IGCSE Accounting: Financial statements of limited companies (Cambridge 0452) – Practice Questions

Syllabus edition note. This resource follows the Cambridge IGCSE Accounting 0452 syllabus (and Cambridge O Level Accounting 7707, which has the same subject content for the same series) for exams in 2027, 2028 and 2029 (version 1), first examined in the March 2027 series in India and the June 2027 series elsewhere. If you sit 0452 in November 2026, you sit the 2026 syllabus (version 2), which differs: Paper 1 has 35 multiple-choice marks in 1 hour 15 minutes, not 40 marks in 1 hour 30 minutes; Topic 7 is “Accounting principles and policies”, without 7.2 Ethical considerations or 7.3 Technology and sustainability; 4.4 is “Irrecoverable debts and provision for doubtful debts”; income statements are named instead of statements of profit or loss; three-column running balance accounts are not required; Clubs and societies is 5.4 and Manufacturing accounts 5.5; and 6.3 is “Inter-firm comparison”. For this topic, the 2026 syllabus covers only trading and service businesses in 5.1 and limits drawings adjustments to goods taken by the owner for own use; for limited companies it excludes cumulative and non-cumulative preference shares, rights issues, share premium and capital redemption reserve but requires the difference between redeemable and non-redeemable preference shares (the 2027-2029 syllabus lists none of these); and for incomplete records it does not ask why businesses keep them or what their advantages are. If you sit in November 2026, work from the 2026 syllabus on the Cambridge International website.

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover syllabus section 5.3 Limited companies in the Cambridge IGCSE Accounting 0452 syllabus for examination in 2027, 2028 and 2029 (Version 1). Read the study guide or revision notes first. See also the topic 5 study guide, course hub, printable checklist and diagnostics.

Questions

1. Pallisade Cycles Ltd ceases trading owing creditors $55,000. Its assets raise $20,000. Rina holds 3,000 ordinary shares of $1, all fully paid.

(a) State what limited liability means. [1] (b) Calculate the amount the creditors are short of and state the most Rina can lose. [2]

2. A sole trader is thinking of forming a limited company. State two advantages and two disadvantages of doing so. [4]

3. A company has total assets of $212,000 and total liabilities of $73,500. Its ordinary share capital is $100,000 and its general reserve $18,000. It has no preference shares.

(a) Calculate its equity. [2] (b) Calculate its retained earnings. [1]

4. State where each item appears in a statement of financial position: (i) 9% debentures repayable in seven years; (ii) general reserve; (iii) 4% preference shares; (iv) debenture interest owing; (v) retained earnings. [5]

5. (a) State two differences between ordinary share capital and debentures. [2] (b) Explain why a company with uncertain profits might prefer issuing ordinary shares to debentures. [2]

6. Thornfield Toys Ltd has issued 200,000 ordinary shares of $0.25 each. It has called up $0.20 per share. The holders of 5,000 shares have not paid.

(a) Calculate the issued, called-up and paid-up share capital. [3] (b) Explain the difference between called-up and paid-up share capital. [1]

7. Pallisade Cycles Ltd, a trading company, at 31 December 2027: revenue $318,000; inventory at 1 January $24,600; purchases $190,000; wages $52,000; rent $14,400; electricity $6,100; trade receivables $25,000; allowance for irrecoverable debts $800; equipment at cost $60,000 with accumulated depreciation $18,000; 8% debentures $45,000; debenture interest paid $1,800.

Adjustments: inventory at 31 December $27,900; rent prepaid $1,200; electricity owing $450; write off irrecoverable debts of $750, then set the allowance at 4% of remaining receivables; depreciate equipment at 20% reducing balance; the rest of the year’s debenture interest is unpaid.

