Accounting 0452/21 May/June 2024: question paper and mark scheme
Cambridge IGCSE Accounting (0452), Paper 2, May/June 2024. Read both free below, or download them. Done the paper? Get it marked by AI against this mark scheme.
Addo is a trader who only sells on credit.
His trade receivables at 1 April 2024 were as follows:
$
Nuru 920
Mahia 1145
Ava 1378
Rachel 215
3658
During April 2024, the following transactions took place:
April 2 Sold goods to Ava, list price $150, less 6% trade discount
9 Received telephone transfer from Ava, $689
12 Sold goods to Nuru, $165
13 Received cheque, $627, from Mahia, in full settlement of an invoice for $660
19 Received $760 from Nuru by electronic transfer. Nuru had deducted 5% cash discount
20 Nuru returned goods $30
21 Sold goods to Mahia, list price $480, trade discount 5%, cash discount 5% if invoice paid within 30 days
30 Rachel has become bankrupt and Addo decides to write off the amount owing from her, as irrecoverable
REQUIRED
(a) Prepare the sales journal for April 2024.
Total the sales journal and indicate the ledger account to which the total would be posted.
Addo
Sales journal
Date Details $ $
[3]
(b) Prepare the journal entry to write off the amount owing by Rachel. A narrative is required.
Addo
Journal
Date Details $ $
[3]
(c) Calculate:
(i) the total amount of money which Addo received from trade receivables during April 2024.
…… [1]
(ii) the total amount of cash discount which Addo allowed in April 2024.
…… [2]
(d) Prepare Addo’s sales ledger control account for April 2024.
Addo
Sales ledger control account
Date Details $ Date Details $
[6]
Addo is considering changing his credit terms. He would introduce more credit checks on new customers and would increase cash discount to 7½% for payment within 30 days.
REQUIRED
(e) Advise Addo whether or not he should make these changes to his credit terms. Justify your answer by providing two advantages and two disadvantages of changing his credit terms.
…… [5]
[Total: 20]
Mark scheme
1(a) Addo 3
Sales journal
Date Details $
2024
Apr 2 Ava (150 – 9) 141 (1)
12 Nuru 165
21 Mahia (480 – 24) 456 (1)
___
30 Transfer to sales account 762 (1)OF
1(b) Addo 3
Journal
Date Details Debit Credit
$ $
2024
April 30 Irrecoverable debts (1) 215
Rachel (1) 215
Amount due from Rachel written off as irrecoverable (1)
1(c)(i) Total amount received = $689 +$627 + $760 = $2 076 (1) 1
1(c)(ii) Total cash discount = $40(1) + $33 = $73 (1)OF 2
1(d) Addo 6
Sales ledger control account
Date Details $ Date Details $
2024 2024
April 1 Balance b/d 3 658 April 30 Sales returns (1) 30
30 Sales (1)OF 762 Bank (1)OF 2 076
Discount allowed (1)OF 73
Irrecoverable debts (1) 215
____ Balance c/d 2 026
4 420 4 420
May 1 Balance b/d (1)OF 2 026
1(e) Advantages 5
Increased cash discount may encourage new customers/existing customers to buy more/increase sales (1)
More customers may pay early because of extra discount/improve liquidity (1)
Irrecoverable debts may be reduced (1)
Increased credit check indicates ability to pay (1)
Accept other valid points
Max (2)
Disadvantages
More credit checks would take more time/cost more money (1)
Less money coming in from sales (1)
No guarantee that customers will pay early (1)
Less profit on each sale/profit for the year will be reduced/expenses increased if give cash discount (1)
No guarantee that there will not be any irrecoverable debts (1)
Accept other valid points
Max (2)
Recommendation (1)
Paul is a trader. He maintains a three-column cash book. Paul has prepared draft financial statements for the year ended 31 March 2024.
Paul later discovered the following five errors in his accounting records for the year ended
31 March 2024.
1 A purchase invoice, $140, had been debited to the account for office equipment.
2 Cash discount received, $18, had been recorded in the bank payments column of the cash book.
3 Carriage inwards, $82, had been credited to the carriage outwards account.
4 A payment for insurance, $375, had been debited to the bank account and credited to the insurance account.
5 The bank receipts column of the cash book for February 2024 had been undercast by $90.
REQUIRED
(a) Prepare the journal entries required to correct these five errors. Narratives are not required.
