2023 Cambridge IGCSE Accounting (0452) Practice Paper with Answers

Lin, a trader, discovered two errors in his accounting records:
1. Cash sales of $150 had been completely omitted from the sales book.
2. The purchase of a computer for $800 had been debited to the office repairs account.

Which types of error had Lin made?

A sports club provided the following information for the financial year:

\begin{tabular}{|l|c|}
\hline
& $\ \
\hline
Subscriptions received during the year & 4500 \
Subscriptions in arrears at the start of the year & 300 \
Subscriptions in arrears at the end of the year & 400 \
Subscriptions in advance at the end of the year & 150 \
\hline
\end{tabular}

What was the amount of subscriptions to be entered in the income and expenditure account for the year?

X and Y are in partnership. Their profit for the year ended 31 December 2022 was $24 000. Under the partnership agreement, the following details are provided:

\begin{tabular}{|l|c|}
\hline
Interest on drawings: X & $200 \
Interest on drawings: Y & $150 \
Annual salary: X & $3000 \
Interest on capital: X & $800 \
Interest on capital: Y & $600 \
\hline
\end{tabular}

What was the residual profit to be shared between X and Y?

A business has a gross profit margin of 25% and a profit margin of 10%. Revenue for the year was $80 000. What was the amount of the business's expenses (excluding cost of sales)?

Samir prepared a draft trial balance. He entered a debit balance for carriage outwards of $450 in the credit column, and completely omitted a bank balance of $150 (debit). Which entry was made in the suspense account to balance the trial balance?

A business sells goods on credit terms. Where are trade discounts and cash discounts first recorded in the books of the business?

An accountant records non-current assets at their original cost price and does not adjust their value to reflect current market rates. Which accounting principle is being applied?

A business provided the following details of its inventory at the end of the year:

\begin{tabular}{|l|c|c|c|}
\hline
Product & Number of units & Cost price per unit & Net realisable value per unit \
& & $ & $ \
\hline
Product A & 100 & 5.00 & 4.00 \
Product B & 200 & 3.00 & 3.50 \
\hline
\end{tabular}

What was the total valuation of the inventory?

The Sunrise Tennis Club provided the following information for the year ended 31 December 2022:

$$\begin{array}{|l|c|}
\hline
& \$ \\
\hline
\text{Subscriptions in arrears on 1 January 2022} & 320 \\
\text{Subscriptions in advance on 1 January 2022} & 180 \\
\text{Subscriptions received during the year} & 4850 \\
\text{Subscriptions written off as irrecoverable} & 60 \\
\text{Subscriptions in arrears on 31 December 2022} & 410 \\
\text{Subscriptions in advance on 31 December 2022} & 220 \\
\hline
\end{array}$$

What was the amount of subscriptions to be transferred to the income and expenditure account for the year ended 31 December 2022?

Patel and Singh are in partnership sharing profits and losses in the ratio 3:2.

The following information is available for the year ended 31 December 2022:

$$\begin{array}{|l|r|}
\hline
\text{Profit for the year} & \$34500 \\
\text{Annual salary to Singh} & \$6000 \\
\text{Capital account balance - Patel} & \$80000 \\
\text{Capital account balance - Singh} & \$50000 \\
\text{Interest on capital (per annum)} & 5\% \\
\hline
\end{array}$$

What was Patel's share of the residual profit?

Elena calculated a draft profit for the year of $15400. She then discovered the following two errors:

1. The purchase of office equipment costing $1200 had been debited to the repairs to equipment account.
2. The sales journal was undercast by $350.

What will be the corrected profit for the year after these errors are corrected?

A trader prepared a trial balance. He entered the bank balance of $450 (debit) on the credit side, and the discount received of $120 (credit) on the debit side.

What was the overall effect of these errors on the trial balance totals?

A business purchased a second-hand delivery van. The following costs were incurred:

$$\begin{array}{|l|r|}
\hline
\text{Purchase price of the van} & \$8500 \\
\text{Painting the business logo on the van} & \$350 \\
\text{Annual insurance premium} & \$480 \\
\text{Repairs to the engine to make the van usable} & \$600 \\
\hline
\end{array}$$

What is the total capital expenditure?

A credit customer, Lee, paid $200 by cheque. This cheque was later returned by the bank marked 'refer to drawer' (dishonoured).

How is the dishonoured cheque recorded in the ledger accounts of the business?

At 1 January 2022, a trader had a provision for doubtful debts of $450.

At 31 December 2022, trade receivables were $12000. It was decided to write off a debt of $400 as irrecoverable and then adjust the provision for doubtful debts to 4% of the remaining trade receivables.

