IGCSE Accounts (0452/12) – Model

Paper Worked Answers

Below are the worked solutions for Questions 1–7. Each includes the correct option and
reasoning.

Q1.
Daniel sold goods on credit to Alison. It was later discovered that Alison had been
overcharged.

Correct Answer: A) Credit Note

Reasoning: A credit note is issued to a customer when they have been overcharged or goods
are returned. It reduces the amount owed by the customer. A debit note is raised by the
buyer, not the seller.

Q2.
The purchase of a non-current asset has been entered in the purchases account by mistake.

Correct Answer: D) Principle Error

Reasoning: This is an error of principle because the transaction was entered in the wrong
type of account (capital expenditure recorded as revenue expenditure).

Q3.
Which of the following would have a credit balance?

Correct Answer: B) Sales

Reasoning: Sales is a revenue account and normally carries a credit balance. Purchases,
wages, and rent are expenses and have debit balances.

Q4.
Which account balance could appear in either the debit or the credit column of a trial
balance?

Correct Answer: B) Bank

Reasoning: A bank account can be either an asset (debit balance if money is in the bank) or a
liability (credit balance if bank overdraft).
Q5.
The following is given by the supplier when the customer makes payment before the
stipulated date.

Correct Answer: B) Cash Discount

Reasoning: Cash discounts are reductions given to customers for early payment. Trade
discount is given at the time of purchase, not for early payment.

Q6.
Which double entries will record a cheque issued to a supplier for goods bought on credit?

Correct Answer: C) Debit Trade Payables, Credit Bank

Reasoning: Paying a supplier reduces the liability (Trade Payables debit) and reduces cash
at bank (Bank credit).

Q7.
Wendy sells goods to Aiden on credit. They are found to be damaged.

Correct Answer: B) Credit Note

Reasoning: A credit note is issued by the seller when goods are returned or found damaged,
reducing the amount owed by the customer.

Q8.
Samir sends faulty goods back to Jasmine. In which book of prime entry would Jasmine
record this transaction?

Correct Answer: D) Sales returns journal

Reasoning: Goods have been returned by a customer to the seller (Jasmine). Returns
inwards by customers are recorded by the seller in the Sales Returns Journal.

Q9.
Cash book has separate bank and cash columns. Opening bank balance (debit) $1,000. Cash
paid into bank $200. Cheque drawn for office cash $50.

Working:

Bank opening (debit) .............. $1,000

+ Cash paid into bank (bank DR) ... $200 → $1,200

− Cheque drawn for cash (bank CR) . $50 → $1,150

Correct Answer: C) $1,150

Q10.
Which will be entered in the general journal?

Correct Answer: A) Correction of an error

Reasoning: The general journal is used for non-routine entries such as opening entries,
error corrections, purchase/sale of non-current assets on credit, and transfers. Discounts
and returns are recorded in the cash book and returns journals respectively; credit sales go
to the sales journal.

Q11.
Patel owes Jarvis $50. He pays by cheque after deducting a 10% cash discount.

Discount = 10% × $50 = $5; Cheque = $45.

Double entry in Patel’s books:

Dr Jarvis (Trade payables) .......... $50 (to clear the liability)

Cr Bank .......................... $45 (cash out)

Cr Discount received ............ $5 (income)

Correct Option: D

Q12.
Which will appear as a credit balance in a trial balance?

Correct Answer: D) Discounts received

Reasoning: Discounts received is an income account and carries a credit balance. Cash and
bank are assets (debit balances unless overdraft), and discounts allowed is an expense
(debit).

Q13.
Which of the following statements is incorrect?

Correct Answer: B) Liabilities + Assets = Capital

Reasoning: Accounting equation is Assets = Capital + Liabilities. Rearranged: Capital =
Assets − Liabilities, not Assets + Liabilities.

Q14.
Which of the following is incorrect? (Check A = L + C)

A) 7850 = 1250 + 6600 → 7850 ✓

B) 8200 = 2800 + 5400 → 8200 ✓

C) 9550 = 1150 + 8200 → 9350 ✗ (does not balance)

D) 6540 = 1120 + 5420 → 6540 ✓

Correct Answer: C

Q15.
Which best describes the meaning of 'Purchases'?

Correct Answer: C) Goods bought for resale

Reasoning: ‘Purchases’ refers to inventory acquired for resale in a trading business; not all
items bought or goods paid for.

Q16.
Which should not be called 'Sales'?

Correct Answer: C) Office fixtures sold

Reasoning: Sale of non-current assets is not trading revenue; it is ‘disposal of non-current

asset’. Cash/credit goods sold and returns of items included in purchases are trading sales.

