Accounting 0452/22 February/March 2023: question paper and mark scheme

Question

Saira is a trader. The following transactions took place in January 2023. Jan 2 Rent received, $360, was paid directly into the bank account 4 Paid $343 to Jai by telephone transfer, having deducted 2% cash discount from the amount due 7 Paid cash, $33, for motor expenses 13 Cash sales, $395, were paid directly into the bank account 17 Paid $194 to David, by electronic transfer, having deducted 3% cash discount from the amount due 20 Received a cheque, $388, from Ivan, in full settlement of a debt of $400 27 Withdrew cash, $150, from the bank for business use 29 Paid $124, cash, for wages REQUIRED (a) Prepare Saira’s cash book on the page opposite. Balance the cash book and bring down the balances at 1 February 2023. Saira Cash Book Date Details Discount Cash Bank Date Details Discount Cash Bank allowed received 2023 $ $ $ 2023 $ $ $ Jan 1 Balance b/d 110 713 …… …… …… …… …… 3 [13] Saira has now received a business bank statement and is comparing it to her cash book. REQUIRED (b) Complete the table by writing ‘increase’, ‘decrease’ or ‘no effect’ in each box to show the effect of recording the items listed, which appeared only on the bank statement. The first one is completed for you as an example. Items to be adjusted Effect on bank Effect on capital balance in cash book Bank charges decrease decrease Credit transfer from Saira’s personal bank account Cheque from Ivan was dishonoured [4] The going concern concept requires that Saira’s financial statements are prepared under the assumption that her business will continue for an indefinite period of time. REQUIRED (c) State why each external user of the accounting statements would be interested in Saira’s business continuing indefinitely. User Reason Bank manager Government Trade payables [3] [Total: 20]

Question

Rai is a trader. He has prepared his trial balance at 31 January 2023. The credit side totalled $152 more than the debit side. Rai placed the difference in a suspense account. Rai later discovered the following errors. 1 Wages, $200, had been entered in the cash book but omitted from the wages account. 2 A credit purchase, $247, from Stella, had been debited to Stella’s account and credited to the purchases account. 3 The rent payable account and the sales account had both been overcast by $100. 4 A cheque for motor expenses, $75, had been debited twice to the motor expenses account. 5 A payment to Jasper, $196, had been recorded as $169 in Jasper’s account. REQUIRED (a) Prepare the journal entries to correct errors 1–5. Narratives are not required. Rai Journal Error Details Debit Credit number $ $ [10] (b) Prepare the suspense account. Rai Suspense account Date Details $ Date Details $ [4] Rai’s original draft profit, before correcting the errors, was $9800. REQUIRED (c) Calculate Rai’s profit after correction of errors 1–5. …… [4] Rai’s trial balance was used to check the arithmetical accuracy of the ledger accounts. His journal was used to correct the errors found. REQUIRED (d) State: (i) one other use of the trial balance …… [1] (ii) one other use of the journal. …… [1] [Total: 20]

Question

Lucas is a trader. He has provided the following information. $ Balances at 1 January 2023 Sales ledger control account 14 940 debit Purchases ledger control account 8 450 credit Totals for January 2023 Credit sales 12 736 Cash sales 3 992 Credit purchases 7 325 Returns to credit suppliers 463 Returns from credit customers 920 Cash received from credit customers 685 Bank transfers received from credit customers 10 620 Bank payments to credit suppliers 6 675 Irrecoverable debts written off 140 Discount received 210 Contra entries 180 Interest charged on overdue purchases ledger accounts 166 REQUIRED (a) Prepare the sales ledger control account for January 2023. Balance the account and bring down the balance at 1 February 2023. Lucas Sales ledger control Date Details $ Date Details $ [6] (b) Prepare the purchases ledger control account for January 2023. Balance the account and bring down the balance at 1 February 2023. Lucas Purchases ledger control Date Details $ Date Details $ [7] (c) State two advantages of preparing control accounts. 1 …… 2 …… [2] One of Lucas’s suppliers has demanded immediate payment of the $3900 due to him. Lucas does not have sufficient cash to pay this amount. He is considering selling some office equipment which had cost $6000 and has been fully depreciated. Lucas has been offered $2500 cash for this equipment. REQUIRED (d) Advise Lucas whether he should sell this office equipment in order to pay the supplier. Justify your answer. …… [5] [Total: 20]

Question

Adya is a trader. She buys and sells one type of good only. She has provided the following information. $ For the year to 31 October 2022 Revenue 98 000 Purchases 62 305 Expenses 31 188 Other income 4 630 At 31 October 2022 Inventory 7 500 Trade receivables 9 240 Trade payables 5 365 Bank overdraft 5 135 The inventory quantity and valuation at 31 October 2022 are double those at 31 October 2021. REQUIRED (a) Complete the following tables. Gross margin Working Answer (correct to two decimal places) Profit margin Working Answer (correct to two decimal places) Rate of inventory turnover Working Answer (correct to two decimal places) Liquid (acid test) ratio Working Answer (correct to two decimal places) [9] Adya’s purchases price has remained constant throughout both years ended 31 October 2021 and 31 October 2022. The following information relates to Adya’s business for the year ended 31 October 2021. Gross margin 37.60% Profit margin 14.85% Rate of inventory turnover 12 times Liquid (acid test) ratio 1.15:1 REQUIRED (b) Comment on the changes in: (i) gross margin …… [2] (ii) the liquid (acid test) ratio. …… [2] Adya is concerned about the increase in inventory over the year to 31 October 2022. She is considering reducing her selling price to increase the quantity of goods she can sell. REQUIRED (c) Advise Adya whether she should reduce her selling price. Justify your answer. …… [5] One of the limitations of financial statements is that there is a gap between the end of the financial year and the preparation of the financial statements. REQUIRED (d) Explain how this limitation may influence Adya’s decision about whether or not to reduce her selling price. …… [2] [Total: 20]

Question

Samir and Punita are in partnership. The partnership agreement provides for the following: interest on drawings of 5% interest on capital of 3% per annum a salary to Punita of $11 000 per annum residual profits and losses are to be shared 60% to Samir and 40% to Punita. The partners provided the following information. $ Profit for the year ended 31 December 2022 24 600 Capital account balances at 1 January 2022 Samir 80 000 Punita 75 000 Current account balances at 1 January 2022 Samir 6 450 credit Punita 8 335 credit Drawings for the year ended 31 December 2022 Samir 16 000 Punita 12 400 REQUIRED (a) Prepare the appropriation account for Samir and Punita for the year ended 31 December 2022. Samir and Punita Appropriation Account for the year ended 31 December 2022 $ $ [6] (b) Prepare Punita’s current account for the year ended 31 December 2022. Balance the account and bring down the balance at 1 January 2023. Punita Current account Date Details $ Date Details $ [6] Samir would now like to pay the expenses of his own private car from the partnership bank account. REQUIRED (c) Place a tick (3) in the appropriate boxes below to show the effects of Samir paying the expenses of his own private car from the partnership bank account. Increase Decrease No effect Partnership profit for the year Samir’s drawings Samir’s interest on drawings [3] Samir and Punita are considering converting the partnership to a limited company. They do not anticipate any need for additional capital. REQUIRED (d) Advise Samir and Punita whether they should convert the business to a limited company. Justify your answer with two advantages and two disadvantages of converting the business to a limited company. …… [5] [Total: 20]