Accounting 0452/22 October/November 2020: question paper and mark scheme
Cambridge IGCSE Accounting (0452), Paper 2, October/November 2020. Read both free below, or download them. Done the paper? Get it marked by AI against this mark scheme.
Dev owns a business selling furniture.
The following transactions took place during August 2020.
Transaction Date Details $
1 August 9 Sold goods on credit to Petra 675
2 14 Petra returned damaged goods to Dev 120
3 23 Banked cash sales 412
4 29 Petra settled her outstanding balance at 1 August by credit transfer after taking a cash discount of 5%
On 1 August 2020, the balance on credit customer Petra’s sales ledger account was $940 debit.
REQUIRED
(a) Complete the table to name each business document and book of prime entry for the following transactions in Dev’s accounting records.
Transaction Business document Book of prime entry
2
3
4
[6]
(b) Prepare the account of Petra for August 2020 as it would appear in Dev’s sales ledger.
Balance the account and bring down the balance on 1 September 2020.
Dev
Petra account
Date Date
2020 Details $ 2020 Details $
[6]
(c) Identify the section of Dev’s statement of financial position at 31 August 2020 in which the balance on Petra’s account would appear.
…… [1]
Dev allows his credit customers a cash discount of 5% for prompt payment. He is considering reducing this to 2%.
REQUIRED
(d) State one advantage and one disadvantage to Dev of this proposal.
…… [2]
Dev is considering turning his business into a limited company.
REQUIRED
(e) Advise Dev whether or not he should form a limited company. Justify your answer with two advantages and two disadvantages of forming a limited company.
…… [5]
[Total: 20]
Mark scheme
1(a) 6
Transaction Business document Book of prime entry
2 Credit note (1) Sales returns journal (1)
3 Paying-in slip (1) Cash book (1)
4 Bank statement (1) Cash book (1)
1(b) Dev 6
Petra account
2020 $ 2020 $
Aug 1 Balance b/d 940 Aug 14 Sales returns 120 (1)
9 Sales 675 (1) 29 Bank 893 (1)
Discount allowed 47 (1)
31 Balance c/d 555
1 615 1 615
2020
Sept 1 Balance b/d 555 (1)OF
+ (1) dates
1(c) Current assets (1) OF 1
1(d) Advantage 2
Increase profit for the year (1)
Increase cash inflow (1)
Accept other valid responses
Max (1)
Disadvantage
May lose customers/sales may fall (1)
Customers may take longer to pay (1)
Accept other valid responses
Max (1)
1(e) Advantages 5
Dev will have limited liability for the debts of the company (1)
The limited company will have a separate legal identity to Dev (1)
Dev will have access to different forms of finance/increase in capital employed (1)
Accept other valid responses
Max (2)
Disadvantages
The limited company will have greater regulation than Dev as a sole trader (1)
The accounting requirements of the limited company will be more complex than for Dev as a sole trader (1)
The financial statements of the limited company may be viewed by the public unlike those of Dev as a sole trader (1)
Accept other valid responses
Max (2)
Recommendation (1)
BH Sports Club provides sporting facilities and a café for the use of its members and guests.
The club’s financial year ends on 31 July. The following information is available.
Assets and liabilities
At 1 August At 31 July
2019 2020
$ $
Bank 840 1270
Café inventory 520 770
Sports hall at book value 17 000 16 560
Insurance prepaid – sports hall and sports equipment 400 440
Sports equipment at book value 3900 ?
Subscriptions in arrears 360 720
Subscriptions received in advance – 120
Wages accrued – café staff 60 80
Receipts and Payments Account for the year ended 31 July 2020
Details $ Details $
Balance b/d 840 Purchases of café supplies 8 190
Subscriptions received 9 960 Wages – café staff 2 750
Café takings 13 520 Wages – sports staff 5 220
Insurance – sports hall and sports equipment 1 430
Sports equipment 2 100
Sports hall expenses 3 360
Balance c/d 1 270
24 320 24 320
Additional information
Sports equipment is depreciated at 10% per annum using the reducing balance method.
