Mark Scheme with Examiners’ Report
GCE O Level Accounting (7011)
June 2006
delivered locally, recognised globally
Mark Scheme with Examiners’ Report
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ACCOUNTING 7011, MARK SCHEME
Question 1 (a) and (b)
Software Ltd Account
Apr 1 Balance b/d 2 000 ¥ Apr 16 Bank 1950¥
Apr 16 Discount All 50¥
Byte Ltd Account
Apr 1 Balance b/d 1 500 ¥
Apr 23 Sales 19 800 ¥
Stock Account
Apr 1 Balance b/d 4 500 ¥ Apr 30 Trading 4 500¥
Apr 30 Trading 3 200 ¥
Mega Ltd Account
Apr 3 Bank 3 492 ¥ Apr 1 Balance b/d 3 600¥
Apr 3 Discount Rec 108 ¥
Video Ltd Account
Apr 1 Balance b/d 5 000¥
Apr 3 Purchases 11 000¥
Capital Account
Apr 1 Balance b/d 31 500¥
Supreme Fitters Account
Apr 12 Fixtures/VAT 4 400¥
Fixtures and Fittings Account
Apr 12 Supreme Fitters 4 000 ¥
Drawings Account
Apr 7 Bank 500 ¥
Admin Exps Account
Apr 12 Bank 80 ¥¥ Apr 30 Profit/loss 170¥
Apr 30 Petty cash 90 ¥
Selling Exps Account
Apr 30 Petty cash 20 ¥ Apr 30 Profit/loss 20¥
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Purchases Account
Apr 21 Bank 1 000 ¥¥ Apr 30 Trading 11 000¥
Apr 30 Sundry creditors 10 000 ¥
Sales Account
Apr 30 Trading 38 000 ¥ Apr 29 Bank 20 000¥¥
Apr 30 Sundry Debtors 18 000 ¥
VAT Account
Apr 12 Supreme Fitters 400 ¥ Apr 29 Bank (Sales) 2 000¥
Apr 12 Bank (Adm exp) 8 ¥ Apr 30 Sundry Deb (Sales) 1 800¥
Apr 21 Bank (Pchs) 100 ¥
Apr 30 Sundry Creditors 1 000 ¥
Apr 30 Petty Cash 11 ¥
38 x ¥ = 19 marks
(c) Using the valuation of stock as your example, evaluate the importance of the prudence concept to the
preparation of final accounts
Up to ¥¥¥ for a point in favour
Up to ¥¥¥ for a point against, or up to ¥¥¥ for a further point in favour
Up to ¥¥¥¥ for conclusion
Example answer
Faisa will value stock at cost¥ or net realisable value whichever is lower¥ because this takes a cautious view¥.
She might have taken some other measure e.g. selling price …but this would not have been cautious¥ and
would have overstated profits¥ and made the balance sheet inaccurate¥
Overall, it is essential that prudence is applied to give an accurate profit ¥¥ and a true and fair balance sheet ¥¥.
10 x ¥ = 5 marks
Total 24 marks
Question 2
Profit and Loss Account for year ended 31 March 2006
Opening stock 2 000¥ Fees received 420 000¥
Materials 22 000¥
Less drawings 500¥
Less closing stock 640¥ 22 860
Wages 40 000¥
Admin Exps 8 500¥
Advertising 840¥
Int on loan (Filling) 500¥
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Insurance owing 900¥
Prov for dep fittings 6 000¥
79 600
Net Profit 340 400 ¥
420 000 420 000
12 x ¥ = 6 marks
Appropriation Account for year ended 31 March 2006
Interest on Capital Net Profit 340 400¥
F 5 000 Interest on Drawings
K 2 500 7 500¥ F 1 000
Salaries K 950¥
F 80 000
K 80 000 160 000¥ 167 500
Share of Profit
F 104 910¥
K 69 940¥ 174 850
342 350 342 350
6 x ¥ = 3 marks
Current Accounts of Filling and Kap
F K F K
Balance b/d 15 000¥ Balance b/d 5 000¥
Drawings 100 500¥¥ 95 000¥ Interest on Capital 5 000¥ 2 500¥
Interest on drawings 1 000¥ 950¥ Share of Profit 104 910¥ 69 940¥
Balance c/d 93 910¥ 41 490¥ Salary 80 000¥ 80 000¥
Interest on Loan 500¥
195 410 152 440 195 410 152 440
16 x ¥ = 8 marks
Question 2 (cont)
Balance sheet at 31 March 2006
Fixed Assets
Premises 255 300¥
Fixtures & Fittings 60 000¥
Less provision for depreciation 24 000 36 000¥ 291 300¥
Current Assets
Stock 640¥
Bank 7 500¥
Cash 275¥ 8 415¥
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Less Current Liabilities
Insurance owing 900¥
Creditors 3 415¥ 4 315¥
Working Capital 4 100
295 400
Capital Accounts
Filling 100 000
Kap 50 000 150 000¥
Current Accounts
Filling 93 910
Kap 41 490 135 400¥ 285 400
Loan from Filling 10 000¥
295 400
14 x ¥ = 7 marks
Question 3
(a)(i) acid test ratio = current assets –stock ¥¥
current liabilities
(ii) gross margin = Gross Profit x 100 ¥¥
Sales
(iii) Rate of stock turnover = Cost of sales ¥¥
Average stock
6 x ¥= 3 marks
________________________________________________________________________
(b) Award ¥¥for any acceptable strategy to improve profit
e.g. advertising campaign to boost sales
reduce costs by finding a cheaper supplier etc.
