2026 Cambridge IGCSE Accounting (0452) 模拟试题及答案详解

Subscriptions for the year are calculated using the subscriptions account:

$$\begin{aligned}
\text{Income transferred} &= \text{Receipts} - \text{Opening arrears} + \text{Opening advance} + \text{Closing arrears} - \text{Closing advance} \\
&= \$8\,600 - \$450 + \$320 + \$610 - \$280 \\
&= \$8\,800
\end{aligned}$$

C is correct (1 mark).

A is incorrect: incorrectly subtracted opening advance and closing arrears, and added opening arrears and closing advance ($8\,600 + 450 - 320 - 610 + 280 = $8\,400).
B is incorrect: omitted the opening advance ($8\,600 - 450 + 610 - 280 = $8\,480).
D is incorrect: added closing advance and subtracted closing arrears.

1. Initial suspense account balance: Since debit total exceeded credit total by $540, the suspense account opened with a credit balance of $540.
2. Error 1: Both entries were debited ($270 in cash book and $270 in Tariq's account), causing debits to exceed credits by $540. To correct: Credit Tariq $540, Debit Suspense account $540.
3. Error 2: Sales returns debited to sales account is an error of principle/commission within the ledger. Total debits still equal total credits, so this error does not affect the suspense account.
4. Balance on suspense account: $$540\text{ (Credit)} - $540\text{ (Debit)} = $0$.

A is correct (1 mark).

B is incorrect: mistakenly applies error 2 to the suspense account ($540 - 540 + 180 = $180 credit).
C is incorrect: corrects Tariq with a single $270 debit instead of $540.
D is incorrect: assumes no errors affected the suspense account.

1. Profit for the year = $45,000
2. Add total interest on drawings = $$320 + \$200 = \$520\$
3. Less interest on capital: Amira (\$5\% \times \$40\,000 = \$2\,000\$), Bilal (\$5\% \times \$30\,000 = \$1\,500\$) \$\rightarrow\$ Total = \$3,500
4. Less partner salary: Bilal = \$6,000
5. Residual profit = $$45\,000 + $520 - $3\,500 - $6\,000 = $36\,020$
6. Amira's share = $\frac{3}{5} \times $36\,020 = $21\,612$.

C is correct (1 mark).

A is incorrect: calculated Bilal's share ($2/5 \times 36\,020 = $14\,408$).
B is incorrect: deducted interest on drawings instead of adding ($45\,000 - 520 - 9\,500 = 34\,980 \times 3/5 = $20\,988$).
D is incorrect: omitted the partner salary from the appropriation calculation.

Under the imprest system, the amount reimbursed equals the net expenditure incurred during the period.

$$\text{Net petty cash expenditure} = \text{Total vouchers} - \text{Petty cash receipts} = \$184 - \$14 = \$170$$

Therefore, $170 is required from the main bank/cash account to restore the float to $250.

B is correct (1 mark).

A is incorrect: this is the remaining cash in the box ($250 - 170 = $80).
C is incorrect: ignores the refund received of $14.
D is incorrect: adds the refund to expenditure ($184 + 14 = $198).

Using the official syllabus formulas:

$$\begin{aligned}
\text{Profit for the year before interest} &= \text{Gross profit} - \text{Operating expenses} \\
&= \$160\,000 - \$100\,000 = \$60\,000 \[6pt]
\text{Capital employed} &= \text{Ordinary shares} + \text{Retained earnings} + \text{Non-current liabilities} \\
&= \$180\,000 + \$45\,000 + \$75\,000 = \$300\,000 \[6pt]
\text{ROCE} &= \left(\frac{\$60\,000}{\$300\,000}\right) \times 100 = 20.0\%
\end{aligned}$$

B is correct (1 mark).

A is incorrect: used profit after interest ($52\,500 / 300\,000 \times 100 = 17.5\%$).
C is incorrect: used profit after interest and excluded debentures from capital employed ($52\,500 / 225\,000 \times 100 = 23.3\%$).
D is incorrect: excluded debentures from capital employed ($60\,000 / 225\,000 \times 100 = 26.7\%$).

A credit balance in the cash book represents an overdraft ($-\text{$1,420}$).

Updating the cash book:
$$\begin{aligned}
\text{Updated balance} &= -\$1\,420 - \$190 \text{ (Direct debit)} + \$450 \text{ (Credit transfer)} - \$60 \text{ (Bank charges)} \\
&= -\$1\,220 \text{ (i.e. } \$1\,220 \text{ credit / overdraft)}
\end{aligned}$$

Note: Unpresented cheques and uncredited deposits are timing differences included in the bank reconciliation statement, not the cash book.

B is correct (1 mark).

A is incorrect: erroneously included unpresented cheques and uncredited deposits in the cash book ($-$1\,220 - 380 + 510 = -$1\,090$).
C is incorrect: calculated the net magnitude correctly but misidentified it as a debit (positive) balance.
D is incorrect: subtracted the credit transfer and added the expenses to the overdraft.

Preparing the rent receivable account:

$$\begin{aligned}
\text{Income for the year} &= \text{Bank receipts} + \text{Opening advance} - \text{Opening arrears} - \text{Closing advance} + \text{Closing arrears} \\
&= \$4\,800 + \$400 - \$250 - \$350 + \$500 \\
&= \$5\,100
\end{aligned}$$

D is correct (1 mark).

A is incorrect: reversed all adjustments ($4\,800 - 400 + 250 + 350 - 500 = $4\,500).
B is incorrect: added both opening balances and subtracted both closing balances ($4\,800 + 400 + 250 - 350 - 500 = $4\,600).
C is incorrect: omitted the opening and closing advance balances.

The materiality concept states that items of very low monetary value do not need strict compliance with standard accounting procedures (such as capitalisation and depreciation over several years) because their omission or simplification will not mislead the users of the financial statements.

B is correct (1 mark).

A is incorrect: consistency refers to applying the same accounting methods over time for similar transactions.
C is incorrect: prudence ensures assets/income are not overstated and liabilities/expenses are not understated; it does not dictate treating low-value non-current items as expenses.
D is incorrect: realisation relates to recognising revenue when goods/services are delivered and legal ownership passes.

