Accounting 0452/23 May/June 2021: question paper and mark scheme
Cambridge IGCSE Accounting (0452), Paper 2, May/June 2021. Read both free below, or download them. Done the paper? Get it marked by AI against this mark scheme.
Leo maintains a petty cash book using the imprest system. The imprest amount, which is $200, is restored on the first day of each month.
All payments of less than $100 are made from petty cash. All cash receipts of less than $100 are paid into petty cash.
On 1 April 2021 Leo had $48 in his petty cash box. Leo provided the following information for April
2021.
April 1 Restored petty cash imprest from the business bank account
5 Paid for office cleaning, $21
7 Paid for train ticket, $13
13 Paid $72 to Hunter, a trade payable
18 Paid taxi fare, $14
25 Received cash, $11, from Conrad, a trade receivable
REQUIRED
(a) Prepare Leo’s petty cash book for the month of April 2021, on page 3.
Balance the petty cash book and bring down the balance on 1 May 2021.
Leo
Petty Cash Book
Total Date Details Total Travel Office Ledger
received paid expenses accounts
$ 2021 $ $ $ $
3
[10]
(b) (i) Name the ledger to which each of the following would be posted.
The total of the column for travel expenses ……
The payment to Hunter ……
[2]
(ii) Name the accounting principle which is being applied when figures from the petty cash book are posted to the appropriate ledgers.
…… [1]
Leo received a statement of account from Hunter.
REQUIRED
(c) State two purposes of issuing this statement to Leo.
1 ……
2 ……
[2]
Leo is considering making all payments over $50 to trade payables by credit transfer.
REQUIRED
(d) Advise Leo whether he should go ahead with this change. Justify your answer by providing two advantages and two disadvantages.
…… [5]
[Total: 20]
Mark scheme
1(a) Leo 10
Petty Cash Book
Total Total Office Ledger
Date Details Travel
received paid expenses accounts
$ 2021 $ $ $ $
48 Apr 1 Balance b/d (1)
152 Bank (1)
5 Office cleaning (1) 21 21
7 Train ticket (1) 13 13
13 Hunter (1) 72 72
11 18 Taxi fare (1) 14 14
25 Conrad (1)
120 27 21 72
91
211 30 Balance c/d 211
91 May 1 Balance b/d (1)OF
+ (1) dates
+ (1) OF totalling analysis columns
1(b)(i) Travel – general ledger (1) 2
Hunter – purchases ledger (1)
1(b)(ii) Duality (1) 1
1(c) To remind Leo to pay the balance (1) 2
To allow Leo to check his records (1)
To provide a summary of the transactions for the month/period (1)
Accept other valid points
Max (2)
1(d) Advantages 5
Do not need to keep as much cash on the premises (1)
Less risk of theft or fraud (1)
Do not have to have face to face meeting to pay/save time (1)
Or other relevant advantages
Max (2)
Disadvantages
No source document immediately available (1)
Still have to pay amounts below $50 by other methods (1)
May be easier / more suitable to use cheques (1)
May Increase bank charges (1)
Or other relevant disadvantages
Max (2)
Recommendation (1)
Tej is a trader who sells goods on credit. His year end is 28 February.
Tej provided the following information.
$
At 1 March 2020
Trade receivables 6250
Other receivables (rent prepaid) 300
For the year ended 28 February 2021
Rent charge for the year 3900
Cheque payments for rent 30 June 2020 1950
30 November 2020 2100
At 28 February 2021
Trade receivables 7000
The provision for doubtful debts was 4% of trade receivables at 1 March 2020 and 6% of trade receivables at 28 February 2021.
REQUIRED
(a) Prepare the rent payable account for the year ended 28 February 2021. Balance the account and bring down the balance on 1 March 2021.
Tej
Rent payable account
Date Details $ Date Details $
[6]
(b) Prepare the provision for doubtful debts account for the year ended 28 February 2021.
Balance the account and bring down the balance on 1 March 2021.
Tej
Provision for doubtful debts account
Date Details $ Date Details $
[4]
(c) Name the accounting principle applied when the income statement is adjusted for rent prepaid.
…… [1]
(d) (i) Explain how the realisation principle is applied to the recording of Tej’s credit sales.
…… [2]
(ii) Explain how the prudence principle is applied to the maintenance of Tej’s provision for doubtful debts.