REQUIRED
(a) Prepare the subscriptions account for the year ended 31 July 2020. Balance the account and bring down the balances on 1 August 2020.
BH Sports Club
Subscriptions account
Date Details $ Date Details $
[6]
(b) Calculate the café profit for the year ended 31 July 2020.
…… [4]
(c) Prepare the income and expenditure account for the year ended 31 July 2020.
BH Sports Club
Income and Expenditure Account for the year ended 31 July 2020
$ $
[7]
(d) (i) State what the balance on BH Sports Club’s accumulated fund represents.
…… [1]
(ii) State the effect that the surplus or deficit on BH Sports Club’s income and expenditure account for the year ended 31 July 2020 will have on the accumulated fund.
…… [2]
[Total: 20]
PLEASE TURN OVER
Mark scheme
2(a) BH Sports Club 6
Subscriptions account
2019 $ 2020 $
Aug 1 Balance b/d 360 (1) Jul 31 Bank 9 960 (1)
2020 Balance c/d 720
Jul 31 Income and Expenditure 10 200 (1)OF
Balance c/d 120 _____
10 680 10 680
2020 2020
Aug 1 Balance b/d 720 (1) Aug 1 Balance b/d 120 (1)
+ (1) dates
2(b) $ $ 4
Revenue 13 520
Opening inventory 520
Purchases 8 190
8 710
Less Closing inventory 770
7 940 (1)
Wages – café staff (2750 + 80(1) – 60(1)) 2 770 10 710
Profit for the year 2 810 (1)(OF)
Alternative forms of presentation acceptable
2(c) BH Sports Club 7
Income and Expenditure Account for the year ended 31 July 2020
$ $
Income
Subscriptions 10 200 (1) OF
Profit on café 2 810 (1) OF
13 010
Expenditure
Wages – sports staff 5 220
Insurance – sports hall and sports equipment
(1430 + 400 (1) – 440 (1)) 1 390
Sports Hall expenses 3 360
Depreciation – sports hall (17 000 – 16 560) 440 (1)
sports equipment
(10% × (3900 + 2100)) 600 (1) 11 010
Surplus for the year 2 000 (1) OF
2(d)(i) The difference between the assets and the liabilities (1) 1
The accumulated surpluses earned since the club started (1)
Max (1)
2(d)(ii) Increase (1)OF $2 000 (1)OF 2
JP Limited’s financial year ended on 30 September 2020.
The following balances were available at that date.
$
7% debentures (2026) 20 000
Administrative expenses 44 000
Carriage inwards 1 500
Distribution costs 38 000
Debenture interest paid 700
Inventory at 1 October 2019 66 000
Non-current assets at book value at 1 October 2019 610 000
Provision for doubtful debts 1 000
Purchases 263 000
Revenue 529 500
Trade receivables 80 500
Additional information
1 Inventory at 30 September 2020 was valued at $59 000.
2 Interest on the 7% debentures (2026) had been paid up to 31 March 2020.
3 Administrative expenses included rates of $1200 for the six months ending 31 March 2021.
4 Distribution costs of $800 were outstanding at 30 September 2020.
5 Non-current assets should be depreciated by 10% per annum using the reducing balance method.
6 Irrecoverable debts of $500 are to be written off.
7 The directors wish to maintain the provision for doubtful debts at 2% of trade receivables.
REQUIRED
(a) Calculate the cost of sales for the year ended 30 September 2020.
…… [2]
(b) Calculate the increase or decrease in the provision for doubtful debts at 30 September 2020.
…… [2]
(c) Prepare the income statement for the year ended 30 September 2020.
JP Limited
Income Statement for the year ended 30 September 2020
$ $
[12]
(d) Complete the table by placing a tick (✓) in the correct column to indicate the effect on the equity of JP Limited of each of the following.
The first one has been completed as an example.
