1 Shiv is a trader. His financial year ends on 31 August. He does not maintain a full set of accounting records but was able to provide the following information for the year ended 31 August 2021. Total revenue $320 000 Mark-up 25% Bank account summary for the year ended 31 August 2021 $ $ Balance b/d 49 000 Expenses 34 000 Cash sales 3 700 Drawings 4 200 Receipts from trade receivables 312 400 Payments to trade payables 257 700 Equipment 16 000 Balance c/d 53 200 365 100 365 100 Assets and liabilities 1 September 2020 31 August 2021 $ $ Inventory at cost 23 500 ? Trade receivables 22 000 25 900 Expenses owing – 400 Trade payables 32 600 29 600 Equipment at net book value – 12 800 Premises at cost 90 000 90 000 Shiv had withdrawn $900 for a family holiday during the year. He had included this in the expenses. On 31 August 2021 Shiv decided to create a provision for doubtful debts of 3% of trade receivables. REQUIRED (a) Calculate the purchases for the year ended 31 August 2021. … … … … … … … [3] (b) Prepare the income statement for the year ended 31 August 2021. The inventory on 31 August 2021 should be clearly shown within the statement. Shiv Income Statement for the year ended 31 August 2021 $ $ … … … … … … … … … … … … … … … ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… [11] (c) Name the accounting principle Shiv should apply when recording the $900 he had used for a family holiday. … [1] Shiv has always valued his inventory at cost price. He is considering valuing the inventory on 31 August 2021 at selling price as he believes it would result in a higher profit for the year. REQUIRED (d) Discuss the implications of Shiv valuing the inventory on 31 August 2021 at selling price. … … … … … … … … … … … … [5] [Total: 20] PLEASE TURN OVER

1(a) $ Payments to trade payables 257 700 Less Opening trade payables 32 600 (1) 225 100 Add Closing trade payables 29 600 (1) Purchases 254 700 (1) Accept alternative forms of presentation 3 1(b) Shiv Income Statement for the year ended 31 August 2021 $ $ Revenue 320 000 (1) Cost of sales Opening inventory 23 500 Purchases 254 700 (1) OF 278 200 Closing inventory 22 200 (2) CF/(1) OF 256 000 (1) OF Gross profit 64 000 (1) Expenses (34 000 + 400 (1) – 900 (1)) 33 500 Provision for doubtful debts 777 (1) Depreciation of equipment (16 000 – 12 800) 3 200 (1) 37 477 Profit for the year 26 523 (1) OF 11 1(c) Business entity (1) 1 1(d) Inventory should be valued at the lower of cost and net realisable value (1) Cost of sales would be understated (1) The profit will be overstated/profit will not be shown at a realistic level (1) The current assets/inventory will be overstated (1) Prudence principle is not being observed (1) Consistency principle is not being observed (1) Comparison with previous years/competitors would not be accurate (1) Accounting records must present a realistic view of the business (1) Accept other valid points Max (5) 5 (a) To calculate purchases, you need to start with payments to trade payables, subtract the opening trade payables, and then add the closing trade payables. (b) To prepare the income statement, you must correctly calculate the cost of sales (including opening inventory, purchases, and closing inventory), and then calculate expenses by adjusting the given figure for expenses owing, drawings, provision for doubtful debts, and depreciation. (c) The principle being referred to is the business entity concept. (d) To earn marks, you need to state that inventory should be valued at the lower of cost and net realisable value, and explain the impact of not doing so on cost of sales, profit, current assets, and the accounting principles violated.