What was the total amount debited to the income statement for the year ended 31 December 2022 for both irrecoverable debts and the provision for doubtful debts?

A trader returned faulty goods to a supplier. The supplier then issued a document to confirm this.

Which document did the trader receive from the supplier, and in which book of prime entry was it recorded by the trader?

The Zenith Chess Club provided the following information for the financial year:

$$\begin{array}{|l|r|}
\hline
\text{Subscriptions received during the year} & \$4\,200 \\
\text{Subscriptions in arrears at the start of the year} & \$350 \\
\text{Subscriptions in arrears at the end of the year} & \$480 \\
\text{Subscriptions in advance at the start of the year} & \$180 \\
\text{Subscriptions in advance at the end of the year} & \$220 \\
\text{Subscriptions written off during the year} & \$100 \\
\hline
\end{array}$$

What was the amount of subscriptions transferred to the Income and Expenditure Account as income for the year?

Hitesh and Janki are in a partnership. The profit for the year before any appropriations was $34,000.

The partnership agreement states:
- Interest on capital is 4% per annum. Capital balances are Hitesh $60,000 and Janki $40,000.
- Janki is entitled to an annual salary of $6,000.
- Interest on drawings is charged: Hitesh $400 and Janki $300.
- Residual profits and losses are shared in the ratio 3:2 to Hitesh and Janki respectively.

What was Janki's share of the residual profit?

A business calculated a draft profit for the year of $18,500. The following errors were then discovered:

1. Motor repairs costing $650 had been debited to the motor vehicles account.
2. An invoice for rent received of $300 had been completely omitted from the bookkeeping records.

What was the corrected profit for the year?

A business bought a computer for office use on credit from Tech Solutions.

In which book of prime entry is this transaction recorded?

A cheque received from a credit customer, Samuel, was returned by the bank as dishonoured.

Which entries are made to record this dishonoured cheque?

A business buys staplers and waste paper bins for office use. Although these items will last for several years, their cost is treated as an expense in the year of purchase.

Which accounting principle is being applied?

A business bought a machine on 1 January 2021 for $20,000. It depreciates its machines at 20% per annum using the reducing balance method.

A full year's depreciation is charged in the year of purchase, but no depreciation is charged in the year of disposal.

The machine was sold on 1 October 2023 for $12,000.

What was the profit or loss on the disposal of the machine?

A trader has a current ratio of 2.0 : 1 and a liquid (acid test) ratio of 1.2 : 1. He paid a trade payable of $500 in cash.

What is the effect of this transaction on the current ratio and the liquid (acid test) ratio?

A credit customer returned goods originally sold to them on credit. Which business document does the supplier issue, and in which book of prime entry does the supplier record this?

The owner of a business took goods costing $150 (with a retail value of $200) for personal use. No entries have been made in the accounts. How should this transaction be recorded in the ledger accounts?

A business paid rent of $1,200 by bank transfer. This transaction was correctly entered in the bank account but was debited to the repairs and maintenance account. Which type of error has been made?

Before preparing the final accounts, a trader discovered two errors: 1. The purchases journal was undercast by $400. 2. Rent paid of $300 had been debited twice to the rent account. What was the net entry required in the suspense account to correct these errors?

Chloe and Dan are in partnership, sharing profits and losses in the ratio 3:2 respectively. For the year ended 31 December 2022, the partnership profit was $48,000. The partnership agreement provides for: - Interest on capital: Chloe $2,000; Dan $1,500 - Annual salary: Chloe $6,500 - Interest on drawings: Chloe $500; Dan $300. What was Dan's share of the residual profit?

A partner provided a loan to the partnership. Interest on this loan is accrued at the end of the financial year. Where is this interest on the partner's loan recorded?

A sports club provided the following information about subscriptions for the year ended 31 December 2022: - Subscriptions in arrears at 1 January 2022: $450 - Subscriptions in advance at 1 January 2022: $250 - Subscriptions received during 2022 (including $300 for 2023): $6,800 - Subscriptions in arrears at 31 December 2022: $550. How much was shown as subscription income in the Income and Expenditure Account for 2022?

Which item would appear in the Receipts and Payments Account of a club but NOT in its Income and Expenditure Account?

On 1 October, the purchases ledger control account of a trader had a credit balance of $2500. During October, the following transactions took place:

$$\begin{array}{|l|r|} \hline & \$ \\ \hline \text{Payments to credit suppliers} & 15\,800 \\ \text{Cash discount received} & 400 \\ \text{Returns outwards} & 350 \\ \text{Contra entry with sales ledger} & 200 \\ \hline \end{array}$$

On 31 October, the balance on the purchases ledger control account was $3100 credit. What was the value of credit purchases during October?

