Accounting 0452/23 October/November 2019: question paper and mark scheme
Cambridge IGCSE Accounting (0452), Paper 2, October/November 2019. Read both free below, or download them. Done the paper? Get it marked by AI against this mark scheme.
Sophie employs a book‑keeper to maintain her accounting records. The book‑keeper was taken ill and was unable to complete the accounting records for August 2019.
The entries the book‑keeper made in the cash book for August 2019 are shown on the opposite page.
The following transactions took place on 31 August 2019.
1 Received a cheque from Jason to settle his debt of $550 after deducting 2% cash discount.
2 Paid a cheque to Ellie for $858 to settle her account after deducting 2½% cash discount.
Sophie received her bank statement for August and compared it with her cash book.
The following items appeared on the bank statement but had not been recorded in Sophie’s accounting records.
$
Bank charges 53
Cheque received from Jack on 17 August dishonoured 156
Payment of insurance by direct debit 50
A credit customer, Bella, had paid her account by credit transfer 260
REQUIRED
(a) Complete Sophie’s cash book on the page opposite.
Balance the cash book and bring down the balances on 1 September 2019. [9]
Sophie
Cash Book
Date Details Discount Cash Bank Date Details Discount Cash Bank
allowed received
2019 $ $ $ 2019 $ $ $
Aug 1 Balance b/d …… 250 …… Aug 1 Balance b/d …… …… 4010
17 Jack …… …… 156 2 Petty cash …… 94 ……
24 Sales …… 3820 …… 30 Bank …… 2000 ……
29 Capital …… …… 5000 …… …… …… …… ……
30 Cash …… …… 2000 …… …… …… …… ……
3
(b) State the meaning of the balance in the bank column in the cash book on 1 August 2019.
…… [1]
(c) State the meaning of the entry made in the cash book on 2 August 2019.
…… [1]
(d) Explain the entries made in the cash book on 30 August 2019.
…… [2]
The bank had not recorded transactions entered in the cash book on 30 August and 31 August 2019.
REQUIRED
(e) Prepare a bank reconciliation statement for Sophie at 31 August 2019 to determine the balance on the bank statement.
Sophie
Bank Reconciliation Statement at 31 August 2019
…… [5]
(f) State two reasons for preparing a bank reconciliation statement.
1 ……
2 ……
…… [2]
Sophie’s ledger is divided into three: the sales ledger, the purchases ledger and the nominal
(general) ledger.
REQUIRED
(g) (i) Identify one transaction recorded in Sophie’s cash book which would also be recorded in the sales ledger.
…… [1]
(ii) Identify one transaction recorded in Sophie’s cash book which would also be recorded in the purchases ledger.
…… [1]
(iii) Identify two transactions recorded in Sophie’s cash book which would also be recorded in the nominal (general) ledger.
1 ……
2 …… [2]
[Total: 24]
Mark scheme
1(a) Sophie 9
Cash Book
Date Details Disc. Cash Bank Date Details Disc. Cash Bank
2019 $ $ $ 2019 $ $ $
Aug 1 Balance b/d 250 Aug 1 Balance b/d 4010
17 Jack 156 2 Petty cash 94
24 Sales 3820 30 Bank 2000
29 Capital 5000 31 Ellie (1) 22 858
30 Cash 2000 Bank charges (1) 53
31 Jason (1) 11 539 Jack (Dis. chq) (1) 156
Bella (1) 260 Insurance (1) 50
Balance c/d 1976 2828
2019 11 4070 7955 22 4070 7955
Sept 1 Balance b/d
1976 2828
(1)OF (1)OF
+ (1) OF totalling both discount columns
1(b) Bank overdraft/amount Sophie owed the bank 1
1(c) Amount withdrawn from the cash to transfer to the petty cash book/amount given in cash to the petty cashier 1
1(d) This is a contra entry (1) Money was transferred to the bank account from the cash account (1) 2
1(e) Sophie 5
Bank Reconciliation Statement at 31 August 2019
$ $
Balance on bank statement (1)OF 1147
Amounts not yet credited
Cash (1) 2000
Cheque – Jason (1)OF 539 2539
3686
Cheque not yet presented
Ellie (1)OF 858
Balance in cash book (1)OF 2828
Alternative presentation
Sophie
Bank Reconciliation Statement at 31 August 2019
$ $
Balance in cash book (1)OF 2828
Cheque not yet presented
Ellie (1)OF 858
3686
Amounts not yet credited 2000
Cash (1) 539 2539
Cheque – Jason (1)OF 1147
Balance on bank statement (1)OF
1(f) Obtain the correct bank balance 2
Identify errors in the bank columns of the cash book
Identify errors on the bank statement
Assist in discovering fraud and embezzlement
Identify amounts/cheques not credited by the bank
Identify cheques not presented
Identify stale cheques
Understand/reconcile the differences between the bank account/bank column in cash book and the bank statement
Any 2 reasons (1) each
1(g)(i) August 17 Cheque received from Jack 1
31 Return of dishonoured cheque to Jack
31 Cheque received from Jason
31 Discount allowed to Jason
31 Payment by credit transfer from Bella
Any 1 transaction (1) mark
1(g)(ii) August 31 Cheque paid to Ellie 1
August 31 Discount received from Ellie
Any 1 transaction (1) mark
1(g)(iii) August 24 Sales 2
29 Capital
31 Bank charges
Insurance
Any 2 transactions (1) mark each
The financial year of CS Limited ends on 30 September.
