Cambridge Assessment International Education

Cambridge International General Certificate of Secondary Education

* 4 9 5 8 6 7 5 4 8 3 *

ACCOUNTING 0452/22
Paper 2 October/November 2019
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 (LEG) 169007/3
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1 Tebogo is a trader. His financial year ends on 31 August.

Tebogo maintains a full set of accounting records. He sells goods on credit terms.

On 1 August 2019 Kayla, a credit customer, owed $900.

The following transactions took place in August 2019.

August 6 Sold goods on credit to Kayla, list price $1400, less a trade discount of 20%

12 Kayla returned some of the goods purchased on 6 August, list price $300

18 Sold goods on credit to Nyack, $620

24 Nyack returned one quarter of the goods purchased on 18 August

29 Received a cheque from Kayla in settlement of the balance due on

1 August, less 2% cash discount

30 Sold goods on credit to Kayla, $160

REQUIRED

(a) Prepare the sales journal and the sales returns journal for August 2019.

Total each journal and indicate the ledger account to which the total would be transferred.

Tebogo
Sales Journal

Date Details $ $

.............. ........................................................... .................... ....................

.............. ........................................................... .................... ....................

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Tebogo
Sales Returns Journal

Date Details $ $

.............. ........................................................... ..................... .....................

.............. ........................................................... ..................... .....................

.............. ........................................................... ..................... .....................

.............. ........................................................... ..................... .....................

.............. ........................................................... ..................... .....................

[5]

(b) Prepare the following accounts in Tebogo’s ledger for the month of August 2019.

Close the accounts by balancing or by making a transfer to the income statement.

Tebogo
Kayla account

Date Details $ Date Details $

2019
Aug 1 Balance b/d 900 ............... ................................. ...............

............... ................................. ............... ............... ................................. ...............

............... ................................. ............... ............... ................................. ...............

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Sales account

Date Details $ Date Details $

2019
.............. ................................ .............. Aug 1 Total sales to date 21 400

.............. ................................ .............. .............. ................................ ..............

.............. ................................ .............. .............. ................................ ..............

.............. ................................ .............. .............. ................................ ..............

Sales returns account

Date Details $ Date Details $

2019
Aug 1 Total returns to date 1 560 .............. ................................ ..............

.............. ................................ .............. .............. ................................ ..............

.............. ................................ .............. .............. ................................ ..............

.............. ................................ .............. .............. ................................ ..............

[8]

Tebogo allows his credit customers a 2% cash discount if they settle their accounts within 30 days.

From 1 September 2019 Tebogo decided to reduce the credit period to 21 days and reduce the
percentage of cash discount to 1%.

REQUIRED

(c) (i) Suggest, giving a reason, one possible effect this decision may have on the profit for the
year ending 31 August 2020.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Suggest, giving a reason, one possible effect this decision may have on the liquidity for
the year ending 31 August 2020.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

[Total: 17]
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2 Amelia opened a business on 1 April 2017. On that date she made the following payments by
bank transfer.

$
Premises 100 000
Office furniture 3 450
Carriage on office furniture 50
Stationery and small office equipment 30
Legal expenses on purchase of premises 1 400
Computer equipment 1 600
Installation of computer equipment 100
Ink cartridges and printer paper 40

REQUIRED

(a) Complete the table by placing a tick (3) in the correct column to indicate whether each
payment is capital expenditure or revenue expenditure.

Payment Capital Revenue

expenditure expenditure
Premises
Office furniture
Carriage on office furniture
Stationery and small office equipment
Legal expenses on purchase of premises
Computer equipment
Installation of computer equipment
Ink cartridges and printer paper
[6]

Amelia decided to depreciate her non-current assets using the reducing (diminishing) balance
method at the following rates.

Premises 2% per annum

Office furniture 20% per annum
Computer equipment 30% per annum

She decided that no depreciation would be charged in the year of disposal.

REQUIRED

(b) Name one other method of depreciation which Amelia could apply.

............................................................................................................................................. [1]

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(c) Prepare the following accounts for each of the years ended 31 March 2018 and 31 March
2019.

