Cambridge International Examinations

Cambridge International General Certificate of Secondary Education

* 3 7 0 3 5 8 4 6 1 8 *

ACCOUNTING 0452/12
Paper 1 October/November 2018
1 hour 45 minutes
Candidates answer on the Question Paper.
No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams or graphs.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.

Answer all questions.

You may use a calculator.

Where layouts are to be completed, you may not need all the lines for your answer.
The businesses mentioned in this Question Paper are fictitious.

At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 22 printed pages and 2 blank pages.

DC (RCL/GO) 156837/3
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There are 10 parts to Question 1.

For each of the parts (a) to (j) below there are four possible answers A, B, C and D. Choose the one
you consider correct and place a tick (ü) in the box to indicate the correct answer.

1 (a) Profit is only recorded in the financial statements when legal title passes between buyer and
seller.

Which accounting principle is being applied?

A consistency

B going concern

C prudence

D realisation [1]

(b) David and Bashir are in partnership. David made a loan to the partnership.

What is the double entry to record this transaction?

account debited account credited

A bank David capital

B bank David loan

C David loan David capital

D David loan David current

[1]

(c) Which statement about debentures is not correct?

A Debentures have a fixed rate of interest.

B Debenture interest must be paid regardless of profit made.

C Debentures are a non-current liability.

D Debentures carry voting rights. [1]

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(d) Marvin provided the following information.

$
revenue for the year 10 000
percentage of gross profit to revenue 40%
percentage of profit to revenue 15%

What were the expenses for the year?

A $1500

B $2500

C $6000

D $8500 [1]

(e) Matthias provided the following summary from his financial statements.

$
Non-current assets 67 400
Current assets 48 700
Non-current liabilities 29 100
Current liabilities 8 000

What was the capital employed?

A $11 600

B $40 700

C $79 000

D $108 100 [1]

(f) In Alice’s books an invoice received from Cait was credited to Kate’s account.

Which type of error has been made?

A commission

B compensating

C original entry

D principle [1]

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(g) What does the term ‘limited liability’ mean in relation to a company?

A A company can only issue a limited number of shares.

B A company can only pay a fixed amount of dividends.

C Shareholders are not at risk of losing personal possessions.

D Shareholders’ liability is not limited to the amount paid for their shares. [1]

(h) Pia sells two products, X and Y. She provided the following information about her inventory at
the year end.

Product Cost $ Selling price $

X 1750 1850
Y 1924 1858

What was the total value of inventory to be included in the financial statements?

A $2608

B $2674

C $2708

D $2774 [1]

(i) What is the role of a book-keeper?

A to advise on business plans

B to analyse the profit or loss for the period

C to maintain records of financial transactions

D to prepare financial statements [1]

(j) Baljit paid rent, $2700, in advance for the three months ended 31 March 2018.

He adjusted his financial statements for the year ended 31 January 2018 for rent prepaid.

Which effect did this have on the total expenses for the year?

A decrease by $900

B decrease by $1800

C increase by $900

D increase by $1800 [1]

[Total: 10]
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2 Jennifer started in business on 1 June 2018 with the following assets and liabilities.

$
Delivery van 15 000
Fixtures and fittings 12 700
Inventory 16 200
Cash 11 500
Loan from Amina 15 000

REQUIRED

(a) Prepare Jennifer’s opening journal entry on 1 June 2018. A narrative is required.

Jennifer
Journal
Date Debit Credit
$ $
………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

………… …………………………………………………………… ………… …………

[5]

(b) State the purpose of a narrative in a journal entry.

...................................................................................................................................................

.............................................................................................................................................. [1]

(c) State two uses of the general journal in addition to the recording of opening entries of a
business.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

.............................................................................................................................................. [2]

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Jennifer’s cousin, John, is also a trader. He started his business on 1 October 2018. He introduced
capital of $30 000, of which he paid $25 000 into the business bank account.

The table shows the account balances following transactions that have taken place.

1 October 2 October 3 October 4 October

2018 2018 2018 2018
$ $ $ $
Assets
Office equipment 11 500 11 500 11 500
Motor vehicle 10 000 10 000
Bank 25 000 25 000 25 000 25 000
Cash 15 000 13 500 13 500 12 500

Liabilities
Payables 10 000 10 000
Capital 30 000 30 000 30 000 29 000

REQUIRED

(d) State for each date the transaction which has taken place.

The first transaction has been completed as an example.

1 October 2018

John introduced capital of which some was banked and some kept in cash.
...................................................................................................................................................

...................................................................................................................................................

2 October 2018

...................................................................................................................................................

...................................................................................................................................................

3 October 2018

...................................................................................................................................................

...................................................................................................................................................

4 October 2018

...................................................................................................................................................

.............................................................................................................................................. [6]

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(e) State the accounting principle which John applied when recording all these transactions.