The following information is available for the year ended 30 September 2019.
1 The final ordinary share dividend of $6000 for the year ended 30 September 2018 was paid on 1 December 2018.
2 The profit for the year ended 30 September 2019 was $15 000.
3 On 30 September 2019 a transfer of $5000 was made to general reserve.
REQUIRED
(a) Complete the statement of changes in equity for the year ended 30 September 2019.
CS Limited
Statement of Changes in Equity for the year ended 30 September 2019
Details Share General Retained Total capital reserve earnings
$ $ $ $
On 1 October 2018 150 000 7 000 16 000 173 000
On 30 September 2019
[4]
The following information is available at 30 September 2019.
$
Non‑current assets at cost
Premises 172 000
Machinery 38 000
Fixtures and fittings 19 500
Provisions for depreciation of non‑current assets
Machinery 13 680
Fixtures and fittings 3 900
Inventory 14 360
Trade payables 14 866
Trade receivables 16 800
Other payables 198
Other receivables 110
Provision for doubtful debts 504
Petty cash 200
Bank overdraft 10 822
5% Debentures (repayable 1 October 2030) 25 000
Bank loan (repayable 1 April 2020) 10 000
REQUIRED
(b) Prepare the statement of financial position at 30 September 2019.
CS Limited
Statement of Financial Position at 30 September 2019
$ $ $
$ $ $
[14]
The directors were disappointed that the profit for the current year was not as good as that of previous years.
REQUIRED
(c) Explain why the difference between the gross profit percentage and the percentage of profit to revenue is an indication of the efficiency of the company.
…… [2]
The directors were also disappointed with the return on capital employed (ROCE). They decided to ask the bank to extend the repayment date of the bank loan to 1 April 2025.
REQUIRED
(d) State what is measured by the return on capital employed (ROCE).
…… [1]
(e) Explain the effect on the return on capital employed (ROCE) of extending the loan repayment date.
…… [2]
[Total: 23]
Mark scheme
2(a) CS Limited 4
Statement of Changes in Equity for the year ended 30 September 2019
Details Ordinary General Retained Total
share reserve earnings
capital
$ $ $ $
On 1 October 2018 150 000 7 000 16 000) 173 000)
Profit for the year .. . 15 000) 15 000) (1)
Final dividend paid . .. (6 000) (6 000) (1)
Transfer to general reserve 5 000 (5 000) .. (1)
On 30 September 2019 150 000 12 000 20 000) 182 000) (1)OF
2(b) CS Limited 14
Statement of Financial Position at 30 September 2019
Assets $ $ $
Cost Accumulated Book value
Non-current assets depreciation
Premises 172 000 172 000
Machinery 38 000 13 680 24 320 (1)
Fixtures and fittings 19 500 3 900 15 600 (1)
229 500 17 580 211 920 (1)
Current assets
Inventory
Trade receivables 14 360
Less provision for doubtful debts
Other receivables 16 800 16 296 (1)
Petty cash 504 110
200 (1)
30 966 (1)
Total assets
242 886
Equity and liabilities
Equity and reserves
Ordinary shares 150 000
General reserve 12 000 (1)OF
Retained earnings 20 000 (1)OF
182 000 (1)OF
Continued
2(b)
Non-current liabilities
5% Debentures 25 000 (1)
(repayable 1 October 2030)
Current Liabilities
Trade payables 14 866
Other payables 198 (1)
Bank overdraft 10 822 (1)
Bank loan (repayable 1 April 2020) 10 000 (1)
35 886 (1)
Total equity and liabilities 242 886
2(c) The difference between the two percentages represents the percentage of expenses to revenue (1) 2
The lower the percentage the more efficiently the expenses are being controlled (1)
Or other suitable comments
Any 2 comments (1) each
2(d) The profit earned for every $100 used in the business 1
2(e) The return on capital employed will decrease (1) because the capital employed will increase (1) 2
Yabani is a manufacturer. His financial year ends on 30 September.
