Cambridge IGCSE™(9–1)

* 7 2 9 3 8 9 6 7 1 3 *

ACCOUNTING 0985/22
Paper 2 Structured Written Paper October/November 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use a calculator.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 100.
● The number of marks for each question or part question is shown in brackets [ ].
● Where you are asked to complete a layout, you may not need all the lines for your answer.

This document has 20 pages. Any blank pages are indicated.

m
co
e.
at

DC (SL) 333462
-m

© UCLES 2023 [Turn over

amx
.e
w
w
w
 2

1 Seok buys and sells goods on credit. He has three credit customers and allows one of them,
Naomi, trade discount of 10%. All customers pay Seok by bank transfer.

The following balances were extracted from Seok’s sales ledger at 1 August 2023.

$
Naomi 450
Siena 155
Bwana 386
991

The following transactions took place in August 2023.

Aug 3 Sold goods on credit, to Naomi, list price $410

5 Sold goods on credit, $89, to Bwana

10 Naomi returned goods, list price $20

11 Naomi paid $423 in full settlement of the amount she owed at 1 August

19 Sold goods on credit, $180, to Bwana

22 Sold goods on credit, to Naomi, list price $230

27 Bwana returned goods, $19

29 Bwana paid $400

REQUIRED

(a) Prepare the sales journal for August 2023.

Total the journal and indicate the ledger account where the total would be posted.

Seok
Sales journal

Date Details $ $

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

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

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

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

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

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

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

m
co
e.
at

[4]
-m
amx

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 3

(b) Prepare the sales returns journal for August 2023.

Total the journal and indicate the ledger account where the total would be posted.

Seok
Sales returns journal

Date Details $ $

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

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

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

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

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

[3]

(c) Prepare the account for Naomi for August 2023 as it would appear in the books of Seok.
Balance the account and bring down the balance at 1 September 2023.

Seok
Naomi account

Date Details $ Date Details $

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

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

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

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

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

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

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

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

[6]
m
co
e.
at
-m
am

[Turn over
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 4

On 31 August Seok decided to write off the amount owing by Siena as an irrecoverable debt.

REQUIRED

(d) Prepare Seok’s sales ledger control account for August 2023. Balance the account and bring
down the balance at 1 September 2023.

Seok
Sales ledger control account

Date Details $ Date Details $

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

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

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

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

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

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

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

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

[7]

[Total: 20]

m
co
e.
at
-m
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 5

BLANK PAGE

m
co
e.
at
-m
am

[Turn over
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 6

2 Sara owns a clothing factory. She sells the clothing to a small number of local shops.
She allows 30 days credit.

At 30 September 2023, Sara’s ledger account balances included the following.

$
Inventory at 1 October 2022
Raw materials 4 875
Work in progress 8 125
Finished goods 12 890
Purchases of raw materials 56 400
Wages
Machine operators 43 300
Factory supervisor 25 000
Delivery vehicle driver 14 250
Rates and insurance 29 600
General factory expenses 9 650
Factory machinery – at cost 80 000
Factory machinery – provision for depreciation 35 000
Trade receivables 27 000
Cash at bank 1 050

Additional information

1. Inventory at 30 September 2023

Raw material 5 110
Work in progress 7 365
Finished goods 13 725

2. At 30 September 2023 general factory expenses of $335 were unpaid.

3. Insurance of $8000 had been paid for the year July 2023 to June 2024.

4. Rates and insurance are to be apportioned equally between the factory and the office.

5. Factory machinery is depreciated at 25% per annum using the reducing balance method.
m
co
e.
at
-m
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 7

REQUIRED

(a) Prepare Sara’s manufacturing account for the year ended 30 September 2023.

Sara
Manufacturing Account for the year ended 30 September 2023
$ $

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

m
co

……………………………………………………………........... …………….... ……………....

e.
at

[11]
-m
am

[Turn over
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 8

(b) Prepare the current assets section of Sara’s statement of financial position at
30 September 2023.

Sara
Statement of financial position (current assets section) at 30 September 2023
$ $

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

[3]
Sara’s factory supervisor is very efficient at running the factory.

REQUIRED

(c) State which accounting principle Sara is complying with by not recording any value for this
efficiency in her financial statements.

............................................................................................................................................. [1]
m
co
e.
at
-m
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 9

Sara has now been asked to supply a local drama school with theatrical costumes. The drama
school would place an order with Sara each month and would require 60 days credit.

REQUIRED

(d) Advise Sara whether she should start supplying the drama school with costumes. Justify your
answer by providing advantages and disadvantages of supplying the costumes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

............................................................................................................................................. [5]

[Total: 20]
m
co
e.
at
-m
am

[Turn over
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 10

3 Lionel started trading on 1 July 2022. He paid $15 000 of his own personal money into the business
bank account. He did not keep full accounting records but has supplied the following information
at 30 June 2023.

1. Cash sales of $90 000 were made and paid into the bank. No other money was received.
Lionel marks up his goods by 50%.

