Cambridge International Advanced Subsidiary Level and Advanced Level

9706 Accounting June 2015

ACCOUNTING
Paper 9706/11
Multiple Choice

Question Question
Key Key
Number Number
1 D 16 A
2 C 17 A
3 D 18 B
4 B 19 A
5 D 20 D

6 A 21 B
7 B 22 B
8 C 23 A
9 C 24 C
10 A 25 C

11 A 26 D
12 C 27 D
13 D 28 D
14 C 29 D
15 C 30 A

General comments

Performance of the candidates was not satisfactory on this paper. Only a few candidates scored more than
15 marks on this paper. This is reflected in the mean mark for the paper which was 11.

Very few questions appeared to be easy for candidates. In fact only Question 8 was answered correctly by
more than 70% of candidates. A significant number of questions proved to be challenging to the candidates.
These have been reviewed below.

Specific questions

Question 2

This required candidates to assess the effect on profit of a prepayment not being accounted for. The
prepayment was for three months and was half of the amount paid ($3000 ÷ 2 = 1500). Thus the effect would
be to understate the profit by this amount, or the key C.

Question 4

This asked for the amount to post in respect of a contra entry between sales and purchases ledger control
accounts. The rule here is that the lower of the two amounts should be selected, in this case $500. Many
candidates wrongly selected the higher amount of $750 and the difference between the two ($250).

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
Question 6

This was a challenging question. From the given data it is possible to work out the gross profit margin of 40%
and from that the total gross profit of $24 000, of which $10 000 was earned by department X. If the total
profit for the year was $8000, total expenses must be $16 000 of which department X was charged with 55%
or $8800. Thus department X’s profit for the year was $1200 ($10 000 – 8800).

Question 9

The key to solving this problem was to recognise that the trade receivables figure was $45 000. This is the
figure on which the trade receivable days would be calculated, thus the credit sales figure was $231 013, or
the key C.

Question 13

Whilst it is usual to write the appropriation account in columnar form with additions and deductions, it is part
of the double entry system and therefore has a debit and credit side when properly written out. Thus the
profit for the year will be debited in the income statement and credited to the appropriation account. This
gave the key D.

Question 26

This is a question where a rule can be applied. A trader would only make a product rather than buy it in when
the variable cost of manufacturing it is lower than the purchase cost, or the cost of buying it in is greater than
the variable cost of manufacturing it. D was the key to this question.

Question 28

This question proved challenging to many candidates. For 1000 units, the total variable costs were $28 000,
or $2.80 per unit. The fixed costs were $14 000 and would remain at that figure for 1200 units. Thus the total
contribution for 1200 units would be $24 500 (10 500 + 14 000). The sales revenue would increase to $60 000
for 1200 units so the variable costs at that level must have been $35 500, or just over $29.58 per unit. Thus
the increase in variable costs per unit was $1.59.

Question 29

This required the calculation of the contribution to sales ratio (C/S ratio), which was 55%. Dividing the total
fixed costs of $330 000 by 55% gave the break even revenue of $600 000.

Overall comment

There seems to be a general lack of understanding of double entry bookkeeping. Questions on costing also
proved to be difficult to candidates.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/12
Multiple Choice

Question Question
Key Key
Number Number
1 A 16 C
2 C 17 B
3 C 18 A
4 D 19 C
5 B 20 C

6 B 21 B
7 D 22 A
8 B 23 A
9 B 24 B
10 B 25 C

11 A 26 B
12 A 27 C
13 C 28 B
14 D 29 B
15 A 30 D

General comments

Candidates performed well on this paper. Almost 69% candidates achieved a score of 15 or more and some
candidates scored the maximum of 30 marks. The mean mark was 17.8.

Many questions proved easy to candidates. More than 70% of candidates answered questions 2, 9, 10, 13,
14, 15, 21, 22, and 23 correctly.

There were only three questions which seemed to cause some degree of difficulty. These are considered
below.

Specific questions

Question 6

This required the calculation of the depreciation charge for machinery for a year. The question indicated that
depreciation is charged on a time basis (month by month). Thus the business held $200 000 of machinery at
cost for the whole period at 20% depreciation = $40 000. Additional machinery of $50 000 was held for nine
months at 20% = $7500 and finally machinery of $10 000 was held for three months at 20% = $500, making
the total charge for the year of $48 000. The question could be approached by breaking the account down
into the various time periods.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
Question 11

A statement of financial position does not, strictly speaking, contain debits and credits, but has debit and
credit balances. The actual statement is simply a list of those balances grouped in a particular order. By the
same token, the income statement is an account with debit and credit sides, although this is sometimes lost
as it is written in columnar form with additions and deductions. Following these principles, closing inventory is
a credit in the income statement and a loss for the year is debited in the capital account and credited in the
income statement. These three elements alone were enough to arrive at the correct key of A.

Question 18

This question was also not well attempted. It concerned the impact on a business of an issue of shares. It
required candidates to understand that share capital will increase by the par value of the shares issued and
the additional cash received will improve the business liquidity.