Net payments made during the month = $18 (tea) + $34 (postage) + $52 (trade payable) + $46 (stationery) - $12 (refund received) = $138.
Under the imprest system, the amount needed to restore the imprest fund is equal to the net expenditure incurred during the period ($138).

B [1 mark] - Correctly calculated net disbursements to restore imprest ($138).
Option A ($112) is the cash remaining in the float.
Option C ($150) ignores the refund.
Option D ($162) adds the refund to expenditure instead of deducting it.

Error 1: Purchases was overstated by $2 400 (which understated profit). Correcting this increases profit by $2 400. However, depreciation of 20% \times $2 400 = $480 was omitted, which decreases profit by $480. Net effect of Error 1 = +$2 400 - $480 = +$1 920.
Error 2: Sales returns should have a debit balance. Crediting the sales returns account by $650 instead of debiting it understated sales returns (and overstated net revenue / profit) by $1 300 ($650 \times 2). Correcting this decreases profit by $1 300.

Corrected profit = $38 400 + $1 920 - $1 300 = $39 020.

C [1 mark] - Correctly adjusted profit for capital expenditure, depreciation, and sales returns correction ($39 020).

Rent receivable transfer to Profit or Loss = Receipts during year ($5 850) + Rent advance at start ($450) + Rent accrued at end ($520) - Rent accrued at start ($300) - Rent advance at end ($600) = $5 920.

C [1 mark] - Accurate calculation of rent income for the year ($5 920).

Year ended 31 Dec 2022: Depreciation = 25% \times $32 000 = $8 000. Carrying value = $24 000.
Year ended 31 Dec 2023: Depreciation = 25% \times $24 000 = $6 000. Carrying value = $18 000.
Year ended 31 Dec 2024 (Disposal year): No depreciation charged.
Carrying value at date of disposal = $18 000.
Disposal proceeds = $16 200.
Loss on disposal = Carrying value - Proceeds = $18 000 - $16 200 = $1 800 loss.

A [1 mark] - Correct calculation of carrying value and resulting loss on disposal of $1 800.

Total profit available for appropriation = Profit for the year ($42 000) + Total interest on drawings ($400 + $600 = $1 000) = $43 000.
Less:
- Interest on capital: Maya (6% \times $50 000 = $3 000) + Leo (6% \times $30 000 = $1 800) = $4 800
- Partner salary: Leo = $9 000
Total appropriations = $4 800 + $9 000 = $13 800.
Residual profit = $43 000 - $13 800 = $29 200.
Maya's share of residual profit = \frac{3}{5} \times $29 200 = $17 520.

B [1 mark] - Correct application of partnership appropriation rules to find Maya's share ($17 520).

Income due for 2024 = 90 \times $95 = $8 550.
Using the Subscriptions Account:
Debit side: Opening arrears ($420) + Income & Expenditure ($8 550) + Closing advance ($480) = $9 450.
Credit side: Opening advance ($310) + Bank received ($8 450) + Closing arrears (x) = $8 760 + x.
Equating totals: $8 760 + x = $9 450 \implies x = $690.

B [1 mark] - Correct calculation of subscriptions in arrears at year-end ($690).

Credit purchases = Cost of sales + Closing inventory - Opening inventory
Credit purchases = $360 000 + $40 000 - $35 000 = $365 000.
Trade payables turnover (days) = \frac{\text{Trade payables}}{\text{Credit purchases}} \times 365 = \frac{42\,000}{365\,000} \times 365 = 42\text{ days}.

B [1 mark] - Correct calculation of credit purchases ($365 000) and trade payables turnover (42 days).

Integrity requires professional accountants to be straightforward, honest, and truthful in all professional relationships, and ensures they do not knowingly allow misleading or false information to be presented in financial reports.

B [1 mark] - Identifies Integrity as the fundamental ethical principle breached.

Total payments made from petty cash = $42 + $65 + $38 = $145. Net cash disbursed = Total payments ($145) - Cash refund received ($15) = $130. To restore the float to $250, the chief cashier must reimburse the net amount spent, which is $130.

B is correct [1 mark]. A includes the refund as an additional expense ($160). C ignores the $15 refund ($145). D is the remaining balance in petty cash ($250 - $130 = $120).

Correction entries: 1. Sales returns (debit account) overcast by $140: Debit Suspense $140, Credit Sales returns $140. 2. Insurance debited as $120 instead of $210 (under-debited by $90): Debit Insurance $90, Credit Suspense $90. Total journal entries to suspense: Debit $140, Credit $90. Net debit to Suspense is $50. Therefore, the suspense account required a net debit of $50 to close, meaning the opening balance was $50 Credit.

A is correct [1 mark]. B misidentifies the balance as a Debit. C calculates $140 + $90 = $230 Credit. D calculates $230 Debit.

Updated cash book balance = $1,840 (initial debit balance) - $150 (standing order omitted) + $85 (correction of duplicate payment) - $35 (bank charges) = $1,740 Debit.

C is correct [1 mark]. A subtracts the duplicate entry instead of adding it back ($1,840 - 150 - 85 - 35 = $1,570). B omits the $85 adjustment ($1,840 - 150 - 35 = $1,655). D adds all items ($1,840 + 150 + 85 + 35 = $2,110).

Insurance expense for the year = Opening prepayment ($360) + Payments during the year ($2,180) - Closing prepayment ($490) = $2,050.

B is correct [1 mark]. A is $2,180 - $360 - $490 = $1,330. C is $2,180 - $360 + $490 = $2,310. D is $2,180 + $360 + $490 = $3,030.

Total interest on capital = (5% \times $50,000) + (5% \times $30,000) = $2,500 + $1,500 = $4,000. Total appropriations = Interest on capital ($4,000) + Greg's salary ($6,000) = $10,000. Residual profit for division = $38,000 - $10,000 = $28,000. Farhan's share of profit = $28,000 \times \frac{3}{5} = $16,800.

D is correct [1 mark]. A calculates Farhan's share of total profit before appropriations ($38,000 \times \frac{3}{5} = $22,800). B gives Greg's share of residual profit ($28,000 \times \frac{2}{5} = $11,200). C adds Farhan's interest on capital to his share of residual profit ($16,800 + $2,500 = $19,300).

