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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

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GCE Ordinary Level

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MARK SCHEME for the May/June 2009 question paper
for the guidance of teachers

7110 PRINCIPLES OF ACCOUNTS

7110/02 Paper 2 (Structured), maximum raw mark 120

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.

Mark schemes must be read in conjunction with the question papers and the report on the
examination.

• CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2009 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.
 Page 2 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2009 7110 02

1 (a) Book of Debit Credit Effect on

original entry profit

(ii) Sales Journal (1) Sallis $1650 (1) Sales $1650 (1) +$700 (1)

(iii) Purchase Returns (1) Evans & Co $325 (1) Purchase Returns (1) Nil (1)
Journal $325
(iv) Cash Book (1) Bank $1455 (1) G.Black $1500 (1) -$45 (1)
Discount Allowed $45 (1)

(v) General Journal (1) Disposal $600 (1) Profit and Loss $600 (1) +$600 (1)
[17]

(b) (i) An invoice is:

An official demand for payment (1)
PLUS (1) for developing a further characteristic
It details the goods or services delivered
Will be sent to customers for sales or received from creditors for purchases
Will be recorded in the sales journal or purchases journal
Details the terms of payment

(ii) A credit note is:

An advice that the debtors account will be credited (1)
PLUS (1) for developing a further characteristic
Used when sales have been made but the goods are returned as incorrect or defective
Recorded in the sales returns journal or purchase returns journal [4]

[Total: 21]

© UCLES 2009
 Page 3 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2009 7110 02

2 (a) (i) Error of omission (1)

(ii) Error of commission (1)

(iii) Error of principle (1)

(iv) Error of reversal (1) [4]

(b) Dr Cr
$ $
(i) Purchases 2 000 (1)
A Morston 2 000 (1)

(ii) T Cley 650 (1)

C Tilley 650 (1)

(iii) Motor vehicle expenses 500 (1)

Motor vehicle 500 (1)

(iv) L Staithe 380 (1)

Discount allowed 190 (1)
Discount received 190 (1) [9]

(c) $
Original net profit 14 670
Plus
Discount allowed 190 (1of)
Discount received 190 (1of)
15 050
Less
Purchases 2 000 (1)
Motor expenses 500 (1)
Revised net profit 12 550 (1of)

(Alternative presentation accepted) [5]

[Total: 18]

© UCLES 2009
 Page 4 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2009 7110 02

3 (a) Single time 120hrs × $5 = $600

Time and a half 12 hrs × $7.5 = $90
Double time 6 hrs × $10 = $60
$750 (2)
Less tax and social security 40% $300 (2of)
Wages payable $450 (1of) [5]

(b) Journal
Dr Cr
$ $
Wages 815 (1of)
Sundry creditors/Manager 450 (1of)
Tax and social security 365 (1of) [3]

(c) Cafe Trading account for the month ended 30 April 2009

$ $
Sales 9 850 + 770 10 620 (1)
Opening stock 1 700
Purchases
4 320 – 1 830 + 1 470 3 960 (2)
5 660
Closing stock 1 230 (1)
4 430
6 190
Less
Wages 815 (2)
Repairs to fixtures 165 (1)
Depreciation on fixtures 50 (1)
1 030
Profit on refreshments 5 160 (1of)
10 620

(Alternative presentation accepted) [9]

(d) Points may include;

Receipts and payments Income and expenditure
Contains all receipts and payments of cash Contains income and expenses relating to the
period
Contains capital receipts and payments Contains depreciation of capital items
Has a balance of cash Identifies surplus/deficit for period
No adjustments made to expenditure Expenditure paid adjusted to that incurred

2 marks per difference × 2

(Accept other valid points) [4]

[Total: 21]

© UCLES 2009
 Page 5 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2009 7110 02

4 (a) Possible differences;

Partnership Limited Company
Partners have unlimited liability Limited Company has limited liability to the
extent of the capital invested
Partnership limited in ability to raise capital Limited Company generally has wider sources
for funds
Partnership managed by owners Limited Company owners employ a Board of
Directors to manage the business
Partners can make drawings throughout Shareholders cannot make drawings
the period

2 marks per difference × 2

(Accept other valid points) [4]