Overall comment

The results for this paper were extremely encouraging. It indicated that well prepared candidates spent time
on both financial and cost accounting.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/13
Multiple Choice

Question Question
Key Key
Number Number
1 A 16 D
2 C 17 D
3 C 18 D
4 B 19 B
5 D 20 C

6 D 21 D
7 D 22 A
8 B 23 C
9 B 24 B
10 D 25 B

11 B 26 A
12 B 27 B
13 D 28 C
14 C 29 C
15 B 30 B

General comments

Overall candidates performed reasonably well on this paper. 70% of candidates achieved a score of 15 or
above out of 30, with some candidates achieving full marks for the paper. Many questions proved easy to
many candidates. 70% or more of candidates answered questions 3, 4, 5, 10, 15, 16, 18, 19, 20, 22
correctly. There were only two questions which seemed to prove slightly challenging for candidates and they
are reviewed below.

Specific questions

Question 21

Though the question appeared straightforward, it required some thought. As the inventory turnover had
decreased statement 2 ‘inventory of goods has increased’ was self-evident. The challenge then was to
determine which statement in respect of profit margin was correct. The logic behind the answer is that an
increase in closing inventory would lead to an increase in profit margin on a constant sales level. This then
meant statement 4 was also correct, thus providing the key.

Question 26

This was a judgement/knowledge question. However, with costing it is usual to assume that depreciation is a
fixed cost however it is calculated. The fact that it goes down from year to year because it is calculated using
the reducing balance method does not matter.

Overall comment

This paper was well attempted by candidates.

© 2015
 Cambridge International Advanced Subsidiary and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/21
Structured Questions

Key Messages

• Candidates should take care to read the questions carefully and to answer the question that has
been asked precisely.

• Candidates should ensure that they develop points sufficiently in written questions.

• When answering computational questions, candidates should always show workings as they will be
rewarded for this and it makes the task of answering the question much more straightforward.

General Comments

Centres and candidates are reminded that questions may be set on any part of the syllabus. The question on
costing was not as well answered as those on financial accounting.

Candidates should be reminded that it is very important to show workings wherever necessary as an
incorrect figure with no supporting workings will not be rewarded whereas if workings are shown, some
marks may be awarded even for an incorrect answer.

Comments on Specific Questions

Question 1

(a) Well prepared candidates were able to gain good marks on the preparation of the income
statement. Calculation of the trading section of the income statement involved preparation of sales
and purchase ledger control accounts. This was appreciated by better students, though many
omitted to make any adjustment for the $ 2600 goods for own use. Less well prepared students
appeared to have little knowledge of the structure of an income statement.

(b) The second task required candidates to prepare the statement of financial position. This was less
well done by the majority of candidates. Few candidates were able to correctly calculate the correct
opening capital balance or the correct net book value of the motor vehicles.

(c) The final task in Question 1 required candidates to state one advantage and one disadvantage of
a five year loan and a bank overdraft. This was a common generic question, but most answers
were superficial and lacked the necessary depth to be rewarded.

Question 2

(a) Candidates were expected to give an appropriate explanation of what is meant by mark-up. Vague
answers were not fully rewarded.

(b) Preparation of the trading section of the income statement relied on the ability to interpret the rate
of inventory turnover. Candidates must acquire a good understanding of accounting ratios rather
than simply memorising them.

© 2015
 Cambridge International Advanced Subsidiary and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

(c) A large number of candidates were not able to use the formula for calculating margin. When asked
to state a formula, a description is not sufficient. A common answer was ‘gross profit expressed as
a percentage of selling price’.

(d) (i) Candidates were expected to offer a correct explanation of non-current asset turnover measures.
Vague responses were not fully rewarded.

(ii) Most candidates were able to state the formula for non-current asset turnover and subsequently
calculate the ratio.

(e) Whilst a number of candidates gave adequate explanations of why a provision for doubtful debts
may be necessary, sufficient depth was required to gain the full reward.

(f) When asked to prepare an account, candidates must always remember to bring down the closing
balance on that account.

(g) Most well prepared candidates were able to correctly state how the provision for doubtful debts is
shown in both the income statement and the statement of financial position.

Question 3

(a) (b) Well prepared candidates were generally able to gain full marks for the calculation of the
contribution of the two products.

(c) (d) Having calculated the contribution, most candidates were then able to calculate the break-even
point in units and in revenue.

(e) The calculation of the margin of safety was less well done. Although this is a common question, a
number of candidates were unable to complete it.

(f) (g) In calculating the revised profit for the company under both proposals, those candidates who
recognised that it was a question of adjusting the contribution under each proposal and deducting
the revised fixed costs, were generally well rewarded.

(h) In advising the directors which proposal should be accepted, responses were rewarded based on
the candidates’ own figures. As a result, those candidates who attempted the question were
generally able to pick up marks.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/22
Structured Questions

Key Messages

Candidates should always provide clear workings when answering computational questions. Marks will
always be awarded for valid workings.

In written questions, candidates should make sure that they provide sufficient development to their answers.
One or two word answers will seldom suffice.