Goods which Yabani is unable to manufacture himself are purchased from other manufacturers.
Yabani provided the following information for the year ended 30 September 2019.
$
At 1 October 2018
Inventory of finished goods 21 340
Delivery vehicle at cost 19 500
Provision for depreciation of delivery vehicle 3 900
Office fixtures and fittings at cost 14 100
Provision for depreciation of office fixtures and fittings 5 640
For the year ended 30 September 2019
Cost of production 141 220
Revenue 205 000
Purchases of finished goods ?
Carriage inwards on finished goods 2 000
Administration and selling expenses (excluding depreciation) 22 120
At 30 September 2019
Inventory of finished goods 22 560
Additional information
1 The delivery vehicle is to be depreciated at 20% per annum using the reducing (diminishing) balance method.
2 The office fixtures and fittings are to be depreciated at 10% per annum using the straight line
(equal instalment) method.
3 The percentage of gross profit to revenue (gross profit margin) is 20%.
REQUIRED
(a) Prepare an income statement for the year ended 30 September 2019.
Insert the missing figure for purchases of finished goods.
Yabani
Income Statement for the year ended 30 September 2019
$ $ $
[12]
Yabani is looking for ways to increase his gross profit.
REQUIRED
(b) Discuss the possible effects on the gross profit of each of the following proposals.
(i) Purchase lower‑quality raw materials
…… [2]
(ii) Do not purchase finished goods from other manufacturers
…… [2]
(iii) Reduce the number of sales staff
…… [2]
(iv) Reduce the rate of pay for the machine operators in the factory
…… [2]
[Total: 20]
Mark scheme
3(a) Yabani 12
Income Statement for the year ended 30 September 2019
$ $ $
Revenue 205 000 (1)
Cost of sales
Opening inventory of finished goods
Cost of production 21 340* (1)*
Purchases of finished goods 141 220* (1)
Carriage on finished goods 22 000 (1)OF
2 000 (1) 24 000*
Closing inventory of finished goods 186 560* (1)OF
Gross profit 22 560* both 164 000 (1)
Administration and selling expenses 41 000 (1)
Depreciation – delivery vehicle (20% × (19 500 – 3900)) 22 120* (1)
office fixtures and fittings (10% × 14 100) 3 120* (1)
Profit for the year 1 410* (1) 26 650
14 350 (1)OF
3(b)(i) Gross profit increases (1) the cost of production reduces (1) 2
OR
Gross profit may decrease (1) if the raw materials are lower quality there may be more wastage and cost of production may
increase (1) so
OR
Gross profit may decrease (1)
If the finished goods are of a lower quality the customers may seek other suppliers so the revenue may decrease (1)
Max 2
3(b)(ii) Gross profit would increase (1) cost of goods sold would decrease (1) 2
OR
Gross profit may decrease (1) the total sales may reduce as customers go elsewhere if Yabani cannot supply these goods (1)
Max 2
3(b)(iii) No effect on gross profit (1) the wages of the sales staff are a selling expense not a manufacturing expense/are not included 2
in the calculation of the gross profit (1)
OR
Gross profit would reduce (1) reducing the number of sales staff may result in a reduction in sales (1)
Max 2
3(b)(iv) Gross profit would increase (1) the cost of production would decrease (1) 2
OR
gross profit may decrease (1) machine operators may take industrial action resulting in reduction of production/reduction in
revenue (1)
Max 2
Ishaq started a business on 1 August 2018. He did not maintain a full set of accounting records.
All purchases were made on credit terms. Some goods were sold on credit terms and some were sold for cash.
All payments were made through the bank and all money received was banked.
Ishaq was able to provide the following information.
$
On 1 August 2018
Capital deposited in business bank account 95 000
Purchase of non‑current assets by bank transfer 70 000
During the year ended 31 July 2019
Amount received from credit customers 47 385
Cash discount allowed 1 215
Cash discount received 981
Credit purchases 38 450
Returns to credit suppliers 1 980
Bad debts written off 150
Operating expenses paid 21 451
At 31 July 2019
Amount owed by credit customers 7 650
Amount owed to credit suppliers 3 770
Cash at bank 21 315
REQUIRED
(a) Calculate the amount paid to credit suppliers during the year ended 31 July 2019.
