Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2021
1 hour

You must answer on the multiple choice answer sheet.

*4583803857*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 03_9706_12/4RP
© UCLES 2021 [Turn over
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1 A business values its inventory at the lower of cost and net realisable value.

Which accounting concept is being applied?

A business entity
B duality
C matching
D prudence

2 On 1 May, Tom sold an old motor vehicle with a net book value of $10 000 to Arnold for $12 000.
Arnold paid $7500 by cheque and agreed to pay the balance by instalments.

What was the net effect of these transactions on Arnold’s accounting equation on 1 May?

owner’s equity
assets liabilities
/ capital
$ $
$

A increase 2500 increase 2500 no effect

B increase 2500 increase 4500 decrease 2000
C increase 4500 increase 2500 increase 2000
D increase 4500 increase 4500 no effect

3 Which item is not included as part of the capital cost of a new machine?

A cost of delivering the machine to the factory

B cost of installing the new machine
C interest on a loan used to buy the machine
D invoice price of the machine

4 Why does a business charge depreciation on its non-current assets?

A to retain profits for the replacement of worn out assets

B to show the correct value of the asset in the statement of financial position
C to show when an asset needs replacing
D to spread the cost of the assets over their useful lives

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5 The net book value of motor vehicles of a company is shown.

beginning of
end of the year
the year

$312 000 $305 000

During the year, an old vehicle was traded in as part exchange for a new vehicle. The part
exchange value of the old vehicle was $8000. The remaining purchase price of the new vehicle,
$30 000, was paid by cheque.

What was the depreciation charge for the year?

A $29 000 B $37 000 C $45 000 D $53 000

6 The bank statement of a business showed a credit balance of $4520. This did not agree with the
cash book. The following were discovered.

1 Bank charges of $89 had not been entered in the cash book.
2 There were unpresented cheques paid to suppliers of $680.
3 A dishonoured cheque for $210 appeared on the bank statement, but was not
shown in the cash book.
4 Sales receipts of $750 had been entered in the cash book, but did not appear on the
bank statement.

What is the bank balance to be shown in the statement of financial position?

A current asset $4501

B current asset $4590
C current liability $4450
D current liability $4539

7 What may help a book-keeper detect errors in the accounting records of a business?

1 books of original entry

2 sales ledger control account
3 statement of financial position
4 trial balance

A 1 and 3 B 2 and 3 C 2 and 4 D 3 and 4

8 The closing balance on a purchases ledger control account is $163 762. The purchases journal
has been undercast by $1000.

What is the correct closing balance on the purchases ledger control account?

A $162 762 B $163 762 C $164 762 D $165 762

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9 A business has calculated its draft profit for the year as $15 000. The following were then
discovered.

1 General expenses were understated by $600.

2 The sales journal total of $55 690 had been posted to the sales account as $56 590.
3 Repairs to vehicles of $1100 had been entered in the vehicles (at cost) account.
4 The salaries account included travelling expenses of $2400 paid to the salesmen.

What was the correct profit for the year?

A $12 400 B $13 600 C $14 200 D $14 800

10 A sole trader maintains a provision for doubtful debts at 5% of trade receivables. Provision for
doubtful debts at the start of the year was $2750. The following information is available at the end
of the year.

trade receivables 37 500

irrecoverable debts written off during the year 500

What is the effect on the profit for the year due to the change in the provision for doubtful debts?

A decrease by $875
B decrease by $900
C increase by $875
D increase by $900

11 Esarba has a financial year end of 31 December.

On 31 March 2020, she transferred her private vehicle to the business at a value of $12 000.

Her profit for the year ended 31 December 2020 was $7800 and her cash drawings amounted to
$8000. Depreciation of $900 had been provided on the vehicle.

She also took goods for her own use with a cost price of $1000 and a selling price of $2000.

What was the increase in Esarba’s capital account balance in the year ended 31 December 2020?

A $8900 B $9800 C $9900 D $10 800

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12 At the end of his first year of trading, the trader lost all of his inventory in a fire. He knows the
values of sales and purchases and wishes to calculate the value of the inventory lost.

Which ratio should he use?

A gross margin
B profit margin
C trade payables turnover
D trade receivables turnover

13 X and Y were in partnership sharing profits and losses equally.

Z was admitted as a partner and the profit and loss sharing ratio for X, Y and Z will be 2 : 2 : 1
respectively.

On the date of admission, the value of non-current assets was increased by $48 000.

Goodwill was valued at $30 000 but would not be retained in the books of account.

What was the effect on X’s capital account?

A increased by $19 200

B increased by $24 000
C increased by $27 000
D increased by $31 200

14 Which items would appear in a partnership’s appropriation account, in the absence of a

partnership agreement?

1 profit for the year

2 partners’ interest on drawings
3 partners’ salaries
4 partners’ share of profits

A 1 and 4 B 1 only C 2 and 3 D 4 only

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15 Annie and Bernie have been in partnership for some years, sharing profits and losses in the ratio
2 : 1.

On 1 January 2020, they decided to introduce interest on drawings. The annual interest on
drawings for the year ended 31 December 2020 was $1300 for Annie and $800 for Bernie.

Which effect did this change have on the balance on Annie’s current account at 31 December 2020?

A decrease of $100
B decrease of $500
C increase of $100
D increase of $500

16 The total of shareholders’ equity at 31 December 2019 was $45 500.

During the year ended 31 December 2020, the following took place.

1 An issue of 10 000 ordinary shares of $1 each at a premium of $0.25 was made.

2 A bonus issue of 5000 shares of $1 each was made.
3 Buildings were revalued from $250 000 to $265 000.
4 The profit for the year was $20 400.
5 There was a transfer to the general reserve of $6000.
6 The directors proposed a final dividend of $8000.

What was the balance of the shareholders’ equity at 31 December 2020?

A $85 400 B $87 400 C $93 400 D $98 400

17 The following relates to a limited company during a year.

repayment of a debenture 200 000

receipt from issue of ordinary shares 500 000
non-current assets purchased by cheque 300 000
net book value of disposals 50 000
disposal proceeds 60 000
revaluation surplus 20 000

What was the total net cash inflow arising from these?

A $60 000 B $70 000 C $80 000 D $110 000

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18 What is included in the reserves of a limited company?

A debentures
B ordinary shares
C preference shares
D share premium

19 Which ratio will help a business assess its ability to meet its immediate cash requirements?

A expenses to revenue
B liquid (acid test)
C non-current asset turnover
D return on capital employed

20 The following information for a business was available at the end of its financial year.

inventory 20 000
bank 8 400 credit
trade receivables 35 000
trade payables 15 000
rent receivable in arrears 3 000

There is also a 5-year bank loan of $20 000 repayable in equal annual instalments.

What was the current ratio?

A 2.12 : 1 B 2.88 : 1 C 3.52 : 1 D 4.43 : 1

21 A manufacturing company pays its production employees basic wages at the same hourly rate
every week. It also pays them a bonus based on achieving production targets.

What sort of cost is this an example of?

A fixed cost
B semi-variable cost
C stepped cost
D variable cost

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22 A company receives the following units of raw material into inventory.

per unit total

units
$ $

120 38 4560
100 40 4000
60 44 2640

It then issued 240 units.

Inventory is valued using the weighted average (AVCO) method.

What was the closing value of inventory?

A $1440 B $1520 C $1600 D $1760

23 The budgeted data of N Limited is as follows.

production level total costs

15 000 units $406 000

25 000 units $546 000

What is the budgeted fixed cost?

A $196 000 B $238 000 C $336 000 D $357 000

24 In March, a company’s overhead absorption rate was $2 per machine hour. In April this rate
increased.

What had increased in April causing the change in the overhead absorption rate?

A cost of insurance for the factory

B hourly pay rate of production workers
C number of actual machine hours worked
D number of budgeted machine hours

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25 A business absorbs its overheads on the basis of machine hours.

The following information is provided.

actual budgeted

overheads $564 000 $560 000

machine hours 6700 7000

By how much are overheads under or over-absorbed?

A over-absorbed by $4000
B under-absorbed by $4000
C over-absorbed by $28 000
D under-absorbed by $28 000

26 Which situation is not usually suitable for the use of marginal costing?

A negotiating a regular selling price with a customer

B quoting a selling price for a special order
C when there is a shortage of direct material for the next month
D whether to make or buy-in a product

27 The following budgeted information is available for 10 000 units.

per unit
$

selling price 53
direct materials and wages 22
variable manufacturing overhead 2
fixed manufacturing overhead 21
variable selling expenses 1
fixed selling expenses 5

What is the budgeted break-even point in units?

A 7242 B 7500 C 8966 D 9286

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28 The budgeted income statement of J Limited shows the following.

sales 400 000

variable costs 240 000
fixed costs 132 000
profit for the year 28 000

What is the margin of safety in dollars?

A $70 000 B $160 000 C $268 000 D $330 000

29 A business provided the following budgeted information.

break-even sales revenue 300 000

fixed costs 180 000
target profit 144 000

What is the sales revenue required to achieve the target profit?

A $486 000 B $540 000 C $624 000 D $810 000

30 Which factors should be considered when setting a budget?

1 availability of skilled labour

2 production capacity
3 quality of goods to be produced

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/12/F/M/21

 Cambridge International AS & A Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice May/June 2021
1 hour

You must answer on the multiple choice answer sheet.

*0073575647*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 06_9706_11/3RP
© UCLES 2021 [Turn over
 2

1 The skill and efficiency of the workforce of a business has increased during the financial period.
The owner of the business wants to record a value for this in the financial statements. His
accountant advises against this idea.

Which accounting concept is the accountant applying?

A business entity
B matching
C money measurement
D prudence

2 On 1 January 2020, Marek bought some machinery. He paid a total of $50 000.

Of this, $6000 was for maintenance of the machinery until 31 December 2022.

Marek depreciates his machinery at the rate of 10% per annum.

How was the expenditure recorded in Marek’s financial statements for the year ended
31 December 2020?

non-current current income

assets assets statement
$ $ $

A 39 600 nil 10 400

B 39 600 4 000 6 400
C 41 600 4 000 4 400
D 45 000 nil 5 000

3 Which statements about depreciation are correct?

1 It is an application of the matching concept.

2 It provides funds for the replacement of a non-current asset.
3 It spreads the cost of a non-current asset over its useful life.

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

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4 An item of revenue expenditure is wrongly treated as capital expenditure.

What is the effect of this error?

non-current profit for the

assets year

A overstated overstated
B overstated understated
C understated overstated
D understated understated

5 When preparing a bank reconciliation statement, the following information is available.

bank balance shown by the cash book 20 000 debit

unpresented cheques 2 500
uncleared bankings 1 400
standing order shown on the bank statement 300
not entered in the cash book

What is the balance on the bank statement?

A $18 600 B $19 200 C $20 800 D $21 400

6 Why does a business keep both a sales ledger control account and individual sales ledger
accounts for credit customers?

1 to check accuracy of the sales journal

2 to check accuracy of the individual customer accounts
3 to ensure payments have been received from customers
4 to monitor whether customers have exceeded their credit limits

A 1, 2 and 3 B 1 and 2 only C 2 and 3 only D 3 and 4

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7 A businessman suspects some of his inventory has been stolen. The following information is
available.

sales revenue 45 600

purchases 33 600
inventory at 1 May 2020 8 300
inventory at 30 April 2021 4 500

All goods are marked up at a rate of 33 31 %.

What was the value of inventory stolen?

A $600 B $3200 C $4400 D $7000

8 At the end of the year, Barack’s draft accounts showed a capital account balance of $4300.

His drawings account included a debit entry of $150 for goods taken for his own use.

Barack realised that this entry had been recorded in error at selling price rather than cost price.

He sells goods with a mark-up of 50%.

What is the correct closing capital account balance?

A $4225 B $4250 C $4300 D $4350

9 The following information is available for a sole trader at 31 December 2020.

goods taken by owner for own use 1 000

inventories
1 January 2020 10 000
31 December 2020 12 000
purchases 75 000
returns
debit balance 3 000
credit balance 4 000

What was the cost of sales?

A $68 000 B $69 000 C $70 000 D $71 000

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10 Which items only appear on the credit side of a partner’s capital account?

1 goodwill in an agreed ratio split

2 opening balances
3 profit on revaluation of assets
4 transfers from current accounts

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

11 A sole trader has a draft profit for the year of $47 500.

No entries have been made in respect of the following.

1 At the end of the year trade receivables were $5600 more than the previous year.
However, an irrecoverable debt of $360 had not been written off. The trader
maintains a provision of doubtful debts of 5%.
2 A machine had been sold for $4000. It had a net book value of $3500.

What will be the correct profit for the year?

A $46 360 B $47 378 C $47 902 D $47 920

12 A sole trader had trade receivables of $21 650 at the start of the year.

During the year there were irrecoverable debts of $450 written off.

Cash received from customers was $42 670.

At the year end, the statement of financial position showed trade receivables of $25 745 after
deducting a provision for doubtful debts of 5%.

What were the sales for the year?

A $46 765 B $47 215 C $47 670 D $48 570

13 L, M and N are in partnership, sharing profits and losses equally.

On 31 December 2020 N retired. At that date:

1 N’s capital account balance was $30 000 and his current account had a debit
balance of $5400.
2 Profit for the year was $21 000 before paying L’s salary of $6000.
3 The goodwill was valued at $18 000 but is not to remain in the books of account.
4 Other assets are to be revalued upwards by $6000.

How much will N be entitled to on his retirement?

A $30 600 B $37 600 C $41 400 D $42 400

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14 Charlie and Daphne are in partnership, sharing profits and losses in the ratio 2 : 1. Their fixed
capital account balances at 31 December 2019 were $20 000 and $13 000 respectively.

They changed the terms of the partnership on 1 January 2020 to introduce interest on capital at
the rate of 10% per annum.

Which effect did this change have on Charlie’s total share of profit for the year ended
31 December 2020?

A decrease of $200
B decrease of $700
C increase of $200
D increase of $700

15 What will be debited in the appropriation account of a partnership?

1 interest on partners’ drawings

2 interest on the partner’s loan
3 salaries of partners
4 partners’ share of goodwill written off

A 1 and 3 B 2 and 3 C 2 and 4 D 3 only

16 A company made a rights issue of ordinary shares at a premium.

How will this be treated in the financial statements?

1 as equity in the statement of financial position

2 as a movement in the statement of changes in equity
3 as a non-current liability in the statement of financial position

A 1 and 2 B 1 only C 2 and 3 D 3 only

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17 The income statement of X Limited for 2020 showed an incorrect profit figure because $10 000
of goods had been counted twice when closing inventory was valued. This incorrect inventory
value was carried forward as the opening inventory for 2021.

In February 2021 the directors paid a dividend equal to 40% of the profit for 2020.

What were the effects of the error in inventory valuation?

retained earnings at
dividend paid in 2021
31 December 2021

A decrease of $4000 decrease of $4000

B decrease of $4000 increase of $14 000
C increase of $4000 decrease of $4000
D increase of $4000 decrease of $14 000

18 A company has the following items in its statement of financial position.

ordinary shares of $0.50 each 900 000

retained earnings 450 000
long-term bank loan 30 000

The company then issues 100 000 bonus shares of $0.50 each to its shareholders.

What is the total equity after the issue of the bonus shares?

A $1 300 000 B $1 350 000 C $1 380 000 D $1 400 000

19 Which ratios are usually calculated to measure the efficiency of a business?

1 current
2 gross margin
3 inventory turnover
4 trade receivables turnover

A 1 and 2 B 1 and 3 C 2 and 3 D 3 and 4

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20 The following information is available for a limited company at the end of its financial year.

ordinary shares of $1 each 400 000

retained earnings (including profit for the year $94 500) 250 000
8% debenture (2028) 100 000
bank overdraft 20 000

What is the return on capital employed?

A 12.27% B 12.60% C 13.31% D 13.67%

21 What is a stepped cost?

A It contains both fixed and variable elements.

B It is fixed for a given level of output then increases.
C It is fixed for any level of output.
D It is variable for a given level of output.

22 Which business would use a batch costing system?

A a clothing retailer
B a footwear manufacturer
C a stationery wholesaler
D an oil refinery

23 Details of a company’s fixed overhead in a period were as follows.

budgeted actual

direct labour hours 5000 5500

Total budgeted fixed overhead was $50 000.

Overheads over-absorbed for the period were $4000.

What was the actual fixed overhead incurred in the period?

A $51 000 B $54 000 C $55 000 D $59 000

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24 How might an under-absorption of overheads arise?

1 Overheads have been over-budgeted.

2 Overheads have been under-budgeted.
3 Production was less than budgeted.
4 Production was more than budgeted.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

25 Which statements explain why it is important for a business to know the contribution per unit for
its production?

1 It helps in assessing the impact of a change in sales volume.

2 It helps in deciding whether to make or buy a product.
3 It helps in making long-term decisions.

A 1 and 2 B 2 only C 2 and 3 D 3 only

26 The following information is available for a month.

sales revenue 150 000

direct materials 45 000
direct labour 28 000
variable overheads 7 000
fixed overheads 21 000

What is the contribution to sales ratio?

A 32.67% B 46.67% C 48.67% D 53.33%

27 A company had the following results.

sales revenue 230 000

variable costs 92 000
fixed costs 60 000
profit 78 000

What was its margin of safety in dollars?

A $100 000 B $130 000 C $138 000 D $170 000

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28 A company has total fixed costs of $400 000.

It manufactures and sells a single product for $25 per unit and has a contribution to sales ratio
of 80%.

How many units does it need to produce and sell to make a profit of $200 000?

A 10 000 B 20 000 C 24 000 D 30 000

29 A trader makes and sells a single product. It has a selling price of $90 and a contribution per unit
of $30.

When 800 units are sold, the profit is $9600.

What is the profit if 1000 units are produced and sold?

A $12 000 B $15 600 C $27 600 D $30 000

30 Why might a business prepare a budget?

A to determine the amount of bank loan it needs

B to determine the skills of labour force
C to identify its market share
D to identify the quality of its products

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/11/M/J/21

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2021
1 hour

You must answer on the multiple choice answer sheet.

*3094855142*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 06_9706_12/3RP
© UCLES 2021 [Turn over
 2

1 Which of these items require entries to be made in the general journal?

1 purchase of a non-current asset on credit

2 sale of inventory to a customer on credit
3 the owner taking drawings from their business in cash
4 writing off an irrecoverable debt

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

2 Which statement relating to depreciation is not correct?

A A business can never change its accounting policy on depreciation.

B Depreciation is the allocation of the cost of a non-current asset over its useful life.
C Freehold land is usually not depreciated.
D Non-current assets of similar class are depreciated using the same method of depreciation.

3 Arnaud owned a vehicle which originally cost $20 000. During the year ended 31 May 2021, he
paid for repairs of $3700 and provided depreciation of $4000.

On 31 May 2021, the vehicle had a net book value of $12 000. Arnaud sold the vehicle on that
date and the loss on disposal amounted to $2500.

What were the cash inflows and outflows relating to the vehicle during the year?

cash inflows cash outflows

$ $

A 9 500 3 700
B 9 500 7 700
C 13 500 6 200
D 13 500 8 000

4 Two years ago a business purchased two machines costing $25 000 each.

During the third year one of them with a net book value of $16 000 was sold. A new machine
costing $30 000 was purchased.

Depreciation is charged at 20% per annum using the reducing balance method on all the assets
owned at the end of the accounting period.

What was the depreciation charge for the third year?

A $6000 B $9200 C $11 000 D $12 800

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5 Which statements about an unpresented cheque are correct?

1 It arises as the result of an error of omission.

2 It arises from a timing difference.
3 It is used when preparing a bank reconciliation statement.

A 1 and 2 B 1 only C 2 and 3 D 3 only

6 The balance on the purchases ledger control account did not agree with the total of balances
from the purchases ledger accounts. The following errors were then discovered.

1 Contra entries had not been entered in the general journal.

2 Debit balances on the purchases ledger had not been included in the control
account.
3 Discount allowed total had been included in the control account.
4 Goods returned to a supplier had not been recorded in the purchases returns
journal.

Which errors will require entries being made in the purchases ledger?

A 1, 2 and 3 B 1, 2 and 4 C 2 and 3 only D 1 and 4 only

7 The correction of which error requires an entry in the suspense account?

A A cheque, $1000, paid to Kong had been debited to Kang’s account.

B A purchase of stamps, $50, had been debited to the purchases account.
C Commission income, $170, had been debited to the loan interest account.
D The insurance account had been undercast by $200 and the wages account overcast
by $200.

8 A business had a draft profit for the year of $200 000.

The following items were then discovered.

1 Depreciation charges had been overstated by $20 000.

2 The value of closing inventory was overstated by $15 000.
3 A year-end accrual for wages was needed, $8000.
4 A year-end adjustment for prepaid insurance, $2500, was required.

What was the corrected profit for the year?

A $159 500 B $199 500 C $240 500 D $245 500

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9 A trader purchased fixtures and fittings on credit from a supplier. These were faulty and were
returned to the supplier.

Which entry in the trader’s books of account recorded the return?

account to debit account to credit

A fixtures and fittings purchases returns

B fixtures and fittings supplier
C purchases returns fixtures and fittings
D supplier fixtures and fittings

10 A sole trader provided the following information.

sales 200 000

opening inventory 50 000
closing inventory 75 000
gross margin 25%

What were the purchases for the year?

A $125 000 B $150 000 C $175 000 D $185 000

11 Which item would not appear in the financial statements of a sole trader?

A bank overdraft
B dividends paid
C interest received
D loss on disposal of machinery

12 L and M are partners sharing profits and losses equally. This year M’s share of the profit is
$18 000.

Next year they plan to change the partnership agreement so that L has an annual salary of
$10 000 and a one-third share of any profits or losses.

What does the total partnership profit for next year need to be for M to receive the same amount
of profit as this year?

A $22 000 B $34 000 C $37 000 D $42 000

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13 V and E are in partnership, sharing profits and losses equally.

Their capital accounts showed the following credit balances at 31 March 2021.

V 80 000
E 40 000

Z was admitted as a partner on 1 April 2021. At that date the following items were taken into
account.

1 Non-current assets were revalued downwards by $20 000.

2 Goodwill was valued at $80 000, but will not remain in the books of account after Z is
admitted.

The new profit-sharing ratio will be V 40%, E 30% and Z 30%.

What was the balance on E’s capital account after the admission of Z?

A $30 000 B $46 000 C $56 000 D $70 000

14 Which account is used to calculate the profit or loss on the dissolution of a partnership?

A appropriation account
B capital account
C realisation account
D revaluation account

15 Which statements apply when a bonus issue of ordinary shares is made by a company?

1 It will be made to existing shareholders.

2 The issue can be at a premium.
3 They can be issued at lower than market price.

A 1 and 2 B 1 only C 2 and 3 D 3 only

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16 At the start of the year a limited company’s equity was as follows.

ordinary shares of $1 each 200 000

retained earnings 120 000

During the year the following took place.

1 Non-current assets were revalued upwards by $70 000.

2 An interim dividend of $30 000 was paid.
3 A 10% debenture (2030) of $10 000 was issued.

The profit for the year was $80 000.

What was the total equity at the end of the year?

A $380 000 B $390 000 C $440 000 D $480 000

17 The financial year of a limited company ends on 30 June. The following information is available
regarding ordinary dividends.

for the year dividend proposed

ended $

30 June 2019 12 000

30 June 2020 19 000

During the year ended 30 June 2020, the company paid last year’s proposed dividend in full
together with an interim dividend of $4300.

What is the amount of dividends shown in the financial statements for the year ended
30 June 2020?

statement of statement of
income statement
changes in equity financial position
$
$ $

A nil 16 300 nil

B nil 23 300 23 300
C 19 000 16 300 nil
D 23 300 19 000 19 000

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18 The trade receivables turnover ratio figures for two companies are shown.

company turnover in days

X 45
Y 55

What does this indicate about company Y?

A It has higher levels of trade receivables than X.

B It has higher liquidity than X.
C It is less efficient in managing its receivables than X.
D It offers less credit to its customers than X.

$20 200
19 In 2019 a company’s non-current asset turnover ratio was = 3.96 times.
$5100

During 2020 the following took place.

1 Net revenue was unchanged.

2 Discount allowed increased by $400.
3 Depreciation was $1000.
4 Purchases of non-current assets amounted to $1300.

What was the non-current asset turnover ratio in 2020?

A 3.09 times
B 3.16 times
C 3.67 times
D 3.74 times

20 Which statements are correct?

1 Fixed cost per unit changes with a change in the level of production.
2 Variable cost per unit changes with a change in the level of production.
3 Total fixed costs are unchanged within a given range of production.
4 Total variable costs are unchanged within a given range of production.

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

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21 An employee is paid $20 an hour basic pay for working seven hours a day. Overtime is paid at
the rate of time and a quarter (basic pay plus 25%). A bonus is also paid at the rate of time and a
half (basic pay plus 50%) for each unit produced in excess of eight units per day.

On Monday the employee worked 10 hours and produced 10 units.

How much did the employee earn on Monday?

A $175 B $200 C $215 D $275

22 A business uses absorption costing.

What will be included in cost of sales?

A variable manufacturing costs, variable selling costs and fixed manufacturing costs
B variable manufacturing costs and fixed manufacturing costs only
C variable manufacturing costs and variable selling costs only
D variable manufacturing costs only

23 A business absorbs its overheads on the basis of machine hours.

The following information is provided.

actual budgeted

overheads $960 000 $900 000

machine hours 6200 6000

By how much were overheads under-absorbed or over-absorbed?

A over-absorbed by $30 000

B under-absorbed by $30 000
C over-absorbed by $60 000
D under-absorbed by $60 000

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24 The following information is provided about one unit of a product.

selling price 100

contribution 40
profit 10

The selling price is expected to increase by $10. Costs are expected to remain unchanged.

What will be the change in the contribution to sales ratio?

A 3.64% decrease
B 3.64% increase
C 5.45% decrease
D 5.45% increase

25 The following information is available.

unit selling price 36

direct cost per unit 18
selling commission per unit 2
total fixed costs 180 000
total units manufactured and sold 18 000

What was the margin of safety?

A 37.50% B 44.44% C 55.56% D 62.50%

26 How is break-even revenue calculated?

A (total fixed costs + total variable costs) divided by contribution per unit
B (total fixed costs + total variable costs) divided by contribution to sales ratio
C total fixed costs divided by contribution per unit
D total fixed costs divided by contribution to sales ratio

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27 A business manufactures three products.

The following information was provided.

X Y Z
per unit
$ $ $

selling price 450 350 400

direct material 160 100 150
direct labour 115 95 190
contribution 175 155 60
fixed overheads 135 110 10
profit 40 45 50

Direct labour is in short supply. All direct labour is paid at the same hourly rate.

Which order of production should be used to maximise the profit?

A X  Z  Y

B X  Y  Z

C Y  X  Z

D Z  Y  X

28 The following information is available for a month.

per unit $

selling price 100

contribution 30

Total fixed costs were $100 000 and budgeted sales were 5000 units.

The directors think that if they reduce the unit selling price to $95, sales will increase to 6500
units a month.

What would be the increase in profit as a result of this?

A $12 500 B $32 500 C $45 000 D $77 500

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29 A business makes and sells a single product.

It has a selling price of $100 and a contribution per unit of $40.

When output is 500 units, the business makes a profit of $2000.

The direct material price is expected to rise by $4 per unit.

How many units will need to be made and sold for the profit to be unchanged?

A 450 B 455 C 550 D 556

30 What is not an advantage to a business of preparing budgets?

A They can motivate managers and employees.

B They ensure that the business will not make loss.
C They facilitate coordination and communication.
D They provide a measure for evaluating performance.

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/12/M/J/21

 Cambridge International AS & A Level

ACCOUNTING 9706/13
Paper 1 Multiple Choice May/June 2021
1 hour

You must answer on the multiple choice answer sheet.

*3628319218*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 06_9706_13/4RP
© UCLES 2021 [Turn over
 2

1 A business purchased a pocket calculator for the use of the book-keeper. The accountant
included it as an expense in the income statement.

Which accounting concept is applied?

A historic cost
B materiality
C realisation
D substance over form

2 What is not a reason for a business to maintain a purchases journal?

A to assist in preparing the purchases ledger control account

B to divide book-keeping duties between several people
C to keep transactions of a similar nature in one place
D to reduce the number of entries in the purchases ledger

3 A business purchased a machine, making the following payments.

machine cost 7500

alterations to improve efficiency 1200
insurance for 12 months 400
installation costs 800
9900

What was the cost of the machine to be included in non-current assets?

A $7500 B $8700 C $9500 D $9900

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4 A business had a financial year end of 31 December 2020.

On 1 September 2020 it had sold an old motor vehicle and purchased a replacement.

How were these transactions recorded in the provision for depreciation account on
1 September 2020?

the transfer to the depreciation on the new

disposal account was vehicle was recorded on
recorded on the debit side the credit side

A   key
B    = correct
C    = not correct
D  

5 During the year ended 31 December 2017 a business purchased a vehicle for $23 500.

On 30 September 2020 it was sold for $3500.

Depreciation was charged at 20% per annum using the straight-line method. A full year’s
depreciation was charged in the year of purchase and the year of disposal.

What was the profit or loss on disposal of the vehicle?

A $1200 loss
B $1200 profit
C $5900 loss
D $5900 profit

6 X sold Y goods on credit with a list price of $5000. When X prepared the invoice, he forgot to give
Y 10% trade discount.

What was the effect of this error in X’s books of account?

1 A suspense account with a credit balance of $500 was opened.

2 A suspense account with a debit balance of $500 was opened.
3 Assets were overstated by $500.
4 Assets were understated by $500.

A 1 and 3 B 2 and 4 C 3 only D 4 only

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7 At the end of a financial year, the debit balance on a trader’s sales ledger control account was
$26 800. At the same date, his sales ledger balances totalled $30 000. He discovered the
following.

1 A dishonoured cheque of $1000 had been omitted from the sales ledger control
account.
2 A sales ledger credit balance of $500 had been listed as a debit balance.
3 The sales journal had been undercast by $1200.

What was the amount of trade receivables to be included in the statement of financial position?

A $26 600 B $29 000 C $29 500 D $31 000

8 A trader extracted the following information from his books of account at 31 March 2021.

purchases ledger balances at 1 March 2021 32 100

credit purchases for March 26 400
cheques paid to credit suppliers in March 29 700
contra with sales ledger 600
discount received 400

What was the closing balance on the purchases ledger control account at 31 March 2021?

A $27 800 B $29 800 C $29 000 D $34 400

9 Some items of closing inventory have been incorrectly included in the financial statements at their
cost prices rather than their net realisable values.

What was the effect of this error?

profit for the year current assets

A higher higher
B lower lower
C higher lower
D lower higher

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10 Marianna rents part of her premises to Paul.

On 1 April 2020, the rent receivable account showed a balance of $800 as Paul owed rent for the
last month of the financial year ended 31 March 2020.

From 1 April 2020 there was a 5% increase in the annual rent.

Marianna received payments from Paul during the year ended 31 March 2021 totalling $10 040.

Which figures should be included in Marianna’s financial statements for the year ended
31 March 2021?

income statement current assets

$ $

A 10 040 800
B 10 040 840
C 10 080 800
D 10 080 840

11 X is a sole trader.

Which statement about X is correct?

A Her accounts include both a capital and a current account.

B She can receive an annual salary.
C She can receive interest on the capital she has invested in the business.
D She can take drawings in excess of the profit for the year.

12 John took goods from the business for his own use. These had cost $125, and $20 had been
paid for their delivery to the business premises.

How was this recorded in John’s books of account?

debit accounts $ credit accounts $

A drawings 145 purchases 125

carriage inwards 20
B drawings 145 purchases 125
carriage outwards 20
C purchases 125 drawings 145
carriage inwards 20
D purchases 125 drawings 145
carriage outwards 20

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13 P and Q were in partnership, sharing profits and losses equally. R was admitted to the
partnership. The terms of R’s admission were as follows.

1 R introduced capital of $20 000 cash and a vehicle valued at $6000.

2 Non-current assets were revalued upwards by $14 000.
3 Goodwill was valued at $10 000, but will not be retained in the books of account.
4 The new future profit-sharing ratio will be P, Q, R, 2 : 2 : 1.

What was the opening balance on R’s capital account?

A $21 200 B $24 000 C $28 000 D $28 800

14 H and D are in partnership. They are charged 5% interest on their annual drawings.

Their appropriation account for the year ended 30 April 2021 showed the following.

H D
$ $

interest on drawings 2 080 1 520

interest on capital 2 000 1 000
salaries 20 000 15 000
share of profits 63 000 42 000

On 1 May 2020 the balance on H’s current account was $3300 debit.

What was the credit balance on H’s current account on 30 April 2021?

A $38 020 B $40 100 C $79 620 D $81 700

15 L and M are in partnership. The following information about the partnership relates to 2020.

profit before appropriation 88 000

interest on drawings: L 1 000
M 1 000
interest on capital: L 3 000
M 1 000

Profits are shared in the same ratio as partners’ capital account balances.

What is L’s share of the residual profit?

A $41 000 B $43 000 C $61 500 D $64 500

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16 A company’s statement of financial position shows the following balances.

ordinary shares of $1 each 100 000

share premium 10 000
retained earnings 48 000
bank (debit) 50 000

A bonus issue of one ordinary share for every four ordinary shares held takes place. Reserves
are kept in their most flexible form.

What are the new account balances?

retained
share premium bank (debit)
earnings
$ $
$

A nil 33 000 50 000

B nil 33 000 75 000
C 10 000 23 000 50 000
D 10 000 23 000 75 000

17 What are shown in the statement of changes in equity?

A bonus issue, debenture interest paid, profit for the year

B bonus issue, dividends proposed, loss for the year
C rights issue, dividends paid, profit for the year
D rights issue, debenture interest paid, loss for the year

18 The following information is available for a limited company at 31 December 2020.

non-current assets 200 000

shareholders’ equity 170 000
5% debentures (2028) 40 000
bank loan 150 000

The bank loan is repayable in five annual equal instalments with the first payment due on
1 June 2021.

What was the total working capital at 31 December 2020?

A $120 000 B $130 000 C $160 000 D $190 000

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19 A trader has been making a provision for irrecoverable debts for some years. He is now
considering reducing the percentage rate of the provision.

Which ratios would be affected by this reduction?

1 current ratio
2 gross margin
3 profit margin

A 1 and 2 B 1 and 3 C 2 and 3 D 3 only

20 The following information is available for a business for the year ended 31 December 2020.

rate of inventory turnover 20 times

opening inventory $40 000
closing inventory $20 000
gross margin 25%

What was the revenue for the year ended 31 December 2020?

A $750 000 B $800 000 C $900 000 D $1 000 000

21 The following information is available regarding direct materials for a month.

opening inventory 1000 kgs at $20 per kg

purchases 20 000 kgs at $22 per kg
closing inventory 3500 kgs

Inventory is valued using the first in, first out (FIFO) method.

What was the cost of the materials issued to production for the month?

A $363 000 B $367 500 C $383 000 D $385 000

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22 Alice works from home making and selling greetings cards. All of her business costs are variable.

Alice plans to double her output. To do this she will need to rent a small workshop.

Which costs will increase?

fixed cost per variable cost total variable

unit per unit cost

A  
B  
C  
D   

23 Which costs are included when calculating the cost of sales using absorption costing?

1 factory overhead costs

2 fixed selling and distribution costs
3 finance costs
4 direct costs

A 1 and 3 B 1 and 4 C 2, 3 and 4 D 4 only

24 A company has budgeted the following factory overheads for the next financial year.

machining assembly stores total

overheads $80 000 $50 000 $10 000 $140 000

Machining and assembly are production departments and stores is the service department. The
two production departments issued requisitions to stores as follows.

machining 120
assembly 80
total 200

What was the budgeted overhead absorption rate for the machining department based on 4300
budgeted machine hours?

A $18.60 B $20.00 C $30.23 D $32.56

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25 Which values per unit are not sufficient to enable the calculation of the contribution to sales ratio?

A contribution, fixed cost

B selling price, fixed cost, profit
C selling price, variable cost
D variable cost, fixed cost, profit

26 Which statement concerning the break-even point is correct?

A At the break-even point a company makes a profit.

B Contribution equals fixed costs at the break-even point.
C Fixed costs are equal to sales revenue at the break-even point.
D Variable costs equal fixed costs at the break-even point.

27 Which assumptions about cost–volume–profit analysis are correct?

1 Many different factors cause costs and revenues to change.

2 Selling price and variable cost per unit are usually constant.
3 Selling price and variable cost per unit change.
4 The only factor causing costs and revenues to change is volume.

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

28 For the month of April a business manufactured 4000 units and sold 3600 units.

The following total costs have been incurred.

direct materials 80 000

direct labour 120 000
variable production overheads 36 000
variable selling commission 18 000
fixed production overheads 144 000

There was no opening inventory.

The business values inventory using marginal costing.

What is the value of the closing inventory?

A $20 000 B $23 600 C $25 400 D $39 800

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29 A manufacturer has fixed costs of $300 000.

It manufactures and sells a single product for $80 per unit. The contribution to sales ratio is 60%.

How many units does it need to sell to make a profit of $600 000?

A 6250 B 6750 C 12 500 D 18 750

30 Which statements concerning the use of a budgetary control system are correct?

1 Managers should receive a copy of the budget.

2 Managers should agree with the aims and objectives of the budget.
3 Managers should be consulted when the budget is prepared.
4 Managers should be committed to attaining budget outcomes.

A 1, 2, 3 and 4
B 1 and 2 only
C 2, 3 and 4 only
D 3 and 4 only

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 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/13/M/J/21

 Cambridge International AS & A Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice October/November 2021
1 hour

You must answer on the multiple choice answer sheet.

*0842787329*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 11_9706_11/4RP
© UCLES 2021 [Turn over
 2

1 A trader keeps a full set of accounting records.

Which statement is correct?

A Credit notes issued are recorded in the sales journal.

B Sales invoices are recorded in the general journal.
C The sales account is kept in the general ledger.
D The sales journal is prepared from entries in the sales ledger.

2 The totals of the discount columns in a three-column cash book were debit side $320 and credit
side $140.

What entries are made when these totals are posted to the nominal ledger?

account debited $ account credited $

A discounts allowed 140 discounts received 320

B discounts allowed 320 discounts received 140
C discounts received 140 discounts allowed 320
D discounts received 320 discounts allowed 140

3 A company sold one of its delivery vehicles for $2800 after two years of use. The original cost of
the vehicle was $6500. The company depreciates its vehicles at 30% per annum using the
reducing balance method.

What was the profit or loss on disposal?

A loss $200
B loss $385
C profit $200
D profit $385

4 A trader depreciates loose tools using the revaluation method.

Which account is credited at the end of the year to record depreciation on loose tools?

A depreciation of loose tools

B disposal
C loose tools
D provision for depreciation of loose tools

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5 A business sold one of its non-current assets.

The following information relates to this asset.

purchase price 50 000

depreciation to date of sale 20 000
sale price 60 000

What was the effect of this transaction on the net assets in the year of sale?

A decrease of $30 000

B decrease of $60 000
C increase of $30 000
D increase of $60 000

6 Which items will be found on the credit side of a sales ledger control account?

1 allowance for irrecoverable debts

2 contra with purchases ledger control account
3 irrecoverable debts written off
4 refund to customers who overpaid

A 1 and 3 B 1 only C 2, 3 and 4 D 2 and 3 only

7 A business omitted discounts allowed of $700 from its trial balance.

During the year a machine had been sold for cash, $500, but the only accounting entry made was
a debit in the bank account.

What is the balance on the suspense account before these errors are corrected?

A $200 debit B $1200 debit C $200 credit D $1200 credit

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8 Felix drew $200 out of his business bank account in order to top up his petty cash float.

When recording this transaction in his cash book he reversed the entries.

Despite this error the bank balance showing in his cash book was equal to the balance on his
bank statement at the same date.

How was this possible?

A There was an uncredited deposit of $200.

B There was an uncredited deposit of $400.
C There was an unpresented cheque for $200.
D There was an unpresented cheque for $400.

9 A business had calculated a draft profit for the year.

The following items have been discovered.

1 A customer has been declared bankrupt and is unable to pay the amount they owe.
2 Unsold goods on sale or return basis have been included in inventory.
3 Rent paid in advance has not been included.
4 The owner's cash drawings have been entered into the owner’s capital account.

Which of these need to be adjusted to calculate the correct profit for the period?

A 1 and 2 B 1 and 3 only C 1, 3 and 4 D 2 and 3

10 The following information has been extracted from the statement of financial position of a sole
trader at 31 March 2021.

non-current assets 130 000

current assets 32 000
current liabilities 18 000
non-current liabilities 25 000
profit for the year ended 31 March 2021 20 000
drawings 15 000

What was the balance on the capital account at 31 March 2021?

A $114 000 B $119 000 C $124 000 D $167 000

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11 At the start of the year the balance on a sole trader’s capital account was $183 000.

During the year the following took place.

1 The owner introduced a motor vehicle into the business. This had a cost of $90 000
and had a market value of $74 000.
2 The owner took cash drawings of $15 000.
3 The owner took inventory for personal use. This had a cost of $24 000 and a selling
price of $32 000.

After recording these and the profit for the year, the closing balance on the capital account was
$265 000.

What was the profit for the year?

A $31 000 B $39 000 C $47 000 D $55 000

12 Why might a sole trader form a partnership?

1 to enable the revaluation of business assets

2 to have the protection of limited liability
3 to gain additional capital for the business

A 1 and 2 B 1 and 3 C 2 only D 3 only

13 X and Y are in partnership. The following information relates to the partnership.

start of the year end of the year

current account
$ $

X 12 000 credit 17 500 credit

Y 6 000 credit 4 000 debit

The following transactions took place during the year.

drawings $

X 13 000
Y 19 000

X received a salary of $5000.

What was the profit for the year before appropriation?

A $22 500 B $27 500 C $30 500 D $32 500

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14 L, M and N were partners sharing profits and losses equally.

N’s capital account was as follows.

$ $

motor vehicle 7 000 balance 14 000

bank 8 000 current account 1 000
15 000 15 000

What explained the entries in the capital account?

A N bought a motor vehicle from the business paying $1000 more than its book value.
B N’s capital account includes his share of the loss on the disposal of a motor vehicle.
C N increased his capital by introducing a motor vehicle and paying cash into the bank.
D N retired and took the amount due to him in the form of a motor vehicle and money from the
bank.

15 A shareholder sells some ordinary shares for more than he paid for them.

What is the effect on the company statement of financial position?

ordinary share capital share premium account

A decrease decrease
B decrease increase
C no effect decrease
D no effect no effect

16 The equity of X Limited at 30 June 2021 was as follows.

share capital 600 000

share premium 100 000
revaluation reserve 90 000
general reserve 50 000
retained earnings 80 000

What was the maximum total dividend that could be paid to shareholders?

A $80 000 B $130 000 C $220 000 D $320 000

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17 The value of inventory for a limited company at 31 May 2020 was overstated by $20 000.

What was the effect of this error on retained earnings?

retained earnings at retained earnings at

31 May 2020 31 May 2021

A overstated by $20 000 no effect

B overstated by $20 000 understated by $20 000
C understated by $20 000 no effect
D understated by $20 000 overstated by $20 000

18 What are limitations of using accounting ratios for comparisons between firms in the same
industry?

1 Different businesses may have different accounting policies.

2 Efficiencies of different businesses cannot be compared.
3 Liquidity of the businesses cannot be assessed.

A 1 and 2 B 1 only C 2 and 3 D 3 only

19 Abdul is assessing the profitability and efficiency of his business and is using these figures from
the financial statements.

non-current assets at cost 70 000

net book value of assets 53 000
revenue 340 000
profit from operations 84 000

What is the non-current asset turnover?

A 1.20 times B 1.58 times C 4.86 times D 6.42 times

20 The following information was available for a business for the year ended 31 December.

annual sales $400 000

gross margin 20%
rate of inventory turnover 4 times
opening inventory $60 000

What was the value of closing inventory?

A $70 000 B $80 000 C $100 000 D $140 000

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21 A manufacturing business is currently operating at full capacity.

As part of an expansion programme to increase production capacity, the business intends to

employ an additional factory supervisor.

How are total supervisory salaries classified?

A fixed cost
B semi-variable cost
C stepped cost
D variable cost

22 The following budgeted information is available.

production total costs

(units) $

20 000 240 000

32 000 326 400

What are the fixed costs?

A $21 600 B $57 600 C $86 400 D $96 000

23 A business absorbs its overheads on the basis of direct labour hours.

The following information is provided.

actual budgeted

overheads $560 000 $546 000

direct labour hours 19 300 18 200

By how much are overheads under or over absorbed?

A over absorbed by $14 000

B under absorbed by $14 000
C over absorbed by $19 000
D under absorbed by $19 000

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24 Which would be a suitable basis to apportion depreciation to production departments?

1 machine hours
2 net book value of machinery
3 number of machines
4 original cost of machinery

A 1 and 2 only B 1, 2 and 4 C 2, 3 and 4 D 3 and 4 only

25 The following information is available.

per unit $

selling price 10
variable costs 4

Budgeted break-even sales volume is 15 000 units.

Budgeted sales volume is 20 000 units.

What were the fixed costs?

A $20 000 B $30 000 C $60 000 D $90 000

26 A business increased its profits by changing from marginal costing to absorption costing.

Which statement is correct?

A Production and sales were equal.

B Production stopped in the period.
C Production was greater than sales.
D Production was less than sales.

27 A company makes and sells a single product. The following budgeted information is available for
one month.

selling price per unit $750

variable costs per unit $550
total monthly sales 600 units
total fixed costs $80 000

The directors are able to reduce the variable costs to $500 per unit.

By how many units can budgeted sales reduce to achieve the same monthly profit?

A 120 B 320 C 400 D 480

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28 Which assumption of cost–volume–profit analysis is not correct?

A Costs can easily be divided into variable and fixed.

B Total fixed costs remain the same within the relevant range.
C Units produced and sold are equal.
D Unit selling price is constant.

29 A business manufactures four products: A, B, C and D. Information relating to these products is

shown.

In the coming month, labour hours available for production are limited and only one product can
be produced.

Which product should be produced in order to maximise the profit?

unit selling contribution overhead absorption

labour hours
price per unit rate per labour hour
per unit
$ $ $

A 45 18 9 2.5
B 50 16 4 3.2
C 40 9 1.5 1.2
D 36 15 2 1.8

30 Why might a business use budgets?

1 to determine the level of demand for its product

2 to have a benchmark against which to assess actual performance
3 to know how much raw material suppliers will be able to supply

A 1, 2 and 3 B 1 and 3 only C 2 and 3 only D 2 only

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/11/O/N/21

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2021
1 hour

You must answer on the multiple choice answer sheet.

*1346665176*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 11_9706_12/4RP
© UCLES 2021 [Turn over
 2

1 A trader has prepared financial statements which include unpaid wages to her employees.

Which accounting concept is being applied?

A business entity
B duality
C matching
D substance over form

2 On which basis will non-current assets be valued if the business is not a going concern?

A net book value

B original cost
C the amount they could be sold for
D the value placed on them by the owner

3 A business has a financial year end of 31 December.

It depreciates its machinery on a month-by-month basis. It uses the straight-line method at

10% per annum.

It bought a machine, cost $12 000, on 1 January 2019 and sold it on 31 March 2020.

Which entries relating to this machine were made in the provision for depreciation of machinery
account for the year ended 31 December 2020?

debit side credit side

$ $

A 300 1500
B no entry 1200
C 1200 no entry
D 1500 300

4 A business purchased a non-current asset for $500 000 with an expected life of 20 years. After
that time it was expected to be sold for $100 000. It was depreciated using the straight-line
method.

The non-current asset was sold after 10 years for $120 000 with selling costs of $10 000.

What was the loss on disposal?

A $130 000 B $140 000 C $180 000 D $190 000

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5 Which items are capital expenditure?

1 payment of wages to staff to install new equipment

2 purchase of a new computer for office
3 purchase of spare parts for factory equipment
4 use of factory machinery to repair owner’s car

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

6 A sales ledger control account showed a debit balance of $15 000.

The following errors were discovered.

1 Returns outwards, $200, had been credited in the sales ledger control account.
2 A contra entry with the purchases ledger control account, $400, had been debited in
the sales ledger control account.
3 A customer balance, $300, had been written off in the sales ledger control account
but no entry had been made in the sales ledger.

Which figure for trade receivables should appear in the statement of financial position?

A $14 400 B $15 200 C $15 600 D $15 700

7 The bank account had a debit balance of $5760 in the cash book at 31 May.

The following items were identified when reconciling the bank account with the bank statement.

amount not yet credited by bank 900

bank charges 120
dishonoured cheque 340
unpresented cheque 740

What was the amount shown in the bank statement at 31 May?

A $3660 B $5140 C $5460 D $5820

8 A trader maintains a full set of accounting records. Each month she issues many sales invoices.

Where does she record an individual sales invoice?

A sales journal and sales ledger

B sales journal and sales ledger control account
C sales ledger and sales account
D sales ledger and sales ledger control account

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9 Brian had a service business which held no inventory. His current assets and current liabilities at
1 April were as follows.

trade receivables 10 000

trade payables 6 100
bank overdraft 1 900

On that date he set off a sales ledger balance, $600, against a purchases ledger balance and
then created a provision for doubtful debts of 5%.

What was the value of his working capital after these adjustments?

A $1470 B $1500 C $1530 D $1900

10 Frieda’s provision for the doubtful debts account for the year included a debit entry representing
the change in the amount provided. The rate of provision for doubtful debts has not changed.

What might have happened during the year to make this entry necessary?

1 Credit control procedures had been improved.

2 Credit control procedures had been reduced.
3 Total trade receivables had decreased.
4 Total trade receivables had increased.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

11 A trader’s income statement recorded sales, $10 000, and cost of sales, $7070. The trader had
taken goods for his own use during the year, cost $280, selling price $410, but had omitted to
record this.

