2024 Cambridge IGCSE Accounting (0452) Practice Paper with Answers

A trader provided the following information for her purchases ledger control account:

$$\begin{array}{|l|r|}
\hline
\text{Opening credit balance} & \$4,200 \\
\text{Purchases journal total} & \$35,600 \\
\text{Cash purchases} & \$8,000 \\
\text{Returns outwards journal total} & \$1,200 \\
\text{Payments to credit suppliers} & \$32,100 \\
\text{Discount received} & \$650 \\
\text{Contra with sales ledger} & \$400 \\
\hline
\end{array}$$

What was the closing credit balance on the purchases ledger control account?

A payment for repairs to motor vehicles, $350, was debited to the motor vehicles account.

What is the effect of correcting this error on the non-current assets and the profit for the year?

A limited company has an ordinary share capital of $200,000 consisting of shares of $0.50 each.

The directors declare a dividend of $0.04 per share.

What is the total amount of the dividend declared?

Which item is part of the equity of a limited company?

A trader does not keep full accounting records but has the following information at hand:

$$\begin{array}{|l|r|}
\hline
\text{Capital at start of year} & \$24,500 \\
\text{Capital at end of year} & \$28,200 \\
\text{Drawings during the year} & \$4,800 \\
\text{Capital introduced during the year} & \$3,000 \\
\hline
\end{array}$$

What was the profit or loss for the year?

A trader provided the following information:

$$\begin{array}{|l|r|}
\hline
\text{Opening inventory} & \$8,500 \\
\text{Closing inventory} & \$9,300 \\
\text{Purchases} & \$42,000 \\
\text{Mark-up} & 25\% \\
\hline
\end{array}$$

What was the revenue for the year?

A business has a current ratio of 2.5:1 and a liquid (acid test) ratio of 1.5:1. Its current liabilities are $45,000.

What is the value of the inventory?

A credit sale of goods to H. Patel for $450 was entered in the ledger account of P. Patel.

Which type of error has been made?

On 1 October, the sales ledger control account of a trader had a debit balance of \( \$12\,400 \). During October, the following transactions occurred: Credit sales \( \$45\,000 \), Cash sales \( \$8\,000 \), Returns inwards from credit customers \( \$1\,200 \), Cash received from credit customers \( \$38\,500 \), Discount allowed to credit customers \( \$800 \), Irrecoverable debts written off \( \$400 \). What was the debit balance on the sales ledger control account on 31 October?

A business purchased a computer for office use costing \( \$1\,200 \) on credit. This was incorrectly debited to the purchases account. No depreciation has yet been charged. What is the effect of correcting this error on the profit for the year and on the non-current assets?

Which item is classified as part of the equity of a limited company in its statement of financial position?

At the start of the financial year, a company's retained earnings balance was \( \$24\,000 \). During the year, the profit was \( \$55\,000 \), a transfer of \( \$10\,000 \) was made to the general reserve, and ordinary dividends of \( \$15\,000 \) were paid. What was the retained earnings balance at the end of the financial year?

The trade receivables of a business were \( \$6\,500 \) on 1 January and \( \$8\,200 \) on 31 December. During the year, cash received from credit customers was \( \$43\,400 \), discounts allowed were \( \$1\,100 \), and irrecoverable debts written off were \( \$300 \). What were the credit sales for the year?

A trader who applies a constant mark-up of 25% provides the following information: Opening inventory \( \$4\,500 \), Closing inventory \( \$5\,200 \), Purchases \( \$24\,700 \). What was the revenue for the year?

George provides the following information: Inventory \( \$18\,000 \), Trade receivables \( \$12\,000 \), Bank \( \$3\,000 \) (debit balance), Trade payables \( \$10\,000 \), Other payables \( \$2\,000 \). What was his liquid (acid test) ratio?

The trial balance of a business did not agree, and the difference was placed in a suspense account. It was later found that a payment of \( \$450 \) for electricity had been correctly entered in the cash book, but debited to the electricity account as \( \$540 \). Which journal entry is required to correct this error?

The following information is available from the books of a trader for the month of September: Credit sales $45 000, Sales returns $1 200, Cash received from credit customers $38 000, Discount allowed $800, Irrecoverable debts written off $500, Closing debit balance on sales ledger control account $12 500. What was the opening debit balance on the sales ledger control account on 1 September?

A payment of $150 for motor vehicle repairs was mistakenly debited to the motor vehicles account. What is the effect of correcting this error on the profit for the year and the value of non-current assets?

A trader's trial balance credit side was short of $360, and a suspense account was opened to record the difference. It was subsequently discovered that: (1) The sales journal was undercast by $100. (2) Rent received of $130 had been debited to the rent received account. What is the balance on the suspense account after these errors have been corrected?