General Comments

Centres and candidates are once again reminded that questions may be set on any part of the syllabus.
Generally, cost accounting questions are not answered as well as those on financial accounting and
candidates must be aware that there will always be a cost accounting question in the examination.

Candidates should be reminded that it is very important to show workings wherever necessary as an
incorrect figure with no supporting workings will not be rewarded whereas if workings are shown, some
marks may be awarded even for an incorrect answer.

Candidates should be made aware that there is no better preparation for the examination than answering
previous examination questions and appropriate textbook exercises.

Comments on Specific Questions

Question 1

The question required candidates to calculate the opening capital of a business from data provided, to
calculate sales revenue, purchases, closing inventory and the cash payment made for motor expenses,
followed by preparation of the trader’s income statement.

(a) Whilst many candidates were able to correctly calculate the opening capital, the presentation of
most answers was unsatisfactory. Many candidates correctly listed the assets and liabilities, but
then omitted the closing balance of the bank account.

(b) (i) Calculation of the sales revenue was generally well done, though some candidates did not realise
that the sales revenue for the year was simply the total of credit sales and cash sales and
attempted to prepare a sales ledger control account.

(ii) Calculation of the purchases for the year did require preparation of a control account and most
candidates did this correctly.

(c) Calculation of the closing inventory proved challenging for the less well-prepared candidates. Many
did not realise that having been provided with the gross profit margin, preparation of the trading
section of the income statement would leave only the closing inventory as the balancing figure.

(d) This task specifically required the preparation of a cash account in order to identify the cash
payment made for motor expenses. Despite the specific requirement, some candidates presented
a calculation rather than a cash account and were not awarded marks. Only a few candidates were
able to produce a totally correct account.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
(e) Preparation of the income statement was generally well done by most candidates. Five marks were
available for the trading part of the income statement and credit for candidates’ own figures from
previous parts was allowed. Few candidates were able to correctly calculate the charge for
depreciation of motor vehicles and the loss on sale of the motor vehicle disposal, but the remaining
items of expenditure generally proved challenging. Presentation of the income statement was not
always as good was expected and some candidates did not correctly label gross profit and loss for
the year.

Question 2

The second question tested candidates’ knowledge of partnership accounts on the introduction of a new
partner. Whilst much of the question was quite well done, presentation was often not satisfactory.

(a) The first part of the question required candidates to prepare the partners’ capital accounts at the
time of the introduction of the new partner. Most candidates were rewarded with good marks,
though a number of candidates were not awarded two marks as they omitted to bring down the
closing balances on the accounts. Some candidates did not appear to know the difference between
capital accounts and current accounts and incorrectly included share of profit, drawings and
interest on capital and drawings. The most common error was to enter Kim’s opening capital as
$600 000, the opening capital from the previous year. The majority of candidates dealt correctly
with the goodwill.

(b) Preparation of the opening statement of financial position of the partnership was well done by most
candidates, though again, some candidates incorrectly included the same extraneous amounts
referred to above. The most common error was not to enter the correct cash and cash equivalents
balance and not accounting for the fact that the initial overdraft of $16 000 was amended into a
debit balance of $144 000 by the introduction of cash by Chan.

(c) Asked to state three advantages to Kim of forming a partnership, the vast majority of candidates
were able to provide three valid advantages and were rewarded with three marks.

(d) The next part of this question required candidates to explain why the partnership may wish to
increase the provision for doubtful debts rate from 2% to 5%. This was not answered satisfactorily,
with the majority of candidates choosing to offer generic comments around the prudence and
matching concepts. Very few candidates related their answer to the scenario which was what was
required.

(e) Very few candidates were able to calculate the correct difference in the two provisions, principally
as a result of not realising that Kim’s trade receivables of $343 000 were after deducting a 2%
provision for doubtful debts. The gross trade receivables were therefore $350 000.

(f) Most candidates were aware of the effect of the increase in provision for doubtful debts on both the
profit for the year and on current assets.

Question 3

The third question concentrated on allocation, apportionment and absorption and whilst most were able to
gain reasonable marks for the first part of the question requiring the cost apportionment, the remaining parts
of the question caused problems to many candidates.

(a) Most candidates were able to gain good marks by correctly allocating the forecast overheads,
though some had greater difficulty in reapportioning the service centres’ overhead costs. A number
of candidates used an incorrect basis for allocating the light and heat cost, using kilowatt hours
rather than floor area. It is equally important for candidates to be aware of the process of
reapportioning service centre costs.

(b) As has often been the case in the past, whilst the majority of candidates were able to calculate an
appropriate absorption rate for each production department, marks were frequently not awarded
where candidates did not stipulate the basis on which they would be applied – i.e. machine hours
or direct labour hours.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
(c) Over one half of candidates calculated correct over or under absorption based on their own figures
and were rewarded accordingly. However, many candidates used the total overheads calculated in
part (a) rather than the actual hours multiplied by the overhead absorption rate.

(d) Responses to the part requiring candidates to state two reasons for the under absorption or over
absorption of overheads calculated in part (c) was not satisfactory. The question clearly required
specific responses relating to Kapoor Limited, but the majority of candidates offered very generic
answers that were not rewarded.