Subscriptions income = Subscriptions received ($7,800) + Advance b/d ($250) - Arrears b/d ($400) + Arrears c/d ($520) - Advance c/d ($310) = $7,860.

C is correct [1 mark]. A reverses opening and closing adjustments ($7,800 - 250 + 400 - 520 + 310 = $7,740). B ignores opening balances ($7,800 + 520 - 310 = $8,010). D is the cash received figure ($7,800).

Cost of sales = Revenue \times (1 - 0.25) = $180,000 \times 0.75 = $135,000. Average inventory = \frac{$16,000 + $20,000}{2} = $18,000. Rate of inventory turnover = \frac{\text{Cost of sales}}{\text{Average inventory}} = \frac{$135,000}{$18,000} = 7.5\text{ times}.

B is correct [1 mark]. A divides Revenue by Average inventory ($180,000 / $18,000 = 10.0 times). C divides Gross profit by Average inventory ($45,000 / $18,000 = 2.5 times). D calculates turnover using closing inventory ($135,000 / $20,000 = 6.75 times).

The historic cost concept requires non-current assets to be recorded at their total acquisition cost, which includes all costs incurred to bring the asset to its present location and working condition ready for intended use.

A is correct [1 mark]. B (Business entity) separates owner and business transactions. C (Materiality) relates to whether omitting/misstating an item affects decisions. D (Prudence) ensures profits/assets are not overstated.

Under the imprest system, the amount reimbursed to the petty cashier is equal to the total expenses paid during the period so that the petty cash fund is restored to the agreed imprest level of $250.

$$\text{Total expenditure} = \$68 + \$54 + \$37 + \$29 = \$188$$

Therefore, the reimbursement required is $188.

B [1 mark]: Correctly identifies that the reimbursement under the imprest system equals total expenditure ($188).
A is incorrect (calculates closing cash balance $250 - $188 = $62).
C is incorrect (unrelated figure).
D is incorrect (the full imprest limit).

Tariq's account should have been credited with $420, but was credited with $240. The account is under-credited by $420 - $240 = $180. To correct this, Tariq's account must be credited with $180, and the debit entry of $180 is made in the suspense account.

B [1 mark]: Debit Suspense account $180, Credit Tariq $180.
A is incorrect (reverses the debit and credit).
C is incorrect (uses the sum $420 + $240 with reversed sides).
D is incorrect (uses the sum $420 + $240).

Starting balance in cash book: -$1,340 (credit/overdrawn)
Less bank charges: -$65
Less direct debit: -$180
Add credit transfer: +$310

$$\text{Updated balance} = -1,340 - 65 - 180 + 310 = -1,275$$

This represents an overdrawn balance (credit balance) of $1,275.

A [1 mark]: Correctly applies adjustments to the overdrawn cash book balance to obtain $1,275 credit.
B is incorrect (wrong debit/credit direction).
C is incorrect (fails to deduct the direct debit).
D is incorrect (adds payments and subtracts receipts).

Rent receivable for the year:
Opening prepaid rent receivable (received in advance on 1 Jan): +$400
Rent received during the year: +$5,200
Closing accrued rent receivable (owed on 31 Dec): +$650

$$\text{Total income for the year} = \$400 + \$5,200 + \$650 = \$6,250$$

D [1 mark]: Correct calculation ($400 + $5,200 + $650 = $6,250).
A is incorrect (subtracts both adjustments: $5,200 - $400 - $650 = $4,150).
B is incorrect (subtracts closing accrual: $5,200 + $400 - $650 = $4,950).
C is incorrect (subtracts opening prepayment: $5,200 - $400 + $650 = $5,450).

Residual profit calculation:
Profit for the year: $48,000
Add Interest on drawings ($800 + $600): +$1,400
Less Interest on capital ($2,500 + $1,500): -$4,000
Less Partner salary: -$6,000

$$\text{Residual profit} = \$48,000 + \$1,400 - \$4,000 - \$6,000 = \$39,400$$

Anya's share of residual profit:
$$\text{Anya's share} = \$39,400 \times \frac{3}{5} = \$23,640$$

B [1 mark]: Residual profit $39,400 × 3/5 = $23,640.
A is incorrect (deducts interest on drawings instead of adding: $36,600 × 3/5 = $21,960).
C is incorrect (adds Anya's interest on capital to share).
D is incorrect (omits deduction of partner salary: $45,400 × 3/5 = $27,240).

Subscriptions transferred to Income and Expenditure Account:
$$\text{Income} = \text{Receipts} + \text{Opening Advance} - \text{Opening Arrears} + \text{Closing Arrears} - \text{Closing Advance}$$
$$\text{Income} = \$8,400 + \$220 - \$350 + \$480 - \$190 = \$8,560$$

C [1 mark]: Correct calculation ($8,400 + $220 - $350 + $480 - $190 = $8,560).
A is incorrect ($8,400 - $350 - $190 = $7,860).
B is incorrect (reverses all adjustments: $8,400 - $220 + $350 - $480 + $190 = $8,240).
D is incorrect (only adds adjustments without subtracting: $8,400 + $220 + $480 = $9,100).

The formula for trade payables turnover is:
$$\text{Trade payables turnover (days)} = \left( \frac{\text{Trade payables}}{\text{Credit purchases}} \right) \times 365 \text{ days}$$
$$\text{Trade payables turnover} = \left( \frac{\$25,000}{\$150,000} \right) \times 365 = 60.83 \approx 61 \text{ days}$$

C [1 mark]: Correct application of trade payables turnover formula ($25,000 / $150,000 × 365 = 61 days).
A is incorrect (uses revenue instead of purchases: $25,000 / $240,000 × 365 = 38 days).
B is incorrect (calculates trade receivables turnover: $36,000 / $240,000 × 365 = 55 days).
D is incorrect (uses trade receivables divided by purchases: $36,000 / $150,000 × 365 = 88 days).

The consistency concept states that accounting methods and practices should be applied consistently from one financial period to the next so that financial statements can be compared over time.

