Cambridge IGCSE™

* 2 1 8 5 9 7 1 3 4 1 *

ACCOUNTING 0452/22
Paper 2 Structured Written Paper February/March 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. Any blank pages are indicated.

DC (PQ) 200799/4
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1 Shilpa is a trader. The following transactions took place in January 2021.

January 2 Paid rent, $450, by direct debit

3 Bought goods on credit from Dilip, list price $120, subject to a trade discount of
25%

6 Sold goods on credit to Kabir, list price $200, subject to a trade discount of 20%

9 Sold surplus office fittings for $110 which was paid by credit transfer

10 Returned goods to Dilip, list price $20. These goods had been purchased on
3 January

11 Paid $50 to Dilip in cash

15 Cash sales, $85, were immediately paid into the bank

17 Paid office expenses, $30, by credit transfer

20 Sold goods on credit to Pari, $150

21 Kabir paid by cheque for the goods he purchased on 6 January, after deducting
cash discount of 7½%

24 Pari paid $141, by cheque, in full settlement of the purchases made on 20 January

26 Sold goods on credit to Yash, $62, offering him a discount of 5% if he paid within
21 days

REQUIRED

(a) Prepare Shilpa’s sales journal for January 2021.

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

Shilpa
Sales journal
Date Details $ $

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[4]

(b) Complete Shilpa’s cash book on the page opposite.

Balance the cash book and bring down the balances on 1 February 2021.
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 Shilpa
Cash Book
Date Details Discount Cash Bank Date Details Discount Cash Bank

© UCLES 2021
allowed received
2021 $ $ $ 2021 $ $ $

Jan 1 Balance b/d ................ 200 814 ........... ....................................... ................ ................ ................

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[11]

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(c) Prepare the ledger account of Dilip for January 2021. Balance the account and bring down
the balance on 1 February 2021.
There was no balance on Dilip’s account on 1 January 2021.

Shilpa
Dilip account
Date Details $ Date Details $

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[4]

(d) Complete the table by placing a tick (3) to indicate which document Dilip would send to
Shilpa for the return of goods on 10 January.

Debit note

Credit note
[1]

[Total: 20]

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2 Zamir is in business providing legal services. Zamir provided the following balances from his
books of account at 31 December 2020.

$
Fee income 151 750
Rent and rates 26 000
Salaries 55 000
Stationery and advertising 6 450
Electricity 8 000
Bank charges 4 100
Office equipment – cost 60 000
Office equipment – provision for depreciation 22 500
Proceeds of disposal of office equipment 1 000
Bank overdraft 7 900
Trade receivables 15 600
Capital 57 000
Drawings 65 000

Additional information

1 The annual rent is $16 000. On 31 December 2020 rent was paid to cover the period from
1 January to 31 March 2021.
There was no accrual or prepayment of rent at 1 January 2020.

2 Rates of $6000 were paid during the year to 31 December 2020. This payment covered the
period 1 January 2020 to 31 October 2020 only. From 1 November 2020 annual rates were
$7560.

3 Depreciation is to be charged on office equipment at 15% per annum using the straight-line
method. No depreciation is charged in the year of disposal.

4 In February 2020 office equipment was sold for $1000. This equipment had been purchased
for $1800 on 1 January 2018. The sales proceeds have been debited to the bank account
and credited to the proceeds of disposal of office equipment account. No other entries have
been made in respect of the disposal.

5 One of Zamir’s clients has become bankrupt. The client owed $1885. Zamir does not expect
to recover this amount.

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REQUIRED

(a) Prepare Zamir’s income statement for the year ended 31 December 2020.

Zamir
Income Statement for the year ended 31 December 2020
$ $

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[10]

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(b) Prepare the assets section of Zamir’s statement of financial position at 31 December 2020.

Zamir
Statement of Financial Position (assets section) at 31 December 2020

$ $ $

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[3]

(c) Suggest two possible reasons why Zamir required a bank overdraft.
high level of drawings
1 ................................................................................................................................................
to purchase non current assets
...................................................................................................................................................
to meet short debts
2 ................................................................................................................................................
improve cash flow
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[2]

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Zamir employs Sharif, who is another lawyer. Sharif also keeps the books of account for the
business. Zamir would like to ensure that Sharif does not leave to start work for a rival legal
business.

