2 Jabir owns an electrical wholesale business. The following balances appeared in his books on 30 September 2021. $ Inventory 8 000 Purchases 109 000 Trade payables 11 600 Revenue 160 000 Trade receivables 22 600 Operating expenses 35 200 The inventory on 1 October 2020 was $11 000. All sales and purchases were on a credit basis. REQUIRED (a) Calculate the gross profit and profit for the year. … … … … … … … … … … … … [2] (b) (i) Calculate the gross margin. … … … [2] (ii) Advise Jabir on two actions he could take to improve his gross margin. 1 … … 2 … … [2] (c) Calculate the trade receivables turnover. Round up your answer to the next whole day. … … … [2] Jabir wants to increase his credit sales and is considering allowing his credit customers an extra 14 days above his current trade receivables turnover. REQUIRED (d) Advise Jabir whether he should allow his credit customers an extra 14 days above his current trade receivables turnover. Justify your answer. … … … … … … … … … … [5] (e) Calculate the trade payables turnover. Round up your answer to the next whole day. … … … [2] Jabir’s credit suppliers are prepared to double the rate of his trade discount provided he increases his current monthly purchases by 20%. REQUIRED (f) Advise Jabir whether he should increase his current monthly purchases by 20% to earn the additional trade discount. Justify your answer. … … … … … … … … … … [5] [Total: 20]

2(a) $ $ Revenue 160 000 Cost of sales Opening inventory 11 000 Purchases 109 000 120 000 Closing inventory 8 000 112 000 Gross profit 48 000 (1) Operating expenses 35 200 Profit for the year 12 800 (1)OF Accept other forms of presentation 2 2(b)(i) Gross margin × 48000 100 160000 1 (1) OF whole formula = 30% (1) OF 2 2(b)(ii) Increase selling price / reduce trade discount to customers (1) Obtain cheaper supplies / obtain higher trade discount from suppliers (1) Purchase lower quality goods (1) Change proportion of different types of goods sold/sell more goods with higher profit margin(1) Accept other valid points Max 2 2 2(c) Trade receivables turnover × 22600 365 160000 1 (1) whole formula = 52 days (1) 2 2(d) Advantages Sales may increase (1) May attract more customers (1) Profit may increase (1) May improve relationship with customers (1) Disadvantages Delays the receipt of money (1) Additional working capital may be required (1) May be an increase in irrecoverable debts (1) May be an increase in administration costs (1) Accept other valid points Max (4) Recommendation (1) 5 2(e) Trade payables turnover × 11600 365 109000 1 (1) whole formula = 39 days (1) 2 2(f) Reduction in cost of sales (1) If goods can be sold the gross profit will increase (1) May reduce selling price to increase sales revenue (1) Could increase range of products to sell (1) Accept other valid points Consider if the additional goods can be sold (1) Increase in quantity / value of inventory (1) Increased cost of storage (1) Additional working capital may be required (1) Increase in amount payable to suppliers each month (1) Accept other valid points Max (4) Recommendation (1) 5 To calculate gross profit, you must correctly determine the cost of sales by adding opening inventory and purchases, then subtracting closing inventory, and finally deducting this from revenue. To find the profit for the year, you must subtract operating expenses from the calculated gross profit.

