark Fu in settlement of his account of $150 less

2% cash discount

15 Withdrew $500 from the bank for personal use

23 Paid Sally Tan $468 by cheque after deducting cash discount of 2½% cash
discount

29 A cheque received in June for $330 from Mulyani Ltd was dishonoured and
returned by the bank

30 Paid all the remaining cash into the bank except $100

REQUIRED

(a) Enter the above transactions in Mai Wang’s cash book on the page opposite.

Balance the cash book at 31 July and bring down the balances on 1 August 2011.

[10]

The cash book is printed on the next page.

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 Mai Wang

© UCLES 2011
Cash Book
Discount Discount
Date Details Cash Bank Date Details Cash Bank
Allowed Received
$ $ $ $ $ $
3

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Mai Wang’s bank statement showed a debit balance of $4873 on 31 July 2011. For
Examiner's
Use

REQUIRED

(b) State the bank balance that should be shown in the balance sheet of Mai Wang at
31 July 2011. State whether it is an asset or a liability.

[2]

(c) Explain the meaning of each of the following terms.

(i) Bank reconciliation statement

[2]

(ii) Cheques not yet credited

[2]

(iii) Cheques not yet presented.

[2]

[Total: 18]

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BLANK PAGE For

Examiner's
Use

Question 2 is on the next page

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2 The financial year of Kapiti Ltd ends on 31 August. For

Examiner's
Use
The following information is available.

Issue share capital 80 000 5% preference shares of $1 each

400 000 ordinary shares of $0.50 each
$
1 September 2010 Retained profit 90 000
General reserve 88 000

During the year ended 31 August 2011 the company paid an interim dividend of $0.05 per
share on the ordinary shares.

On 31 August 2011 it was decided to:

1 Pay the preference share dividend in full.

2 Transfer $25 000 to a general reserve.
3 Pay a final dividend of $0.10 per share on the ordinary shares.

The profit for the year ended 31 August 2011 before the preference share dividend
was $174 000.

REQUIRED

(a) Calculate the profit for the year ended 31 August 2011 after taking into account the
preference share dividend.

Show your workings.

[3]

(b) Prepare the profit and loss appropriation account of Kapiti Ltd for the year ended
31 August 2011

Start with the profit for the year after the preference share dividend you calculated in (a)

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Kapiti Ltd For

Profit and Loss Appropriation Account for the year ended 31 August 2011 Examiner's
Use

[9]

(c) State the amount that would be shown for each of the following in the balance sheet of
Kapiti Ltd at 31 August 2011.

(i) General reserve $

(ii) Retained profit $ [2]

(d) Explain whether the interim ordinary share dividend would appear in the balance sheet
of Kapiti Ltd on 31 August 2011.

[3]

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(e) Explain the meaning of the term “limited liability”. For

Examiner's
Use

[2]

Kapiti Ltd requires extra finance. It is considering increasing the total preference share
capital to $100 000 by the issue of additional 5% preference shares of $1 each.

REQUIRED

(f) (i) State two features of preference shares.

[4]

(ii) State how much money the company could raise from the issue of preference
shares.

[1]

(iii) State the amount of additional preference dividend which would have to be paid
each year if the extra shares are issued.

[1]

(iv) State one way in which the issue of preference shares may affect the existing
ordinary shareholders.

[2]

[Total: 27]

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3 Ajit Singh is a trader. He maintains a full set of books of prime (original) entry and prepares For
a sales ledger control account and a purchases ledger control account at the end of each Examiner's
Use
month.

REQUIRED

(a) State two advantages of preparing control accounts.

(i)

(ii)

[2]

(b) State one reason why it is possible to have a credit balance brought down on a sales
ledger control account.

[1]

Ajit Singh provided the following information for the month of October 2011.

$
October 1 Debit balances in sales ledger 15 940

October 31 Totals for the month

Credit sales 14 820
Cash sales 5 630
Cheques received from credit customers 15 252
Cheques paid to credit suppliers 17 670
Discounts allowed 355
Discounts received 298
Returns by credit customers 1 280
Returns to credit suppliers 996
Bad debts written off 105
Provision for doubtful debts 680
Interest charged by credit supplier on overdue account 15
Interest charged to credit customer on overdue account 10
Contra entry 485

November 1 Debit balances in sales ledger ?

Credit balances in sales ledger 100

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REQUIRED For
Examiner's
Use
(c) Select the relevant figures and prepare Ajit Singh’s sales ledger control account for the
month of October 2011.

Where a traditional “T” account is used it should be balanced and the balances brought
down on 1 November 2011.

Where a three column running balance account is used the balance column should be
up-dated after each entry.

Ajit Singh
Sales ledger control account

[12]

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Ajit Singh’s financial year ended on 31 October 2011. His sales for the year were as For
follows. Examiner's
Use

$
Credit sales 165 900
Cash sales 71 000

Ajit Singh allows his credit customers one month in which to pay their accounts.