REQUIRED

(d) Advise Zamir whether he should offer Sharif an increase in salary or invite him to become a
partner in the business. Justify your answer with two advantages of each course of action.
increase salary:
...................................................................................................................................................
- sharif will be entitled a salary and not share of profit
...................................................................................................................................................

...................................................................................................................................................
- no disagreements may occur between them

...................................................................................................................................................
- Zamir will have full control over the business

...................................................................................................................................................
Invite him to become partner:
...................................................................................................................................................
- capital will be introduced into the business
...................................................................................................................................................
- risks will be shared
...................................................................................................................................................
- losses will be shared
...................................................................................................................................................
in my opinion, i think he should increase sharif's salary rather than inviting him to become a partner
.............................................................................................................................................
because the benefits of increasing the salary exceeds the benefits from inviting him as a partner [5]

[Total: 20]

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3 Rachel prepared her trial balance at 31 January. The total of the debit side was more than the total
of the credit side. Rachel entered the difference in a suspense account.

(a) Explain how the use of a suspense account allows a draft statement of financial position to be
prepared.
the suspense account enables to the trial balance to be balance, meaning that the debit and the credit
...................................................................................................................................................
sides of the trial balance will be equal, therefore the accounting equation (Statement of financial position)
...................................................................................................................................................
will be balance.
...................................................................................................................................................

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

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

Rachel later discovered the following errors.

1 A repair to the premises, $220, had been debited to the premises account.

2 The purchase of a motor vehicle, $3400, on credit from Neil’s Wheels, had not been recorded
in the accounting records.

3 Both the sales journal and the purchases journal had been overcast by $100.

4 Returns inwards, $19, had not been recorded in the returns inwards account.

5 Bank interest received, $25, had been debited to the bank charges account. The entry in the
bank account had been correctly made.

REQUIRED

(b) Prepare the journal entries to correct errors 1–5. Narratives are not required.

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Rachel
Journal
Error Details Debit Credit
number $ $

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[11]

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(c) State the number of the error which is

(i) a compensating error

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

(ii) an error of omission

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

(d) Complete the table to indicate the effect of each error on gross profit and on profit for the
year. The first one has been completed as an example.

Gross Profit Profit for the year

Error
number No effect Understated Overstated No effect Understated Overstated
$ $ $ $
1 3 220

5
[4]

(e) State why a balance may remain on the suspense account after errors 1–5 have been
corrected.
because not all errors were discovered during the financial period
...................................................................................................................................................

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

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

[Total: 20]

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4 Chaaya provided the following information.

$
For the year to 31 December 2020
Credit sales 114 400
Credit purchases 63 110
Gross profit 51 480

At 31 December 2020
Inventory 2 850
Trade receivables 15 400
Trade payables 7 430
------>Bank overdraft 6 190

REQUIRED

(a) Complete the following table.

ratio working answer

gross margin

trade receivables
turnover days
(round up to next whole day)

current ratio
(correct to two decimal places)

[6]

Chaaya is comparing her ratios with those of Sara, her main competitor. Based on Sara’s most
recent financial statements, her trade receivables turnover is 28 days.

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REQUIRED

(b) (i) Compare Chaaya’s trade receivables turnover with Sara’s trade receivables turnover.
chayas trade receivable turnover is lower than that of Sara. Sara's trade receivable take 28 days
...........................................................................................................................................
to pay amount due while chaayas trade receivable take 50 days to pay amount due which is almost
...........................................................................................................................................
double the duration. this shows that chaayas efficiency is lower than that of sara. this might cause
...........................................................................................................................................
cash flow problems to chaaya as well as the liquidity of the company may be negatively affected.
...........................................................................................................................................
furthermore, knock on effect may occur to chaaya, meaning that if the trade receivable delayed their
...........................................................................................................................................
payment the payment to the trade payables may be affect. also chaaya has a high risk of having
..................................................................................................................................... [3]
bad debts
(ii) State two problems with the inter-firm comparison in 4(b)(i).
companies may operate using different accounting policies
1 ........................................................................................................................................
companies may have different financial year end
...........................................................................................................................................
different credit periods
2 ........................................................................................................................................