What effect did the omission have on the gross margin?

A 2.8% overstated
B 2.8% understated
C 4.1% overstated
D 4.1% understated

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12 William buys radios for $10 each and sells them for $15 each.

His draft statement of financial position included a value of $1500 for inventory.

His method of calculation of inventory was correct.

He then found that 12 radios could only be sold for $8 each and 4 radios had been stolen.

By how much should William reduce his inventory valuation?

A $64 B $84 C $124 D $144

13 A sole trader has not kept a full set of double-entry records.

The following information relates to the business for the year ended 31 March 2021.

sales 210 000

inventory at 1 April 2020 17 600
inventory at 31 March 2021 18 700
prepaid expense at 1 April 2020 630
expenses paid by cheque 11 900

All goods are marked up by 25%.

What were the purchases and profit for the year?

profit for the

purchases
year
$
$

A 158 600 40 150

B 168 000 29 470
C 168 000 30 730
D 169 100 29 470

14 Which statement is correct in the absence of a partnership agreement?

A Interest is charged on drawings at 5%.

B Only one partner can have a salary.
C Partners are not entitled to interest on capital.
D Profits and losses are shared in the ratio of partners’ capital contribution.

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15 X and Y are in partnership sharing profits and losses equally. They have combined capital
account balances of $200 000.

Z was admitted as a partner. Non-current assets were revalued upwards by $30 000. Goodwill
was valued at $20 000 but was not to be retained in the books of account.

Following Z’s admission the total of the partners’ capital accounts was $270 000.

How much capital did Z contribute?

A $20 000 B $40 000 C $50 000 D $70 000

16 A company’s statement of financial position at 1 January 2020 included the following amounts.

ordinary shares of $5 each 800 000

general reserve 80 000
retained earnings 120 000

The following transactions took place during the year ended 31 December 2020.

1 The company issued a further 50 000 ordinary shares at a premium of $1 per share.
2 The company’s land was revalued upwards by $130 000.
3 The company paid a final dividend of $60 000.

What were the total revenue reserves and capital reserves at 31 December 2020 after these
three transactions?

total revenue total capital

reserves reserves
$ $

A 140 000 180 000

B 190 000 130 000
C 200 000 180 000
D 250 000 130 000

17 A company revalued its premises upwards.

Which statement about the increase in value is correct?

A It is an unrealised profit.
B It is debited to the revaluation reserve.
C It is recorded in the income statement.
D It can be used to pay cash dividends.

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18 The table shows equity and liabilities of a company at 31 December 2020.

ordinary share capital 750 000

6% debentures (2030) 150 000
bank loan (repayable 2024) 75 000
bank overdraft 110 000
mortgage on buildings (repayable 2021) 120 000

What is the total of non-current liabilities in the statement of financial position at

31 December 2020?

A $195 000 B $225 000 C $270 000 D $345 000

19 The non-current asset turnover of a business improved between 2020 and 2021, even though the
net revenue was the same for both years.

What caused the improvement in the ratio?

A a reduction in the level of irrecoverable debts being incurred

B an upwards revaluation of the premises at the year end
C depreciation charged being higher than the cost of new non-current assets
D purchases of new non-current assets being greater than disposals

20 A business provides the following information.

trade payables 39 540

opening inventory 15 450
closing inventory 32 780
credit purchases 184 600
credit sales 230 600

What is the trade payables turnover?

A 63 days B 72 days C 79 days D 87 days

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21 When a company produces 5000 units of a product it requires one supervisor.

If production is increased beyond 5000 units then two supervisors are required.

Which type of cost is this an example of?

A fixed
B semi-variable
C stepped
D variable

22 A business employs 20 workers as production staff. Each worker is employed for 40 hours per
week at a rate of $7.80 per hour.

Bonus is calculated at 20% of basic rate pay per hour for each product manufactured above
120 units per employee.

In a week, each employee produced 145 units.

What were the total wages for the week?

A $7020 B $9984 C $10 764 D $10 920

23 A business uses absorption costing to set its selling prices.

Which overheads are accounted for by the use of the overhead absorption rate?

A total production, administrative and selling

B total production only
C variable production, administrative and selling
D variable production only

24 A business uses absorption costing and applies a mark-up of 50% when setting selling prices.

Each unit of product X has a direct cost of $60 and a selling price of $150 and requires two hours
of machine time.

What is the overhead absorption rate per machine hour?

A $7.50 B $15.00 C $20.00 D $40.00

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25 A business had no opening inventory. In one month it produced 4000 units and sold 3500 units.
The following information is available.

per unit
$

selling price 70
variable cost 30
fixed cost 15

How would inventory value and profit vary between using absorption costing and marginal
costing?

inventory value profit

A absorption costing higher by $7500 absorption costing higher by $7500

B absorption costing higher by $7500 absorption costing lower by $7500
C marginal costing higher by $7500 marginal costing higher by $7500
D marginal costing higher by $7500 marginal costing lower by $7500

26 Which costs are part of the marginal cost of a product?

1 direct material
2 fixed production
3 fixed selling and distribution
4 variable production

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

27 A company provided the following information.

variable costs 540 000

contribution 360 000
fixed production costs 100 000
fixed selling and distribution costs 320 000

What is its budgeted break-even sales revenue?

A $420 000 B $460 000 C $700 000 D $1 050 000

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28 Details for two products made by a company were as follows.

product X product Y
$ $

selling price per unit 13 8

variable cost per unit 11 4

The company could sell a maximum of 11 000 units of X and 9000 units of Y.

However, the company cannot produce more than 10 000 units of X and Y together due to
production constraints.

Which production mix will maximise profits?

units of X units of Y

A 10 000 0
B 1 000 9000
C 9 000 1000
D 5 000 5000

29 A manufacturer has a target profit of $80 000 per annum. Last year the business made a profit of
$60 000 when 10 000 units were produced and sold. Contribution was $10 per unit.

In order to achieve the target profit the plan is to increase advertising by $10 000 per annum.
Variable cost per unit and selling price per unit will remain unchanged.

What will be the total fixed cost if this plan is carried out?

A $20 000 B $30 000 C $40 000 D $50 000

30 Which are advantages of a budgetary control system?

1 Budgets help to prepare year-end financial statements.

2 Budgets may be set at easily achievable levels to make the business appear more
efficient.
3 Managers become responsible for implementing their department’s budget.
4 Where budget targets are not met, corrective action is taken.

A 1, 2 and 3 B 1, 3 and 4 C 2 and 4 D 3 and 4 only

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/12/O/N/21

 Cambridge International AS & A Level

ACCOUNTING 9706/13
Paper 1 Multiple Choice October/November 2021
1 hour

You must answer on the multiple choice answer sheet.

*4676402514*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB21 11_9706_13/4RP
© UCLES 2021 [Turn over
 2

1 A company does not include in the financial statements the value of skills gained by its
employees from training programmes.

Which accounting concept is being applied?

A consistency
B materiality
C money measurement
D substance over form

2 The following transactions took place.

1 owner’s withdrawal of inventory for private use

2 purchase of new shop fixtures on credit
3 writing off an irrecoverable debt

Which transactions would be recorded in the general journal?

A 1, 2 and 3 B 1 and 2 only C 1 only D 2 and 3 only

3 The accounting year end of a company is 31 December.

The company purchased a motor vehicle on 1 January 2020 and incurred the following costs.

1 cost, $30 000, of which half was paid by cheque. The balance was paid by a bank
loan. Loan interest for the year ended 31 December 2020 was $2500.
2 delivery cost, $2000
3 engine improvement cost, $4000
4 repair and maintenance costs for three years, $5000

The motor vehicle was to be depreciated by 20% per annum using the straight-line method.

What is the depreciation charge for the year ended 31 December 2020?

A $4200 B $7200 C $7700 D $8200

4 A business sold a non-current asset. It had been purchased for $15 000 and had an estimated life
of 10 years, with no residual value. It was depreciated using the straight-line method.

It was sold after six years.

Disposal costs were $1000 and there was a profit on disposal of $3000.

What was the sale price?

A $8000 B $9000 C $10 000 D $13 000

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5 Which statements about a depreciation charge for the year are correct?

1 It is a non-monetary expense.
2 It is debited to the provision for depreciation account.
3 It is only provided on non-current assets with an estimated useful life.

A 1 and 2 B 1 and 3 C 2 and 3 D 3 only

6 The sales ledger control account of a business showed a debit balance of $26 400.

This did not agree with the total of the sales ledger balances.

The following items appeared in the sales ledger accounts but had been omitted from the sales
ledger control account.

1 a contra item, $340

2 discount allowed, $56
3 dishonoured cheque, $62
4 irrecoverable debt written off, $438

What was the correct balance on the sales ledger control account?

A $25 504 B $25 628 C $26 066 D $26 308

7 Which are reasons for preparing a trial balance?

1 to assist in the preparation of draft financial statements

2 to detect all errors in the books of account
3 to find out the balance of the suspense account

A 1 and 2 B 1 only C 2 and 3 D 3 only

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8 The following information is available for the telephone account for the year ended
31 December 2020.

at at payments
1 Jan 2020 31 Dec 2020 and refund
$ $ $

accrual 2000 5000

prepayment 1000 3000
payments made 19 000
amount refunded 500

What was the telephone expense for 2020?

A $9500 B $17 500 C $19 500 D $21 500

9 A trader calculated his draft profit for the year as $16 000. The following items had not been
adjusted.

1 decrease in prepaid insurance, $400

2 increase in closing inventory, $1200
3 decrease in provision for doubtful debts, $120
4 increase in accrued rent receivable, $300

What was the profit for the year after adjusting for these items?

A $16 620 B $16 980 C $17 220 D $17 780

10 An item of capital expenditure has been incorrectly treated as revenue expenditure in the
financial statements of a business.

What is the effect of this error on the financial statements?

assets profit for the year

A overstated overstated
B overstated understated
C understated overstated
D understated understated

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11 The following information is available for a business.

$
at the start of the year

non-current assets 45 000

current assets 17 800
current liabilities 11 300
for the year
drawings 5 000
profit for the year 6 950

What is the closing balance on the capital account at the year end?

A $49 550 B $53 450 C $72 150 D $76 050

12 A trader did not keep full accounting records. The following information was available for 2020.

trade payables on 1 January 32 785

trade payables on 31 December 43 630
payments to suppliers during the year 72 830
discounts received during the year 3 450

What was the value of purchases?

A $58 535 B $65 435 C $80 225 D $87 125

13 How would the following transactions affect the owner’s equity of a sole trader?

paying the owner’s personal taking a long-term loan to

motoring costs from the finance the purchase of
business bank account new business machinery

A decrease no effect
B decrease increase
C increase no effect
D no effect decrease

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14 A partner is retiring from a partnership business.

What is the correct accounting treatment for goodwill if no goodwill is retained in the books of
account?

old partners’ new partners’

capital accounts capital accounts
A credit in old debit in new
profit-sharing ratio profit-sharing ratio
B credit in old debit in old
profit-sharing ratio profit-sharing ratio
C debit in new credit in new
profit-sharing ratio profit-sharing ratio
D debit in old credit in new
profit-sharing ratio profit-sharing ratio

15 X, Y and Z are in partnership sharing profits and losses equally.

At 31 December 2020, X had a capital account balance of $100 000 and a current account credit
balance of $80 000. On 1 January 2021 X retired. Non-current assets and goodwill were revalued
upwards by a total of $60 000.

X left half the amount due to her on retirement as a loan to the partnership. The balance was paid
to her by cheque.

How much was X paid?

A $40 000 B $60 000 C $100 000 D $120 000

16 A company had share capital of 100 000 ordinary shares of $1 each at the start of its financial
year.

The following transactions took place during the year.

1 An issue of 50 000 ordinary shares at $1.40 each was made.

2 A bonus issue of 15 000 ordinary shares of $1 each was then made.
3 A 12% debenture of $100 000 was issued.
4 A bank loan of $75 000 was repaid.

What was the net cash inflow from these transactions?

A $75 000 B $95 000 C $110 000 D $210 000

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17 A company paid an ordinary share dividend of $15 000 in the year.

Where would it appear in the financial statements?

A as a finance cost in the income statement

B as an administrative expense in the income statement
C under retained earnings in the statement of changes in equity
D under share capital in the statement of changes in equity

18 The equity of a limited company is shown.

start of the year end of the year

$ $

ordinary shares of $1 each 200 000 250 000

retained earnings 77 000 112 000
total equity 277 000 362 000

During the year the following transactions took place.

1 A bonus issue of one ordinary share for every four ordinary shares held was made.
2 Debenture interest of $18 000 was paid.
3 An interim dividend of $22 000 was paid.

What was the profit for the year?

A $57 000 B $107 000 C $125 000 D $157 000

19 The following information is available.

sales $250 000

purchases $120 000
average inventory $20 000
mark-up 25%

What is the rate of inventory turnover?

A 6.0 times
B 9.4 times
C 10.0 times
D 12.5 times

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20 The trade receivables turnover of a business has been calculated for two years.

turnover
in days

this year 60
last year 50

What is a possible reason for the change?

A increased levels of discounts received

B increased profit margins
C increased cash sales volume
D customer liquidity problems

21 A manufacturing company employs 20 workers who are paid a basic rate of $30 per hour for a
40-hour week. To meet a special order, the workers each worked 50 hours and were paid a
premium of 40% over basic rate for the overtime.

What was the value of wages paid to meet the special order?

A $30 000 B $32 400 C $33 600 D $42 000

22 A company paid the following telephone costs.

number of total cost

month
customer enquiries $

1 250 000 425 000

2 350 000 575 000

Telephone costs are a semi-variable cost.

What would be the total telephone costs incurred for 305 000 enquiries?

A $501 071 B $507 500 C $508 333 D $518 500

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23 Which statements are correct?

1 When output increases, fixed costs per unit decrease.

2 When output increases, variable costs per unit stay the same.
3 When output decreases, total fixed costs stay the same.
4 When output decreases, total variable costs decrease.

A 1, 2, 3 and 4
B 1 and 2 only
C 1, 3 and 4 only
D 2 and 3 only

24 A company’s fixed overheads details were as shown.

fixed
hours overheads
$

budget 10 000 150 000

actual 11 000 170 000

What was the over or under absorption of fixed overheads?

A $5000 over absorbed

B $5000 under absorbed
C $15 000 over absorbed
D $15 000 under absorbed

25 The following budgeted data is available for July 2021.

direct labour ($20 per hour) 80 000

indirect labour 12 000
factory expenses 36 000
depreciation on machinery 30 000
depreciation on office equipment 18 000
administrative expenses 44 000

What is the budgeted overhead absorption rate per direct labour hour?

A $19.50 B $24 C $35 D $39.50

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26 The following budgeted information is available for a business.

revenue 650 000

variable costs 390 000
fixed non-production cost 150 000
fixed selling and distribution costs 90 000

What is its budgeted break-even sales revenue?

A $250 000 B $375 000 C $400 000 D $600 000

27 Which statements relating to marginal costing are correct?

1 Fixed production costs are included in inventory valuations.

2 Fixed production costs are fully written off as an expense.
3 Variable production costs are included in inventory valuations.
4 Variable production costs are fully written off as an expense.

A 1 and 3 B 1 and 4 C 2 and 3 D 3 and 4

28 A business makes and sells four products A, B, C and D.

Which product should be produced first when labour hours are not sufficient to produce all four
products?

selling price variable costs labour hours

$ $ $

A 10 15 1
B 35 10 5
C 50 30 2
D 75 57 3

29 When does cost–volume–profit analysis inform users about cost behaviour?

A when different time periods are involved and when absorption costing is used
B when different time periods are involved and when marginal costing is used
C when the level of output changes and when absorption costing is used
D when the level of output changes and when marginal costing is used

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30 Which statement about budgets is correct?

A They are usually prepared by the board of directors.

B They can identify limiting factors.
C They can only show monetary values.
D They have to be approved by shareholders.

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/13/O/N/21

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2022
1 hour

You must answer on the multiple choice answer sheet.

*6011464210*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 03_9706_12/3RP
© UCLES 2022 [Turn over
 2

1 Which actions are taken in respect of the totals of a three-column cash book at the end of an
accounting period?

cash and bank discount

columns columns

A balanced balanced
B balanced totalled
C totalled balanced
D totalled totalled

2 Which item is an example of capital expenditure?

A cost of repairs to an office building

B cost of repainting business name on delivery van
C legal cost paid to purchase an office building
D legal cost to collect outstanding receivables

3 On 1 July 2021, Tim bought a delivery van for $10 000. He paid an additional $900 to have racks
fitted inside, and $800 for a year’s insurance.

Tim provides for depreciation at the rate of 10% per annum. A full year’s depreciation is charged
in the year of acquisition.

What was the total for expenses recorded in Tim’s income statement in respect of the van for the
year ended 30 September 2021?

A $1290 B $1690 C $2100 D $2500

4 A business has a year end of 31 December. It purchased a non-current asset on 1 January 2020
for $100 000. The asset was depreciated using the reducing balance method at 20% per annum.
It was sold for $40 000 on 1 January 2022.

What was the loss on disposal?

A $20 000 B $24 000 C $40 000 D $60 000

5 What is entered in the sales ledger control account?

1 cash sales
2 increase in provision for doubtful debts
3 returns inwards

A 1 and 2 B 1 and 3 C 2 and 3 D 3 only

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6 A trial balance included a suspense account. The bank balance of $28 412 had mistakenly been
entered as an overdraft and placed on the credit side as $28 142.

There had also been an addition error and the debit side of the trial balance had been undercast
by $450.

Which entry in the suspense account will correct these errors?

A credit $56 104

B debit $56 104
C credit $57 004
D debit $57 004

7 Which statement is correct?

A The balance on the irrecoverable debts account is carried down to the next accounting
period.
B The balance on the irrecoverable debts account is treated as an expense in the income
statement.
C The balance on the provision for doubtful debts account is calculated before the deduction of
irrecoverable debts.
D The balance on the provision for doubtful debts account is not included in a trial balance.

8 The following information is available for a business at 31 December 2021.

general expenses in arrears 1 January 420

general expenses in advance 1 January 240
general expenses in arrears 31 December 720
general expenses in advance 31 December 120

Total amount paid during the year ended 31 December 2021 is $11 500.

What is the amount to be included in the income statement for general expenses for the year
ended 31 December 2021?

A $10 240 B $10 720 C $11 080 D $11 920

9 When would the year end value of inventory need to be adjusted?

1 when inventory has not yet been paid for

2 when selling price has fallen below cost
3 when the owner has recorded taking goods for his own use during the year

A 1 and 2 B 2 and 3 C 2 only D 3 only

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10 A business had a draft profit for the year of $250 000.

The following errors were then discovered.

1 Depreciation charged was $25 000. The figure should have been $40 000.
2 Closing inventory for the period was undervalued by $10 000.

What was the correct profit for the year?

A $225 000 B $245 000 C $255 000 D $275 000

11 A capital account for a sole trader contained three entries, in addition to the opening and closing
balances.

What did these entries represent?

debit side credit side

A capital introduced drawings, loss for the year

B capital introduced, drawings profit for the year
C drawings, loss for the year capital introduced
D profit for the year capital introduced, drawings

12 The year end of a business is 31 December 2021.

On 5 January 2022, inventory was counted and valued at cost, $30 000.

The following was then discovered.

1 Goods purchased and received after the year end, costing $1500, had been
included in the valuation.
2 It included goods returned by a customer after the year end. They had a selling price
of $900 which included a mark-up of 25% during the year.
3 Some goods included in the inventory, costing $500, were damaged. They can be
sold for $300 after repairs costing $100.

Which value of inventory should be included in the financial statements at 31 December 2021?

A $27 480 B $27 525 C $28 275 D $29 270

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13 A sole trader provided the following information for the year ended 31 December.

non-current assets increased by 25 000

current assets increased by 10 000
current liabilities increased by 12 500
additional capital introduced during the year 20 000
drawings for the year 13 000

What was the profit for the year ended 31 December?

A $10 500 B $14 500 C $15 500 D $29 500

14 Which rule does not apply in the absence of a partnership agreement?

A Interest on partners’ loans is charged at 6% per annum.

B No interest on capital is charged.
C No salaries are paid to partners.
D Profits and losses are shared equally between the partners.

15 P and Q are in partnership sharing profits and losses equally. On 1 January 2021, the
partnership had net assets of $410 000. At that date, R was admitted into the business on the
following terms.

1 Net assets to be revalued to $480 000.

2 Goodwill was valued at $50 000 but will not be retained in the books of account.
3 Profits and losses will now be shared P 40%, Q 40% and R 20%.

What was the change in Q’s capital immediately after R’s admission?

A decrease by $33 000

B decrease by $40 000
C increase by $33 000
D increase by $40 000

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16 X and Y are in partnership, sharing residual profits and losses equally. Partners are charged 2%
interest on their drawings. Y is entitled to a salary of $10 000.

The partners’ drawings for the year were as shown.

X 12 000
Y 8 000

The profit for the year was $52 000.

How much did each partner receive as a share of residual profits?

A $10 800 B $11 200 C $20 800 D $21 200

17 Which statements are correct?

1 Dividends can be paid out of the general reserve.

2 Rights issues can be made from the share premium account.
3 The general reserve can be created from retained earnings.

A 1 and 2 B 1 and 3 C 1 only D 2 and 3

18 A limited company had the following balances on 1 January 2021.

revaluation reserve 20 000

retained earnings 142 000

Profit for the year ended 31 December 2021 was $105 000.

The revaluation reserve, $20 000, was created two years ago from a revaluation of a property.
The same property was revalued on 31 December 2021 with a revaluation loss of $35 000.

On 1 August 2021 an interim dividend, $40 000, was paid.

On 31 December 2021 a final dividend, $55 000, was proposed.

What was the value of retained earnings at 31 December 2021?

A $117 000 B $137 000 C $172 000 D $192 000

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19 The bank balance of a limited company was $390 000 before the following transactions took
place.

1 An issue of 500 000 new shares of $0.50 each was made at a premium of $0.25
per share.
2 A debenture for $100 000 was repaid.
3 A bonus issue of 100 000 shares of $0.50 each was made.

What was the bank balance after these transactions?

A $540 000 B $665 000 C $715 000 D $865 000

20 What might cause a decrease in a company’s non-current asset turnover?

A increase in expenses
B increase in sales revenue
C purchase of new non-current assets
D selling non-current assets

21 The following information for a limited company at 31 December 2021 is available.

ordinary share capital 300 000

retained earnings 110 000
8% debenture 100 000

Retained earnings at 1 January 2021 were $82 000. An interim dividend of $45 000 was paid on
1 May 2021.

What was the return on capital employed for the year ended 31 December 2021?

A 6.83% B 7.06% C 14.31% D 15.88%

22 Which statements about stepped costs are correct?

1 fixed within a range of activity levels

2 fixed whatever the level of activity
3 include fixed costs only
4 include both fixed and variable costs

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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23 A production worker is paid $15 per hour for working 8 hours a day.

Overtime is paid at the rate of time and a fifth (basic pay plus 20%).

A productivity bonus is also paid at the rate of $21 per unit for each unit produced in excess of
12 units per day.

Last Friday, the production worker worked 12 hours and assembled 14 units.

How much did he earn on Friday?

A $144 B $162 C $192 D $234

24 A retailer made the following purchases of inventory in October.

quantity unit price total cost

purchase
(units) $ $

5 Oct 50 500 25 000

12 Oct 50 500 25 000
23 Oct 150 525 78 750
128 750

There was no opening inventory for October.

The business uses the first-in first-out (FIFO) method to value its inventory.

In October, 200 units were sold for $900 each.

What was the gross profit for October?

A $76 667 B $77 000 C $77 500 D $96 250

25 A company has two departments in its factory. The details are shown.

budgeted fixed
budgeted
department overheads
hours
$

machining 180 000 6 000

assembly 90 000 10 000
total 270 000 16 000

What is the fixed overhead absorption rate per hour in the machining department?

A $11.25 B $16.875 C $30 D $45

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26 What would cause overheads to be over-absorbed?

A Overhead absorbed is greater than overhead budgeted.

B Overhead absorbed is less than overhead budgeted.
C Overhead incurred is greater than overhead absorbed.
D Overhead incurred is less than overhead absorbed.

27 A company has the following information for producing 2000 units of a product.

sales revenue 85 000

direct materials 30 000
direct labour 14 000
direct expenses 2 500
other variable overheads 10 200
fixed overheads 8 000

What is the contribution to sales ratio?

A 23.88% B 33.29% C 45.29% D 54.71%

28 The following information is available about two products.

product 1 product 2
per unit per unit

material X 2 kilos 4 kilos

material Y 3 kilos 1 kilo
direct labour 3 hours 6 hours

Production is planned to be 100 units of each product.

700 kilos of material X and 400 kilos of material Y are available. A total of 800 direct labour hours
can be worked.

What are the limiting factors?

A direct labour only

B material X only
C material Y only
D all three inputs

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29 A company provides the following information about its product.

selling price $100

variable cost per unit $40
fixed costs $21 600
break-even point 360 units

If the business changes its production method, contribution will increase by 10% and fixed costs
will increase by 5%.

What would be the effect on the break-even point?

A decrease by 16 units
B decrease by 18 units
C increase by 16 units
D increase by 18 units

30 What are possible limitations of a budgetary control system?

1 Budgets are based on estimates.

2 Budgets may lead to staff demotivation.
3 Budgets may prevent managers from being creative.

A 1 and 2 only B 1 and 3 only C 1, 2 and 3 D 2 and 3 only

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/12/F/M/22

 Cambridge International AS & A Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*9177817688*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9706_11/5RP
© UCLES 2022 [Turn over
 2

1 Which statements are correct?

1 A book of prime entry is also part of the double entry system.

2 All sales made by the business are included in the sales ledger.
3 Ledger accounts for income and liabilities have credit balances.
4 Trade discounts appear in the income statement.

A 1 and 2 B 1 and 3 only C 1, 3 and 4 D 3 and 4 only

2 Which accounting concepts are not reasons for including depreciation in the income statement?

1 matching
2 materiality
3 prudence
4 realisation

A 1 and 4 B 2 and 3 C 3 only D 4 only

3 On 1 January 2019, a non-current asset was purchased at a cost of $290 000. Delivery and
installation costs of $10 000 were also paid.

The reducing balance method is used to depreciate the asset at a rate of 20% per annum. A full
year’s depreciation is charged in the year of acquisition and none in the year of disposal.

On 31 December 2021, the non-current asset was sold for $205 000. Disposal costs of $5000
were also paid.

What was the profit on disposal?

A $8000 B $13 000 C $14 400 D $46 400

4 A sole trader purchased a machine costing $30 000 with an estimated residual value of $5000. It
was expected to have a useful life of five years.

At the end of the fourth year, the machine was sold at a profit of $200.

Depreciation is charged using the straight-line method. A full year’s depreciation is charged for
each year the asset is owned.

What was the amount of sale proceeds?

A $5200 B $6200 C $10 200 D $15 200

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5 Which statement about control accounts is not correct?

A Only cash book entries need to be checked to identify errors.

B They help to identify where errors have been made.
C They make the totals of trade receivables and trade payables more easy to obtain.
D They reduce the possibility of fraud.

6 At the end of a financial period, the trial balance of a business did not agree and a suspense
account was opened.

The following was then discovered.

1 A cheque for $7800 was correctly entered in the customer’s account but had been
debited in the bank account as $7000.
2 A credit purchase of $2500 had been omitted from the books of account.
3 Discounts received of $9600 had been entered on the debit side of discounts
allowed account.
4 The sales account had been overcast by $18 200.

After adjusting these items, the suspense account was cleared.

What was the opening balance of the suspense account?

A $200 credit
B $2700 credit
C $9400 debit
D $19 000 debit

7 Which statements about a bank reconciliation are correct?

1 Cleared cheques are excluded.

2 It locates all errors.
3 It locates any fraud.
4 Uncredited deposits are included.

A 1 and 3 B 1 and 4 C 2 and 3 D 3 and 4

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8 At the beginning of the financial year, inventory was valued at $15 000. During the year, sales of
$21 000 and purchases of $18 000 were made. Unfortunately, all inventory was stolen on the last
day of the financial year.

Goods are marked up by 50% to calculate selling price.

What is the cost of the stolen inventory?

A $7500 B $11 000 C $19 000 D $22 500

9 What will be used to calculate the general provision for doubtful debts?

A total trade receivables only

B total trade receivables less irrecoverable debts only
C total trade receivables less provision for specific doubtful debts only
D total trade receivables less irrecoverable debts and provision for specific doubtful debts

10 At 31 December 2021, a business had calculated the draft profit for the year of $57 500.

It was then discovered that the following adjustments were necessary.

1 Inventory valued at $2400 was damaged and now had a resale value of $1660.
2 Rent receivable included $400 prepaid for 2022.
3 The provision for doubtful debts needed to be increased by $890.

What is the correct profit for the year?

A $55 470 B $56 270 C $58 050 D $58 730

11 Closing inventory has been undervalued.

What is the effect on the financial statements?

total current assets profit for the year

A no effect understated
B overstated overstated
C understated no effect
D understated understated

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12 A sole trader has provided the following information.

net assets at 1 January 2021 10 000

net assets at 31 December 2021 24 000
during the year ended 31 December 2021
drawings for the year 3 200
cash introduced by owner 6 000
motor vehicle introduced by owner 2 500

What was the trader’s profit for the year ended 31 December 2021?

A $8000 B $8700 C $14 700 D $19 300

13 What will apply to a partnership where there is no partnership agreement?

A Partners are entitled to interest on the capital they have contributed to the partnership.
B Partners are not charged interest on their drawings.
C Partners are entitled to salaries.
D Partners are not entitled to interest on loans they make to the partnership.

14 X and Y were in partnership sharing profits and losses equally.

On 1 January, P was admitted into the partnership. He contributed $20 000 cash and $10 000
other assets.

The non-current assets were revalued upwards by $12 000 on this date.

There was no adjustment for goodwill.

Profits and losses continued to be shared equally.

What was the balance on P’s capital account after all relevant entries had been made?

A $20 000 B $26 000 C $30 000 D $34 000

15 Daisy, Freddie and Harry, who shared profits equally, had been in partnership for some years.
Harry decided to retire.

Harry’s capital and current accounts had credit balances of $40 000 and $8000 respectively.

The total assets of the partnership had a book value of $98 000 but a realisable value of
$116 000. There was no adjustment for goodwill.

Which amount did Harry receive from the partnership on his retirement?

A $38 000 B $42 000 C $48 000 D $54 000

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16 A company made a bonus issue of one ordinary share for every five ordinary shares held.

What is the effect on share capital and reserves and net assets?

share capital and

net assets
reserves

A increase increase
B increase no change
C no change increase
D no change no change

17 At the end of its first year of trading, a company provided the following information.

paid during
at the year end
the year
$
$

dividends 3 000 5 800 proposed

debenture interest 4 000 1 600 accrued
directors’ salaries 10 800 nil

By how much do these items reduce the profit for the year?

A $13 200 B $14 400 C $16 400 D $19 400

18 M Limited has the following balances at 1 January 2021.

ordinary share capital 500 000 shares of $0.50 each 250 000
share premium 10 000
general reserve 40 000
retained earnings 50 000

During the year ended 31 December 2021:

1 an interim dividend of $0.02 per share was paid

2 there was a transfer of $20 000 to the general reserve.

For the year ended 31 December 2021, the company made a profit for the year of $80 000.

What is the maximum additional dividend payable per ordinary share for the year ended
31 December 2021?

A $0.20 B $0.22 C $0.32 D $0.34

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19 Which ratios are efficiency ratios?

1 expenses to revenue ratio

2 inventory turnover
3 non-current asset turnover
4 return on capital employed

A 1 and 2 B 2 and 3 C 3 and 4 D 4 only

20 The following information is available for a limited company.

closing inventory $30 000

increase in inventory from the start of the year 50%
rate of inventory turnover 8 times
gross profit for the year $200 000

What was the company’s sales revenue for the year?

A $360 000 B $400 000 C $440 000 D $600 000

21 Which item is a direct cost?

A carriage inwards on production materials

B cleaning materials for the factory
C factory rent
D wages of the factory manager

22 A business pays its employees $2 for each unit of X they assemble and $3.20 for each unit of Y.
Monthly output is 1800 units of X and 1000 units of Y. The factory supervisor is paid $1000 per
month.

What is the direct labour cost per month?

A $6800 B $7760 C $7800 D $8760

23 An employee works a 35-hour week and is paid an hourly rate of $24.

In addition to basic pay she receives a bonus of 25% of her hourly rate. This is calculated using
time saved against the target units produced. Each unit should take 15 minutes to produce.

For a 35-hour week she produced 170 units. Of these, 2 units were rejected and her total pay
was reduced by $2.50 per unit.

What were her wages for the week?

A $840 B $880 C $885 D $890

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24 A manufacturing business uses direct labour hours to calculate its overhead absorption rate.

What are the causes for over-absorption of overhead?

1 More labour hours have been used than budgeted.

2 More products have been produced than budgeted.

3 More products have been sold than budgeted.

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

25 The following information is provided by a company for a month.

actual direct labour hours worked 4500

budgeted direct labour hours 5000
budgeted overhead expenditure $80 000
overheads under-absorbed $12 000

What is the amount of the actual overhead expenditure?

A $60 000 B $68 000 C $72 000 D $84 000

26 What is the contribution to sales ratio used to calculate?

A break-even point
B overhead absorption rate
C profit for the period
D value of inventory

27 The following information relates to the first year of operation of a business.

production (units) 5000

sales (units) 4000
unit selling price $10
variable production costs per unit $4
selling expense per unit $1
total fixed manufacturing overhead $13 000

What is the value of gross profit if the business uses absorption costing to value its inventory?

A $7000 B $11 000 C $13 600 D $20 000

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28 A company makes and sells a single product type which has a selling price of $20 per unit.

Variable costs are $8 per unit.

Total fixed costs are $7000.

The company wishes to achieve a target profit of $20 000.

How many units should be produced and sold to achieve the target profit?

A 1000 B 1350 C 1667 D 2250

29 Last year a company sold 2000 units and made a contribution of $50 per unit. After deducting
total fixed costs, profit was $60 000.

This year:

sales volume increased by 10%

contribution per unit decreased by 5%
total fixed costs increased by 25%.

What was the company’s profit this year?

A $45 000 B $54 500 C $60 000 D $64 500

30 Which statement does not apply to budgeting?

A Budgets are plans that guide management to achieve strategic objectives.

B Budgeted outcomes should be compared with actual results so that effective management
action can be taken.
C Budgets should be easily achieved so that managers appear to be efficient.
D Management should communicate and coordinate budgets across all levels of management.

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© UCLES 2022 9706/11/M/J/22

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/11/M/J/22

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*8276462329*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9706_12/4RP
© UCLES 2022 [Turn over
 2

1 Which accounting concept states that revenue can only be recognised after it has been earned?

A consistency
B going concern
C money measurement
D realisation

2 A sole trader has changed the method of depreciating his machinery from the reducing balance
method in the year 1 to the straight-line method in the year 2 of trading. The same percentage
rate of depreciation is used in both cases.

What is the effect on the net book value of machinery and profit for the year 2?

net book value profit for the year 2

A higher higher
B higher lower
C lower higher
D lower lower

3 Paul has a year end of 31 December.

On 1 January 2020, he bought a non-current asset for $10 000. He sold it on 1 January 2021 for
$8500.

Paul usually provides depreciation at the rate of 10% per annum. A full year’s depreciation is
charged in the year of acquisition and none in the year of disposal. He forgot to provide for any
depreciation on this non-current asset.

What was the effect of this error on Paul’s profit for the year ended 31 December 2021?

A $1000 higher
B $1000 lower
C $1500 higher
D $1500 lower

4 A business depreciates its machinery at 10% per annum using the straight-line method on a
month-by-month basis. The business’s financial year end is 30 June.

Machinery which had cost $6600 on 1 April 2020 was sold on 30 November 2021. The profit on
sale was $350.

What were the sale proceeds?

A $5150 B $5425 C $5850 D $6125

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5 Why does a business maintain sales and purchases ledger control accounts as part of the double
entry accounting system?

1 It allows a trial balance to be prepared easily from the nominal ledger.

2 It can involve separate employees which makes fraud more difficult.
3 There is no need to keep sales and purchases journals.
4 There is no need to reconcile with personal accounts for customers and suppliers.

A 1 and 2 only B 1, 2 and 3 C 1, 3 and 4 D 2, 3 and 4

6 Doug received his business bank statement. He updated the cash book and prepared the bank
reconciliation statement.

Which items appeared on the bank reconciliation statement?

customer
bank uncredited
payments by
charges deposits
direct debit

A no no yes
B no yes yes
C yes no no
D yes yes no

7 At 31 December 2021, the sales ledger control account had a balance of $19 100 while the total
balances in the sales ledger were $20 900.

The following reconciliation statement had been prepared after the errors were located.

balance of sales ledger control account 19 100

credit sales omitted from the sales journal 1 600
discount allowed understated in sales ledger 200
total of balances in the sales ledger 20 900

What is the correct amount of total trade receivables as shown in the statement of financial
position?

A $17 500 B $18 900 C $19 300 D $20 700

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8 At the year-end, Victor had 100 units of inventory which had cost $12 per unit.

Of these, eight units had been received on the last day of the year and had not yet been paid for.

An additional six units were damaged and would be sold for $10 each once repairs to them
totalling $20 were made.

What was the value of inventory in Victor’s financial statements at the year-end?

A $1072 B $1092 C $1168 D $1188

9 Which items are treated as expenses in the income statement?

accrued wages prepaid telephone increase in

at the end of charges at the provision for
the year end of the year doubtful debts

A   
B   
C   
D   

10 At 31 December 2021, the draft statement of financial position for a business showed total assets
of $1 000 000.

The following was then discovered.

1 An increase in the provision for doubtful debts, $5000, had not been recorded.
2 Closing inventory had been overvalued by $20 000.
3 Depreciation, $10 000, had not been recorded.

What was the corrected total assets value?

A $965 000 B $985 000 C $1 005 000 D $1 015 000

11 On what basis does a trading business produce an income statement?

1 cash received and paid out by the business in the year

2 income earned less costs incurred by the business during the year
3 revenue received less any cash paid out by the business during the year

A 1 and 2 B 1 and 3 C 2 and 3 D 2 only

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12 A business provides the following information.

revenue 140 000

opening inventory 22 000
closing inventory 24 500
purchases 120 000

Goods are sold at cost plus 25%.

The owner has taken goods for own use but has not recorded these as drawings.

What is the value of the goods taken for own use?

A $5500 B $10 500 C $12 500 D $17 500

13 A business owner does not maintain a full set of accounting records. At the end of the financial
year the following information is available.

trade payables
opening balance 22 500
closing balance 27 400
returns outwards 1 000
payments to trade payables 110 600

There were no cash purchases.

The opening and closing inventory has remained at the same amount.

What was the amount of the cost of sales?

A $105 700 B $106 700 C $115 500 D $116 500

14 The provisions of the Partnership Act apply if partners do not draw up a partnership agreement.

Which statement is true as a provision of the Partnership Act?

A Interest on drawings is charged at 5% a year.

B Interest on loans from partners is to be at 8% a year.
C Partners are not entitled to salaries.
D Profits are to be shared in the ratio of fixed capitals.

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15 Dua and Noor are in partnership sharing profits and losses equally.

They admitted Zee and now share profits and losses in the ratio Dua : Noor : Zee, 2 : 2 : 1.

On admission of Zee, tangible assets were reduced in value by $20 000 and goodwill was valued
at $60 000, but was not retained in the books of account.

What was the net decrease on Noor’s capital account?

A $4000 B $8000 C $10 000 D $14 000

16 The following information is available for a partnership.

profit for the year before interest 15 000

interest on partner’s loan to the firm 1 000
interest on capital 2 000
drawings 10 000

Which profit figure is to be appropriated between the partners?

A $3000 B $13 000 C $14 000 D $15 000

17 Which item should not be recorded in a statement of changes in equity?

A bonus issue of ordinary shares

B dividends paid on ordinary shares

C profit from operations for the year
D transfer to general reserve

18 The following information has been extracted from the statement of financial position of a limited
company.

6% debenture (2026–2028) 20 000

400 000 ordinary shares of $1 each 400 000
5-year bank loan 200 000
share premium account 50 000
retained earnings 75 000

What is the value of the total equity?

A $525 000 B $545 000 C $695 000 D $725 000

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19 On 1 January, X Limited had share capital of 100 000 ordinary shares which had been issued at
their par value of $1 each. There was no share premium account.

On 1 March, a bonus issue of one new ordinary share for every five ordinary shares held was
made from retained earnings.

On 1 June, the company made a rights issue of one new ordinary share for every four ordinary
shares held at a price of $1.50 each. All the rights were taken up.

How much was recorded in the share premium account?

A $12 500 B $15 000 C $30 000 D $45 000

20 The following information is available for a business.

sales revenue $500 000

purchases $365 000
gross margin 25%
mark-up 33 31 %
inventory at start of the period $20 000

What was the value of closing inventory?

A $10 000 B $20 000 C $30 000 D $50 000

21 The following shows extracts from the statement of financial position of a company.

at 30 September
$

non-current assets 120 000

inventory 35 000
trade receivables 23 000
cash at bank (debit balance) 12 000
trade payables 15 000
bank loan repayable within 12 months 40 000

What is the liquid (acid test) ratio?

A 0.64 : 1 B 1.27 : 1 C 2.33 : 1 D 4.67 : 1

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22 The cost of direct materials is increasing.

What is the effect if a business uses first-in-first-out (FIFO) instead of average cost (AVCO) for
inventory valuation in this situation?

closing inventory
cost of sales profit for the year
value

A increases decreases increases

B increases decreases decreases
C decreases increases decreases
D decreases increases increases

23 Q Limited employs machine operators and supervisors.

Each machine operator produces 100 units per week.

One supervisor can supervise up to 10 machine operators and is paid $550 per week.

Production is 7700 units per week.

Which type of cost is the supervisors’ pay and how much is their total pay per week?

total pay per

type of cost week
$

A stepped 4235
B stepped 4400
C variable 4235
D variable 4400

24 What is a limitation of absorption costing?

A It does not comply with accounting principles.

B It does not take into account all costs of production.
C It is not accepted for preparing published financial statements.
D It is not useful for improving the organisation’s performance.

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25 The following information relates to one accounting period.

opening inventory 40 000 units

closing inventory 44 000 units
absorption cost profit $284 000
marginal cost profit $250 000

What was the overhead absorption rate per unit during the accounting period?

A $6.25 B $6.45 C $7.10 D $8.50

26 The selling price of a product remains constant.

In which circumstances will the break-even point in units decrease?

1 increase in labour costs per unit

2 decrease in material costs per unit
3 decrease in variable costs per unit
4 increase in total fixed costs

A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

27 A company makes and sells a single product type.

The product is sold for $50 per unit and variable costs are $30 per unit.

Total fixed costs are $500 000.

How many units of the product does the company need to sell to make a profit of $300 000?

A 6400 B 15 000 C 25 000 D 40 000

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28 A business makes and sells three different product types, M, N and O. The following information
is available.

product
M N O
per unit
$ $ $

selling price 240 280 250

direct material 110 120 90
direct labour 65 90 100
variable overheads 20 30 25
fixed overheads 50 30 18
profit / (loss) (5) 10 17

Each product uses the same direct material, which is in short supply.

In which order of priority should the products be produced to maximise the profit?

A MNO

B MON

C NOM

D ONM

29 A business has the following information.

break-even point 5000 units

variable costs per unit $27
contribution to sales ratio 40%

What is the total fixed cost?

A $54 000 B $81 000 C $90 000 D $135 000

30 Why does a business prepare budgets?

A to assess their non-financial performance

B to control their expenditure
C to strategically plan several years ahead
D to value the assets and liabilities of the organisation

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© UCLES 2022 9706/12/M/J/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/12/M/J/22

 Cambridge International AS & A Level

ACCOUNTING 9706/13
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*8650445070*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 06_9706_13/4RP
© UCLES 2022 [Turn over
 2

1 Mia has agreed to supply goods to a customer on a sale or return basis. At the end of her
financial year, the customer has not indicated whether they will keep the goods.

Which accounting concept should Mia apply to these items in her financial accounts?

A matching
B prudence
C realisation
D substance over form

2 Which item should be treated as capital expenditure?

A cost of a printer for an existing computer system

B rent paid on a factory, whilst the company negotiated the purchase of the factory
C repainting the wooden office door
D repair costs to a car which are not covered by insurance

3 A business has a financial year end of 31 December. It purchased a vehicle on 1 January 2019
for $30 000.

The business depreciates vehicles at the rate of 20% per annum using the reducing balance
method. Depreciation is charged on a month-by-month basis.

The vehicle was sold on 30 September 2021.

A profit on disposal of $3000 had been calculated. However, no entries had been made to record
the depreciation for 2021.

What was the effect of not recording the depreciation for 2021 on the profit on disposal?

A $2880 overstated
B $3840 overstated
C $2880 understated
D $3840 understated

4 A trader bought a machine on 1 January 2019. He depreciated it at the rate of 10% per annum
using the straight-line method.

He sold this machine on 1 January 2021 for $4000. The profit on disposal was $200.

How much had the machine cost on 1 January 2019?

A $4560 B $4750 C $5040 D $5250

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5 Which item is recorded on the credit side of a sales ledger control account?

A discount received
B dishonoured cheques
C interest on overdue accounts
D set-off of amounts in the purchases ledger

6 The bank column of the cash book showed a credit balance of $2915. This did not agree with the
balance shown on the bank statement.

It was then discovered that:

1 a bank transfer, $150, from a customer was not recorded in the cash book
2 a cheque, $450, received from a customer was not recorded on the bank statement
3 a cheque, $530, issued to a supplier was incorrectly recorded in the cash book as
$350 but was correctly recorded by the bank
4 bank charge, $25, was not recorded in the cash book.

When these items were adjusted, the cash book balance agreed with the bank statement
balance.

What was the balance shown on the bank statement before any adjustments were made?

A $2520 debit
B $2520 credit
C $3420 debit
D $3420 credit

7 The correction of which error would require an entry in the suspense account?

A A sales invoice, $45, was omitted from the sales journal.

B Drawings, $60, were debited in the cash book and were credited to the drawings account.
C Vehicle repairs, $100, were debited to the vehicles at cost account.
D Wages, $150, were correctly recorded in the wages account and debited in the cash book.

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8 The amount of the expense for rent and rates recorded in the income statement for the year
ended 31 December 2021 was $76 230.

The following information was also available.

balance brought forward balance carried forward

1 January 2021 31 December 2021
$ $

rent accrued 4000 6500

rates prepaid 770 820

How much was paid from the bank account for rent and rates during the year ended
31 December 2021?

A $73 680 B $73 780 C $78 680 D $78 780

9 Which statements regarding the financial statements of a sole trader are correct?

1 Cash drawings for the year are recorded in the income statement.
2 Gross profit for the year is shown in the statement of financial position.
3 Prepayments only appear in the income statement.
4 Trade receivables appear in the statement of financial position.

A 1 and 2 B 2 and 3 C 3 and 4 D 4 only

10 A business provided the following information regarding its first year of trading.

credit sales 93 730

receipts from credit customers 76 500
irrecoverable debt written off 150
contra recorded between purchases ledger and sales ledger 80

The net trade receivables recorded in the statement of financial position at the end of the year
were $16 660.

What was the balance on the provision for doubtful debts account at the end of the year?

A $340 B $490 C $500 D $650

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11 Which items are recorded in the income statement of a sole trader?

1 interest payable on bank loan

2 interest on capital
3 transfer to general reserve

A 1 and 2 B 1 and 3 C 1 only D 2 and 3

12 A summary of a trader’s bank statements for his first year of trading showed the following
amounts.

receipts from credit customers 25 000

cash sales takings banked 82 000

The trader took $2000 every month from takings as drawings before banking the remaining
takings. Trade receivables at the year end amounted to $9500.

What was total revenue for the year?

A $73 500 B $92 500 C $121 500 D $140 500

13 Jane provided the following information about her business.

1 January 2021 31 December 2021

$ $

total assets 108 000 119 000

current liabilities 7 500 11 500

During the year, the business took a long-term loan of $10 000 and Jane’s drawings totalled
$12 000.

What was Jane’s profit for the year ended 31 December 2021?

A $7000 B $9000 C $19 000 D $29 000

14 Which factors may cause a partnership to revalue its tangible non-current assets?

1 admission of a new partner

2 change in the profit-sharing ratios
3 retirement of a partner

A 1 and 2 B 1 and 3 C 1 only D 2 and 3

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15 L and M were in partnership sharing profits and losses in the ratio of 2 : 1.

At 31 December 2021, the assets and liabilities of the partnership were as follows.

non-current assets at net book value 600 000

inventory 50 000
trade receivables 40 000
bank 5 000 debit
trade payables 20 000
capital and current account L 350 000
capital and current account M 325 000

The partnership closed on 31 December 2021.

At that date the following took place.

1 The non-current assets were sold for $654 000.

2 Inventory was sold for $80 000.
3 All trade receivables were collected and trade payables were settled at their book
values.
4 Realisation expenses were $6000.

What was L’s share of the profit on realisation?

A $50 000 B $52 000 C $56 000 D $60 000

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16 X, Y and Z are in partnership sharing profits and losses in the ratio 5 : 2 : 3.

Y is entitled to a salary of $18 000 per annum.

Partners receive interest at 6% per annum on their capital account balances at the beginning of
the year.

At the beginning of the year, capital account balances were as follows.

X 30 000
Y 22 000
Z 20 000

The profit for the year before Y’s salary and partners’ interest on capital is $140 000.

What is Y’s share of the total profits?

A $23 536 B $28 000 C $42 856 D $46 000

17 During the year, a business issued $1 ordinary shares at $1.20 each. The directors proposed a
final dividend at the end of the year.