(b) Bell and Hayward Appropriation Account

$ $
Net profit 20 500
Interest on drawings:
Bell 240 (1)
Hayward 800 (1)
1 040
21 540
Interest on capital:
Bell 2 850 (2)
Hayward 1 200 (1)

Salary – Hayward 12 000 (1)

Share of profit:
Bell 2 745 (1of) If correct split and no aliens
Hayward 2 745 (1of)

21 540

(Alternative presentation accepted) [8]

(c) Hayward – Current account

$ $
Balance b/d 1 500 Interest on capital 1 200
Interest on drawings 800 (1)of Salary 12 000 (1)
Drawings 20 000 Share of profit 2 745 (1)of
Balance c/d 6 355
22 300 22 300
Balance b/d 6 355 (1)of [4]

COGS 240 000 (1)

(d) (i) = = 15 Times (2) [4]
Average stock 16 000 (1)

Gross profit × 100 60 000 (1) × 100

(ii) = = 20% (2) [4]
Sales 300 000 (1)

© UCLES 2009
 Page 6 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2009 7110 02

(e) Possible reasons:

1 Prices have been reduced to increase sales volume

Advertising increased sales volume

2 Regulation of prices to increase sales required

Gross profit
The cost of goods sold was increased as a result of higher purchase prices charged by
suppliers

2 marks per reason × 2 [4]

(Accept other valid reasons)

[Total: 28]

5 (a) Sue Searle – Trading and Profit and Loss Account for the year ended 31 March 2009

$ $
Sales 95 800 (1)

Opening stock 10 780 (1)

Purchases 48 340 (1)
Carriage In 3 800 (2)
52 140
Purchase Ret. (960) (1)
51 180
61 960
Closing stock 12 600 (1)
Cost of sales 49 360
Gross profit 46 440 (1)
Plus
Discount received 5 300 (1)
Decrease in PDD 190 (1)
5 490
51 930
Less
Motor vehicle wages 9 200 (1)
Motor vehicle expenses 5 200 (1)
Motor vehicle deprec. 800 (1)
Premises depreciation 1 200 (1)
Rent, ins. 7 700 – 450 7 250 (1)
Light, heat 4 950 + 130 5 080 (1)
General and marketing 6 200
Loan interest 2 400 (1)
37 330
Net profit 14 600 (1)
51 930

(Alternative presentation accepted) [18]

© UCLES 2009
Page 7 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2009 7110 02

(b) Balance Sheet at 31 March 2009

$ $
Fixed assets
Cost Deprec Book value
Premises 60 000 – 13 200 46 800 (1of)
Motor van 20 000 – 16 000 4 000 (1of)
50 800

Current assets
Stock 12 600 (1)
Debtors 18 500 (1)
less PDD 370 (1)
18 130
Prepaid insurance 450 (1)
Cash 270 (1)
31 450

Current liabilities
Creditors 9 750 (1)
Accruals (2 400 + 130) 2 530 (2)
Bank overdraft 1 680 (1)
13 960
Working Capital 17 490
68 290
Long term liabilities
Bank loan 30 000 (1)
38 290
Financed by:
Capital 35 000
Net profit 14 600 (1of)
49 600
Drawings 11 310 (1)
38 290

(Alternative presentation accepted) [14]

[Total: 32]

© UCLES 2009
 Page 8 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2009 7110 02

ASSESSMENT GRID

Question Syllabus A: Knowledge B: Analysis C:Evaluation Total

Reference with Marks
Understanding

1(a) 1.2,1.4 9 4 4 17
1(b) 1.3 4 4
2(a) 1.8,2.3 4 4
2(b) 1.6,2.3 3 6 9
2(c) 3.1 5 5
3(a) 5.2 5 5
3(b) 5.2 2 1 3
3(c) 4.3 9 9
3(d) 4.3 4 4
4(a) 4.2,4.5 4 4
4(b) 4.2 8 8
4(c) 4.2 4 4
4(d) 6.1 8 8
4(e) 6.1 4 4
5(a) 4.1,3.1 15 3 18
5(b) 4.1,3.2 13 1 14

Total 30 70 20 120

Percentage (%) 25 58 17
Specification (%) 25 55 20 100

© UCLES 2009