(e) Many candidates were unable to explain why estimated figures are used to calculate overhead
absorption rates. It is very important that candidates understand the reasons for doing something,
not simply how to do it.

(f) The calculation of the full invoice value was not undertaken satisfactorily by the vast majority of
candidates. A number of candidates were able to correctly calculate the direct material and direct
labour elements of the invoice, but only a handful were able to correctly calculate the overhead to
apply.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/23
Structured Questions

General comments

Overall performance on this paper was satisfactory and there were some excellent scripts.

Candidates are advised to read each question carefully before starting their answers.

Comments on specific questions

Section A

Question 1

(a) This part was well answered with a significant number of candidates scoring full marks. The most
common errors were the omission of the carriage inwards and the incorrect treatment of the
manufacturing wages. A few candidates did not label prime cost and production cost of finished
goods and were lost marks accordingly.

(b) Again, this part was well answered with most candidates scoring high marks. The most common
errors were the miscalculation of the provision for doubtful debts and the incorrect placement of the
carriage inwards in cost of sales.

(c) This was less well answered than (a) and (b). Well prepared candidates were able to score full
marks but many merely gave an example such as obsolescence and did not provide the required
explanation.

Question 2

(a) Most candidates provided the correct formula and calculation for the trade receivables turnover, the
trade payables turnover and the current ratio. Performance was not so good for the inventory
turnover and the non-current asset turnover. Some candidates incorrectly used sales instead of
cost of sales when calculating the inventory turnover. A common error in the calculation of the
non-current asset turnover was the reversal of the formula.

(b) Performance on this part was mixed. There were some very good answers with candidates
demonstrating a sound understanding of the topic but also a misinterpretation of the requirement to
evaluate Alberto’s performance was shown by a few candidates who made calculations.

(c) Candidates generally scored better marks for the partnership than the limited company. Some
candidates showed a misinterpretation of the limited liability concept and few were able to provide
satisfactory disadvantages of forming the private limited company.

Question 3

(a) This was well answered with nearly all of the candidates making the correct calculation.

(b) This was also well answered although some candidates lost marks for not labelling contribution
and/or profit.

(c) Many candidates made the correct calculation but a significant number used the actual production
rather than the budgeted production.

© 2015
 Cambridge International Advanced Subsidiary Level and Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
(d) This was less well answered. Many candidates were unable to calculate the production cost and
many others were unable to deal with the under absorption.

(e) Most candidates produced an acceptable reconciliation statement.

(f) Most candidates demonstrated some understanding but the quality of the explanation was varied.
Many candidates did not mention the cost of the inventory and just discussed the two methods
generally.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/31
Multiple Choice

Question Question
Key Key
Number Number
1 D 16 B
2 C 17 C
3 A 18 D
4 C 19 B
5 B 20 B

6 B 21 B
7 D 22 D
8 A 23 C
9 C 24 C
10 A 25 B

11 C 26 A
12 B 27 B
13 B 28 A
14 C 29 A
15 D 30 C

General comments

43% of the total candidates achieved a score of 15 or more correct answers. The median mark was 13 and
mean mark 15. Most of the questions were well attempted, with both Questions 4 and 30 answered correctly
by 75% or more of candidates. There were some questions which proved challenging to candidates. They
have been reviewed below.

Specific questions

Question 7

This was a knowledge based question on the uses of the share premium account. These are clearly set out
in the Companies act. The answer was D: to write off preliminary expenses.

Question 21

This required knowledge of IAS36, impairment of non-current assets. The principle is that the carrying cost of
the assets is compared with the higher of the fair value of the asset and the asset’s value in use. If the
carrying value is higher than the figure it is compared to then it is required to be impaired; the difference is
written off in the income statement. In this case the carrying value was $114 000. The value in use was
$105 000 and the fair value was ($115 000 – 3000 selling costs = $112 000). The amount of the impairment
was $114 000 – 112 000 = $2000.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
Question 22

This required knowledge of IAS10. The question required candidates to classify the events as adjusting
event or non-adjusting event. In this instance both the items listed were non-adjusting events, hence the key
D.

Question 24

Over and under absorption of factory overheads proves challenging, both in identifying their causes from
written statements as in this case or in calculating the amount. Of the four statements given the one which
will give rise to an over absorption is when actual production is greater than budgeted production.

Overall comment

The candidates clearly put in a lot of effort to ensure most aspects of the syllabus were covered. The only
exception seems to be knowledge of IAS topics.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/32
Multiple Choice

Question Question
Key Key
Number Number
1 D 16 B
2 C 17 C
3 A 18 D
4 C 19 B
5 B 20 B

6 B 21 B
7 D 22 D
8 A 23 C
9 C 24 C
10 A 25 B

11 C 26 A
12 B 27 B
13 B 28 A
14 C 29 A
15 D 30 C

General comments

Performance of candidates was very good on this paper, with 77% of candidates achieving 15 or more
correct answers. A high number of questions appeared easy to candidates; 1, 3, 4, 5, 10, 12, 13, 19, 23, 25,
27, 28 were answered correctly by 70% or more of candidates. Only two questions proved challenging and
they have been discussed below.