Paul
Journal
Error Details Debit Credit number $ $
[11]
(b) Calculate the corrected bank balance at 31 March 2024.
$
Original cash at bank balance per draft financial statements 3290
Bank balance after correcting errors
[4]
(c) Calculate the corrected profit for the year ended 31 March 2024.
$
Original profit for the year per draft financial statements 9268
Profit for the year after correcting errors
[5]
[Total: 20]
Mark scheme
2(a) Paul 11
Journal
Error Details Debit Credit
number $ $
1 Purchases (1) 140
Office equipment (1) 140
2 Bank (1) 18
Discount received (1) 18
3 Carriage inwards (1) 82
Carriage outwards (1) 82
Suspense (1) 164
4 Insurance (1) 750
Bank (1) 750
5 Bank (1) 90
Suspense (1) 90
2(b) $ 4
Original cash at bank balance per draft financial statements 3 290
Error 2 18 (1)
Error 4 (750) (1)
Error 5 90 (1)
Bank balance after correcting errors 2 648 (1)OF
2(c) $ 5
Original profit for the year per draft financial statements 9 268
Error 1 (140) (1)
Error 2 18 (1)
Error 3 (82 × 2) (164) (1)
Error 4 (750) (1)
Profit for the year after correcting errors 8 232 (1)OF
Zahra and Panya are the shareholders and directors of Q Limited. The company directors of
Q Limited have provided the following trial balance.
Q Limited
Trial Balance at 31 January 2024
Debit Credit
$ $
Revenue 78 000
Purchases 38 200
Rent and insurance 10 600
Directors’ salaries 19 000
General expenses 3 420
Advertising 5 400
Dividends paid 2 500
Fittings at cost 18 000
Provision for depreciation of fittings 5 400
Inventory at 1 February 2023 2 950
Cash at bank 915
Trade payables 2 288
Ordinary share capital 13 000
Retained earnings 2 297
100 985 100 985
Additional information
1 Inventory at 31 January 2024 was valued at $4720.
2 Depreciation on fittings is to be charged at 10% per annum using the straight-line method.
3 Payment for advertising, $75, is outstanding at 31 January 2024.
4 No dividends were outstanding at 31 January 2024.
REQUIRED
(a) Prepare the income statement for Q Limited for the year ended 31 January 2024.
Q Limited
Income statement for the year ended 31 January 2024
$ $
[6]
(b) Calculate the retained earnings at 31 January 2024.
…… [3]
(c) Prepare the statement of financial position for Q Limited at 31 January 2024.
Q Limited
Statement of financial position at 31 January 2024
$ $
[6]
Zahra and Panya would like to expand the company and increase sales. In order to do this they are considering increasing the amount spent on advertising by 100%.
(d) Advise Zahra and Panya whether or not they should go ahead with the 100% increase in the amount spent on advertising. Justify your answer by providing two points in favour and two points against this increase.
…… [5]
[Total: 20]
Mark scheme
3(a) Q Limited 6
Income statement for the year ended 31 January 2024
$ $
Revenue 78 000
Less: Cost of sales
Opening inventory 2 950
Purchases 38 200
41 150
Less Closing inventory 4 720 36 430 (1)
Gross profit 41 570 (1)OF
Less Rent and insurance 10 600 }
Directors’ salaries 19 000 }(1)
General expenses 3 420 }
Advertising (5 400 + 75) 5 475 (1)
Depreciation of fittings (10% × 18 000) 1 800 (1) 40 295
Profit for the year 1 275 (1)OF
3(b) Retained earnings: $ 3
Opening balance 2 297
Profit for the year 1 275 (1)OF
3 572
Less Dividend paid (2 500) (1)
Closing balance 1 072 (1)OF
3(c) Q Limited 6
Statement of financial position at 31 January 2024
$ $ $
Accumulated Net book
Non-current assets Cost
depreciation value
Fittings 18 000 7 200 (1)OF 10 800 (1)OF
Current assets
Inventory 4 720
Bank 915 5 635 (1)
16 435
Equity and Liabilities
Ordinary share capital 13 000
Retained earnings 1 072 (1)OF
14 072
Current liabilities
Trade payables 2 288
Other payables 75 (1) 2 363 (1)OF
16 435
3(d) For 5
May increase sales/result in more customers (1)
May help reduce the level of inventory (1)
May benefit future years (1)
Increase in gross profit more than the extra cost of advertising may increase profit for the year (1)
Accept other valid points
Max (2)
Against
May not be able to afford the increase in advertising costs (1)
May need to borrow money for increased advertising costs (and borrowing would incur interest) (1)
There is no guarantee that sales would increase (1)
Profit may reduce/may result in a loss/expenses will increase because of extra advertising (1)
Accept other valid points
Max (2)
Recommendation (1)
Ahmed owns a trading business. He prepares his financial statements to 31 December each year.