Prepare the statement of profit or loss for the year ended 31 December 2027. [10]

8. Merrin Interiors Ltd had at 1 July 2027: ordinary shares $60,000; 6% preference shares $30,000; general reserve $8,000; retained earnings $14,200. It issued 15,000 ordinary shares of $1 at $1, all paid. Profit for the year was $19,800. It transferred $2,500 to the general reserve and paid the preference dividend and $0.05 on every ordinary share. Prepare the statement of changes in equity for the year ended 30 June 2028. [6]

9. Ainsley Design Ltd is a service company. At 30 June 2028: premises $90,000; office equipment cost $24,000, accumulated depreciation $9,600; trade receivables $7,800; allowance for irrecoverable debts $300; other receivables $450; bank $12,150; trade payables $4,200; other payables $650; 7% debentures repayable in eight years $20,000; ordinary shares $70,000; general reserve $5,000; retained earnings $24,650. Prepare the statement of financial position. [8]

10. Brackenhill Joinery Ltd makes furniture. For the year: raw materials used $61,000; direct wages $44,000; factory overheads $29,500; work in progress $6,200 at the start and $5,400 at the end; finished goods inventory $9,800 at the start and $11,300 at the end; revenue $210,000.

(a) Calculate prime cost and the factory cost of production. [3] (b) Calculate cost of sales and gross profit. [2]

11. Zara Whitlow runs Whitlow Fabrics as a sole trader. She needs $120,000 for larger premises and is considering forming a limited company and issuing ordinary shares to family members. Evaluate this plan and recommend. [6]

Answers

1. (a) A shareholder can lose no more than the amount paid, or agreed to be paid, for their shares [1]. (b) Shortfall $55,000 - $20,000 = $35,000 [1]; Rina can lose at most the $3,000 she paid for her shares [1]. [3] Examiner insight: Name the cap on the loss and its figure.

2. Advantages: loss is limited [1]; large sums can be raised, or the company continues if an owner leaves, or borrowing is easier [1]. Disadvantages: more legal requirements and cost [1]; profit shared as dividends, or accounts may be public, or owners may not manage [1]. [4] Examiner insight: Four separate points are needed.

3. (a) $212,000 - $73,500 [1] = $138,500 [1]. (b) $138,500 - $100,000 - $18,000 = $20,500 [1]. [3] Examiner insight: Show the subtraction line.

4. (i) Non-current liabilities [1]; (ii) equity [1]; (iii) equity [1]; (iv) current liabilities, as other payables [1]; (v) equity [1]. [5] Examiner insight: Name the heading exactly.

5. (a) Two differences, for example: shareholders are owners, debenture holders are lenders [1]; ordinary dividend varies and need not be paid, debenture interest is fixed and compulsory [1]. (b) Directors can cut the dividend if profit is poor [1], but debenture interest must be paid whatever the profit [1]. [4] Examiner insight: A comparison states both sides.

6. (a) Issued 200,000 x $0.25 = $50,000 [1]; called-up 200,000 x $0.20 = $40,000 [1]; paid-up $40,000 - (5,000 x $0.20) = $39,000 [1]. (b) Called-up is the amount asked for; paid-up is the part of it actually received [1]. [4] Examiner insight: Label each of the three figures.

7.

Pallisade Cycles Ltd
Statement of profit or loss for the year ended 31 December 2027
                                        USD       USD
Revenue                                          318,000
Cost of sales
  Inventory at 1 January             24,600
  Purchases                         190,000
                                    214,600
  Less Inventory at 31 December      27,900
                                                 186,700
Gross profit                                     131,300
Less Expenses
  Wages                              52,000
  Rent (14,400 - 1,200)              13,200
  Electricity (6,100 + 450)           6,550
  Irrecoverable debts                   750
  Increase in allowance                 170
  Depreciation: equipment             8,400
                                                  81,070
Profit from operations                            50,230
Less Finance costs: debenture interest             3,600
Profit for the year                               46,630

Cost of sales with both inventories [2]; gross profit [1]; rent [1]; electricity [1]; irrecoverable debts [1]; allowance 4% x $24,250 = $970, less $800 = $170 increase [1]; depreciation 20% x ($60,000 - $18,000) = $8,400 [1]; profit from operations [1]; interest 8% x $45,000 = $3,600 and profit for the year [1]. [10] Examiner insight: Show brackets such as “Rent (14,400 - 1,200)” beside each figure.

8.