Specific questions

Question 22

This required knowledge of IAS10. The principle is to determine which of the items listed is either an
adjusting or a non-adjusting event. In this instance both the items listed were non-adjusting events, hence
the key D.

Question 24

Candidates find questions on over and under absorption of factory overheads challenging. Of the four
statements given the one which will give rise to an over absorption is when actual production is greater than
budgeted production.

Overall comment

Candidates were clearly well prepared. However, candidates need to focus more on their knowledge of IAS.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/33
Multiple Choice

Question Question
Key Key
Number Number
1 C 16 B
2 C 17 C
3 D 18 D
4 C 19 D
5 A 20 C

6 B 21 A
7 A 22 D
8 A 23 B
9 D 24 A
10 A 25 A

11 C 26 C
12 B 27 C
13 D 28 D
14 D 29 A
15 C 30 C

General comments

Candidates performed well on this paper with 75% achieving a score of 15 or more. The median mark for the
paper was 19, with the mean slightly lower. Questions 1, 7, 8, 9, 13, 15, 16, 17, 20, 23, 24, 25 and 30
proved easy to candidates with 70% or more answering correctly. There were though some questions which
proved challenging and they are reviewed below.

Specific questions

Question 2

This question asked candidates to consider what the equivalent of dividends paid by a limited company is for
a sole trader. The answer was C, owner’s drawings on the principle that the owner and the business are
separate entities. The business retains profit; the owner takes drawings on account of the profit earned by
the business. A limited company retains the profit and the shareholders receive dividends.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
Question 5

This was a challenging question, requiring candidates to think backwards. The presumption was that the total
of the balances of the sales ledger had been used to prepare the financial statements. The transaction
omitted from the books would not have affected either the control account or the total of trade receivables.
The provision for doubtful receivables would have been deducted from the total of the balances. Likewise the
discount allowed would have been entered in the personal account of the customer. Thus the control account
balance of $128 000 should have been reduced by $2500 and $600 to arrive at the figure on the statement
of financial position ($124 900).

Question 10

This required candidates to think about the sources from which a company might issue bonus shares. A total
of $80 000 shares were to be issued. If the minimum amount was to come from the retained earnings, then
the maximum would come from the share premium of $60 000, leaving $20 000 to be taken from retained
earnings.

Question 21

This required knowledge of IAS23. The IAS states that interest can be capitalised during the time the asset is
under construction. Whilst the loan was taken out some time before that the interest cannot be capitalised,
as the planning permission may fail, or the company may decide to do something else with the funds. The
period of construction was seven months (March to September). Thus 7/12 of $6000 = $3500 could be
capitalised.

Overall comment

Once again the results for this paper were excellent. For the revised A level syllabus candidates will be
expected to think more about what they have prepared, rather than the straightforward process of preparing
financial statement.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/41
Problem Solving (Supplementary Topics)

General Comments

The majority of candidates were able to access the paper and attempt the majority of the question paper.
There were no apparent timing issues. Many candidates produced reasonable answers to each question with
some excellent well prepared and logically thought out scripts. Question 3 on investment appraisal was the
best answered question with some excellent answers showing correct calculations and all workings. On
Question 2 many candidates appeared unsure of which approach to take to calculate net assets in part (a),
which they then used in part (b). Most candidates seemed familiar with the IAS format required in Question
1, although few were able to provide the non-current asset note.

It cannot be stressed enough how important it is to show all workings even for straight forward calculations.
Candidates seemed to use the question paper as a working document, thereby often not providing full
workings to support their final answer in the answer booklet. Despite clear instructions to copy the tables
produced on the question paper into their answer booklet some candidates used the question paper to
provide a complete answer to Question 3 parts (a) and (b)(i). If workings are completed on another page
these must be included within the booklet.

Comments on Specific Questions

Question 1

(a) (i) This question was generally answered well despite many candidates ignoring the instruction on the
question paper to round their answers. Although the budgeted revenue was properly calculated for
the most part, there were a fair number of candidates who were unable to calculate the budgeted
gross profit or understand what the instructions meant. Some confused this with cost of sales and
showed a gross profit of 58% and cost of sales of 42%, or alternatively showed gross profit as 42%
of the original revenue, or showed the original gross profit increased by 42%.

Other common errors were adding in deprecation to the administrative expenses. Occasionally the
candidate added in the $ 4000 from the last income statement charge. If other expenses had been
incorrectly calculated some candidates were left with a loss before tax. However, they then still
went on to calculate a tax charge.

Candidates were not rewarded if they did not label key totals and subtotals in the income statement
(operating profit, profit before tax etc.) and used abbreviations for cost of goods sold and gross
profit. Occasionally there was a ‘net’ in a profit label.

(ii) The vast majority of candidates either omitted dividends entirely here or included only the ordinary
proposed dividends. Some candidates showed the opening balance as $ 24 000 from 1 October
2013. The layout and format confused a number of candidates – a few tried to show the whole
Statement of Changes in Equity, or omitted to given an indication of what was an opening and
closing balance.