Xavier and Yusuf are in partnership. Yusuf is entitled to a partnership salary of $4000 per annum and Xavier is entitled to interest on capital of $1200 per annum. Residual profits and losses are shared in the ratio of 3 : 2 to Xavier and Yusuf respectively.

The profit for the year ended 31 December 2022 was $15 200. During the year, Yusuf made drawings of $5000.

On 1 January 2022, Yusuf's current account had a credit balance of $1500.

What was the balance on Yusuf's current account on 31 December 2022?

A social club provided the following information for the year ended 31 December 2022:

$$\begin{array}{|l|r|r|} \hline & 1 \text{ January 2022} & 31 \text{ December 2022} \\ & \$ & \$ \\ \hline \text{Subscriptions in arrears} & 600 & 800 \\ \text{Subscriptions in advance} & 400 & 500 \\ \hline \end{array}$$

During the year, subscriptions received amounted to $8400. This included $100 of subscriptions in arrears from the previous year which had to be written off as irrecoverable.

What was the subscription income transferred to the income and expenditure account for the year ended 31 December 2022?

The Sunset Sailing Club has provided the following details for the year ended 31 December 2022:

* Subscriptions in arrears on 1 January 2022: $320
* Subscriptions in advance on 1 January 2022: $180
* Total subscriptions received by bank during the year: $4,200
* During the year, subscriptions in arrears from 2021 amounting to $100 were written off as irrecoverable.
* Subscriptions in arrears on 31 December 2022: $450
* Subscriptions in advance on 31 December 2022: $240

**REQUIRED**

Prepare the Subscriptions Account for the year ended 31 December 2022. Balance the account and bring down the balances on 1 January 2023.

Leo and Mia are partners sharing profits and losses in the ratio of 3:2. On 1 January 2022, their current account balances were:
* Leo: $1,200 credit
* Mia: $450 debit

For the year ended 31 December 2022, the partners had the following transactions/allocations:
* Partner salaries: Mia $4,000 per annum
* Interest on capital: Leo $1,500, Mia $1,000
* Interest on drawings: Leo $350, Mia $200
* Drawings: Leo $6,500, Mia $5,200
* Share of residual loss: Leo $1,800, Mia $1,200

**REQUIRED**

Prepare Mia's Current Account for the year ended 31 December 2022. Balance the account and bring down the balance on 1 January 2023.

Hassan's financial year ends on 31 December. On 1 January 2021, Hassan's provision for doubtful debts was $640. The trade receivables on 31 December for three consecutive years were as follows:

* 31 December 2021: $18,500
* 31 December 2022: $14,000
* 31 December 2023: $16,200

Hassan maintains a provision for doubtful debts at a rate of 4% of trade receivables at the end of each financial year.

**REQUIRED**

Prepare Hassan's Provision for Doubtful Debts Account for the three years ended 31 December 2021, 31 December 2022, and 31 December 2023. Balance the account at the end of each year and bring down the balances.

Zoya's trial balance on 31 October 2022 failed to balance. The debits exceeded the credits, and a suspense account was opened to record the difference.

Zoya later discovered the following errors:
1. A payment for rent of $480 was correctly entered in the cash book but had been debited to the rent account as $840.
2. Sales on credit to Malik of $310 had been credited to Malik's account as $130. The entry in the sales account was correct.
3. The total of the purchases returns journal, $380, had been posted to the debit of the sales returns account. The entries in the individual supplier accounts were correct.
4. Cash sales of $150 had been completely omitted from the bookkeeping records.

**REQUIRED**

Prepare Zoya's Suspense Account to show the correction of these errors. Start with the original difference on the trial balance as the balancing figure.

Sanjay's sales ledger control account for April 2023 had been prepared with a closing debit balance of $8,450. The individual sales ledger balances totaled $8,280.

Upon investigation, the following errors and omissions were discovered:
1. The sales journal had been undercast by $150.
2. No entry had been made in the control account for a contra entry of $220 with the purchases ledger.
3. A discount allowed of $45 had been correctly entered in the cash book but completely omitted from the customer's account in the sales ledger.
4. A bad debt of $180 had been written off in the sales ledger but no entry was made in the control account.
5. Interest of $35 charged on a customer's overdue account had been debited in the customer's account but was omitted from the control account.

**REQUIRED**

(a) Prepare Sanjay's Sales Ledger Control Account for April 2023 to show the necessary corrections. Balance the account and show the corrected balance.

(b) Reconcile the total of the individual sales ledger balances with the corrected balance on the control account, starting with the original uncorrected total of $8,280.