Balance the provision for depreciation of computer equipment account and bring down the
balance on 1 April 2018 and 1 April 2019.

Amelia
Computer equipment account

Date Details $ Date Details $

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

Provision for depreciation on computer equipment account

Date Details $ Date Details $

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

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[6]

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On 30 September 2019 Amelia sold the office furniture as it was no longer suitable and received
$1750 in cash.

REQUIRED

(d) Calculate the total depreciation on the office furniture up to the date of disposal.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(e) Calculate the profit or loss on the disposal of the office furniture.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

[Total: 20]

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Question 3 is on the next page.

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3 The financial year of the KS Sports Club ends on 31 July. The club has 150 members and the
annual subscription is $50.

On 1 August 2018 subscriptions were outstanding from 5 members and 2 members had paid their
subscription in advance for the next financial year.

On 31 July 2019 subscriptions had been paid in advance for the next financial year by 4 members.

REQUIRED

(a) Prepare the subscriptions account for the year ended 31 July 2019 to show the amount
received for subscriptions during the year.
Balance the account and bring down the balance on 1 August 2019.

KS Sports Club
Subscriptions account

Date Details $ Date Details $

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

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[6]

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The treasurer of the KS Sports Club provided the following information.

$
At 1 August 2018

Bank overdraft 2620

5% loan from AB Loans 2000

Receipts and payments during the year ended 31 July 2019

Subscriptions received from members ?

Loan interest and repayment of loan 2100
Short-term interest-free loan received from a member 1000
General expenses 435
Rates and insurance 3120
Purchase of new sports equipment 4150
Repairs to sports equipment 215
Proceeds of sale of old sports equipment (book value $750) 870
Receipts from sports tournament 525
Expenses of sports tournament 335

At 31 July 2019

General expenses accrued 25

Insurance prepaid 150

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(b) Prepare the receipts and payments account for the year ended 31 July 2019.
Balance the account and bring down the balance on 1 August 2019.

KS Sports Club
Receipts and Payments Account for the year ended 31 July 2019

Date Details $ Date Details $

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

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[13]

[Total: 19]

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4 Mariam’s financial year ends on 30 September. She does not maintain a full set of accounting
records, but was able to provide some information.

On 1 October 2018
$ $
Premises at cost 80 000 Capital ?
Fixtures and fittings at cost 7 800 Loan 21 000
Motor vehicle at cost 10 000 Trade payables 6 220
Inventory 6 350
Trade receivables 5 900
Bank balance 6 170

Mariam’s non-current assets have not been depreciated.

During the year ended 30 September 2019

Mariam’s drawings amounted to $3125

Mariam transferred $5000 of her own money into the business bank account
One-third of the loan was repaid and it was agreed that a further one-third would be repaid on
1 March 2020.

Comparing the assets and liabilities on 30 September 2019 with those on 1 October 2018 the
following differences were found:

inventory had decreased by $510

trade payables had increased by $880
the balance at bank had increased by 10%
trade receivables had increased to $6450
other payables amounted to $260

On 30 September it was decided to:

write off a debt of $150 as irrecoverable

create a provision for doubtful debts of 5% of the remaining trade receivables
provide for depreciation on the fixtures and fittings for the year at 15% per annum on cost
provide for depreciation on the motor vehicle for the year at 20% per annum on cost
maintain the premises at cost price.

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REQUIRED

(a) Prepare a statement of affairs at 30 September 2019 showing the total capital at that date.

Mariam
Statement of Affairs at 30 September 2019
$ $ $

.......................................................................... ...................... ...................... ......................

.......................................................................... ...................... ...................... ......................

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[15]

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(b) Prepare the capital account of Mariam for the year ended 30 September 2019 to show the
profit or loss for the year.

Mariam
Capital account

Date Details $ Date Details $

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

............. .............................. ............. ............. .............................. .............

[5]

Mariam has been advised to start maintaining double entry records.

REQUIRED

(c) State two advantages to Mariam of maintaining double entry records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

............................................................................................................................................. [2]

[Total: 22]

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PLEASE TURN OVER

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5 Sabir’s financial year ends on 30 September. The totals of the trial balance prepared on
30 September 2019 did not balance and Sabir opened a suspense account with a debit entry of
$7000.

