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Centre Number Candidate Number Name

CAMBRIDGE INTERNATIONAL EXAMINATIONS

International General Certificate of Secondary Education
ACCOUNTING 0452/03
Paper 3
May/June 2003

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 in the spaces provided on the Question Paper.
You may use a soft pencil for rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.

Answer all questions.

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.
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.

For Examiner’s Use

2
If you have been given a label, look at the
details. If any details are incorrect or 3
missing, please fill in your correct details
in the space given at the top of this page. 4

Stick your personal label here, if 5

provided.
Total

This document consists of 15 printed pages and 1 blank page.

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1 Ian Selkirk is a sole trader who maintains a full set of accounting records. He divides his
ledger into three sections – general ledger, purchases ledger and sales ledger.

(a) State and explain one advantage of dividing the ledger into these three sections.

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(b) Name two accounts which would appear in the general ledger.

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(c) Ian Selkirk prepares control accounts for his purchases and sales ledgers at the end of
each month.

On 1 April 2003 the balances brought down on the control accounts were –

$
Purchases Ledger Control account 1960 credit
Sales Ledger Control account 1750 debit
Sales Ledger Control account 100 credit

Totals of the journals for April 2003 were –

$
Purchases Journal 4190
Sales Journal 5150
Purchases Returns Journal 135
Sales Returns Journal 270

The Cash Book for April 2003 showed –

$
Cheques received from debtors 4990
Cheques paid to creditors 3830
Cheque paid to debtor in respect of
overpayment 100
Discount allowed 110
Discount received 180

The journal entries for April 2003 showed –

$
Bad debts written off 74

Prepare Ian Selkirk’s Purchases Ledger Control account and Sales Ledger Control account
for the month of April 2003. Bring down the balances on 1 May 2003.

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Purchases Ledger Control account

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Sales Ledger Control account

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2 The following trial balance was extracted from the books of Amir Sadiq as at 31 March 2003.

$ $
Capital 33 000
Drawings 2 500
Buildings at cost 20 000
Fixtures and equipment at valuation 3 400
Motor vehicles at cost 8 000
Provision for depreciation of motor vehicles 3 250
Provision for doubtful debts 200
Debtors 7 500
Creditors 6 700
Bank overdraft 2 880
Motor vehicle expenses 1 240
General expenses 2 030
Wages 11 940
Insurance 1 470
Carriage inwards 700
Discount received 250
Sales 92 100
Purchases 68 500
Sales returns 1 200
Stock 1 April 2002 9 900
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138 380 138 380
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Additional information

1. At 31 March 2003:
Stock was valued at $10 200.
Wages outstanding amounted to $1080.
Insurance prepaid amounted to $210.

2. During the year ended 31 March 2003 Amir took goods costing $300 for his own use.
No entries had been made in the accounting records.

3. The provision for doubtful debts is to be maintained at 2% of the debtors.

4. Motor vehicles are to be depreciated at 20% per annum using the reducing balance
method.

5. Fixtures and equipment were valued at $2800 on 31 March 2003. No fixtures and
equipment were bought or sold during the year ended 31 March 2003.

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(a) Prepare the Trading and Profit and Loss Account of Amir Sadiq for the year ended 31
March 2003.

A Balance Sheet is not required.

Amir Sadiq

Trading and Profit and Loss Account for the year ended 31 March 2003

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(b) Calculate, correct to two decimal places, Amir’s rate of stock turnover for the year
ended 31 March 2003. Show your workings.

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(c) (i) Explain what is meant by the going concern principle.

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(ii) On what basis should stock be valued when the going concern principle is applied?

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3 (a) On 31 January 2003 Mary, a trader, obtained a statement from her bank and
compared it with the bank account in her cash book.

The bank balance shown in the cash book was an overdraft of $1780. This differed from
the balance shown on the bank statement because –

1. a cheque for $270 payable to David had not yet been presented for payment

2. cash paid into the bank amounting to $800 had not yet been credited to Mary’s
account.

Prepare a bank reconciliation statement to show the balance which appeared on the
bank statement on 31 January 2003.