…… [2]
Tej sells to a small number of customers. He has good working relationships with them and they sometimes recommend him to potential customers.
Tej is concerned that his customers are taking a long time to pay him. He is considering charging interest on overdue accounts.
REQUIRED
(e) Advise Tej whether or not he should charge interest on overdue accounts. Justify your answer.
…… [5]
[Total: 20]
Mark scheme
2(a) Tej 6
Rent payable account
Date Details $ Date Details $
2020 2021
Mar 1 Balance b/d (1) 300 Feb 28 Income Statement (1) 3 900
Jun 30 Bank (1) 1950 Balance c/d 450
Nov 30 Bank (1) 2100
4350 4 350
2021
Mar 1 Balance b/d (1)OF 450
+ (1) dates
2(b) Tej 4
Provision for doubtful debts account
Date Details $ Date Details $
2021 2020
Feb 28 Balance c/d (7 000 × 6%) (1) 420 Mar 1 Balance b/d (6 250 × 4%) (1) 250
2021
Feb 28 Income statement (1)OF 170
420 420
Mar 1 Balance b/d (1)OF 420
2(c) Matching (1) 1
Accept ‘Accruals’
2(d)(i) Revenue is regarded as being earned (1) when title to the goods is passed (1) 2
The profit on sales is not recognised until it is earned (1)
Profit is recognised when earned not when payment is received (1)
Profit is earned when the sale is completed/legal title passes (1)
No profit is recognised when goods are ordered (1)
Accept other valid points.
Max (2)
2(d)(ii) To ensure that profits/trade receivables are not overstated (1) 2
To ensure that trade receivables are shown at a realistic amount in the statement of financial position (1)
Profits and assets are reduced when the provision for doubtful debts is increased/profits and assets are increased when
the provision is reduced (1)
Accept other valid points
Max (2)
2(e) Advantages 5
Will encourage customers to pay earlier (1)
May increase liquidity/cash flow (1)
May reduce administration time/costs (1)
Or other relevant advantages
Max (2)
Disadvantages
Good relationships with customers will be damaged (1)
May lose customers/sales may reduce (1)
May incur extra costs to attract customers/advertising/marketing (1)
Or other relevant disadvantages
Max (2)
Recommendation (1)
The trial balance of HV Limited at 31 March 2021 was as follows.
HV Limited
Trial Balance at 31 March 2021
Debit Credit
$ $
Revenue 145 000
Inventory at 1 April 2020 5 820
Purchases 64 900
Rent and insurance 9 280
Wages 24 750
Operating expenses 8 500
Fittings at cost 200 000
Provision for depreciation of fittings 72 000
Trade receivables 12 500
Bank 13 765
Trade payables 6 615
4% Debentures (repayable 1 April 2031) 30 000
Ordinary share capital 70 000
Retained earnings 21 500
Dividend paid on ordinary shares 5 600
345 115 345 115
Additional information
1 Inventory at 31 March 2021 was valued at $6090.
2 Depreciation on fittings is to be charged at 20% per annum using the reducing balance method.
3 Rent includes a payment of $1800 for the 3 months from 1 March 2021 to 31 May 2021.
4 Accrued wages at 31 March 2021 were $2250.
5 No debenture interest has been paid for the year ended 31 March 2021.
6 No dividends were outstanding at 31 March 2021.
7 $2000 is to be transferred to a general reserve on 31 March 2021.
REQUIRED
(a) Prepare the income statement for HV Limited for the year ended 31 March 2021.
HV Limited
Income Statement for the year ended 31 March 2021
$ $
[8]
(b) Prepare the statement of changes in equity for HV Limited for the year ended 31 March 2021.
HV Limited
Statement of Changes in Equity for the year ended 31 March 2021
Details Ordinary General Retained Total
Share reserve earnings capital
$ $ $ $
On 1 April 2020 …… …… …… ……
On 31 March 2021 …… …… …… ……
[5]
(c) Calculate the return on capital employed for the year ended 31 March 2021.
The answer should be correct to two decimal places.
…… [3]
(d) State two differences between ordinary shares and preference shares.