Increase Decrease No effect
Issue additional debentures ✓
Issue additional ordinary shares
Payment of ordinary share dividend
Proposal of ordinary share dividend
Transfer from retained earnings to general reserve
[4]
[Total: 20]
Mark scheme
3(a) $ 2
Opening inventory 66 000
Purchases 263 000
Carriage inwards 1 500
330 500 (1)
Less Closing inventory 59 000
Cost of sales 271 500 (1) OF
3(b) $ 2
Provision at 30 September 2020 ((80 500 – 500) x 2%) 1 600 (1)
Less Provision at 1 October 2019 1 000
Increase in provision for doubtful debts 600 (1) OF
3(c) JP Limited 12
Income Statement for the year ended 30 September 2020
$ $
Revenue 529 500
Less Cost of sales 271 500 (1) OF
Gross profit 258 000 (1) OF
Less expenses
Administrative expenses (44 000(1) - 1200(1)) 42 800
Distribution costs (38 000(1) + 800(1)) 38 800
Irrecoverable debts 500 (1)
Provision for doubtful debts 600 (1) OF
Depreciation – non-current assets 61 000 (1) 143 700
Profit from operations 114 300
Debenture interest (700(1) + 700 (1)) 1 400
Profit for the year 112 900 (1) OF
3(d) 4
Increase Decrease No effect
Issue of additional debentures
Issue of additional ordinary shares (1)
Payment of ordinary share dividend (1)
Proposal of ordinary share dividend (1)
Transfer from retained earnings to general reserve (1)
Carlos owns a business selling computer equipment.
He provided the following information for the year ended 31 July 2020.
$
Sales 240 000
Cost of sales 169 000
Operating expenses 55 000
Drawings 18 000
Capital employed 62 000
REQUIRED
(a) Calculate the profit for the year ended 31 July 2020.
Workings Profit for the year ended
31 July 2020 31 July 2019
$11 550
[1]
(b) Calculate the following ratios correct to two decimal places.
Profit margin
Workings Year ended
31 July 2020 31 July 2019
8.56%
Gross margin
Workings Year ended
31 July 2020 31 July 2019
34.26%
Return on capital employed (ROCE)
Workings Year ended
31 July 2020 31 July 2019
32.08%
[6]
(c) Comment on the performance of Carlos’s business over the two years (2019 and 2020).
…… [6]
Carlos is concerned that the business bank balance has shown a large decrease. He is considering either investing more cash from his private funds or obtaining a two-year bank loan.
REQUIRED
(d) Advise Carlos which option he should select. Justify your answer by providing one advantage and one disadvantage of each option.
…… [5]
(e) State the name of one party, other than himself and his employees, who would be interested in Carlos’s financial statements. State one reason for their interest.
Interested party The interest they would have
[2]
[Total: 20]
PLEASE TURN OVER
Mark scheme
4(a) 1
Workings Profit for the year
240 000 – 169 000 – 55 000 $16 000 (1)
4(b) Profit margin 6
Workings Answer
16 000 OF 100 6.67% (1) OF
× (1) whole formula
240 000 1
Gross margin
Workings Answer
240 000 − 169 000 100 29.58% (1)
× (1) whole formula
240 000 1
Return on capital employed (ROCE)
Workings Answer
16 000 OF 100 25.81% (1) OF
× (1) whole formula
62000 1
4(c) Profit margin 6
General comment
Has worsened from 8.56% to 6.67% (1)
Possible causes
Increase in expenses (1)
Poor control over expenses (1)
Accept other valid responses
Max (1) from possible causes
All comments to be based on Own Figures from (b)
Gross margin
General comment
Has worsened from 34.26% to 29.58% (1)
Possible causes
Reduction in selling price (1)
Purchasing from more expensive suppliers / increased cost of sales (1)
Accept other valid responses
Max (1) from possible causes
All comments to be based on Own Figures from (b)
Return on capital employed
General comment
Has worsened from 32.08% to 25.81% (1)
Possible causes
Increased capital employed (1)
Less efficient use of its resources (1)
Accept other valid responses
Max (1) from possible causes
All comments to be based on Own Figures from (b)
4(d) Introduce additional capital 5
Advantages
Does not have to be repaid (1)