Sabir used the trial balance to prepare draft financial statements for the year ended 30 September
2019.

After the preparation of these draft financial statements five errors were discovered.

REQUIRED

(a) Complete the table to show the entries required to correct each error.
The first one has been completed as an example.

Entry required to correct the error

Debit Credit
Error
account $ account $

1 The total of the sales returns journal, sales 990 suspense 1980
$990, had been posted to the credit of
the sales account. sales returns 990

2 A bad debt written off, $65, had been

credited to the account of Nadia
instead of the account of Nadira. ........................ ............ ........................ ............

3 No entry had been made for goods,

cost price $150, withdrawn by Sabir for
personal use. ........................ ............ ........................ ............

4 The opening inventory, $4100, had not

been entered in the trial balance. ........................ ............ ........................ ..........

5 The total of the discount allowed

column in the cash book, $430,
had been posted to the credit of the
discount received account as $340. ........................ ............ ........................ ............

........................ ............ ........................ ............

[9]

(b) State whether all the errors in Sabir’s books have been discovered.

Give a reason for your answer.

Have all the errors been discovered? ..................................

Reason .....................................................................................................................................

............................................................................................................................................. [2]

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(c) Complete the following statement to show the effect on the draft profit for the year of
correcting errors 1–5.
Calculate the corrected profit for the year.

If the error does not affect the profit place a tick (3) in the ‘No effect on profit’ column.

Sabir
Statement of corrected profit for the year ended 30 September 2019

Draft profit for the year before corrections $31 400

No effect Increase Decrease

on profit in profit in profit

Error 1 ......... $ ......... $.........

Error 2 ......... $......... $.........

Error 3 ......... $......... $.........

Error 4 ......... $......... $.........

Error 5 ......... $......... $.........

______ ______

$______ $______ ______

Corrected profit for the year $______

[9]

[Total: 20]

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6 Rashida started a business trading in fruit and vegetables on 1 July 2017. She rents shop
premises. She works in the shop herself and does not employ any staff. All goods are sold on
cash terms.

Rashida provided the following information at the end of her second year of trading.

$
Capital 53 000
Interest-free long term loan from family 10 000
Inventory 1 July 2018 860
Inventory 30 June 2019 920
Cost of sales 35 490
Revenue 42 000
Operating expenses 3 772

REQUIRED

(a) Complete the table to show the ratios for Rashida for the year ended 30 June 2019.
Calculations should be correct to two decimal places.

You may use the space at the bottom of this page for your workings.

Percentage of gross profit to revenue ..................%

Percentage of profit to revenue ..................%

Return on capital employed ..................%

Rate of inventory turnover ..................times

[8]

Workings

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Rashida decided to compare her results with those of her two brothers Damon and Hakim. They
formed a partnership eight years ago when they purchased premises and started a business as
furniture wholesalers. They now employ ten warehouse workers. All goods are sold on credit terms
to retail stores.

REQUIRED

(b) Explain why Rashida had a lower percentage of gross profit to revenue than her brothers.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(c) Suggest one reason why Rashida’s rate of inventory turnover is higher than that of her
brothers.

...................................................................................................................................................

............................................................................................................................................. [1]

(d) Suggest two expenses which would appear in the income statement of Damon and Hakim
but would not appear in the income statement of Rashida.

1 ................................................................................................................................................

2 .......................................................................................................................................... [2]

(e) Suggest four factors which Rashida should consider when comparing her results with those
of her brothers.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................

4 ................................................................................................................................................

............................................................................................................................................. [4]

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Rashida is disappointed with the percentage of gross profit to revenue. She is considering
increasing the selling price.

REQUIRED

(f) Discuss how an increase in selling price may affect Rashida’s business.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Rashida is considering asking her sister, Sabeena, to join her in the business.

(g) State three factors Rashida should consider before formally inviting Sabeena to become a
partner.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

............................................................................................................................................. [3]

[Total: 22]

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© UCLES 2019 0452/22/O/N/19