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[2]

Chaaya is considering stopping selling on credit and instead selling on a cash only basis. Chaaya
would offer a trade discount of 12% to regular customers in order to maintain a good relationship
with customers.

REQUIRED

(c) Advise Chaaya whether she should start to make cash sales only and offer the trade discount.
Justify your answer by providing two advantages and two disadvantages.
advantages:
...................................................................................................................................................
- bank overdraft may be reduced
...................................................................................................................................................
- reduce risk of bad debts
...................................................................................................................................................
- cash would be received quicker
...................................................................................................................................................

...................................................................................................................................................
Disadvantages:

...................................................................................................................................................
- customers may look for other suppliers who offer goods on credit (loss of customers as well as market share)

...................................................................................................................................................
- reduction in the profit due to high trade discount offered

...................................................................................................................................................
- reduction in sales, because not all customers may be able to purchase goods by cash

...................................................................................................................................................
in my opinion, i think that she should NOT stop selling on credit because, she will lose a big part of her market

.............................................................................................................................................
share, since not all customer will be able to execute cash transactions only, in addition, her [5]
profitability will be negatively affected (drawbacks outcomes the benefits). she should try to improve credit
© UCLES 2021control and continue offering both 0452/22/F/M/21
cash and credit terms
 15

(d) (i) State two reasons why Chaaya’s employees would be interested in her financial
statements.
to know whether the company will have enough liquidity/profitability to offer them employment
1 ........................................................................................................................................
to know whether chaaya will be able to increase their wages or not
...........................................................................................................................................

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

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[2]

(ii) State two types of users of Chaaya’s financial statements, other than Chaaya and her
employees.
bank manager
1 ........................................................................................................................................

2 ........................................................................................................................................
customers
[2]
government
[Total: 20]

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5 Maira opened a shop on 1 January 2020.

She provided the following trading information.

Gross margin: 40%

Purchase price: $70 per unit
Carriage inwards: $2 per unit
Inventory: 130 units at 31 December 2020

REQUIRED

(a) Calculate the cost of Maira’s inventory at 31 December 2020.

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

Maira has not kept a full set of accounting records, but provided the following information.

1 All sales were made on cash terms. The sales for the first year were:

for the first two months: $10 800 each month

for the next eight months: $12 000 each month
for the last two months: $16 200 each month

2 During the year Maira purchased 1400 units. Carriage was paid on these units.

3 Maira took goods from the business during the year ended 31 December 2020. No record
was kept of these drawings.

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REQUIRED

(b) Prepare Maira’s income statement (trading section) for the year ended 31 December 2020.

Maira
Income Statement (trading section) for the year ended 31 December 2020
$ $

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[8]

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Maira has been too busy to keep a full set of accounting records. However, she is now considering
using double-entry book-keeping for her business.

(c) Advise Maira on whether or not she should start to keep a full set of accounting records.
Justify your answer with two advantages and two disadvantages.
in my opinion i think that maria should start to keep a full set of accounting records because:
...................................................................................................................................................

...................................................................................................................................................
- she will have detailed records about all accounts that will benefit her in the future

...................................................................................................................................................
- she will be able to make yearly comparisons and comparisons with other businesses

...................................................................................................................................................
- she will be able to prepare financial statements more easily

...................................................................................................................................................
- errors and fraud will be reduced

...................................................................................................................................................
- assist her in decision making
but on the other side:
...................................................................................................................................................
- she might be busy and she might not have time for book keeping
...................................................................................................................................................
- she will take time to learn how to prepare double entry
...................................................................................................................................................
- training costs to learn double entry book keeping will increase, and as a result the profit might
............................................................................................................................................. [5]
be negatively affected.
(d) Place a tick (3) in the correct column to indicate to Maira the book of prime entry in which
each of the following should be recorded.

Cash book Purchases journal Purchases

returns journal
Discount received from a
supplier for prompt payment
Credit note received from a
supplier
Direct debit paid to a
supplier
[3]

(e) Complete the table by placing a tick (3) in the correct column to indicate to Maira the
accounting objective which is described in each statement.

Comparability Relevance Reliability

Maira’s financial statements should be
free from significant errors.
Maira’s financial statements should be
provided in time for her to use them
when making decisions about her shop.
[2]

[Total: 20]

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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
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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 0452/22/F/M/21