3 The trial balance of HV Limited at 31 March 2021 was as follows. HV Limited Trial Balance at 31 March 2021 Debit Credit $ $ Revenue Inventory at 1 April 2020 Purchases Rent and insurance Wages Operating expenses Fittings at cost Provision for depreciation of fittings Trade receivables Bank Trade payables 4% Debentures (repayable 1 April 2031) Ordinary share capital Retained earnings Dividend paid on ordinary shares 5 820 64 900 9 280 24 750 8 500 200 000 12 500 13 765 5 600 145 000 72 000 6 615 30 000 70 000 21 500 345 115 345 115 Additional information 1 Inventory at 31 March 2021 was valued at $6090. 2 Depreciation on fittings is to be charged at 20% per annum using the reducing balance method. 3 Rent includes a payment of $1800 for the 3 months from 1 March 2021 to 31 May 2021. 4 Accrued wages at 31 March 2021 were $2250. 5 No debenture interest has been paid for the year ended 31 March 2021. 6 No dividends were outstanding at 31 March 2021. 7 $2000 is to be transferred to a general reserve on 31 March 2021. REQUIRED (a) Prepare the income statement for HV Limited for the year ended 31 March 2021. HV Limited Income Statement for the year ended 31 March 2021 $ $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] (b) Prepare the statement of changes in equity for HV Limited for the year ended 31 March 2021. HV Limited Statement of Changes in Equity for the year ended 31 March 2021 Details Ordinary Share capital $ General reserve $ Retained earnings $ Total $ On 1 April 2020 … … … … … … … … … … … … … … … … … … … On 31 March 2021 … … … … [5] (c) Calculate the return on capital employed for the year ended 31 March 2021. The answer should be correct to two decimal places. … … … [3] (d) State two differences between ordinary shares and preference shares. 1 … … … 2 … … … [4] [Total: 20]

3(a) HV Limited Income Statement for the year ended 31 March 2021 $ $ Revenue 145 000 Cost of sales Opening inventory 5 820 Purchases 64 900 70 720 Less Closing inventory 6 090 64 630 (1) Gross profit 80 370 (1)OF Less Expenses Rent and insurance (9 280 (1) – (2/3 × 1 800) (1)) 8 080 Wages (24 750 + 2 250) 27 000 (1) Operating expenses 8 500 Depreciation of Fittings 25 600 (1) 69 180 (20% × (200 000 – 72 000)) Profit from operations 11 190 Debenture interest 1 200 (1) Profit for the year 9 990 (1)OF 8 3(b) HV Limited Statement of Changes in Equity for the year ended 31 March 2021 Details Ordinary share capital General Reserve Retained earnings Total $ $ $ $ On 1 April 2020 Profit for the year Dividend paid Transfer to general reserve 70 000 2 000 21 500 9 990 (5 600) (2 000) 91 500 9 990 (5 600) (1) (1)OF (1) (1) On 31 March 2021 70 000 2 000 23 890 95 890 (1)OF 5 3(c) Return on Capital employed = ( ) ( )( ) ( ) 11190 100 8.89% 95 890 30 000 1 × = + 1 OF 1 OF OF 1 OF 3 3(d) There is a fixed rate of dividend on preference shares (1): the dividend on ordinary shares may vary (1) There are higher risks and rewards for ordinary shares (1) than there are for preference shares (1) Ordinary shares normally carry voting rights (1): preference shares do not (1) Ordinary shares are part of the equity of the company (1). Redeemable preference shares are a non-current liability and non-redeemable preference shares are part of the equity (1). If the company is wound up, preference shares are repaid before ordinary shares(1)/ordinary shares are repaid after preference shares (1) Preference shares receive the dividend first (1) ordinary shares receive the dividend after the preference shares (1) Accept other valid points Must be two contrasting statements Max (4) 4 To earn marks, you must correctly calculate and present the cost of sales, including opening and closing inventory. You also need to correctly calculate and deduct all expenses, including adjustments for rent prepayment, accrued wages, and depreciation using the reducing balance method, as well as debenture interest, to arrive at the profit for the year.

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 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. REQUIRED (b) (i) Compare Chaaya’s trade receivables turnover with Sara’s trade receivables turnover. … … … … … … [3] (ii) State two problems with the inter-firm comparison in 4(b)(i). 1 … … 2 … … [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. … … … … … … … … … … [5] (d) (i) State two reasons why Chaaya’s employees would be interested in her financial statements. 1 … … 2 … … [2] (ii) State two types of users of Chaaya’s financial statements, other than Chaaya and her employees. 1 … 2 … [2] [Total: 20]