B [1 mark]: Correctly identifies the consistency concept.
A is incorrect (business entity separates the owner from the business).
C is incorrect (materiality deals with the significance of items in financial statements).
D is incorrect (realisation deals with recognising revenue when goods/services are delivered).

1. Correcting the office equipment error: Office stationery (an expense) was overstated by $800, so profit must be increased by $800. 2. Correcting the discount error: Discount allowed (an expense) was incorrectly debited by $150, and discount received (an income) of $150 was omitted. Correcting both increases profit by $150 + $150 = $300. Corrected profit = $34 500 + $800 + $300 = $35 600.

D (1 mark): Correct calculation of profit adjustment ($34 500 + $800 + $300 = $35 600).

Cost of sales = Revenue / (1 + Mark-up) = $180 000 / 1.25 = $144 000. Average inventory = ($16 000 + $20 000) / 2 = $18 000. Rate of inventory turnover = Cost of sales / Average inventory = $144 000 / $18 000 = 8.0 times.

C (1 mark): Cost of sales ($144 000) divided by average inventory ($18 000) = 8.0 times.

Subscriptions transferred to income and expenditure account = Subscriptions received ($8 400) + Subscriptions in advance at start ($320) + Subscriptions in arrears at end ($510) + Irrecoverable debt written off ($60) - Subscriptions in arrears at start ($450) - Subscriptions in advance at end ($280) = $8 560.

C (1 mark): Correctly preparing subscriptions account yielding $8 560.

(a)
Nadia — Petty Cash Book

| Receipts ($) | Date (2025) | Details | Voucher No. | Total ($) | Cleaning ($) | Stationery ($) | Travelling ($) | Ledger Accounts ($) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 35 | May 1 | Balance b/d | | | | | | |
| 215 | May 1 | Bank | | | | | | |
| | May 4 | Taxi fare | 41 | 28 | | | 28 | |
| | May 9 | Printer paper & pens | 42 | 34 | | 34 | | |
| | May 15 | Window cleaning | 43 | 45 | 45 | | | |
| | May 21 | Tariq | 44 | 50 | | | | 50 |
| | May 27 | Bus tickets | 45 | 16 | | | 16 | |
| | May 29 | Cleaning supplies | 46 | 22 | 22 | | | |
| | May 31 | Totals | | 195 | 67 | 34 | 44 | 50 |
| | May 31 | Balance c/d | | 55 | | | | |
| 250 | | | | 250 | | | | |
| 55 | June 1 | Balance b/d | | | | | | |
| 195 | June 1 | Bank | | | | | | |

(b)
Advantage of the imprest system (any one):
- It limits the amount of cash held on premises to a predetermined fixed maximum, reducing the risk of loss or theft.
- It helps monitor and control petty expenditure because the chief cashier checks and verifies all vouchers before reimbursing the spent amount.
- It relieves the main cashier and main cash book from recording numerous low-value transactions.

(c)
Differences between trade discount and cash discount:
1. Purpose: Trade discount is given to encourage bulk purchasing or trade customer loyalty, whereas cash discount is given to encourage prompt/early settlement of credit accounts.
2. Accounting record: Trade discount is deducted on the invoice and does not appear in double entry ledger accounts, whereas cash discount is recorded in the cash book and discount accounts in the general ledger.

(a) [7 marks total]
- 1 mark for May 1 Balance b/d ($35) and Bank ($215)
- 1 mark for May 4 and May 27 travelling entries ($28 and $16)
- 1 mark for May 9 stationery entry ($34)
- 1 mark for May 15 and May 29 cleaning entries ($45 and $22)
- 1 mark for May 21 ledger account entry ($50)
- 1 mark for column totals ($195, $67, $34, $44, $50)
- 1 mark for May 31 Balance c/d ($55), June 1 Balance b/d ($55) and June 1 Bank ($195)

(b) [2 marks total]
- 1 mark for identifying a valid advantage (e.g., control over cash / fraud reduction / relieves main cashier)
- 1 mark for developing/explaining how the mechanism achieves this (e.g., reimbursement equals exact amount spent against verified vouchers).

(c) [2 marks total]
- 1 mark for each valid point of distinction (e.g. purpose: bulk buying vs prompt payment; ledger treatment: not recorded in accounts vs recorded in discount accounts). Max 2.

### Naomi
### Bank Reconciliation Statement at 31 May 2025

$$\begin{array}{lrr}
\hline
& \$ & \$ \\
\hline
\text{Balance as per updated cash book} & & 3\,840 \\
\text{Add: Unpresented cheques} & 1\,290 & \\
\text{Add: Bank error (dividend incorrectly credited)} & 420 & 1\,710 \\
\hline
& & 5\,550 \\
\text{Less: Uncredited deposits} & & (2\,150) \\
\hline
\mathbf{\text{Balance as per bank statement}} & & \mathbf{3\,400} \\
\hline
\end{array}$$

Alternative layout starting with bank statement balance:

$$\begin{array}{lrr}
\hline
& \$ & \$ \\
\hline
\text{Balance as per bank statement} & & 3\,400 \\
\text{Add: Uncredited deposits} & & 2\,150 \\
\hline
& & 5\,550 \\
\text{Less: Unpresented cheques} & (1\,290) & \\
\text{Less: Bank error (dividend incorrectly credited)} & (420) & (1\,710) \\
\hline
\mathbf{\text{Balance as per updated cash book}} & & \mathbf{3\,840} \\
\hline
\end{array}$$

[1] for unpresented cheques ($1 290) added to cash book balance (or deducted from bank statement balance)
[1] for bank error ($420) correctly added to cash book balance (or deducted from bank statement balance)
[1] for uncredited deposits ($2 150) deducted from cash book balance (or added to bank statement balance)
[1] for correct final balance as per bank statement ($3 400) with appropriate label (OF applies if arithmetic is correct based on own figures)

Advantages of using a business debit card:
- Reduces the risk of theft or loss associated with keeping physical cash on the business premises.
- Transactions are recorded electronically immediately, simplifying bank reconciliation and reducing bookkeeping errors.
- Eliminates the time required by the cashier to count cash, obtain vouchers, and restore the cash imprest.
- Can be used for online purchases where cash is not accepted.