Q17.
Compute Capital from the accounting equation.

Assets: Premises $20,000 + Stock $8,500 + Cash $100 = $28,600.

Liabilities: Creditors $3,000 + Loan from Adams $4,000 = $7,000.

Capital = Assets − Liabilities = $28,600 − $7,000 = $21,600.

Correct Answer: C) 21,600.

Q18.
Which of the following is correct?

Correct Answer: B) Profit increases capital

Reasoning: Closing capital = Opening capital + Profit − Drawings + Additional capital. Profit
increases owner’s equity.

Q19.
Which best describes a trial balance?

Correct Answer: B) It is a list of balances on the books

Reasoning: A trial balance lists ledger balances (debit/credit) on a given date to test
arithmetical accuracy; it is not the financial position and not a special account.

Q20.
Is it true that the trial balance totals should agree?

Correct Answer: B) Yes

Reasoning: A trial balance is a list of debit and credit balances; if books are arithmetically
correct, the totals must agree (though some errors may still exist).

Q21.
The accounting concept that assumes a business will continue operations indefinitely is:

Correct Answer: B) Going Concern

Reasoning: Going concern assumes the entity will remain in operation for the foreseeable
future.

Q22.
Credit notes issued by us will be entered in our:

Correct Answer: C) Returns Inwards Journal

Reasoning: As the seller, credit notes to customers are recorded in the Sales Returns
(Returns Inwards) Journal.

Q23.
When a bank allows drawings in excess of the available balance, the excess is called:
Correct Answer: C) Bank Overdraft

Reasoning: An overdraft is a negative bank balance permitted by the bank.

Q24.
If goods are purchased for $5,500 and the supplier allows a 10% cash discount, what are net
purchases?

Correct Answer: A) $5,500

Working/Reasoning: Purchases are recorded at invoice price less trade discount. Cash
discounts are not deducted from purchases; they are credited to ‘Discount Received’.
Therefore, net purchases remain at $5,500.

Q25.
The word ‘balance’ in ledger accounts represents:

Correct Answer: D) Difference between each side of the account (debit and credit)

Reasoning: The balance is the net amount remaining after offsetting debits and credits.

Q26.
The balance of which account may appear on the debit side of the trial balance?

Correct Answer: A) Carriage Inwards

Reasoning: Carriage inwards is an expense (debit). Purchases returns and sales have credit
balances. ‘Rent receivable’ as income would normally be credit; if outstanding it becomes an
asset, but the standard treatment in MCQs is that ‘Carriage Inwards’ is the clear debit item.

Q27.
Most petty cash books are maintained using which system?

Correct Answer: B) Imprest system

Reasoning: Under the imprest system, the petty cashier is given a fixed float and is
reimbursed to that level at period end.

Q28.
Which book of prime entry is a part of the double entry system?

Given: 1) Cash book 2) Petty cash book 3) Purchases journal 4) Sales journal
Correct Answer: A) 1 only

Reasoning: The cash book serves as both a book of prime entry and a ledger account,
forming part of double entry. Petty cash book and the purchases/sales journals are books of
original entry only; their totals are posted to the ledger.

Q29.
Purpose of a trial balance?

Correct Answer: B) To provide the arithmetical accuracy

Reasoning: It is a list of ledger balances used to check that total debits equal total credits.

Q30.
Maleha takes goods costing $100 for own use. How to record?

Correct Answer: B) Dr Drawings $100 Cr Purchases $100

Reasoning: In a periodic inventory system, drawings of goods reduce purchases; drawings

is a deduction from capital.

Q31.
The main book of original entry is called:

Correct Answer: B) Journal

Reasoning: Transactions are first recorded chronologically in the journal (or day books); the
ledger is for posting.

Q32.
Bank opening balance $9,420. Transactions: bought goods on credit $100 (no bank), sold
goods on credit $2,200 (no bank), repaid a loan by cheque $5,000.

Working: $9,420 − $5,000 = $4,420.

Correct Answer: B) $4,420

Q33.
Which is a resource provided by the owner of the business?

Correct Answer: B) Capital

Reasoning: Capital is the owner’s contribution of resources; rent/profit are incomes,
drawings is withdrawal.

Q34.
Which task is not performed by an accountant?

Correct Answer: D) Writing up a three column cash book

Reasoning: Writing up day books/cash books is a book-keeper’s task. An accountant

prepares financial statements and reports and may help monitor business performance.

Q35.
What is the purpose of book-keeping?

Correct Answer: D) To record the financial transactions of the business

Reasoning: Book-keeping is the systematic recording of transactions; analysis/reporting

and trend identification come later at the accounting stage.