3(a) The suspense account balance is entered on the trial balance (1) This means that there are equal debits and credits on the trial balance/the trial balance will balance (1) 2 3(b) Rachel Journal Error number Details Debit $ Credit $ 1 Premises repairs Premises 220 (1) 220 (1) 2 Motor vehicles Neil’s Wheels 3400 (1) 3400 (1) 3 Sales Purchases 100 (1) 100 (1) 4 Sales returns Suspense 19 (1) 19 (1) 5 Suspense Bank interest received Bank charges 50 (1) 25 (1) 25 (1) 11 3(c)(i) Error 3 (1). 1 3(c)(ii) Error 2 (1). 1 To earn marks for the ratios, you must show the correct formula and calculation for gross margin, trade receivables turnover (rounded up to the next whole day), and the current ratio (rounded to two decimal places). For comparing trade receivables turnover, you need to compare Chaaya's calculated turnover with Sara's and explain what the difference means for Chaaya's business, such as slower collection of debts or potential liquidity issues.

5 Omer is a trader. He provided the following information. $ For the year ended 30 April 2021 Credit sales 191 000 Credit purchases 120 000 Gross profit 80 220 Commission receivable 20 280 Expenses 29 830 At 30 April 2021 Trade receivables 12 400 Trade payables 7 000 REQUIRED (a) Calculate the following ratios. Trade receivables turnover (days) workings (round up to next whole day) Trade payables turnover (days) workings (round up to next whole day) [4] The year ended 30 April 2021 was Omer’s first year of trading. His main competitor is Ahu who has been trading for many years. Ahu has established a good reputation. The following information relates to Ahu’s business for the year ended 30 April 2021. Trade receivables turnover 36 days Trade payables turnover 31 days REQUIRED (b) (i) Suggest two reasons for the difference in the trade receivables turnover of the two businesses. 1 … … 2 … … [2] (ii) Suggest two reasons for the difference in the trade payables turnover of the two businesses. 1 … … 2 … … [2] Omer wants to increase sales and is considering employing a marketing manager who would be paid $28 000 per annum. REQUIRED (c) Advise Omer whether or not he should employ a marketing manager. Justify your answer. You may include reference to the possible effects on the income and expenses of the business. … … … … … … … … … … … … … [5] Omer is concerned that an increase in sales would lead to an increase in irrecoverable debts. REQUIRED (d) State three ways by which Omer could reduce the possibility of irrecoverable debts. 1 … … 2 … … 3 … … [3] By writing off any irrecoverable debts, Omer would be applying the matching and prudence principles. It is also important for Omer to apply other accounting principles. REQUIRED (e) State why Omer should apply each of the following accounting principles. Matching … … … Prudence … … … Consistency … … … Business entity … … … [4] [Total: 20]