Ahmed had some unused office space and he decided to use some of this to store inventory and to rent the rest to Bilal.
On 1 January 2023 Bilal started renting the office space from Ahmed. The annual rental charge is
$4800. During 2023 Bilal paid the following amounts of rent into Ahmed’s bank account.
$
1 April 3600
30 September 2400
REQUIRED
(a) Prepare Ahmed’s rent receivable account for the year ended 31 December 2023.
Balance the account and bring down the balance at 1 January 2024.
Ahmed
Rent receivable account
Date Details $ Date Details $
[3]
Ahmed sold old office equipment for $1350 on 3 January 2023, on credit to Rahat. The equipment had been purchased for $3200 on 1 January 2021. Ahmed charges depreciation at 25% per annum using the reducing balance method. He does not charge depreciation in the year of disposal.
REQUIRED
(b) Prepare the disposal of office equipment account.
Ahmed
Disposal of office equipment account
Date Details $ Date Details $
[5]
(c) Complete the table by placing a tick (✓) to indicate whether each amount of spending on the new inventory storage space is capital expenditure or revenue expenditure.
$ Capital Revenue expenditure expenditure
Painting the walls of the storage area 600
Shelving for the storage area 2115
Installation of the shelving 460
Light fittings for storage area 620
Light bulbs for storage area 105
[3]
Ahmed’s ledger accounts at 31 December 2023 include the following balances.
$
Inventory at 1 January 2023 9000
Receivables 6180
Cash 175
Payables 5500
Bank overdraft 640
Ahmed’s inventory at 31 December 2023 was valued at $12 130. His purchases for the year ended
31 December 2023 were $97 000.
REQUIRED
(d) Complete the following table.
ratio working answer
(to 2 decimal places)
Rate of inventory turnover (times)
Current ratio
Liquid (acid test) ratio
[7]
Ahmed’s rate of inventory turnover for 2023 was lower than for 2022.
REQUIRED
(e) Suggest two problems which may be caused by Ahmed’s lower rate of inventory turnover.
1 ……
2 ……
[2]
[Total: 20]
Mark scheme
4(a) Ahmed 3
Rent receivable account
Date Details $ Date Details $
2023 2023
Dec 31 Income statement (1) 4 800 Apr 1 Bank }(1) 3 600
Balance c/d 1 200 Sept 30 Bank } 2 400
6 000 6 000
2024
Jan 1 Balance b/d (1) 1 200
4(b) Ahmed 5
Disposal of office equipment account
Date Details $ Date Details $
2023 2023
Jan 3 Office equipment (1) 3 200 Jan 3 Provision for Depreciation
(800 + 600) (1) 1 400
Rahat (1) 1 350
____ Dec 31 Income statement (1)OF 450
3 200 3 200
Dates (1)
*Calculation of depreciation 3 200 × 25% = 800 (3 200 – 800) = 2 400 × 25% = 600
4(c) 3
Capital Revenue
$
expenditure expenditure
Painting the walls of the storage area 600 (1)
Shelving for the storage area 2 115 }
Installation of the shelving 460 }(1)
Light fittings for storage area 620 }
Light bulbs for storage area 105 }(1)
4(d) 7
ratio working answer
(to 2 decimal
places)
Rate of inventory (9 000 + 97 000 − 12130) 93 870 (1) 8.88 (1)OF
turnover (times) =
(9 000 + 12130) / 2 10 565 (1)
Current ratio (12 130 + 6180 + 175) : (5500 + 640) 3.01:1 (1)OF
= 18 485 : 6140 (1) whole formula
Liquid (acid test) (6180 + 175) : (5500 + 640) 1.04:1 (1)OF
ratio = 6355 : 6140 (1) whole formula
4(e) The increased inventory may result in goods deteriorating or becoming obsolete (1) 2
Increase in storage costs (1)
Inefficient use of storage space (1)
Increase in funds tied up in inventory/may result in bank overdraft/may incur interest charges (1)
Accept other valid points
Max (2)
Stella started in business as a retailer on 1 April 2023. She sells one type of good only. She has not kept a full set of accounting records but has provided the following information.