The treasurer of the Oakwood Cricket Club provided the following information for the year ended 31 December 2022:

- Subscriptions received during the year: $4,800
- Subscriptions in arrears on 1 January 2022: $350
- Subscriptions in advance on 1 January 2022: $210
- Subscriptions in arrears on 31 December 2022: $420
- Subscriptions in advance on 31 December 2022: $180
- During the year, $120 of the opening arrears was written off as irrecoverable.

Calculate the subscription income to be transferred to the Income and Expenditure Account for the year ended 31 December 2022. Show your workings clearly.

Leila and Sam are in partnership, sharing profits and losses in the ratio 3:2. The partnership agreement provides for interest on capital at 5% per annum, interest on drawings at 4% per annum, and an annual salary to Sam of $6,000.

The profit for the year ended 31 March 2023 was $38,500.

During the year, the partners' interest on capital was calculated as Leila $1,200 and Sam $800. Interest on drawings was Leila $450 and Sam $350.

Calculate the share of residual profit for each partner for the year ended 31 March 2023.

A trader prepared a draft profit statement showing a profit of $14,200 for the year. He subsequently discovered the following three errors:

1. A payment for motor vehicle repairs, $260, was debited to the motor vehicles asset account.
2. Purchase of goods on credit from P. Smith, $450, was entered in the purchases journal as $540.
3. Rent received, $300, was correctly entered in the cash book but had not been posted to the rent received account in the ledger.

Calculate the revised (adjusted) profit for the year after correcting these three errors.

The books of prime entry of a trader provided the following totals for the month of October 2022:

- Debit balance on Sales Ledger Control Account (1 October 2022): $6,400
- Credit sales for October: $18,200
- Cash and cheque receipts from credit customers: $15,800
- Sales returns from credit customers: $650
- Cash discounts allowed: $320
- Irrecoverable debts written off: $180
- Contra entry (set-off with purchases ledger): $400

Calculate the closing debit balance on the Sales Ledger Control Account on 31 October 2022.

Classify each of the following five transactions for a business as Capital Expenditure, Revenue Expenditure, Capital Receipt, or Revenue Receipt:

1. Purchased a new delivery van for $16,500.
2. Paid $350 for fuel and oil for the delivery van.
3. Received $1,200 from the sale of an old office computer at book value.
4. Paid $180 for the annual insurance of the delivery van.
5. Received $850 bank interest on the business deposit account.

Yasmin is a wholesaler of medical supplies. She currently records all sales transactions manually in journals and ledgers. She is considering migrating to a fully computerized cloud-based accounting package. Advise Yasmin whether she should invest in a computerized accounting system. Justify your answer by providing two advantages and two disadvantages of adopting this system, and a recommendation.

Chloe and Liam have been operating a retail store as partners, sharing profits and losses in the ratio 3:2. Liam wants to admit Chloe's brother, Ethan, as a third partner. Ethan will contribute $30,000 capital but expects a guaranteed salary of $5,000 per annum because of his extensive experience in digital marketing. Chloe is concerned that Ethan's admission will reduce her share of profits. Advise Chloe whether she should agree to admit Ethan as a partner under these terms. Justify your answer by providing two points in favour of admitting Ethan, two points against, and a final recommendation.

The Riverside Rowing Club needs to raise $8,000 to purchase a new competition boat. The treasurer has suggested two options to raise the funds: Option 1: Increase the annual membership subscription by 25% for the next financial year. Option 2: Organize a series of public fundraising events and ticketed gala dinners throughout the year. Advise the treasurer which option the club should choose. Justify your answer by discussing one advantage and one disadvantage of each option, concluding with a recommendation.

Nadia, a sole trader, recently purchased a new delivery van for $24,000. She decided to write off the entire cost of the van as an expense in the current year's income statement to reduce her taxable profit, rather than capitalizing it and depreciating it over its useful life of 5 years. Her accountant objects to this treatment. Advise Nadia whether she should correct her accounts to capitalize and depreciate the van. Justify your answer by explaining the accounting principles violated by her proposed treatment and providing a recommendation.

Vikram's trade receivables at 31 December 2022 were $80,000. He currently maintains a flat-rate provision for doubtful debts of 5%. His credit controller has suggested moving to an 'aging schedule' method, where provisions are calculated based on how long debts have been outstanding (e.g., 2% for under 30 days, 5% for 31-60 days, and 15% for over 60 days). Advise Vikram whether he should change from a flat-rate provision to the aged trade receivables method. Justify your answer by providing two advantages of the aging schedule method, two disadvantages, and a final recommendation.