1 ……
2 ……
[4]
[Total: 20]
Mark scheme
3(a) HV Limited 8
Income Statement for the year ended 31 March 2021
$ $
Revenue 145 000
Cost of sales
Opening inventory 5 820
Purchases 64 900
70 720
Less Closing inventory 6 090
64 630 (1)
Gross profit 80 370 (1)OF
Less Expenses
Rent and insurance (9 280 (1) – (2/3 × 1 800) (1)) 8 080
Wages (24 750 + 2 250) 27 000 (1)
Operating expenses 8 500
Depreciation of Fittings 25 600 (1) 69 180
(20% × (200 000 – 72 000))
Profit from operations 11 190
Debenture interest 1 200 (1)
Profit for the year 9 990 (1)OF
3(b) HV Limited 5
Statement of Changes in Equity for the year ended 31 March 2021
Ordinary
General Retained
Details share Total
Reserve earnings
capital
$ $ $ $
On 1 April 2020 70 000 21 500 91 500 (1)
Profit for the year 9 990 9 990 (1)OF
Dividend paid (5 600) (5 600) (1)
Transfer to general reserve 2 000 (2 000) (1)
On 31 March 2021 70 000 2 000 23 890 95 890 (1)OF
3(c) 11190 (1) OF 100 3
Return on Capital employed = × = 8.89% (1) OF
( 95 890 OF + 30 000 )(1) OF 1
3(d) There is a fixed rate of dividend on preference shares (1): the dividend on ordinary shares may vary (1) 4
There are higher risks and rewards for ordinary shares (1) than there are for preference shares (1)
Ordinary shares normally carry voting rights (1): preference shares do not (1)
Ordinary shares are part of the equity of the company (1). Redeemable preference shares are a non-current liability and
non-redeemable preference shares are part of the equity (1).
If the company is wound up, preference shares are repaid before ordinary shares(1)/ordinary shares are repaid after
preference shares (1)
Preference shares receive the dividend first (1) ordinary shares receive the dividend after the preference shares (1)
Accept other valid points
Must be two contrasting statements
Max (4)
RIA Music Club owns its premises where it has a shop and a number of music rooms.
Shop sales are for cash and shop purchases are on credit. Mark-up is 20%.
The treasurer provided the following information.
At At
1 January 31 December
2020 2020
$ $
Subscriptions in advance 1 200 1 050
Subscriptions in arrears 5 215 5 830
Total shop trade payables 4 275 4 990
Shop inventory 2 500 2 500
Balance at bank 240 110
For the year to 31 December 2020
Subscriptions received 36 700
Shop purchases 34 200
Shop purchases returns 1 710
Interest charged on overdue shop trade payables accounts 200
REQUIRED
(a) Prepare the subscriptions account for the year ended 31 December 2020. Balance the account and bring down the balances on 1 January 2021.
RIA Music Club
Subscriptions account
Date Details $ Date Details $
[6]
(b) Prepare the total shop trade payables account for the year ended 31 December 2020 to calculate the amount paid to shop trade payables.
RIA Music Club
Total shop trade payables account
Date Details $ Date Details $
[6]
(c) Calculate the revenue from shop sales for the year ended 31 December 2020.
…… [3]
The treasurer is concerned about the decreasing bank balance and the increase in shop trade payables. He is looking into the possibility of renting out part of the club premises to an art society for $400 per month.
REQUIRED
(d) Advise the treasurer whether renting out part of the premises is the most suitable way of improving cash flow or whether other methods may be more suitable. Justify your answer.
