Cambridge IGCSE™

* 8 6 6 8 6 6 0 1 5 4 *

ACCOUNTING 0452/21
Paper 2 Structured Written Paper October/November 2021

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.

DC (RW) 222134
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1 Shiv is a trader. His financial year ends on 31 August. He does not maintain a full set of accounting
records but was able to provide the following information for the year ended 31 August 2021.

Total revenue $320 000

Mark-up 25%

Bank account summary for the year ended 31 August 2021

$ $
Balance b/d 49 000 Expenses 34 000
Cash sales 3 700 Drawings 4 200
Receipts from trade receivables 312 400 Payments to trade payables 257 700
Equipment 16 000
Balance c/d 53 200
365 100 365 100

Assets and liabilities

1 September 2020 31 August 2021

$ $
Inventory at cost 23 500 ?
Trade receivables 22 000 25 900
Expenses owing – 400
Trade payables 32 600 29 600
Equipment at net book value – 12 800
Premises at cost 90 000 90 000

Shiv had withdrawn $900 for a family holiday during the year. He had included this in the expenses.

On 31 August 2021 Shiv decided to create a provision for doubtful debts of 3% of trade receivables.

REQUIRED

(a) Calculate the purchases for the year ended 31 August 2021.

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(b) Prepare the income statement for the year ended 31 August 2021. The inventory on
31 August 2021 should be clearly shown within the statement.

Shiv
Income Statement for the year ended 31 August 2021

$ $

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[11]

(c) Name the accounting principle Shiv should apply when recording the $900 he had used for a
family holiday.

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Shiv has always valued his inventory at cost price. He is considering valuing the inventory on
31 August 2021 at selling price as he believes it would result in a higher profit for the year.

REQUIRED

(d) Discuss the implications of Shiv valuing the inventory on 31 August 2021 at selling price.

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[Total: 20]

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PLEASE TURN OVER

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2 Jas owns a printing business and has recently incurred various expenditures relating to her
premises.

REQUIRED

(a) Complete the table by inserting a tick (3) to show how each item of expenditure should be
classified. The first one has been completed as an example.

Capital Revenue
expenditure expenditure

Building new extension to warehouse 3

Rates on new extension

Carriage costs for roof tiles for new extension

Legal costs for new extension

Repairs to office roof

[4]

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Jas’s business is expanding rapidly and she needs more warehousing space.

Jas can rent an additional warehouse. The rent for the first six months would be $40 000.

Alternatively, Jas can purchase a warehouse for $900 000. She can obtain a long-term loan of
$700 000.

REQUIRED

(b) Advise Jas whether she should rent or purchase a warehouse. Justify your answer.

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An extract from Jas’s statement of financial position at 31 December 2019 showed the following:

Cost Accumulated Net book

depreciation value
$ $ $
Fixtures 115 000 77 625 37 375

During the year ended 31 December 2020 the following transactions took place.

On 1 January 2020 fixtures, $30 000, were purchased by cheque.

On 30 June 2020 fixtures were sold for $6000, which was received by cheque. These fixtures had
originally been purchased on 1 January 2018 for $20 000.

Jas depreciates fixtures on a straight-line basis. She assumes fixtures will have a useful life of four
years, at which time the residual value will be 10% of original cost. Depreciation is charged for
each part of the year for which the fixtures are owned.

REQUIRED

(c) Prepare the following accounts for the year ended 31 December 2020. Balance each account
and bring down the balance on 1 January 2021.

Jas
Fixtures account

Date Details $ Date Details $

2020
Jan 1 Balance b/d 115 000 ............... ..................................... ...............

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Provision for depreciation of fixtures account

Date Details $ Date Details $

2020
............... ..................................... ............... Jan 1 Balance b/d 77 625

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[8]

(d) Prepare the fixtures disposal account for the year ended 31 December 2020.

Jas
Fixtures disposal account

Date Details $ Date Details $

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[3]

Workings:

[Total: 20]
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3 Anil is a trader. The totals of the trial balance he prepared on 31 December 2020 did not agree.
The debits exceeded the credits by $5140.

The following errors were later discovered.