Disadvantages of using a business debit card:
- The bank may charge card fees or transaction charges, increasing operating costs.
- Greater risk of unauthorised employee spending if card details or PINs are shared.
- Staff may fail to collect and submit receipts/tax invoices, making it difficult to record the correct split of expenses/tax.
- Some very small vendors may not accept card payments or may enforce minimum transaction amounts.

Recommendation:
Tariq should replace the petty cash system with a business debit card if he can implement strict controls over card access and receipt submission, as this significantly improves security and administrative efficiency.

Points in favour of using a business debit card (Max 3 marks):
- Less risk of physical theft / loss of cash on the premises (1)
- Electronic record produced automatically / easy integration with accounting software / bank statement (1)
- Saves administrative time in counting cash / managing vouchers / restoring the imprest (1)
- Enables online purchasing / useful where cash is not accepted (1)

Points against using a business debit card (Max 3 marks):
- Possible bank fees / charges for card transactions (1)
- Risk of uncontrolled or unauthorised spending by staff holding the card (1)
- Difficulty in obtaining and matching paper receipts / tax invoices for every small card transaction (1)
- Some small local suppliers / transactions might not accept card payments (1)

Note: Award maximum 4 marks for discussion of advantages and disadvantages (max 3 for either side).

Recommendation (1 mark):
- A clear recommendation supported by the candidate's arguments (1)

Calculation of Accumulated Fund at 1 January 2025:

Total Assets:
Clubhouse and equipment: $46 800
Inventory of refreshments: $1 150
Bank balance: $3 420
Subscriptions in arrears: $480
Total Assets = $46 800 + $1 150 + $3 420 + $480 = $51 850

Total Liabilities:
Subscriptions in advance: $310
Trade payables for refreshments: $860
Accrued general expenses: $240
Total Liabilities = $310 + $860 + $240 = $1 410

Accumulated Fund = Total Assets - Total Liabilities
Accumulated Fund = $51 850 - $1 410 = $50 440

[1 mark] for correctly identifying and summing all assets ($51 850)
[1 mark] for correctly identifying and summing all liabilities ($1 410)
[0.5 mark] for correct calculation of accumulated fund ($50 440) (allow OF if only one error made in classification)

Calculation of Accumulated Fund at 1 May 2024:

Total Assets:
Sports equipment: $18 700
Subscriptions in arrears: $620
Prepaid insurance: $380
Bar inventory: $940
Total Assets = $18 700 + $620 + $380 + $940 = $20 640

Total Liabilities:
Bank overdraft: $1 650
Subscriptions in advance: $450
Trade payables for bar supplies: $1 260
Accrued rent: $550
Total Liabilities = $1 650 + $450 + $1 260 + $550 = $3 910

Accumulated Fund = Total Assets - Total Liabilities
Accumulated Fund = $20 640 - $3 910 = $16 730

[1 mark] for correctly identifying and summing all assets ($20 640)
[1 mark] for correctly identifying and summing all liabilities ($3 910)
[0.5 mark] for correct calculation of accumulated fund ($16 730) (allow OF if only one arithmetic or classification error)

### Oakridge Badminton Club
#### Subscriptions Account

| Date | Details | Amount ($) | Date | Details | Amount ($) |
|---|---|---|---|---|---|
| 2025 | | | 2025 | | |
| Jan 1 | Balance b/d | 420 | Jan 1 | Balance b/d | 280 |
| Dec 31 | Income and expenditure | 9 670 | Dec 31 | Bank | 9 650 |
| Dec 31 | Balance c/d | 350 | Dec 31 | Balance c/d | 510 |
| | | 10 440 | | | 10 440 |
| 2026 | | | 2026 | | |
| Jan 1 | Balance b/d | 510 | Jan 1 | Balance b/d | 350 |

Calculation of Income and Expenditure figure:
$$\text{Subscriptions transferred} = \$9\,650 + \$280 - \$420 - \$350 + \$510 = \$9\,670$$

- Jan 1 (2025) Opening balances: Balance b/d $420 (Dr) and Balance b/d $280 (Cr) (1)
- Dec 31 Bank $9 650 (Cr) (1)
- Dec 31 Income and expenditure account $9 670 [OF] (Dr) (1)
- Dec 31 Balance c/d $350 (Dr) (1)
- Dec 31 Balance c/d $510 (Cr) (1)
- Jan 1 (2026) Closing balances brought down: Balance b/d $510 (Dr) and Balance b/d $350 (Cr) (1)

### Highfield Cricket Club
Snack Bar Income Statement for the year ended 31 December 2026

$$\begin{array}{lrr}
\hline
& \$ & \$ \\
\hline
\text{Revenue} & & 14\,600 \\
\text{Cost of sales:} & & \\
\quad \text{Opening inventory} & 840 & \\
\quad \text{Add Purchases} & 7\,350 & \\
\hline
& 8\,190 & \\
\quad \text{Less Closing inventory} & (1\,120) & (7\,070) \\
\hline
\textbf{Gross profit} & & 7\,530 \\
\text{Expenses:} & & \\
\quad \text{Snack bar wages } (2\,800 + 350) & & (3\,150) \\
\hline
\textbf{Profit from snack bar} & & \mathbf{4\,380} \\
\hline
\end{array}$$

- (1) for Revenue ($14,600)
- **(1)** for Cost of sales ($7,070) showing correct opening inventory, purchases, and closing inventory deduction
- (1) for Snack bar wages ($3,150) including accrual ($2,800 + $350)
- **(1 OF)** for Profit from snack bar ($4,380) [dependent on gross profit and wages calculation, no alien items]

Highfield Sports Club
Income and Expenditure Account for the year ended 31 December 2025

$$\begin{array}{lrr}
\textbf{Income} & \$ & \$ \\
\text{Subscriptions} & & 14\,200 \\
\text{Profit from cafe} & & 3\,150 \\
\text{Competition entry fees} & & 1\,800 \\
\hline
\text{Total income} & & 19\,150 \\
\\
\textbf{Expenditure} & & \\
\text{Rent of sports ground } (4\,500 + 300) & 4\,800 & \\
\text{General administrative expenses } (2\,450 - 250) & 2\,200 & \\
\text{Competition prizes} & 950 & \\
\text{Depreciation of sports equipment} & 1\,600 & \\
\hline
\text{Total expenditure} & & (9\,550) \\
\hline
\textbf{Surplus for the year} & & \mathbf{9\,600} \\
\hline\hline
\end{array}$$