2 x ¥ = 1 mark
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________________________________________________________________________
(c) Award ¥¥ for the any acceptable strategy to improve liquidity
e.g. offer cash discount to encourage quicker payment by debtors
reduce prices to turn stock into cash
sell off surplus fixed assets, etc.
2 x ¥= 1 mark
________________________________________________________________________
(d) Award up to ¥¥¥¥ for each point, (¥¥ for point and ¥¥ for development)
(i) Sales have gone up but profits have decreased
x Business expenses (e.g. advertising ) may have increased massively to
lower the net profit ¥¥¥¥
x The cost of materials (purchases) may have increased significantly and
Dhaka Ltd has not been able to pass the full cost (in sales prices) to the customer
etc. ¥¥¥¥
(8 x ¥ = 4 marks)
(ii) Profits have gone down yet working captial has improved.
x Profits may have reduced due to a rise in advertising. This may have been
accompanied by the sale of an asset for cash hence improving liquidity¥¥¥¥
x Profits may have been reduced due to selling items off cheap (sale). This may have been accompanied by
raising a long term loan¥¥¥¥
(8 x ¥ = 4 marks)
16 x ¥ = 8 marks
Total 13 marks
Question 4
Adonnis Boxos¥
(a)
Manufacturing Account for year ended 31 March 2006¥
Raw Materials Cost of Finished Goods 298 600¥¥
Opening Stock 500¥
Purchases 200 000¥ 200 500
Less Cl Stock 400¥
Less Rets Outw 100¥ 500
CORMC 200 000 ¥¥
Man. Wages 80 000 ¥
PRIME COST 280 000 ¥¥
Factory O/H’s
Indirect F Exps 6 000¥
Depr on P/M 12 000¥¥ 18 000
Work in Progress
Opening Stock 800¥
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Less Cl Stock 200¥ 600
298 600 298 600
If alien items included lose one sub total ¥.
¥¥ for sub total must be correct
¥ for sub total OF (NC)
18 x ¥ = 9 marks
(b)
Trading Account for year ended 31 March 2006
Finished Goods Sales 595 000¥¥
Opening Stock 2 400¥
Cost of F G 298 600¥ 301 000
Less Cl Stock 3 500¥
Cost of Sales 297 500 ¥
Gross Profit 297 500 ¥¥
595 000 595 000
8 x ¥ = 4 marks
Total 13 marks
Question 5
An error was identified on question 5 on the day of the examination. The correct figure under point (iv) should
be £150. It was agreed at standardisation in light of the error identified that any figure provided by candidates
in would be accepted and examiners marked all accounts generously to compensate for this. The answers
calculated with the correct figure have been included below.
Subscriptions Account
April 1 Balance b/d 250 ¥ April 1 Balance b/d 100¥
Mar 31 Inc/Exp 50 000 ¥¥ Mar 31 Bank/R & P 50 250¥
Mar 31 Balance c/d 150 ¥ Mar 31 Balance c/d 50¥¥
50 400 50 400 10 x ¥ = 5
marks
Apr 1 Balance b/d 50¥ Apr 1 Balance b/d 150¥
Income and Expenditure Account of Sylett Cricket Club¥ for year ended 31 March 2006¥
Rent 1 600¥ Subscriptions 50 000¥¥
Less prepaid 120 1 480¥ Competition receipts 800¥
Wages 8 500¥
Add accrued 140 8 640¥
Repairs 320¥
Competition fees 350¥
Deprn on Equip 2 500¥
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Loss on sales equipment 360¥¥ 13 650
SURPLUS 37 150¥¥
50 800 50 800
16 x¥= 8 marks
Total 13 marks
Question 6
Balance Sheet of Tsaris Ltd at 31 March 2006
Fixed Assets
Premises 700 000¥
Plant and machinery 500 000
Less provision for depreciation 100 000 400 000¥ 1 100 000¥
Current Assets
Stock (-40 000¥) 80 000¥
Income in arrears (-150¥) 150¥
Debtors 15 500¥
VAT 880¥
Cash 2 000¥ 98 530¥
Less Current Liabilities
Bank overdraft 28 680¥
Preference dividend proposed 25 000¥
Ordinary dividend proposed 50 000¥
Debenture interest owing 3 000¥
Creditors 15 000¥ 121 680¥
Working Capital -23 150
1 076 850
Authorised Capital
4 000 000 25p Ordinary shares 1 000 000
500 000 50p 5% Preference shares 250 000 1 250 000¥
Issued Capital
2 000 000 25p Ordinary shares (fully paid) 500 000¥
300 000 50p 5% Preference shares (fully paid) 150 000¥ 650 000
Profit and loss credit balance (-3 000¥ -150¥ - 376 850¥
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50 000¥ -40 000¥)
Shareholders’ funds 1 026 850
6% Debentures 50 000¥
1 076 850
Total 13 Marks
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Examiners’ Report
GCE O Level Accounting (7011)
June 2006
delivered locally, recognised globally
Examiners’ Report
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ACCOUNTING 7011, CHIEF EXAMINERS’ REPORT
General Comments
This paper was the second June paper on the revised specification. Centres are
taking time to reach the standard of work pre-revision. VAT, accounting concepts
and the greater amount of evaluation pose development issues for candidates.