No interest cost (1)
Accept other valid responses
Max (1)
Disadvantages
May not have enough available funds (1)
Greater personal risk (1)
Accept other valid responses
Max (1)
Loan
Advantages
Instantly available (1)
Has two years to pay it off (1)
Accept other valid responses
Max (1)
Disadvantages
Annual interest is charged (1)
Must be repaid (1)
Security may be required (1)
Accept other valid responses
Max (1)
Recommendation (1)
4(e) 2
Interested party The interest they would have
Suppliers/potential suppliers To assess whether outstanding debts are likely to be paid
Bank To assess the likelihood of loan/overdraft being repaid when due
To assess the ability to pay interest on a loan/overdraft
To assess the availability of security for a loan
Lenders/potential lenders To assess the likelihood of a loan being repaid when due
To assess the ability to pay interest on a loan
To assess the availability of security for a loan
Investors/potential partners To assess future prospects of the business
To assess profitability
Government/tax authorities To assess the tax due from the owner of the business
Accept other suitable parties and reasons
(1) for one named party + (1) for reason
Razia’s financial year ends on 30 September.
The totals of the trial balance on 30 September 2020 did not agree. The totals were debit $10 450 and credit $10 250. A suspense account was opened.
The following errors were later discovered.
1 The total of the sales returns journal had been overcast by $300.
2 Cash sales, $820, had not been recorded in the books of account.
3 A purchase invoice, $190, had been credited to the account of P Hill instead of D Hill.
4 A cheque payment, $240, for motor repairs had been correctly entered in the cash book but had been posted to the debit of motor repairs account as $420.
5 Rent received, $310, had been debited to the rent payable account.
6 Staff wages, $250, had been posted to Razia’s drawings account.
7 A cheque paid, $900, to Kamil, a credit supplier, had been entered correctly in the cash book but had not been posted to Kamil’s account.
REQUIRED
(a) Prepare the suspense account. Start with the balance arising from the difference on the trial balance. The account should be balanced or totalled as necessary.
Razia
Suspense account
Date Details $ Date Details $
[6]
(b) Identify the types of error made in Error 2 and Error 4.
Error Type of error
2
4
[2]
(c) Complete the table by placing a tick (✓) in the correct column to indicate the effect on the profit for the year of correcting each error.
Error Increase profit Decrease profit No effect on profit number
1
2
3
4
5
6
7
[7]
Razia is considering whether or not to sell on cash terms only.
REQUIRED
(d) Advise Razia whether or not she should sell on cash terms only. Justify your answer with two advantages and two disadvantages of selling on cash terms only.
…… [5]
[Total: 20]
Mark scheme
5(a) Razia 6
Suspense account
2020 $ 2020 $
Sep 30 Sales returns 300 (1) Sep 30 Difference on trial balance 200 (1)
Motor repairs 180 (1)
Rent receivable 310 (1) Kamil 900 (1)
Rent payable 310 (1) ___
1 100 1 100
5(b) 2
Error Type of error
2 Error of omission (1)
4 Error of transposition in one account (1)
5(c) 7
Error number Increase profit Decrease profit No effect on profit
1 (1)
2 (1)
3 (1)
4 (1)
5 (1)
6 (1)
7 (1)
5(d) Advantages 5
Less book-keeping (1)
No irrecoverable debts (1)
Cash received immediately (1)
Accept other valid responses
Max (2)
Disadvantages
May lose customers/sales may reduce (1)
May adversely affect customer relationships/customer loyalty (1)
Increased security issues (1)
Accept other valid responses
Max (2)
Recommendation (1)
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Accounting 0452/22 for October/November 2020 is out of 100 marks, with 1 hour 45 minutes to answer it, across 5 questions.
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