(b) (i) Candidates were required to know how to present a full non-current asset note. Most showed
closing cost, accumulated depreciation and closing net book value. Some candidates showed the
lines for additions and the depreciation charge. The opening and closing balances had to be
correctly labelled. Often candidates omitted the previous year’s net book value.

(ii) Marks for this were variable – although some candidates did extremely well here both in terms of
layout and figures. Candidates should ensure they show workings. The presentation of non-current
assets was variable (often the investment and goodwill were omitted and labels for ‘tangible’ and

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

‘intangible’ left out). Most candidates did seem to understand and use the IAS terminology and
format. Strong responses showed the ‘Total Asset’ figure. Responses should avoid using the old
style format and terminology. The amounts for taxation seemed often not to be the candidate’s own
figure from part (a) but included the $ 4000 for the last statement, and Retained Earnings often did
not match up to the candidate’s answer in part (a)(ii). A number of candidates did not identify that
the trade receivables and payables figures needed to be calculated from the income statement
amounts for sales and purchases– some merely repeated the amounts from the 30 September
2014 statement. A very small minority realised that cash needed to be the balancing figure – most
candidates used the $ 61 000 from the original statement.

Question 2

(a) Most candidates attempted this question by calculating the revised values of the assets and
liabilities, although a number did provide a revised balance sheet but did not make it clear what
their final net assets figure was. A very small number of candidates tried to adjust the original value
of net assets for the change in assets and liabilities. Common errors were in the calculation of the
property value – it seemed that many the responses included depreciation on the land. Few
candidates stated a correct net book value for the equipment. Most identified the addition of
$ 16 000, however, incorrectly calculated depreciation on this and the existing equipment pro rata to
the number of months. Some candidates confused current assets, often taking this to be the total
assets figure of $ 153 200. The long-term loan was often omitted.

(b) Candidates needed to see the link between the calculations from part (a) and use this to determine
profit. Some candidates focused on an attempt to recreate the partners’ current accounts. Many did
have the correct approach but used incorrect opening net assets (frequently $ 152 300) but
mistakenly added in interest on capital.

Approaches varied, for example candidates used a T account, by putting the opening values of
assets on the debit side, the closing values of assets on the credit side, and visa versa for
liabilities.

(c) This part of the question was done well. The injection of capital by Zola was correctly treated as
was goodwill, either showing entries on both sides of the account or by netting off. Only A small
minority of candidates correctly calculated the revaluation – with common errors in their accounting
for depreciation over the first six months. A few candidates did confuse what should be contained
in the capital accounts, sometimes including items such as interest on capital. Only approximately
half of candidates brought balances down to achieve that final mark.

(d) Answers were confused in this question especially with regards to the calculation of the share of
profits and the interest of capital being split between the different periods of the year. Candidates
tended to work out the shares of profit without deducting interest on capital first. Many candidates
did not identify that the whole year needed to be accounted for, therefore frequently the drawings of
Andy and Nicole for the first six months and their share of profits and interest on capital for that
period were omitted. Other common errors were to include a full year’s interest on capital on the
capital account balances calculated in part (c), and not deducting interest on capital from the profit
available for sharing

(e) Candidates should avoid making comments that are just taken from the question paper.
Responses were expected to state the amount of drawings of each partner with conclusions. Some
compared the previous years’ drawings with only six months of drawings from the current year.
Quite a number of candidates thought that the amount of drawings had an impact on the profit
made.

Question 3

(a) Many candidates achieved full marks here. Rarely candidates lost marks for minor errors or, for
example, for failing to label the final net present value figure. A few candidates omitted the outflow
of $ 20 000 in year zero. A relatively small number of candidates had an incorrect net cash flow –
mainly this was because they added or deducted an extra $ 4000 in respect of depreciation.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

(b) (i) This was also very well done – the vast majority of candidates correctly applied to the relevant
discount factors to their own net cash flows.

(ii) Most candidates were able to calculate the internal rate of return (IRR) and apply this to their own
figures correctly, even if they had mistakenly calculated two positive values for the net present
values. A few candidates did not read the instructions and did not provide the answer to 2 decimal
places as required, or failed to provide a percentage sign.

(c) The accounting rate of return (ARR) was very well done. In a few situations the candidate had
supplied no workings to identify where the average profit figure was derived from. Common errors
related mainly to the calculation of depreciation and what was included in the net cash flow. The
average investment was also often shown to be $ 4000.

(d) Candidates reached appropriate conclusions here consistent with their own figures. Appropriate
development points supporting the conclusion were provided by most, although many did not draw
out the advantages of the net present value.