1 Shiv is a trader. His financial year ends on 31 August. He does not maintain a full set of accounting records but was able to provide the following information for the year ended 31 August 2021. Total revenue $320 000 Mark-up 25% Bank account summary for the year ended 31 August 2021 $ $ Balance b/d 49 000 Expenses 34 000 Cash sales 3 700 Drawings 4 200 Receipts from trade receivables 312 400 Payments to trade payables 257 700 Equipment 16 000 Balance c/d 53 200 365 100 365 100 Assets and liabilities 1 September 2020 31 August 2021 $ $ Inventory at cost 23 500 ? Trade receivables 22 000 25 900 Expenses owing – 400 Trade payables 32 600 29 600 Equipment at net book value – 12 800 Premises at cost 90 000 90 000 Shiv had withdrawn $900 for a family holiday during the year. He had included this in the expenses. On 31 August 2021 Shiv decided to create a provision for doubtful debts of 3% of trade receivables. REQUIRED (a) Calculate the purchases for the year ended 31 August 2021. … … … … … … … [3] (b) Prepare the income statement for the year ended 31 August 2021. The inventory on 31 August 2021 should be clearly shown within the statement. Shiv Income Statement for the year ended 31 August 2021 $ $ … … … … … … … … … … … … … … … ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… [11] (c) Name the accounting principle Shiv should apply when recording the $900 he had used for a family holiday. … [1] Shiv has always valued his inventory at cost price. He is considering valuing the inventory on 31 August 2021 at selling price as he believes it would result in a higher profit for the year. REQUIRED (d) Discuss the implications of Shiv valuing the inventory on 31 August 2021 at selling price. … … … … … … … … … … … … [5] [Total: 20] PLEASE TURN OVER

1(a) $ Payments to trade payables 257 700 Less Opening trade payables 32 600 (1) 225 100 Add Closing trade payables 29 600 (1) Purchases 254 700 (1) Accept alternative forms of presentation 3 1(b) Shiv Income Statement for the year ended 31 August 2021 $ $ Revenue 320 000 (1) Cost of sales Opening inventory 23 500 Purchases 254 700 (1) OF 278 200 Closing inventory 22 200 (2) CF/(1) OF 256 000 (1) OF Gross profit 64 000 (1) Expenses (34 000 + 400 (1) – 900 (1)) 33 500 Provision for doubtful debts 777 (1) Depreciation of equipment (16 000 – 12 800) 3 200 (1) 37 477 Profit for the year 26 523 (1) OF 11 1(c) Business entity (1) 1 1(d) Inventory should be valued at the lower of cost and net realisable value (1) Cost of sales would be understated (1) The profit will be overstated/profit will not be shown at a realistic level (1) The current assets/inventory will be overstated (1) Prudence principle is not being observed (1) Consistency principle is not being observed (1) Comparison with previous years/competitors would not be accurate (1) Accounting records must present a realistic view of the business (1) Accept other valid points Max (5) 5 (a) To calculate purchases, you need to start with payments to trade payables, subtract the opening trade payables, and then add the closing trade payables. (b) To prepare the income statement, you must correctly calculate the cost of sales by including opening inventory, purchases, and closing inventory. Then, calculate total expenses by adjusting the given expenses for expenses owing, drawings, provision for doubtful debts, and depreciation. Finally, subtract total expenses from gross profit to find the profit for the year. (c) The specific accounting concept being applied is the business entity concept. (d) To earn marks, you need to state that inventory should be valued at the lower of cost and net realisable value. Then, explain the impact of incorrect valuation on the cost of sales, profit, and current assets/inventory, and mention the accounting principles not being observed, such as prudence and consistency, or the impact on comparability and realistic view.

2 Zamir is in business providing legal services. Zamir provided the following balances from his books of account at 31 December 2020. $ Fee income 151 750 Rent and rates 26 000 Salaries 55 000 Stationery and advertising 6 450 Electricity 8 000 Bank charges 4 100 Office equipment – cost 60 000 Office equipment – provision for depreciation 22 500 Proceeds of disposal of office equipment 1 000 Bank overdraft 7 900 Trade receivables 15 600 Capital 57 000 Drawings 65 000 Additional information 1 The annual rent is $16 000. On 31 December 2020 rent was paid to cover the period from 1 January to 31 March 2021. There was no accrual or prepayment of rent at 1 January 2020. 2 Rates of $6000 were paid during the year to 31 December 2020. This payment covered the period 1 January 2020 to 31 October 2020 only. From 1 November 2020 annual rates were $7560. 3 Depreciation is to be charged on office equipment at 15% per annum using the straight-line method. No depreciation is charged in the year of disposal. 4 In February 2020 office equipment was sold for $1000. This equipment had been purchased for $1800 on 1 January 2018. The sales proceeds have been debited to the bank account and credited to the proceeds of disposal of office equipment account. No other entries have been made in respect of the disposal. 5 One of Zamir’s clients has become bankrupt. The client owed $1885. Zamir does not expect to recover this amount. REQUIRED (a) Prepare Zamir’s income statement for the year ended 31 December 2020. Zamir Income Statement for the year ended 31 December 2020 $ $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [10] (b) Prepare the assets section of Zamir’s statement of financial position at 31 December 2020. Zamir Statement of Financial Position (assets section) at 31 December 2020 $ $ $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [3] (c) Suggest two possible reasons why Zamir required a bank overdraft. 1 … … 2 … … [2] Zamir employs Sharif, who is another lawyer. Sharif also keeps the books of account for the business. Zamir would like to ensure that Sharif does not leave to start work for a rival legal business. REQUIRED (d) Advise Zamir whether he should offer Sharif an increase in salary or invite him to become a partner in the business. Justify your answer with two advantages of each course of action. … … … … … … … … … … [5] [Total: 20]