Which balances in the statement of changes in equity were affected by these transactions?

ordinary share general retained

share capital premium reserve earnings

A  
B   
C  
D  

18 The following items were taken from the bank transactions of a company for a period.

share issue proceeds 30 000

sale of non-current assets 5 000
dividend paid 9 000
increase in bank loan 6 000

What was the net increase in the company’s bank balance as a result of these?

A $28 000 B $32 000 C $38 000 D $40 000

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19 On 1 January 2021, W Limited had total revenue reserves of $122 000.

During the year ended 31 December 2021, the following took place.

1 A dividend of $7500 was paid.

2 An amount of $10 000 was transferred from retained earnings to general reserve.
3 Premises were revalued upwards by $19 800.

For the year ended 31 December 2021, W Limited made a profit for the year of $32 000.

What was the total of revenue reserves at 31 December 2021?

A $136 500 B $141 800 C $146 500 D $156 300

20 What would increase the current ratio of a business?

A buying goods on credit for $2000 and selling immediately for $3000 cash
B paying wages of $1000 in cash
C purchasing a non-current asset of $10 000 on credit
D selling goods of $1000 at cost price on credit

21 The following information is available for a business.

sales 36 000
purchases 21 000
inventory at 1 January 2021 3 500
inventory at 31 January 2021 2 800

What is the rate of inventory turnover for January?

A 6.67 times
B 6.89 times
C 7.75 times
D 11.43 times

22 Which statements about a semi-variable cost are correct?

1 Part of the amount always changes for any level of output.

2 Part of the amount changes for a given level of output.
3 The amount always changes for a given level of output.

A 1 and 2 B 1 and 3 C 2 and 3 D 2 only

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23 A company has a financial year end of 30 November. It has no opening inventory at the
beginning of the financial year.

During the year, the following amounts of inventory are purchased.

unit cost
date quantity
$

30 March 330 40
1 November 288 50

Sales for the period are 500 units at $100 each.

Inventory is valued using the average cost (AVCO) method.

What is the value of inventory, to the nearest dollar, at the end of the year?

A $4720 B $5270 C $5900 D $11 800

24 A business has the following budgeted data for a production of 50 000 units.

direct production cost 300 000

indirect labour 20 000
factory supervisor salaries 60 000
sales staff salaries 70 000
depreciation on machinery for production 80 000
depreciation on motor vehicles for delivery 50 000
administrative expenses 360 000
total costs 940 000

To determine the selling price, the business adds 40% on the cost of production.

What would be the total selling price of 500 units?

A $4200 B $5600 C $6440 D $7140

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25 A trader rents a vehicle for $10 000 which allows him to cover 20 000 miles per financial year. If
this mileage is exceeded, an additional charge of $5000 is made.

Which type of cost is this an example of?

A fixed
B semi-variable
C stepped
D variable

26 When might a business calculate its contribution to sales ratio rather than contribution per unit?

A when the break-even point needs to be expressed in units

B when the business produces and sells several different products
C when the value of fixed costs is uncertain
D when there are limiting factors affecting production

27 The following information is available.

selling price per unit 50

variable manufacturing expense per unit 26
variable selling expense per unit 4
total manufacturing overhead 360 000
total administrative overhead 120 000

What is the break-even point in units?

A 15 000 B 18 000 C 20 000 D 24 000

28 K Limited manufactures and sells a single type of product. The following budgeted information is
available in respect of it.

selling price $80 per unit

variable costs $28 per unit
total fixed costs $70 000
production and sales 3500 units

How many extra units would the company need to produce and sell to increase the budgeted
profit by $26 000?

A 325 B 362 C 500 D 813

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29 M Limited manufactures and sells two different colours of paint. The following actual information
is available for last year.

red paint blue paint total

$ $ $

revenue 350 000 150 000 500 000

direct materials and labour 180 000 65 000 245 000
allocated fixed overheads 110 000 88 000 198 000
profit / (loss) 60 000 (3 000) 57 000

The company is considering closing the blue paint department and using the extra space to
increase revenue in red paint by 20%. Variable costs will increase in the same proportion as the
increase in revenue.

What would be the change in the total profit if this action is taken?

A $3000 increase
B $29 000 increase
C $51 000 decrease
D $85 000 decrease

30 Why might a business prepare budgets?

1 to encourage planning and decision-making

2 to improve coordination between departments
3 to monitor and control costs

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/13/M/J/22

 Cambridge International AS & A Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice October/November 2022
1 hour

You must answer on the multiple choice answer sheet.

*4197354864*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 11_9706_11/4RP
© UCLES 2022 [Turn over
 2

1 For which items does the cash book act as a book of prime entry?

1 payments to suppliers
2 purchase of a non-current asset on credit
3 receipts from customers
4 returns outwards

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

2 Which statements about the reducing balance method of depreciation are correct?

1 The annual percentage depreciation rate changes each year.

2 The annual depreciation charge remains the same each year.
3 The annual percentage depreciation rate remains the same each year.
4 The annual depreciation charge falls each year.

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

3 On 1 April 2021 a business purchased a machine for $120 000 with an estimated residual value
of $12 000.

On 1 July 2022 the machine was sold for $100 000.

Machinery is depreciated at the rate of 20% per annum using the straight-line method.
Depreciation is calculated for each month of ownership.

Which entry should be made in the provision for depreciation of machinery account for the
disposal of the machine?

A $21 600 credit

B $21 600 debit
C $27 000 credit
D $27 000 debit

4 Sue purchased a new machine. She depreciated it at a rate of 40% per annum using the
reducing balance method. After two years its net book value was $3600.

What was the purchase price of the machine?

A $7056 B $9216 C $10 000 D $22 500

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5 Which items will be included in the sales ledger control account?

1 amounts owed by credit customers at the end of the previous month

2 provision for doubtful debts
3 total of the invoices sent out to credit customers
4 total of the sales returns journal

A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

6 Which error would affect the balancing of a trial balance?

A A payment for rent of $250 had been debited in the bank account. It had been entered
correctly in the rent account.
B A purchase invoice for $259 was entered in the purchases journal as $295.
C A sales invoice for $180 was lost before it could be entered in the sales journal.
D A sales return of $500 was debited in the customer’s account and credited to the purchases
returns account.

7 The balance on a purchases ledger control account at 1 March was $71 300.

During the month ended 31 March, the following transactions took place.

payments to trade payables by cheque 133 200

credit purchases 149 000
purchases returns 3 000
cash purchases 2 000
contra with sales ledger 1 600

What was the trade payables balance at 31 March?

A $80 500 B $82 500 C $83 700 D $85 700

8 Which statements about accruals and prepayments are correct?

1 Accrued revenue at the end of an accounting period is recorded as a current asset.

2 Accrued revenue at the end of an accounting period is recorded as a current liability.
3 Prepaid expenses at the end of an accounting period are recorded as a current
asset.
4 Prepaid expenses at the end of an accounting period are recorded as a current
liability.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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9 A business has a bank overdraft of $4800.

It pays for materials invoiced, $3000, less a trade discount of 20% and a settlement discount
of 5%.

A cheque for $500 is received from a credit customer.

What is the bank balance after these transactions?

A $2020 overdraft
B $6580 overdraft
C $7150 overdraft
D $7580 overdraft

10 How are closing inventory and loss for the year treated in the financial statements of a sole
trader?

closing inventory loss for the year

A asset in statement of financial position debit in capital account

credit in income statement credit in income statement

B asset in statement of financial position debit in income statement

credit in income statement credit in capital account

C debit in income statement debit in capital account

liability in statement of financial position credit in income statement

D debit in income statement debit in income statement

liability in statement of financial position credit in capital account

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11 A trader had the following closing trade receivables.

year $

1 64 000
2 80 000
3 90 000

He usually provides for doubtful debts at the rate of 5%. At the end of year 2 he forgot to adjust
the provision.

What was the effect on profit in year 3 of forgetting to adjust the provision in year 2?

A $800 decrease
B $800 increase
C $1300 decrease
D $1300 increase

12 The following information is available for the year ended 31 December 2021.

revenue 1 400 000

inventory as at 1 January 2021 140 000
inventory as at 31 December 2021 148 000

The trader uses a mark-up of 60% on all purchases.

What was the value of purchases for the year?

A $848 000 B $867 000 C $875 000 D $883 000

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13 The following information is available for a business for the year ended 31 March 2022.

non-current assets at cost at 1 April 2021 62 000

provision for depreciation on non-current assets at 1 April 2021 12 000
expenses paid by cash and cheques during the year 42 200
expenses prepaid at 31 March 2022 4 600
trade receivables at 31 March 2022 25 000

A provision for doubtful debts is to be created at 2% of trade receivables.

Depreciation on non-current assets is to be provided at 20% using the reducing balance method.

What was the total of expenses for the year?

A $47 600 B $48 100 C $50 500 D $57 300

14 X and Y are in partnership but do not have a partnership agreement. X had introduced twice as
much capital as Y and made a loan to the partnership.

X insists he is entitled to the following:

1 interest on the extra capital he has invested

2 interest on the loan he has made to the partnership
3 a profit share of double that of Y
4 not to pay interest on his drawings.

What is X entitled to?

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

15 L, M and N share profits equally. N is retiring and net assets at net book value of $27 000 are
revalued at $36 000.

Goodwill is valued at $18 000 but will not be recorded in the books of account.

After N retires, L and M will share profits in the ratio 3 : 2.

What will be the change to L’s capital account?

A $1800 decrease
B $1800 increase
C $7800 decrease
D $7800 increase

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16 Dele and Iyabo are partners and share profits in the ratio of 3 : 1.

Their profit for the year is $80 000.

The following information is available.

Dele Iyabo
$ $

interest on capital 3000 2500

interest on drawings 500 1000

How will the residual profit be shared?

Dele Iyabo
$ $

A 57 000 19 000
B 57 500 18 500
C 62 500 21 500
D 63 000 21 000

17 W Limited made a loss for the year. The directors wish to increase the balance on the retained
earnings account.

How can they do this?

1 increase dividends paid

2 issue new ordinary shares at a premium
3 make a transfer from general reserve

A 1 and 2 B 1 only C 2 and 3 D 3 only

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18 The following items were taken from the financial statements of a limited company during a
period.

increase in trade receivables 6 000

increase in trade payables 4 000
loan repaid 10 000

What was the effect of these items on the net cash inflow or outflow for the period?

A $8000 outflow
B $12 000 inflow
C $12 000 outflow
D $20 000 outflow

19 The following information is available for a limited company.

At 1 April 2021 the balance of the retained earnings account was $858 000.

for the year ended 31 March 2022 $

profit from operations 978 000

debenture interest paid for the year 100 000
ordinary share dividends paid 150 000

On 31 March 2022 the directors transferred $280 000 to a general reserve. They also issued
250 000 bonus shares of $1 each using the general reserve.

What was the balance of the retained earnings account at 31 March 2022?

A $1 056 000 B $1 306 000 C $1 406 000 D $1 586 000

20 What does return on capital employed measure for a business?

A efficiency to generate profit from its total assets

B efficiency to generate profit from its total liabilities
C efficiency to generate profit from its non-current assets
D efficiency to generate profit from its shareholders’ equity and non-current liabilities

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21 The following information was available for a business at the end of a financial year.

sales 300 000

opening inventory 33 000
closing inventory 27 000

The business applies a mark-up of 20% on all goods purchased.

What was the inventory turnover in days?

A 40 B 44 C 45 D 46

22 A business employs machine operators. Each machine operator works 36 hours a week.

One unit of output takes four hours of labour.

It also employs supervisors who can each supervise ten machine operators.

Production is currently 1140 units a week.

How many more units can be produced each week before the company needs to employ an
extra supervisor?

A 3 B 30 C 75 D 90

23 What best describes a fixed cost?

A a part that stays the same and a part that changes as output increases
B the same cost per unit for any level of output
C the same total cost for any level of output
D the same total cost for output within a relevant range

24 What would result in the under-absorption of overheads?

expenditure units produced

A actual is less than budgeted actual is less than budgeted

B actual is less than budgeted actual is more than budgeted
C actual is more than budgeted actual is less than budgeted
D actual is more than budgeted actual is more than budgeted

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25 A company has received an order to supply 3000 pairs of safety glasses.

The costs of production are shown.

raw materials 975

packaging for 50 pairs 4.20
direct labour at $8.00 per direct labour hour 800
order setting up costs 100
overhead absorption rate per direct labour hour 6.25

What is the cost of manufacturing this order?

A $2552 B $2652 C $2710 D $2752

26 How is break-even point in units calculated?

A fixed costs ÷ contribution per unit

B fixed costs ÷ selling price per unit

C fixed costs ÷ variable cost per unit

D (sales – fixed costs) ÷ contribution per unit

27 A company manufactures and sells a single product. The following information is available about
a unit of the product.

selling price 105

direct materials 45
direct labour 30

The supplier of direct materials has agreed to increase the trade discount from 10% to 20%.

What is the new contribution per unit?

A $25.00 B $25.50 C $34.50 D $35.00

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28 The fixed costs of a business increase. All other revenues and costs remain unchanged.

What happens if output is unchanged?

contribution break-even margin of

per unit point per unit safety per unit

A decreases decreases decreases

B increases no change increases
C no change increases decreases
D no change increases increases

29 A business manufactures three types of products which all use the same material. The following
information is available.

X Y Z
$ $ $

selling price 160 190 240

direct material 56 68 90
direct labour 35 32 50
variable overhead 28 34 45
contribution 41 56 55

Direct material is in short supply.

In which order should the products be manufactured to maximise profits?

A X→Y→Z

B Y→X→Z

C Y→Z→X

D Z→Y→X

30 Which statements about a budgetary control system are correct?

1 It can encourage departmental rivalry.

2 It will always improve staff motivation.
3 It will always lead to improved business performance.
4 It will define areas of responsibility of personnel.

A 1, 2 and 3 B 1, 3 and 4 C 1 and 4 only D 2 and 3 only

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/11/O/N/22

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2022
1 hour

You must answer on the multiple choice answer sheet.

*3192058211*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 11_9706_12/3RP
© UCLES 2022 [Turn over
 2

1 Which items would be entered in the General Journal?

1 goods taken by owner for personal use

2 goods purchased for resale
3 purchase of a non-current asset on credit
4 purchase of office stationery

A 1 and 2 B 1 and 3 only C 1, 3 and 4 D 3 and 4 only

2 Why is it important for a trader to distinguish between capital expenditure and revenue
expenditure?

1 to apply the realisation concept

2 to know which method of depreciation to use
3 to obtain a more accurate profit figure

A 1 and 2 B 1 only C 2 and 3 D 3 only

3 A company purchased a new vehicle for $30 000. It part-exchanged an existing vehicle at a value
of $6500, with the balance being paid by cheque.

The part-exchanged vehicle originally cost $12 000 and had a net book value of $4800 on
disposal.

Which entries will be made in the accounts?

income statement bank account

A $1700 income motor vehicle at cost $23 500 credit

B $1700 expense motor vehicle at cost $30 000 debit
C $5500 expense motor vehicle at cost $23 500 debit
D $5500 income motor vehicle at cost $30 000 credit

4 At 31 December 2021 a business had a non-current asset with a net book value of $18 000. It
had been purchased during the year ended 31 December 2020.

Depreciation is charged at a rate of 25% per annum using the reducing balance method. A full
year’s depreciation is charged in the year of purchase.

What was the original cost of the non-current asset?

A $22 500 B $24 000 C $27 000 D $32 000

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5 Which item is an error of principle?

A No record was made of inventory withdrawn by the owner for private use.
B Sales returns were credited to the returns inwards account.
C The amount shown on a purchases invoice for goods for resale was incorrectly recorded in
the purchases journal.
D The cost of machinery repairs was debited to the machinery at cost account.

6 The sales ledger control account of a business had a balance of $17 640. This did not agree with
the total of the individual customer accounts in the sales ledger.

The following errors have been discovered.

1 An invoice in the sales journal for $460 has been entered wrongly in the sales ledger
as $640.
2 Credit balances on the sales ledger, $470, have been omitted from the sales ledger
control account.
3 Discounts allowed have been incorrectly totalled as $310 instead of $325.
4 Goods sold to Harry for $690 have been entered in the account of Barry in error.

What is the correct balance on the sales ledger control account?

A $16 975 B $17 155 C $17 185 D $18 125

7 The totals on a trial balance were:

debit $500 150 credit $500 000

Which error could have caused the difference?

A A cash sale has only been recorded in the sales account.

B A credit purchase has only been recorded in a supplier’s account.
C A credit sale has not been recorded.
D A credit sale has only been recorded in a customer’s account.

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8 A draft statement of financial position for a business showed total net assets of $600 000.

The following items were then discovered.

1 A long-term loan for $10 000 had not been recorded. This was taken out on the last
day of the financial year.
2 Closing inventory had been overstated by $20 000.
3 Depreciation had been understated by $15 000.

What is the correct total net assets value?

A $555 000 B $565 000 C $595 000 D $605 000

9 A company has produced draft financial statements for the year. It is then discovered that some
inventory is damaged and the value must be reduced.

What will be the effect?

profit for the year current assets

A decrease decrease
B decrease increase
C increase decrease
D increase increase

10 A trader took out a 6% bank loan of $30 000 on 1 November 2021, to be repaid in full in 10 years’
time. Interest is to be paid annually. No interest had been paid by 30 April 2022.

How should this be recorded in the statement of financial position at 30 April 2022?

current non-current
liabilities liabilities
$ $

A 0 30 000
B 900 30 000
C 1 800 30 000
D 30 900 0

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11 In preparing the financial statements, an accrual for rent payable was treated as a prepayment.

What effect does this have on the profit and the current liabilities?

profit current liabilities

A overstated overstated
B overstated understated
C understated overstated
D understated understated

12 A sole trader is preparing his income statement for the year ended 31 December 2021, his first
year of trading. The following information is available.

takings banked 16 400

payments to trade payables 8 500
expenses for the year 2 900
balance of trade payables 1 200
balance of trade receivables 700

He took goods for his own use, $1000, during the year. There was no closing inventory.

What was his profit for the year?

A $4500 B $5500 C $7400 D $7900

13 The following information is available for the year ended 31 December 2021.

trade payables at 1 January 2021 18 000

trade payables at 31 December 2021 14 000
discount received 6 000
payments to credit suppliers 158 000
returns outwards 3 000
contra to sales ledger control account 2 000

What were the credit purchases for the year?

A $143 000 B $161 000 C $165 000 D $173 000

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14 What is recorded in both the appropriation account and the current accounts of a partnership?

1 drawings
2 interest on drawings
3 interest on capital

A 1, 2 and 3 B 1 only C 2 and 3 only D 3 only

15 R, S and T were in partnership, sharing profits equally.

T retired as a partner. At that time, the balance on his capital and current accounts totalled
$320 000.

Goodwill was valued at $60 000.

The partnership assets were revalued upwards by $30 000.

T agreed to leave $90 000 in the partnership as a loan on retirement.

The balance due to him was paid from the partnership bank account.

How much was paid to T on his retirement?

A $230 000 B $240 000 C $250 000 D $260 000

16 Owing to an issue with Question 16, it has been removed from the question paper.

17 Where is the dividend received by a company shown in its financial statements?

A income statement only

B income statement and statement of changes in equity
C statement of changes in equity only
D statement of financial position and income statement

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18 On 1 January a company had 300 000 ordinary shares of $1 each and a 10% bank loan of
$100 000. On 1 July the company issued a 6% debenture of $800 000.

The profit from operations for the year ended 31 December was $120 000.

The company paid a dividend of $0.05 per ordinary share during the year.

What was the profit for the year ended 31 December?

A $71 000 B $86 000 C $96 000 D $110 000

19 X Limited recorded the following information in its books of account.

1 issue of 10 000 ordinary shares of $1 each at a price of $1.80

2 payment of dividends, $6200
3 transfer to general reserve, $7500

What was the effect on total revenue reserves?

A $6200 decrease
B $6700 increase
C $8000 increase
D $13 700 decrease

20 H Limited uses ratio analysis to analyse its financial performance.

On 31 January 2021 the company prepared draft financial statements before it revalued its
premises upwards.

How did this revaluation affect the company’s ratios?

non-current asset return on capital

turnover employed

A decrease decrease
B decrease increase
C increase decrease
D increase increase

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21 A company purchases its inventory on credit. The following information is available.

sales revenue 440 000

purchases 270 000
trade payables 90 000
trade receivables 110 000

What is the trade payables turnover in days?

A 75 B 92 C 122 D 149

22 A business has the following wages policy for its direct workers.

standard working hours per week 40

basic rate per hour $16
overtime basic rate + 25%
standard production per worker per week 100 units
bonus $4 per unit in excess of
standard production

Last week Ben produced 115 units and earned $860.

How many hours did Ben work last week?

A 48 B 50 C 51 D 53.75

23 Which statements are correct about the first in first out (FIFO) method for inventory valuation?

1 issues to production are valued at the most recent purchase prices

2 issues to production are valued at the oldest purchase prices
3 provides a higher profit during periods of inflation
4 provides a lower profit during periods of inflation

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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24 A manufacturing business has two production departments: assembly and painting.

The following information is available.

assembly painting

machinery at net book value ($) 150 000 100 000

machinery repair costs ($) 14 000 6 000
machine operating hours 60 000 15 000
number of machines 30 10

The total machinery insurance cost for the year was $5000.

How much insurance should be apportioned to the assembly department?

A $3000 B $3500 C $3750 D $4000

25 Which statement about absorption costing is correct?

A It allocates fixed costs to a product when it is sold.

B It allocates fixed costs to a product whether it is sold or not.
C It increases the costs charged to the income statement.
D It reduces the cost of the closing inventory.

26 What is equal to total revenue at the break-even point?

A total contribution
B total fixed costs
C total variable and fixed costs
D total variable costs

27 A business manufactures and sells a single product.

It is sold for $10 per batch.

The variable cost is $4 per batch.

Fixed costs are absorbed based on a normal activity level of 5000 batches at $1 per batch.

What is the profit, using marginal costing, if the company makes and sells 6000 batches?

A $24 000 B $30 000 C $31 000 D $36 000

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28 A company provides the following information for a year.

sales 400 000

total variable costs 240 000
total contribution 160 000
total fixed costs 100 000
profit for the year 60 000

To increase the sales volume by 20%, the company plans to reduce the selling price by 10%.
Total fixed costs and variable cost per unit will remain unchanged.

By how much will profit for the year change?

A 8% increase
B 10% decrease
C 21.33% increase
D 26.67% decrease

29 A business makes and sells a single product. The budget for sales of 5000 units is as follows:

per unit $

selling price 75.00

variable production cost 25.00
fixed production cost 18.90
variable selling expenses 5.00

The company plans to reduce the selling price to $60 per unit.

How many extra units will need to be sold to break even?

A 810 B 1050 C 2100 D 3150

30 Which statements about a budgetary control system are correct?

1 It is a long-term plan.
2 It is a short-term plan.
3 It is qualitative.
4 It is quantitative.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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BLANK PAGE

© UCLES 2022 9706/12/O/N/22

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/12/O/N/22

 Cambridge International AS & A Level

ACCOUNTING 9706/13
Paper 1 Multiple Choice October/November 2022
1 hour

You must answer on the multiple choice answer sheet.

*0719816521*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 11_9706_13/5RP
© UCLES 2022 [Turn over
 2

1 Goods, $1200, sent to a customer on a sale or return basis have not been recorded in the sales
journal.

Which accounting concept has been applied?

A going concern
B matching
C materiality
D realisation

2 A business sold a non-current asset at a profit.

What are the entries to be made in a disposal account?

debit credit
A non-current asset at cost provision for depreciation
bank income statement
B non-current asset at cost provision for depreciation
income statement bank
C provision for depreciation non-current asset at cost
bank income statement
D provision for depreciation non-current asset at cost
income statement bank

3 On 1 January 2020 a business purchased new delivery vehicles. The following information is
available.

total purchase cost 300 000

cost of painting delivery vehicles in the company’s colours 4 000
total annual maintenance cost 16 000

The company depreciates delivery vehicles using the reducing balance method at a rate of 40%
per annum.

What is the depreciation charge for the delivery vehicles for the year ended 31 December 2021?

A $72 000 B $72 960 C $75 840 D $76 800

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4 The following information is available in respect of a trader’s non-current assets.

accumulated depreciation at 31 May 2020 40 000

depreciation charge for the year ended 31 May 2021 9 000
accumulated depreciation at 31 May 2021 46 000

During the year ended 31 May 2021, a non-current asset which had cost $10 000 was sold. There
was a loss on disposal of $1200.

What were the sale proceeds?

A $5800 B $7000 C $8200 D $8800

5 Which error would result in an entry in the suspense account?

1 a balance is omitted when extracting the trial balance

2 an item is posted to the correct side of the wrong account
3 entries for an item are reversed

A 1 and 2 B 1 and 3 C 1 only D 2 and 3

6 The balance of a purchases ledger control account was $7270. However, the total of the
accounts of trade payables was $6860.

The following errors have been discovered.

1 A credit note received from a supplier for $100 had been omitted from the book of
prime entry.
2 The discounts received column in the cash book had been understated by $50.

When these errors were corrected the balance on the purchases ledger control account still did
not match the total of the accounts of trade payables.

What were the updated amounts after the corrections?

purchases ledger total of the accounts

control account balance of trade payables
$ $

A 7120 6710
B 7120 6760
C 7170 6810
D 7220 6710

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7 Which group would appear only on the credit side of a sales ledger control account?

A cash refunds, contras with the purchases ledger control accounts, sales
B cash refunds, contras with the purchases ledger control accounts, sales returns
C irrecoverable debts written off, cash received, discounts allowed
D irrecoverable debts written off, cash refunds, sales

8 Owing to an issue with Question 8, it has been removed from the question paper.

9 A business has calculated its draft profit for the year.

The following information was then discovered.

1 Closing inventory had been overvalued.

2 Irrecoverable debts needed to be written off.
3 Depreciation of non-current assets needed to be reduced.

What is the effect on the profit for the year when these items are adjusted?

closing trade depreciation

inventory receivables reduction

A decreased decreased increased

B decreased increased decreased
C increased decreased decreased
D increased decreased increased

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10 A business makes a provision for doubtful debts of 4%. At 31 March 2021 the value of trade
receivables after deducting the provision was $153 600. For the year ended 31 March 2022, there
was an increase of $960 in the provision for doubtful debts.

What was the value of trade receivables at 31 March 2022 after deducting the provision for
doubtful debts?

A $161 000 B $170 496 C $176 640 D $177 600

11 When preparing a sole trader’s financial statements, no adjustment was made for a prepayment
at the end of the year.

What is the effect of this omission?

A current assets overstated and owner’s capital overstated

B current assets understated and owner’s capital understated
C profit for the year overstated and trade payables understated
D profit for the year understated and trade payables understated

12 A sole trader has not kept proper accounting records for his first year of trading.

The following information is available.

cash from customers 70 000

trade receivables 4 000
cash paid to suppliers 65 000
trade payables 2 000
closing inventory 20 000
expenses paid 3 000

What was the profit for the year?

A $24 000 B $26 000 C $27 000 D $28 000

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13 On 1 January 2022 a sole trader’s inventory was valued at $4500.

On 14 April 2022 there was a fire in his business premises.

Up to 14 April 2022 his sales were $24 600 and his purchases were $16 700.

He worked on a mark-up of 33 1 %.
3

Goods which had cost $1485 were saved from the fire. This included some goods which had cost
$800 but as a result of the fire damage can now only be sold for $650.

What was the total inventory loss for the business?

A $1115 B $1265 C $1415 D $2750

14 Which items would appear on the debit side of the dissolution account for a partnership?

1 costs of dissolution
2 net book value of the assets
3 proceeds of sales of assets
4 profit on dissolution

A 1 and 2 only B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

15 L and M were in partnership sharing profits and losses equally. They admitted a new partner, P.

The partners do not have a partnership agreement. The terms of P’s admission were as follows:

1 Assets were revalued downwards by $60 000.

2 Goodwill was valued at $30 000 but was not retained in the books of account.

What will be the effect on L’s capital account balance on the admission of P?

effect due to effect due to

revaluation goodwill

A decrease increase
B decrease decrease
C increase increase
D increase decrease

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16 J and K are in partnership sharing residual profits and losses in the ratio 7 : 3.

Their fixed capital accounts have balances of J $40 000, K $60 000. Interest is allowed on these
at the rate of 10% per year.

J is paid a salary of $40 000 per year. Profit for the year was $200 000.

What was each partner’s total share of the profit for the year?

J K
$ $

A 137 000 63 000

B 140 000 60 000
C 149 000 51 000
D 152 000 48 000

17 X, Y and Z were in partnership sharing profits and losses equally. Z retired from the partnership
on 31 March 2022. The balances on his capital account and current account were $85 000 and
$7000 debit respectively. After Z’s retirement, X and Y would share profits and losses equally.

Goodwill was valued at $24 000 and would not remain in the books of accounts.

As part of the amount due to him, Z took a motor vehicle at an agreed valuation of $4000. The
other non-current assets were revalued downwards by $15 000.

The remaining amount due to Z would be paid equally by X and Y.

How much would X pay to Z?

A $36 500 B $37 500 C $38 500 D $45 500

18 Draft financial statements for a company showed a balance of retained earnings of $170 000 at
the year end.

The following information was then discovered.

1 An irrecoverable debt of $25 000 should have been written off.

2 An ordinary share dividend, $30 000, had been paid but not recorded.
3 Closing inventory was undervalued by $15 000.

What was the correct balance of retained earnings at the year end?

A $100 000 B $125 000 C $130 000 D $185 000

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19 A company provided the following information.

at 1 January $

ordinary shares of $1 each 100 000

retained earnings 95 000

The following actions took place during the year ended 31 December.

1 A bonus issue of one ordinary share for every two ordinary shares held on
1 January.
2 A rights issue of 50 000 ordinary shares at $1.25 each. The issue was fully
subscribed.
3 A transfer, $25 000, to create a general reserve.
4 A dividend, $11 250, was paid.

The profit for the year ended 31 December was $68 500.

What was the total shareholders’ equity at 31 December?

A $289 750 B $314 750 C $364 750 D $389 750

20 A business buys goods for resale, paying by cheque rather than buying on credit.

What effect will this have on the current ratio and the liquid (acid test) ratio?

current ratio liquid (acid test) ratio

A decrease decrease
B increase decrease
C no change decrease
D no change increase

21 The following information is available.

non-current assets at cost at 31 December 2021 400 000

provision for depreciation at 31 December 2021 280 000
sales revenue for the year 2021 980 000
cost of sales for the year 2021 410 000

What is the non-current asset turnover in times?

A 1.03 B 2.45 C 3.42 D 8.17

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22 A cost accountant is calculating the budgeted production overheads for a company which makes
and sells a single product.

Which row will give the correct total of production overheads?

wages of cost of
wages of wages of
supervisors’ factory cost of raw factory
production assembly
salaries maintenance materials cleaning
workers workers
workers materials

A   
B    
C     
D   

23 Workers are paid a basic rate of $10 per hour.

Overtime rate is paid at time and a half.

Bonus is paid at a rate of 10% of basic pay if production exceeds its target.

The following information is available for a month.

total hours worked 1500

hours at basic rate 1000
target production 12 500 units
actual production 15 000 units

What was the total factory labour cost for the month?

A $16 500 B $18 500 C $19 250 D $24 750

24 Why are service department costs transferred to production departments?

1 so that both direct and indirect costs can be covered by revenue

2 so that overhead absorption rates can be calculated and applied
3 so that the break-even point can be calculated

A 1 and 2 B 1 and 3 C 2 and 3 D 3 only

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25 A company’s profit was $100 000 using marginal costing.

Its opening inventory was 2000 units and closing inventory was 3000 units.

The fixed production overhead absorption rate is $30 per unit.

What was the profit using absorption costing?

A $40 000 B $70 000 C $130 000 D $190 000

26 A business prepares its income statement using marginal costing. The profit is reduced by
changing from marginal costing to absorption costing.

Which statement is correct?

A All units produced in the period were sold.

B Units sold were greater than units produced.
C Units sold were fewer than units produced.
D There were no units produced in the period.

27 A company wants to sell 50 000 units and achieve a profit of $600 000. It has variable costs of
$60 per unit and total fixed overheads of $400 000.

What is the selling price per unit it needs to charge to achieve the required profit?

A $64 B $68 C $72 D $80

28 The following information is available for a month.

sales revenue 160 000

total costs 105 000
variable overheads (included in total costs) 26 000

When calculating the contribution to sales ratio, the book-keeper treated the variable overheads
as fixed by mistake.

What was the effect of this on the contribution to sales ratio?

A 16.25% too high

B 16.25% too low
C 24.76% too high
D 24.76% too low

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29 A business had the following results in April and May.

April May

units produced and sold 1000 1200

total revenue $50 000 ?
total contribution $22 000 ?
total profit $8 000 $10 500

The selling price per unit and total fixed costs remained constant.

What was the change in the variable cost per unit?

A decrease $0.75
B decrease $1.58
C increase $0.75
D increase $1.58

30 Which statements about budgeting are correct?

1 Accurate overhead allocations are always made.

2 Managers may make budgets easy to achieve.
3 Financial factors are considered.
4 Very little time is taken to produce the budget.

A 1 and 2 B 1 and 3 C 2 and 3 D 3 and 4

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/13/O/N/22

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2023
1 hour

You must answer on the multiple choice answer sheet.

*4225378755*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 03_9706_12/3RP
© UCLES 2023 [Turn over
 2

1 Why did Amitav prefer to form a partnership with Lennie rather than set up as a sole trader?

A Amitav was certain they could work without disagreements.

B Lennie had a different area of expertise to Amitav.
C The financial statements of a partnership are not shared publicly.
D The legal requirements in setting up the business would be reduced.

2 A credit customer cleared her debt of $600 after deducting a cash discount of $12.

How would the customer account appear in the books of the supplier after the payment has been
recorded?

debit $ credit $
A balance b / d 600 bank 588
discount allowed 12
B balance b / d 600 bank 588
discount received 12
C bank 588 balance b / d 600
discount allowed 12
D bank 588 balance b / d 600
discount received 12

3 What is the advantage of keeping a full set of double entry books of account?

A Account balances are available through the year.

B Business assets and owner’s assets can be kept separate.
C It enables the book-keeper to check the bank statement for errors and omissions.
D It stops the value of assets being overstated.

4 At the start of a financial period, the owner’s capital account of a business showed a balance of
$85 000.

During the period, the owner introduced to the business a private vehicle worth $30 000. In
addition, the owner made cash drawings of $15 000. The business made a net loss for the period
of $22 000.

What is the balance on the capital account at the end of the period?

A $18 000 B $48 000 C $78 000 D $100 000

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5 A business has incorrectly recorded a vehicle purchase as a vehicle repair. The business does
not charge depreciation on assets in the year of purchase.

What is the effect of this error on the financial statements?

statement of statement of
profit or loss financial position

A profit overstated assets overstated

B profit overstated assets understated
C profit understated assets overstated
D profit understated assets understated

6 Non-current assets at the end of Year 1 were recorded as cost, $500 000, and carrying value,
$360 000.

During Year 2, certain assets were sold. They had originally cost $100 000 and had been
depreciated by $40 000.

The depreciation charge for the remaining non-current assets in Year 2 was $30 000.

What was the carrying value of non-current assets at the end of Year 2?

A $270 000 B $300 000 C $330 000 D $370 000

7 The cost of repainting a property was debited to the property account.

Which type of error was made?

A commission
B compensating
C original entry
D principle

8 A trial balance does not balance. The difference has been entered in a suspense account.

The following errors are found.

1 A cash payment of $630 for rent has been credited in the cash book and debited to
the irrecoverable debts account.
2 The provision for depreciation account has been overcast by $960.
3 The purchases ledger control account balance of $48 300 has been included as a
debit balance.

What is the correcting debit entry to the suspense account?

A $47 340 B $95 010 C $95 640 D $97 560

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9 What are the benefits of preparing a bank reconciliation statement?

1 acts as a deterrent to fraud

2 identifies out-of-date cheques
3 prevents the business going into overdraft
4 provides the correct bank balance for financial statements

A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

10 At the month end, a business bank statement showed a credit balance of $12 697. This did not
agree with the cash book balance.

The following differences were found.

1 A cheque received, $7170, was entered as $7710 in the cash book.

2 A cheque paid in, $2400, had not been cleared by the bank.
3 A standing order, $450, was recorded in the cash book but had not been paid by the
bank.
4 Bank interest payable of $642 had not been entered in the cash book.

What was the cash book balance before the necessary corrections were made?

A $9565 B $13 429 C $14 995 D $15 829

11 Which statements identify the advantages of using a purchases ledger control account as part of
the accounting system?

1 Compensating errors within the purchases ledger can be found more easily.
2 Errors of commission within the purchases ledger will be detected.
3 The honesty of staff working on the accounts of trade payables is checked.
4 The total amount owing to trade payables can be ascertained quickly.

A 1, 2 and 3 B 2, 3 and 4 C 2 and 4 only D 3 and 4 only

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12 The sales ledger control account of a trader showed a debit balance of $28 500 at the end of the
financial period. This did not agree with the total of the individual trade receivables accounts in
the sales ledger.

The following errors were discovered.

1 A dishonoured cheque for $300 from a credit customer had been entered on the
credit side of the sales ledger control account.
2 Contras of $500 entered correctly in the sales ledger had been omitted from the
sales ledger control account.
3 Discounts allowed of $700 had not been entered in the sales ledger control account.

Which figure should be used for trade receivables in the financial statements?

A $27 600 B $27 900 C $28 900 D $29 300

13 At the start of the year on 1 January, a business had an inventory of stationery which had cost
$3740. On that date, $1200 was owed to suppliers for stationery.

During the financial year ended 31 December, a total of $38 800 was paid for stationery. Some
old stationery was sold to staff for $240.

At the end of the year on 31 December, the business had an inventory of stationery valued at
cost, $4200. On that date, $1800 was owed to suppliers for stationery.

Which figure should be included in the statement of profit or loss for the year ended 31 December
for stationery?

A $34 960 B $36 160 C $38 700 D $38 940

14 The following information is extracted from the records of a business for a financial year.

$
at 1 January
rent paid in advance 4 000
during the year ended 31 December
rent paid 41 000
at 31 December
rent paid in advance 7 000

How much will be charged for rent in the statement of profit or loss for the year ended
31 December?

A $34 000 B $38 000 C $41 000 D $44 000

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15 Which items would affect a sole trader’s gross profit?

1 carriage inwards
2 cash discounts allowed
3 commission received
4 trade discounts received

A 1 and 4 B 1 only C 2 and 3 D 2 and 4

16 John and Mary are in partnership. After the first year of operation, the current accounts of both
partners had a debit balance.

What might have caused the debit balances?

1 drawings
2 loss for the year
3 salaries they are entitled to

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 only

17 The following information is available for a partnership at the end of the financial year.

residual loss 3 000

total salaries to partners 5 000
total interest on capital 27 000
total drawings 14 000
total interest on drawings 700

How much was the profit for the year?

A $14 300 B $20 300 C $28 300 D $34 300

18 A limited company intends to issue shares at a price above the par value.

Which items, apart from the bank balance, will be affected by the share issue?

A share capital, capital reserves and revenue reserves

B share capital and capital reserves only
C share capital and revenue reserves only
D share capital only

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19 The following information is available for a limited company for a financial year ended on
31 December.

total equity on 1 January 492 000

profit for the year 70 500
dividends paid 24 000
dividends proposed 12 000

On 30 June, there was a bonus issue of 20 000 ordinary shares of $1 each.

On 31 December, the following decisions were made.

1 The buildings are to be revalued at $250 000. These had cost $200 000 and the
accumulated depreciation was $50 000.
2 There is to be a transfer of $5000 to the general reserve.

What is the total equity on 31 December after these adjustments have been made?

A $588 500 B $613 500 C $618 500 D $638 500

20 A business has a rate of inventory turnover of 17 times.

What is the numerator in the calculation?

A average inventory
B closing inventory
C cost of sales
D credit sales

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21 The year-end statement of financial position of X Limited at 31 December shows the following:

$000

non-current assets 1350

current assets 140
ordinary share capital 900
general reserve 150
long-term loan 200
current liabilities 90
retained earnings 150

The profit from operations for the year was $65 000 and finance costs were $20 000.

What was the return on capital employed for the year?

A 3.21% B 4.64% C 5.7% D 5.91%

22 Which statement is correct?

A Direct costs change in direct proportion to changes in levels of activity.

B Fixed costs remain as a constant proportion of total costs when output changes.
C Semi-variable costs increase in direct proportion to an increase in production.
D Stepped costs increase in direct proportion to an increase in production.

23 A manufacturer operates a bonus system. He provides the following information.

output required from each worker 175 units

time allowed to complete output 10.5 hours
actual time worked by Fred 7 hours

A bonus is paid of 25% of the labour costs for time saved, in addition to the hourly rate of $8.75.

What did Fred earn for his output of 175 units?

A $68.91 B $76.56 C $91.88 D $99.53

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24 A job cost sheet showed the following estimates.

materials 680
labour at $20 per hour 200
overheads at $10 per labour hour 100
profit 280
price of job 1260

The job actually took 25% more labour hours than were estimated.

What was the actual profit?

A $205 B $230 C $330 D $355

25 What is the most suitable basis to apportion power costs between two production centres?

A capital cost of machinery

B maintenance cost of machinery
C number of employees
D number of units produced

26 A manufacturing business makes a single type of product. It has two production departments,
machining and assembly. A maintenance department provides services to the production
departments.

Budgeted figures for these departments are shown.

machining assembly maintenance

overheads $800 000 $400 000 $300 000

production units 200 000 50 000

The business uses a cost per unit rate to absorb overheads. Maintenance department overheads
are transferred to production departments in proportion to output.

Which figures are correct for the machining department?

overheads cost per unit

$ $

A 950 000 4.75

B 1 000 000 5.00
C 1 040 000 4.16
D 1 040 000 5.20

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27 The following data applies to the budget for a job.

direct materials $4800

direct labour $2200
machine hours 240

Direct labour is employed at an hourly rate of $11.

Production overheads are charged at $25 per direct labour hour and an amount for selling and
distribution overhead is calculated at 20% of factory cost.

What is the total cost of the job?

A $8400 B $12 000 C $14 400 D $15 600

28 A company has two production departments, manufacturing and assembly, and a stores service
department. The overheads are apportioned to each department using the appropriate costing
information supplied.

manufacturing assembly stores

direct labour hours 8 400 33 600

machine hours 20 160 6 720
total cost of the stores department $32 800
number of store requisitions 3 000 2 000

What are the overhead absorption rates for the two production departments in respect of the
stores?

manufacturing department assembly department

A $0.39 direct labour hour $0.98 machine hour

B $0.58 direct labour hour $0.65 machine hour
C $0.65 machine hour $0.58 direct labour hour
D $0.98 machine hour $0.39 direct labour hour

29 What does an increase in the marginal cost of a product cause?

A decreased contribution
B decreased fixed costs
C increased contribution
D increased contribution to sales ratio

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30 Which statements describe the usefulness of cost–volume–profit analysis?

1 to see the relationship between costs and revenue at different levels of activity
2 to set the selling price of a product to achieve targeted profit
3 to set the selling prices for a variety of products

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

© UCLES 2023 9706/12/F/M/23

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/12/F/M/23

 Cambridge International AS & A Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice May/June 2023
1 hour

You must answer on the multiple choice answer sheet.

*6170519216*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 06_9706_11/3RP
© UCLES 2023 [Turn over
 2

1 Which statement describes the purpose of preparing a trial balance?

A to assist in the preparation of financial statements

B to calculate owner’s equity
C to calculate profit for the year
D to prove that ledger balances are free from errors

2 Phil purchased new premises and made the following payments.

premises 60 000
legal fees relating to purchase 2 000
insurance for the financial year 700

When recording the purchase of the premises, the legal fees and insurance were both treated
incorrectly.

Phil’s accounting policy is not to charge depreciation on non-current assets in the year of
purchase.

What was the effect of the errors on the profit for the year?

A $1300 overstated
B $1300 understated
C $2700 overstated
D $2700 understated

3 The delivery cost of a machine purchased for business use has been included in carriage
inwards.

What is the effect on the profit for the year and on total assets?

profit for
total assets
the year

A overstated overstated
B overstated understated
C understated overstated
D understated understated

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 3

4 Which factors are considered when choosing the most appropriate method of calculating
depreciation?

1 the benefit received over the years by using the non-current asset
2 the non-current asset has a clearly defined life
3 the replacement cost of the non-current asset

A 1 and 2 B 1 and 3 C 1 only D 2 and 3

5 The carrying value of a company’s non-current assets at the beginning and end of a financial
year is shown.

at 1 January 100 000

at 31 December 80 000

During the year non-current assets were sold for $20 000 cash, realising a profit on disposal of
$5000.

Depreciation charged for the year was $8000.

What was the expenditure on non-current assets during the year?

A $3000 B $5000 C $8000 D $15 000

6 Why would a book-keeper make use of verification procedures?

A to assist in the location of errors

B to check that accounting policies have been applied consistently
C to ensure that all transactions have been recorded
D to identify debts that have become irrecoverable

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7 Douglas prepared a trial balance and found that the total of the debit column was $50 higher than
the total of the credit column. The following errors were discovered.

error 1 a purchases invoice for $100 had been incorrectly recorded

error 2 an irrecoverable debt of $50 had been incorrectly recorded

Which combination of the two errors together caused the difference in the totals?

error 1 error 2
A recorded in purchases journal at $50 both entries reversed
B recorded in purchases journal at $50 not recorded at all
C recorded in sales journal recorded in expense account only
rather than purchases journal
D recorded in sales journal recorded in sales ledger account only
rather than purchases journal

8 When preparing a bank reconciliation statement, which item is an uncredited deposit?

A a cheque to a credit supplier not yet recorded on the bank statement

B a credit transfer from a credit customer not yet recorded in the cash book
C an amount charged by the bank not yet recorded in the cash book
D an amount paid into the bank not yet recorded on the bank statement

9 A company received its bank statement dated 30 June showing a credit balance of $6890. The
cash book on this date had a debit balance of $7234. The following items were discovered.

1 Bank charges of $54 had not been entered in the cash book.
2 Deposits made to the bank on 30 June for $490 had not been shown on the bank
statement.
3 Suppliers had not banked cheques for $200.

Which figure should be used for bank in the statement of financial position at 30 June?

A $6600 B $6654 C $7126 D $7180

10 Where is discount allowed recorded?

discount allowed sales ledger

cash book
account control account

A credit side credit side credit side

B credit side debit side debit side
C debit side debit side credit side
D debit side credit side debit side

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11 The closing balance on a sales ledger control account was $10 150.

It was then discovered that:

1 a sales invoice for $270 had been correctly entered in the sales journal but posted to
the customer’s account as $200
2 goods returned by a credit customer for $90 had not been entered in the sales
returns journal.

What was the total of the individual sales ledger balances before the correction of these errors?

A $9990 B $10 080 C $10 170 D $10 220

12 A company undervalued the closing inventory for its current accounting period.

How did this affect gross profit?

current period following period

A no effect no effect
B understated overstated
C understated no effect
D understated understated

13 Draft financial statements for a business showed a profit for the year of $62 000.

The following errors were discovered.

1 Accrued loan interest payable of $3900 had not been accounted for.
2 Allowance for irrecoverable debts had been overstated by $4800.
3 Depreciation was found to be understated by $7500.
4 Prepaid rent expense of $2600 had not been accounted for.

What was the corrected profit for the year?

A $43 200 B $48 400 C $58 000 D $60 600

14 Joe is a sole trader.

Which statements relating to his business are not correct?

1 Joe can receive a bank loan for the business.

2 Joe’s drawings are transferred to his capital account.
3 Joe’s personal expenses are included in his statement of profit or loss.

A 1 and 2 B 1 only C 2 and 3 D 3 only

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15 The owner of a business does not keep a full set of accounting records for his business.

The following information is available about assets and liabilities.

current year end previous year end

$ $

inventory 19 200 17 500

trade receivables 31 200 22 400
trade payables 14 300 16 600

All purchases and sales are on credit.

During the current year:

1 The business received $168 000 from customers after allowing them a discount of
$3400.
2 The business paid $74 000 to suppliers for inventory. No discounts were received.
3 The owner took inventory of $3200 for personal use.

What was the gross profit for the current year?

A $110 000 B $110 200 C $111 700 D $113 400

16 A partnership agreement includes the following provisions.

1 interest on capital
2 interest on drawings
3 interest on partners’ loans

Which provisions will result in entries in the partnership’s appropriation account?

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

17 The partnership agreement of X and Y stated that interest on capital should be calculated at the
rate of 10% per annum.

At the beginning of the year on 1 January, the balances on X’s accounts were: capital $50 000,
current $2000 debit.

On 1 July, X contributed additional capital of $20 000.

On 31 December, the balance on X’s current account was $20 500 credit. He had made no
drawings.

What was X’s share of the residual profit for the year?

A $12 500 B $15 500 C $16 500 D $17 500

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18 The following actions took place in respect of a limited company.

1 A transfer of $50 000 was made from retained earnings to general reserve.
2 An issue of 200 000 ordinary shares of $1 each at a price of $2.50 each was made.
3 Non-current assets with a carrying value of $1 250 000 were revalued at $1 500 000.
4 Ordinary dividends of $100 000 were proposed.

What was the increase in the company’s total equity?

A $450 000 B $500 000 C $650 000 D $750 000

19 Gordon sells goods on credit to Sybil.

Which information from Sybil’s financial statements is of greatest interest to Gordon?

A current ratio
B gross profit margin
C mark-up
D return on capital employed

20 Which actions would, in general, improve the acid test ratio of a business in the short term?

1 delaying trade payables

2 selling inventory
3 selling surplus non-current assets
4 trade receivables paying their debts

A 1 and 4 B 2 and 3 C 3 only D 4 only

21 A business had current liabilities of $4000 at its year end.

The acid test ratio was 1.5 : 1.