(e) (f) These provided varied answers. The most common answers provided by candidates related to
ordinary shares, their voting rights and the inconsistency of dividend return. Ideas about preference
shares were generally correct, although many candidates failed to mention that only cumulative
preference shares will be entitled to any arrears of dividends. Candidates generally knew enough
about ordinary shares and preference shares, but could not always identify which features would
be an advantage or disadvantage from a particular perspective. Some candidates looked for
advantages and disadvantages from the viewpoint of existing shareholders (although there are not
any) rather than new ones.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/42
Problem Solving (Supplementary Topics)

General Comments

The majority of candidates were able to access the paper and attempt the majority of the question paper.
There were no apparent timing issues. Many candidates produced reasonable answers to each question with
some excellent well prepared and logically thought out scripts. Question 3 on investment appraisal was the
best answered question with some excellent answers showing correct calculations and all workings. On
Question 2 many candidates appeared unsure of which approach to take to calculate net assets in part (a),
which they then used in part (b). Most candidates seemed familiar with the IAS format required in Question
1, although few were able to provide the non-current asset note.

It cannot be stressed enough how important it is to show all workings even for straight forward calculations.
Candidates seemed to use the question paper as a working document, thereby often not providing full
workings to support their final answer in the answer booklet. Despite clear instructions to copy the tables
produced on the question paper into their answer booklet some candidates used the question paper to
provide a complete answer to Question 3 parts (a) and (b)(i). If workings are completed on another page
these must be included within the booklet.

Comments on Specific Questions

Question 1

(a) (i) This question was generally answered well despite many candidates ignoring the instruction on the
question paper to round their answers. Although the budgeted revenue was properly calculated for
the most part, there were a fair number of candidates who were unable to calculate the budgeted
gross profit or understand what the instructions meant. Some confused this with cost of sales and
showed a gross profit of 58% and cost of sales of 42%, or alternatively showed gross profit as 42%
of the original revenue, or showed the original gross profit increased by 42%.

Other common errors were adding in deprecation to the administrative expenses. Occasionally the
candidate added in the $ 4000 from the last income statement charge. If other expenses had been
incorrectly calculated some candidates were left with a loss before tax. However, they then still
went on to calculate a tax charge.

Candidates were not rewarded if they did not label key totals and subtotals in the income statement
(operating profit, profit before tax etc.) and used abbreviations for cost of goods sold and gross
profit. Occasionally there was a ‘net’ in a profit label.

(ii) The vast majority of candidates either omitted dividends entirely here or included only the ordinary
proposed dividends. Some candidates showed the opening balance as $ 24 000 from 1 October
2013. The layout and format confused a number of candidates – a few tried to show the whole
Statement of Changes in Equity, or omitted to given an indication of what was an opening and
closing balance.

(b) (i) Candidates were required to know how to present a full non-current asset note. Most showed
closing cost, accumulated depreciation and closing net book value. Some candidates showed the
lines for additions and the depreciation charge. The opening and closing balances had to be
correctly labelled. Often candidates omitted the previous year’s net book value.

(ii) Marks for this were variable – although some candidates did extremely well here both in terms of
layout and figures. Candidates should ensure they show workings. The presentation of non-current
assets was variable (often the investment and goodwill were omitted and labels for ‘tangible’ and

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

‘intangible’ left out). Most candidates did seem to understand and use the IAS terminology and
format. Strong responses showed the ‘Total Asset’ figure. Responses should avoid using the old
style format and terminology. The amounts for taxation seemed often not to be the candidate’s own
figure from part (a) but included the $ 4000 for the last statement, and Retained Earnings often did
not match up to the candidate’s answer in part (a)(ii). A number of candidates did not identify that
the trade receivables and payables figures needed to be calculated from the income statement
amounts for sales and purchases– some merely repeated the amounts from the 30 September
2014 statement. A very small minority realised that cash needed to be the balancing figure – most
candidates used the $ 61 000 from the original statement.

Question 2

(a) Most candidates attempted this question by calculating the revised values of the assets and
liabilities, although a number did provide a revised balance sheet but did not make it clear what
their final net assets figure was. A very small number of candidates tried to adjust the original value
of net assets for the change in assets and liabilities. Common errors were in the calculation of the
property value – it seemed that many the responses included depreciation on the land. Few
candidates stated a correct net book value for the equipment. Most identified the addition of
$ 16 000, however, incorrectly calculated depreciation on this and the existing equipment pro rata to
the number of months. Some candidates confused current assets, often taking this to be the total
assets figure of $ 153 200. The long-term loan was often omitted.

(b) Candidates needed to see the link between the calculations from part (a) and use this to determine
profit. Some candidates focused on an attempt to recreate the partners’ current accounts. Many did
have the correct approach but used incorrect opening net assets (frequently $ 152 300) but
mistakenly added in interest on capital.

Approaches varied, for example candidates used a T account, by putting the opening values of
assets on the debit side, the closing values of assets on the credit side, and visa versa for
liabilities.

(c) This part of the question was done well. The injection of capital by Zola was correctly treated as
was goodwill, either showing entries on both sides of the account or by netting off. Only A small
minority of candidates correctly calculated the revaluation – with common errors in their accounting
for depreciation over the first six months. A few candidates did confuse what should be contained
in the capital accounts, sometimes including items such as interest on capital. Only approximately
half of candidates brought balances down to achieve that final mark.