…… [5]
(b) Calculate the credit sales for the year ended 31 July 2019.
…… [5]
Ishaq’s cash sales were equal to one quarter of his credit sales.
He kept $3000 of the money received from cash sales for personal use and banked the remainder.
REQUIRED
(c) Calculate the amount paid into the bank from cash sales.
$
Amount of cash sales ……
Less Cash kept for personal use ……
Amount paid into bank for cash sales ……
[2]
(d) Prepare the bank account for the year ended 31 July 2019.
Insert the missing figure which represents the amount Ishaq withdrew from the bank for personal use.
Ishaq
Bank account
Date Details $ Date Details $
[8]
Ishaq knows that he must place a value on his inventory at the end of his financial year.
REQUIRED
(e) (i) State the basis on which Ishaq should value his inventory.
…… [1]
(ii) Name the accounting principle which Ishaq would be applying by valuing his inventory on this basis.
…… [1]
(f) Complete the table by placing a tick (3) in the correct column to indicate the effect of Ishaq undervaluing his inventory at 31 July 2019.
overstated understated gross profit for the year ended 31 July 2019 current assets at 31 July 2019 cost of sales for the year ending 31 July 2020 profit for the year ending 31 July 2020
[4]
[Total: 26]
PLEASE TURN OVER
Mark scheme
4(a) Calculation of amount paid to credit suppliers 5
$ $
Credit purchases 38 450 (1)
Less Returns to credit suppliers 1 980 (1)
Cash discount received 981 (1)
Amount owing to credit suppliers 31 July 2019 3 770 (1) 6 731
Amount paid to credit suppliers 31 719 OF(1)
Alternative presentation
Total trade payables account
Date Details $ Date Details $
2019 2019
Aug 31 Returns (1) 1 980 Aug 31 Purchases (1) 38 450
Discount (1) 981
*Bank (1)OF 31 719
Balance c/d (1) 3 770 ______
38 450 38 450
4(b) Calculation of credit sales 5
$
Amount received from credit customers 47 385 (1)
Cash discount allowed 1 215 (1)
Bad debts 150 (1)
Amount owing by credit customers 31 July 2019 7 650 (1)
Credit sales 56 400 (1)OF
Alternative presentation
Total trade receivables account
Date Details $ Date Details $
2019 2019
Aug 31 *Sales (1)OF 56 400 Aug 31 Bank (1) 47 385
Discount (1) 1 215
Bad debts (1) 150
Balance c/d (1) 7 650
56 400 56 400
4(c) Calculation of cash banked $ 2
Amount of cash sales 14 100 (1)OF
Less Cash kept for personal use 3 000
Amount paid into bank for cash sales 11 100 (1)OF
4(d) Ishaq 8
Bank account
Date Details $ Date Details $
2018 2018
Aug 1 Capital (1) 95 000 Aug 1 Non-current assets (1) 70 000
2019 2019
July 31 Credit customers (1) 47 385 July 31 Operating expenses (1) 21 451
Sales (1)OF 11 100 Credit suppliers (1)OF 31 719
*Drawings (1)OF 9 000
Balance c/d (1) 21 315
153 485 153 485
4(e)(i) Lower of cost and net realisable value 1
4(e)(ii) Prudence Or Accruals (matching) 1
4(f) 4
overstated understated
gross profit for the year ended 31 July 2019 9(1)
current assets at 31 July 2019 9(1)
cost of sales for the year ending 31 July 2020 9(1)
profit for the year ending 31 July 2020 9(1)
Lili is a clothing wholesaler. Her financial year ends on 31 July.
Lili purchases most of her stationery on credit from SS Limited, but also purchases a few items from a local store for cash.
Her transactions for the year ended 31 July 2019 included the following.
2018
September 3 Paid the amount owed to SS Limited by bank transfer after deducting 2½% cash discount
2019
March 30 Purchased stationery, $45, and paid in cash
July 6 Purchased stationery on credit from SS Limited, $322
On 31 July 2019 Lili’s inventory of stationery was valued at $96.
REQUIRED
(a) Complete the following accounts in Lili’s ledger for the year ended 31 July 2019.
Close the accounts by balancing, and make a transfer to the income statement if appropriate.