2(a) Zamir Income Statement for the year ended 31 December 2020 $ $ Fee income 151 750 Less Expenses *Rent and rates (26 000 – 4 000 (1) + 1 260 (1)) 23 260 Salaries 55 000 } Stationery and advertising 6 450 } (1) Electricity 8 000 } Bank charges 4 100 } (1) Irrecoverable debts 1 885 (1) Loss on disposal of office equipment (1 000 – (1 260) (1) 260 (1)OF Depreciation of office equipment (60 000 – 1 800 = 58 200 × 15% (1) 8 730 (1)OF 107 685 Profit for the year 44 065 (1)OF * Rent and rates alternative calculation rent 4 000 × 4 16 000 (1) rates 6 000 + (2/12 × 7 560) 7 260 (1) 23 260 10 2(b) Zamir Statement of Financial Position (assets section) at 31 December 2020 $ $ $ Assets Non-current Assets Cost Accumulated depreciation Net book value *Office equipment 58 200 (1) 30 690 (1)OF 27 510 OF Current Assets Trade receivables (15 600 – 1 885) 13 715 } (1) Other receivables 4 000 } 17 715 Total assets 45 225 * workings: cost 60 000 – 1800 = 58 200 acc dep (22 500 – 540) = 21 960 + 8730 OF = 30 690 OF 3 2(c) High level of drawings (1) High level of trade receivables/trade receivables slow to settle debts (1) Expenses not controlled efficiently (1) To meet short-term debts when they fall due (1) To improve cash flow/liquidity (1) To be able to take advantage of business opportunities as they arise (1) To purchase additional non-current assets/expand the business (1) Accept other valid answers Max (2) 2 2(d) Salary increase – advantages Sharif would only be entitled to his salary and not a share of the profit (1) Zamir would not need to consult Sharif before making decisions (1) Disagreements about decisions etc. would not arise (1) Sharif’s motivation and commitment may improve (1) No changes would be required to the (legal) structure of the business (1) Accept other valid points Max (2) Partnership offer – advantages Sharif may be required to introduce capital (1) The risks/losses and responsibilities would be shared (1) The decision-making would be shared (1) Sharif’s salary as an employee would not need to be paid (1) Sharif may be more committed (1) Accept other valid points Max (2) Recommendation (1) 5 To earn marks for the income statement, you must correctly calculate and include adjusted figures for rent and rates, salaries, stationery and advertising, electricity, bank charges, irrecoverable debts, loss on disposal of office equipment, and depreciation of office equipment. For the statement of financial position, you need to correctly calculate the cost and accumulated depreciation of office equipment to find its net book value, and correctly calculate adjusted trade receivables and other receivables. For the final part, you need to identify valid reasons for the business's financial position, such as high drawings, slow-paying receivables, or uncontrolled expenses.