The current ratio was 2.25 : 1.

What was the value of inventory held at the year end?

A $3000 B $4000 C $9000 D $15 000

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22 The following information is available for a company for its year ended 31 December.

non-current assets 472 000

current assets 60 000
current liabilities 45 000
interest paid 12 000
profit from operations 84 000
share capital 200 000
total reserves including the profit for the year 157 000
non-current liabilities 130 000

What is the return on capital employed?

A 14.78% B 17.25% C 20.17% D 23.53%

23 An employee is paid at the hourly rate of $20 basic pay for working 8 hours a day.

Overtime is paid at the hourly rate of basic pay plus 25% (time and a quarter).

A productivity bonus is also paid at the hourly rate of basic pay plus 50% (time and a half) for
every unit produced more than 30 units per day.

On Wednesday, the employee worked 10 hours and produced 32 units.

How much was the employee’s gross pay for Wednesday?

A $210 B $220 C $270 D $310

24 Julia is a retailer of electronic equipment. She decides to introduce a system of just-in-time

inventory management.

Which benefit can she expect from this?

A to be able to take advantage quickly of product improvements

B to increase the amount of trade discount she can receive
C to limit the effect on her profit of price rises by the manufacturer
D to protect herself better from shortages of goods to sell

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25 Justine is an accountant and charges her clients a fee at an hourly rate plus overheads. She
adds a mark-up of 20%.

The following budgeted information is available.

annual hours worked 1610

annual overhead expenditure $56 350
direct labour rate per hour $45
extra charge if job is greater than 15 hours $200
overheads are charged on a direct labour hour basis

How much will Justine charge a client for a job which takes 20 hours to complete?

A $1920 B $2000 C $2160 D $2250

26 Which statement describes the purpose of overhead apportionment?

A to assign specific costs to production departments

B to assign specific costs to service departments
C to share common costs to production departments
D to share common costs to service departments

27 A business has two production departments: machining and assembly. The budgeted direct
labour hours for each department are:

machining 4000
assembly 16 000.

The business has calculated overhead absorption rates as:

machining $12 per direct machining hour

assembly $7.70 per direct labour hour.

Insurance of $4800 relating to the assembly department was incorrectly omitted when making the
calculations.

What is the correct overhead absorption rate for the assembly department?

A $6.40 B $7.94 C $8.00 D $8.80

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28 Which statements about marginal costing are correct?

1 It only uses fixed and variable costs in calculations.

2 It only uses variable costs in calculations.
3 It should only be used for long-term planning decisions.
4 It should only be used for short-term planning decisions.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

29 A business makes and sells a single type of product. The following information is available.

per unit $

selling price 10.80

direct material 2.20
direct labour 4.20

The business also has a semi-variable overhead associated with this type of product. The
overhead is $32 000 when output is 20 000 units, but rises to $40 000 when output is 40 000 units.

What is the break-even point for this type of product?

A 5455 units
B 6000 units
C 7273 units
D 8000 units

30 What is the purpose of cost–volume–profit analysis?

A comparing actual and budgeted costs

B organising resources in the most efficient way
C planning to achieve targeted profit
D preparing annual financial statements

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BLANK PAGE

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/11/M/J/23

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2023
1 hour

You must answer on the multiple choice answer sheet.

*0633714088*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 06_9706_12/3RP
© UCLES 2023 [Turn over
 2

1 Which row correctly describes an advantage and a disadvantage of a partnership?

advantage disadvantage
A limited liability risk of disagreements
B access to more expertise unlimited liability
C limited liability joint responsibility for debts
D indefinite lifetime of business each partner bound by
decisions of other partners

2 An asset is purchased on credit by a business.

What is the effect of this transaction on the accounting equation?

assets liabilities capital

A increase decrease increase

B increase decrease no change
C increase increase decrease
D increase increase no change

3 Which items relating to new manufacturing equipment are capital expenditure?

1 cost of the equipment

2 delivery cost of the equipment
3 staff training cost to operate the equipment

A 1 and 2 B 1 and 3 C 1 only D 2 and 3

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4 The financial year of a business ends on 31 December. At the beginning of the financial year, the
following payments were made in respect of a new machine.

purchase cost 60 000

installation cost 10 000

It was discovered that the installation cost had been incorrectly treated as an expense. It is the
policy of the business to depreciate machinery at 20% per annum using the straight-line method.

What was the effect of this error on the profit for the year ended 31 December?

A $8000 overstated
B $8000 understated
C $12 000 overstated
D $12 000 understated

5 The motor vehicles at cost account had a balance of $90 000 at the beginning of the year on
1 January.

On 1 September in the same year, the following transactions took place.

1 A motor vehicle was disposed of. The vehicle had been purchased in the previous
year for $21 000.
2 A new motor vehicle was purchased at a cost of $24 000.

Depreciation is calculated at 20% using the straight-line method. Depreciation is charged on a

month-by-month basis for each month the motor vehicle is owned.

What was the depreciation charge for the year ended 31 December?

A $15 400 B $18 200 C $18 600 D $22 400

6 Which error would not affect the agreement of the totals of a trial balance?

A A credit note for $56 received from a supplier was entered in the book of prime entry as $65.
B Goods taken for own use by the owner for $180 were debited to the cash account and
debited to the drawings account.
C The discounts received total in the cash book was not transferred to the general ledger.
D The purchases returns account was understated by $50 and the cash account was
overstated by $50.

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7 A trial balance did not agree and the book-keeper found the following errors.

1 A bank overdraft of $100 had been shown as a debit in the trial balance.
2 A cash purchase of $160 had been entered in the purchases account as $150; the
purchase was entered correctly in the cash account.
3 A telephone invoice for $400 had been debited to the insurance account.

The book-keeper opened a suspense account in order to correct the errors.

What was the opening entry in the suspense account?

A credit $190
B credit $210
C debit $60
D debit $550

8 A bank statement shows a credit balance of $8360. Comparison with the cash book reveals:

1 bank charges of $124 have not been entered in the cash book
2 cheques received from customers for $16 223 have not been credited by the bank
3 cheques sent to suppliers for $18 725 have not been presented.

What is the correct cash book balance?

A $5734 credit
B $5734 debit
C $5858 debit
D $10 986 credit

9 Which statements are benefits of control accounts?

1 They check the numerical accuracy of the ledgers.

2 They help to identify missing entries in books of prime entry.
3 They provide details of individual transactions.
4 They provide information for financial statements quickly.

A 1 and 2 B 1 and 4 C 2 and 3 D 2 and 4

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10 A company has obtained the following information for the year ended 31 December.

opening balance on sales ledger control account 31 000

closing balance on sales ledger control account 35 000
discount allowed 2 300
credit sales 125 400

What was the amount received from credit customers?

A $119 100 B $123 700 C $127 100 D $131 700

11 Which statement contains the correct accounting treatment for accrued income?

A added to income and shown as a current asset

B added to income and shown as a current liability
C deducted from income and shown as a current asset
D deducted from income and shown as a current liability

12 A business receives rent from letting part of its premises.

On 1 January 2022, there was a balance brought forward of $1000 in the rent receivable account
in respect of one month’s rent received in advance.

During the year ended 31 December 2022, the business received further amounts totalling
$13 000 to cover the period from 1 February 2022 to 31 January 2023.

A rent increase of 10% was introduced from 1 April 2022.

The statement of profit or loss for the year ended 31 December 2022 incorrectly included an
amount of $13 000 for rent receivable.

What was the effect of this error on the profit for the year?

A $100 overstated
B $100 understated
C $1100 overstated
D $1100 understated

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13 A sole trader’s personal expenses had been paid out of the business bank account and included
in the statement of profit or loss.

What was the effect of this on the profit for the year and on capital?

profit for the year capital

A no effect no effect
B no effect overstated
C understated no effect
D understated understated

14 A business has a gross profit margin of 25%.

The following information is available for the year.

sales revenue 200 000

opening inventory 10 000
closing inventory 5 000

What were the purchases for the year?

A $135 000 B $145 000 C $155 000 D $165 000

15 A partnership maintains separate capital accounts and current accounts.

Which statements are correct?

1 The capital accounts represent the retained earnings of the business.

2 The capital accounts show the total amount owed to each partner.
3 The capital accounts and current accounts equal the net assets.

A 1 and 2 B 1 and 3 C 2 only D 3 only

16 X, Y and Z are in partnership, sharing profits and losses in the ratio 2 : 2 : 1.

X is allowed an annual salary of $10 000.

Y has made a loan to the partnership on which the partnership pays interest of $5000 each year.

Profit for the year before appropriation was $150 000.

What was Z’s total share of profit for the year?

A $27 000 B $28 000 C $29 000 D $30 000

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17 A company had sufficient balances in each of the share premium, general reserve and retained
earnings accounts to issue bonus shares. During the year, bonus shares were issued. The
directors decided to keep the reserves in their most flexible form.

Which ledger account will be debited on the issue of the bonus shares?

A bank
B general reserve
C retained earnings
D share premium

18 X Limited had the following equity on 1 January.

ordinary share capital ($1 shares) 400 000

share premium 30 000
general reserve 10 000
retained earnings 70 000

During the year ended 31 December, the following transactions took place.

1 January a bonus issue of 1 ordinary share for every 8 ordinary shares; it is the
company’s policy to keep its reserves in the most flexible form
1 July an issue of debentures for $150 000
1 December a rights issue of 1 ordinary share for every 15 ordinary shares at a
price of $1.60 per share; the rights issue was fully taken up
31 December profit for the year ended 31 December was $120 000

What was the total equity at 31 December?

A $678 000 B $728 000 C $828 000 D $878 000

19 Which three key users of financial statements will be most interested in the statement of profit or
loss?

A employees, environmental bodies, government

B public, environmental bodies, suppliers
C public, suppliers, potential investors
D shareholders, government, potential investors

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20 Raj, a supplier of goods, has calculated the following ratios from the financial statements of a
possible new customer.

1 current ratio
2 non-current asset turnover
3 trade payables turnover
4 trade receivables turnover

Which ratios would help Raj decide whether or not to supply goods?

A 1 and 2 B 1 and 3 C 2 and 3 D 3 and 4

21 The following information is available for a business for the year ended 31 December.

$000

revenue 800
purchases 600
owing to credit suppliers 46
owed by credit customers 58

90% of revenue is from credit sales.

80% of purchases are on credit terms.

What is the trade payables turnover?

A 23 days B 28 days C 35 days D 45 days

22 The table shows information from a company’s financial statements.

$000

revenue 135
gross profit 34
profit from operations 11
profit for the year 8
non-current assets 59
current assets 50
non-current liabilities 12
current liabilities 40

What is the return on capital employed?

A 8.1% B 11.3% C 14.0% D 15.9%

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23 A company incurs a semi-variable cost per employee hour worked.

If hours worked exceed 10 000, an extra fixed administrative cost of $600 is incurred.

administrative
hours
cost
worked
$

8 000 20 000
10 000 24 000

What will be the total administrative cost when 12 000 hours are worked?

A $28 600 B $30 600 C $33 400 D $34 600

24 Which costs are charged to individual jobs in a job costing system?

A direct labour plus direct materials

B direct labour plus direct materials plus production overhead
C direct labour plus production overhead
D direct materials plus production overhead

25 A business absorbs its overheads on the basis of direct labour hours.

The following information is provided for its last period.

actual budgeted

overheads $640 000 $620 000

labour hours 13 100 12 400

By how much were overheads over-absorbed or under-absorbed?

A over-absorbed by $15 000

B under-absorbed by $15 000
C over-absorbed by $20 000
D under-absorbed by $20 000

26 Why might a business use absorption costing?

1 to calculate inventory valuation for financial statements

2 to calculate selling price by adding profit to total cost
3 to include all production costs for the units produced

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

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27 Gareth makes and sells bread. He has calculated how many loaves he needs to sell each day in
order to break even.

Which factor helps him accurately analyse his break-even point?

A All of his production is sold on the day it is made.

B He sells several different types of bread.
C Seasonal effects cause the cost of flour to vary.
D Selling prices are reduced at the end of the day.

28 A business has the following information about a type of product.

current production and sales 8000 units

unit selling price $20
unit variable cost $12
total fixed costs $25 000

What will happen to the break-even point and the margin of safety if fixed costs increase to
$32 000?

break-even point margin of safety

A decrease by 875 units decrease by 875 units

B decrease by 875 units increase by 875 units
C increase by 875 units decrease by 875 units
D increase by 875 units increase by 875 units

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29 A company manufactures three products: X, Y and Z. The table provides per unit information
concerning the three products.

product X product Y product Z

per unit
$ $ $

selling price 100.00 120.00 130.00

direct material cost 40.00 45.00 48.00
direct labour cost 20.00 25.50 29.00
variable overhead cost 15.00 18.00 20.00
fixed overhead cost 18.00 18.00 27.00
profit 7.00 13.50 6.00

All three products are made from the same material.

If the material is in short supply, which manufacturing pattern will maximise profit?

order of priority
1 2 3

A Y X Z
B Y Z X
C Z X Y
D Z Y X

30 Why would a business use cost–volume–profit analysis?

A to act as a basis for long-term planning

B to assist in the valuation of inventory
C to decide which costs are fixed and which are variable
D to understand the relationship between sales volume and profit

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/12/M/J/23

 Cambridge International AS & A Level

ACCOUNTING 9706/13
Paper 1 Multiple Choice May/June 2023
1 hour

You must answer on the multiple choice answer sheet.

*9550560034*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 06_9706_13/3RP
© UCLES 2023 [Turn over
 2

1 What are advantages of being in a partnership?

1 All partners have limited liability.

2 Responsibility for running the business is shared.
3 Shares can be sold.
4 The business has access to more sources of capital than a sole trader.

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

2 Which statement about the purpose of a trial balance is correct?

A It assists the subsequent preparation of financial statements.

B It ensures that all double-entry postings to ledgers are accurate.
C It ensures that all postings to books of prime entry are accurate.
D It shows that all transactions in a period have been recorded.

3 The accounting equation of a business was as shown.

assets = liabilities + capital

$ $ $

48 000 = 7000 + 41 000

The assets included a bank balance of $1000.

The following transactions occurred.

1 The owner took drawings of $2000 by cheque.

2 Goods for resale were purchased on credit; list price was $4000 less 25% trade
discount.

What was the accounting equation after these transactions?

assets = liabilities + capital

$ $ $

A 49 000 10 000 39 000

B 50 000 10 000 40 000
C 50 000 11 000 39 000
D 51 000 11 000 40 000

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4 Which item is revenue expenditure?

A installation costs of machinery

B legal fees on the purchase of premises
C number plates on a new motor vehicle
D redecorating office premises

5 On 1 January, the owner of a business purchased a new machine. All non-current assets are
depreciated by 25% per annum.

During the year, the following payments were made in respect of the machine.

cost of machine 16 000

delivery 400
installation 600
one year’s insurance 100

A charge of $5100 for these items was included in the draft statement of profit or loss for the year
ended 31 December.

By how much was the draft profit for the year understated?

A $300 B $450 C $750 D $850

6 What is the purpose of providing for depreciation?

A to apply the matching principle

B to calculate the true value of non-current assets
C to ensure that money is available for repair of non-current assets
D to provide cash in the business for replacement of non-current assets

7 A business purchased a vehicle which had cost $27 000 and had an estimated residual value of
$1000. Depreciation of $18 200 has been charged on this vehicle.

The vehicle was sold in part exchange for a new vehicle which cost $29 500. A cheque for
$19 000 was paid in settlement of the transaction.

Which profit or loss was made on the sale of the vehicle?

A loss $1700
B loss $2700
C profit $1700
D profit $2700

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8 The totals of a trial balance did not agree and the following errors were discovered.

1 A cheque for $27 000 for the sale of a non-current asset had been credited to the
sales account. The corresponding entry was correct.
2 The purchase on credit of a new motor vehicle for $27 000 had been omitted from
the supplier’s account. The corresponding entry was correct.
3 Entries in the cash book for a transfer from cash to bank for $27 000 had been
reversed.
4 The purchases account had been overcast by $27 000.

Which errors would have led to the trial balance totals being different?

A 1 and 2 B 1 and 4 C 2 and 3 D 2 and 4

9 A suspense account had a balance of $450 debit.

What caused this balance in the suspense account?

A motor expenses of $225 correctly entered in the cash book and posted to motor expenses as
a credit
B motor expenses of $225 entered in the cash book as a receipt and posted to motor expenses
as a credit
C motor expenses of $450 correctly entered in the cash book and posted to motor vehicles as
a debit
D motor expenses of $675 entered in the cash book as a credit of $225 and posted to motor
expenses as a debit of $225

10 What is a benefit of preparing a bank reconciliation?

A to identify differences between the cash book and bank statement

B to know whether any bank overdraft limit has been reached
C to know whether the balance at the bank is a debit or credit
D to use the bank statement balance in the statement of financial position

11 A bank statement shows a credit balance of $1500.

A payment of $500 and a receipt of $1250 were included in the cash book but have not yet
appeared on the bank statement.

Bank interest payable of $1100 had been correctly recorded in the cash book but due to a bank
error had been recorded in the bank statement as $1000.

What is the cash book balance?

A $650 B $850 C $2150 D $3350

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12 A business is preparing a sales ledger control account.

Which statements are correct?

1 All sales are debited to the sales ledger control account.

2 Contra entries are credited to the sales ledger control account.
3 Discounts allowed are credited to the sales ledger control account.
4 The allowance for irrecoverable debts is credited to the sales ledger control account.

A 1 and 2 B 1 and 3 C 2, 3 and 4 D 2 and 3 only

13 At the end of a financial period, the total of the individual balances in the purchases ledger was
$149 000.

The following errors were then discovered.

1 A contra for $2500 had been omitted from a supplier account.

2 Discounts received of $1200 had been credited to a supplier’s account as $2100.
3 No entries had been made for a credit purchase of $5100 from a supplier.
4 Purchases returns of $3000 had been credited to a supplier’s account.

What was the corrected total of the individual balances in the purchases ledger at the end of
the period?

A $142 300 B $144 700 C $146 500 D $147 300

14 A statement of financial position at the end of the financial year showed the following information.

non-current assets 18 000

trade receivables 3 000
inventory 1 800
trade payables 3 600
bank 350 credit

Capital at the start of the financial year was $19 100. The profit for the year was $9200.

What were the owner’s drawings for the year?

A $8250 B $8750 C $8950 D $9450

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15 In the absence of a partnership agreement, the Partnership Act 1890 might apply.

Which statement is not correct about the provisions of the Partnership Act 1890?

A Drawings are not allowed.

B Interest on capital is not allowed.
C Profits and losses are to be shared equally.
D Salaries are not allowed.

16 Victor and Wasim are in partnership. At the start of the financial year, the balances on the
partners’ current accounts were Victor, $22 500 credit, and Wasim, $3700 debit. The following
information is available for the financial year.

Victor Wasim
$ $

interest on capital 1 500 1 700

share of profits 65 000 97 500
drawings 22 000 17 500
interest on drawings 660 525
capital introduced – 5 000

What was the balance on Wasim’s current account at the end of the financial year?

A $72 475 B $77 475 C $78 525 D $82 475

17 Which item would not be included on the statement of financial position for a limited company?

A issued share capital

B proposed final dividends
C revaluation reserve
D share premium account

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18 The equity section of the statement of financial position of a limited company at 1 January is
shown.

ordinary shares of $2 each 450 000

retained earnings 150 000
600 000

On 28 February, the company made a rights issue of 1 new share for every 3 existing shares
held at a premium of $1.50 per share. The rights issue was fully subscribed.

How much cash was received from the rights issue?

A $112 500 B $225 000 C $262 500 D $525 000

19 Which stakeholders use the financial statements to assess whether a company is a reasonable
credit risk?

A customers
B employees
C government
D suppliers

20 Which statements describe the limitations of accounting information?

1 Businesses in the same industry may use different accounting policies.

2 Non-monetary aspects of a business are excluded from financial statements.
3 Results of accounting ratios are based on the use of historic cost.

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

21 A company provided the following information at the end of its first year of trading.

cash sales 9 000

credit sales 27 000
receipts from credit customers 24 000
trade receivables at year end 4 100

What was the trade receivables turnover?

A 42 days B 46 days C 56 days D 63 days

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22 A company’s profit from operations during a year was $128 000.

Interest payable was $8000.

The following amounts were included in the company’s statement of financial position at the year
end.

non-current assets 485 000

net current assets 27 000
non-current liabilities 80 000

What was the return on capital employed?

A 20.3% B 21.6% C 23.4% D 25.0%

23 Which business functions would benefit from just in time (JIT) management of inventory?

1 administration
2 distribution
3 production
4 research and development

A 1 and 2 B 1, 3 and 4 C 1 and 4 only D 2 and 3

24 A business pays its employees on a time rate basis at $8 per hour. It also pays a weekly bonus of
$1.20 for every unit of production over 100 units, plus an additional $0.80 per unit for all
production over 120 units.

Employees are guaranteed a minimum weekly wage of $335.

An employee worked 37.5 hours last week and produced 129 units.

What was the employee’s wage for that week?

A $335.00 B $342.00 C $358.00 D $365.20

25 Which type of business is most likely to use a job costing system?

A an aircraft manufacturer
B a paint manufacturer
C a pet food manufacturer
D a stationery manufacturer

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26 Which statement describes a cost centre rather than a cost unit?

A a location where only variable costs are incurred

B a measurable part of a product or service
C a part of a product or service for which costs are calculated
D any location where costs are incurred

27 A business marks up all of its products by 20% on total cost to calculate a selling price.

Each unit of product uses 4 hours of direct labour and 2 kilos of direct material.

The correct overhead absorption rate to be used is $8 per direct labour hour.

In error the book-keeper used a rate of $13 per direct labour hour.

What was the effect of this error on the selling price of one unit of the product?

A $5 B $12 C $20 D $24

28 The following budgeted information is available for a business.

fixed costs 120 000

profit 88 000
variable costs 52 000

What is the budgeted break-even point in sales revenue?

A $120 000 B $150 000 C $172 000 D $208 000

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29 A business provided the following information about its total costs.

direct material and direct labour 84 200

factory expenses (variable) 15 700
factory overheads (fixed) 16 800
selling and distribution expenses (variable) 18 100
selling and distribution overheads (fixed) 9 400
144 200

1000 units had been manufactured and sold for $200 each.

What was the contribution per unit?

A $55.80 B $82.00 C $100.10 D $115.80

30 Which items are included in the marginal cost of a unit of production?

A direct labour, direct materials, fixed production costs and variable production overheads
B direct labour, direct materials, fixed costs and variable production overheads
C direct labour, direct materials and variable production overheads only
D direct labour and direct materials only

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/13/M/J/23

 Cambridge International AS & A Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice October/November 2023
1 hour

You must answer on the multiple choice answer sheet.

*7903772521*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 11_9706_11/3RP
© UCLES 2023 [Turn over
 2

1 Which sources are external short-term sources of finance for a limited company?

1 bank overdraft
2 retained earnings
3 share capital
4 trade credit

A 1 and 2 B 1 and 4 C 2 and 3 D 2 and 4

2 A sole trader settles an account payable in full with her own money. This transaction has not
been recorded.

What will be the effect when this is recorded?

A asset decreased and liability decreased

B asset increased and liability decreased
C liability decreased and capital increased
D liability increased and capital decreased

3 Sally had $1000 in the bank when she paid $1500 to buy goods for resale. The bank allowed the
payment.

How was this transaction recorded in Sally’s books of account?

account account(s)
$ $
debited credited
A inventory 1500 bank 1500
B inventory 1500 bank 1000
bank overdraft 500
C purchases 1500 bank 1500
D purchases 1500 bank 1000
bank overdraft 500

4 Which items identify revenue expenditure and a capital receipt?

revenue expenditure capital receipt

A carriage inward on a non-current asset issue of debentures

B commission received proceeds from sale of non-current asset
C discounts allowed cash drawings
D repair of motor vehicle receipt of loan from lender

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5 Which statement identifies why depreciation is provided on non-current assets?

A so that the cost is allocated to periods that benefit from them

B so that the realisation concept is applied
C so that there is enough cash in the business to replace them
D so that they are shown at market value

6 New equipment costing $40 000, with an estimated residual value of $6000, was acquired at the
beginning of the year on 1 January.

On the same date the business made the following payments in respect of the equipment.

delivery 5000
installation 7000
8-year maintenance contract 8000

The equipment has an estimated life of 8 years. The business uses the straight-line method of
depreciation.

What would be the carrying amount for this item at the end of the year on 31 December?

A $35 750 B $46 250 C $52 500 D $53 250

7 Which error would not be identified by preparing a trial balance?

A A contra entry of $650 had been entered twice in the sales ledger control account.
B A purchase invoice of $495 had been recorded as $459 in the purchases journal.
C Carriage inwards of $57 in the cash book had been recorded as $75 in the carriage inwards
account.
D Discount allowed of $35 had been credited to the discount received account.

8 During the year a sole trader withdrew $3000 cash from the business bank account. Accounting
entries made were a debit of $300 to the drawings account and a credit of $3000 to the bank
account.

In addition, $500 had been omitted from the discount received account in the trial balance.

What was the balance on the suspense account before these errors were corrected?

A $2200 debit
B $2200 credit
C $3200 debit
D $3200 credit

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9 A company’s bank statement showed a credit balance of $2000.

The following issues were found.

1 A receipt of $2700 and a payment for $3000 were recorded on the bank statement.
Both had been omitted from the cash book.
2 Bank charges of $500 were correctly shown on the bank statement but had been
recorded as $600 in the cash book.
What was the cash book balance before any necessary adjustments were made?

A $1600 B $1800 C $2200 D $2400

10 Why might a business maintain a sales ledger control account as part of the double entry
accounting system?

1 to facilitate prompt preparation of financial statements

2 to help reduce fraud
3 to provide details of all sales transactions

A 1 and 2 B 1 only C 2 and 3 D 2 only

11 The purchases ledger control account showed a balance of $79 500 before the following errors
were taken into account.

1 A contra of $5300 between the purchases and sales ledger control accounts had
been omitted.
2 Cash purchases of $1200 made on the last day of the period had not been
recorded.
3 The discount received column in the cash book had been overcast by $6200.
4 The returns inwards journal had been undercast by $1500.

Which figure for trade payables should be included in the statement of financial position?

A $78 900 B $80 100 C $80 400 D $81 600

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12 A business has trade receivables of $52 000 at the year-end.

The allowance for irrecoverable debts in the draft statement of financial position is $3000.

The allowance for irrecoverable debts is to be changed to 5% of trade receivables.

What is the effect of changing the allowance?

on profit on current assets

A decrease by $2600 decrease by $400

B decrease by $2600 decrease by $2600
C increase by $400 decrease by $400
D increase by $400 increase by $400

13 A trader prepared her financial statements but made no adjustments for accrued rent receivable
at the end of the year.

What is the effect of this omission?

current assets current liabilities profit for the year

A no effect overstated overstated

B overstated no effect understated
C understated overstated no effect
D understated no effect understated

14 A sole trader calculated her draft profit for the year as $50 000.

She asked her accountant for advice regarding four issues which she thought might affect the
draft profit.

1 A customer debt of $2000 needs to be written off as irrecoverable.

2 She accounted for her drawings of $10 000 as if they were staff salaries.
3 She wants to increase the value of a non-current asset by $20 000.
4 The existing charge for depreciation is overstated by $5000.

What was the profit for the year?

A $43 000 B $57 000 C $63 000 D $73 000

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15 Which items in the books of a partnership would increase the profit available for distribution to the
partners?

1 discount received
2 interest on capital
3 interest on drawings
4 partnership salary

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

16 L and M are in partnership, sharing profits and losses in proportion to their capital invested. The
following information is available.

capital: L 68 000
M 102 000
profit for the year before appropriation 28 900
drawings: L 8 000
M 12 000

No interest is charged on drawings up to $10 000 for each partner.

Interest at a rate of 5% is charged on any drawings in excess of $10 000.

What was L’s share of residual profit?

A $11 520 B $11 600 C $11 800 D $11 960

17 Which statements describe the advantages of a rights issue of shares?

1 Additional funds for a company can be raised cheaply.

2 Control of the company remains with existing shareholders if all rights are taken up.
3 It is an alternative to dividends as a way of rewarding existing shareholders.

A 1 and 2 B 1 and 3 C 2 and 3 D 2 only

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18 The following information is available for a limited company’s financial year ended 31 December.

1 At 1 January the total equity was $350 000. This included 100 000 ordinary shares of
$1 each.
2 On 30 June there was a rights issue of 10 000 ordinary shares for $1.50 each. This
was fully subscribed.
3 On 1 October the company paid a dividend of $0.10 per ordinary share.
4 On 1 December a dividend was proposed totalling $20 000.
5 Profit for the year was $26 500.

What was the total equity on 31 December?

A $360 500 B $375 500 C $380 500 D $391 500

19 Why would employees be interested in their employer’s financial statements?

A to assess whether the business can continue to trade in the foreseeable future
B to compare their salaries with the employees of competitors
C to put a value on the reputation of the business
D to understand the impact of the business on the economy

20 A business received a five-year loan of $40 000. The loan was paid into the bank current account.

What was the effect of the loan?

return on
current ratio
capital employed

A decreased decreased
B decreased increased
C increased decreased
D increased increased

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21 The draft financial statements of a business for the year ended 30 June included the following:

revenue 280 000

gross profit 60 000

It was subsequently discovered that the closing inventory was understated by $10 000.

What was the gross profit margin after correcting this error?

A 17.9% B 20.7% C 21.4% D 25.0%

22 The following information is available for a company.

sales revenue for the year $1 600 000

debenture interest paid $60 000
gross profit margin 20%
operating expenses to revenue ratio 12%
return on capital employed 16%

What is the company’s capital employed?

A $256 000 B $425 000 C $800 000 D $2 000 000

23 What are the benefits of operating a just in time (JIT) system of inventory management?

1 increased efficiency
2 reduced warehouse costs
3 reduced waste

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

24 Eight employees work in a team. Each employee is paid $16 an hour and the team share a group
bonus between them, which is based on their output of product. For any production in excess of
500 units the team, as a group, is paid a bonus of $8 per unit. The bonus is shared equally and
paid on a weekly basis.

Last week, each member of the team worked 40 hours, and the team as a whole produced
560 units.

What is the pay of each member of the team?

A $700 B $760 C $1120 D $1200

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25 Which type of business is most likely to use a batch costing system?

A an aircraft manufacturer
B a car component manufacturer
C a ship construction yard
D a wedding cake maker

26 A company is asked to make a new machine for a customer. It provides the following estimates.

Materials will cost $1100.

Labour will be 30 hours at a cost of $14 per hour.

The company charges overheads at $10 per labour hour and has a mark-up of 30% on total cost.

What is the price on the job cost sheet?

A $1520 B $1820 C $1976 D $2366

27 Which formula would be used to calculate an overhead absorption rate for a capital-intensive
production process?

A labour hours
overhead costs

B machine hours
overhead costs

C overhead costs
labour hours

D overhead costs
machine hours

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28 A company provides the following information.

department X department Y

budgeted overheads $150 000 $210 000

budgeted direct labour hours 2000 10 000
budgeted machine hours 8000 1000

What is the most appropriate overhead absorption rate for each department?

department X department Y

A $18.75 per machine hour $21 per direct labour hour

B $75 per direct labour hour $210 per machine hour
C $18.75 per machine hour $210 per machine hour
D $75 per direct labour hour $21 per direct labour hour

29 A company makes and sells a single type of product. The following budgeted information is
available.

selling price $10 per unit

sales volume 10 000 units
variable costs $5 per unit
fixed costs $25 000

The sales director has recommended a 20% reduction in the selling price of the product.

Variable costs will reduce to $4 per unit.

The sales volume would be expected to increase by 5%.

What will be the new budgeted profit?

A $15 000 B $17 000 C $20 000 D $27 500

30 How is contribution calculated?

A sales revenue – absorption cost

B sales revenue – fixed cost
C sales revenue – marginal cost
D sales revenue – total cost

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/11/O/N/23

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2023
1 hour

You must answer on the multiple choice answer sheet.

*3524415390*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages.

IB23 11_9706_12/4RP
© UCLES 2023 [Turn over
 2

1 Which list is a long-term source of additional funds for a limited company?

A bank loan, bonus issue of shares, debenture issue

B bank loan, leasing of premises, rights issue of shares
C bonus issue of shares, leasing of premises, trade credit
D debenture issue, rights issue of shares, trade credit

2 Which statements describe advantages of maintaining full accounting records?

1 A more complete assessment of business performance is possible.

2 Book-keeping costs are minimised.
3 Business managers can make more informed decisions.
4 Financial statements will be free from errors and inaccuracies.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

3 Maria recorded a cheque for $475 received from Josh, a credit customer. Josh had deducted a
5% cash discount. The cheque has now been returned as dishonoured.

What is the correct entry to record the return of the cheque in Maria’s books?

debit $ credit $
A bank 475 Josh 500
discount received 25
B Josh 500 bank 475
discount received 25
C bank 475 Josh 500
discount allowed 25
D Josh 500 bank 475
discount allowed 25

4 A business purchased a shop and incurred the following costs.

purchase price of the shop 680 000

legal fees incurred in the purchase of the shop 7 200
cost of initial inventory 12 500
cost of installing air conditioning 47 300

What was the total capital expenditure?

A $680 000 B $687 200 C $734 500 D $747 000

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5 A used motor vehicle was part exchanged for a new motor vehicle. The balance of the purchase
cost of the new motor vehicle was settled by cheque.

What were the entries to record the part-exchange value?

account debited account credited

A bank disposal
B bank motor vehicles
C motor vehicles bank
D motor vehicles disposal

6 A non-current asset of a business cost $300 000 in 2021. It is depreciated using the reducing
balance method at the rate of 40% per annum. A full year’s depreciation is provided in the year of
acquisition but none in the year of sale. The financial year of the business ends on 31 December.

In 2023, the item was sold for $150 000. Disposal costs of $15 000 were incurred.

What was the profit on disposal?

A $27 000 B $42 000 C $57 000 D $70 200

7 A business received $100 cash from a credit customer in settlement of a debt. When recording it,
an error of commission was made.

Which statement about the debit and credit columns of the trial balance is correct?

A The total of the credit column was $100 higher than the total of the debit column.
B The total of the debit column was $100 higher than the total of the credit column.
C The totals of both columns were the same as if the error had not taken place.
D The totals of both columns were understated by the same amount.

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8 A company’s trial balance includes a suspense account. It was found that the only errors were
discounts received of $240 and discounts allowed of $312, which had both been entered on the
incorrect sides of the respective ledger accounts.

What is the double entry required to clear the suspense account balance?

debit credit
account
$ $

A discounts allowed 312

discounts received 240
suspense 72

B discounts allowed 624

discounts received 480
suspense 144

C discounts received 240

suspense 72
discounts allowed 312

D discounts received 480

suspense 144
discounts allowed 624

9 Which statements describe the benefits of preparing a bank reconciliation statement?

1 checks the accuracy of transactions recorded on the bank statement

2 ensures that cash in the till agrees with the total of the cash column in the cash book
3 eliminates the possibility of fraud by members of staff
4 ensures that the trial balance and financial statements contain an up-to-date figure
for cash at bank

A 1 and 2 B 1, 3 and 4 C 1 and 4 only D 2 and 3

10 A trader’s cash book shows a debit balance of $12 460 at 30 April. Bank charges of $4500 have
not been entered in the cash book.

A cheque for $14 470 received from a credit customer and a cheque for $1740 paid to a supplier
appear in the cash book but not on the bank statement.

What is the balance shown on the bank statement at 30 April?

A $4770 credit
B $4770 debit
C $20 690 credit
D $20 690 debit

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11 A credit customer gave cash to a sales ledger clerk in part settlement of her debt. The clerk was
dishonest and kept the cash for himself. He entered the receipt in the customer’s sales ledger
account but made no entry in the cash book.

What caused the theft to be discovered?

A A bank reconciliation statement was prepared.

B A sales ledger control account reconciliation statement was prepared.
C A statement of account was sent to and checked by the customer.
D A trial balance was extracted from the books of account.

12 The following information is available.

balance of trade receivables at the start of the year 48 000

balance of trade receivables at the end of the year 65 300
trade discount given to credit customers 3 000
cash discount taken by credit customers 4 500
irrecoverable debt written off during the year 6 200
increase in allowance for irrecoverable debts for the year 2 700
cash received from credit customers during the year 516 000

What is the total value of credit sales for the year?

A $541 000 B $544 000 C $546 700 D $547 000

13 At a business’s financial year-end there were expenses owing, expenses prepaid, income owing
and income received in advance.

How will the ledger account balances brought down at the start of the new financial year appear
in the general ledger?

debit balances credit balances

A expenses owing expenses prepaid
income owing income received in advance
B expenses owing expenses prepaid
income received in advance income owing
C expenses prepaid expenses owing
income owing income received in advance
D expenses prepaid expenses owing
income received in advance income owing

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14 A business prepared its statement of profit or loss for the year ended 31 December.

During that year, on 30 April, a non-current asset had been sold. The following information is
available in respect of this item.

cost $130 000

sale proceeds $53 500
residual value $10 000
carrying value at 1 January $52 500
expected life 8 years

Non-current assets are depreciated using the straight-line method, with depreciation being
charged for each month of ownership.

No accounting entries had been made in respect of this non-current asset for the year
ended 31 December.

What was the effect of this omission on the profit for the year?

A $1000 understated
B $5000 overstated
C $6000 understated
D $9000 overstated

15 The owner of a trading business prepared draft financial statements for the year ended
31 December.

It was then discovered that the following transactions occurring during the year had not been
recorded.

1 A cheque for $500 had been received for commission earned.

2 Cash amounting to $2900 was received for a sale of goods which had cost $3000.
3 Inventory costing $5000 had been taken from the business by the owner for
personal use.
4 Non-current assets with a carrying value of $6500 had been sold for $7000 cash.

Which transactions will affect both the gross profit for the year and the total value of net assets
on the statement of financial position?

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

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16 A business sells some inventory for $80 on credit. This originally cost $50.

How does this affect the statement of financial position?

current assets owner’s capital

A decrease by $30 decreases by $30

B decrease by $30 increases by $30
C increase by $30 decreases by $30
D increase by $30 increases by $30

17 Which entries are made to record interest on capital in partnership accounts?

debit credit

A appropriation account capital account

B appropriation account current account
C capital account appropriation account
D current account appropriation account

18 L and M are in partnership, sharing profits and losses in the ratio of 3 : 2 respectively.

For the year ended 31 March, their statement of profit or loss showed a profit for the year of
$68 000.

The following information relates to the partnership for the same period.

interest on loan from L 400

total for both partners:
interest on capital 2 600
interest charged on drawings 1 200
salaries 20 000

How much of the residual profit will L receive?

A $26 520 B $27 720 C $27 960 D $28 200

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19 Which reserves are revenue reserves?

1 general reserve
2 retained earnings
3 revaluation reserve
4 share premium account

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

20 A limited company has the following in its statement of financial position at 31 March.

equity $

ordinary share capital 200 000

retained earnings 82 500
share premium 80 000

Ordinary shares have a par value of $0.40 each.

A bonus issue is made on the basis of 3 shares for every 8 shares held at 31 March. The issue is
made so that reserves are kept in their most flexible form.

What are the balances on the reserve accounts after the bonus issue has been made?

retained share
earnings premium
$ $

A 7 500 80 000
B 52 500 80 000
C 82 500 5 000
D 82 500 80 000

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21 A company has calculated inventory turnover periods for two successive years.

inventory
year turnover
in days

1 90
2 120

Company directors have suggested the following reasons for the change.

1 Purchases have decreased.

2 Purchases have increased.
3 Sales have decreased.
4 Sales have increased.

What are the possible reasons for the change?

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

22 The following information is available for a business at the end of its financial year.

credit purchases 140 000

credit sales 220 000
total purchases 160 000
total sales 250 000
trade payables 15 000
trade receivables 16 000

What is the trade receivables turnover?

A 24 days B 27 days C 35 days D 40 days

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23 A business commenced trading on 1 January. The purchases and sales of inventory for January
were as follows:

date purchases sales

January 4 3 at $200 each –

13 – 2 at $400 each
26 3 at $250 each –
28 – 2 at $400 each

The business used the first in first out (FIFO) method of inventory valuation.

What was the gross profit for January?

A $250 B $650 C $700 D $750

24 A company has been asked to quote a price for a specific job. Estimated costs are as follows:

direct materials 2000

direct labour 3300

Overheads are charged at 50% of labour cost.

Profit is 20% of the total job cost.

What is the total of the quotation for the job?

A $5300 B $6360 C $6950 D $8340

25 A manufacturing business has a service department, X, and production departments, Y and Z.

Department Z is labour intensive.

How is the overhead absorption rate set for department Z?

first task second task third task

A apportion total overheads reapportion X’s overheads divide Z’s overheads by
across X, Y and Z to Y and Z budgeted labour hours
B apportion total overheads reapportion X’s overheads divide Z’s overheads by
across X, Y and Z to Y and Z actual labour hours
C subtract X’s overheads from apportion remaining divide Z’s overheads by
total overheads overheads across Y and Z budgeted labour hours
D subtract X’s overheads from apportion remaining divide Z’s overheads by
total overheads overheads across Y and Z actual labour hours

© UCLES 2023 9706/12/O/N/23

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26 What would cause overheads to be under absorbed?

A Overhead absorbed is greater than overhead budgeted.

B Overhead absorbed is less than overhead budgeted.
C Overhead incurred is greater than overhead absorbed.
D Overhead incurred is less than overhead absorbed.

27 A business produces two types of product, P and Q, for the month of January. Overheads are
absorbed using direct labour hours. The production details are as follows:

P Q

units manufactured and sold 5000 2000

direct labour hours per unit 1.5 1

Direct costs for the month were $23 750.

The fixed overheads were $6500.

What was the overhead absorption rate per hour?

A $0.68 B $2.50 C $3.18 D $3.39

28 Which statements about marginal costing are correct?

1 Contribution is the difference between sales revenue and total production costs.
2 Costs are classified as variable costs or fixed costs only.
3 Variable costs include variable selling expenses.

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

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29 The following information relates to a manufacturing business.

production for the period 2400 units

closing inventory 400 units
$
direct material costs 12 000
direct labour costs 6 000
factory fixed expenses 4 080

There was no opening inventory.

Closing inventory is valued using marginal costing.

What is the marginal cost per unit of the finished goods?

A $7.50 B $9.00 C $9.20 D $11.04

30 Which statement reflects how cost–volume–profit (CVP) analysis can help with management
decision-making?

A separating out fixed and variable elements of cost

B setting short-term prices
C understanding changes in the business environment
D understanding changes in the product mix

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/12/O/N/23

 Cambridge International AS & A Level

ACCOUNTING 9706/13
Paper 1 Multiple Choice October/November 2023
1 hour

You must answer on the multiple choice answer sheet.

*1750252593*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• There are thirty questions on this paper. Answer all questions.
• For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB23 11_9706_13/3RP
© UCLES 2023 [Turn over
 2

1 Inventories are valued at the lower of cost and net realisable value in the statement of financial
position.

Which accounting concept is being applied?

A duality
B historic cost
C matching
D prudence

2 Which statements describe ways in which the security of data can be ensured within a
computerised accounting system?

1 avoiding the use of updates from the accounting software provider

2 frequent backing-up of all work entered into the accounting system
3 making sure that anti-virus protection is put in place
4 using a single password to allow access to the entire accounting system

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

3 On 1 January, Ann owed Sam $400. She paid the amount due on 6 January after deducting a
2% cash discount.

How did Ann record this?

account debited $ account credited $

A bank 392 Sam 400
discount allowed 8
B bank 392 Sam 400
discount received 8
C Sam 400 bank 392
discount allowed 8
D Sam 400 bank 392
discount received 8

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4 An improvement to business premises has been incorrectly treated as an expense in the financial
statements.

What is the effect on the financial statements after this error has been corrected?

assets profit for the year

A decreased decreased
B decreased increased
C increased decreased
D increased increased

5 A business incurs the following business expenditure during the year.

purchase of a machine 9 700

3-year maintenance for the machine 10 000
replacing the wheels of a motor car 8 500
upgrading the hardware of a computer 5 600

What are the total costs to be included in the non-current assets account during the year?

A $15 300 B $15 600 C $23 800 D $25 300

6 What is a reason for providing for depreciation of non-current assets?

A to ensure non-current assets are replaced when they are worn out
B to match the cost to the revenue earned each year by the non-current assets
C to provide funds for purchasing replacement non-current assets
D to show the amount they would realise if non-current assets were sold

7 A business uses the straight-line method of depreciation.

A machine which it has owned for three years has a carrying value of $13 000 at the end of the
third year. When purchased, it was estimated that it had a life of five years and a residual value of
$5000.

What was the original cost of the machine?

A $18 000 B $20 000 C $25 000 D $32 500

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8 Sammy paid a credit supplier $190 in full settlement of a debt of $200. He omitted to record the
discount.

How did the correction of this error affect Sammy’s statement of financial position?

bank capital trade payables

A decreased decreased no effect

B increased no effect decreased
C no effect decreased increased
D no effect increased decreased

9 The trial balance of a business did not agree and a suspense account was opened.

The following errors were then discovered.

1 The sales journal total of $9150 had been credited to both the sales account and the
sales ledger control account.
2 The purchases journal total of $3450 had been entered correctly in the purchases
account but as $3350 in the purchases ledger control account.
3 Motor expenses of $6450 paid by cheque had only been entered in the bank
account.

What was the opening balance in the suspense account?

A $15 700 credit

B $15 700 debit
C $24 650 credit
D $24 650 debit

10 Which items are used to update the cash book when preparing a bank reconciliation statement?

1 an amount directly collected by a supplier from the business’s bank account

2 an amount directly transferred by a customer to the business’s bank account
3 an amount not yet credited to the business’s bank account
4 an amount not yet debited to the business’s bank account

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

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11 The year-end balance in the cash book was $23 780. This was different from the balance on the
bank statement. The difference was due to the following items.

$
a bank error meant a cheque was incorrectly 560
debited to the bank account
a customer’s cheque which was dishonoured 1 375
bank charges 216

Which figure should be included as cash at bank in the statement of financial position?

A $21 629 B $22 189 C $25 371 D $25 931

12 Which item is not recorded in the sales ledger control account?

A allowance for irrecoverable debts

B dishonoured cheque
C returns inwards
D settlement discount

13 The closing balance of a purchases ledger control account was $7480. It did not agree with the
total of the suppliers’ balances in the purchases ledger. The following two errors were found.

1 An error of original entry occurred when a credit note from a supplier for $120 had
been recorded as $210.
2 Interest charged on an overdue supplier’s account of $40 had been debited to the
purchases ledger control account.

What is the corrected balance of the purchases ledger control account?

A $7470 B $7490 C $7520 D $7650

14 Which statements are correct?

1 An increase in the allowance for irrecoverable debts increases profit for the year.
2 Irrecoverable debts decrease profit for the year.
3 Rental income received in advance at the end of the period will increase profit for
the year.
4 Revenue which has been earned but not yet received will increase profit for the
year.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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15 A business paid an annual rent of $24 000. At the beginning of the year, on 1 January, there was
accrued rent of $4000.

Rental payments during the year were as follows:

1 January 12 000
1 July 10 000
1 September 13 000

How was rent recorded in the financial statements at 31 December?

statement of other other

profit or loss receivables payables
$ $ $

A 24 000 7 000 nil

B 24 000 nil 7 000
C 35 000 11 000 nil
D 35 000 nil 11 000

16 A business adds a mark-up of 25% to all goods sold.

The following information is available for the year ended 30 June.

receipts from credit customers 284 300

opening trade receivables 22 100
closing trade receivables 26 500
cash used for business expenses and drawings 52 400
discount allowed to credit customers 1 200
closing cash balance 500

Receipts from cash sales were used to pay business expenses and drawings. Any remaining
cash was placed in the cash account. The opening cash balance was nil.

What was the value of total sales for the year?

A $340 400 B $341 600 C $342 800 D $428 500

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17 A partnership agreement only provides for interest on capital at a rate of 6% and interest on
drawings at a rate of 8%.

What will be the interest payable on a loan from a partner?

A 0% B 5% C 6% D 8%

18 L and M are in partnership. The following information relates to the financial year.

L M
$ $

drawings 20 000 30 000

interest on drawings 1 200 1 800
interest on partner’s loan 8 000
salary 20 000
residual profit share 36 000 18 000

What was the profit for the year?

A $71 000 B $77 000 C $79 000 D $121 000

19 Which items will not form part of the equity of a limited company?

1 long-term bank loan

2 share premium
3 retained earnings
4 revaluation reserve

A 1, 3 and 4 B 1 only C 2, 3 and 4 D 2 only

20 Which is an internal stakeholder?

A bank
B debenture holder
C employee
D potential investor

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21 In the last financial year, R Limited had sales revenue of $190 000 and operating expenses of
$108 000.

In the current financial year, the directors think that if they increase spending on advertising by
$5000, then sales would increase to $205 000. Operating expenses (excluding advertising) would
increase by $7000.

What would the operating expenses to revenue ratio be if the additional advertising took place?

A 56.10% B 58.54% C 158.33% D 170.83%

22 The following information is available for a business.

total purchases 820 000

credit purchases 740 000
opening inventory 60 000
closing inventory 80 000
total sales (all on credit) 910 000
carriage inwards 20 000
returns outwards 40 000

What was the inventory turnover?

A 29 days B 32 days C 33 days D 35 days

23 Which characteristic describes an indirect cost?

A a cost that cannot be controlled by company managers

B a cost that cannot be directly traced to individual cost units or cost centres
C a cost that changes at different levels of activity
D a cost that remains unchanged at all levels of activity

© UCLES 2023 9706/13/O/N/23

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24 The manufacture of product type X incurs a specific cost. Data relating to this is as follows:

units produced 6000 9000

cost per unit $3 $2

Which type of cost is this?