2. Payments from the bank:

$
Purchase of motor vehicle (van) 8 000
Payments to credit suppliers 55 000
Wages 8 060
General expenses 1 140
Rent and insurance 5 585
Motor expenses 4 992
Cash drawn from bank 14 600

3. Purchases returns amounted to $3000.

4. Inventory at 30 June 2023 was valued at $4175.

5. One third of the motor expenses paid were for Lionel’s private car.

6. A full year’s depreciation at 25% is to be charged on the van using the reducing balance
method.

7. Lionel withdrew $1000 each month from the business cash, for personal use. The remaining
cash drawn from the bank was used to pay wages.

m
co
e.
at
-m
am
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 11

REQUIRED
(a) Prepare Lionel’s income statement for the year ended 30 June 2023.
Lionel
Income Statement for the year ended 30 June 2023
$ $

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

……………………………………………………………........... …………….... ……………....

[9]

(b) Prepare Lionel’s capital account for the year ended 30 June 2023. Balance the account and
bring down the balance at 1 July 2023.
Lionel
Capital account
Date Details $ Date Details $

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

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

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

m
co

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

e.
at
-m

[5]
am

[Turn over
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 12

(c) State one reason why Lionel should keep double-entry bookkeeping records.

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

Lionel currently makes cash sales only. He would like to start selling on credit and is considering
whether to offer a 10% trade discount to regular customers or a 3% discount for payment within
21 days.

REQUIRED

(d) Advise Lionel whether he should offer the 10% trade discount or the 3% cash discount.
Justify your answer.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

............................................................................................................................................. [5]

[Total: 20]
m
co
e.
at
-m
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 13

4 Rachel is a trader.
The totals of Rachel’s trial balance prepared on 30 September 2023 did not agree and the
difference was placed in a suspense account.

Rachel later discovered the errors shown in the following table.

REQUIRED

(a) Complete the following table to show the entries required to correct each error. The first one
has been completed as an example.

Entries required to correct the error

Error Debit Credit
Account $ Account $
A payment for rent, $350, had been Rent
350 Wages 350
debited to the wages account. payable

The sales journal for September had ................... .............. ................... ..............
been overcast by $90.
................... .............. ................... ..............

Sales returns, $110, had been ................... .............. ................... ..............

recorded as purchases returns.
................... .............. ................... ..............

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

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

A payment for office expenses, $18, ................... .............. ................... ..............

had been recorded in the office
expenses account as $81. ................... .............. ................... ..............

A petty cash book payment, $29, to ................... .............. ................... ..............

Cole, a supplier, had been recorded
in the column for motor expenses. ................... .............. ................... ..............

[9]
m
co
e.
at
-m
am

[Turn over
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 14

(b) Prepare the suspense account. Include the balancing figure as the original difference on the
trial balance.

Rachel
Suspense account

Date Details $ Date Details $

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

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

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

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

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

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

[5]

Rachel’s draft profit before the errors were discovered was $18 243.

REQUIRED

(c) Calculate Rachel’s profit for the year ended 30 September 2023 after the errors in the table
have been corrected.

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

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

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

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

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

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

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

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

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

............................................................................................................................................. [5]

(d) State why financial statements may still be reliable even if errors are present.

...................................................................................................................................................
m
co
e.

............................................................................................................................................. [1]
at
-m

[Total: 20]
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 15

5 Nala is a retailer who sells toys and games. All sales are on a cash basis and all purchases are on
credit.

She has provided the following information.

$
At 31 August 2023:
Inventory 6 265
Cash at bank 992
Trade payables 4 880
Capital 125 000
For the year to 31 August 2023:
Revenue 98 420
Purchases 78 130
Expenses 11 325
Inventory at 1 September 2022 was valued at $6175.

REQUIRED

(a) Complete the following table.

Ratio Working Answer (to 2

decimal places )
Gross margin

Profit margin

Return on capital
employed (ROCE)

Rate of inventory
turnover (times)

Liquid (acid test)

ratio

[11]
m
co
e.
at
-m
am

[Turn over
x

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 16

Nala increased her advertising expenses over the year to 31 August 2023 and sells at a lower
price than her nearest competitor. This has resulted in Nala selling her inventory faster than her
nearest competitor. Nala and her nearest competitor buy inventory at the same prices. Nala is
pleased with her results.

REQUIRED

(b) Explain why Nala should not be entirely pleased with her results.

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

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

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

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

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

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

Nala is planning to expand her business and to take out a bank loan to finance the expansion. The
loan would be repayable after five years.

REQUIRED

(c) Advise Nala whether she should obtain a bank loan to expand the business. Justify your
answer by providing two points for and two points against obtaining the bank loan to expand
the business.

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

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

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

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

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

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

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

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

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

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

...................................................................................................................................................
m

............................................................................................................................................. [5]
co
e.
at
-m
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 17

(d) State why Nala’s bank manager would be interested in her financial statements if she requests
the loan.

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

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

[Total: 20]

m
co
e.
at
-m
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 18

BLANK PAGE

m
co
e.
at
-m
amx

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 19

BLANK PAGE

m
co
e.
at
-m
amx

© UCLES 2023 0985/22/O/N/23

.e
w
w
w
 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
m

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
co

Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
e.

at www.cambridgeinternational.org after the live examination series.

at
-m

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.
xam

© UCLES 2023 0985/22/O/N/23

.e
w
w
w