CAMBRIDGE INTERNATIONAL EXAMINATIONS

International General Certificate of Secondary Education

MARK SCHEME for the May/June 2014 series

0452 ACCOUNTING
0452/21 Paper 2, maximum raw mark 120

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.

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Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.

Cambridge will not enter into discussions about these mark schemes.

Cambridge is publishing the mark schemes for the May/June 2014 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.
 Page 2 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

1 (a) Nasir Manufacturing Limited

Manufacturing Account for the year ended 31 January 2014
$ $
Cost of materials used
Opening inventory of raw materials 23 500
Purchases of raw materials 124 600 (1)
148 100
Closing inventory of raw materials 26 100
122 000 (1)
Direct wages (136 000 + 2 200) 138 200 (1)
Direct expenses 16 300 (1)
Prime cost 276 500 (1)
Factory overheads
Wages of factory supervisors 31 400 }
General factory expenses 19 208 }(1)
Rates & insurance (¾ × (6 360 – 120)) 4 680 (2)
Depreciation Plant & machinery
(20% × (94 000 – 33 840) 12 032 (1)
Loose tools
(2 650 + 310 – 2 740) 220 (1) 67 540
344 040 (1)OF
Opening work in progress 11 020 (1)
355 060
Closing work in progress 12 060 (1)
Cost of production 343 000 (1)OF

Horizontal format acceptable [14]

(b) Nasir Manufacturing Limited

Income Statement for the year ended 31 January 2014
$ $ $
Revenue 539 000
Cost of sales
Opening inventory finished goods 18 100 (1)
Cost of production 343 000 (1)OF
Purchases finished goods 16 900 (1)
Less Returns 200 (1) 16 700
377 800
Less Closing inventory finished goods 19 300 (1) 358 500
Gross profit 180 500 (1)OF

Horizontal format acceptable [6]

[Total: 20]

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 Page 3 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

2 (a) Leroy Smith

Stationery account
$ $
2013 2013
April 1 Balance b/d 144 (1) Aug 1 Drawings 26 (1)
June 30 Bank 368 (1) 2014
Mar 31 Income
statement 394 (1)
___ Balance c/d 92 (1)
512 512
2014
April 1 Balance b/d 92 (1)

Three column running balance format acceptable [6]

(b) The business entity principle has been applied when the stationery taken for personal use
was transferred from the stationery account to the drawings account. [2]

(c) Leroy Smith

Rent and rates account
$ $
2013 2013
April 1 Balance (rates) b/d 380 (1) April 1 Balance (rent) b/d 260 (1)
2014 2014
Mar 31 Bank (rates) 2470 } (1) Mar 31 Income
Bank (rent) 3380 } statement 5400 (1)
____ Balance (rates) c/d 570 (1)
6230 6230
2014
April 1 Balance b/d 570 (1)

Three column running balance format acceptable [6]

(d) The accruals principle has been applied when only the expense for the year was transferred
to the income statement. [2]

(e) Capital receipts

Amounts received which do not form part of the day-to-day trading activities. (1)

Capital expenditure
Money spend on acquiring improving and installing non-current assets. (1)

Revenue receipts
Amounts received in the day-to-day trading activities from revenue and other items of
income. (1)

Revenue expenditure
Money spent on running a business on a day-to-day basis. (1) [4]

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 Page 4 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

(f)
non-current assets profit for the year ended
at 31 March 2014 31 March 2014

Overstated Understated Overstated Understated

(1)
(1)
[2]

[Total: 22]

3 (a) (i) The straight line method of depreciation uses the same amount of depreciation each
year. [1]

(ii) This method is used where each year is expected to benefit equally from the use of the
asset. [1]

(b) (i) The reducing balance method of depreciation uses the same percentage rate of
depreciation each year, but it is calculated on the book value at the end of each year.
[1]

(ii) This method is used where the greater benefits from the use of the asset will be gained
in the early years of its life. [1]

(c) 1 Computer equipment – reducing balance method (1)

2 Buildings – straight line method (1)
3 Motor vehicle – reducing balance method (1) [3]

(d) (i) The asset is valued at the end of each year and the difference between the opening and
closing value is the depreciation for the year. [1]

(ii) This method is used where it is impractical or difficult to maintain detailed records of the
asset. [1]

(iii) Loose tools, packing cases, small items of equipment

Or other suitable example
Any 1 example (1) [1]

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 Page 5 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

(e) Tony Yeo

Equipment account
$ $
2013 2013
May 1 Balance b/d 8 600 Oct 31 Disposals 2 000 (1)
Nov 1 New2You 3 400 (1) 2014
Apl 30 Balance c/d 10 000
12 000 12 000
2014
May 1 Balance b/d 10 000 (1)OF [3]