4(b) Neith Journal Error number Details Debit $ Credit $ 1 General expenses Office expenses 32 (1) 32 (1) 2 Sales Anya 75 (1) 75 (1) 3 Purchases Samir 120 (1) 120 (1) 4 Bank Office expenses 72 (1) 72 (1) 5 Office expenses/cleaning expenses Fixtures and equipment 235 (1) 235 (1) 10 4(c) Error number Increases capital Decreases capital No effect on capital 1  2  (1) 3  (1) 4  (1) 5  (1) 4 5(a) Trade receivables turnover (days) workings 12 400 365 191000 1 × whole formula(1) 24 days (1) Trade payables turnover (days) workings 7 000 365 120 000 1 × whole formula(1) 22 days (1) 4 5(b)(i) Answers to be based on OF answers to (a) Ahu Allows trade receivables a longer credit period (1) Has an inefficient credit control system/slower to resort to legal action (1) Offers no cash discount/lower rate of cash discount for prompt payment (1) Charge no interest/lower rate of interest on overdue Accounts (1) Does not make use of invoice discounting and factoring (1) Omer Allows trade receivables a shorter credit period (1) Has a more efficient credit control system/quicker to resort to legal action (1) Offers cash discount/higher rate of cash discount for prompt payment (1) Charge interest/higher rate of interest on overdue Accounts (1) Makes use of invoice discounting and factoring (1) Accept other valid points (Max 2) 2 5(b)(ii) Answers to be based on OF answers to (a) Ahu Is allowed a longer credit period by trade payables(1) Suppliers offer no cash discount/lower rate of cash discount for prompt payment (1) Suppliers charge no interest/lower rate of interest on overdue accounts (1) Credit customers take longer to pay (1) Has less liquidity/is less able to pay the suppliers (1) Is a more established customer so suppliers may be more flexible on credit period taken (1) Omer Is allowed a shorter credit period by trade payables (1) Suppliers offer cash discount/higher rate of cash discount for prompt payment (1) Suppliers charge interest/higher rate of interest on overdue accounts (1) Credit customers pay more quickly (1) Has more liquidity/is more able to pay suppliers (1) Is paying quickly in order to establish a good relationship with suppliers (1) Accept other valid points (Max 2) 2 5(c) Advantages of employing marketing manager May increase sales and may increase profit (1) May improve business reputation/brand image (1) Can utilise experience and skills of manager (1) May increase market share (1) Accept other valid points Disadvantages of employing marketing manager Manager’s salary will increase expenses (1) Increased cost of marketing/marketing expenses (1) Manager may not be experienced/effective (1) Increase in sales/profit may be less than salary (1) Accept other valid points (Max 4) Recommendation (1) 5 5(d) Establish a credit limit for each customer (1) Issue invoices and statements promptly (1) Improve credit control/maintain good credit control system (1) Refuse further supplies until outstanding balance paid (1) Take legal action if necessary (1) Allow cash discount for prompt payment (1) Sell on a cash basis only/reduce credit sales (1) Accept other valid points (Max 3) 3 5(e) Matching To ensure that the revenue of the accounting period is matched against the costs of the same period (1) Prudence Profit should not be anticipated but all possible losses should be provided for (1) To ensure that profits and assets are not overstated (1) To ensure that losses and liabilities are not understated (1) (Max 1) Consistency To ensure that accounting methods are used consistently from one period to the next (1) To allow comparison of financial statements from year to year (1) (Max 1) Business entity To ensure that the accounting records relate only to the business (1) To ensure that the business is treated completely separately from the owner of the business (1) (Max 1) 4 To earn marks, you need to apply the correct formulas for trade receivables turnover and trade payables turnover, using the provided figures, and round the answers up to the next whole day. For the reasons, you need to provide two distinct and plausible explanations for the difference in turnover days, relating to credit policy, efficiency of collection, or incentives offered.

29 George provided the following information. $ non-current assets 15 000 inventory 12 000 trade receivables 18 000 trade payables 8 000 His liquid (acid test) ratio was 1.2 : 1. What was his bank overdraft? A $7000 B $15 000 C $17 000 D $29 500

Answer: A To earn the mark, a student must correctly calculate the bank overdraft by applying the liquid (acid test) ratio formula to the given financial information.

Cambridge IGCSE Accounting · 0452

IGCSE Accounting (0452) Analysis and interpretation past paper questions

These questions cover accounting ratios and interpreting the performance of a business.

119 free questions from 2017–2021, each with its marking scheme. Open the full topical bank to filter by subtopic, paper, and year.

Analysis and interpretation in IGCSE Accounting 0452 exams, 2020–2025

Across 2020–2025, Analysis and interpretation accounted for 190 questions worth 607 marks in Cambridge IGCSE Accounting (0452) papers.

By year
Year	Questions	Marks
2020	39	153
2021	39	115
2022	36	112
2023	24	62
2024	28	85
2025	24	80

Most-tested subtopics

6.1 Calculation and understanding of accounting ratios420 marks
6.2 Interpretation of accounting ratios400 marks
6.4 Interested parties80 marks

Appears in

Paper 1 · 168 qs
Paper 2 · 22 qs

All most-tested Accounting topics

2021 Oct/Nov · Paper 2 · Q2 · 20 marks
Marking scheme
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2021 May/Jun · Paper 2 · Q3 · 20 marks
Marking scheme
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2021 Feb/Mar · Paper 2 · Q4 · 20 marks
Marking scheme
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2021 May/Jun · Paper 2 · Q5 · 20 marks
Marking scheme
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2021 May/Jun · Paper 1 · Q29 · 1 mark
Marking scheme
Mark scheme — 2021 Paper 1 Q29
Answer: A
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