REQUIRED

(d) Using the debit balance on 1 November on the sales ledger control account you
prepared in (c) and the above information, calculate the collection period for trade
receivables. Your answer should be rounded up to the next whole day.

Show your workings.

[2]

(e) State and explain whether you think that Ajit Singh will regard the collection period for
trade receivables as satisfactory.

Will he be satisfied?

Explanation

[3]

(f) State one possible advantage to Ajit Singh of being able to collect the trade
receivables before the due date.

[1]

[Total: 21]

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4 Ahmed El Din is a manufacturer of men’s suits. He purchases fabric from several suppliers For
which his workforce makes into suits for sale to wholesalers and large retailers. Examiner's
Use

Ahmed El Din’s financial year ends on 30 September.

He provided the following information.

At 1 October 2010 At 30 September 2011

$ $
Inventory – raw materials 17 300 19 400
finished goods 29 300 31 200
Work in progress 9 200 10 400
Direct factory wages accrued 2 300 2 750
Factory general expenses prepaid - 250

For the year ended 30 September 2011

$
Revenue 858 000
Raw materials purchased 203 300
Direct factory wages 199 500
Indirect factory wages 42 600
Factory general expenses 122 400

Additional information on 30 September 2011:

1 On 1 October 2010 the factory machinery was valued at $132 500.

Additional machinery costing $5900 was purchased during the year.
There were no sales of machinery during the year.
On 30 September 2011 the factory machinery was valued at $124 000.

2 Inventories are valued at the lower of cost and net realisable value.

3 During the year ended 30 September 2011 Ahmed El Din took finished goods
costing $900 for his own use. No entries have been made in the accounting
records.

REQUIRED

(a) Prepare the manufacturing account of Ahmed El Din for the year ended
30 September 2011.

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Ahmed El Din For

Manufacturing Account for the year ended 30 September 2011 Examiner's
Use

[14]

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(b) Prepare the income statement of Ahmed El Din showing the calculation of his gross For
profit for the year ended 30 September 2011. Examiner's
Use

Ahmed El Din
Income Statement for the year ended 30 September 2011

[6]

(c) Explain how the prudence principle has been applied in the preparation of the
manufacturing account. Give an example to illustrate your answer.

[2]

(d) Explain how the accruals (matching) principle has been applied in the preparation of
the manufacturing account. Give an example to illustrate your answer.

[2]

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(e) Explain how the business entity principle has been applied in the preparation of the For
income statement. Give an example to illustrate your answer. Examiner's
Use

[2]

[Total: 26]

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5 Susan Morgan is a trader. Her financial year ends on 31 July. She provided the following For
information: Examiner's
Use

ratio Year ended 31 July 2010 Year ended 31 July 2011

percentage of gross profit to sales 21% 25%

percentage of net profit to sales 10% 11%

REQUIRED

(a) Suggest two reasons for the increase in the percentage of gross profit to sales.

(i)

(ii)

[2]

(b) Suggest two reasons for the increase in the percentage of net profit to sales.

(i)

(ii)

[2]

(c) Using the information in the table above, calculate the percentage of expenses to sales
for each year. Show your workings.

(i) Year ended 31 July 2010

[1]

(ii) Year ended 31 July 2011

[1]

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(d) Explain how the change in the percentage of expenses to sales has affected the For
efficiency of the business. Examiner's
Use

[3]

Susan Morgan provided the following information at 31 July 2011.

$
Inventory 4500
Trade payables 5600
Trade receivables 3800
Petty cash 50
Balance at bank 1000

REQUIRED

(e) Calculate Susan Morgan’s current ratio. The calculation should be correct to two
decimal places.
Show your workings.

[2]

(f) Calculate Susan Morgan’s quick ratio. The calculation should be correct to two decimal
places.
Show your workings.

[2]

(g) Susan Morgan’s quick ratio at 31 July 2010 was 1.05:1.

State and explain whether you think that Susan Morgan will be satisfied with the
change in the quick ratio.

Will she be satisfied?

Explanation

[3]

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(h) Explain why it is important for Susan Morgan to have an adequate amount of working For
capital. Examiner's
Use

[2]

(i) State and explain the effect of each of the following transactions on Susan Morgan’s
working capital.

The first one has been completed as an example.

(i) Susan Morgan paid $10 000 additional capital into the business bank account.

Effect Working capital increases by $10 000

Explanation The current assets increase by $10 000 as the bank balance

increases. There is no change in the current liabilities.

(ii) Payment of $20 from petty cash for office expenses.

Effect

Explanation

[2]

(iii) Payment of $240 by cheque to Jones, a creditor, in full settlement of $250 owing.

Effect

Explanation

[2]

(iv) Receipt of $230 in cash from the sale of goods (cost price $270).

Effect

Explanation

[2]

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(j) State one reason why each of the following business people are interested in Susan For
Morgan’s financial statements. Examiner's
Use

(i) Bank manager

(ii) Employee

(iii) Supplier of goods on credit

(iv) Potential purchaser of the business.

[4]

[Total: 28]

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