A fixed
B semi-variable
C stepped
D variable

25 A company makes a single type of product and sells it for $12 per batch.

The variable cost is $4 per batch.

Fixed costs have been absorbed based on a normal activity level of 1000 batches at
$3 per batch.

What is the profit under marginal costing if the company makes and sells 1500 batches?

A $6000 B $7500 C $9000 D $12 000

26 A business operates a system of absorption costing.

Which statements are correct?

1 Overheads would be over absorbed if the actual activity level was below the
budgeted level.
2 Overheads would be under absorbed if the actual activity level was below the
budgeted level.
3 Overheads would be over absorbed if the actual overhead exceeded the budgeted
overhead.
4 Overheads would be under absorbed if the actual overhead exceeded the budgeted
overhead.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

27 A business uses an overhead absorption rate of $20 per direct labour hour.

In April budgeted direct labour hours were 6000 and actual direct labour hours were 6100.

Overheads for the month were under absorbed by $3000.

What were the actual overheads in April?

A $117 000 B $119 000 C $123 000 D $125 000

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28 Which statement is an argument for using marginal costing?

A International accounting standards require use of marginal costing.

B Marginal costing data enables the use of decision-making techniques.
C Setting selling prices is made easier under marginal costing because all costs are
considered.
D The distinction between fixed and variable overheads under marginal costing is no longer
relevant.

29 The following information is available for a business.

total fixed costs $15 000

variable cost $12 per unit
selling price $20 per unit
break-even point 1875 units

The business wants to reduce the break-even point to 1500 units.

Which strategy will not achieve the target break-even level?

A increasing the selling price to $22 per unit

B reducing fixed costs to $12 750 and reducing variable cost to $11.50 per unit
C reducing fixed costs to $12 800
D reducing variable costs to $10 per unit

30 Which assumption does not apply for cost–volume–profit (CVP) analysis?

A All units produced are sold.

B Only a single type of product is produced and sold.
C Total fixed costs change over a period.
D Variable cost changes in direct proportion with sales volume.

© UCLES 2023 9706/13/O/N/23

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BLANK PAGE

© UCLES 2023 9706/13/O/N/23

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/13/O/N/23

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2024
1 hour

You must answer on the multiple choice answer sheet.

*4703812695*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

03_9706_12_1.15a
© UCLES 2024 [Turn over
 2

1 Which statement about sole traders is correct?

A They always trade by buying and selling goods.

B They do not employ any staff.
C They keep all their profit themselves.
D They maintain a retained earnings account.

2 Which source of finance would be available to a public limited company but not to a partnership?

A bank overdraft
B debentures
C leasing
D trade credit

3 Which items will be debited to accounts in the purchases ledger?

1 discount allowed
2 payments to suppliers
3 purchases
4 purchases returns

A 1 and 2 B 1 and 4 C 2 and 3 D 2 and 4

4 Tom bought goods costing $100 on credit from Sam. He returned goods costing $20 as faulty.

He deducted a cash discount and paid $76 by cheque in full settlement.

Which amounts were recorded in Tom’s books of prime entry?

purchases purchases three-column

journal returns journal cash book (bank column)
$ $ $

A 80 0 76
B 80 0 80
C 100 20 76
D 100 20 80

© UCLES 2024 03_9706_12_2024_1.15a

 3

5 What are the characteristics of non-current assets?

1 They are not intended for resale.

2 They provide future economic benefits.
3 They prevent the company from going out of business.

A 1 and 2 only B 1 and 3 only C 2 and 3 only D 1, 2 and 3

6 At the beginning of the financial year on 1 January, a business acquired a new motor vehicle for
$34 000. In error, this was recorded in the account for motor expenses. Motor vehicles are
depreciated using the reducing balance method at the rate of 30% per annum. It is estimated that
the motor vehicle will have a residual value of $4000 at the end of its life.

If the error is not corrected, what will be the effect on the profit for the year ended 31 December?

A $10 200 overstated

B $23 800 understated
C $25 000 understated
D $34 000 understated

7 A company purchased a machine on 1 April 2021 for $25 000. It was depreciated at 20% per annum
using the straight-line method. A full year’s depreciation is charged in the year of purchase but
none in the year of sale. On 30 June 2023 the machine was sold for $12 500.

The company’s year end is 31 December.

What was the profit or loss on the disposal of the machine?

A $1250 loss
B $1250 profit
C $2500 loss
D $2500 profit

8 Which error will cause a trial balance not to balance?

A an invoice entered as a credit note on original input

B a journal entry that does not balance
C a transaction entered as the wrong amount on original input
D a transaction not entered in the books of account

© UCLES 2024 03_9706_12_2024_1.15a [Turn over

 4

9 A business prepared a trial balance that included a suspense account. Draft financial statements
were prepared which showed a profit for the year of $85 000.

The following errors were then discovered.

1 Discounts allowed of $1000 had been debited to the discounts received account.
2 Motoring expenses of $4000 had been debited to the purchases account.
3 A payment for purchases of $5000 had been correctly entered in the cash book but
credited to the drawings account.

After correcting these errors the balance on the suspense account was eliminated.

What was the revised profit for the year?

A $76 000 B $78 000 C $80 000 D $82 000

10 Amit compared his bank statement with his cash book.

How did Amit deal with the items revealed by this comparison?

including in bank
updating his cash
reconciliation
book
statement

A bank charges timing differences

and bank errors
B bank charges and timing differences
bank errors
C timing differences bank charges
and bank errors
D timing differences bank charges and
bank errors

© UCLES 2024 03_9706_12_2024_1.15a

 5

11 The bank statement of a business shows a credit balance of $1570 at 31 December.

The following differences were discovered on comparing the cash book with the bank statement.

unpresented cheques 1250

uncredited bankings 1800

A direct debit of $230 was shown as $320 in the cash book.

What is the updated cash book balance at 31 December?

A $930 B $1020 C $2030 D $2120

12 What are the benefits of preparing a sales ledger control account?

1 detecting errors of original entry

2 helping reduce the possibility of fraud
3 providing totals of trade receivables for inclusion in financial statements

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

13 A company prepared its purchases ledger control account, which showed a balance of $15 960.
The following items were then discovered.

1 Discounts received of $450 had been entered into the purchases ledger control
account as $540.
2 A payment of $720 to a supplier had not been entered in his account.
3 The purchases ledger debit balances carried down totalling $110 had been omitted
from the control account.
4 A contra of $170 had been entered in the purchases ledger but not in the purchases
ledger control account.

What was the correct total of the trade payables?

A $15 050 B $15 240 C $15 990 D $16 150

© UCLES 2024 03_9706_12_2024_1.15a [Turn over

 6

14 Deepak provided the following information.

end of year 1 end of year 2

allowance for irrecoverable debts $600 $800

rate of allowance 3% 5%

By how much did the total of trade receivables change from the end of year 1 to the end of year 2?

A $4000 decrease
B $4000 increase
C $10 000 decrease
D $10 000 increase

15 A sole trader began a business on 1 January with $50 000 capital.

During the year she introduced to the business her own private vehicle which had cost $22 000
but which was valued at $16 000 when she added it to the business. Drawings for the year were
$20 000. At the end of the financial year on 31 December the closing balance on the capital account
was $105 000.

What was the profit for the year?

A $39 000 B $53 000 C $59 000 D $75 000

16 Which provision of the Partnership Act 1890 applies when there is no partnership agreement?

A Partners receive 5% interest per annum on their capital contributions.

B Partners are charged 5% interest per annum on their drawings.
C Partners receive interest of 5% per annum on loans to the partnership.
D Partners are entitled to equal amounts of salary.

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 7

17 A partnership provided the following information for the year.

$
gross profit 76 000
operating costs 30 000
bank interest 1 300

interest on partner’s loan 600

interest on capital 5 600

interest on drawings 2 000

What were the profit for the year and the residual profit shared by the partners?

profit for the year residual profit

$ $

A 44 100 40 500
B 44 100 47 700
C 44 700 40 500
D 44 700 47 700

18 Why is a statement of changes in equity prepared?

A to calculate profit when incomplete records have been kept

B to match the dividends paid to profit for the year
C to show the change in capital employed
D to show the movements in the shareholders’ stake in the business

© UCLES 2024 03_9706_12_2024_1.15a [Turn over

 8

19 The trial balance of a company at 31 December at the end of year 1 included the following amounts.

Ordinary share capital 800 000

($0.50 shares)
Share premium 200 000
Retained earnings 1 000 000

On 1 January in year 2 the company made a rights issue of 400 000 shares at a premium of $0.70
per share. This was fully taken up.

On 1 July in year 2 the company issued bonus shares at the rate of one new share for every four
held.

The policy is to maintain reserves in their most flexible form.

What is the balance on the share premium account after these transactions?

A $230 000 B $330 000 C $355 000 D $480 000

20 Jim is a manager in a limited company. He also owns a few of its shares.

Why has he been looking at its most recent financial statements?

A to discover the profit made by his department as he might receive a bonus

B to find out if the company made a profit, making his job more secure
C to know if dividends will increase over the next five years, improving his income
D to see if the company has a good reputation, increasing the value of his shares

© UCLES 2024 03_9706_12_2024_1.15a

 9

21 H Limited’s cost of sales for the recent two years (Year 2 and Year 1) is as follows:

Year 2 Year 1
$ $
average inventory 100 000 65 000
credit purchases 910 000 760 000
cost of sales 850 000 750 000

Which statement regarding the efficiency of inventory turnover is correct?

A Year 2 is better because the average inventory is higher.

B Year 2 is better because the inventory turnover (in days) is higher.
C Year 2 is worse because the cost of sales is higher.
D Year 2 is worse because the inventory turnover (in days) is higher.

22 Which expense for a business may be classified as a stepped cost?

A direct labour
B direct materials
C factory rent
D telephone

23 Which statements describe just in time (JIT) management of inventory?

1 It increases administration costs as more suppliers are required.

2 It is a management strategy that minimises inventory to increase efficiency.
3 Producers hold only sufficient inventory to meet maximum market demand.
4 The system benefits cash flow and reduces the amount of capital required to run the
business.

A 1 and 2 B 1, 3 and 4 C 2, 3 and 4 D 3 and 4 only

24 The direct materials cost of a batch of soft drinks is $10 000 for 50 000 cans. 60 direct labour hours
are required at a cost of $40 per labour hour. Overheads are absorbed at 250% of the cost of direct
labour.

What is the cost per soft drink can to the nearest dollar?

A $0.20 B $0.37 C $0.44 D $1.04

© UCLES 2024 03_9706_12_2024_1.15a [Turn over

 10

25 What is an advantage of absorption costing?

A It helps to determine a product‘s selling price.

B It is used to improve operational efficiency.
C It makes it easy to analyse costs at different production levels.
D It takes into account only variable costs.

26 The following information is forecast for the next month.

opening inventory 20 300 units

closing inventory 22 500 units
marginal cost profit $90 600
absorption cost profit $100 400

What is the overhead absorption rate per unit?

A $4.03 B $4.45 C $4.46 D $4.95

27 X Limited has budgeted monthly overheads of $125 000. Its overhead absorption rate is $5 per
machine hour. In July there was an under-absorption of overheads of $1000.

Which changes from budgeted data caused this to happen?

overheads machine hours

A $500 higher 100 hours less

B $500 lower 100 hours more
C $750 higher 50 hours more
D $750 lower 50 hours less

28 Which changes result in a decrease in the margin of safety?

unit variable cost total fixed costs

A decrease decrease
B decrease increase
C increase decrease
D increase increase

© UCLES 2024 03_9706_12_2024_1.15a

 11

29 A company has the following budgeted information per unit.

selling price 25
variable costs 10

Fixed costs are $72 000.

What is the increase in break-even sales if fixed costs increase by 33 %?

A $38 400 B $40 000 C $53 333 D $60 000

30 Which statements about cost–volume–profit analysis are correct?

1 Fixed costs remain constant for a range of activity.

2 Profits are calculated on an absorption costing basis.
3 Sales revenue increases in direct proportion to output.
4 There is only one product or there is a constant sale mix.

A 1, 2, 3 and 4
B 1 and 2 only
C 1, 3 and 4 only
D 2, 3 and 4 only

© UCLES 2024 03_9706_12_2024_1.15a

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 03_9706_12_2024_1.15a

 Cambridge International AS & A Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice May/June 2024
1 hour

You must answer on the multiple choice answer sheet.

*2187644047*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

06_9706_11_2024_1.8b
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1 Jamie is setting up a business.

There are three details which are important to Jamie.

1 Jamie wants to have a salary for his work in managing the business.
2 Jamie wants full ownership of the business.
3 Jamie wants to avoid the risk of losing personal assets.

Which type of business should Jamie choose?

A sole trader
B partnership
C private limited company
D public limited company

2 The owner of a business paid for business stationery using her personal funds.

Which ledger account will be credited?

A capital
B cash
C drawings
D stationery

3 Why does a business charge depreciation?

1 to be able to replace an asset at the end of its useful life

2 to charge the cost of an asset to each period that benefits from its use
3 to treat each asset according to the concept of consistency

A 1 and 2 B 2 only C 2 and 3 D 3 only

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4 The following information relates to the non-current assets of a business that was formed three
years ago.

cost at start of year 1 10 000

accumulated depreciation at end of year 3 6 000
draft profit for year 3 18 000

In calculating the draft profit for year 3, depreciation has been consistently charged using the
straight-line method.

Prior to finalising the accounts, the business decided to change the method of depreciation for
year 3 to the reducing balance method at a rate of 25% per annum.

What was the revised profit for year 3?

A $16 000 B $17 500 C $18 500 D $19 000

5 Why does a business maintain a sales ledger control account?

A to ensure that statements are sent out promptly to customers

B to record the total of discounts received
C to reduce the risk of irrecoverable debts
D to verify the arithmetical accuracy of entries in the sales ledger

6 Iga is worried that her book-keeper may have been forgetting to record credit notes received.

What should she do to find out?

1 check purchases ledger balances against statements of account

2 extract a trial balance showing individual purchases ledger accounts
3 prepare a purchases ledger control account

A 1 and 2 B 1 only C 2 and 3 only D 3 only

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 4

7 A trial balance does not balance and a suspense account is opened.

On investigation, the following errors are found.

1 The debit balance of $450 on the carriage outwards account has been brought down
as $540.
2 The purchases returns journal has been overcast by $100.

3 A cheque for $50 received from Alan Green has been posted to the credit account
of Brian Green.
4 Rent received of $350 has been posted to the debit of rent paid account.

What is the opening balance on the suspense account?

A credit $690 B credit $740 C debit $690 D debit $740

8 The table shows extracts from a business’s bank reconciliation.

$
balance per cash book at 31 December 2075 debit
balance per bank statement at 31 December 2250 credit
bank charges per bank statement not entered in cash book 150
outstanding cheques not presented at year end 325

What is the bank balance to be shown in the financial statements?

A $1600 B $1925 C $2075 D $2225

9 The total of trade payables balances in Konrad’s purchases ledger was $57 400. The following
errors were then discovered.

discount allowed overcast in cash book 2000

returns outwards omitted in a supplier’s account 350
payments to trade payables undercast in cash book 137
purchases journal overcast 500

What is the correct total of trade payables balances?

A $54 413 B $54 913 C $55 050 D $57 050

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10 Which statement is not correct?

A Control accounts reveal whether there are errors in sales and purchases ledgers.
B Credit balances in a sales ledger are trade receivables.
C Debit balances in a purchases ledger are current assets.
D A sales ledger control account includes irrecoverable debts.

11 A business maintains an allowance for irrecoverable debts of 5% of trade receivables. At the end
of the current financial year, trade receivables totalled $8000 which was 20% less than the
year before.

How will the profit for the current financial year be affected by the change in the allowance for
irrecoverable debts?

A decrease by $100
B decrease by $400
C increase by $100
D increase by $400

12 A trader does not keep full records but supplies the following information.

1 January 31 December

$ $
bank (debit) 4240 6320
cash balance 264 271

Cheques issued during the year were $19 950.

All takings from sales were banked except that cash of $5400 was used for drawings and $7200
was paid for wages.

In addition, $3000 was paid to bank from the sale of a motor vehicle.

What was the total amount of sales during the year?

A $22 037 B $31 630 C $31 637 D $34 637

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13 Which statement(s) are true of drawings?

1 They are a reduction in the owner’s investment.

2 They have to be less than the profit for the year.
3 They represent the salary paid to the owner.

A 1 and 2 B 1 only C 2 and 3 D 3 only

14 Vikram is a partner in a business. Partners do not receive salaries or interest on capital, but
they are charged 5% interest on the balance of their drawings account.

Vikram made drawings of $40 000 during the year and his share of profits was $47 500.

His current account showed a credit balance of $4500 after the relevant entries were made at
the end of the financial year.

What was the debit balance on Vikram’s current account at the beginning of the financial year?

A $1000
B $3000
C $5000
D $5500

15 A partnership operates without having a partnership agreement.

Which rules will apply to the partnership?

1 Partners will be entitled to interest on any loans made to the business at a rate of
10% per annum.
2 Partners will be entitled to interest on their capital at a rate of 5% per annum.
3 Partners will not be charged interest on their drawings.
4 Partners will not be entitled to a salary.

A 1 and 3 B 1 and 4 C 2 and 3 D 3 and 4

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16 L and M are in partnership, sharing profits and losses in the ratio of 3 : 2 respectively.

The following information was available at year end.

L M
$ $

capital 200 000 150 000 interest on capital 8%

drawings 30 000 20 000 interest on drawings 5%
partners’ salaries 22 000 17 000

The residual profit shared by L was $24 000.

What was the profit for the year before appropriation?

A $48 500 B $88 500 C $104 500 D $109 500

17 Which statements about debenture interest are correct?

1 Interest percentage rate will always be higher than dividend per share.
2 Interest will be deducted in the statement of changes in equity.
3 Interest will be paid before ordinary shareholder dividends.
4 Interest will be paid even if the company records a loss.

A 1, 2 and 3 B 1, 3 and 4 C 2 and 3 only D 3 and 4 only

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18 A company has the following reserves.

$
share premium 60 000
revaluation reserve 75 000
general reserve 10 000
retained earnings 21 500

The directors wish to make a bonus issue of ordinary shares of $1 each.

What is the maximum number of bonus shares which the company could possibly issue?

A 31 500
B 91 500
C 135 000
D 166 500

19 A business provided the information shown for a period.

$
sales revenue 1 500 000
purchases 1 000 000
inventory at end of the period 50 000

The rate of inventory turnover for the period was 12 times and the business attained a gross
profit margin of 40%.

The business also made some purchases returns and incurred an amount for carriage inwards.

What was the value of inventory at the beginning of the period?

A $100 000 B $116 667 C $128 572 D $200 000

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20 When comparing with the previous year, a trader finds that his gross profit margin has
increased and his trade receivables turnover has decreased.

Which statement would explain this?

A He bought in bulk and passed the savings on to his customers who bought more.
B He offered more trade discount and more customers paid in cash.
C He raised his selling price and offered more cash discounts.
D He reduced his selling price to increase the total value of sales.

21 B Limited had credit sales for the year of $3 285 000 and trade receivables at year end of
$405 000.

The sales director believed that if cash discounts had been given, then trade receivables
would have been $351 000. The allowance for irrecoverable debts would have been reduced by
$9000.

What difference would the discounts have made to the trade receivables turnover?

A It would have been 5 days faster.

B It would have been 5 days slower.
C It would have been 6 days faster.
D It would have been 6 days slower.

22 A business makes wedding dresses. Each machinist is paid $30 a day and each supervisor $40 a
day. Each supervisor can work with up to 10 machinists and each machinist can produce one
wedding dress a day.

If 95 wedding dresses a day are produced, what is the daily labour cost?

A $2850 B $3210 C $3230 D $3250

23 Which statement best describes variable costs?

A costs that are the same in total up to a certain level then increase with output
B costs that are the same in total over any output level
C costs that are constant per unit as output increases
D costs that increase per unit as output increases

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24 P Limited makes wooden chairs at a unit cost of $70 each.

It has received an order to produce a batch of 1000 wooden chairs with padded seats. This requires
$6000 of additional materials, an extra 500 labour hours at $15 per hour and a $2000 increase in
overheads.

What is the cost of the batch?

A $13 500 B $15 500 C $83 500 D $85 500

25 Why would overheads be over absorbed?

A Overheads absorbed is less than overheads budgeted.

B Overheads absorbed is more than overheads budgeted.
C Overheads incurred is less than overheads absorbed.
D Overheads incurred is more than overheads absorbed.

26 A company makes one product with a selling price of $384 per unit. The costs are as follows:

per unit

direct materials 4 kilos at $8 per kilo

direct labour 8 hours at $12 per hour
selling and distribution $40

The mark-up is 50%.

What is the factory overhead absorption rate per labour hour?

A $3 B $5 C $11 D $22

27 Which statements about marginal costing are correct?

1 It enables a business to make the best use of its resources when there is a limiting
factor.
2 It ensures that decisions taken are based upon the total cost of producing a product.
3 It takes into account apportionment of service costs to production cost centres.
4 It usually leads to a lower inventory valuation than absorption costing.

A 1 and 4 only B 1, 2 and 4 C 2 and 3 D 3 and 4 only

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28 A company makes and sells a single type of product. The budgeted information for 6000 units is
as follows:

variable manufacturing costs 90 000

variable selling expenses 6 000
fixed manufacturing overheads 54 000
fixed administrative overheads 21 000

The unit selling price is $40.

How many units must the company produce and sell to achieve a target profit of $45 000?

A 3960 B 4125 C 4800 D 5000

29 The diagram shows a break-even chart.

X sales revenue

revenue total cost

and costs
$ Y
fixed cost

0 budgeted level of activity

level of activity

What does line XY represent?

A the break-even point revenue

B the margin of safety in terms of revenue
C the profit at break-even point
D the total contribution at break-even point

30 What is not an assumption in cost–volume–profit analysis?

A The unit fixed cost is constant.

B The unit selling price is constant.
C The unit variable cost is constant.
D The units produced are all sold.

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 06_9706_11_2024_1.8a

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2024
1 hour

You must answer on the multiple choice answer sheet.

*3832683287*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

06_9706_12_2024_1.13b
© UCLES 2024 [Turn over
 2

1 Which statements relate to a sole trader?

1 The business is a separate legal entity.

2 There is no separation between ownership and control.
3 Some of the profit is used to pay interest on the owner's capital.
4 There is no legal requirement to keep full accounting records.

A 1, 3 and 4 B 1 and 3 only C 2 and 3 D 2 and 4

2 Which item incorrectly applies the matching concept?

A capitalising staff expertise and writing it off over the working life of the staff
B including a value for unused stationery in the statement of financial position
C providing for irrecoverable debts in the year the sales took place
D recording telephone costs incurred but not yet billed

3 Goods that had previously been purchased on credit have been returned to the supplier.

How should this be recorded in the purchaser’s books of account?

account to be debited account to be credited

A bank purchases returns

B trade payable bank
C trade payable purchases returns
D purchases returns trade payable

4 Jason sold a non-current asset with a carrying value of $8000. He mistakenly recorded this by
debiting the bank account and crediting the sales account with the proceeds of $6500.

By which amount was the profit for the year overstated?

A $1500 B $5000 C $6500 D $8000

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5 Adam’s financial year ends on 31 December.

At the beginning of the year, on 1 January, the carrying value of machinery was $20 000.

During the year, on 30 June, he purchased a new machine for $6000. He paid 50% of the cost in
cash and the balance by part exchange of an old machine which had the carrying value of $2500
on that date.

He depreciates his machinery by 20% per annum on the carrying value calculated on a time basis.

What is the carrying value of the machinery shown in the statement of financial position at the end
of the year on 31 December?

A $18 000 B $18 800 C $19 150 D $20 800

6 Which statement describes a limitation of reconciliation and verification procedures?

A Sometimes a sales ledger control account balance does not agree with the total of sales
ledger account balances.
B Errors of commission could be present in the books of account.
C Bank transactions may be missing from the bank column in the cash book.
D The totals shown in the trial balance do not always agree.

7 The following errors in the accounting records have been found and corrected.

1 A purchase invoice for $250 was omitted from the books of account.
2 A sale for $120 to X was debited to the account of Y.
3 The sales journal was overcast by $100.

The gross profit for the year before correcting the errors was $60 200.

What is the correct gross profit for the year?

A $59 850 B $59 970 C $60 350 D $60 550

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8 The bank statement of a business showed a credit balance of $3421, which did not agree with the
balance in the cash book.

Further investigation revealed that a receipt entered in the cash book for $125 and a payment for
$455 had not yet appeared on the bank statement.

The bank statement showed bank charges of $64 and a credit transfer of $177 which had not been
entered in the cash book.

Which balance was shown in the cash book before making the necessary changes and preparing
a reconciliation statement?

A $2978 B $3091 C $3204 D $3421

9 Which statements describe the benefits of preparing control accounts?

1 assists in detection of fraud

2 assists in finding errors of original entry
3 assists in finding transposition errors
4 assists in preparation of financial statements

A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

10 A trade payable for $720 transferred from the purchases ledger has been entered on the wrong
side of the sales ledger control account.

The sales ledger control account has a closing balance of $92 460 before correcting the transfer.
An allowance for irrecoverable debts of $1000 is to be made.

What is the correct balance on the sales ledger control account?

A $90 020 B $91 020 C $91 740 D $92 180

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11 After preparing the draft statement of profit or loss, it was discovered that the purchase of an office
computer had been incorrectly recorded in the purchases account.

What will the effect of correcting this error be on cost of sales and profit for the year?

cost of profit for

sales the year

A decrease decrease
B decrease increase
C increase decrease
D increase increase

12 The draft profit for a business was $64 000 before the following information was taken into
account.

• An allowance for irrecoverable debts was maintained at 2% of trade receivables. The total
of trade receivables was $150 000 at the beginning of the period and $220 000 at the end of
the period.
• On the last day of the period $4000 was recovered from a trade receivable that had
been written off as irrecoverable.

What is the revised profit for the period?

A $58 600 B $62 600 C $63 600 D $66 600

13 A sole trader does not keep a complete set of books of account. He believes a staff member
has stolen some cash.

Which items will not be needed to calculate the amount missing?

1 cash in hand at the beginning and end of the year

2 owner's drawings taken from the bank
3 cheques received from customers
4 totals of cash sales and cash purchases

A 1 and 4 B 2 and 3 C 2 only D 3 only

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14 A trader sells goods at a uniform mark-up of 20%. The following information is available for the
year ended 31 December.

inventory at 1 January 1 780

inventory at 31 December 2 100
purchases 23 400
carriage inwards 700
carriage outwards 450
goods taken for own use (at selling price) 1 800

What was the value of cost of sales for the year ended 31 December?

A $20 880 B $21 830 C $22 280 D $22 340

15 Both partners in a business have a credit balance on their current account.

How does the inclusion of interest on drawings affect the financial statements of the partnership?

current account shares of

balance residual profit

A decreases decreases
B decreases increases
C increases decreases
D increases increases

16 Vicram and Walter are in partnership but have not made any partnership agreement.
The net assets of the partnership at the end of a financial period totalled $180 000.

The partners maintain capital and current accounts.

The opening balances on the current accounts were:

$
Vicram 3200 debit
Walter 6800 credit

The profit of the partnership for the period, before appropriation, was $85 000.

Vicram had provided a loan of $20 000 to the business.

What is the balance on Vicram’s capital account at the end of the period?

A $35 200 B $45 200 C $48 800 D $55 200

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17 Which row correctly shows an example of a capital reserve and an example of a revenue reserve?

capital reserve revenue reserve

A general reserve retained earnings

B retained earnings revaluation reserve
C revaluation reserve share premium
D share premium general reserve

18 On 1 January a company makes a bonus issue of 10 000 ordinary shares of $0.50 each. During
the year it makes a rights issue of 15 000 ordinary shares for $0.60 each.

What is the effect of these in the statement of financial position?

share capital and current assets

reserves increase increase
$ $

A 9 000 9 000
B 9 000 12 500
C 14 000 9 000

D 14 000 14 000

19 An accounting student made the following statements about the requirements of different
users of the accounting information of a company.

1 the government wants to assess the company's return on capital employed

2 suppliers want to know if the company is financially stable
3 managers use the information for planning and control purposes
4 lenders want to know whether the business is able to pay dividends

Which statements are correct?

A 1, 2 and 3 B 1 and 4 C 2, 3 and 4 D 2 and 3 only

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 8

20 What could improve the current ratio of a sole trader?

A delaying payments to credit suppliers

B encouraging credit customers to pay promptly
C purchasing all inventory on credit
D reducing monthly cash drawings

21 Which ratios will identify the highest profit for the year for a business?

A expenses to revenue ratio of 18% and non-current asset turnover of four times per annum
B expenses to revenue ratio of 18% and non-current asset turnover of six times per annum
C expenses to revenue ratio of 20% and non-current asset turnover of four times per annum
D expenses to revenue ratio of 20% and non-current asset turnover of six times per annum

22 A business provided the following information at 31 March.

$
inventories 225 000
trade receivables 785 000
cash and cash equivalents 15 000
trade payables 365 000
other payables 85 000

What is the acid test ratio?

A 1.78 : 1 B 2.19 : 1 C 2.28 : 1 D 2.81 : 1

23 A company pays its employees $6.80 per hour for a basic 40-hour week. An overtime premium of
50% is payable together with a production bonus of $0.25 per unit for all units produced over 350.
Employees are guaranteed a weekly wage of $330.

One employee worked 45 hours last week and produced 410 units.

What was the employee’s gross pay that week?

A $330 B $338 C $372 D $474

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 9

24 When are unit costing and job costing principles applied?

unit costing job costing

A in continuous in continuous
operations operations
B in continuous for a special order
operations
C for a special order in continuous
operations
D for a special order for a special order

25 A hotel provided the following information for a 30-day period.

rooms with rooms with

two beds one bed

number of letting bedrooms 180 60

average number of rooms occupied per day 150 50
number of guests in period 5250
average length of stay 2 days
payroll and cleaning costs $300 000

What are the average payroll and cleaning costs per occupied bed per day?

A $23.80 B $28.57 C $50.00 D $57.14

26 Which two factors would mean fixed overheads are under-absorbed?

1 actual hours worked are less than budgeted hours

2 actual hours worked are more than budgeted hours
3 actual output is less than budgeted output
4 actual output is more than budgeted output

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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 10

27 A company has a positive margin of safety.

How did this arise?

A Actual sales are greater than break-even sales.

B Actual sales are greater than budgeted sales.
C Break-even sales are greater than actual sales.
D Budgeted sales are greater than actual sales.

28 A company makes three products X, Y and Z for which details per unit are as follows:

X Y Z

selling price $18 $35 $50

direct material costs $4 $5 $5
direct labour hours 0.5 2 2.5

The direct labour rate is $8.00 per hour. Direct labour hours are limited.

In which order should the products be ranked to achieve the maximum profit with the
available labour hours?

first next last

A X Y Z
B Y Z X
C Z X Y
D X Z Y

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29 The details of a planned college course are as follows:

course fee per student 100

variable course cost per student 20
total fixed costs of the course 480

The budgeted number of students is 10. However, if a lower fee is charged, 20 students are likely
to take the course.

How much should the course fee of $100 be reduced by to earn the same total profit from
10 students as from 20 students?

A $16 B $24 C $40 D $50

30 Which statement applies for cost−volume−profit analysis?

A fixed costs per unit stay the same over a period

B inventory levels change over a period
C selling price per unit stays the same over a period
D variable costs per unit change over a period

© UCLES 2024 06_9706_12_2024_1.13b

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 06_9706_12_2024_1.13b

 Cambridge International AS & A Level

ACCOUNTING 9706/13
Paper 1 Multiple Choice May/June 2024
1 hour

You must answer on the multiple choice answer sheet.

*0400003730*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.

INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

06_9706_13_2024_1.11b
© UCLES 2024 [Turn over
 2

1 What are the advantages of being a sole trader?

1 ability to make quick decisions

2 no bank borrowings are needed
3 owner keeps all the profits
4 unlimited liability for debts

A 1 and 2 B 1 and 3 C 1 and 4 D 2 and 3

2 What is not a purpose of ledger accounts?

A to assist in the preparation of the financial statements

B to assist in the preparation of the trial balance
C to record the double entry from the subsidiary books
D to verify the accuracy of the bookkeeping system

3 An item is included in a financial statement because it affects the interpretation of financial

statements.

Which accounting concept is being applied?

A consistency
B materiality
C money measurement
D substance over form

4 A business acquired new factory machinery costing of $120 000. This amount was included in
non-current assets, and depreciation at 10% of cost was charged to the draft statement of profit or
loss for the period.

In addition the business paid $14 000 for installation of the machinery and $6000 for insuring the
machine. These amounts were treated as revenue expenditure for the period.

The draft statement of profit or loss for the period showed a profit of $50 000.

What is the revised profit for the period?

A $48 600 B $50 000 C $62 600 D $68 000

© UCLES 2024 06_9706_13_2024_1.11b

 3

5 Jake sold a non-current asset which was not fully depreciated. He mistakenly recorded this
by debiting the bank account and crediting the sales account with the proceeds.

What was the effect of this error?

1 Assets were overstated.

2 Assets were understated.
3 Profit was overstated.
4 Profit was understated.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

6 Sara bought a non-current asset. Depreciation was provided at the rate of 10% per annum in
years 1 and 2. It was sold at a profit in year 3. The policy of the business is not to charge
depreciation in the year of disposal.

How would profits be affected if the rate had been 15% per annum?

profit in profit in
years 1 and 2 year 3

A higher higher
B higher lower
C lower higher
D lower lower

7 A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on
1 January Year 3.

The business has depreciated the vehicle at 10% a year, using the straight-line method.

The business provides a full year’s depreciation in the year of purchase and none in the year
of disposal.

Which amount for profit or loss will appear in the disposal account, and on what side of
the disposal account will it be shown?

A $1500 on the credit side

B $1500 on the debit side
C $2500 on the credit side
D $2500 on the debit side

© UCLES 2024 06_9706_13_2024_1.11b [Turn over

 4

8 Which errors would be identified by preparing a trial balance?

1 A bank payment of $275 for rent has been entered as $257 in the cash book.
2 A discount received of $47 has been entered twice in the account.
3 The purchase of a new motor vehicle costing $12 500 has been entered in
the purchases account.

4 The total sales of $34 670 from the sales journal has been posted to the sales
account as $34 760.

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

9 A suspense account was opened to record the difference on a trial balance.

The following errors were then discovered.

1 The discount allowed of $2000 had only been entered in the sales ledger
control account.
2 A cheque for $1500 paid for repairs had been entered as $5100 in the repairs account.

What was the opening balance on the suspense account?

A $1600 credit
B $1600 debit
C $5600 credit
D $5600 debit

10 At the financial year end of a business, the following information is available.

debit balance on the bank statement 1000

unpresented cheques 300
lodgements not yet credited by the bank 600
bank charges and interest charged not yet entered in the cash book 150

What is the current balance in the cash book?

A $400 credit B $400 debit C $550 credit D $550 debit

© UCLES 2024 06_9706_13_2024_1.11b

 5

11 What do the debit side closing balance carried down and the credit side opening balance brought
down represent in a sales ledger control account?

debit side closing credit side opening

balance carried down balance brought down

A owing from customers owing from customers

B owing from customers owing to customers
C owing to customers owing from customers
D owing to customers owing to customers

12 The purchases ledger control account for a business shows a closing balance of $7640.

The following items were then discovered.

1 A purchase invoice for $250 had been entered in the purchases ledger but not in the
purchases journal.
2 A sales ledger contra of $630 had not been entered.

3 A supplier’s account with a debit balance of $70 had been omitted from the control
account.

4 Returns inwards of $540 had been entered on the debit side of the control account.

What was the credit balance to carry down after adjusting for these items?

A $7330 B $7410 C $7730 D $7870

13 In a draft statement of profit or loss, two errors were discovered.

1 A profit of $6000 on the disposal of equipment had been treated as a loss.

2 A charge of $18 000 for the depreciation of a motor vehicle had been omitted.

What was the effect of these errors on the draft profit for the year?

A overstated $6000
B overstated $12 000
C understated $6000
D understated $12 000

© UCLES 2024 06_9706_13_2024_1.11b [Turn over

 6

14 At the beginning of the financial year on 1 July, a business shows an accrual on the rent account
of $600.

During the financial year, payments were made for rent as detailed below.

$
26 July paid 3 months' rent to 31 July 900
11 November paid 4 months' rent to 30 November 1 200
15 March paid 4 months' rent to 31 March 1 200

Which amount is to be shown as a prepayment or accrual for rent at the end of the financial year
on 30 June?

A $600 accrual
B $600 prepayment
C $900 accrual
D $900 prepayment

15 A sole trader sold goods at a mark-up of 50%.

During the year, he withdrew goods for his own use. The drawings account was debited and the
sales account was credited with goods at the selling price of $5400.

What was the effect of these errors on the profit for the year?

A $1800 overstated
B $1800 understated
C $2700 overstated
D $2700 understated

16 X and Y are in partnership. They do not have a partnership agreement.

Which statement is correct?

A Interest on capital is earned at 5%.

B Interest on drawings is charged at 5%.
C Interest on partners' loans is earned at 5%.
D Profits and losses are shared in the ratio of capital contributed.

© UCLES 2024 06_9706_13_2024_1.11b

 7

17 Yasmin and Zara are in partnership, sharing profits and losses in the ratio 3 : 2 respectively after
providing Zara with a partnership salary of $8000 per annum.

During the partnership’s first year of trading, Yasmin’s drawings totalled $11 500 and the partnership
made a profit of $7000 before appropriation.

What was the closing debit balance on Yasmin’s current account?

A $7300 B $10 900 C $11 900 D $12 100

18 A company is planning to invest funds in a project. Current interest rates are high and the company
wishes to avoid a change in the control of shareholders.

Which method should the company use to fund the project?

A a bonus issue
B a fully subscribed rights issue
C an issue of debentures
D a new issue of shares

19 A company’s statement of financial position at the beginning of the financial year on 1 January is
shown.

issued share capital 2 000 000

share premium 500 000
revaluation reserve 300 000
general reserve 150 000
retained earnings 1 600 000

The profit for the year ended 31 December was $680 000.

During the year, the following took place:

• an issue of 500 000 ordinary shares of $1 each at a price of $2.50 each

• an upward revaluation of non-current assets of $250 000
• a transfer of $100 000 from retained earnings to general reserve
• a payment of ordinary dividends of $125 000.

What was the increase in the company’s equity and reserves for the financial year ended
31 December?

A $1 305 000 B $1 955 000 C $2 055 000 D $2 180 000

© UCLES 2024 06_9706_13_2024_1.11b [Turn over

 8

20 Who are internal users of accounting information?

A customers
B directors
C potential investors
D providers of finance

21 Which actions will make the acid test ratio worse?

1 owner taking goods for own use

2 paying trade payables
3 purchasing a non-current asset by cheque
4 repaying a non-current liability

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

22 A business provided the following information relating to its most recent financial period.

sales revenue 1 020 000

purchases 700 000

carriage inwards 80 000

carriage outwards 180 000

opening inventory 170 000

closing inventory 210 000

What is the rate of inventory turnover (times) for the period?

A 3.47
B 3.89
C 4.84
D 5.37

© UCLES 2024 06_9706_13_2024_1.11b

 9

23 Actual output for a business is higher than budgeted output.

Which costs will still be the same as budgeted?

1 fixed cost per unit

2 total fixed cost
3 total variable cost
4 variable cost per unit

A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

24 A business uses the first in first out (FIFO) method for valuation of inventory.

There was no opening inventory in July.

The business purchased direct materials during July as follows:

quantity cost per kg

July
kg $

3 purchases 2000 25

15 purchases 3000 28

Each unit required 4 kg of direct materials.

The labour cost for each unit was $42.

The fixed overhead for July was $85 000.

In July 1000 units were produced and 800 units were sold.

What is the average direct cost for each unit?

A $148 B $176 C $185 D $233

25 A business provides accounting services to its clients.

One of its employees takes 30 hours to complete a job. The employee’s hourly rate is $25.

The business absorbs its overheads at a rate of $10 per labour hour.

It adds 20% profit to the total cost of the job.

What is the total price of the job charged to the client?

A $900 B $1050 C $1200 D $1260

© UCLES 2024 06_9706_13_2024_1.11b [Turn over

 10

26 A business operates a staff cafeteria at a cost of $12 000.

What is the most appropriate basis for apportioning this overhead cost?

A carrying value of cafeteria equipment

B direct labour hours
C floor area
D number of employees

27 A business has the following budgeted and actual results for a month.

$
budgeted fixed overheads 354 000
actual fixed overheads 360 000
under-absorption of overheads 3 000

The fixed overheads are absorbed per unit.

The budgeted number of units is 118 000.

What is the actual level of activity in units?

A 118 000 B 119 000 C 120 000 D 121 000

28 Which statement concerning break-even charts is correct?

A At the break-even point, revenue and fixed costs intersect on the chart.
B Choices of optimal activity levels cannot be made using break-even charts.
C Costs and revenues are assumed to show linear behaviour.
D Revenue in excess of fixed costs represents the margin of safety.

© UCLES 2024 06_9706_13_2024_1.11b

 11

29 A business provides the following information.

break-even point 4500 units

unit selling price $50
contribution to sales ratio 40%

What is the effect on the break-even point if the unit selling price is increased by 10%?

A increased by 409 units

B decreased by 409 units
C increased by 900 units
D decreased by 900 units

30 When might the application of cost–volume–profit (CVP) analysis be ineffective?

A when a change in production method is planned

B when an increase in the price of direct labour is expected
C when output is likely to fall
D when there are fixed costs as well as variable costs

© UCLES 2024 06_9706_13_2024_1.11b

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 06_9706_13_2024_1.11b

 Cambridge International AS & A Level
* 9 8 0 2 8 1 5 4 3 8 *

ACCOUNTING 9706/22
Paper 2 Structured Questions February/March 2021

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages.

DC (CJ) 201861/3
© UCLES 2021 [Turn over
 2

1 Faraz, Javed and Leah were in partnership. Their agreement included the following terms:

1 Interest on drawings to be charged at 5% on total drawings for the year.

2 Interest at 12% per annum to be provided on fixed capitals.

3 Javed to receive a salary of $9000 per annum.

4 Remaining profits and losses to be shared in the ratio Faraz, Javed and Leah, 4 : 3 : 3
respectively.

The following information was available for the year ended 31 December 2020.

Faraz Javed Leah

$ $ $
Balances at 1 January 2020
Capital accounts 80 000 60 000 50 000
Current accounts 3 400 credit 2 900 debit 1 700 debit
For the year ended 31 December 2020
Drawings 22 400 17 200 20 200

The profit for the year ended 31 December 2020, before appropriation, was $31 500.

REQUIRED

(a) State two reasons why partnership agreements sometimes include a provision to charge
interest on drawings.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2021 9706/22/F/M/21

 3

(b) Prepare the appropriation account for the year ended 31 December 2020.

Faraz, Javed and Leah

Appropriation account for the year ended 31 December 2020
$ $

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

[5]

© UCLES 2021 9706/22/F/M/21 [Turn over

 4

(c) Prepare Javed’s current account for the year ended 31 December 2020.

Javed
Current account

$ $

[6]

© UCLES 2021 9706/22/F/M/21

 5

Additional information

On 1 January 2021, Javed retired from the partnership. It was agreed that on this date:

1 Javed would keep some equipment for personal use. The equipment had a net book value of
$15 400 and was to be transferred to Javed at a value of $13 000.

2 Other non-current assets were to be revalued upwards by $24 000.

3 Goodwill was valued at $50 000. A goodwill account was not to be maintained in the
partnership’s books.

REQUIRED

(d) Explain the meaning of goodwill.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

(e) Explain why a valuation of goodwill could be made when a partner retires.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2021 9706/22/F/M/21 [Turn over

 6

(f) Prepare a statement to show the amount due to Javed on his retirement from the partnership.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[6]

© UCLES 2021 9706/22/F/M/21

 7

Additional information

Faraz and Leah continued in partnership sharing profits and losses equally. They discussed
how best to finance the amount due to Javed on his retirement from the partnership. They are
considering two options.

Option 1: Take out a bank loan to cover the amount due.

Option 2: Admit a new partner whose capital contribution would cover the amount due.

REQUIRED

(g) Advise the partners which option they should choose. Justify your answer by discussing both
options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[7]

[Total: 30]

© UCLES 2021 9706/22/F/M/21 [Turn over

 8

2 Myra owns a delivery business. The following information is available about her business’s delivery
vehicles.

Vehicle Date of purchase Cost

$
A 1 August 2017 30 000
B 1 February 2018 36 000
C 1 June 2019 39 000

Vehicles are depreciated using the straight-line method at 20% per annum. Depreciation is
charged on a month-by-month basis. The business’s financial year end is 31 December.

REQUIRED

(a) Calculate the balance on the provision for depreciation of vehicles account at
31 December 2019.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

© UCLES 2021 9706/22/F/M/21

 9

Additional information

On 1 March 2020, Vehicle A was sold in part exchange for Vehicle D. Vehicle D cost $42 000 of
which $29 200 was paid by cheque.

REQUIRED

(b) Prepare the vehicle disposal account.

Vehicle disposal account

$ $

[5]

© UCLES 2021 9706/22/F/M/21 [Turn over

 10

(c) Prepare the provision for depreciation of vehicles account for the year ended
31 December 2020.

Provision for depreciation of vehicles account

$ $

[3]

© UCLES 2021 9706/22/F/M/21

 11

Additional information

Businesses may use the revaluation method of depreciation for some of their non-current assets.

REQUIRED

(d) Explain one reason why some businesses may use the revaluation method of depreciation.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

(e) State how an annual depreciation charge is calculated using the revaluation method.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[1]

[Total: 15]

© UCLES 2021 9706/22/F/M/21 [Turn over

 12

3 The directors of B Limited have provided the following information.

Statement of financial position at 31 December 2020

Assets $
Non-current assets 656 000
Current assets
Inventory 34 000
Trade receivables 31 000
65 000
Total assets 721 000
Equity and liabilities
Equity
Issued share capital 500 000
Share premium 67 000
Retained earnings 68 000
Total equity 635 000
Non-current liabilities
8% Debenture (2025) 50 000
50 000
Current liabilities
Trade payables 19 000
Cash and cash equivalents 17 000
36 000
Total liabilities 86 000
Total equity and liabilities 721 000

1 The company’s revenue for the year ended 31 December 2020 was $540 000 of which 60%
was on credit.

2 The company’s profit for the year was $80 000.

REQUIRED

(a) Calculate the following ratios at 31 December 2020.

(i) Current ratio (to two decimal places)

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[1]

© UCLES 2021 9706/22/F/M/21

 13

(ii) Trade receivables turnover (days)

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[1]

(iii) Return on capital employed (to two decimal places)

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[2]

Additional information

The following ratios are available for 2019 along with comparative ratios for 2018.

At 31 December At 31 December
2019 2018
Current ratio 2.20 : 1 2.10 : 1
Trade receivables turnover 37 days 38 days
Return on capital employed 15.57% 14.32%

REQUIRED

(b) Compare the company’s position at 31 December 2020 with that of the previous two years in
regard to the following ratios:

(i) Current ratio

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[2]

© UCLES 2021 9706/22/F/M/21 [Turn over

 14

(ii) Trade receivables turnover (days)

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[2]

(iii) Return on capital employed

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[2]

(c) State two ways in which a company could improve its current ratio.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2021 9706/22/F/M/21

 15

Additional information

Companies compare their financial performance with that of different businesses.

REQUIRED

(d) State three limitations of comparing the financial performance of different businesses.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 15]

© UCLES 2021 9706/22/F/M/21 [Turn over

 16

4 K Limited produces goods at two sites and uses marginal costing.

At one site the company makes a single product. The following details are available.

Maximum capacity 14 500 units per month

Fixed costs $216 000 per month

$
Unit selling price 90
Costs per unit:
Direct materials 25
Direct labour 36
Other variable costs 11

REQUIRED

(a) Calculate the break-even point per month in units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]
(b) Define the term ‘margin of safety’.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

The directors have decided to make the following changes:

1 Reduce selling price by 2%.

2 Introduce a sales commission of $2 per unit on every unit sold in excess of 5000 units per
month.

3 Purchase direct materials in bulk and obtain a trade discount of 20%.

Buying direct materials in bulk will increase storage costs by $4000 per month.

Demand will be 98% of factory capacity.

© UCLES 2021 9706/22/F/M/21

 17

REQUIRED

(c) Prepare a marginal costing statement to show the monthly profit based on these changes.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[6]
(d) Explain two advantages of using a system of marginal costing.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

© UCLES 2021 9706/22/F/M/21 [Turn over

 18

Additional information

At its other site the company makes three products: Product X, Product Y and Product Z. The
following details are available.

Product X Product Y Product Z

Contribution per unit $15 $20 $27
Machine hours per unit 1.5 2.5 3
Maximum monthly output in units 600 300 200

Fixed costs per month are $14 100.

Each month the company plans to work to full capacity producing the maximum output of each
product.

In August 2021 only two-thirds of the month’s machine hours will be available.

REQUIRED

(e) Calculate the machine hours available in August 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

The company has a regular order to supply one major customer with 50% of the output of each
product per month.

Two options are being considered to deal with the shortage of machine hours.

Option 1: The finance director has recommended the company makes the maximum profit possible
in August 2021 and if necessary not complete all of the major customer’s order.

Option 2: The sales director has recommended that the company should ensure it fulfils the major
customer’s order.

© UCLES 2021 9706/22/F/M/21

 19

REQUIRED

(f) Calculate the profit or loss for August 2021 based on:

(i) Option 1

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[4]
(ii) Option 2

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[5]
© UCLES 2021 9706/22/F/M/21 [Turn over
 20

(g) Advise which option the company should choose. Justify your advice by discussing both
options. (Consider both financial and non-financial factors.)