2 John and Banu are partners. The partners provided the following list of balances at 31 March 2021. $ Revenue 158 000 Inventory at 1 April 2020 9 400 Purchases 69 200 Rates and insurance 11 250 Wages 10 475 General expenses 9 675 Discount allowed 2 000 Commission receivable 4 800 Balance at bank 4 000 Trade receivables 14 150 Trade payables 5 835 Premises at cost 130 000 Fittings at cost 18 000 Provision for depreciation of fittings 8 100 Loan from John 10 000 Capital accounts John 75 000 Banu 50 000 Current accounts John 4 050 Banu 2 365 Drawings John 19 000 Banu 21 000 Additional information 1 Inventory at 31 March 2021 was valued at $9200. 2 Rates of $650 were unpaid at 31 March 2021. 3 Commission receivable of $300 was due at 31 March 2021. 4 Depreciation on fittings is to be charged at 15% per annum using the straight-line method. 5 The partnership agreement provides for: interest on partner’s loan of 5% per annum interest on drawings of 6% interest on capital of 3% per annum a salary to John of $8500 per annum residual profits and losses to be shared 40% to John and 60% to Banu. REQUIRED (a) Prepare the income statement for John and Banu for the year ended 31 March 2021. John and Banu Income Statement for the year ended 31 March 2021 … … … … … … … … … … … … … … … … … … … $ … … … … … … … … … … … … … … … … … … … $ … … … … … … … … … … … … … … … … … … … [9] (b) Prepare the appropriation account for John and Banu for the year ended 31 March 2021. John and Banu Appropriation Account for the year ended 31 March 2021 $ $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [5] (c) State the purpose of: (i) charging interest on the partners’ drawings … … [1] (ii) paying interest on the loan from John. … … [1] (d) Complete the table by placing a tick (3) against each statement which describes an advantage to John of being in a partnership with Banu. Continuity of existence of the business Banu may have skills and knowledge which John does not have John is only liable for business debts up to the amount he agreed to contribute Additional finance is available to the business Risks and responsibilities are shared John is bound by the actions of Banu carried out on behalf of the business John can discuss matters with Banu before making decisions [4] [Total: 20]

2(a) John and Banu Income Statement for the year ended 31 March 2021 $ $ Revenue 158 000 Cost of sales Opening inventory 9 400 Purchases 69 200 78 600 Less Closing inventory 9 200 69 400 (1) Gross profit 88 600 (1)OF Commission receivable (4 800 + 300) 5 100 (1) 93 700 Less Expenses Rates and insurance (11 250 + 650) 11 900 (1) Wages 10 475} General expenses 9 675}(1) Discount allowed 2 000 (1) Depreciation of fittings (15% × 18 000) 2 700 (1) 36 750 Profit from operations 56 950 Loan interest 500 (1) Profit for the year 56 450 (1)OF 9 2(b) John and Banu Appropriation Account for the year ended 31 March 2021 $ $ Profit for the year 56 450 OF Add interest on drawings John 1 140} Banu 1 260} (1) 2 400 58 850 Less Interest on capital John 2 250} Banu 1 500}(1) 3 750 Salary John 8 500 (1) 12 250 46 600 Profit share John (40% × 46 600) 18 640 (1) OF Banu (60% × 46 600) 27 960 (1) OF 46 600 5 To earn marks, you must correctly calculate and present the cost of sales, including opening and closing inventory, and then accurately list all income and expenses to arrive at the profit for the year. Each correct calculation and placement of an item, such as adjusted commission receivable, adjusted rates and insurance, and depreciation, contributes to the marks.

17 What are the advantages of being a sole trader? easy to raise finance entitled to all profit has total control has unlimited liability A B C D

Answer: D To earn this mark, you must correctly identify that a sole trader is entitled to all profit and has total control over the business, while also acknowledging that they have unlimited liability and may find it difficult to raise finance.

Cambridge IGCSE Accounting · 0452

IGCSE Accounting (0452) Preparation of financial statements past paper questions

Questions on income statements and balance sheets for traders, partnerships, and other organisations.

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

Preparation of financial statements in IGCSE Accounting 0452 exams, 2020–2025

Across 2020–2025, Preparation of financial statements accounted for 507 questions worth 2,156 marks in Cambridge IGCSE Accounting (0452) papers.

By year
Year	Questions	Marks
2020	78	362
2021	84	350
2022	93	413
2023	87	372
2024	86	371
2025	79	288

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2021 Oct/Nov · Paper 2 · Q1 · 20 marks
Marking scheme
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2021 Oct/Nov · Paper 2 · Q1 · 20 marks
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2021 Feb/Mar · Paper 2 · Q2 · 20 marks
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2021 May/Jun · Paper 2 · Q2 · 20 marks
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2021 May/Jun · Paper 1 · Q17 · 1 mark
Marking scheme
Mark scheme — 2021 Paper 1 Q17
Answer: D
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