*(Note: Net competition profit of $$850\$ (\$1\,800 - 950\$) shown under income is also acceptable, giving total income of $$18\,200$ and total expenditure of $$8\,600\$, resulting in the same surplus of $$9\,600$.)*

1 mark for Subscriptions ($14 200) and Cafe profit ($3 150).
1 mark for Competition fees ($1 800) and Competition prizes ($950) [or net competition surplus of $850].
1 mark for Rent of sports ground ($4 800).
1 mark for General administrative expenses ($2 200) and Depreciation of sports equipment ($1 600).
1 mark for Surplus for the year ($9 600) (O/F) with correct label (Surplus for the year / Surplus of income over expenditure).

Total: 5 marks.

Mona and Tariq
Advertising account

DateDetails$DateDetails$2024 Jan 1Balance b/d3402024 Dec 31Statement of profit or loss3 8702024 Mar 18Bank1 4602024 Oct 12Bank1 7802024 Dec 31Balance c/d290Total3 870Total3 8702025 Jan 1Balance b/d290

Advertising account:
[1] for opening balance on Dr ($340) with correct date (2024 Jan 1)
[1] for both bank payments on Dr ($1 460 and $1 780) with correct dates (or single entry of $3 240)
[1] for transfer to Statement of profit or loss on Cr ($3 870) with correct date (2024 Dec 31)
[1] for closing balance c/d on Dr ($290) and balance b/d on Cr ($290) with correct date (2025 Jan 1)

Notes:
- Accept 'Income statement' or 'Profit and loss' for 'Statement of profit or loss'.
- Do not award marks for balances if dates or sides are reversed.

Arguments for obtaining a bank loan:
- The partners do not need to tie up their own personal savings or risk additional private funds in the business.
- Loan interest is an allowable expense deducted in the statement of profit or loss, reducing the profit for the year and lowering the partners' tax liabilities.
- Unlike additional capital contributions, a bank loan does not affect ownership proportions, profit-sharing ratios, or require renegotiation of the partnership agreement.
- Once the loan principal and interest are fully repaid, the partnership retains full ownership of the vehicles without ongoing obligations.

Arguments against obtaining a bank loan:
- Interest payments are mandatory and fixed, which must be paid regardless of whether the partnership earns a profit or experiences cash flow difficulties.
- The bank may require collateral or security over business assets, creating risk of asset repossession if repayments are missed.
- The principal amount must be repaid by a fixed future date, which puts pressure on working capital and liquidity compared to capital which is permanent.
- Increasing long-term liabilities increases financial gearing and risk, making it harder to obtain credit from suppliers or banks in the future.

Recommendation:
- The partners should choose to introduce additional capital if they have sufficient personal funds, as this avoids fixed interest expenses and repayment pressure, protecting business liquidity during the initial expansion phase. (OR: The partners should obtain the bank loan if the business has strong, predictable cash flows to cover the interest and capital repayments, allowing the partners to retain their personal funds for private use or emergencies.)

Points for obtaining a bank loan (Max 3 marks):
- Partners do not need to use/risk personal funds (1)
- Loan interest is an allowable business expense / reduces tax liability (1)
- Does not alter profit-sharing ratios / capital balances (1)
- Once repaid, no ongoing liability remains (1)

Points against obtaining a bank loan (Max 3 marks):
- Interest must be paid regardless of profit levels (1)
- Loan principal must be repaid on maturity / drains future cash flow (1)
- Bank may require security/collateral over assets (1)
- Increases business liabilities / financial risk / gearing (1)

(Max 4 marks total for arguments/evaluation points)

Recommendation (1 mark):
- 1 mark for a clear, justified recommendation consistent with the candidate's arguments.

### Tariq and Nadia
#### Current Accounts

$$\begin{array}{|c|l|r|r||c|l|r|r|}
\hline
\textbf{Date} & \textbf{Details} & \textbf{Tariq (\$)} & \textbf{Nadia (\$)} & \textbf{Date} & \textbf{Details} & \textbf{Tariq (\$)} & \textbf{Nadia (\$)} \\
\hline
\text{2025} & & & & \text{2025} & & & \\
\text{Jan 1} & \text{Balance b/d} & - & 850 & \text{Jan 1} & \text{Balance b/d} & 3\,400 & - \\
\text{Dec 31} & \text{Drawings} & 14\,000 & 11\,500 & \text{Dec 31} & \text{Interest on capital} & 3\,000 & 2\,000 \\
& \text{Interest on drawings} & 450 & 320 & & \text{Partnership salary} & - & 6\,000 \\
& \text{Balance c/d} & 10\,550 & 7\,730 & & \text{Profit share / Appropriation} & 18\,600 & 12\,400 \\
\hline
& & \mathbf{25\,000} & \mathbf{20\,400} & & & \mathbf{25\,000} & \mathbf{20\,400} \\
\hline
\hline
& & & & \text{2026} & & & \\
& & & & \text{Jan 1} & \text{Balance b/d} & 10\,550 & 7\,730 \\
\hline
\end{array}$$

Workings:
- Interest on capital:
- Tariq: \(5\% \times \$60\,000 = \$3\,000\)
- Nadia: \(5\% \times \$40\,000 = \$2\,000\)

Tariq and Nadia — Current Accounts (7 marks)

- (1) Opening balances: Tariq credit $3 400 AND Nadia debit $850 (both required for 1 mark).
- (1) Interest on capital: Credit side — Tariq $3 000 AND Nadia $2 000 (both required for 1 mark).
- (1) Partnership salary: Credit side — Nadia $6 000.
- **(1)** Profit share (or Profit and loss appropriation): Credit side — Tariq $18 600 AND Nadia $12 400 (both required for 1 mark).
- **(1)** Drawings: Debit side — Tariq $14 000 AND Nadia $11 500 (both required for 1 mark).
- **(1)** Interest on drawings: Debit side — Tariq $450 AND Nadia $320 (both required for 1 mark).
- **(1) OF** Closing balances c/d and b/d: Tariq credit balance b/d $10 550 AND Nadia credit balance b/d $7 730 on 1 January 2026.