Provision for depreciation of equipment account

$ $
2013 2013
Oct 31 Disposals 800 (2) May 1 Balance b/d 3 260
2014 2014
Apl 30 Balance c/d 4 120 Apl 30 Income statement
20% × 6600 1 320 (1)
20% × 3400 × ½ 340 (1)
4 920 4 920
2014
May 1 Balance b/d 4 120 (1)OF [5]

Disposal of equipment account

$ $
2013 2013
Oct 31 Equipment 2 000 (1)OF Oct 31 Prov for dep 800 (1)OF
Cash 750 (1)
2014
Apl 30 Income statement 450 (1)OF
2 000 2 000 [4]

Three column running balance format acceptable

[Total: 22]

4 (a) $30 000 × 5% = $1 500 (1)

$50 000 × 6% = $3 000 (1)

$70 000 × 8% = $5 600 (1) [3]

(b) To indicate that part of the profit is for long term use within the company and is not available
for distribution. [1]

(c) $ $
Profit before interest and dividends 18 600
Less Debenture interest 1 500 (1)
Preference share dividend 3 000 (1)
Ordinary share dividend 5 600 (1)
Transfer to general reserve 4 000 (1) 14 100
Profit retained in the year 4 500 (1)OF [5]

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 Page 6 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

(d) LWS Ltd

Extract from Statement of Financial Position at 30 April 2014
$
Capital and reserves
140 000 Ordinary shares of $0.50 each 70 000 }
50 000 6% Preference shares of $1 each 50 000 }(1)
General reserve 4 000 (1)
Retained profits (7 500 (1) + 4 500 (1)OF) 12 000 [4]

(e) Non-current liabilities [1]

(f) (i) Current liabilities [1]

(ii) $750 [1]

[Total: 16]

5 (a) To ensure that the totals of the trial balance agree (1)
To allow draft financial statements to be prepared (1) [2]

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Page 7 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

(b) Uzma Khan

Journal

Debit Credit
$ $

1 Suspense 270 (1)

Rent 270 (1)
Correction of error of transposition (1)

2 Drawings 400 (1)

Wages 400 (1)
Correction of error, drawings
debited to wages (1)

3 Discount allowed 43 (1)

Suspense 43 (1)
Correction of error, discount not
transferred to ledger (1)

4 Mona 200 (1)

Suspense 1800 (1)
Amina 2000 (1)
Correction of error, receipt from
Amina $2000 entered as $200 in
Mona’s account (1)

4 Alternative presentation

Mona 200 (1)

Suspense 200 }
Suspense 2000 } (1)
Amina 2000 (1)
Correction of error, receipt from
Amina $2000 entered as $200 in
Mona’s account (1)
[13]

(c)
Effect on profit for the year
Error
Overstated Understated No effect
$ $

2 400 (2)

3 43 (2)

4 No effect (2)
[6]

[Total: 21]

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 Page 8 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

6 (a)
Ratio Year ended 31 March
2014

percentage of gross profit to revenue (sales) 31.11 % (2)

percentage of profit for the year to revenue (sales) 7.78 % (2)OF

current ratio 1.09 : 1 (2)

quick ratio 0.69 : 1 (2)

[8]

Calculations

Percentage of gross profit to revenue

450 000 − 310 000 (1) 100
× = 31.11% (1)
450 000 1

Percentage of profit for the year to revenue

140 000 O/F − 105 000 (1)OF 100
× = 7.78% (1)OF
450 000 1

Current ratio
(21 500 + 100 + 37 400) : (36 800 + 12 200 + 5 000) (1) = 1.09 : 1 (1)

Quick ratio
(100 + 37 400) : (36 800 + 12 200 + 5 000) (1) = 0.69 : 1 (1)

(b) Increase in selling price

Reduction in trade discount allowed to customers
Selling at a higher mark-up
Decrease in cost price
Increase in trade discount allowed by suppliers
Taking advantage of bulk buying
Or other suitable reason based on answer to (a)
Any 2 reasons (1) each [2]

(c) Year ended 31 March 2013 (1)

In 2013 the expenses were 17.85% of revenue: in 2014 the expenses were 23.33% of
revenue. (2)
Or suitable answer based on answers to (a) [3]

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Page 9 Mark Scheme Syllabus Paper
IGCSE – May/June 2014 0452 21

(d)
Increase Decrease No effect

Cheque paid to credit supplier

(1)
Goods taken for own use
(1)

Purchase of non-current asset
(1)

on credit
[3]

(e) Unsatisfied (1)

The ratio of liquid assets to current liabilities has fallen from 0.90:1 to 0.69:1. (1)
She cannot pay immediate liabilities from liquid assets. (1)
Or suitable answer based on answer to (a) [3]

[Total: 19]

© Cambridge International Examinations 2014