.............................................................................................................................................. [1]

(f) State the meaning of

iii(i) assets .................................................................................................................................

...........................................................................................................................................

ii(ii) liabilities .............................................................................................................................

...........................................................................................................................................

(iii) capital .................................................................................................................................

...................................................................................................................................... [3]

(g) Explain what is meant by a ‘statement of financial position’.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

.............................................................................................................................................. [2]

[Total: 20]

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3 Saul prepared the following trial balance at 31 March 2018 which contains errors.

$ $
Motor vehicle at net book value 138 000
Revenue 109 000
Purchases 180 230
Inventory 1 5 100
Bank overdraft 113 900
Cash in hand 111 500
Drawings 16 500
Discount allowed 11 720
Other operating expenses 9 350
Wages and salaries 116 500
Capital 135 000
Difference 160 700
188 250 188 250

REQUIRED

(a) Prepare a corrected trial balance at 31 March 2018.

Saul
Corrected Trial Balance at 31 March 2018

Debit Credit
$ $
Motor vehicle at net book value
Revenue
Purchases
Inventory
Bank overdraft
Cash in hand
Drawings
Discount allowed
Other operating expenses
Wages and salaries
Capital

[7]

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From 1 April 2018, Saul decided to make sales and purchases on credit.
He maintains a full set of accounting records and prepares control accounts at the end of each
month.

REQUIRED

(b) State what is meant by a ‘book of prime (original) entry’.

...................................................................................................................................................

.............................................................................................................................................. [1]

(c) Complete the table to name the book of prime (original) entry which Saul uses to obtain
information when preparing his control accounts.
The first one has been completed as an example.

Book of prime (original) entry

Purchases Purchases Journal
Cash and cheques received from credit customers
Bad debts written off
Discount received from credit suppliers
Sales returns
Interest charged by credit suppliers

[5]

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Saul provided the following information for the month ended 30 June 2018.

2018 $
June 1 Sales ledger debit balances 16 420
Sales ledger credit balances 390

30 Credit sales 39 800

Sales returns 2 700
Cash and cheques received from credit customers 36 350
Bad debt written off 340
Sales ledger balance set off against purchases ledger balance 760
Discount allowed ?
Interest charged to credit customers on overdue accounts 175

July 1 Sales ledger debit balances 15 485

Sales ledger credit balances 200

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REQUIRED

(d) Prepare the sales ledger control account for the month of June 2018.
Insert the figure for discount allowed.
Balance the account and bring down the balances on 1 July 2018.

Saul
Sales ledger control account

Date Details $ Date Details $

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

…… ………………………… ………… …… ………………………… …………

[10]

(e) State two benefits of maintaining a sales ledger control account.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

.............................................................................................................................................. [2]

[Total: 25]

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4 Most businesses have receipts and payments which include both capital and revenue items.

REQUIRED

(a) Complete the table by inserting a tick (ü) to show how each item should be classified.
The first one has been completed as an example.

Capital Revenue Capital Revenue

expenditure expenditure receipt receipt
Motor vehicle repairs ü
Legal fees on purchase of office building
Purchase of goods for resale
Insurance of plant and equipment
Proceeds of sale of fixtures at net book
value
Discount received from supplier
[5]

Ahmed is a wholesaler. He provided the following draft income statement for the year ended
30 September 2018, which contains errors.

Ahmed
Draft Income Statement for the year ended 30 September 2018

$ $
Revenue 75 000
Proceeds from sale of motor vehicle 52 600
77 600
Opening inventory 58 500
Purchases 52 200
60 700
Closing inventory 5(7 300)
Cost of sales (53 400)
Gross profit 24 200
Expenses (12 900)
Profit for the year 11 300

Additional information

1 Purchases included $15 000 for new plant and equipment.

2 The motor vehicle was sold at net book value. No entry had been made in the motor vehicles
account.

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REQUIRED

(b) Complete the following table by inserting a tick (ü) to show the effect of correcting the errors
on each of the following items.

Increase Decrease
Plant and equipment
Motor vehicle
[2]

(c) Complete the statement to calculate the corrected gross profit for the year ended
30 September 2018.

Ahmed
Statement of corrected gross profit for the year ended 30 September 2018

Increase Decrease
$ $ $
Draft gross profit 24 200

Corrected gross profit

[3]

Ahmed’s brother, Khalid, also has a business. His financial year ends on 31 March.
Khalid provided the following information.

1 April 2017:
$
Office equipment:
cost 9000
provision for depreciation 3600

Khalid provides depreciation on the office equipment at 20% per annum on the straight line (equal
instalment) basis. A full year’s depreciation is charged in the year of purchase and none in the
year of sale.

On 31 March 2018 Khalid sold office equipment which had been purchased on 1 April 2016 at a
cost of $1500. Sales proceeds, $1100, were received by cheque.

On the same day Khalid purchased new office equipment, costing $2500.