1 The sales account had been undercast by $7100.

2 Sales returns of $520 had been posted as a credit to the purchases account. The correct
entry had been made in the customer’s account.

3 Bank charges of $320 had been correctly entered in the cash book, but had not been entered
in the bank charges account.

4 A cheque refund of $600 for insurance overpaid had been entered on the wrong side of the
bank account and no entry had been made in the insurance account.

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REQUIRED

(a) Prepare journal entries to correct errors 1 to 4. Narratives are not required.

Anil
Journal

Error Details Debit Credit

number $ $

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[12]

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(b) Complete the suspense account.

Anil
Suspense account

Date Details $ Date Details $

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[6]

(c) Name two types of error not disclosed by a trial balance.

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[2]

[Total: 20]

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PLEASE TURN OVER

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4 Karishma runs her own business. The balances in her books on 1 October 2020 included the
following.
$
Insurance account 1700 prepaid
Electricity account 1800 owing

During the financial year ended 30 September 2021 Karishma made the following payments by
cheque.

Insurance payments
$
7 February 2021 3400
13 August 2021 3500

Electricity payments
$
14 October 2020 1800
24 January 2021 1800
26 May 2021 1800

A refund of $300 for insurance overpaid was received by bank transfer on 28 February 2021. The
insurance paid on 13 August 2021 covered a period of five months to 31 December 2021.

At 30 September 2021, an amount of $2000 was owing for electricity.

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REQUIRED

(a) Prepare the following accounts for the year ended 30 September 2021. Balance the accounts
and bring down the balances on 1 October 2021.

Karishma
Insurance account

Date Details $ Date Details $

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Electricity account

Date Details $ Date Details $

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[10]

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Karishma is considering changing her electricity supplier. The new supplier has offered Karishma
a two-year contract at a fixed monthly amount of $450 payable by direct debit.

REQUIRED

(b) Advise Karishma whether she should change to the new electricity supplier. Justify your
answer with two advantages and two disadvantages of changing supplier.

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On 1 October 2020 Karishma decided to rent out part of her premises to Noor at an annual rent of
$1965.

During the financial year ended 30 September 2021 Noor made the following payments to
Karishma by cheque.

$
1 October 2020 800
2 March 2021 825
8 August 2021 850

The amount received on 8 August 2021 included rent of $510 covering the period 1 October 2021
to 31 December 2021.

REQUIRED

(c) Prepare the rent receivable account for the year ended 30 September 2021. Balance the
account and bring down the balance on 1 October 2021.

Karishma
Rent receivable account

Date Details $ Date Details $

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[4]

(d) Identify the section of the statement of financial position at 30 September 2021 in which the
balance on the rent receivable account would appear.

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[Total: 20]

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5 The financial year of VL Sports Club ends on 31 December. The treasurer provided the following
information about receipts and payments for the year ended 31 December 2020.

Receipts $
Subscriptions 19 200
Competition receipts 7 300
Dinner dance ticket sales 6 500

Payments $
Competition prizes 4 100
Dinner dance costs 6 200
Equipment 12 000
General expenses 11 500

The treasurer also provided the following information.

1 January 2020 31 December 2020

$ $
Equipment at net book value 23 000 30 000
General expenses owing 400 500
Subscriptions in arrears 700 300
Subscriptions in advance 1 100 900

Of the subscriptions in arrears on 1 January 2020 an amount of $80 had not been paid by
31 December 2020 and is to be written off as irrecoverable.

REQUIRED

(a) Prepare the subscriptions account for the year ended 31 December 2020. Balance the
account and bring down the balances on 1 January 2021.

VL Sports Club
Subscriptions account

Date Details $ Date Details $

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REQUIRED

(b) Prepare the income and expenditure account for VL Sports Club for the year ended
31 December 2020.

VL Sports Club
Income and Expenditure Account for the year ended 31 December 2020

$ $

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The treasurer of VL Sports Club wants to encourage more members to pay their subscriptions in
advance by offering a 10% reduction in annual subscription fees.

(c) Advise the treasurer whether or not VL Sports Club should offer this reduction in annual
subscription fees to members who pay in advance. Justify your answer with one advantage
and one disadvantage.

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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.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

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

© UCLES 2021 0452/21/O/N/21