Merrin Interiors Ltd
Statement of changes in equity for the year ended 30 June 2028
                          Ordinary Preference General Retained   Total
                             share     share  reserve earnings
                           capital   capital
                               USD       USD      USD      USD     USD
At 1 July 2027              60,000    30,000    8,000   14,200 112,200
Ordinary shares issued      15,000                              15,000
Profit for the year                                     19,800  19,800
Transfer to general reserve                     2,500   (2,500)      -
Preference dividend paid                                (1,800) (1,800)
Ordinary dividend paid                                  (3,750) (3,750)
At 30 June 2028             75,000    30,000   10,500   25,950 141,450

Opening balances [1]; shares issued [1]; profit [1]; transfer in both columns [1]; dividends 6% x $30,000 = $1,800 and 75,000 x $0.05 = $3,750 [1]; closing balances [1]. [6] Examiner insight: State the share count used.

9.

Ainsley Design Ltd
Statement of financial position at 30 June 2028
                                   Cost  Accum.  Carrying
                                          deprec.   value
                                    USD     USD       USD
Non-current assets
  Premises                        90,000       -    90,000
  Office equipment                24,000   9,600    14,400
                                 114,000   9,600   104,400
Current assets
  Trade receivables      7,800
  Less Allowance           300    7,500
  Other receivables                 450
  Bank                           12,150           20,100
Total assets                                     124,500

Equity
  Ordinary shares                                 70,000
  General reserve                                  5,000
  Retained earnings                               24,650
                                                  99,650
Non-current liabilities
  7% debentures                                   20,000
Current liabilities
  Trade payables         4,200
  Other payables           650                     4,850
Total equity and liabilities                     124,500

Non-current assets, carrying value $104,400 [2]; net trade receivables $7,500 [1]; current assets $20,100 [1]; total assets $124,500 [1]; equity $99,650 [1]; debentures as non-current liability [1]; current liabilities $4,850, matching total [1]. [8] Examiner insight: If the totals disagree, look for an item under the wrong heading.

10. (a) Prime cost $61,000 + $44,000 = $105,000 [1]; factory cost of production $105,000 + $29,500 + $6,200 [1] - $5,400 = $135,300 [1]. (b) Cost of sales $9,800 + $135,300 - $11,300 = $133,800 [1]; gross profit $210,000 - $133,800 = $76,200 [1]. [5] Examiner insight: Factory cost of production replaces purchases; do not add both.

11. Advantages applied: limited liability protects Zara’s private assets if the larger premises fail [1]; family members can supply the $120,000, which she may not raise alone [1]. Disadvantages applied: more legal requirements and costs than a sole trader faces [1]; profit will be shared as dividends and she loses sole control [1]. Judgement, for example: forming the company is sensible as $120,000 is a large personal risk [1], if the costs and shared profit are acceptable [1]. A reasoned opposite view is valid. [6] Examiner insight: Refer to Zara’s own figures and plans.

Where marks are usually lost

• Putting dividends in the statement of profit or loss, or debentures in equity.
• Adding a general reserve transfer into the total column.
• Confusing issued, called-up and paid-up share capital.

Next steps

• Revise with the revision notes and study guide.
• Use the course hub and checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

How is a transfer to the general reserve shown in the statement of changes in equity? A transfer moves an amount from retained earnings to the general reserve within equity, so it does not change total equity. Adding it into the total column is a common error.

Where is unpaid debenture interest shown? The full year’s debenture interest is a finance cost in the statement of profit or loss, and any amount unpaid at the year end is included in other payables. Leaving out the unpaid half is a common mistake.

Are debentures part of equity? No. Debentures are loan capital and are shown under non-current liabilities in the statement of financial position. Equity is made up of share capital and reserves.

How do you answer an evaluation question on limited companies in Cambridge IGCSE Accounting (0452)? Link each advantage or disadvantage to the business described, for example explaining why raising large sums matters for a planned factory. Listing points without that link earns little credit.

Official syllabus

Cambridge IGCSE Accounting 0452 syllabus for examination in 2027, 2028 and 2029 (Version 1), section 5.3 Limited companies, Cambridge International.