Notes:
- Allow Own Figure (OF) for closing balances only if there are no extraneous items and arithmetic is correct.
- Award full marks if separate T-accounts are prepared correctly for each partner.

### Tara and Luke
### Statement of Financial Position (Extract) at 31 December 2025

$$\begin{array}{|l|r|r|r|}
\hline
\textbf{Capital accounts} & \$ & \$ & \$ \\
\hline
\text{Tara} & 60\,000 & & \\
\text{Luke} & 40\,000 & & 100\,000 \\
\hline
\textbf{Current accounts} & & & \\
\hline
\text{Tara} & 5\,800 & & \\
\text{Luke} & (1\,400) & & 4\,400 \\
\hline
\textbf{Total} & & & \mathbf{104\,400} \\
\hline
\end{array}$$

---

### Workings / Explanations:
1. Capital accounts: $$60\,000 + \$40\,000 = \$100\,000\$.
2. **Current accounts:** $$5\,800 \text{ (credit)} - $1\,400 \text{ (debit)} = $4\,400$.
3. **Total:** $$100\,000 + $4\,400 = $104\,400$.

Award marks as follows:
- (1 mark) for correctly listing both Capital account balances (Tara $$60\,000\$, Luke $$40\,000$) and extending subtotal $$100\,000\$.
- (1 mark) for showing Tara's current account balance of $$5\,800$.
- **(1 mark)** for showing Luke's current account balance as a negative / deduction of $($1\,400)$.
- **(1 mark)** for the correct total of $$104\,400$ (or own figure [OF] if arithmetically consistent).

Note: Accept horizontal presentation or full columnar layouts as long as debit balance of Luke is clearly deducted.

(a) Error 1:
Correct depreciation = 20% of $14 000 = $2 800.
Depreciation recorded = $1 400.
Understated depreciation = $2 800 - $1 400 = $1 400.
Journal entry:
Debit: Income statement / Depreciation of office equipment $1 400
Credit: Provision for depreciation of office equipment $1 400

Error 2:
Motor vehicle repairs were incorrectly capitalised to the non-current asset account.
Journal entry:
Debit: Motor vehicle repairs $620
Credit: Motor vehicles $620

(b) (i) Error of principle
(ii) Matching / accruals concept (or capital vs revenue expenditure / historic cost concept)
(iii) No (a single-sided entry occurred, causing an imbalance)

(a) Error 1:
- Debit: Income statement / Depreciation of office equipment $1 400 (1)
- Credit: Provision for depreciation of office equipment $1 400 (1)

Error 2:
- Debit: Motor vehicle repairs / Motor expenses $620 (1)
- Credit: Motor vehicles $620 (1)

(b) (i) Error of principle (1)
(ii) Matching / accruals (1) (Accept: Capital and revenue expenditure)
(iii) No / It will not balance (0.5)

(a) Error 1:
The debit to depreciation/income statement was correct, but the credit was wrongly placed in the asset account rather than the accumulated depreciation account.
Debit: Fixtures and fittings $1 800
Credit: Provision for depreciation of fixtures and fittings $1 800

Error 2:
Capital expenditure was wrongly treated as revenue expenditure (purchases).
Debit: Office machinery $3 200
Credit: Purchases $3 200

(b) Calculation of revised profit for the year:
Draft profit for the year: $28 400
Add: Overstated purchases (Error 2): $3 200
Revised profit for the year: $28 400 + $3 200 = $31 600
(Note: Error 1 does not affect the profit for the year as the expense was already charged).

(c) Matching / accruals concept

(a) Error 1:
- Debit: Fixtures and fittings $1 800 (1)
- Credit: Provision for depreciation of fixtures and fittings $1 800 (1)

Error 2:
- Debit: Office machinery $3 200 (1)
- Credit: Purchases $3 200 (1)

(b) Draft profit $28 400 + $3 200 (1) = $31 600 (0.5 OF)

(c) Matching / accruals (1) (Accept: Prudence)

Statement of Corrected Profit for the year ended 31 December 2024:

Draft profit for the year: $28 650

Add:
Error 4: Drawings incorrectly debited to general expenses: +$500

Less:
Error 1: Repairs to office equipment omitted from expenses: -$450
Error 2: Correction of discount allowed credited to discount received ($210 + $210): -$420
Error 3: Overstatement of closing inventory: -$800

Corrected profit for the year: $28 650 + $500 - $450 - $420 - $800 = $27 480.

Award [1] mark for each correct adjustment and final total:
- Error 1: Deduct $450 (1)
- Error 2: Deduct $420 (1)
- Error 3: Deduct $800 (1)
- Error 4: Add $500 AND Corrected profit for the year $27 480 (1 OF)

Note: If an error is applied in the wrong direction (e.g. added instead of deducted), award 0 for that line.

An error of principle occurs when an entry is made to an incorrect class/type of account (e.g. debiting an expense account instead of a non-current asset account).

Error of principle (1)

The materiality concept states that low-value items (immaterial amounts) do not need to be recorded strictly as non-current assets and depreciated over time, but can be treated immediately as revenue expenses.

Materiality (1)

The matching (accruals) concept requires that the revenues and expenses of a particular accounting period are matched together and recorded in the period to which they relate, regardless of when cash is paid or received.

Matching (or Accruals / Matching or accruals) (1)

(a) (i) Current ratio:
$$\text{Current assets} = \$24\,000 + \$29\,590 + \$6\,410 = \$60\,000$$
$$\text{Current liabilities} = \$18\,411 + \$1\,589 = \$20\,000$$
$$\text{Current ratio} = \frac{\text{Current assets}}{\text{Current liabilities}} = \frac{\$60\,000}{\$20\,000} = 3 : 1 \text{ (or } 3.00 : 1)$$

(ii) Acid test ratio:
$$\text{Acid test ratio} = \frac{\text{Current assets} - \text{Inventory}}{\text{Current liabilities}} = \frac{\$60\,000 - \$24\,000}{\$20\,000} = \frac{\$36\,000}{\$20\,000} = 1.8 : 1 \text{ (or } 1.80 : 1)$$

(b) Disadvantages of slow collection from trade receivables (any two):
1. Cash flow shortage / difficulty in paying trade payables and expenses on time.
2. Increased risk of irrecoverable (bad) debts.
3. Inability to take advantage of cash discounts from suppliers.
4. Increased administrative costs and time spent pursuing overdue debts.