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[5]

[Total: 30]

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/22/F/M/21

 Cambridge International AS & A Level
* 9 1 1 8 5 1 5 0 1 9 *

ACCOUNTING 9706/21
Paper 2 Structured Questions May/June 2021

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (DH) 201941/3
© UCLES 2021 [Turn over
 2

1 Suyin owns a small retail business. She has not maintained full accounting records.

REQUIRED

(a) State two reasons why the owner of a small business may decide not to maintain full
accounting records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

Suyin has been informed that the accounting concepts of matching and prudence must be followed
when preparing financial statements.

REQUIRED

(b) Explain how these accounting concepts are applied when a business prepares financial
statements.

Matching

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Prudence

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

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 3

Additional information

Suyin has provided the following information.

1 On 1 August 2019 the business’s assets and liabilities included:

$
Fittings and equipment at valuation 18 500
Inventory 11 440
Other payables: shop rent 510
Other receivables: insurance 290
Trade payables 3 970

2 Summary of bank statements for the year ended 31 July 2020.

$
Receipts
Cash sales banked 79 480
Proceeds from the sale of equipment (net book value $490) 550

Payments
Drawings 24 070
Shop rent 3 580
General expenses 16 810
Carriage inwards 610
Insurance 2 950
Trade payables (after deducting 2.5% cash discounts) 46 800

3 Cash account for the year ended 31 July 2020.

$ $
Balance b/d 420 Bank 79 480
Cash sales 96 000 Wages 15 430
Purchases 1 320
Balance c/d 190
96 420 96 420
Balance b/d 190

4 During the year ended 31 July 2020

Goods had been returned to suppliers, $1280.

All sales were made on a cash basis.

5 At 31 July 2020

Suppliers were owed $4560.

Inventory was valued at $18720.
Fittings and equipment was valued at $15 860.

© UCLES 2021 9706/21/M/J/21 [Turn over

 4

REQUIRED

(c) Calculate total purchases for the year ended 31 July 2020.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

(d) Prepare the income statement for the year ended 31 July 2020.

Workings:

© UCLES 2021 9706/21/M/J/21

 5

Suyin
Income statement for the year ended 31 July 2020
$ $

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

[10]

© UCLES 2021 9706/21/M/J/21 [Turn over

 6

Additional information

Suyin has the opportunity to move her business to a busier location. The following information is
available.

1 The rent of the new shop premises will be three times the current annual charge.

2 Annual sales could be increased by 10% on the figure for the year ended 31 July 2020.

3 She intends to achieve a gross margin of 60%.

4 She will need to apply for a bank loan of $16 000 at 8% per annum interest to cover the costs
of changing location. The loan will be repayable over a two-year period.

5 Discounts received will no longer be available.

6 All other expenses will remain unchanged and there will be no sources of additional income.

REQUIRED

(e) Calculate how much profit per annum will be made if Suyin moves her business to the new
location.

$
Revised gross profit

Revised profit for the year

[4]

© UCLES 2021 9706/21/M/J/21

 7

(f) Advise Suyin whether or not she should change her business’s location. Justify your answer
considering both financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

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 8

2 Karis and Lara are in partnership.

(a) State two reasons why partners may each have a separate capital account and current
account.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

Karis and Lara share profits and losses in the ratio 3:2 respectively.

They decided to admit Megan as a partner on 1 February 2021.

On that date the statement of financial position was as follows.

Assets $ $
Non-current assets at net book value
Motor vehicles 43 500
Furniture and equipment 16 200
59 700
Current assets
Trade receivables 18 410
Total assets 78 110

Capital and liabilities

Capital accounts
Karis 35 700
Lara 24 500
60 200
Current accounts
Karis 3 110
Lara (540)
2 570
Current liabilities
Trade payables 11 230
Bank overdraft 4 110
15 340
Total capital and liabilities 78 110

© UCLES 2021 9706/21/M/J/21

 9

The partners agreed the following on Megan’s admission.

1 Current accounts would no longer be used.

2 Karis took over a motor vehicle for private use with a net book value of $18 400 at an agreed
value of $15 000.

3 Goodwill was valued at $48 000. No goodwill account was to be maintained in the partnership’s
books of account.

4 Profits and losses are to be shared in the ratio Karis : Lara : Megan 7 : 5 : 3 respectively.

5 Megan introduced a motor vehicle valued at $23 000 as part of her capital contribution.

After making the adjustments, it was agreed that Megan should pay sufficient cash into the
business bank account to make her total capital equal to that of Lara.

REQUIRED

(b) Prepare, on the next page, the capital accounts of the partners to record the admission of
Megan as a partner.

© UCLES 2021 9706/21/M/J/21 [Turn over

 Capital accounts

Karis Lara Megan Karis Lara Megan

© UCLES 2021
$ $ $ $ $ $
10

9706/21/M/J/21
[8]
 11

Additional information

In the new partnership agreement Lara is to receive a salary of $12 000 per annum.

Megan is hoping to achieve a 25% return on her capital employed (ROCE).

REQUIRED

(c) Calculate the minimum profit the partnership must make in order for Megan to achieve this
ROCE.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(d) State two possible disadvantages to existing partners of admitting a new partner.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

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 12

3 C Limited’s statement of financial position at 31 December 2020 is shown with comparative figures
at 31 December 2019.

At 31 December
2020 2019
$000 $000
Assets
Non-current assets 2621 2217
Current assets
Inventory 61 47
Trade and other receivables 29 38
Cash and cash equivalents 2 31
92 116
Total assets 2713 2333

Equity and liabilities

Equity
Ordinary shares 1800 1200
Share premium - 220
Retained earnings 401 624
Revaluation reserve 300 -
Total equity 2501 2044
Non-current liabilities
8% Debentures (2025) 160 250
Current liabilities
Trade and other payables 52 39
Total equity and liabilities 2713 2333

The following information is also available.

1 The company’s issued capital consists of ordinary shares of $0.25 each.

2 On 1 January 2020 the directors revalued the property upwards by $300 000.

3 There were no purchases or disposals of non-current assets during the year.

4 On 1 July 2020 the directors made a bonus issue of ordinary shares.

5 There were no other changes in share capital during the year.

REQUIRED

(a) Explain two reasons for making a bonus issue of shares.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]
© UCLES 2021 9706/21/M/J/21
 13

(b) Calculate the number of bonus shares issued on 1 July 2020.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(c) Prepare the journal entry recording the bonus issue on 1 July 2020. A narrative is required.

Journal

Dr Cr

$000 $000

[4]

(d) Identify three factors that directors of a company should consider when deciding on the
amount of a proposed dividend.

1 ................................................................................................................................................

2 ................................................................................................................................................

3 ................................................................................................................................................
[3]

Additional information

The directors of C Limited wish to propose a dividend of $0.01 per share on all shares in issue at
31 December 2020.

REQUIRED

(e) Calculate the amount of the proposed dividend.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]
© UCLES 2021 9706/21/M/J/21 [Turn over
 14

4 P Limited is a manufacturing business.

REQUIRED

(a) Define the following terms:

(i) Direct costs

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Stepped costs

...........................................................................................................................................

..................................................................................................................................... [2]

(b) State the formula for finding the margin of safety in units.

...................................................................................................................................................

............................................................................................................................................. [1]

(c) Explain the term ‘limiting factor’ when using marginal costing.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

© UCLES 2021 9706/21/M/J/21

 15

Additional information

P Limited manufactures a single product. The factory has the capacity to make 40 000 units per
month. All production is sold.

The following budgeted information is available for December 2021.

Sales 30 000 units at $48 per unit

Direct materials per unit 4.5 m at $4 per metre
Direct labour per unit 3 hours at $8.50 per labour hour
Fixed costs $112 000

The company has a target profit of $40 000 per month.

REQUIRED

(d) Calculate the number of units to be sold for the company to achieve its target profit for
December 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

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 16

(e) Prepare a budgeted marginal cost statement for December 2021.

Budgeted marginal cost statement for December 2021

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

Additional information

The directors have been told that demand for their product is likely to fall in future months. They
are considering two proposals: Proposal A and Proposal B.

Proposal A

Produce a superior version of the product.

Sales 27 000 units per month at $57 per unit.

Direct materials The same quantity of material per unit as currently used,
but the price per metre would increase by 7.5%.
Direct labour The rate would increase to $9.25 per hour and each unit
would take 3.4 hours to make.
Additional fixed Extra machinery costing $75 000 will be required.
costs Machinery is depreciated at 20% per annum using the
straight-line method.

A loan would be required to finance the full cost of the

machinery. Interest rates are currently 8% per annum.

© UCLES 2021 9706/21/M/J/21

 17

REQUIRED

(f) Calculate the monthly profit to be made from proposal A.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [9]

Additional information

Proposal B

The directors are also considering a proposal to produce a simpler version of the product with a
selling price of $37 per unit. This proposal would require 76 000 labour hours per month. They
estimate that 38 000 units per month could be sold.

This will produce a monthly profit of $49 500.

© UCLES 2021 9706/21/M/J/21 [Turn over

 18

REQUIRED

(g) Advise the directors which proposal they should choose. Justify your choice by considering
both financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2021 9706/21/M/J/21

 19

BLANK PAGE

© UCLES 2021 9706/21/M/J/21

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/21/M/J/21

 Cambridge International AS & A Level
* 3 6 3 1 2 6 5 2 3 8 *

ACCOUNTING 9706/22
Paper 2 Structured Questions May/June 2021

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages.

DC (DH) 201942/3
© UCLES 2021 [Turn over
 2

1 N Limited is a trading business. Sales are made on the credit basis only.

The following information was available at 31 December 2020.

Debit Credit
$000 $000
8% Debentures (2025) 250
Administrative expenses 171
Cash and cash equivalents 14
Cost of sales 466
Debenture interest 8
Distribution costs 63
Dividends paid 80
Inventory at 31 December 2020 33
Issued capital:
Ordinary shares of $0.25 each at 31 December 2020 500
Non-current assets
Cost 1140
Provision for depreciation at 1 January 2020 140
Retained earnings at 1 January 2020 129
Revenue 923
Share premium at 31 December 2020 70
Trade payables 42
Trade receivables 79
2054 2054

The following information is also available at 31 December 2020.

1 Administrative expenses included insurance of $16 000 for four months ended
31 January 2021.

2 Depreciation should be provided on non-current assets at 25% per annum using the reducing
balance method. Depreciation charges should be allocated 20% to distribution costs and 80%
to administrative expenses.

3 The account of a credit customer, $3000, should be written off to administrative expenses as
an irrecoverable debt.

4 Debenture interest was outstanding for the second half of the year. The directors had issued
additional debentures of $50 000 on 1 October 2020.

© UCLES 2021 9706/22/M/J/21

 3

REQUIRED

(a) Prepare the company’s income statement for the year ended 31 December 2020.

N Limited
Income statement for the year ended 31 December 2020

$000

Workings:

Distribution costs

Administrative expenses

Finance costs

[10]

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 4

Additional information

On 1 July 2020 the directors had decided to make a rights issue of two ordinary shares for every
three shares held at a price of $0.30 per share. The rights issue was fully subscribed.

REQUIRED

(b) Explain two reasons why a company may make a rights issue of shares rather than an issue
of debentures.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

(c) Calculate the amount raised by the rights issue.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2021 9706/22/M/J/21

 5

(d) Prepare a statement of changes in equity for the year ended 31 December 2020.

N Limited
Statement of changes in equity
for the year ended 31 December 2020

Ordinary share Share Retained Total

capital premium earnings
$000 $000 $000 $000
Balance at
1 January 2020

[5]

Additional information

The directors are concerned about the company’s credit control and wish to improve the company’s
liquidity position. They are considering a proposal to offer a 5% cash discount to customers for
settlement within 30 days on all invoices of more than $2000.

REQUIRED

(e) Identify two ratios which can be used to assess the liquidity of a business.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

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 6

(f) Advise the directors whether or not they should go ahead with this proposal. Justify your
answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2021 9706/22/M/J/21

 7

2 Zak owns a wholesale business. He makes sales on credit.

REQUIRED

(a) Explain why it may be important for a business to maintain a provision for doubtful debts.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

Zak has prepared an aged schedule of trade receivables at 31 December 2020.

Amount Estimated
Period outstanding
$ irrecoverable debts
Less than 1 month 34 200 1%
Between 1 month and 3 months 6 680 5%
Between 4 and 6 months 2 130 10%

In addition, two accounts had been outstanding for over 6 months.

$
P Limited 340
Q Limited 510

Zak’s policy is to write off as irrecoverable any amounts outstanding for more than 6 months.
Zak updates the provision for doubtful debts at each financial year end based on the estimated
percentage of irrecoverable debts.

REQUIRED

(b) Prepare a journal entry to write off the irrecoverable debts. A narrative is not required.

Journal

Dr Cr
$ $

[2]

© UCLES 2021 9706/22/M/J/21 [Turn over

 8

(c) State two ways in which the risk of irrecoverable debts may be reduced.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

At 1 January 2020 the business had a provision for doubtful debts of $980.

REQUIRED

(d) Calculate the adjustment required to the provision for doubtful debts at 31 December 2020.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

(e) Prepare the provision for doubtful debts account for the year ended 31 December 2020.

Provision for doubtful debts account

$ $

[3]

© UCLES 2021 9706/22/M/J/21

 9

(f) State two factors that should be taken into account when setting a provision for doubtful
debts.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

© UCLES 2021 9706/22/M/J/21 [Turn over

 10

3 Jason prepared the following statement of financial position which contained errors.

Statement of financial position at 31 December 2020

$ $
Non-current assets
Cost 65 000
Provision for depreciation 31 000
34 000
Current assets
Inventory 17 390
Trade receivables 14 800
Other payables 700
Bank overdraft 490
33 380
67 380
Capital
Opening balance 56 950
Profit for the year 11 270
Drawings (18 450)
49 770
Non-current liabilities
Bank loan (repayable March 2021) 4 900

Current liabilities
Provision for doubtful debts 480
Other receivables 490
Trade payables 11 360
12 330
67 000

In addition to some items being recorded in the incorrect sections of the statement of financial
position, the following errors have also been discovered.

1 Closing inventory had been overvalued by $510.

2 The balance of the rent receivable account, debit $220, had been included in other payables
in the statement of financial position.

3 Depreciation at 20% per annum had been charged using the straight-line method instead of
the reducing balance method at 20% per annum.

4 The balance of the drawings account had been understated by $580.

© UCLES 2021 9706/22/M/J/21

 11

REQUIRED

(a) Calculate the revised profit for the year ended 31 December 2020.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2021 9706/22/M/J/21 [Turn over

 12

(b) Prepare the corrected statement of financial position at 31 December 2020.

Corrected statement of financial position at 31 December 2020

$ $

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

[7]

© UCLES 2021 9706/22/M/J/21

 13

(c) Identify three types of error which do not affect the balancing of the trial balance.

1 ................................................................................................................................................

2 ................................................................................................................................................

3 ................................................................................................................................................
[3]

[Total: 15]

© UCLES 2021 9706/22/M/J/21 [Turn over

 14

4 T Limited manufactures goods at two factories: Factory A and Factory B.

Factory A

Factory A has two production departments, Assembly and Finishing; and two service departments,
Administration and Canteen.

Absorption costing is used at this factory.

Budgeted overheads for February 2021 have already been apportioned.

The basis for reapportioning the service department overheads is as follows:

Production departments Service departments

Assembly Finishing Administration Canteen
Canteen 50% 40% 10% -
Administration 75% 25% - -

REQUIRED

(a) Prepare a statement showing the reapportionment of service department overheads for
February 2021.

Production departments Service departments

Assembly Finishing Administration Canteen
$ $ $ $

Overheads 83 500 70 100 28 300 15 400

Reapportionment of
canteen
Subtotal

Reapportionment of
administration
Total overheads

[4]

© UCLES 2021 9706/22/M/J/21

 15

Additional information

Assembly Finishing
Direct labour hours per month 1700 1400
Machine hours per month 2800 900
Direct labour rate per hour $8.40 $8.20

REQUIRED

(b) Calculate the overhead absorption rate for each production department to two decimal
places.

Assembly department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Finishing department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

© UCLES 2021 9706/22/M/J/21 [Turn over

 16

Additional information

The company received an order from a customer. The following details are available:

Direct materials $1880

Direct labour:
Assembly department 11.5 hours
Finishing department 6.1 hours
Machine hours:
Assembly department 5.7 hours
Finishing department 2.4 hours

The company’s policy is to achieve a profit of 40% on selling price.

REQUIRED

(c) Prepare a statement to show the total selling price that T Limited will quote to the customer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2021 9706/22/M/J/21

 17

(d) State two possible causes of under absorption of overheads.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(e) State what is meant by

(i) allocation of overheads

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) apportionment of overheads

...........................................................................................................................................

..................................................................................................................................... [1]

© UCLES 2021 9706/22/M/J/21 [Turn over

 18

Additional information

Factory B

T Limited manufactures a single product in Factory B.

Marginal costing is used at this factory.

The following information is available for December 2020 when production was 9000 units which
included 1000 units produced using overtime.

$
Direct materials 72 000
Direct labour 74 000
Other variable costs 22 500
Fixed costs 65 000
Total costs 233 500

Direct labour overtime is paid at 1.25 times the normal rate.

All production was sold at $30 per unit.

The directors have been considering changing the supplier of materials. The following information
is available.

1 An overseas supplier is prepared to become the company’s sole supplier of materials at $5.50
per unit including delivery costs.

2 The supplier can only provide sufficient materials for the company to make 7600 units per
month.

3 The directors do not expect any other costs or the unit selling price to change. All production
will be sold.

© UCLES 2021 9706/22/M/J/21

 19

REQUIRED

(f) Calculate the maximum profit per month that can be made if materials were obtained from the
overseas supplier and production limited to 7600 units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2021 9706/22/M/J/21 [Turn over

 20

(g) Advise the directors whether or not they should change the supplier. Justify your advice by
considering both financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/22/M/J/21

 Cambridge International AS & A Level
* 9 6 1 5 0 1 5 0 3 5 *

ACCOUNTING 9706/23
Paper 2 Structured Questions May/June 2021

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (DH) 201943/2
© UCLES 2021 [Turn over
 2

1 Adam owns a retail business. He is aware that he must follow certain accounting concepts when
preparing his business’s financial statements.

REQUIRED

(a) Explain how each of the following concepts is applied when preparing a business’s financial
statements.

(i) Consistency

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Realisation

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(iii) Materiality

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

© UCLES 2021 9706/23/M/J/21

 3

Additional information

Adam has completed the trading section of the income statement. However, some errors had
been made.

Income statement for the year ended 31 December 2020

$ $
Revenue 186 500
Less returns outwards (3 180)
183 320
Opening inventory 14 830
Purchases 93 710
Less returns inwards (2 940)
Add carriage inwards 730
106 330
Less closing inventory (12 670)
Cost of sales 93 660
Gross profit 89 660

The following information is also available.

1 No record had been made of goods taken for own use by Adam, $580.

2 Closing inventory included 14 damaged items which cost $30 each. Six of these items cannot
be sold and are to be regarded as waste. The remaining items could be sold for $35 each but
will incur total repairs cost of $56.

© UCLES 2021 9706/23/M/J/21 [Turn over

 4

REQUIRED

(b) Calculate a revised figure for gross profit for the year ended 31 December 2020.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2021 9706/23/M/J/21

 5

Additional information

The following balances were extracted from the books of account of Adam’s business on
31 December 2020.

$
Discounts 1 580 credit
Furniture and equipment
cost 18 220
provision for depreciation (at 1 January 2020) 5 370
Marketing expenses 4 850
Motor vehicle
cost 16 800
provision for depreciation (at 1 January 2020) 13 900
Office expenses 2 950
Premises
cost 160 000
provision for depreciation (at 1 January 2020) 9 600
Provision for doubtful debts (at 1 January 2020) 530
Rent receivable 6 640
Repairs and maintenance 1 970
Trade receivables 9 800
Wages and salaries 31 280

The following information is also available.

1 Repairs and maintenance included a payment of $380 for installation of new equipment on
1 January 2020.

2 The provision for doubtful debts should be maintained at 5% of trade receivables.

3 Rent receivable of $1800 for the three months ended 28 February 2021 had not been received.

4 A payment of $2000 for a five-month advertising campaign which began on 1 November 2020
was outstanding.

5 Depreciation should be provided on non-current assets as follows:

Furniture and equipment at 20% per annum using the reducing balance method
Premises at 2% per annum using the straight-line method
No depreciation is charged on non-current assets in the year of sale.

6 No record had been made of the sale of the only motor vehicle on 1 December 2020 for
$1350.

© UCLES 2021 9706/23/M/J/21 [Turn over

 6

REQUIRED

(c) Prepare the income statement for the year ended 31 December 2020. Start the statement
with your gross profit figure in part (b).

Income statement for the year ended 31 December 2020

$ $

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

........................................................................................... ..................... .....................

[10]

© UCLES 2021 9706/23/M/J/21

 7

Additional information

Adam would like to improve his business’s profitability. He has been considering the following
proposals.

Proposal 1: Reducing inventory levels

Proposal 2: Increasing mark-up by 5% on the current level

REQUIRED

(d) Advise Adam which proposal he should choose. Justify your answer by considering both
proposals.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[7]

[Total: 30]

© UCLES 2021 9706/23/M/J/21 [Turn over

 8

2 Hamid prepares control accounts to check the accuracy of his business’s purchases and sales
ledgers.

REQUIRED

(a) Explain two benefits to a business of using control accounts other than checking the
arithmetical accuracy of ledger accounts.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

Additional information

On 31 January 2021 Hamid provided the following information:

1 The balance of the sales ledger control account on 1 January 2021 was $17 820.

2 Totals for January 2021 from books of prime entry

$
Cash book
Discount allowed 430
Receipts from trade receivables 16 230
General journal
Contra entries with purchases ledger 890
Sales journal 18 440
Sales returns journal 310

3 On 31 January 2021 a credit customer had overpaid his account by $170.

© UCLES 2021 9706/23/M/J/21

 9

REQUIRED

(b) Prepare the sales ledger control account for January 2021.

Sales ledger control account

$ $

[6]

Additional information

On 31 January 2021 the total of balances in the purchases ledger was $12 860, but the balance of
the purchases ledger control account on this date was $12 980.

The following errors were discovered.

1 The total of the discounts received column of $110 had not been posted from the cash book.

2 The total of the purchases returns journal had been overstated by $250.

3 Interest of $130 charged by a supplier because of an overdue balance had been debited to
the supplier’s account.

© UCLES 2021 9706/23/M/J/21 [Turn over

 10

REQUIRED

(c) Prepare statements to show corrected totals for:

(i) the purchases ledger balances

Correction of purchases ledger balances

Details $

Incorrect total 12 860

[2]

(ii) the purchases ledger control account balance

Correction of purchases ledger control account balance

Details $

Incorrect balance 12 980

[3]

[Total: 15]

© UCLES 2021 9706/23/M/J/21

 11

3 Cherry, Winston and Yupar were in partnership sharing profits and losses in the ratio 3 : 5 : 2. The
partners decided to dissolve their partnership on 1 December 2020. On this date the partnership’s
statement of financial position was as follows.

Assets $ $
Non-current assets at net book value
Premises 97 000
Furniture and equipment 22 000
119 000
Current assets
Inventory 17 400
Total assets 136 400
Capital and liabilities
Capital accounts
Cherry 18 300
Winston 54 900
Yupar 26 700
99 900
Current accounts
Cherry (5 740)
Winston 2 290
Yupar 820
(2 630)
Non-current liability
Loan from Yupar 18 000

Current liabilities
Trade payables 14 800
Bank overdraft 6 330
21 130
Total capital and liabilities 136 400

The following information is also available.

1 Winston took over the equipment at a valuation of $7200.

2 Premises and furniture were sold for $61 100 and a cheque for this amount was received.

3 Inventory was sold at a loss of $5200. A cheque was received for the amount.

4 Trade payables were settled in full by cheque after deducting a 5% cash discount.

5 The expenses of dissolution were paid by cheque, $2140.

6 The amounts owed by, or to, the partners were settled by cheque.

© UCLES 2021 9706/23/M/J/21 [Turn over

 12

REQUIRED

(a) Prepare the realisation account to show the profit or loss made on the dissolution of the
partnership.

Realisation account

$ $

[7]

(b) Prepare, on the next page, the capital accounts of the partners recording the dissolution and
final settlement of the amounts owed to, or by, each partner.

© UCLES 2021 9706/23/M/J/21

 Capital accounts

Cherry Winston Yupar Cherry Winston Yupar

© UCLES 2021
$ $ $ $ $ $
13

[5]

9706/23/M/J/21
[Turn over
 14

Additional information

The partners had decided to dissolve their partnership because of disagreements on important
decisions.

REQUIRED

(c) State three other reasons why a partnership might be dissolved.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 15]

© UCLES 2021 9706/23/M/J/21

 15

4 T Limited manufactures a single product. The following budgeted information is available.

Per unit
$
Direct materials 8.40
Direct labour 14.50
Other variable costs 2.30
Fixed costs 8.00

Each unit is sold for $36. Budgeted monthly production and sales are 1200 units.

REQUIRED

(a) Calculate the monthly break-even point in units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

(b) Calculate the margin of safety:

(i) in units

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) in revenue

...........................................................................................................................................

..................................................................................................................................... [1]

(c) Identify three assumptions made when using break-even analysis.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]
© UCLES 2021 9706/23/M/J/21 [Turn over
 16

Additional information

In January 2021 the company made and sold 1120 units.

REQUIRED

(d) (i) Calculate the contribution to sales ratio.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Calculate the profit made in January 2021.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

Additional information

In March 2021 a machine fault meant that only 75% of budgeted output could be produced. The
directors considered two options.

Option A

1 Reduce normal output by 25%; as a result, materials cost would be affected because trade
discount of 20% on bulk orders would not be available. All other costs would remain the
same.

2 Buy in units from a competitor at $27.20 per unit. The competitor can supply a maximum of
250 units and will charge $125 for delivering this quantity.

Option B

1 Hire a replacement machine at a cost of $1600 for the month.

2 The replacement machine could make an additional 200 units per month.

3 All other costs would remain the same.

© UCLES 2021 9706/23/M/J/21

 17

REQUIRED

(e) Calculate the profit for March 2021 for:

(i) Option A

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [7]

(ii) Option B

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

© UCLES 2021 9706/23/M/J/21 [Turn over

 18

(f) Advise the directors which option they should choose. Justify your advice by considering
both options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2021 9706/23/M/J/21

 19

Additional information

Recently a system of budgetary control has been introduced by T Limited. However, there have
been concerns that the system has not worked well.

REQUIRED

(g) State three limitations of budgetary control.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 30]

© UCLES 2021 9706/23/M/J/21

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/23/M/J/21

 Cambridge International AS & A Level
* 2 4 7 9 4 6 3 4 0 0 *

ACCOUNTING 9706/21
Paper 2 Structured Questions October/November 2021

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (LK) 206627/3
© UCLES 2021 [Turn over
 2

1 Eleni owns a business selling computers. She does not maintain full accounting records.

The following information is available.

At 30 June At 1 July
2021 2020
$ $
Equipment at valuation 3250 3460
Inventory 1940 2210
Trade receivables 5650 7200
Provision for doubtful debts ? 360
Other receivables: rent prepaid 1080 500
Trade payables 2120 1440
Other payables: wages 110 190
Bank 1420 Credit 860 Credit
Cash in hand – 150
Bank loan – 1350

A summary of receipts and payments made through the bank for the year ended 30 June 2021
was as follows:

Receipts $
Receipts from credit customers 58 960
Cash sales banked 3 980
Sale of equipment 180

Payments $
Payments to credit suppliers 39 750
Purchase of equipment 610
General expenses 940
Rent 6 860
Bank loan repayments 1 390
Bank charges 50
Cash withdrawn 14 080

All cash sales are banked.

© UCLES 2021 9706/21/O/N/21

 3

REQUIRED

(a) Calculate total revenue for the year ended 30 June 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

Of the cash withdrawn from the bank, Eleni took $450 each month for drawings and paid total
wages of $7620 for the year. The remaining cash from the cash till was used to pay for general
expenses.

REQUIRED

(b) Prepare the cash account to calculate the amount paid in cash for general expenses.

Cash account

$ $

[3]

© UCLES 2021 9706/21/O/N/21 [Turn over

 4

Additional information

The following information is also available.

1 Eleni wishes to write off an irrecoverable debt of $50 at 30 June 2021. She wishes to maintain
the provision for doubtful debts at the same percentage as the previous year.

2 Equipment sold during the year had a valuation of $140.

REQUIRED

(c) Prepare the income statement for the year ended 30 June 2021.

Eleni
Income statement for the year ended 30 June 2021

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2021 9706/21/O/N/21

 5

Workings:

[12]

(d) Prepare an extract from the statement of financial position at 30 June 2021 to show the capital
and liabilities section only.

Eleni
Statement of financial position at 30 June 2021

Capital and liabilities

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2021 9706/21/O/N/21 [Turn over

 6

Additional information

Eleni is concerned that she is not earning enough profit. She is considering increasing her
prices by 5%.

REQUIRED

(e) Advise Eleni whether or not she should increase her prices by 5%. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

(f) State three factors that a business should consider when making a provision for doubtful
debts.

1 ................................................................................................................................................

2 ................................................................................................................................................

3 ................................................................................................................................................
[3]

[Total: 30]

© UCLES 2021 9706/21/O/N/21

 7

PLEASE TURN OVER

© UCLES 2021 9706/21/O/N/21 [Turn over

 8

2 The following balances have been extracted from the books of account of G Limited at
1 October 2020.

Account $
6% debentures (2022–23) 50 000
Retained earnings 34 500
Revaluation reserve 28 000

During the year ended 30 September 2021 the following took place.

Date Transaction
1 November 2020 Made a rights issue of one ordinary share of $1 each for every
ten shares held at a premium of 20%. The issue was fully
subscribed.
1 March 2021 Paid a dividend of $0.05 per share on all shares in issue at
that date.
1 May 2021 Made a bonus issue of one ordinary share of $1 each for every
four shares held. The directors decided to leave the reserves
in the most flexible form.
30 September 2021 Revalued property downwards by $35 000.

The profit for the year ended 30 September 2021 was $96 000.

REQUIRED

(a) Prepare the statement of changes in equity for the year ended 30 September 2021.

G Limited
Statement of changes in equity for the year ended 30 September 2021

Share Share Revaluation Retained

capital premium reserve earnings Total
$ $ $ $ $
At 1 October 2020 28 000 34 500

At 30 September 2021 440 000 4 600

© UCLES 2021 9706/21/O/N/21

 9

Workings:

[8]

Additional information

The directors of G Limited wish to raise $500 000 additional capital for expansion. They have
identified two options to raise the full amount.

Option 1: Issue ordinary shares of $1 each.

Option 2: Issue 8% preference shares.

REQUIRED

(b) Advise the directors which option they should choose. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2021 9706/21/O/N/21 [Turn over

 10

Additional information

The finance director has suggested that the company could issue further debentures.

REQUIRED

(c) State two characteristics of a debenture.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

© UCLES 2021 9706/21/O/N/21

 11

PLEASE TURN OVER

© UCLES 2021 9706/21/O/N/21 [Turn over

 12

3 Martina has prepared the following sales ledger control account for the month of August 2021. All
sales are on credit.

Sales ledger control account for the month of August 2021

$ $
Balance b/d 14 280 Sales returns journal 210
Sales journal 9 540 Bank 11 860
Discounts received 280
Balance c/d 11 470
23 820 23 820
Balance b/d 11 470

Martina produced a list of all customer account balances at 31 August 2021 totalling $10 020.

She discovered that the following errors had been made in the records.

1 Discounts allowed of $1190 had been entered in customers’ accounts but had not been
entered in the control account.

2 A credit transfer from a customer of $420 had been correctly entered in the cash book but
had been credited to the customer’s account as $240.

3 A credit balance of $60 on a customer’s account had been recorded on the list of balances as
a debit balance.

4 A contra to the purchases ledger of $860 had been entered in the customer’s sales ledger
account but had not been entered in the control account.

5 A cheque received from a customer of $380 had been returned unpaid by the bank. No entries
had been made in Martina’s books of account in respect of the unpaid cheque.

6 Martina had sent a cheque for $20 to a customer who had overpaid his account. The payment
had been correctly processed in both the cash book and the customer’s account but had
been posted to the purchases ledger control account in error.

© UCLES 2021 9706/21/O/N/21

 13

REQUIRED

(a) Prepare an adjusted sales ledger control account.

Sales ledger control account

$ $
Balance b/d 11 470

[6]

(b) Prepare an adjusted list of sales ledger balances to agree with the adjusted sales ledger
control account balance in part (a).

$
Original total of sales ledger balances 10 020

Adjusted total of sales ledger balances

[4]

© UCLES 2021 9706/21/O/N/21 [Turn over

 14

(c) Explain how the preparation of a sales ledger control account assists in the prevention of
fraud.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(d) State three types of error that will not be identified by preparing a sales ledger control
account.

1 ........................................................................

2 ........................................................................

3 ........................................................................
[3]

[Total: 15]

© UCLES 2021 9706/21/O/N/21

 15

4 B Limited is a manufacturing business. The business uses marginal costing techniques and
manufactures three products, Ess, Tee and Ewe.

The following budgeted monthly information is available.

Per unit Ess Tee Ewe

$ $ $
Selling price 30 43 69
Direct material 18 22 36
Direct labour at $8 per hour 4 6 14
Variable overhead 2 3 5

Maximum monthly demand 300 units 400 units 360 units

Fixed overheads are budgeted to be $96 000 per annum.

REQUIRED

(a) Calculate the contribution per unit for each product.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2021 9706/21/O/N/21 [Turn over

 16

(b) Prepare a statement to show the maximum monthly contribution and maximum monthly profit
that B Limited can earn.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(c) Calculate the monthly direct labour hours that B Limited requires to meet the budgeted
maximum monthly demand.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................ [1]

© UCLES 2021 9706/21/O/N/21

 17

Additional information

Due to a shortage of skilled labour, the directors are aware that only 900 direct labour hours per
month will be available from 1 December 2021.

REQUIRED

(d) Calculate the maximum contribution and maximum profit for December 2021, taking into
account the limited direct labour hours available.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

........................................................................................................................................... [11]

© UCLES 2021 9706/21/O/N/21 [Turn over

 18

Additional information

In order to overcome the shortage of skilled labour and also be able to meet maximum demand,
the directors are considering paying an overtime premium of 25% and paying a total monthly
bonus of $200 to be shared between all workers.

REQUIRED

(e) Calculate the total contribution and total profit for the month of December 2021 if the directors
decide to carry out this proposal.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

(f) Explain two disadvantages to a business of offering a bonus payment to its employees.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

© UCLES 2021 9706/21/O/N/21

 19

(g) Explain two disadvantages to a business of operating a system of budgetary control.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

[Total: 30]

© UCLES 2021 9706/21/O/N/21

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/21/O/N/21

 Cambridge International AS & A Level
* 2 4 3 5 4 1 3 4 4 7 *

ACCOUNTING 9706/22
Paper 2 Structured Questions October/November 2021

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 16 pages. Any blank pages are indicated.

DC (LK) 206628/3
© UCLES 2021 [Turn over
 2

1 The following balances have been extracted from the books of P Limited at 31 August 2021.

$
5% Debentures (2022–2023) 36 000
Administrative expenses 35 180
Bank 4 770 Credit
Carriage inwards 390
Delivery vehicles
Cost 89 420
Provision for depreciation at 1 September 2020 42 200
Distribution costs 44 320
Dividend paid 3 000
Freehold property at valuation at 31 August 2020 66 000
Interest paid 1 590
Inventory at 1 September 2020 22 880
Purchases 88 900
Revenue 216 600
Retained earnings 24 200
Returns outwards 260
Revaluation reserve 6 000
Share capital (ordinary shares of $0.50 each) 60 000
Share premium 8 500
Trade payables 11 730
Trade receivables 32 480
Wages and salaries 26 100

The freehold property was revalued on 1 September 2020 at $58 000. The revaluation has not yet
been recorded in the books of account.

REQUIRED

(a) Prepare the journal entry to record the revaluation of the freehold property on
1 September 2020. A narrative is not required.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2021 9706/22/O/N/21

 3

Additional information

The following information is also available.

1 Revenue includes goods sent to a credit customer on 23 August 2021 on a sale or return
basis. The directors were uncertain whether any of these goods would be returned. The
selling price of the goods was $6400, and they had been sold at a gross margin of 25%.

2 Inventory in P Limited’s warehouse at 31 August 2021 was valued at cost, $18 600.

3 Debenture interest had been paid to 30 June 2021.

4 Delivery vehicle licences of $540 had been paid for the year ending 31 December 2021.

5 Wages and salaries of $620 were outstanding at 31 August 2021.

6 Wages and salaries are to be charged as follows:

Administrative expenses 25%

Distribution costs 75%

7 On 31 August 2021, a delivery vehicle was sold for $7000. The vehicle had been purchased
on 1 September 2018 for $13 000. No entries for the sale had been made in the books of
account and the sale proceeds had not yet been received.

8 The freehold property is used only as a distribution warehouse. Its remaining useful life at
1 September 2020 was estimated to be 40 years.

9 Depreciation is to be charged as follows:

Non-current asset Depreciation method

Freehold property Written off over the remaining useful life
Delivery vehicles 20% per annum reducing balance

A full year’s depreciation is charged in the year of purchase, but none in the year of disposal.

© UCLES 2021 9706/22/O/N/21 [Turn over

 4

REQUIRED

(b) Prepare the income statement for the year ended 31 August 2021. Use the space on the
next page for your workings.

P Limited
Income statement for the year ended 31 August 2021

Revenue

Cost of sales

Gross profit

Administrative expenses

Distribution costs

Profit from operations

Finance costs

Profit for the year

© UCLES 2021 9706/22/O/N/21

 5

Workings

Revenue

Cost of sales

Depreciation

Administrative expenses

Distribution costs

Finance costs

[15]

© UCLES 2021 9706/22/O/N/21 [Turn over

 6

(c) Prepare a statement to show the balance of retained earnings at 31 August 2021 after the
preparation of the income statement.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

Additional information

The directors wish to reduce the level of trade receivables.

REQUIRED

(d) State two ways in which the level of trade receivables of a business could be reduced.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2021 9706/22/O/N/21

 7

Additional information

The directors have plans to expand the business and they are considering two options.

Option 1: Make a rights issue of 80 000 ordinary shares of $0.50 each at a premium of 25%.

Option 2: Issue 8% debentures (2027–2028) to raise $50 000.

REQUIRED

(e) Advise the directors which option they should choose. Justify your decision.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2021 9706/22/O/N/21 [Turn over

 8

2 Shamal maintains a full set of accounting records. He has extracted a trial balance at
30 September 2021 that does not balance and he has opened a suspense account for the
difference.

Shamal has now identified the following six errors. There were no other errors.

1 A payment of $169 for motor repairs had been correctly entered in the cash book but had
been debited to the motor repairs account as $196.

2 The purchase of new machinery, $670, had been debited to general expenses.

3 Discount allowed of $175 had been entered correctly in the cash book but had not been
posted to the discount allowed account.

4 The sales journal was totalled at $86 961. The total should have been $86 741.

5 A cheque for $425 received from McCann, a credit customer, had been correctly entered in
the cash book but had been debited to the sales ledger control account.

6 The total of the discount received column in the cash book, $490, had been entered twice on
the correct side of the discount received account.

REQUIRED

(a) Prepare the suspense account at 30 September 2021, clearly identifying the opening balance.

Suspense Account

Details $ Details $

[6]

© UCLES 2021 9706/22/O/N/21

 9

(b) Complete the table to name the type of error in each of the errors 1, 2 and 3 identified by
Shamal.

Error Type of error

3
[3]

(c) Explain two benefits to a business of preparing a purchases ledger control account.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

(d) State two items that would appear on the credit side of a purchases ledger control account.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

[Total: 15]

© UCLES 2021 9706/22/O/N/21 [Turn over

 10

3 The following information has been extracted from the financial statements of D Limited at
30 June 2020.

$
Share capital (ordinary shares of $0.50 each) 150 000
Share premium 25 000
Retained earnings 28 700

Transactions during the year ended 30 June 2021.

1 August 2020 Made a rights issue of one ordinary share for every five shares held at
$0.70 per share. The issue was fully subscribed.
1 December 2020 Paid a dividend of $0.02 per share on all shares in issue at that date.
1 March 2021 Made a bonus issue of two ordinary shares for every nine shares held.
Reserves were left in the most flexible form.
30 June 2021 Proposed a final dividend of 2%.

The profit for the year ended 30 June 2021 was $76 520.

REQUIRED

(a) Prepare the following ledger accounts.

Ordinary share capital

Date Details $ Date Details $

© UCLES 2021 9706/22/O/N/21

 11

Share premium

Date Details $ Date Details $

Retained earnings

Date Details $ Date Details $

[11]

(b) State two differences between capital reserves and revenue reserves.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(c) Explain one reason why a company might make a bonus issue of shares.

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]

© UCLES 2021 9706/22/O/N/21 [Turn over

 12

4 Hayden manufactures two products, Aye and Bee. The business operates two production
departments, Machining and Finishing, and two service departments, Stores and Maintenance.

REQUIRED

(a) Identify one possible basis of apportionment that a business could use in respect of:

(i) rent and rates

...........................................................................................................................................

(ii) machinery depreciation

...........................................................................................................................................

(iii) electricity for machinery.

...........................................................................................................................................
[3]

Additional information

The following information is available.

Machining Finishing
Number of orders from Stores 3 200 1 800
Maintenance call-outs 160 32
Budgeted direct labour hours 6 200 19 800
Budgeted machine hours 38 600 9 400

REQUIRED

(b) Complete the following table to show the apportionment of budgeted overhead costs for the
year ended 30 September 2021.

Production Service departments

departments
Total Machining Finishing Stores Maintenance
$ $ $ $ $

Total apportioned overheads 449 800 188 850 172 850 53 325 34 775

Re-apportion Stores

Subtotal

Re-apportion Maintenance

Total overheads cost

[4]

© UCLES 2021 9706/22/O/N/21

 13

(c) Calculate, to two decimal places, an overhead absorption rate for each production
department, using a suitable basis.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

Additional information

The actual results for the year ended 30 September 2021 were as follows:

Machining Finishing
Factory overheads $265 800 $187 420
Direct labour hours 6 350 19 260
Machine hours 36 940 9 810

REQUIRED

(d) Calculate the over-absorption or under-absorption of overheads for each department for the
year ended 30 September 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2021 9706/22/O/N/21 [Turn over

 14

Additional information

The following information is available for one unit of product Aye.

Direct material $36.20

Direct labour hours
Machining ($8 per hour) 45 minutes
Finishing ($10 per hour) 60 minutes
Machine hours
Machining 20 minutes
Finishing 30 minutes

During September 2021, a customer requested a quotation for supplying 200 units of Aye. Hayden
required a 30% gross profit margin on the order.

REQUIRED

(e) Prepare a statement to show the total selling price that Hayden quoted to the customer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

© UCLES 2021 9706/22/O/N/21

 15

Additional information

Hayden is considering using one factory-wide overhead absorption rate rather than separate
departmental overhead absorption rates.

REQUIRED

(f) Advise Hayden whether or not he should use one factory-wide absorption rate. Justify your
answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

(g) Explain two effects that the over-absorption of overheads may have on a business.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

[Total: 30]

© UCLES 2021 9706/22/O/N/21

 16

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/22/O/N/21

 Cambridge International AS & A Level
* 2 7 9 2 3 3 0 8 6 3 *

ACCOUNTING 9706/23
Paper 2 Structured Questions October/November 2021

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (LK) 206629/3
© UCLES 2021 [Turn over
 2

1 The following information has been extracted from the accounting records of T Limited at
30 June 2021.

1 Inventory at 1 July 2020 was valued at $46 800.

2 Inventory at 30 June 2021 was valued at $54 200.

3 The rate of inventory turnover was 8.8 times.

4 The gross profit margin was 45%.

REQUIRED

(a) Calculate for the year ended 30 June 2021:

(i) cost of sales

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) revenue.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

© UCLES 2021 9706/23/O/N/21

 3

Additional information

The following balances were extracted from the books of account at 30 June 2021.

$
8% debentures (2026–2027) 96 000
Administrative expenses 55 900
Directors’ remuneration 62 400
Distribution costs 59 200
Finance costs 6 350
Wages and salaries 88 300
Trade receivables 110 360
Provision for doubtful debts at 1 July 2020 1 235

The following information is also available.

1 The 8% debentures (2026–2027) were taken out on 1 November 2020. Interest was paid
every three months in arrears, starting on 1 February 2021.

2 Wages and salaries of $3800 were owing at 30 June 2021.

3 At 30 June 2021, a bonus was due to be paid to the sales director of $12 000.

4 Expenses were to be allocated as follows:

Administrative Distribution
expenses costs
Wages and salaries 30% 70%
Directors’ remuneration 75% 25%

5 Depreciation is to be charged as follows:

Motor vehicles for office staff $26 400

Delivery vehicles $32 800

6 A credit customer owing $2360 from 12 April 2021 has been declared bankrupt and the debt
is to be written off to administrative expenses.

7 Aged analysis of net trade receivables at 30 June 2021:

0–60 61–90 Over 90

days days days
Percentage of total net trade receivables 75% 15% 10%

8 The directors wish to make a provision for doubtful debts as follows:

Debts 61–90 days 2.5%
Debts over 90 days 10%

The movement in the provision is to be charged to administrative expenses.

© UCLES 2021 9706/23/O/N/21 [Turn over

 4

REQUIRED

(b) Calculate the balance of the provision for doubtful debts at 30 June 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

(c) Prepare the income statement for the year ended 30 June 2021. Use the space on the
next page for your workings.

T Limited
Income Statement for the year ended 30 June 2021

Revenue

Cost of sales

Gross profit

Administrative expenses

Distribution costs

Profit from operations

Finance costs

Profit for the year

© UCLES 2021 9706/23/O/N/21

 5

Workings

Administrative expenses

Distribution costs

Finance costs

Other workings

[11]

© UCLES 2021 9706/23/O/N/21 [Turn over

 6

Additional information

The following transactions had also taken place during the year ended 30 June 2021.

Date Transaction
1 July 2020 Freehold property was revalued downwards by $10 000.
1 July 2020 Made a rights issue of one ordinary share of $2 each for every two
shares held. This was offered at a premium of $0.75. The issue was
fully subscribed.
1 March 2021 Made a bonus issue of one ordinary share of $2 each for every ten
shares held. Reserves were left in the most flexible form.
31 March 2021 Paid a dividend of $0.05 per share on all shares in issue at that date.

REQUIRED

(d) Prepare the statement of changes in equity for the year ended 30 June 2021.

T Limited
Statement of Changes in Equity for the year ended 30 June 2021

Ordinary Share Revaluation Retained

share capital premium reserve earnings Total
$ $ $ $ $
At 1 July 2020 440 000 – 7500 86 320 533 820

At 30 June 2021

[6]

© UCLES 2021 9706/23/O/N/21

 7

Additional information

The directors make use of accounting ratios to interpret the information contained within the
financial statements.

REQUIRED

(e) (i) State the formula for calculating the non-current asset turnover.

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) State what information the directors would obtain from calculating the non-current asset
turnover.

...........................................................................................................................................

..................................................................................................................................... [1]

(f) State three limitations of ratio analysis when comparing the performance of businesses in the
same industry.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 30]

© UCLES 2021 9706/23/O/N/21 [Turn over

 8

2 Abbie, Ben and Cain have been in partnership for many years sharing profits and losses in the
ratio 3 : 2 : 1.

The partnership’s draft statement of financial position at 30 June 2021 is shown below.

Abbie, Ben and Cain

Statement of financial position at 30 June 2021

$
Non-current assets
Property 65 000
Motor vehicles 52 000
117 000
Current assets
Inventory 18 200
Trade receivables 13 700
Bank 800
32 700
Total assets 149 700

Capital and liabilities

Capital accounts
Abbie 60 000
Ben 40 000
Cain 20 000
120 000
Current accounts
Abbie 18 520
Ben (3 250)
Cain 6 230
21 500
Current liabilities
Trade payables 8 200
Total capital and liabilities 149 700

Ben retired from the partnership on 30 June 2021 and the following was agreed.

1 Ben should retain one of the motor vehicles at the net book value $14 500.

2 The remaining motor vehicles should be revalued at $33 000.

3 Property should be revalued at $77 000.

4 Inventory should be revalued at $17 000.

5 The value of goodwill was $39 000 and it was not to be retained in the books of account.

Any amounts due to Ben were to be transferred to a short-term loan to be repaid from the
partnership bank account within one month.

Abbie and Cain decided to continue in partnership sharing profits and losses in the ratio 3 : 2.

Cain agreed to pay sufficient funds into the partnership bank account so that the partners’ capital
account balances reflected the new profit-sharing ratio.
© UCLES 2021 9706/23/O/N/21
 9

REQUIRED

(a) State one reason why a partnership may revalue assets on the retirement of a partner.

...................................................................................................................................................

............................................................................................................................................. [1]

(b) Prepare the revaluation account at 30 June 2021.

Revaluation Account

$ $

[3]

(c) Prepare the partners’ capital accounts at 30 June 2021 on the next page.

© UCLES 2021 9706/23/O/N/21 [Turn over

 Capital Accounts

Abbie Ben Cain Abbie Ben Cain

© UCLES 2021
$ $ $ $ $ $
10

9706/23/O/N/21
[6]
 11

Additional information

Ben has indicated that he may be willing to leave $10 000 as an interest-free loan, but he requires
any other amount due to be paid within one month.