Some progress is being made. If the advice in this report is turned into action by
Centres and Candidates, further improvement in the standard will be the outcome.
The vast majority of candidates answered all questions on the paper. Written
aspects in general and evaluation in particular continued to be poor.
Question 1
As usual ledger work proved to be difficult for many candidates, showing perhaps that
the bulk of their studies is given over to preparing final accounts and giving less weight to
the basic bookkeeping procedures. However, most candidates made a reasonable
attempt at this question. The main points of weakness were:
x The treatment of VAT. This is probably the main area that needs attention.
VAT was often included in the nominal accounts and omitted from the personal
accounts. This is a point for teachers to pick up on – stress that the customer
or supplier account contains everything (goods and VAT) and that this is then
split up in the nominal ledger into goods (sales or purchases account) and VAT
account. After practice this would become familiar and students would have
no problem with it. The VAT account itself caused severe difficulty to many –
incorrect amounts on the incorrect side with incorrect narrations.
x Narrations. Numerous marks were lost due to incorrect narrations
The main rule is not difficult and can be easily grasped with practice. The
narration for each entry should be the name of the account where the double
entry is recorded.
Candidates are not distinguishing between bank, cash and petty cash.
Many candidates are still writing simply Bb/d or just b/d. This occurred 6 times
in this question and caused the loss of 3 marks for those who could not take the
time to write Balance properly.
x Transfers to the trading and profit and loss accounts. Some candidates did
not do this at all and others transferred to the wrong account. Again this
simply requires good practice.
The written part of this question was not well answered. Most candidates referred
to not anticipating profits and better ones used the phrase ‘true and fair value’ but
got no further. Very few attempted to explain net realisable value. The trigger
word evaluation is asking candidates to weigh up the strengths and weaknesses and
draw a conclusion. Candidates are advised to practise these techniques of
evaluation.
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Question 2
Most candidates scored well on this final accounts question. The main problem areas
were:
x Failure to recognise that this was a service business and that fees would be
shown on the credit of the profit and loss account with the corresponding
expenses shown on the debit side.
x Stock drawings and interest on loan often omitted.
x Few candidates found the correct insurance figure in either the profit and loss
account or the balance sheet.
Question 3
(a) (b) and (c) Most did well, showing good knowledge of formulae and selecting
appropriate strategies.
(d)
Candidates found the final 8 marks in this question difficult to obtain.
Liquidity was particularly weak. Most suggested that current assets had
increased and current liabilities had decreased and gave no further reason.
Others made suggestions which would have simply caused a change in the
composition of the working capital without altering its total. Liquidity can be
increased by reducing other parts of working capital (stock and debtors) but
working capital can be increased only by bringing in funds from another
section of the balance sheet.
Question 4
This question was well done by most. The main problems were:
x classifying items in the incorrect section. For example, returns outward
appeared in many places - only one of which was correct.
x candidates must appreciate that selection is an important part of some
questions. Not all items are actually required.
x many candidates lost 1 mark by omitting the name of the person and of the
account.
x inability to use the mark up to calculate the sales figure in the trading
account.
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Question 5
(a) There was an error in the paper on this question relating to subscriptions. The
subscription account was marked very generously to offer compensation.
x A significant number failed to use the word ‘balance’ but wrote ‘accrued
b/d’ or ‘prepaid b/d’. This is unacceptable but can easily be corrected.
x Some candidates were confused over which side the opening balances
should appear on. An asset is a debit balance b/d and a liability is a credit
balance b/d.
(b) The income and expenditure account was well done by most. The main
problems related to:
x the sale of equipment
x treatment of the loan
x poor title.
Question 6
Most candidates scored well on this balance sheet question, showing good
classification of items. Points of difficulty were:
x the income in arrears and VAT were often placed under current liabilities.
x dividends were often omitted and those who did include them often failed
to write ‘proposed’ and so lost marks.
x the majority are still not giving the details of the share capital. Even where
this was done marks were lost due to a failure to state ‘fully paid’.
ACCOUNTING 7011, GRADE BOUNDARIES
Grade A B C D E
Lowest
mark for
62 52 43 38 26
award of
grade
Note: Grade boundaries may vary from year to year and from subject to subject,
depending on the demands of the question paper.
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