(d) Answers were confused in this question especially with regards to the calculation of the share of
profits and the interest of capital being split between the different periods of the year. Candidates
tended to work out the shares of profit without deducting interest on capital first. Many candidates
did not identify that the whole year needed to be accounted for, therefore frequently the drawings of
Andy and Nicole for the first six months and their share of profits and interest on capital for that
period were omitted. Other common errors were to include a full year’s interest on capital on the
capital account balances calculated in part (c), and not deducting interest on capital from the profit
available for sharing

(e) Candidates should avoid making comments that are just taken from the question paper.
Responses were expected to state the amount of drawings of each partner with conclusions. Some
compared the previous years’ drawings with only six months of drawings from the current year.
Quite a number of candidates thought that the amount of drawings had an impact on the profit
made.

Question 3

(a) Many candidates achieved full marks here. Rarely candidates lost marks for minor errors or, for
example, for failing to label the final net present value figure. A few candidates omitted the outflow
of $ 20 000 in year zero. A relatively small number of candidates had an incorrect net cash flow –
mainly this was because they added or deducted an extra $ 4000 in respect of depreciation.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

(b) (i) This was also very well done – the vast majority of candidates correctly applied to the relevant
discount factors to their own net cash flows.

(ii) Most candidates were able to calculate the internal rate of return (IRR) and apply this to their own
figures correctly, even if they had mistakenly calculated two positive values for the net present
values. A few candidates did not read the instructions and did not provide the answer to 2 decimal
places as required, or failed to provide a percentage sign.

(c) The accounting rate of return (ARR) was very well done. In a few situations the candidate had
supplied no workings to identify where the average profit figure was derived from. Common errors
related mainly to the calculation of depreciation and what was included in the net cash flow. The
average investment was also often shown to be $ 4000.

(d) Candidates reached appropriate conclusions here consistent with their own figures. Appropriate
development points supporting the conclusion were provided by most, although many did not draw
out the advantages of the net present value.

(e) (f) These provided varied answers. The most common answers provided by candidates related to
ordinary shares, their voting rights and the inconsistency of dividend return. Ideas about preference
shares were generally correct, although many candidates failed to mention that only cumulative
preference shares will be entitled to any arrears of dividends. Candidates generally knew enough
about ordinary shares and preference shares, but could not always identify which features would
be an advantage or disadvantage from a particular perspective. Some candidates looked for
advantages and disadvantages from the viewpoint of existing shareholders (although there are not
any) rather than new ones.

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers

ACCOUNTING
Paper 9706/43
Problem Solving (Supplementary Topics)

General comments

Overall performance of the candidates was satisfactory on the paper.

Improvement was noted throughout the paper and this was particularly noticeable in Question 3 which
provided many excellent answers.

Comments on specific questions

Section A

Question 1

(a) Most candidates prepared a reasonable extract. Some candidates did not read the question and
produced columns other than the retained earnings column. Some candidates also lost marks for
not labelling the entries.

(b) The note was not prepared well. Many candidates fully omitted the total column and very few
entered the opening net book values.

(c) This was well answered by nearly all of the candidates. A few candidates used the old format and
as a consequence did not get the total assets mark.

(d) Many candidates did not answer the question for part (i) as they stated how the error could be
corrected rather than how it had affected the financial statements. Part (ii) was not answered
appropriately with a majority of candidates discussing IAS 10 (events after the reporting period).

Question 2

(a) The capital accounts were very well prepared with many candidates achieving full marks. The most
common error was not bringing down the closing balances for Abdul and Barry.

(b) The statement of financial position again was very well prepared with many candidates obtaining
full marks. The most common error was being unable to deal correctly with the $60 000 payment to
Chandra.

(c) There were some very good written answers. Less well prepared candidates gained few marks as
they were unable to explain that the convertible loan stock could be converted to shares and
consequently unable to highlight the required difference to the debenture.

(d) Though most candidates were able to calculate the ratios correctly, they often did not present them
appropriately. For example, the current ratio must be expressed as a value : 1 and the earnings per
share must be expressed as a monetary value. Some candidates calculated the interest cover
rather than the income gearing ratio..

(e) There were some very good responses but a significant number of candidates stated that the ratio
was higher or lower without further explanation. It is imperative when answering such a question
that the candidate explains whether the ratio is better or worse. Some candidates advised Chandra
basing their advice on ratios other than those asked for in the question (return on capital employed,
gearing and income gearing).

© 2015
 Cambridge International Advanced Level
9706 Accounting June 2015
Principal Examiner Report for Teachers
Question 3

(a) Nearly all candidates scored full marks for this section.

(b) Most candidates scored full marks for the Process 1 account. The Process 2 account was also
generally well prepared. The most common error was the miscalculation of the number of units of
scrap as 10% of the total cost rather than 10% of the units.

(c) This part was very well answered with no common errors.

(d) Most candidates were able to calculate a revised cost per unit.. The advice given was also
generally correct.

(e) The work-in-progress was generally calculated correctly. The most common error was the incorrect
inclusion of the fixed overhead.

(f) This part was the least well answered of the question with many candidates just providing a list of
all of the elements of cost.

© 2015