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REQUIRED

(d) Prepare the provision for depreciation account for office equipment for the year ended
31 March 2018. Balance the account and bring down the balance on 1 April 2018.

Khalid
Provision for depreciation account for office equipment

Date Details $ Date Details $

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

[5]

(e) Prepare the office equipment disposal account.

Khalid
Office equipment disposal account

Date Details $ Date Details $

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

……… ………………………… ………… ……… ………………………… …………

[4]

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(f) Prepare an extract from Khalid’s statement of financial position at 31 March 2018 to show the
office equipment.

Khalid
Extract from Statement of Financial Position at 31 March 2018

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

.............................................................................................................................................. [3]

(g) Name the accounting principle applied when charging depreciation.

.............................................................................................................................................. [1]

[Total: 23]

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5 TP Limited manufactures toys.

REQUIRED

(a) Complete the table by inserting a tick (ü) to show how each type of manufacturing cost
should be classified. The first one has been completed as an example.

Direct Direct Factory

material labour overhead
Purchase of plastic toy parts ü
Rent of factory
Wages of machine operator
Purchase of packaging
Wages of supervisor
[4]

(b) State how prime cost is calculated.

...................................................................................................................................................

.............................................................................................................................................. [2]

TP Limited provided the following information.

$
Inventory on 1 June 2017
Raw materials 1 18 000
Work in progress 1 15 750
Finished goods 1 27 200

For the year ended 31 May 2018

Purchases of raw material 323 000
Factory wages 198 000
Factory overheads 125 000
Purchases of finished goods 1128 900
Revenue 836 000

Inventory on 31 May 2018

Raw materials 122 100
Work in progress 11 6 820
Finished goods 130 100

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REQUIRED

(c) Prepare the manufacturing account for the year ended 31 May 2018.

TP Limited
Manufacturing Account for the year ended 31 May 2018

$ $

………………………………………………………………………… ………… …………

………………………………………………………………………… ………… …………

………………………………………………………………………… ………… …………

………………………………………………………………………… ………… …………

………………………………………………………………………… ………… …………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

………………………………………………………………………… …………… ……………

[6]

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(d) Prepare the income statement (trading account section) for the year ended 31 May 2018.

TP Limited
Income Statement (Trading Account section) for the year ended 31 May 2018

$ $

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

……………………………………………………………………… …………… ……………

[4]

(e) State two reasons why TP Limited purchases finished goods.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...............................................................................................................................................[2]

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(f) Name the accounting principle applied when valuing inventory.

.............................................................................................................................................. [1]

TP Limited’s inventory turnover was 19.78 times for the year ended 31 May 2018 and 25.24 times
for the previous year.

REQUIRED

(g) Suggest two reasons why the rate of inventory turnover is lower than the previous year.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

.............................................................................................................................................. [2]

The directors of TP Limited compared their rate of inventory turnover with that of GH Limited, a
bakery. GH Limited has a rate of inventory turnover of 53.41 times.

REQUIRED

(h) Suggest two reasons why GH Limited has a higher rate of inventory turnover than TP Limited.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

.............................................................................................................................................. [2]

[Total: 23]

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6 CC Club provides sporting facilities and also runs a café for its members. The receipts and
payments account for the year ended 30 September 2018 is as follows.

CC Club
Receipts and Payments Account for the year ended 30 September 2018

$ $
2017 2018
Oct 1 Balance b/d 13 125 Sep 30 Rent 14 000
2018 Purchases of food for café 12 300
Sep 30 Subscriptions 24 500 General expenses 16 870
Receipts from café 14 145 Purchase of sports
Competition entry fees 11 550 equipment 17 600
Wages of club staff 16 900
Wages of café staff 11 800
Competition prizes 1 1500
Balance c/d 13 350
43 320 43 320
Oct 1 Balance b/d 13 350

Additional information.

1 Café inventory

$
1 October 2017 200
30 September 2018 185

2 Subscriptions in arrears

$
1 October 2017 750
30 September 2018 650

3 Sports equipment was valued at $37 400 on 1 October 2017 and $36 750 on 30 September
2018.

4 At 30 September 2018, rent paid in advance was $500 and general expenses owing were
$320.

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REQUIRED

(a) Calculate the profit of the club café for the year ended 30 September 2018.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

.............................................................................................................................................. [4]

(b) Prepare CC Club’s income and expenditure account for the year ended 30 September 2018.

CC Club
Income and Expenditure Account for the year ended 30 September 2018

$ $

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

……………………………………………………………………… ………… …………

[9]
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(c) State three differences between a receipts and payments account and an income and
expenditure account.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................

.............................................................................................................................................. [3]

CC Club wishes to improve the profit earned by the café.

REQUIRED

(d) Suggest three ways the club could improve its café profit.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

.............................................................................................................................................. [3]

[Total: 19]

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BLANK PAGE

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BLANK PAGE

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© UCLES 2018 0452/12/O/N/18