…… [5]
[Total: 20]
Mark scheme
4(a) RIA Music Club 6
Subscriptions account
Date Details $ Date Details $
2020 2020
Jan 1 Balance b/d (1) 5 215 Jan 1 Balance b/d (1) 1 200
Dec 31 Income and expenditure (1)OF 37 465 Dec 31 Bank (1) 36 700
Balance c/d 1 050 Balance c/d 5 830
43 730 43 730
2021 2021
Jan 1 Balance b/d (1) 5 830 Jan 1 Balance b/d (1) 1 050
4(b) RIA Music Club 6
Total shop trade payables account
Date Details $ Date Details $
2020 2020
Dec 31 Purchases returns (1) 1 710 Jan 1 Balance b/d (1) 4 275
Bank (1)OF 31 975 Dec 31 Purchases (1) 34 200
Balance c/d (1) 4 990 Interest (1) 200
38 675 38 675
2021
Jan 1 Balance b/d 4 990
4(c) Sales revenue = cost of sales + 20% 3
Cost of sales = 34 200 – 1 710 = 32 490 (1)
Sales revenue = 32 490 + 20% = 32 490 + 6 498 (1)OF = 38 988 (1)OF
Alternative calculation
Cost of sales 32 490 (1)
Gross profit 20% 6 498 (1)OF
Sales revenue 38 988 (1)OF
4(d) Benefits of renting out the premises 5
Extra income would be generated by renting out the premises (1)
Extra funds would be raised if the club is not fully used (1)
May increase the opportunity to recruit new members (1)
May increase the levels of shop trade to additional customers/increase shop profit (1)
Or other relative benefits
Max 2
Disadvantages
Income from existing members may fall/members may leave the club (1)
The facilities to members may be reduced (1)
Expenses may be increased (1)
Alternatives to renting out the premises
Extra funds could be raised by increasing subscriptions/charging interest on overdue subscriptions/fund raising/increasing
the mark-up on the sales of shop goods (1)
Expenses may be reduced (1)
Or other relative disadvantages/alternatives
Max (2)
Recommendation (1)
Kia is a trader.
The totals of the trial balance prepared on 30 April 2021 did not agree and the difference was placed in a suspense account.
Kia later discovered the errors shown in the table in part (a).
REQUIRED
(a) Complete the following table to show the entries required to correct each error.
The first one has been completed as an example.
Entries required to correct the error
Error Debit Credit
Account $ Account $
Cash drawings, $200, had been omitted Drawings 200 Suspense 200 from the drawings account.
A petty cash book payment, $31, to …… …… …… ……
Abel, a supplier, had been recorded in the column for office expenses. …… …… …… ……
Sales returns, $105, had been correctly …… …… …… ……
entered in the customer’s account but had been credited to the purchases …… …… …… ……
returns account.
A payment for motor expenses, $72, …… …… …… ……
had been recorded in the motor expenses account as $172. …… …… …… ……
A purchase invoice, $102, from Abel, …… …… …… ……
had been debited to Abel’s account and credited to the purchases account. …… …… …… ……
[9]
(b) Prepare the suspense account. Include the original difference on the trial balance, as a balancing figure.
Kia
Suspense account
Date Details $ Date Details $
[5]
(c) The account for Abel in Kia’s books showed that Kia owed him $327 before the errors were corrected. Calculate the correct amount which Kia owed Abel at 30 April 2021.
…… [3]
Kia has recorded the purchase of a calculator, $5, as an office expense.
REQUIRED
(d) State three reasons why Kia did not record this as a non-current asset.
1 ……
2 ……
3 ……
[3]
[Total: 20]
Mark scheme
5(a) 9
Entries required to correct the error
Error Debit Credit
Account $ Account $
Cash drawings, $200, had been omitted Drawings 200 Suspense 200
from the drawings account.
A petty cash book payment, $31, to Abel, a Abel 31 (1) Office expenses 31 (1)
supplier, had been recorded in the column
for office expenses.
Sales returns, $105, had been correctly Sales returns 105 (1) Suspense 210 (1)
entered in the customer’s account but had Purchases returns 105 (1)
been credited to the purchases returns
account.
A payment for motor expenses, $72, had Suspense 100 (1) Motor expenses 100 (1)
been recorded in the motor expenses
account as $172.
A purchase invoice, $102, from Abel, had Purchases 204 (1) Abel 204 (1)
been debited to Abel and credited to
purchases.
5(b) Kia 5
Suspense account
Date Details $ Date Details $
2021 2021
April 30 Trial balance difference (1)OF 310 April 30 Drawings (1) 200
Motor expenses (1) 100 Sales returns (1) 105
Purchases returns (1) 105
410 410
5(c) $ 3
Original balance 327
Purchases 204 (1)
Office expenses (31) (1)
Corrected balance 500 (1)OF
5(d) The principle of materiality was applied (1). 3
The cost of the calculator was an immaterial amount (1)
The cost of recording the calculator as a non-current asset would have outweighed the benefit (1)
The amount of depreciation would be insignificant (1)
The calculator may not last over 12 months (1)
Accept other valid points
Max (3)
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Accounting 0452/23 for May/June 2021 is out of 100 marks, with 1 hour 45 minutes to answer it, across 5 questions.
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