Lili
SS Limited account
Date Details $ Date Details $
2018
…… …… …… Aug 1 Balance b/d 440
Stationery account
Date Details $ Date Details $
2018
Aug 1 Balance b/d 85 …… …… ……
[9]
Lili trades on credit terms.
If Lili’s credit customers pay their accounts within 30 days they are entitled to a cash discount. If
Lili pays her credit suppliers within 40 days she is entitled to a cash discount.
Lili provided the following information.
31 July 2018 31 July 2019
Trade receivables collection period 33 days 29 days
Trade payables payment period 38 days 44 days
REQUIRED
(b) Suggest two reasons for the change in the trade receivables collection period.
1 ……
2 ……
…… [2]
(c) State one disadvantage to the credit suppliers of the change in the payment period.
…… [1]
Lili’s credit suppliers are proposing to reduce the credit period to 30 days and increase the cash discount to 3%.
REQUIRED
(d) Discuss how this may affect Lili.
…… [2]
Lili’s receipts and payments during the financial year ended 31 July 2019 included both capital and revenue items.
REQUIRED
(e) State the meaning of each of the following terms.
Capital expenditure
Capital receipt
Revenue expenditure
Revenue receipt
…… [4]
After the preparation of the draft financial statements for the year ended 31 July 2019 the following errors were discovered.
Error 1 Rent received, $3000, had been debited to the cash book and credited to the premises account.
Error 2 Repairs to premises, $1630, had been credited to the cash book and debited to the premises account.
Error 3 The total of the discount allowed column in the cash book, $640, had been credited to the discount received account.
Error 4 The purchase of office furniture, $1500, had been debited to the purchases account and credited to the supplier’s account.
Office furniture is depreciated at 10% per annum calculated on the cost of office furniture owned at the end of each financial year.
REQUIRED
(f) Complete the table to indicate the effect of each of the errors.
Where there is no effect on the non‑current assets place a tick (3) in the ‘No effect’ column.
The first one has been completed as an example.
You may use the space provided for your workings.
effect in non‑current assets effect on profit for the year overstated understated no effect overstated understated
$ $ $ $ error 1 3000 3000 error 2 error 3 error 4
[9]
Workings
[Total: 27]
Mark scheme
5(a) Lili 9
SS Limited account
Date Details $ Date Details $
2018 2018
Sept 3 Bank (1) 429 Aug 1 Balance b/d 440
Discount (1) 11 2019
2019 July 6 Stationery (1) 322
July 31 Balance c/d 322 ___
762 762
2019
Aug 1 Balance b/d (1)OF 322
Stationery account
Date Details $ Date Details $
2018 2019
Aug 1 Balance b/d 85 July 31 Income statement(1)OF 356
2019 Balance c/d 96
Mar 30 Cash (1) 45
July 6 SS Limited (1) 322
452 452
2019
Aug 1 Balance b/d (1) 96
+ (1) Dates
5(b) Credit customers paying early to take advantage of cash discount 2
Increase in rate of cash discount
Introduction of interest charge on overdue accounts
Improved credit control
Issue invoices/statements of account promptly
Refusal of further supplies until outstanding balance paid
Any 2 reasons (1) each
5(c) Have to wait longer for the money/could cause cash flow problems 1
Increased risk of bad debts
Or other suitable disadvantage
Any 1 disadvantage (1)
5(d) Opportunity to earn more cash discount/pay smaller amount 2
Have to pay earlier/deprived of use of the money earlier/may create cash flow problems
If credit customers delay in paying the business will have to use existing money to pay the credit suppliers if wish to earn the
cash discount
If cannot pay on time may be charged interest on overdue account
If cannot pay on time relationship with suppliers may be damaged
Will have little impact as is not earning the cash discount now
Any two comments (1) each
5(e) Capital expenditure 4
Money spend on acquiring, improving and installing non-current assets (1)
Capital receipt
Amounts received which do not form part of the day-to-day trading activities (1)
Revenue expenditure
Money spent on the running of a business on a day-to-day basis (1)
Revenue receipt
Amounts received in the day-to-day trading activities and other items of income (1)
5(f) 9
effect on non-current assets effect on profit for the year
overstated understated no effect overstated understated
$ $ $ $
error 1 3000 3000
error 2 1630 (1) 1630 (1)
error 3 9(1) 1280 *
error 4 1350* 1350*
*(1) position and (1) amount
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Accounting 0452/23 for October/November 2019 is out of 120 marks, with 1 hour 45 minutes to answer it, across 5 questions.
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