1 Half of Stella’s purchases were on cash terms and half on credit terms. During the year ended
31 March 2024, Stella paid $34 250 to credit suppliers. On 31 March 2024, she owed $2960 to credit suppliers.
2 Unlike her competitors, Stella made all of her sales for cash. Stella’s mark-up was 32%.
3 The following amounts were paid for expenses during the year to 31 March 2024.
$
Rent and insurance 6750
Wages 8300
Other expenses 1815
4 At 31 March 2024, $300 was unpaid for wages and $500 was paid in advance for rent.
5 Insurance is $2400 per annum. On 1 April 2023, Stella paid $3000 for insurance for the following 15 months.
6 Other expenses included $120 paid for vases and flowers. One third of these were for Stella’s own home. Stella treats business costs of under $150 as revenue expenditure.
7 Inventory was valued at $6420 at 31 March 2024.
REQUIRED
(a) Calculate total purchases for the year ended 31 March 2024.
…… [3]
(b) Prepare Stella’s income statement for the year ended 31 March 2024.
Stella
Income Statement for the year ended 31 March 2024
$ $
[8]
Stella’s sales revenue was the same each month for the year to 31 March 2024. She is now considering selling on credit terms as well as for cash.
REQUIRED
(c) Advise Stella whether or not to start selling on credit terms. Justify your answer by providing points for and against starting selling on credit.
…… [5]
(d) State:
(i) the accounting principle which Stella is following when she treats payments for small items which may last longer than one year, as revenue expenditure.
…… [1]
(ii) one advantage of following the principle in 5(d)(i).
…… [1]
(e) State two advantages of maintaining a full set of double entry accounting records.
…… [2]
[Total: 20]
Mark scheme
5(a) $ 3
$ $
Payments to credit suppliers 34 250 (1)
Bank 34 250 (1) Purchases 37 210
Add closing credit suppliers 2 960 (1)
_____
Credit purchases 37 210
Balance c/d 2 960 (1) 37 210
Cash purchases 37 210 OF OR 37 210
Total purchases 74 420 (1)OF
Credit purchases 37 210
Cash purchases 37 210 OF
Total purchases 74 420 (1)OF
5(b) Stella 8
Income statement for the year ended 31 March 2024
$ $
Sales 89 760 (1)OF (132%)
Less Cost of sales
Purchases 74 420 OF
Less Closing inventory 6 420 68 000 (1)OF (100%)
Gross profit 21 760 (1)OF (32%)
Less Rent and insurance
(6 750 – 600(1) – 500(1)) 5 650
Wages (8 300 + 300) 8 600 (1)
Other expenses (1 815 – (120/3)) 1 775 (1) 16 025
Profit for the year 5 735 (1)OF
5(c) For: 5
Should increase sales/attract more customers (1)
Should lead to higher profit/higher profit margin (1)
Competitors may allow credit sales/may help Stella to compete (1)
Increase monthly sales to generate growth (1)
Accept other valid points
Max (3)
Against:
Money would come into the business more slowly (1)
Liquidity may be reduced (1)
Irrecoverable debts can occur (1)
Increased bookkeeping/a sales ledger would be required (1)
Credit control may be required (1)
Accept other valid points
Max (3)
Max (4)
Recommendation (1)
5(d)(i) Materiality (1) 1
5(d)(ii) Time and cost of recording small items outweigh the benefits of treating them as non-current assets (1) 1
Depreciation does not need to be calculated and charged low value non-current assets (1)
Max (1)
5(e) Full details of the assets, liabilities, revenues and expenses are available (1) 2
The preparation of financial statements is more straightforward (1)
The calculation of profit or loss for the year is likely to be more accurate (1)
More informed decision-making is possible (1)
A greater degree of control over the business activities can be exercised (1)
The possibility of fraud is reduced (1)
Comparisons with the results of previous years and with other businesses are possible (1)
Detailed records are available for reference (1)
Information required by a bank or other lender is readily available (1)
Accept other valid points
Max (2)
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