(c) (i) Accounting concept:
- Prudence (or Matching / Accruals)

(ii) Reason for maintaining allowance:
- To ensure that current assets (trade receivables) and profit for the year are not overstated / to show a true and fair view of the net realisable value of trade receivables.

(d) Advice on selling the unused motor vehicle:
- Points in favour: Generates an immediate cash inflow to strengthen bank balance/liquidity; eliminates future depreciation and ongoing holding expenses (road tax, insurance, storage, maintenance).
- Points against: A one-off cash receipt that does not solve underlying credit control issues; might be sold at a loss on disposal; replacement costs will be high if business needs expand in the future.
- Recommendation: A reasoned conclusion advising whether or not to sell based on these factors.

(a) (i) Current ratio:
$$\frac{\$60\,000}{\$20\,000} \text{ (1)} = 3 : 1 \text{ or } 3.00 : 1 \text{ (1)}$$

(ii) Acid test ratio:
$$\frac{\$36\,000}{\$20\,000} \text{ (1)} = 1.8 : 1 \text{ or } 1.80 : 1 \text{ (1)}$$
[Note: Award full 2 marks for correct final ratio even if working is not shown. Accept OF rule if current assets/liabilities are derived consistently.]

(b) Disadvantages (1 mark per valid point, max 2 marks):
- Cash flow problems / shortage of liquid funds (1)
- Difficulties paying trade payables / suppliers on time (1)
- Increased risk of debts becoming irrecoverable / bad debts (1)
- Cost / time involved in chasing overdue accounts (1)
- Missed cash discount opportunities from suppliers (1)

(c) (i) Prudence / Matching / Accruals (1)

(ii) Any 1 point for 1 mark:
- To ensure trade receivables / current assets are not overstated (1)
- To ensure profit for the year is not overstated (1)
- To present a more realistic / true and fair value of receivables (1)

(d) Evaluation and advice (Max 3 marks):
- Positive point: Provides immediate cash inflow / improves liquidity / saves ongoing running/insurance/depreciation costs (1)
- Negative point: One-off injection / does not fix operating cash flow / potential loss on disposal / high replacement cost if needed later (1)
- Clear advice/decision supported by analysis (1)

The acid test (liquid) ratio assesses a business's ability to settle its short-term liabilities using its most liquid liquid funds. Inventory is excluded because it is the least liquid of all current assets; it takes time to sell goods, there is no guarantee a buyer will be found immediately, and forced quick sales may require price reductions or result in losses.

Award [1] mark for identifying that inventory is the least liquid current asset / cannot be converted into cash immediately; award [1] mark for explaining that goods must first be sold to customers / may not be sold quickly / may require discounting.

1. Applying the prudence concept: Trade receivables are shown at a realistic estimated recoverable amount in the statement of financial position, ensuring that current assets and profit for the year are not overstated.
2. Applying the matching / accruals concept: The estimated loss arising from non-payment is charged as an expense against the revenue of the accounting period in which the credit sales took place, rather than waiting until the debt is confirmed as irrecoverable in a future year.

Award [1] mark for stating prudence and explaining that trade receivables / profit are not overstated; award [1] mark for stating matching / accruals and explaining that the expected loss is matched to the revenue generated in that period.

Advantage:
- Offering longer credit terms can make the business more attractive than competitors, leading to an increase in credit sales and higher market share.

Disadvantage:
- The trade receivables turnover in days will increase, tying up liquid funds and potentially causing cash flow shortages to pay day-to-day liabilities / suppliers; there is also an increased risk of bad debts (irrecoverable debts).

Award [1] mark for a valid advantage (e.g. higher sales volume, customer retention, competitive edge); award [1] mark for a valid disadvantage (e.g. cash tied up in working capital, deterioration in liquidity/acid test ratio, higher risk of irrecoverable debts, unable to pay trade payables on time).

### Points for selling the vehicle and hiring a courier:
- Immediate cash injection of $9 500 will significantly reduce the bank overdraft and improve both the working capital (current ratio) and liquid (acid test) ratio.
- Reduces regular fixed operating expenses such as motor vehicle insurance, routine servicing, maintenance, and annual depreciation.
- Courier costs are flexible and only incurred when deliveries are actually requested (variable cost).

### Points against selling the vehicle and hiring a courier:
- Courier charges may be expensive per unit delivery in the long term, reducing operating profit margins.
- Tariq loses direct control over delivery schedules and the standard of customer service, which could lead to delayed deliveries and customer dissatisfaction.
- If the carrying amount (net book value) of the delivery vehicle is higher than $9 500, the business will record a loss on disposal in the statement of profit or loss.

### Recommendation:
Tariq should proceed with selling the vehicle if delivery demand is irregular and the $9 500 cash proceeds are urgently required to clear the high-interest bank overdraft. However, if customer deliveries are frequent and reliability is critical to maintaining sales, he should look at alternative liquidity measures such as improving trade receivables collection.

Points for selling the vehicle (Max 2 marks):
- Cash inflow of $9 500 reduces bank overdraft / improves acid test (liquid) ratio / working capital (1)
- Eliminates vehicle running costs (insurance, repairs, fuel, depreciation) (1)
- Courier costs vary directly with sales / deliveries made (1)

Points against selling the vehicle (Max 2 marks):
- Courier service fees may be costly per delivery / lower profit margins over time (1)
- Loss of control over delivery times / risk of poor customer service / damaged goods (1)
- Potential loss on disposal if book value exceeds $9 500 (1)

(Max 4 marks total for points for and against)

Recommendation / Decision (1 mark):
- 1 mark for a clear, justified decision based on the candidate's arguments.