A limited company provided the following information on 1 January 2023: Ordinary share capital ($0.50 shares) $200 000, Retained earnings $45 000. During the year ended 31 December 2023, the company made a profit of $60 000. It paid an interim dividend of $0.05 per ordinary share and transferred $10 000 to the general reserve. What was the total equity of the company on 31 December 2023?

Which statement correctly describes 5% debentures issued by a limited company?

A sole trader does not maintain full double-entry accounting records. The following information was available: Capital on 1 October 2022 $35 000, Capital on 30 September 2023 $42 000. During the year ended 30 September 2023, the trader took $8 000 cash for private use and introduced a personal motor vehicle worth $5 000 into the business. What was the profit or loss for the year?

A retailer applies a markup of 25% to arrive at selling prices. The following figures are available for the year ended 31 December 2023: Opening inventory $6 000, Purchases $48 000, Closing inventory $8 000. What was the revenue for the year?

The following ledger balances were extracted from a trader's books on 31 December 2023: Inventory $24 000, Trade receivables $18 000, Cash at bank $3 000, Trade payables $15 500, Other payables $2 500. What was the liquid (acid test) ratio?

Which transaction would be entered on the credit side of a purchases ledger control account?

The sales ledger control account of a trader has a debit balance of $8200 on 1 November. During November, the following transactions took place:

* Credit sales: $12400
* Returns inwards: $450
* Cheques received from credit customers: $11200
* Irrecoverable debts written off: $150
* Discount allowed: $220

What was the debit balance on the sales ledger control account on 30 November?

A trader made a payment of $150 for motor repairs. This was entered correctly in the cash book but was debited to the motor vehicles account as $510.

Which journal entry is required to correct this error?

The draft profit for the year of a business was $18500. It was later discovered that two errors had been made:

1. Rent prepaid of $400 at the end of the year had been completely omitted.
2. A purchase invoice for office equipment costing $1200 had been debited to the purchases account.

What was the corrected profit for the year?

A limited company provided the following information at the end of its financial year:

* Ordinary shares of $0.50 each: $150000
* Retained earnings: $45000
* General reserve: $20000
* 5% Debentures: $50000

What was the total equity of the company?

Which statement about ordinary shares and debentures is correct?

A trader who does not keep full accounting records provided the following information:

* Opening inventory: $6500
* Closing inventory: $8200
* Purchases for the year: $42000

The trader applies a mark-up of 25% on all goods sold. What was the revenue for the year?

A business provided the following information:

* Inventory: $18000
* Trade receivables: $12000
* Cash at bank (debit balance): $3000
* Trade payables: $16000
* Bank overdraft: $4000

What was the liquid (acid test) ratio?

The following information was extracted from the books of a trader for the month of October:

$$\begin{array}{|l|r|}
\hline
\text{Opening credit balance on purchases ledger control account} & \$4500 \\
\text{Opening debit balance on purchases ledger control account} & \$120 \\
\text{Credit purchases} & \$32000 \\
\text{Cash purchases} & \$8000 \\
\text{Payments to credit suppliers} & \$29500 \\
\text{Discount received} & \$600 \\
\text{Returns outward} & \$450 \\
\text{Contra entry with sales ledger} & \$300 \\
\text{Closing debit balance on purchases ledger control account} & \$150 \\
\hline
\end{array}$$

What was the closing credit balance on the purchases ledger control account?

A trader calculated a draft profit for the year of $18400. He then discovered the following errors in his accounting records:

1. Rent received of $450 had been debited to the rent paid account.
2. The purchase of a computer, $1200, had been debited to the office equipment repairs account. No depreciation is charged in the year of purchase.

What was the corrected profit for the year?

On 1 January 2023, a limited company had retained earnings of $35000 and a general reserve of $20000.

For the year ended 31 December 2023, the following information is available:

$$\begin{array}{|l|r|}
\hline
\text{Profit for the year} & \$48000 \\
\text{Transfer to general reserve} & \$10000 \\
\text{Ordinary shares dividend paid} & \$12000 \\
\text{Proposed final ordinary shares dividend} & \$8000 \\
\hline
\end{array}$$

What was the balance of retained earnings on 31 December 2023?