Mary

Bank Reconciliation Statement as at 31 January 2003

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(b) The following balances were extracted from the books of Mary on 31 January 2003 –

$
Machinery 26 000
Fixtures 8 500
Stock 6 600
Debtors 5 400
Creditors 4 620
Insurance prepaid 120
Rent received in advance 160
Bank overdraft 1 780
Cash 240
General expenses accrued 700
Long term loan 15 000
Capital 24 600

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(i) Select the relevant figures and calculate Mary’s working capital on 31 January
2003.

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(ii) Calculate, correct to two decimal places, Mary’s current ratio and quick ratio at 31
January 2003. Show your workings.

1. Current ratio

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2. Quick ratio

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(c) (i) State and explain two disadvantages to a business of having insufficient working
capital.

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(ii) State two ways in which a business could increase its working capital.

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

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4 Suzi Iyambo is a sole trader whose financial year ends on 31 January.

(a) The following account appears in Suzi’s ledger.

John Karunda account

$ $
2002 2002
Apr 1 Sales 1000 Apr 30 Bank 1000
May 6 Bank (dishonoured Dec 1 Cash 850
cheque) 1000 2003
Jan 3 Bad debts 150
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2000 2000
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For candidates who are not familiar with the layout of the account shown above, an
alternative presentation is provided.

John Karunda account

Dr Cr Balance
$ $ $
2002
Apr 1 Sales 1000 1000
30 Bank 1000 0
May 6 Bank (dishonoured cheque) 1000 1000
Dec 1 Cash 850 150
2003
Jan 3 Bad debts 150 0

Explain each entry in John Karunda’s account as it appears in Suzi Iyambo’s ledger.

April 1 Sales

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April 30 Bank

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May 6 Bank (dishonoured cheque)

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December 1 Cash

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January 3 Bad debts

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(b) Suzi maintains a provision for doubtful debts. On 1 February 2002 there was a credit
balance of $900 on the provision for doubtful debts account.

At 31 January 2003 Suzi’s debtors owed $40 000, and she decided to maintain the
provision for doubtful debts at 2% of the debtors.

Write up the Provision for Doubtful Debts account in Suzi’s ledger for the year ended 31
January 2003.

Provision for Doubtful Debts account

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(c) State four ways in which Suzi Iyambo could reduce the risk of bad debts.

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

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5 The Cobbydale Sports Club was formed on 1 May 2002.

The treasurer produced the following information for the year ended 30 April 2003.

Receipts and Payments Account for the year ended 30 April 2003

Receipts $ Payments $
Subscriptions 6 800 General expenses 1 430
Sale of tickets for open day 3 250 Insurance 670
Loan from a member 1 000 Purchase of equipment 3 500
Expenses of open day 1 950
Rent of premises 2 420
Balance 30 April 2003 c/d 1 080
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11 050 11 050
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Balance 1 May 2003 b/d 1 080

Additional notes –

1. At 30 April 2003
$
Subscriptions due from members amounted to 300
Rent due amounted to 220

2. The equipment is expected to have a useful life of 6 years after which time its scrap
value is expected to be $200. Depreciation is to be provided using the straight line
(equal instalment) method. A full year’s depreciation is charged in the year of purchase.

(a) Prepare the Income and Expenditure Account of the Cobbydale Sports Club for the year
ended 30 April 2003.

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Cobbydale Sports Club

Income and Expenditure Account for the year ended 30 April 2003

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(b) (i) Select one of the items appearing in the Receipts and Payments Account which
should not be included in the Income and Expenditure Account and explain why it
does not appear.

Item ...........................................................

Explanation ................................................................................................................

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(ii) Select one of the items appearing in the Income and Expenditure Account which
does not appear in the Receipts and Payments Account and explain why it does
not appear.

Item ...........................................................

Explanation ................................................................................................................

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(c) Prepare the Balance Sheet of the Cobbydale Sports Club as at 30 April 2003.

Cobbydale Sports Club

Balance Sheet as at 30 April 2003

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