In order to maintain sufficient working capital, Abbie and Cain are considering two options to
finance the settlement due to Ben.

Option 1: Request an overdraft facility from the bank.

Option 2: Ask Ben to consider leaving the whole amount due as a 5% loan repayable over ten
years in equal annual instalments.

REQUIRED

(d) Advise Abbie and Cain which option they should choose to finance the amount due to Ben.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 15]

© UCLES 2021 9706/23/O/N/21 [Turn over

 12

3 Petra owns a small manufacturing business. Her depreciation policy is as follows:

Non-current asset Depreciation policy

Plant and machinery 20% per annum reducing balance method
A full year’s depreciation is charged in the year of purchase but none in the year of sale.

The following information in respect of plant and machinery has been extracted from the books of
account for the year ended 31 July 2021.

Date Details
1 August 2020 Cost, $26 800; Provision for Depreciation, $12 200.
1 January 2021 Purchased new machinery, cost $4200. This was settled by a cheque
payment of $2450 and part exchange of machinery that had originally cost
$2500 in September 2018.
31 July 2021 Machinery with an original cost of $850 and a net book value of $60 was
scrapped with no proceeds.

REQUIRED

(a) Prepare the provision for depreciation account for plant and machinery for the year ended
31 July 2021.

Provision for Depreciation – Plant and Machinery

Date Details $ Date Details $

2020
Aug 1 Balance b/d 12 200

[5]

Workings:

© UCLES 2021 9706/23/O/N/21

 13

(b) Prepare the disposal account for the year ended 31 July 2021.

Disposal Account

Date Details $ Date Details $

[7]

(c) Discuss the reasons why a business may choose to depreciate plant and machinery using
the reducing balance method.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

[Total: 15]

© UCLES 2021 9706/23/O/N/21 [Turn over

 14

4 EMM is a manufacturing business producing one product, a wooden desk.

The business is contracted to supply 220 desks each week to H Co, a large retailer, at a
selling price of $44 per unit.

The costs incurred by EMM are as follows:

$
Direct material 36.00 per unit
Production labour
Salaries 410.00 per week
Bonus 0.50 per unit
Finishing labour
Salaries 180.00 per week
Bonus 0.30 per unit
Machine hire 120.00 per week
Administration costs 400.00 per week
Rent and rates 240.00 per week

REQUIRED

(a) Calculate the weekly break-even point in units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(b) (i) Define the term ‘margin of safety’.

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Explain the usefulness of the margin of safety to a business.

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

© UCLES 2021 9706/23/O/N/21

 15

(c) Prepare a weekly profit statement using marginal cost principles.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

Additional information

EMM is concerned about future prospects. It has spare direct labour capacity and the machinery
is not being fully utilised.

EMM has been approached by K Limited, a large furniture company, requesting a quotation to
supply 80 desks each week. K Limited would require a small design change to the desks, and this
would add $5.40 to the direct material cost. Workers on these desks would receive an additional
finishing labour bonus of $0.20 per unit.

REQUIRED

(d) Calculate the selling price per unit that EMM should quote to K Limited in order to achieve a
20% contribution to sales ratio.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2021 9706/23/O/N/21 [Turn over

 16

Additional information

It has been decided to quote a price of $48 per unit to K Limited.

This work would involve employing extra finishing labour at a weekly salary of $120 and hiring an
additional machine at $30 per week.

The contract with H Co to produce 220 desks each week would still be continued at a price of
$44 per unit.

EMM has decided to set an annual target profit of $17 000.

REQUIRED

(e) Prepare a profit statement for EMM to show the total weekly contribution and total weekly
profit if K Limited accepts the quotation.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

Additional information

K Limited have advised EMM that they will only proceed with the order if they are given
5% settlement discount for paying the account within seven days.

REQUIRED

(f) Calculate the total weekly profit of EMM if EMM agrees to giving the settlement discount.

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [1]

© UCLES 2021 9706/23/O/N/21

 17

(g) Advise EMM whether or not the terms proposed by K Limited should be accepted. Justify
your answer using both financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

(h) State two advantages of cost–volume–profit analysis to management.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(i) State three limitations of cost–volume–profit analysis.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 30]

© UCLES 2021 9706/23/O/N/21

 18

BLANK PAGE

© UCLES 2021 9706/23/O/N/21

 19

BLANK PAGE

© UCLES 2021 9706/23/O/N/21

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/23/O/N/21

 Cambridge International AS & A Level
* 9 5 8 7 0 7 0 3 5 8 *

ACCOUNTING 9706/22
Paper 2 Structured Questions February/March 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (RW) 303870/3
© UCLES 2022 [Turn over
 2

1 Rafiq owns a retail business. When the business was opened a few years ago, Rafiq maintained
only minimal accounting records.

REQUIRED

(a) State two reasons why the owner of a business might maintain minimal accounting records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(b) Identify four benefits of maintaining full accounting records.

1 ................................................................................................................................................

2 ................................................................................................................................................

3 ................................................................................................................................................

4 ................................................................................................................................................
[4]

Additional information

More recently Rafiq has been able to provide more detailed financial information.

1 On 1 January 2021, the business’s assets and liabilities were as follows:

$
Cash in hand 840
Bank overdraft 1 390
Furniture and fittings at valuation 22 710
Trade payables 11 870
Inventory 14 430
Rent prepaid 1 250

© UCLES 2022 9706/22/F/M/22

 3

2 The following summary of receipts and payments for the year ended 31 December 2021 has
been prepared from the business’s bank statements.

Receipts $ $
Cash sales banked 132 200
Disposal of furniture and fittings 3 480
Total receipts 135 680

Payments
Drawings 18 390
Trade payables 93 100
Rent 14 750
Additional furniture and fittings 8 000
Installation costs for new fittings 380
General expenses 5 940
Total payments 140 560

3 Rafiq purchases all goods for resale on a credit basis.

4 All sales are on a cash basis.

5 A cash discount of 5% was received when Rafiq settled debts with trade payables during the
year ended 31 December 2021.

6 At 31 December 2021 trade payables totalled $9230.

REQUIRED

(c) Calculate the total purchases for the year ended 31 December 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[3]

© UCLES 2022 9706/22/F/M/22 [Turn over

 4

Additional information

During the year ended 31 December 2021:

1 Some cash takings were not banked but were used to pay wages, $21 540, and drawings,
$2580.

2 Rafiq took goods costing $480 for private use.

3 Furniture and fittings with a value of $2950 were sold.

At 31 December 2021:

1 Cash takings of $1200 had not yet been banked.

2 The balance of cash in hand was $920.

3 Inventory was valued at $11 920.

4 Furniture and fittings were valued at $23 400.

5 Rent of $1440 was prepaid.

REQUIRED

(d) Prepare the income statement for the year ended 31 December 2021.

Workings:

© UCLES 2022 9706/22/F/M/22

 5

Rafiq
Income statement for the year ended 31 December 2021

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[14]

© UCLES 2022 9706/22/F/M/22 [Turn over

 6

Additional information

Rafiq would like to expand his business but requires additional finance to carry out this plan. He is
considering two options.

Option 1: Invite a friend, Khaled, to become a partner in the business. Khaled would introduce
capital of $10 000.

Option 2: Apply for a bank loan of $10 000.

REQUIRED

(e) Advise Rafiq which option he should choose. Justify your answer by discussing both financial
and non-financial issues of each option.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[7]

[Total: 30]

© UCLES 2022 9706/22/F/M/22

 7

2 T Limited’s statement of financial position at 28 February 2021 included the following:

$
Equity
Issued capital: ordinary shares of $0.50 each 450 000
Share premium 122 000
Retained earnings 342 000
914 000

On 31 August 2021 the directors paid an interim dividend of $0.05 per share.

REQUIRED

(a) Calculate the amount paid as an interim dividend.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[1]

(b) Identify two factors which directors should take into account when deciding the amount of a
dividend payment to shareholders.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

© UCLES 2022 9706/22/F/M/22 [Turn over

 8

Additional information

On 1 December 2021, the directors made a bonus issue on the basis of two ordinary shares for
every three ordinary shares currently held. The directors wished to leave the reserves in their
most flexible form.

REQUIRED

(c) Prepare the journal entry to record the bonus issue of shares. A narrative is not required.

Journal
Dr Cr
$ $

[3]

Additional information

On 28 February 2022, the directors paid a final dividend of $0.07 per share on all ordinary shares
issued at this date.

The company’s profit for the year ended 28 February 2022 was $114 000.

REQUIRED

(d) Calculate the closing balance of the company’s retained earnings account at 28 February 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[6]

© UCLES 2022 9706/22/F/M/22

 9

(e) State three reasons why a company sometimes makes a rights issue of shares rather than
a general issue of shares.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 15]

© UCLES 2022 9706/22/F/M/22 [Turn over

 10

3 Bipin, Feroz and Neeru have been in partnership for many years sharing profits and losses in the
ratio 3 : 1 : 2 respectively.

Feroz decided to retire from the partnership with effect from 1 January 2022. On this date the
statement of financial position was available.

Statement of financial position

$ $
Assets
Non-current assets at net book value 132 000
Current assets
Inventory 17 560
Trade receivables 10 540
Cash at bank 18 490
46 590
Total assets 178 590

Capital and liabilities

Capital accounts
Bipin 72 000
Feroz 44 300
Neeru 57 000
173 300
Current accounts
Bipin 4 240
Feroz (1 980)
Neeru (2 750)
(490)
Total capital 172 810

Current liabilities
Trade payables 5 780

Total capital and liabilities 178 590

The following information is also available.

1 Non-current assets were revalued at $155 000 and inventory was revalued at $13 160.

2 Goodwill was valued at $39 000. It was agreed that a goodwill account was not to be
maintained in the books of the partnership.

3 Bipin and Neeru agreed to remain in partnership sharing profits and losses equally.

4 On his retirement, Feroz agreed to take a non-current asset at its valuation of $15 000. He
agreed to leave the remaining amount due to him as a loan to the partnership.

REQUIRED

(a) Prepare, on the next page, the partners’ capital accounts to record the retirement of Feroz.

© UCLES 2022 9706/22/F/M/22

 Capital accounts

Bipin Feroz Neeru Bipin Feroz Neeru

$ $ $ $ $ $

© UCLES 2022
11

[7]

9706/22/F/M/22
[Turn over
 12

Additional information

Bipin and Neeru have agreed the following for the new partnership.

1 They will no longer use current accounts. Each partner’s current account balance is to be
transferred to the partner’s capital account.

2 The opening balances of their capital accounts are to reflect their new profit and loss sharing
ratio.
Neeru was to introduce or withdraw funds in order to achieve this.

REQUIRED

(b) Calculate the amount Neeru should introduce or withdraw.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

(c) Explain one reason for valuing goodwill when a partner retires.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2022 9706/22/F/M/22

 13

(d) State two reasons why it is usual not to maintain a goodwill account in the books of a
partnership.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

© UCLES 2022 9706/22/F/M/22 [Turn over

 14

4 R Limited uses absorption costing at one of its factories. This factory has two production
departments: Machining and Assembly, and two service departments: Support and Canteen.
Some budgeted overheads have already been apportioned for April 2022. The remaining budgeted
overheads for April 2022 are as follows:

$
Depreciation of machinery 25 000
Production departments’ supervisor’s wages 19 800

The following additional information is available.

1
Production departments Service departments
Machining Assembly Support Canteen
Floor area (m2) 7000 2000 400 600
Power (Kwh) 4500 1800 300 900
Machinery cost ($) 850 000 110 000 15 000 25 000
Number of employees 75 35 8 7

2 The canteen provides meals for staff in the Machining, Assembly and Support departments.

3 The Support department’s overheads should be reapportioned on the basis of production

departments’ machinery cost.

REQUIRED

(a) Complete the following table showing the apportionment of overheads and the reapportionment
of service department overheads.

Production departments Service departments

Machining Assembly Support Canteen
$ $ $ $
Overheads already
106 350 28 600 7 180 13 870
apportioned
Depreciation of
machinery
Production departments’
supervisor’s wages

Reapportioned Canteen

Reapportioned Support

Total
[5]
© UCLES 2022 9706/22/F/M/22
 15

Additional information

Machining Assembly
Direct labour hours per month 3200 2400
Machine hours per month 5600 1800

REQUIRED

(b) Calculate the overhead absorption rate for each production department to two decimal
places.

Machining

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Assembly

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

(c) State two reasons why overheads may be under-absorbed.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2022 9706/22/F/M/22 [Turn over

 16

Additional information

At another factory a single product is made. This factory uses marginal costing.

The following information is available.

$
Direct materials per unit 8.80
Direct labour per unit 10.10
Selling price per unit 27.00

Fixed costs per month $44 000

Production capacity per month 15 000 units

The factory has been operating at below its normal capacity. However, recently demand for the
company’s product has increased considerably. The directors believe there is an opportunity to
increase profits. They are considering two options to meet increased demand.

Option 1

1 Increase the selling price per unit by 5%.

2 Increase production to 16 000 units per month.

3 Overtime is paid at an additional $4.10 per unit.

4 Reduce monthly advertising by $2 000.

Option 2

1 Increase production capacity per month by 15% by purchasing additional machinery costing
$78 000. This machinery will be depreciated at 20% per annum.

2 Selling price will remain at $27 per unit.

3 The supplier of materials currently offers a trade discount of 20%. This will increase to 30%.

4 The additional machinery will be more efficient and production will not require any overtime
working.

© UCLES 2022 9706/22/F/M/22

 17

REQUIRED

(d) Calculate the monthly profit to be made for each option.

(i) Option 1

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[5]

(ii) Option 2

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
[5]

© UCLES 2022 9706/22/F/M/22 [Turn over

 18

Additional information

The cost of the additional machinery required in Option 2 would be financed by an issue of ordinary
shares.

REQUIRED

(e) Advise the directors which option they should choose. Justify your answer by considering
both financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[5]

© UCLES 2022 9706/22/F/M/22

 19

(f) (i) State two benefits of budgetary control.

1 ........................................................................................................................................

...........................................................................................................................................

2 ........................................................................................................................................

...........................................................................................................................................
[2]

(ii) State two limitations of budgetary control.

1 ........................................................................................................................................

...........................................................................................................................................

2 ........................................................................................................................................

...........................................................................................................................................
[2]

[Total: 30]

© UCLES 2022 9706/22/F/M/22

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/22/F/M/22

 Cambridge International AS & A Level
* 4 6 0 3 4 3 2 7 3 3 *

ACCOUNTING 9706/21
Paper 2 Structured Questions May/June 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (CJ) 303853/3
© UCLES 2022 [Turn over
 2

1 Khin is a retailer.

The following balances have been extracted from his books of account at 31 January 2022.

$
Advertising 4 900
Carriage inwards 2 140
Carriage outwards 1 730
Furniture and equipment at cost 18 900
Furniture and equipment provision for depreciation at 1 February 2021 7 300
General expenses 13 450
Inventory at 1 February 2021 12 310
Irrecoverable debts 670
Loss on disposal of delivery vehicle 1 350
Premises at cost 360 000
Premises provision for depreciation at 1 February 2021 21 600
Provision for doubtful debts at 1 February 2021 840
Purchases 118 220
Rent receivable 7 000
Revenue 197 300
Trade receivables 15 580
Wages and salaries 34 640

The following information is also available at 31 January 2022.

1 Closing inventory was valued at $13 480.

2 No record had been made of goods taken for own use by Khin, $910.

3 An irrecoverable debt of $380 is to be written off.

4 The provision for doubtful debts is to be maintained at 5% of trade receivables.

5 Advertising includes a payment of $3250 for a campaign which will last from 1 December 2021
to 30 April 2022.

6 Rent receivable is $500 per month.

7 Wages, $1440, are outstanding.

8 Khin sold his business’s only delivery vehicle in January 2022 resulting in the loss of $1350
shown in the balances at 31 January 2022.

9 The business’s depreciation policy is as follows:

i Premises to be depreciated by 2% per annum using the straight-line method.

ii Furniture and equipment to be depreciated by 15% using the reducing balance method.

© UCLES 2022 9706/21/M/J/22

 3

REQUIRED

(a) Prepare the income statement for the year ended 31 January 2022. Use the space provided
on page 4 for your workings.

Khin
Income statement for the year ended 31 January 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2022 9706/21/M/J/22 [Turn over

 4

Workings:

[15]

Additional information

There was no opening balance on the rent receivable account at 1 February 2021.

REQUIRED

(b) Prepare the rent receivable account for the year ended 31 January 2022.

Rent receivable account

$ $

[2]

© UCLES 2022 9706/21/M/J/22

 5

(c) Prepare a journal entry to record the adjustment to the provision for doubtful debts account at
31 January 2022. A narrative is not required.

Journal
Dr Cr
$ $

[2]

Additional information

Khin intends to purchase a new delivery vehicle. He is not sure whether the delivery vehicle should
be depreciated using the straight-line method or reducing balance method of depreciation.

REQUIRED

(d) Explain the reason for recording depreciation in a business’s income statement.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(e) State one benefit of using each of the following methods of depreciation.

(i) Straight-line

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Reducing balance

...........................................................................................................................................

..................................................................................................................................... [1]

© UCLES 2022 9706/21/M/J/22 [Turn over

 6

Additional information

Khin is concerned about a decline in the business’s profitability. He is considering two options.

Option 1: decrease the amount spent on advertising whilst also reducing the selling price by a
small amount.

Option 2: purchase goods from cheaper suppliers.

REQUIRED

(f) Advise Khin which option he should choose. Justify your advice by discussing both options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2022 9706/21/M/J/22

 7

2 Yasmin is a sole trader. She has prepared a trial balance. Some errors are not revealed by a trial
balance.

REQUIRED

(a) Describe each of the following errors. Examples are not required.

(i) Error of commission

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Error of original entry

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(iii) Error of principle

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

Additional information

When Yasmin prepared a trial balance for her business at the year-end, 31 December 2021, the
totals did not agree. The difference was entered in a suspense account.

The following errors were discovered which accounted for the difference.

1 Goods for own use, $430, had been debited to the drawings account but no other entry had
been made.

2 Returns inwards of $740 had been credited to the returns outwards account.

3 An irrecoverable debt of $260 had been correctly recorded in the journal and in the account of
the customer, but had been posted to the wrong side of the irrecoverable debts account.

© UCLES 2022 9706/21/M/J/22 [Turn over

 8

REQUIRED

(b) Prepare the suspense account clearly identifying the original difference in the trial balance
totals.

Suspense account
$ $

[5]

Additional information

The business’s draft profit before correcting the errors was $28 750 for the year ended
31 December 2021.

REQUIRED

(c) Complete the following table to calculate the corrected profit for the year ended
31 December 2021.

$
Draft profit 28 750
Error 1
Error 2
Error 3
Corrected profit
[4]

[Total: 15]

© UCLES 2022 9706/21/M/J/22

 9

PLEASE TURN OVER

© UCLES 2022 9706/21/M/J/22 [Turn over

 10

3 Maria and Rio have been in partnership for a number of years. They are considering admitting a
new partner.

REQUIRED

(a) State three disadvantages to the existing partners when a new partner is admitted.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

Additional information

The partnership year end is 31 December. For the period 1 January to 30 September 2021, Maria
and Rio did not have a partnership agreement.

The following information is available for the year ended 31 December 2021.

The balances on the partners’ accounts on 1 January 2021 were:

$
Capital accounts
Maria 52 000
Rio 38 000
Loan account: Rio 6 000

On 1 October 2021 they admitted Sarah as a partner. Sarah introduced capital of $45 000 from
her personal savings. The partners agreed to make no adjustments for goodwill or the revaluation
of the partnership assets.

From 1 October 2021 a formal partnership agreement was prepared as follows:

1 Rio to be given interest on his loan at 8% per annum.

2 Interest to be given at 6% per annum on fixed capitals.

3 Rio to be given a partnership salary of $15 000 per annum.

4 Profits to be shared in the ratio Maria : Rio : Sarah, 2 : 1 : 2 respectively.

© UCLES 2022 9706/21/M/J/22

 11

During the year ended 31 December 2021, the partnership made a profit of $82 500 before taking
into account interest on Rio’s loan. It was assumed that the profit before interest on Rio’s loan had
accrued evenly throughout the year.

REQUIRED

(b) Prepare the appropriation account for the year ended 31 December 2021.

Maria, Rio and Sarah

Appropriation account for the year ended 31 December 2021

Maria and Rio Maria, Rio and Sarah

1 Jan–30 Sept 1 Oct–31 Dec
$ $

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2022 9706/21/M/J/22 [Turn over

 12

Additional information

Before Sarah had been admitted as a partner, she had been earning a salary of $18 000 per
annum. She had also received interest of 8% per annum on her personal savings.

REQUIRED

(c) Compare Sarah’s income as a partner with the total income she would have otherwise received
in the three months ended 31 December 2021. Support your answer with calculations.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 15]

© UCLES 2022 9706/21/M/J/22

 13

PLEASE TURN OVER

© UCLES 2022 9706/21/M/J/22 [Turn over

 14

4 N Limited manufactures a single product at one of its factories. The company uses marginal
costing.

REQUIRED

(a) State two benefits of using break-even analysis.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(b) Define the term ‘fixed costs’.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

The following details are available for one month’s production:

Fixed costs $70 000

Break-even point 8 000 units
Selling price per unit $20
Margin of safety $80 000

REQUIRED

(c) Calculate the variable cost per unit.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2022 9706/21/M/J/22

 15

Additional information

The directors have decided to increase output by 20%. All the output can be sold.

New machinery will be purchased at a cost of $72 000. The new machinery will have a useful life
of 5 years. The directors also plan the following:

1 Variable costs will remain unchanged.

2 Selling prices will be reduced by 5% to ensure that all production can be sold.

3 The cost of the new machinery will be financed by the issue of 10% debentures.

REQUIRED

(d) (i) Calculate the monthly revenue based on this plan.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Prepare a budgeted marginal costing statement for one month based on this plan for
total production.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2022 9706/21/M/J/22 [Turn over

 16

Additional information

At another factory the company manufactures two products: X and Y. Both products use the same
material.

The following information is available for one month’s output.

X Y
$ $
Selling price per unit 32 44
Direct material per unit 10 14
Direct labour per unit 12 19

Output 5000 units 4000 units

This factory’s fixed costs are $58 000 per month.

In April 2022 the supplier of direct materials informed the company that it would only be able to
supply 75% of the normal monthly requirement in June 2022.

REQUIRED

(e) Prepare a budgeted production plan for June 2022 to show the maximum profit available.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2022 9706/21/M/J/22

 17

Additional information

A director has suggested an alternative plan that the factory should produce extra units in
May 2022 to make up for the shortfall of either Product X or Product Y in June 2022. Any additional
production will require overtime to be worked.

The following information is available:

1 All material requirements can be met in May 2022 but the material has to be converted into
finished product immediately as purchased.

2 Overtime is paid at 1.5 times the normal rate.

3 The extra units will be stored at a cost of $4000.

REQUIRED

(f) Calculate the profit or loss to be made on the extra units if this plan is implemented in
May 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2022 9706/21/M/J/22 [Turn over

 18

(g) Advise the directors whether they should use the original budgeted production plan in (e)
or whether they should increase production in May 2022 as suggested by the director in his
alternative plan. Justify your advice.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2022 9706/21/M/J/22

 19

BLANK PAGE

© UCLES 2022 9706/21/M/J/22

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/21/M/J/22

 Cambridge International AS & A Level
* 5 5 5 5 6 5 4 0 4 9 *

ACCOUNTING 9706/22
Paper 2 Structured Questions May/June 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (CE) 303891/4
© UCLES 2022 [Turn over
 2

1 Karen and Lee are in partnership sharing profits and losses in the ratio 2 : 3 respectively.
The following balances were available at 28 February 2022.

Trial balance at 28 February 2022

Debit Credit
$ $
Administrative expenses 6 020
Bank interest charges 180
Bank overdraft 5 910
Capital accounts
Karen 40 000
Lee 50 000
Carriage inwards 3 880
Current accounts, 1 March 2021
Karen 1 220
Lee 1 880
Drawings
Karen 17 500
Lee 19 900
Insurance 7 740
Inventory, 1 March 2021 8 250
Loan from Lee 10 000
Non-current assets
At cost 160 000
Provision for depreciation, 1 March 2021 56 000
Provision for doubtful debts, 1 March 2021 260
Purchases 151 440
Returns 2 200 3 930
Revenue 229 250
Trade payables 14 450
Trade receivables 31 210
Suspense account 820
411 020 411 020

The following information is also available.

1 On 28 February 2022, inventory had been valued at cost, $21 220. This figure included some
damaged items which had cost $1320 and had a sales value of $2480. The damaged items
could be repaired at a cost of $1300.

2 In January 2022, an error had been made recording returns inwards, $410. This amount had
been credited to the returns outwards account.

3 Insurance includes $1410 paid for the three months ended 30 April 2022.

4 The loan from Lee had been arranged on 1 November 2021. It was agreed that Lee should
be entitled to interest at 6% per annum on the loan. No entries have been made for interest
on the loan.

5 The provision for doubtful debts should be increased to $310.

6 Non-current assets are to be depreciated by 20% per annum using the reducing balance
method.

© UCLES 2022 9706/22/M/J/22

 3

REQUIRED

(a) Prepare the income statement for the year ended 28 February 2022. Use the space provided
on the next page for your workings.

Karen and Lee

Income statement for the year ended 28 February 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2022 9706/22/M/J/22 [Turn over

 4

Workings:

[9]

(b) Prepare Lee’s current account for the year ended 28 February 2022.

Lee
Current Account

$ $

[4]

© UCLES 2022 9706/22/M/J/22

 5

Additional information

The partners have been considering making a more detailed partnership agreement to include the
following terms.

1 Interest to be charged on all drawings at 10%.

2 Karen to receive a salary of $8400 per annum.

3 Profits and losses would continue to be shared in the ratio Karen : Lee, 2 : 3 respectively.

REQUIRED

(c) Calculate the increase or decrease in Lee’s current account balance at 28 February 2022
assuming the new agreement had been in use from 1 March 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

© UCLES 2022 9706/22/M/J/22 [Turn over

 6

Additional information

Karen and Lee had also considered operating as a limited company.

REQUIRED

(d) Explain one advantage of operating as a partnership rather than a limited company.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(e) Explain two advantages of operating as a limited company rather than a partnership.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

© UCLES 2022 9706/22/M/J/22

 7

Additional information

The partners are concerned about the business’s liquidity position.

Karen believes the problem arises because the business holds too much inventory. She suggests
that credit purchases should be reduced for the next three months to ensure inventory levels are
lowered.

REQUIRED

(f) Advise Lee whether or not he should accept Karen’s suggestion. Justify your advice.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2022 9706/22/M/J/22 [Turn over

 8

2 V Limited owns various non-current assets. Non-current assets depreciate due to a number of
factors including wear and tear.

REQUIRED

(a) State two reasons, other than wear and tear, why non-current assets depreciate.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

Additional information

Businesses must apply the consistency concept when accounting for depreciation.

REQUIRED

(b) Describe the consistency concept.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

The company’s financial year ends on 31 December.

1 Property was purchased on 1 January 2019 at a cost of $850 000. Property is depreciated at
5% per annum on cost.

2 On 1 January 2021 the directors decided to revalue the property at $1 200 000.

REQUIRED

(c) Prepare the journal entry to record the revaluation of the property. A narrative is not required.

Journal

Dr Cr
$ $

[3]

© UCLES 2022 9706/22/M/J/22

 9

Additional information

1 Furniture and equipment was purchased on 1 January 2019 at a cost of $140 000.

2 Furniture and equipment is depreciated at 10% per annum using the reducing balance
method.

3 On 1 September 2021, the directors sold furniture and equipment which had cost $21 000 on
1 January 2019.

4 A full year’s depreciation is charged in the year of purchase but none in the year of disposal.

REQUIRED

(d) Calculate the charge for depreciation of furniture and equipment for the year ended
31 December 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2022 9706/22/M/J/22 [Turn over

 10

Additional information

1 Motor vehicles were purchased on 1 January 2020 at a cost of $84 000.

2 Motor vehicles are depreciated at 20% per annum using the reducing balance method.

3 On 1 November 2021, a new motor vehicle was purchased at a cost of $44 000. A cheque
for $17 000 was paid for the vehicle and the balance was covered by the part-exchange of a
vehicle which had cost $40 000 on 1 January 2020.

4 A full year’s depreciation is charged in the year of purchase but none in the year of disposal.

REQUIRED

(e) Prepare the motor vehicle disposal account for the year ended 31 December 2021.

Motor vehicle disposal account

$ $

[4]

[Total: 15]

© UCLES 2022 9706/22/M/J/22

 11

BLANK PAGE

© UCLES 2022 9706/22/M/J/22 [Turn over

 12

3 N Limited is a trading company. The statement of financial position at 31 December 2021 is as

follows.

$000
Assets
Non-current assets at net book value 1520
Current assets
Inventory 35
Trade receivables 30
Total assets 1585

Equity and liabilities

Equity
Share capital 900
Share premium 180
Retained earnings 202
Total equity 1282
Liabilities
Non-current liabilities
8% Debentures (2026) 250
Current liabilities
Trade payables 42
Bank overdraft 11
53
Total liabilities 303
Total equity and liabilities 1585

The following information is also available.

1 Purchases for the year were $600 000 of which 80% were on credit.

2 Credit sales were 30% of all sales.

3 The company had a gross profit margin of 40%. The company’s gross profit for the year
ended 31 December 2021 was $420 000.

4 The company’s profit for the year was $182 000.

5 No interest was charged on the bank overdraft.

© UCLES 2022 9706/22/M/J/22

 13

REQUIRED

(a) Calculate the following ratios for the year ended 31 December 2021 stating the formula used.

(i) Trade payables turnover (days)

Formula Calculation

[3]

(ii) Trade receivables turnover (days)

Formula Calculation

[3]

(iii) Return on capital employed (to two decimal places)

Formula Calculation

[3]

© UCLES 2022 9706/22/M/J/22 [Turn over

 14

(iv) Non-current asset turnover (to two decimal places)

Formula Calculation

[2]

(b) Explain the importance of this non-current asset turnover to the directors of N Limited.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(c) Explain one reason why shareholders will be interested in the financial statements of a
company.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]

© UCLES 2022 9706/22/M/J/22

 15

4 F Limited is a manufacturing company which uses absorption costing at one of its factories. This
factory has two production departments and two service departments.

Budgeted costs have already been allocated and apportioned.

REQUIRED

(a) Explain the meaning of each of the following terms:

(i) Allocation

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Apportionment

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(b) State one benefit of using absorption costing.

...................................................................................................................................................

............................................................................................................................................. [1]

(c) State one limitation of using absorption costing.

...................................................................................................................................................

............................................................................................................................................. [1]

© UCLES 2022 9706/22/M/J/22 [Turn over

 16

Additional information

The budgeted costs for April 2022 before reapportionment of the service departments’ overheads
are as follows.

Production departments Service departments

Assembly Finishing Stores Maintenance
department department department department
$ $ $ $
Total overhead
275 000 103 200 19 200 26 700
costs

The service department overheads are apportioned to the production departments on the following
basis.

Assembly Finishing Stores Maintenance

department department department department
Maintenance 60% 30% 10% –
Stores 75% 25% – –

REQUIRED

(d) Calculate the total overheads for each production department by reapportioning the service
department overheads.

Production departments Service departments

Assembly Finishing Stores Maintenance
department department department department
$ $ $ $
Total overhead
275 000 103 200 19 200 26 700
costs

Subtotal

Total
[3]

© UCLES 2022 9706/22/M/J/22

 17

Additional information

The following additional monthly budgeted information is available about the production
departments.

Labour hours Machine hours

Assembly department 950 1 430
Finishing department 840 380

REQUIRED

(e) Calculate the overhead absorption rate for each department to two decimal places.

(i) Assembly department

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Finishing department

...........................................................................................................................................

..................................................................................................................................... [2]

Additional information

In April 2022, production was less than the forecast figure. The Assembly department’s actual
overheads were $285 400, actual labour hours were 820 and actual machine hours were 1310.

REQUIRED

(f) Calculate the under-absorption or over-absorption of overheads for April 2022 for the
Assembly department.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2022 9706/22/M/J/22 [Turn over

 18

Additional information

At another factory the company manufactures two products. This factory uses marginal costing. The
following details are available.

Product X Product Z
$ $
Direct materials per unit 6 9
Direct labour per unit 9 9
Fixed costs per unit 5 6
Selling price per unit 24 30

Normal production per month (units) 8000 4000

The company has a major customer who usually orders 5000 units of Product X each month. This
order is included in the normal production of 8000 units per month.

In May 2022 the customer has asked for 9000 units of Product X.

If it is not possible to supply this quantity, the customer has informed the directors that they will place
their entire order and all future orders with another company.

The directors are considering two options.

Option A

1 Stop manufacture of Product Z and devote all labour hours to the production of Product X.

2 The company will be able to complete all the normal orders for Product X and the increased order
from the customer.

3 The workforce for Product Z will require some retraining, costing $3000.

Option B

1 Maintain normal production levels.

2 Refuse the customer’s order.

3 Reduce the selling price of Product X by 5% in order to enable all normal production of this unit to
be sold.

© UCLES 2022 9706/22/M/J/22

 19

REQUIRED

(g) Calculate the profit to be made in May 2022 for each of the options.

(i) Option A

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [4]

(ii) Option B

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

© UCLES 2022 9706/22/M/J/22 [Turn over

 20

(h) Advise the directors which option they should choose. Justify your answer by discussing both
financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/22/M/J/22

 Cambridge International AS & A Level
* 2 1 0 9 5 8 9 6 8 1 *

ACCOUNTING 9706/23
Paper 2 Structured Questions May/June 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (RW) 303854/3
© UCLES 2022 [Turn over
 2

1 K Limited’s financial year ended on 31 December 2021. The company’s income statement for the
year ended on that date has already been prepared. The following information was available at
the year‑end.

$
8% Debentures (2022) 120 000
Bank overdraft 4 700
Dividends paid 96 000
Inventory 49 400
Non‑current assets at cost 960 000
Non‑current assets provision for depreciation 170 000
Ordinary share capital: shares of $0.25 each at 31 December 2021 480 000
Other payables 2 700
Other receivables 1 400
Profit for the year 99 400
Retained earnings at 1 January 2021 133 000
Share premium at 31 December 2021 90 000
Trade payables 25 900
Trade receivables 18 900

On 1 July 2021, the directors had made a rights issue of one ordinary share for every two ordinary
shares in issue. The rights issue was made at $0.35 per share and was fully subscribed.

REQUIRED

(a) Calculate the profit from operations for the year ended 31 December 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(b) Calculate the amount raised by the rights issue on 1 July 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2022 9706/23/M/J/22

 3

(c) Prepare a statement of changes in equity for the year ended 31 December 2021.

K Limited
Statement of changes in equity for the year ended 31 December 2021

Share capital Share Retained Total

premium earnings
$ $ $ $

Balances at 1 January 2021

[7]

© UCLES 2022 9706/23/M/J/22 [Turn over

 4

(d) Prepare the statement of financial position at 31 December 2021.

K Limited
Statement of financial position at 31 December 2021
$

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................

.......................................................................................................................... .....................
[7]
© UCLES 2022 9706/23/M/J/22
 5

(e) Explain the meaning of each of the following terms.

(i) Revenue reserve

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Capital reserve

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

© UCLES 2022 9706/23/M/J/22 [Turn over

 6

Additional information

The directors of K Limited will require additional finance in 2022 to cover the cost of opening a
new branch of the business.

They are considering two options.

Option 1: Make a further rights issue of shares.

Option 2: Make an issue of 8% debentures.

REQUIRED

(f) Advise the directors which option they should choose. Justify your answer by discussing both
options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2022 9706/23/M/J/22

 7

2 Rakesh prepared his business’s end of year financial statements on 30 September 2021.

REQUIRED

(a) Define the following accounting concepts. Give one example of each.

(i) Matching

Definition ...........................................................................................................................

...........................................................................................................................................

Example ............................................................................................................................

...........................................................................................................................................
[2]

(ii) Going concern

Definition ...........................................................................................................................

...........................................................................................................................................

Example ............................................................................................................................

...........................................................................................................................................
[2]

(iii) Materiality

Definition ...........................................................................................................................

...........................................................................................................................................

Example ............................................................................................................................

...........................................................................................................................................
[2]

© UCLES 2022 9706/23/M/J/22 [Turn over

 8

Additional information

On 30 September 2021, Rakesh decided to write off an irrecoverable debt of $730 from the
account of JD Supplies.

REQUIRED

(b) Prepare the journal entry in Rakesh’s books of account to record the write off of the
irrecoverable debt. A narrative is not required.

Journal

Dr Cr
$ $

[2]

Additional information

Rakesh receives rent from a tenant. The following details are available for the year ended
30 September 2021.

1 At 1 October 2020, the tenant owed rent $1200.

2 During the year ended 30 September 2021, the tenant paid rent of $9000 by bank transfer.

3 At 30 September 2021, rent of $1125 had been received in advance.

REQUIRED

(c) Prepare the rent receivable account in Rakesh’s books of account.

Rent receivable account

$ $

[4]
© UCLES 2022 9706/23/M/J/22
 9

Additional information

The business owns equipment which cost $24 000 when it was purchased on 1 October 2018.
The policy is to provide depreciation at 20% per annum using the reducing balance method.

REQUIRED

(d) Prepare the provision for depreciation of equipment account for the year ended
30 September 2021.

Provision for depreciation of equipment account

$ $

[3]

[Total: 15]

© UCLES 2022 9706/23/M/J/22 [Turn over

 10

3 Nibras purchases and sells goods for cash and on credit. Control accounts are used to check the
accuracy of the business’s purchases and sales ledgers.

The following information is available for January 2022.

1 Purchases ledger account balances at 1 January 2022 were:

$
Amounts owed to suppliers 23 490
Amount overpaid to one supplier 320

2 Totals from the books of prime entry were as follows:

$
Cash book
Cash purchases 18 540
Payments to trade payables 202 950
Discounts received 4 920
Purchases journal 212 480
Returns outwards journal 3 770
General journal
Contras to sales ledger 810

3 There were no overpaid accounts in the purchases ledger at the end of the month.

REQUIRED

(a) Prepare the purchases ledger control account for January 2022.

Purchases ledger control account

$ $

[5]
© UCLES 2022 9706/23/M/J/22
 11

Additional information

On 31 January 2022 the following information was available concerning trade receivables.

$
Balance of the sales ledger control account 25 310
Total of balances in the sales ledger 23 980

The following errors were discovered. When corrected, the total of balances in the sales ledger
agreed with the balance of the sales ledger control account.

1 An irrecoverable debt of $540 had been recorded as $450 in both the general ledger and the
customer’s sales ledger account.

2 The total of the returns inwards journal, $1390, had been omitted from the sales ledger control
account.

3 The balance of a customer’s account had been understated by $120.

4 A credit note, $90, issued to a credit customer had been recorded correctly in the sales return
journal but posted to the debit side of the customer’s account.

REQUIRED

(b) (i) Calculate the correct balance of the sales ledger control account.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

(ii) Calculate the correct total of balances in the sales ledger.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [4]

© UCLES 2022 9706/23/M/J/22 [Turn over

 12

Additional information

Control accounts do not reveal every type of error.

REQUIRED

(c) State three types of error which are not revealed by a control account.

1 ................................................................................................................................................

2 ................................................................................................................................................

3 ................................................................................................................................................
[3]

[Total: 15]

© UCLES 2022 9706/23/M/J/22

 13

4 G Limited manufactures products at two factories. The company uses marginal costing.

REQUIRED

(a) State four assumptions used in break‑even analysis.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................

4 ................................................................................................................................................

...................................................................................................................................................
[4]

(b) State the formula for calculating the margin of safety in units and sales value.

(i) Units

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Sales value

...........................................................................................................................................

..................................................................................................................................... [1]

© UCLES 2022 9706/23/M/J/22 [Turn over

 14

Additional information

At one factory a single product is made. The following budgeted details are available.

Direct materials per unit 3 kg at $5 per kg

Direct labour per unit 2 hours at $9.50 per hour
Fixed costs per month $66 000
Selling price per unit $48
Sales 8 000 units per month

REQUIRED

(c) Calculate the monthly margin of safety in units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2022 9706/23/M/J/22

 15

Additional information

The directors are concerned that there could be a fall in demand for this product. They plan to
make some changes to reduce the product’s break‑even point and encourage sales.

1 Use a different grade of material. The list price of this material is 10% less per kilogram than
the existing material.

2 Each unit will require 5% more kilograms of this material.

3 The supplier of materials has agreed to give a 20% trade discount.

4 Make alterations to machinery to improve efficiency at a cost of $24 000. Machinery is

depreciated at 25% per annum.

5 Introduce a sales commission of $0.50 per unit.

6 Reduce the selling price by 1.5% per unit.

REQUIRED

(d) Calculate the decrease in the monthly break‑even point in units if these changes are made.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [8]

© UCLES 2022 9706/23/M/J/22 [Turn over

 16

Additional information

At the other factory monthly production and sales are normally 14 000 units of a different product.
This product has a variable cost of $65 per unit and a contribution of $17 per unit. The budgeted
factory fixed costs are $128 000 per month.

A major customer normally purchases 5500 units per month. However, the company has been
informed that no units will be required by this customer in August 2022.

The directors are considering two options.

Option A

1 Reduce production in August 2022 by 4000 units.

2 Run an advertising campaign at a cost of $2 200 to increase demand so that all production is
sold.

Option B

1 Continue with normal production in August.

2 Store 5500 units in a warehouse at a cost of $6000.

3 At the end of August an overseas customer will purchase all the units in the warehouse at a
special price of $70 per unit. Transport costs of $1.80 per unit will be incurred on these units.

REQUIRED

(e) Calculate the profit for August 2022 for:

(i) Option A

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

(ii) Option B

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [4]

© UCLES 2022 9706/23/M/J/22

 17

(f) Advise the directors which option they should choose. Justify your answer by discussing both
financial and non‑financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2022 9706/23/M/J/22

 18

BLANK PAGE

© UCLES 2022 9706/23/M/J/22

 19

BLANK PAGE

© UCLES 2022 9706/23/M/J/22

 20

BLANK PAGE

Permission to reproduce items where third‑party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer‑related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/23/M/J/22

 Cambridge International AS & A Level
* 6 6 6 8 4 4 5 0 1 2 *

ACCOUNTING 9706/21
Paper 2 Structured Questions October/November 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (LK) 302482/3
© UCLES 2022 [Turn over
 2

1 The directors of Y Limited have provided the following balances at 30 June 2022.

$
6% debentures (2025–2026) 60 000
Administrative expenses 89 540
Bank overdraft 1 440
Carriage inwards 4 310
Delivery vehicles – valuation 74 000
Distribution costs 72 910
Dividends paid 6 400
Finance costs 1 800
Inventory at 1 July 2021 105 600
Office equipment – cost 54 600
Office equipment – provision for depreciation 22 300
Provision for doubtful debts 3 540
Purchases 338 200
Retained earnings 16 920
Returns inwards 7 550
Revenue 615 300
Share capital (ordinary shares of $1 each) 80 000
Trade payables 48 650
Trade receivables 93 240

The following information is also available.

1 Inventory at 30 June 2022 was valued at $126 800.

2 Inventory at 30 June 2022 included damaged goods costing $3200 that could be sold for
$3950 after repairs costing $910.

3 The delivery vehicles have an estimated value at 30 June 2022 of $62 000.

4 Office equipment is to be depreciated at 10% per annum using the reducing balance method.

5 Administrative expenses included $1800 office rent for the three months ending
31 August 2022.

6 Distribution costs of $850 were owing at 30 June 2022.

7 The 6% debentures (2025–2026) were issued in 2017.

8 An irrecoverable debt of $490 is to be written off to administrative expenses.

9 The provision for doubtful debts is to be maintained at 4% of trade receivables.

10 There is no interest charged on the bank overdraft.

© UCLES 2022 9706/21/O/N/22

 3

REQUIRED

(a) Prepare the income statement for the year ended 30 June 2022.

Y Limited
Income Statement for the year ended 30 June 2022

Revenue

Cost of sales

Gross profit

Administrative expenses

Distribution costs

Profit from operations

Finance costs

Profit for the year

Workings:

Cost of sales

Administrative expenses

Distribution costs

[15]
© UCLES 2022 9706/21/O/N/22 [Turn over
 4

(b) Prepare the statement of financial position at 30 June 2022.

Y Limited
Statement of Financial Position at 30 June 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

........................................................................................................................................... [10]

© UCLES 2022 9706/21/O/N/22

 5

Additional information

The directors of Y Limited wish to repay the 6% debentures (2025–2026) early. They are
considering making a rights issue of one ordinary share for every two shares held at a premium of
50%.

REQUIRED

(c) Advise the directors whether or not they should make a rights issue of ordinary shares to
repay the debentures. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2022 9706/21/O/N/22 [Turn over

 6

2 Bharti owns a small business. The following information was extracted from her accounting
records.

Balances at 1 July 2021

$
Delivery vehicles
cost 52 000
provision for depreciation 14 000

Extract from asset register

Cost
Date of purchase Vehicle
$
1 July 2019 DV1 18 000
1 July 2020 DV2 34 000

On 1 October 2021, Bharti purchased a new delivery vehicle (DV3) costing $26 000. She paid
$14 500 by cheque and the balance was settled by part-exchange of the old delivery vehicle, DV1.

Bharti depreciates delivery vehicles using the straight-line method on a month-by-month basis.
The estimated useful life of all delivery vehicles is five years with no residual value.

REQUIRED

(a) Prepare the following ledger accounts for the year ended 30 June 2022.

Delivery Vehicles – Cost

Date Details $ Date Details $

© UCLES 2022 9706/21/O/N/22

 7

Delivery Vehicles – Provision for depreciation

Date Details $ Date Details $

Disposal account

Date Details $ Date Details $

Workings:

[9]

© UCLES 2022 9706/21/O/N/22 [Turn over

 8

(b) State one reason why non-current assets are depreciated, with reference to an appropriate
accounting concept.

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(c) Explain one difference between capital expenditure and revenue expenditure.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(d) State one example of a:

(i) capital receipt

..................................................................................................................................... [1]

(ii) revenue receipt

..................................................................................................................................... [1]

[Total: 15]

© UCLES 2022 9706/21/O/N/22

 9

3 The directors of H Limited provided the following details from the statement of financial position at
30 September 2021.

$
Equity and reserves
Share capital (ordinary shares of $0.50 each) 200 000
Share premium 50 000
Retained earnings 120 000

During the year ended 30 September 2022, the following transactions took place.

Date Transaction

1 1 November 2021 Paid a final dividend of $0.06 per ordinary share.

2 1 January 2022 Made a rights issue of two ordinary shares for every five shares
held at a price of $0.60. The issue was fully subscribed.

3 1 July 2022 Paid an interim dividend of $0.02 per ordinary share.

4 31 August 2022 Made a bonus issue of one ordinary share for every four shares
held. The directors decided to leave the reserves in the most
flexible form.

REQUIRED

(a) Prepare journal entries to record transactions 1 – 4. Dates and narratives are not required.

Workings:

© UCLES 2022 9706/21/O/N/22 [Turn over

 10

Journal

Item Account Debit Credit

$ $

[10]

© UCLES 2022 9706/21/O/N/22

 11

(b) State three reasons why a company may make a bonus issue of shares.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

(c) State two features of preference shares.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

© UCLES 2022 9706/21/O/N/22 [Turn over

 12

4 Mandeep owns two manufacturing businesses.

REQUIRED

(a) State what is meant by:

(i) Variable costs

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Fixed costs

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [1]

(iii) Semi-variable costs

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [1]

© UCLES 2022 9706/21/O/N/22

 13

Additional information

One of Mandeep’s businesses manufactures three products, Ess, Tee and Ewe. The following
monthly budgeted information is available for December 2022.

Per unit Ess Tee Ewe

Selling price $90 $105 $150
Contribution $41.50 $45.00 $55.20

Maximum monthly demand 80 units 50 units 75 units

Budgeted fixed overheads are absorbed at $14 per unit based on maximum monthly demand.

REQUIRED

(b) Calculate the total maximum contribution and also total maximum profit that Mandeep can
earn in December 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

Additional information

The business uses the same material to manufacture Ess, Tee and Ewe. The following information
is available for direct material.

Per unit Ess Tee Ewe

Direct material ($6 per metre) 5 metres 6 metres 8 metres

REQUIRED

(c) Calculate the total material (in metres) required to meet the maximum demand in
December 2022.

...................................................................................................................................................

............................................................................................................................................. [1]

© UCLES 2022 9706/21/O/N/22 [Turn over

 14

Additional information

Mandeep has been told that due to a national shortage of material, he will only be able to obtain
1000 metres of material each month for the next three months.

REQUIRED

(d) Prepare a statement to show the maximum contribution and also maximum profit that
Mandeep can earn in December 2022 taking account of the shortage of material.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

© UCLES 2022 9706/21/O/N/22

 15

Additional information

Mandeep made enquiries and found an overseas supplier who would be able to provide enough
material to meet his requirements each month. Mandeep has never used this supplier before. He
has been assured that the material will be of a similar quality to his current supply and that the
price would be $5 per metre.

REQUIRED

(e) Advise Mandeep whether or not he should purchase all future supplies of material from the
overseas supplier. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2022 9706/21/O/N/22 [Turn over

 16

Additional information

Mandeep is currently preparing budgets for his other business for the next year.

He operates a system of absorption costing and provides the following information for one unit of
product.