Debra is a trader who maintains a sales ledger control account. On 1 May 2024, the balances in her sales ledger control account were: Debit $4210, Credit $120. The following information was available for the month of May 2024: Credit sales: $8600; Cash sales: $1400; Returns inward from credit customers: $340; Cheques received from credit customers: $7850; Discount allowed: $150; Irrecoverable debts written off: $180; Interest charged to outstanding customer accounts: $45; Contra entry with purchases ledger: $220; Balance in Sales Ledger Control Account on 31 May 2024: Credit $95. REQUIRED: (a) Prepare Debra's Sales Ledger Control Account for May 2024, balancing the account and bringing down the debit and credit balances on 1 June 2024. [8 marks] (b) List three sources of information Debra would use to prepare her Sales Ledger Control Account. [3 marks] (c) Explain one reason why Debra's Sales Ledger Control Account might have a credit balance at the end of the month. [2 marks] (d) Explain how a sales ledger control account acts as an independent check on the accuracy of the sales ledger. [2 marks] (e) Debra is considering whether to offer a cash discount to all customers to improve cash flow. Advise Debra on whether she should do this, providing two advantages and two disadvantages of doing so. [5 marks]

Marcus is a trader. He prepared a trial balance on 31 December 2023 which failed to agree. The debit side of the trial balance exceeded the credit side by $50. A suspense account was opened to record the difference. Marcus later discovered the following errors: 1. Rent paid, $450, was correctly entered in the cash book but had been debited to the rent account as $540. 2. A credit sales invoice to Julian for $280 had been completely omitted from the books. 3. Purchase of office machinery on credit from Tech Ltd, $1200, had been entered in the purchases account. 4. Motor expenses of $115 had been credited to the motor expenses account. The entry in the bank account was correct. 5. Cash received from a credit customer, Tanya, $190, was entered in the cash book but no other entry had been made. REQUIRED: (a) Prepare the journal entries to correct errors 1 to 5. Narratives are not required. [10 marks] (b) Prepare the Suspense Account, showing the correction of the relevant errors and bringing it to a nil balance. [4 marks] (c) Explain the difference between an error of commission and an error of principle, giving an example of each. [4 marks] (d) State two errors that do not affect the agreement of a trial balance. [2 marks]

Hale Ltd has an authorized and issued share capital of 200,000 ordinary shares of $0.50 each. The company's trial balance on 31 December 2023 showed: Ordinary Share Capital: $100,000; General Reserve: $15,000; Retained Earnings (1 January 2023): $8,400; Profit for the year ended 31 December 2023 before interest and tax: $34,200; 6% Debentures (repayable 2030): $40,000. During the year, the following decisions and payments were made: 1. An interim dividend of $0.03 per ordinary share was paid on 1 July 2023. 2. The directors proposed a final ordinary dividend of $0.05 per share on 31 December 2023. 3. A transfer of $5,000 is to be made to the General Reserve. 4. Debenture interest for the year is outstanding at 31 December 2023. REQUIRED: (a) Prepare the Statement of Changes in Equity for Hale Ltd for the year ended 31 December 2023. [8 marks] (b) Prepare the Equity section of the Statement of Financial Position at 31 December 2023. [4 marks] (c) State three differences between ordinary shares and debentures. [3 marks] (d) Explain the term 'limited liability'. [2 marks] (e) State why a company might transfer funds to a general reserve. [3 marks]

Fiona started a business on 1 January 2023 with a bank balance of $15,000. She did not keep a full set of accounting records. On 31 December 2023, Fiona provided the following information about her assets and liabilities: Fixtures and fittings (cost): $12,000; Fiona depreciates fixtures and fittings at 15% per annum on cost; Inventory: $8,400; Trade receivables: $4,600; Trade payables: $3,200; Prepaid rent: $400; Accrued electricity: $150; Bank overdraft: $1,100. Fiona's drawings during the year were $350 per month. Fiona also introduced additional capital of $4,000 during the year. REQUIRED: (a) Prepare Fiona's Statement of Affairs at 31 December 2023 to determine her capital on that date. [8 marks] (b) Calculate Fiona's profit or loss for the year ended 31 December 2023. [5 marks] (c) State three limitations of using Fiona's incomplete records to prepare financial statements. [3 marks] (d) Explain the difference between 'markup' and 'margin'. [4 marks]

Rohan provided the following information from his financial statements for the year ended 30 April 2024: Revenue: $180,000; Cost of sales: $120,000; Operating expenses: $36,000; Capital employed (30 April 2024): $150,000; Current assets: $45,000; Current liabilities: $30,000; Inventory (included in current assets): $18,000. For the previous year ended 30 April 2023, the ratios were: Gross profit margin: 35.00%; Profit margin: 10.00%; Return on capital employed (ROCE): 12.00%; Current ratio: 2.10:1; Liquid (acid test) ratio: 1.25:1. REQUIRED: (a) Calculate the following ratios for Rohan for the year ended 30 April 2024. Show your workings and round to two decimal places: (i) Gross profit margin [3 marks] (ii) Profit margin [3 marks] (iii) Return on capital employed (ROCE) [3 marks] (iv) Current ratio [3 marks] (v) Liquid (acid test) ratio [3 marks] (b) Analyze Rohan's liquidity performance over the two years, comparing 2023 and 2024, and suggest one possible reason for the change. [5 marks]