Direct material 6 kg at $4.80 per kg

Direct labour Machining department

2 hours at $9 per hour
Assembly department
3 hours at $8 per hour

Overheads Machining department

2 direct labour hours
3 machine hours
Assembly department
3 direct labour hours
0.5 machine hours

Overhead absorption rates

Machining department $6.75 per machine hour
Assembly department $4.60 per direct labour hour

REQUIRED

(f) Calculate the price per unit that Mandeep should charge customers in order to obtain a
20% profit margin.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2022 9706/21/O/N/22

 17

(g) State three benefits to a business of preparing budgets.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

(h) State two limitations of budgetary control.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 30]

© UCLES 2022 9706/21/O/N/22

 18

BLANK PAGE

© UCLES 2022 9706/21/O/N/22

 19

BLANK PAGE

© UCLES 2022 9706/21/O/N/22

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/21/O/N/22

 Cambridge International AS & A Level
* 9 1 4 4 0 8 4 6 7 3 *

ACCOUNTING 9706/22
Paper 2 Structured Questions October/November 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (RW) 303869/3
© UCLES 2022 [Turn over
 2

1 The following balances have been extracted from the draft financial statements of H Limited at
30 September 2022.

$
8% bank loan (2028–2029) 28 000
Cash and cash equivalents 2 590
Inventory 48 900
Plant and machinery at net book value 52 000
Property at valuation 65 000
Retained earnings 27 350
Revaluation reserve 23 000
Share capital (ordinary shares of $1 each) 80 000
Share premium 19 400
Trade payables 17 140
Trade receivables 26 400

The directors discovered that the following had not been accounted for.

1 Plant and machinery had been purchased for $16 500. This was settled by the part‑exchange
of machinery with a net book value of $11 800 and a bank payment of $4700.

2 No depreciation for the year had been charged. Plant and machinery is depreciated at 10%
per annum using the reducing balance method. A full year’s depreciation is charged in the
year of purchase and none in the year of disposal.

3 A bonus issue of one ordinary share for every four shares held had been made on 1 June 2022.
The directors had decided to keep the reserves in the most flexible form.

4 An interim dividend of $0.03 per share had been paid on 1 September 2022 on all shares in
issue at that date.

5 Property had been revalued downwards by $4000.

6 One half of the 8% bank loan (2028–2029) had been repaid on 30 September 2022.

7 A provision for doubtful debts of 5% was to be made.

© UCLES 2022 9706/22/O/N/22

 3

REQUIRED

(a) Prepare the journal entry to record the bonus issue of shares. Dates and narrative are not
required.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(b) Calculate the net book value of plant and machinery at 30 September 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

(c) Calculate the adjusted balance of cash and cash equivalents at 30 September 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2022 9706/22/O/N/22 [Turn over

 4

(d) Calculate the adjusted balance of retained earnings at 30 September 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2022 9706/22/O/N/22

 5

(e) Prepare the statement of financial position at 30 September 2022.

H Limited
Statement of Financial Position at 30 September 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [8]

© UCLES 2022 9706/22/O/N/22 [Turn over

 6

(f) Explain two differences between capital reserves and revenue reserves.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

(g) Explain one accounting concept applied when making a provision for doubtful debts.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 30]

© UCLES 2022 9706/22/O/N/22

 7

PLEASE TURN OVER

© UCLES 2022 9706/22/O/N/22 [Turn over

 8

2 Usman has extracted the following information from his books of account in order to update the
sales ledger control account for the month of August 2022.

$
Balance brought down at 1 August 2022 34 210
Cheque receipts from credit customers 32 840
Customers’ dishonoured cheques 1 020
Sales journal totals 29 760
Sales returns journal totals 980

Usman has produced a list of all customer account balances at 31 August 2022 totalling $30 477.

He has discovered the following:

1 The total of the sales journal had been overcast by $600.

2 Discounts allowed of $218 had been entered in customers’ accounts but no entries had been
made in the control account.

3 A contra for $325 had been correctly entered in both the customer’s account and the supplier’s
account.

4 A customer’s overpayment of $65 had been repaid by cheque but no entries had been made
in the books of account.

5 A cheque received from Musa for $250 had been posted to the account of Hussein.

6 An irrecoverable debt of $180 had been correctly written off in a customer’s account but had
not been entered in the control account.

7 A credit balance of $315 on a customer’s account had been incorrectly entered as a debit
balance in the list of customer account balances at 31 August 2022.

© UCLES 2022 9706/22/O/N/22

 9

REQUIRED

(a) Prepare the updated sales ledger control account for the month of August 2022.

Sales ledger control account

$ $

Balance b/d 34 210

[9]

(b) Prepare an amended total of customer account balances to agree with the sales ledger
control account balance in (a).

Original total of customer account balances 30 477

[3]

© UCLES 2022 9706/22/O/N/22 [Turn over

 10

(c) State one limitation of preparing a control account.

...................................................................................................................................................

............................................................................................................................................. [1]

(d) Explain why a sales ledger control account would help in the prevention of fraud.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]

© UCLES 2022 9706/22/O/N/22

 11

PLEASE TURN OVER

© UCLES 2022 9706/22/O/N/22 [Turn over

 12

3 N Limited provided the following information for the year ended 31 August 2022.

$
6% debentures (2022) 20 000
Bank overdraft 9 430
Cash in hand 650
Closing inventory 64 800
Finance costs 1 400
Opening inventory 45 600
Operating expenses 96 000
Other payables 4 340
Other receivables 6 080
Purchases 172 000
Revenue 292 000
Trade payables 10 100
Trade receivables 19 800

Cash sales accounted for 20% of revenue.

Cash purchases accounted for 25% of purchases.

REQUIRED

(a) Calculate the following efficiency ratios, showing the formula used.

Ratio Formula Workings

Trade receivables
turnover (days)

Answer:

Trade payables
turnover (days)

Answer:

[4]

© UCLES 2022 9706/22/O/N/22

 13

(b) Calculate the following liquidity ratios to two decimal places, showing the formula used.

Ratio Formula Workings

Current ratio

Answer:

Liquid (acid test)

ratio

Answer:

[4]

© UCLES 2022 9706/22/O/N/22 [Turn over

 14

Additional information

The directors have reported a 5% increase in profit for the year ended 31 August 2022 and are
satisfied with the results.

REQUIRED

(c) Advise the directors whether or not they are correct to be satisfied. Justify your answer and
support it by considering the efficiency ratios and liquidity ratios in (a) and (b).

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

(d) State two limitations of using accounting ratios to compare the results of two businesses.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

© UCLES 2022 9706/22/O/N/22

 15

4 Brady manufactures one product which is sold through agents who receive a 10% commission
based on the selling price.

The following budgeted information is available for December 2022.

$
Sales revenue (12 000 units) 78 000
Direct materials 21 600
Direct labour 14 400
Variable production overheads 4 800
Fixed production overheads 9 200
Fixed administrative overheads 6 100
Selling expenses including sales commission 13 200

All selling expenses with the exception of sales commission are fixed.

REQUIRED

(a) Calculate for December 2022:

(i) budgeted total contribution

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) budgeted total profit

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(iii) break‑even point in units.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

© UCLES 2022 9706/22/O/N/22 [Turn over

 16

(b) State the formula for calculating the margin of safety.

...................................................................................................................................................

............................................................................................................................................. [1]

Additional information

Brady has a monthly target profit of $10 800.

REQUIRED

(c) Calculate how many units Brady would have to sell in December 2022 in order to achieve the
target profit.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

Brady is aware that he needs to make changes in order to achieve his monthly target profit and he
is proposing the following:

1 Improve the specification of the product and increase the selling price by $0.30 per unit.

2 The new materials will increase the direct material price by $0.40 per unit.

3 Reduce the direct labour rate by 5% per unit.

4 Reduce the sales commission to 8%.

5 Reduce the administrative overheads by $18 000 per annum by making one member of staff
redundant.

6 Increase the advertising budget by $2500 per month.

Brady is confident that these measures will produce additional sales of 1000 units each month.

© UCLES 2022 9706/22/O/N/22

 17

REQUIRED

(d) Prepare a budgeted marginal cost statement for December 2022 if Brady makes the proposed
changes.

Brady
Budgeted marginal cost statement for December 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Workings:

[10]

© UCLES 2022 9706/22/O/N/22 [Turn over

 18

(e) Advise Brady whether or not he should make the proposed changes. Justify your advice by
discussing the issues that he should consider.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

(f) State two advantages of cost–volume–profit analysis.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2022 9706/22/O/N/22

 19

(g) State two limitations of cost–volume–profit analysis.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 30]

© UCLES 2022 9706/22/O/N/22

 20

BLANK PAGE

Permission to reproduce items where third‑party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer‑related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/22/O/N/22

 Cambridge International AS & A Level
* 0 4 3 5 9 3 9 1 9 5 *

ACCOUNTING 9706/23
Paper 2 Structured Questions October/November 2022

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (CJ) 303163/3
© UCLES 2022 [Turn over
 2

1 Reece, a sole trader, does not maintain a full set of accounting records. He has provided the
following information for the year ended 30 June 2022.

30 June 2022 1 July 2021

$ $
Cash 110 240
Electricity accrued 380 420
Inventory 21 400 23 600
Machinery
Cost ? 18 480
Accumulated depreciation ? 9 685
Rent paid in advance 1 100 950
Trade payables 8 520 6 285
Trade receivables 20 620 23 580

Bank account summary

Receipts $ Payments $
Balance b/d 1 860 Credit suppliers 80 140
Credit customers 149 810 Rent 12 250
Cash sales banked 7 170 Wages 36 240
Sale of machinery 4 000 Electricity 3 680
General expenses 18 590
New machinery 9 200
Balance c/d 2 740
162 840 162 840

The following information is also available.

1 Total cash sales for the year were $15 280.

2 Reece had also paid cash for wages during the year but had not recorded this.

3 Reece took $450 per month drawings before the cash sales were banked. He had also taken
goods for his own use with a selling price of $350 after a mark-up of 25%.

4 During the year, machinery that had cost $6000 on 1 July 2019 was sold.

5 Machinery is to be depreciated at 15% per annum using the reducing balance method. A full
year’s depreciation is charged in the year of purchase, but none in the year of disposal.

© UCLES 2022 9706/23/O/N/22

 3

REQUIRED

(a) Calculate the total credit sales for the year ended 30 June 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(b) Calculate the total credit purchases for the year ended 30 June 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [1]

(c) Calculate the total cash paid for wages during the year ended 30 June 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(d) Calculate the depreciation charge for the year ended 30 June 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2022 9706/23/O/N/22 [Turn over

 4

Additional information

Inventory at 30 June 2022 included damaged goods which had cost $1800, but needed repairs
costing $350. The goods could then be sold for 30% less than the normal selling price of $2250.

REQUIRED

(e) Prepare the income statement for the year ended 30 June 2022.

Reece

Income statement for the year ended 30 June 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Workings:

[10]
© UCLES 2022 9706/23/O/N/22
 5

(f) State two causes of depreciation of non-current assets.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

(g) Explain, with reference to an accounting concept in each case, why:

(i) a business should make a provision for depreciation of non-current assets

Accounting concept

...........................................................................................................................................

Explanation

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) a business should make an adjustment for damaged inventory.

Accounting concept

...........................................................................................................................................

Explanation

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

© UCLES 2022 9706/23/O/N/22 [Turn over

 6

Additional information

Reece has been thinking of maintaining a full set of accounting records.

REQUIRED

(h) Advise Reece whether or not he should maintain a full set of accounting records. Justify your
answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2022 9706/23/O/N/22

 7

PLEASE TURN OVER

© UCLES 2022 9706/23/O/N/22 [Turn over

 8

2 Darius and Ewan are in partnership sharing profits and losses in the ratio 5 : 3.

The following balances were extracted from the partnership books of account at 31 July 2022.

$
Bank overdraft 12 700
Capital accounts
Darius 94 300
Ewan 68 300
Fixtures and fittings 44 000
Inventory 36 200
Property at valuation 127 000
Bank loan (2025) 24 000
Trade payables 14 200
Trade receivables 6 300

On 1 August 2022, the partners agreed to admit Karim into the partnership on the following terms.

1 Karim was to introduce total capital of $48 000. This consisted of fixtures and fittings valued at
$9500 with the balance to be introduced into the partnership bank account.

2 Future profits and losses were to be shared between Darius, Ewan and Karim in the ratio
5 : 3 : 2.

3 Goodwill was to be valued at $36 800. Goodwill was not to be retained in the books of account.

4 Property was to be revalued to $135 000.

5 Obsolete inventory of $2000 was to be written off.

REQUIRED

(a) Prepare, on page 9, the partners’ capital accounts on 1 August 2022 following the admission
of Karim.

© UCLES 2022 9706/23/O/N/22

 Capital accounts

Darius Ewan Karim Darius Ewan Karim

© UCLES 2022
$ $ $ $ $ $
9

9706/23/O/N/22
Workings:

[5]

[Turn over
 10

(b) Prepare the partnership statement of financial position at 1 August 2022 following the
admission of Karim. Use the space provided on page 11 for your workings.

Darius, Ewan and Karim

Statement of financial position at 1 August 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2022 9706/23/O/N/22

 11

Workings:

[6]

Additional information

Partners may allow interest on capital and charge interest on drawings.

REQUIRED

(c) State one advantage of allowing interest on capital to a:

partner ......................................................................................................................................

...................................................................................................................................................

partnership ................................................................................................................................

...................................................................................................................................................
[2]

(d) Explain one reason why a partnership may charge interest on drawings.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]

© UCLES 2022 9706/23/O/N/22 [Turn over

 12

3 R Limited is a retail company.

REQUIRED

(a) Explain the meaning of 8% debentures (2025–2026).

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

Additional information

The directors of R Limited provided the following information at 1 October 2021.

$000
Building at valuation 120
Retained earnings 315
Revaluation reserve 40
Share capital (ordinary shares of $0.50 each) 1 200
Share premium 145

The following transactions took place during the year ended 30 September 2022.

31 December 2021 Paid a final dividend of $0.06 per share.

31 March 2022 Made a rights issue of one ordinary share for every four shares held at a
price of $0.65. The issue was fully subscribed.

31 July 2022 Made a bonus issue of one ordinary share for every six shares held. The
directors decided to leave the reserves in the most flexible form.

31 August 2022 Paid an interim dividend of $0.04 per share.

30 September 2022 The building, which had originally cost $80 000, was revalued to $115 000.

The profit for the year ended 30 September 2022 was $87 000.

© UCLES 2022 9706/23/O/N/22

 13

REQUIRED

(b) Prepare the statement of changes in equity for the year ended 30 September 2022.

R Limited
Statement of changes in equity for the year ended 30 September 2022

Share Share Revaluation Retained

capital premium reserve earnings Total
$000 $000 $000 $000 $000

At 1 October 2021 1 200 145 40 315 1 700

At 30 September 2022

Workings:

[10]

(c) Explain why dividends proposed at the end of a financial year are not shown in a company’s
statement of financial position.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]

© UCLES 2022 9706/23/O/N/22 [Turn over

 14

4 X Limited is a manufacturing business operating two production departments, Machining and

Finishing and two service departments, Stores and Maintenance.

All overhead costs have already been allocated to the departments. The service department costs
are to be apportioned to production departments as follows:

Stores department: in proportion to the number of parts orders

Maintenance department: in proportion to the number of maintenance call-outs.

The following budgeted information was available for the year ended 30 September 2022.

Machining Finishing Maintenance

department department department
Direct labour hours 11 500 54 600 –
Machine hours 48 000 12 000 –
Number of parts orders 6 400 1 800 300
Number of maintenance call-outs 120 30 –

REQUIRED

(a) Complete the table to apportion the service department costs to production departments.

Production departments Service departments

Total Machining Finishing Stores Maintenance

$ $ $ $ $
Allocated
803 900 288 500 515 400 – –
overheads

Indirect labour 459 000 106 000 52 000 70 000 231 000

Other indirect costs 360 000 114 000 56 000 78 000 112 000

Total overheads 1 622 900 508 500 623 400 148 000 343 000

[4]

© UCLES 2022 9706/23/O/N/22

 15

(b) Calculate, to two decimal places, a suitable overhead absorption rate for each production
department.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

Additional information

The actual results for the year ended 30 September 2022 were as follows:

Machining Finishing
Total overheads $910 000 $705 000
Direct labour hours 12 100 51 800
Machine hours 49 200 10 900

REQUIRED

(c) Calculate the over-absorption or under-absorption of overheads for each production

department.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

(d) State two possible reasons why a business may under absorb overheads.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]
Additional information

The total budgeted direct labour cost for the production departments for the year ended
30 September 2022 was $594 900.

REQUIRED

(e) Calculate the budgeted hourly direct labour rate for the production departments.

............................................................................................................................................. [1]

© UCLES 2022 9706/23/O/N/22 [Turn over

 16

Additional information

X Limited have been asked to supply a quotation for a customer who requires 50 units of a product.
Each unit would require the following:

Direct material 4 kilos at $2.45 per kilo

Direct labour Machining department – 3 hours
Finishing department – 4.5 hours
Overheads Machining department
2 direct labour hours
1.25 machine hours
Finishing department
2.5 direct labour hours
1.75 machine hours

The machining department is working at full capacity, so an overtime premium of 25% would be
required to complete this work.

X Limited would require a profit margin of 25% on this work.

REQUIRED

(f) Prepare a statement to show the total selling price that X Limited will quote to the customer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

(g) Explain why a business apportions service department costs to production departments.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]
© UCLES 2022 9706/23/O/N/22
 17

Additional information

The directors of X Limited have been advised that they should change from a departmental
overhead absorption rate to one factory-wide rate. They are concerned that this may affect the
profits of the business.

REQUIRED

(h) Advise the directors whether or not they should make this change. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2022 9706/23/O/N/22

 18

BLANK PAGE

© UCLES 2022 9706/23/O/N/22

 19

BLANK PAGE

© UCLES 2022 9706/23/O/N/22

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/23/O/N/22

 Cambridge International AS & A Level
* 2 7 2 8 7 0 6 7 1 6 *

ACCOUNTING 9706/22
Paper 2 Fundamentals of Accounting February/March 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages.

DC (LK) 311559/5
© UCLES 2023 [Turn over
 2

1 Nibras and Raif are in partnership. They own a car hire business.

The following balances were available at 31 December 2022.

Debit Credit
$ $
Allowance for irrecoverable debts 380
Cash at bank 7 370
Capital accounts
Nibras 180 000
Raif 120 000
Current accounts
Nibras 5 950
Raif 4 760
Drawings
Nibras 19 200
Raif 12 140
Insurance 15 400
Interest on loan from Raif 750
Loan from Raif 9 000
Motor vehicle expenses 12 420
Motor vehicles
Cost 144 000
Provision for depreciation 1 January 2022 33 200
Premises
Cost 220 000
Provision for depreciation 1 January 2022 44 000
Rent receivable 6 050
Repairs and maintenance 8 270
Revenue from car hire 88 300
Trade receivables 21 730
Wages and salaries 18 460
Totals 485 690 485 690

The following additional information is available.

1 Interest at 10% per annum on the loan from Raif is accrued for the last two months of the
year.

2 Insurance payments covered the period 1 January 2022 to 28 February 2023. Monthly
insurance costs have remained unchanged during this period.

3 The partners have agreed that the allowance for irrecoverable debts is no longer required.

4 Rent receivable by the partnership is $550 per month. Part of the premises have been rented
for the full year.

5 Motor vehicles are to be depreciated at 25% per annum using the reducing balance method.

6 Premises are to be depreciated by 2% per annum using the straight-line method.

© UCLES 2023 9706/22/F/M/23
 3

REQUIRED

(a) Prepare the statement of profit or loss for the year ended 31 December 2022. Use the space
on page 4 to show your workings.

Nibras and Raif

Statement of profit or loss for the year ended 31 December 2022

$ $

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2023 9706/22/F/M/23 [Turn over

 4

Workings:

[9]

© UCLES 2023 9706/22/F/M/23

 5

Additional information

Nibras and Raif agreed the following terms for the appropriation of profits and losses.

1 Interest on capital to be 10% per annum.

2 Nibras to receive a partnership salary of $6000 per annum.

3 Remaining profits and losses to be shared in the ratio Nibras:Raif, 3:2.

REQUIRED

(b) Prepare the appropriation account for the year ended 31 December 2022.

Nibras and Raif

Appropriation account for the year ended 31 December 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2023 9706/22/F/M/23 [Turn over

 6

Additional information

The partners would like to know what difference it would have made if they had operated without a
partnership agreement during the year ended 31 December 2022.

REQUIRED

(c) Calculate by how much Nibras’ current account balance at 31 December 2022 would
have been different if there had been no partnership agreement during the year ended
31 December 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [8]

© UCLES 2023 9706/22/F/M/23

 7

Additional information

The partners had considered charging interest on drawings as part of their agreement.

REQUIRED

(d) State one reason for including interest on drawings in a partnership agreement.

...................................................................................................................................................

............................................................................................................................................. [1]

(e) State the double entry for recording interest on drawings.

Debit .........................................................................................................................................

Credit ........................................................................................................................................
[2]

© UCLES 2023 9706/22/F/M/23 [Turn over

 8

Additional information

Nibras and Raif would like to expand their business but they require additional finance. They have
considered two options:

Option 1: Nibras to introduce additional capital by selling some personal investments

Option 2: Arrange a bank loan

REQUIRED

(f) Advise the partners which option they should choose. Justify your answer by discussing both
options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/22/F/M/23

 9

2 Jakoub owns a restaurant. The business’s financial year end is 31 December.

The business owns many small items of kitchen equipment. The following information is available.

1 On 1 January 2022 kitchen equipment was valued at $3450.

2 Additional kitchen equipment was purchased for cash, $1680, during the year ended
31 December 2022.

3 On 31 December 2022 kitchen equipment was valued at $3950.

REQUIRED

(a) Prepare the kitchen equipment account for the year ended 31 December 2022.

Kitchen equipment

$ $

[4]

(b) State two reasons why the reducing balance method of depreciation might be chosen by a
business for depreciating non-current assets.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2023 9706/22/F/M/23 [Turn over

 10

Additional information

On 1 January 2022, a new delivery vehicle was purchased in part exchange for the business’s
old delivery vehicle. A payment of $22 500 was made. The old delivery vehicle had originally cost
$24 000 when it was purchased on 1 January 2020. The old delivery vehicle was part exchanged
at net book value.

Delivery vehicles are depreciated by 25% per annum using the reducing balance method of
depreciation.

REQUIRED

(c) Prepare a journal entry to record the charge for depreciation of vehicles for the year ended
31 December 2022. A narrative is not required.

Journal

Dr Cr
$ $

Workings:

[5]

© UCLES 2023 9706/22/F/M/23

 11

(d) Define each of the following terms:

(i) capital expenditure

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) capital receipts.

...........................................................................................................................................

..................................................................................................................................... [1]

© UCLES 2023 9706/22/F/M/23 [Turn over

 12

Additional information

Jakoub is preparing his business’s financial statements for the year ended 31 December 2022.
The following additional information is available.

Payments $

Purchase of new ovens 5 600

Installation costs for new ovens 400
Repairs to electrical equipment 2 600
Maintenance of computer equipment 300
Extension to restaurant 85 000
Decoration of restaurant extension 3 200

Receipts $

Bank loan 25 000

Additional capital provided by Jakoub 40 000
Proceeds from the disposal of unwanted furniture 2 800

REQUIRED

(e) Calculate the total amount for each of the following:

(i) capital expenditure

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) capital receipts.

...........................................................................................................................................

..................................................................................................................................... [1]

[Total: 15]

© UCLES 2023 9706/22/F/M/23

 13

3 Haniya wished to compare some ratios for her business. The following information is available for
the year ended 30 November 2021.

Acid test ratio 0.8:1

Trade receivables turnover (days) 34 days
Trade payables turnover (days) 36 days

The following extract was taken from the statement of financial position at 30 November 2022.

$
Current assets
Inventory 11 500
Trade receivables 9 600
Cash at bank 6 250
27 350
Current liabilities
Bank loan 10 000
Other payables 1 720
Trade payables 6 580
18 300

For the year ended 30 November 2022 credit sales totalled $94 800 and credit purchases totalled
$88 300.

REQUIRED

(a) Calculate each of the following ratios for the year ended 30 November 2022.

(i) Acid test ratio (to two decimal places)

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) Trade receivables turnover (days)

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

© UCLES 2023 9706/22/F/M/23 [Turn over

 14

(iii) Trade payables turnover (days)

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(b) Explain the importance of the acid test ratio to a business.

...................................................................................................................................................

............................................................................................................................................. [2]

(c) Identify two ways in which the owner of a business could improve the acid test ratio.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(d) Discuss the changes that have occurred in the trade receivables turnover (days) ratio
and the trade payables turnover (days) ratio for Haniya’s business during the year ended
30 November 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 15]

© UCLES 2023 9706/22/F/M/23

 15

4 G Limited manufactures a single product type at one of its factories. The company uses marginal
costing.

REQUIRED

(a) Define each of the following terms:

(i) contribution per unit

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) stepped costs

...........................................................................................................................................

..................................................................................................................................... [1]

(iii) margin of safety.

...........................................................................................................................................

..................................................................................................................................... [1]

(b) State two benefits of using marginal costing.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2023 9706/22/F/M/23 [Turn over

 16

Additional information

The following budgeted information is available for September 2022.

Selling price per unit $59

Direct materials per unit 8 kg at $2.70 per kg
Direct labour per unit 4 hrs at $8.20 per hour
Fixed costs per month $18 400

All units produced are sold.

REQUIRED

(c) Calculate the monthly break-even point in units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

Additional information

The directors hope to increase demand by improving the product.

The following information is available.

1 Current production of the original product is 7200 units per month. This represents 90% of
normal capacity.

2 Direct materials will cost $3 per kg for the improved product. Each unit of the improved
product will require 15% more material.

3 The selling price of the improved product will be $65.

4 It is expected that monthly production will increase by 20%.

5 The factory can operate in overtime conditions. Direct labour is paid 1.5 times the normal rate
in overtime conditions.

6 An additional machine costing $40 000 will be required. Non-current assets are depreciated
by 15% per annum.

© UCLES 2023 9706/22/F/M/23

 17

REQUIRED

(d) Prepare a marginal costing statement to show the monthly forecast profit if the improved
product is made.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2023 9706/22/F/M/23 [Turn over

 18

Additional information

At a second factory the company manufactures another single product type. The following
information is available.

$
Direct material per unit 13
Direct labour per unit 11
Other variable costs per unit 3
Selling price per unit 42
Fixed costs per week 12 000

The factory uses 10 machines, each producing 300 units per week. The directors are aware that
problems have arisen with 4 machines which require urgent repairs. These machines will be taken
out of production for 8 weeks.

The directors are considering two options.

Option A: Buy in goods

The goods will be provided by an overseas supplier at $34 per unit.
Total delivery costs of $4200 for 8 weeks will be charged.
The supplier can only provide 75% of the lost production.

Option B: Hire replacement machines

Only two replacement machines are available at a cost of $150 per machine per week.
The machines will only be available for 7 weeks.
Staff will require training on the replacement machines at a total cost of $700.

REQUIRED

(e) Calculate the profit for the 8 weeks for each option.

(i) Option A

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [4]

© UCLES 2023 9706/22/F/M/23

 19

(ii) Option B

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [4]

© UCLES 2023 9706/22/F/M/23 [Turn over

 20

(f) Advise the directors which option they should choose. Justify your answer by considering
both options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/22/F/M/23

 Cambridge International AS & A Level
* 3 5 6 0 1 0 7 9 3 7 *

ACCOUNTING 9706/21
Paper 2 Fundamentals of Accounting May/June 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (RW) 311558/3
© UCLES 2023 [Turn over
 2

1 Mima is the owner of a wholesale business, Mima Supplies.

During the year ended 31 December 2022 the business owned the following delivery vehicles.

Date of purchase Cost

$
Vehicle A 1 January 2019 28 000
Vehicle B 1 January 2020 30 000
Vehicle C 1 July 2022 32 000

Delivery vehicles are depreciated at 25% per annum using the straight‑line method on a
month‑by‑month basis. No depreciation is provided in the year of sale.

Vehicle A was sold for $5200 on 30 June 2022.

REQUIRED

(a) Calculate the profit or loss on the disposal of Vehicle A.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(b) Calculate the total depreciation charge on delivery vehicles for the year ended
31 December 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2023 9706/21/M/J/23

 3

Additional information

Mima has also supplied the following information for the year ended 31 December 2022.

1
$
Advertising 6 580
Allowance for irrecoverable debts at 1 January 2022 1 390
Cost of sales 483 900
Furniture and equipment at 1 January 2022
Cost 36 800
Provision for depreciation 18 200
Insurance 7 380
Interest receivable 1 200
Rent of warehouse 33 480
Returns inwards 4 420
Revenue 726 310
Vehicle running costs 8 580
Wages 63 480

2 Advertising includes the cost of a six‑month campaign, $4200, which began on

1 September 2022.

3 The value of inventory at 31 December 2022 was understated by $4940 when calculating the
cost of sales of $483 900.

4 Six months’ interest at 10% per annum was received on a bank deposit of $24 000. The deposit
was made on 1 March 2022. The next receipt of interest took place on 28 February 2023.

5 The allowance for irrecoverable debts is to be maintained at 5% of trade receivables. At

31 December 2022, trade receivables totalled $31 300.

6 Depreciation is to be provided on furniture and equipment at 15% per annum using the
reducing balance method of depreciation.

7 Wages, $1620, were accrued at 31 December 2022.

© UCLES 2023 9706/21/M/J/23 [Turn over

 4

REQUIRED

(c) Prepare the statement of profit or loss for the year ended 31 December 2022. Use the space
provided on the next page to show your workings.

Mima Supplies
Statement of profit or loss for the year ended 31 December 2022

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2023 9706/21/M/J/23

 5

Workings:

[13]

(d) Explain the importance of making an allowance for irrecoverable debts in a business’s
financial statements.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

Mima would like to assess her business’s liquidity position at 31 December 2022.

REQUIRED

(e) Identify two ratios which could be used to assess a business’s liquidity position.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

© UCLES 2023 9706/21/M/J/23 [Turn over

 6

Additional information

Mima has noticed that her business’s rate of inventory turnover has decreased since last year.
She is considering two options to increase the rate of inventory turnover.

Option A: reduce inventory levels.

Option B: reduce selling prices by 2% and increase the annual advertising budget by 5%.

REQUIRED

(f) Advise Mima which option she should choose. Justify your choice by considering both
options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/21/M/J/23

 7

2 Param uses control accounts to verify the accuracy of his business’s sales and purchases ledgers.

He provided the following information for the month ended 30 April 2023 relating to trade
receivables.

$
Sales ledger balances, 1 April 2023
Debit 14 890
Credit 610
Contra entries with the purchases ledger 1 850
Credit sales 153 480
Credit customers’ cheques returned 880
Discounts allowed 4 830
Interest charged on overdue accounts 540
Irrecoverable debts written off 1 830
Receipts from credit customers 148 200
Returns inwards 2 790

There were no credit balances in the sales ledger on 30 April 2023.

REQUIRED

(a) Prepare the sales ledger control account for April 2023. Dates are not required.

Sales ledger control account

$ $

[6]
© UCLES 2023 9706/21/M/J/23 [Turn over
 8

(b) Identify the books of prime entry for each of the following:

(i) discounts allowed

..................................................................................................................................... [1]

(ii) irrecoverable debts written off.

..................................................................................................................................... [1]

(c) State three benefits of maintaining control accounts.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

© UCLES 2023 9706/21/M/J/23

 9

Additional information

The balance of the sales ledger control account at 30 April 2023 did not agree with the total of the
individual customer account balances at this date.

The following errors were discovered, some of which affected the sales ledger control account
and some of which affected the customer account balances.

1 Returns inwards of $720 had been credited to the account of Rafiq Stores instead of Raif
Stores.

2 A sales invoice for $820 had been omitted from the books of account.

3 The balance of a credit customer’s account, $430, had been brought down as $340.

4 The total of the returns inwards journal had been understated by $470.

5 Interest of $40 charged on an overdue account had been correctly entered in the journal but
had been credited to the customer’s account.

REQUIRED

(d) Calculate the revised sales ledger control account balance at 30 April 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

[Total: 15]

© UCLES 2023 9706/21/M/J/23 [Turn over

 10

BLANK PAGE

© UCLES 2023 9706/21/M/J/23

 11

3 The following extract from J Limited’s statement of financial position at 1 January 2022 is available.

$
Equity
Issued capital: ordinary shares of $0.25 each 600 000
Share premium 175 000
Retained earnings 54 000
Total equity 829 000
Non‑current liabilities
7% Debentures (2028) 200 000

REQUIRED

(a) State two features of revenue reserves which do not apply to capital reserves.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

The directors wished to raise additional finance. On 1 April 2022 the company made a rights issue
of 2 ordinary shares for every 3 shares held at a price of $0.35 per share. The issue was fully
subscribed.

REQUIRED

(b) Calculate the amount raised by the rights issue of shares.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2023 9706/21/M/J/23 [Turn over

 12

Additional information

The directors had considered making an issue of debentures rather than a rights issue.

(c) Identify two reasons why the directors of J Limited might prefer to raise additional finance
through a rights issue rather than by issuing debentures.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

The directors paid an interim dividend of $0.12 per share on 1 July 2022.

REQUIRED

(d) Calculate the total amount of the interim dividend.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

The company made a profit of $535 000 for the year ended 31 December 2022.

REQUIRED

(e) Prepare the statement of changes in equity for the year ended 31 December 2022.

J Limited
Statement of changes in equity at 31 December 2022

Share capital Share Retained Total

premium earnings
$ $ $ $

[6]

[Total: 15]
© UCLES 2023 9706/21/M/J/23
 13

4 D Limited has two production departments and two service departments at one of its factories
where absorption costing is used. Some forecast factory overheads have already been allocated
and apportioned as follows:

Production departments Service departments

Cutting Assembly Maintenance Canteen
$ $ $ $
Factory overheads 223 480 217 980 45 270 36 260

The following forecast factory overheads are still to be apportioned.

$
Depreciation of machinery 48 000
Power 40 200

Canteen department overheads should be reapportioned on the basis of the number of employees.
Maintenance department overheads should be reapportioned on the basis of the number of
machines in production departments.

The following data is available.

Production departments Service departments

Cutting Assembly Maintenance Canteen
Machinery at carrying value $90 000 $66 000 $18 000 $6 000
Number of machines 43 27
Kilowatt hours 1 800 1 500 100 200
Number of employees 27 18 5
Budgeted machine hours 40 000 33 500
Budgeted direct labour hours 23 000 62 500

© UCLES 2023 9706/21/M/J/23 [Turn over

 14

REQUIRED

(a) Complete the following table to show the apportionment of factory overheads and the
reapportionment of service department overheads.

Production departments Service departments

Cutting Assembly Maintenance Canteen
$ $ $ $
Factory overheads 223 480 217 980 45 270 36 260
Depreciation of machinery
Power
Total overheads
Reapportionment
Subtotal
Reapportionment
Total overheads
[5]

(b) Calculate, to two decimal places, an overhead absorption rate for each production
department, using a suitable basis.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

© UCLES 2023 9706/21/M/J/23

 15

Additional information

The following information is available.

Cutting department Assembly department

Direct labour rate per hour $10.90 $8.20
Machine hours per unit 8 6
Labour hours per unit 3 4

Direct materials cost $6.95 per unit.

Selling prices are set to achieve a profit margin of 25%.

A customer has placed an order for 40 units.

REQUIRED

(c) Calculate the selling price to be quoted for this order of 40 units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2023 9706/21/M/J/23 [Turn over

 16

(d) State two causes of under absorption of overheads.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

At the other factory a single product, Product Exe, is currently being made. Marginal costing is
used at this factory.

The following information is available.

Selling price per unit $48

Contribution per unit $13
Direct labour 2.5 hours per unit at $10 per hour
Fixed costs $96 000 per annum
Factory capacity 28 000 labour hours per year
Current production level 80% of factory capacity

All units produced are sold.

REQUIRED

(e) Calculate the profit made each year from Product Exe.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2023 9706/21/M/J/23

 17

Additional information

The directors plan to make a new product, Product Wye, at this factory at the request of an
important customer. The following details are available.

1 The factory will be able to operate at full capacity.

2 All units produced will be sold.

3 Product Wye will have a selling price of $64 per unit and a contribution of $8 per unit.

4 Product Wye will require direct labour at $10 per hour for 1.5 hours per unit.

5 The customer requires 10 000 units of Product Wye each year. The customer will only accept
this quantity each year.

6 In order to complete the customer’s order, production of Product Exe will be reduced.

7 Some new machinery will be required costing $36 000. Machinery is depreciated by 20% per
annum.

8 A loan of $20 000 at 5% per annum interest will be required to finance the purchase of the
new machinery.

© UCLES 2023 9706/21/M/J/23 [Turn over

 18

REQUIRED

(f) Calculate the total profit from both products which will be made in the first year if this plan is
put into operation.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2023 9706/21/M/J/23

 19

(g) Advise the directors whether this plan should be put into operation. Justify your answer by
considering both financial and non‑financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/21/M/J/23

 20

BLANK PAGE

Permission to reproduce items where third‑party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer‑related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/21/M/J/23

 Cambridge International AS & A Level
* 8 5 5 4 0 5 4 7 6 6 *

ACCOUNTING 9706/22
Paper 2 Fundamentals of Accounting May/June 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (CE) 311673/3
© UCLES 2023 [Turn over
 2

1 J Limited’s financial year ended on 30 September 2022. The following balances were available on
this date.

$
8% Debentures (2025) 100 000
Administrative expenses 28 000
Distribution costs 57 000
Dividends paid 21 000
Finance costs 4 000
Inventory at 1 October 2021 54 000
Issued share capital: shares of $0.50 each at 420 000
1 October 2021
Non-current assets at 1 October 2021
Cost 1 300 000
Provision for depreciation 260 000
Purchases 460 000
Retained earnings at 1 October 2021 125 000
Revenue 869 000
Share premium at 1 October 2021 210 000
Trade receivables 83 000

The following additional information is available.

1 Inventory at 30 September 2022 was valued at $57 000.

2 The balance of the account of a credit customer, $3000, should be written off as irrecoverable
and charged to administrative expenses.

3 The directors have agreed to create an allowance for irrecoverable debts of 5% of trade
receivables. The allowance should be charged to administrative expenses.

4 Debenture interest for the second half of the year is outstanding.

5 Non-current assets should be depreciated at 20% per annum using the straight-line method.
Depreciation should be allocated as follows:

Administrative expenses 60%

Distribution costs 40%

© UCLES 2023 9706/22/M/J/23

 3

REQUIRED

(a) Prepare the statement of profit or loss for the year ended 30 September 2022. Use the space
provided to show your workings.

J Limited
Statement of profit or loss for the year ended 30 September 2022

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

..........................................................................................................................................................

Workings:

Administrative expenses

Distribution costs

[11]

© UCLES 2023 9706/22/M/J/23 [Turn over

 4

Additional information

The directors found that the following transaction had not been recorded in the books of account:

On 30 September 2022 the directors had made a bonus issue of 2 ordinary shares for every
3 shares held. The directors had decided to maintain reserves in their most flexible form.

REQUIRED

(b) Calculate the balance of retained earnings at 30 September 2022 following the bonus issue.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

(c) State one reason why the directors of a company might decide to make a bonus issue.

...................................................................................................................................................

............................................................................................................................................. [1]

(d) Explain one reason why trade payables and potential lenders might approve of a company
making a bonus issue.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

© UCLES 2023 9706/22/M/J/23

 5

(e) Identify three points the directors should consider when deciding whether to pay a dividend.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

© UCLES 2023 9706/22/M/J/23 [Turn over

 6

Additional information

The directors of J Limited wish to improve the company’s liquidity. They will choose one of the
following options.

Option 1: allow trade receivables a cash discount of 5% for payment within 20 days.

Option 2: make all purchases on credit from a different supplier who is prepared to offer a trade
discount.

REQUIRED

(f) Advise the directors which option they should choose. Justify your choice by discussing both
options.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/22/M/J/23

 7

2 Rudra prepares bank reconciliation statements for his business at the end of each month.

REQUIRED

(a) State three reasons why it is important to a business to prepare bank reconciliation statements
at regular intervals.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

Additional information

On 31 March 2022 the balance shown in the business’s cash book (bank columns) was
$3060 overdrawn. This did not agree with the balance shown on the business’s bank statement on
this date. The difference in the two balances was accounted for by the following:

1 Rudra had omitted to record a direct debit for water charges of $442.

2 There were unpresented cheques: TK Stores $482, RH Supplies $1043.

3 Bank charges, $85, appeared on the bank statement but had not yet been recorded in the
cash book.

4 Rudra had debited the cash book with cash takings, $893, but this had not yet been recorded
by the bank.

5 A cheque payment to Peter, $320, had been correctly recorded in the bank statement, but
had been entered in the cash book as $230.

6 The bank statement included an entry for a dishonoured cheque for $582 received by Rudra
from Jamia. No entries had been made in the cash book to record the dishonoured cheque.

7 An error had been made in the cash book. Interest received, $225, had been correctly
recorded in the bank statement, but had been credited in the cash book.

© UCLES 2023 9706/22/M/J/23 [Turn over

 8

REQUIRED

(b) Prepare the cash book to show the updated balance at 31 March 2022. Dates are not
required.

Cash book (bank columns)

$ $

[6]

(c) Prepare a bank reconciliation statement to show the bank statement balance at 31 March 2022.

Rudra
Bank reconciliation statement at 31 March 2022

$ $
Balance as per updated cash book

[4]

© UCLES 2023 9706/22/M/J/23

 9

(d) Define each of the following terms:

(i) unpresented cheque

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) dishonoured cheque.

...........................................................................................................................................

..................................................................................................................................... [1]

[Total: 15]

© UCLES 2023 9706/22/M/J/23 [Turn over

 10

3 Khaled opened his business on 1 January 2021 with a capital of $41 000. He did not maintain a
full set of accounting records.

Khaled wishes to know his profit or loss for the year ended 31 December 2021. He has provided
the following information.

1 Assets and liabilities at 31 December 2021

$
Bank overdraft 3 470
Bank loan 8 500
Inventory 18 450
Non-current assets (carrying value) 27 500
Trade payables 9 940
Trade receivables 7 230

2 Non-current assets include a motor vehicle. This vehicle had been privately owned by Khaled
but during 2021 it was transferred to the business at a valuation of $9000.

3 During 2021 Khaled’s drawings were $14 870.

REQUIRED

(a) Calculate the business’s profit or loss for the year ended 31 December 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2023 9706/22/M/J/23

 11

Additional information

During 2022 Khaled kept more detailed records but could not provide a figure for revenue. The
following information is available at 31 December 2022.

$
Inventory at 31 December 2022 16 250
Purchases 148 300

Khaled’s policy is to mark-up all goods by 50%.

REQUIRED

(b) Calculate revenue for the year ended 31 December 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

(c) State two advantages to a business of maintaining a full set of accounting records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(d) State two disadvantages to a business of maintaining a full set of accounting records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

© UCLES 2023 9706/22/M/J/23 [Turn over

 12

4 K Limited is a manufacturing company which has two production departments and one service
department at one of its factories. At this factory absorption costing is used.

REQUIRED

(a) Define each of the following terms:

(i) cost centre

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) allocation of overheads

...........................................................................................................................................

..................................................................................................................................... [1]

(iii) apportionment of overheads.

...........................................................................................................................................

..................................................................................................................................... [1]

Additional information

The following budgeted information is available for the year ended 31 August 2022.

Production departments
Cutting Finishing Service department
$ $ $
Factory overheads 273 820 189 240 31 350

The service department’s overheads are reapportioned on the basis of the number of employees
in each production department.

Cutting department Finishing department

Number of employees 125 84

© UCLES 2023 9706/22/M/J/23

 13

REQUIRED

(b) Reapportion the service department’s overheads to the production departments.

Cutting department Finishing department Service department

$ $ $
Factory overheads 273 820 189 240 31 350
Reapportionment
Total overheads
[2]

Additional information

The following forecast information is available for the year ended 31 August 2022.

Cutting Finishing
department department
Direct labour hours per annum 9 400 7 420
Machine hours per annum 17 900 3 840

REQUIRED

(c) Calculate an appropriate overhead absorption rate, correct to two decimal places, for each
production department:

(i) Cutting department

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Finishing department.

...........................................................................................................................................

..................................................................................................................................... [1]

© UCLES 2023 9706/22/M/J/23 [Turn over

 14

Additional information

The actual results for the year ended 31 August 2022 were as follows:

Cutting Finishing
department department
Factory overheads $312 600 $193 400
Direct labour hours 9 800 7 210
Machine hours 17 200 4 220

(d) Calculate the under-absorption or over-absorption of factory overheads for each production
department for the year ended 31 August 2022.

(i) Cutting department

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

(ii) Finishing department

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

© UCLES 2023 9706/22/M/J/23

 15

Additional information

At a second factory marginal costing is used.

A single product, Product X, is manufactured. However, demand for this product has fallen recently
due to increased competition.

The following information is available for Product X.

Per unit $
Direct materials 22
Direct labour 18
Contribution 20

Normal capacity is 14 000 units per month. The factory is currently operating at 75% of normal
capacity. All the units produced are sold. Fixed costs per month are $56 000.

(e) Calculate the profit for one month.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [1]

Additional information

The directors are considering two options to increase profits.

Option A:

1 Reduce the selling price per unit by 5%.

2 Run a six-month advertising campaign at a cost of $1100 per month.

3 Monthly sales are forecast to increase by 25% on current levels.

Option B

1 Discontinue manufacture of Product X.

2 Produce a different product, Product Y, with a selling price of $58 per unit.

3 It is forecast that demand will be such that the factory can operate at 110% normal capacity.

4 Direct material cost will increase by 10% per unit.

5 Direct labour costs will remain unchanged. However, workers will be paid an overtime
premium of 50% for all work over normal capacity.

6 Machinery will need some alterations which will cost $54 000. Non-current assets are
depreciated by 25% per annum.

7 The company will need to borrow $30 000 to finance the cost of the machinery alterations.
Interest at 6% per annum will be charged on this loan.
© UCLES 2023 9706/22/M/J/23 [Turn over
 16

REQUIRED

(f) Calculate the profit to be made on each option in the first month of production.

(i) Option A

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

(ii) Option B

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2023 9706/22/M/J/23

 17

(g) Advise the directors which option they should choose. Justify your answer by considering
both financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/22/M/J/23

 18

BLANK PAGE

© UCLES 2023 9706/22/M/J/23

 19

BLANK PAGE

© UCLES 2023 9706/22/M/J/23

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/22/M/J/23

 Cambridge International AS & A Level
* 4 9 4 7 2 1 0 0 8 4 *

ACCOUNTING 9706/23
Paper 2 Fundamentals of Accounting May/June 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 16 pages.

DC (RW) 311555/4
© UCLES 2023 [Turn over
 2

1 Hamza owns a retail business with a financial year end of 31 December.

On 31 December 2022 inventory was valued at $15 330. However, this figure included 30 damaged
items which had a cost price of $32 each. Of the damaged items, 23 will be scrapped with no
value. The remaining 7 items will require repairs costing a total of $126 before being sold at the
normal price of $48 each.

REQUIRED

(a) Explain, with reference to an accounting concept, how damaged inventory should be valued.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(b) Calculate the corrected valuation of inventory at 31 December 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2023 9706/23/M/J/23

 3

Additional information

The following information has been extracted from the books of account at 31 December 2022.

Dr Cr
$ $
Administrative expenses 14 380
Carriage inwards 1 720
Carriage outwards 3 860
Discounts 840 620
Furniture and equipment
Cost 36 000
Provision for depreciation 11 800
Inventory at 1 January 2022 16 780
Insurance 4 320
Purchases 182 770
Rent payable 17 000
Returns 5 460 4 810
Revenue 299 490
Trade receivables 18 460
Wages 37 330

At 31 December 2022:

1 No record had been made of goods taken by the owner for his own use, cost $550.

2 The balance of $760 on a credit customer’s account is to be written off as irrecoverable.

3 An allowance for irrecoverable debts of 5% is to be created based on the amount outstanding

from credit customers.

4 Rent of $5100 is paid at the end of every three months. Rent for the three months ending
31 January 2023 is accrued.

5 The policy is to depreciate furniture and equipment by 20% per annum using the straight‑line
method on a month‑by‑month basis. However, the furniture and equipment account includes
equipment purchased during the year that cost $6500 and on which depreciation of $650 has
not yet been charged.

© UCLES 2023 9706/23/M/J/23 [Turn over

 4

REQUIRED

(c) Prepare the statement of profit or loss for the year ended 31 December 2022. Use the space
provided on page 5 for your workings.

Hamza
Statement of profit or loss for the year ended 31 December 2022

$ $

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

................................................................................................... ................... ...................

© UCLES 2023 9706/23/M/J/23

 5

Workings:

[15]

(d) State the double entry required to record goods withdrawn by an owner for personal use.

Debit: ........................................................................................................................................

Credit: .......................................................................................................................................
[2]

© UCLES 2023 9706/23/M/J/23 [Turn over

 6

Additional information

Hamza is concerned that the performance of the business has declined in recent months. He is
considering two options to increase the gross profit of the business.

Option A: Purchase goods from a different supplier who is prepared to offer a large trade discount.
Hamza would need to order in bulk, but less frequently than now.

Option B: Increase selling prices and increase monthly expenditure on advertising.

REQUIRED

(e) Advise Hamza which option he should choose. Justify your answer by considering both
financial and non‑financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/23/M/J/23

 7

2 Veda owns a retail business. Her accountant advised her to prepare a trial balance.

REQUIRED

(a) State two benefits of preparing a trial balance.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

On 31 March 2023 Veda prepared a trial balance but the totals did not agree. The debit column
totalled $84 050 and the credit column totalled $83 350. The difference was posted to a suspense
account.

The following errors were identified and corrected after which the trial balance totals agreed.

1 A payment of $740 to Opal Stores was recorded in the account of Opal Wholesale.

2 Sales returns of $340 from Kali had been correctly recorded in the sales returns journal, but
$430 had been posted to the debit side of Kali’s account.

3 The discount columns in the cash book had not been posted to the general ledger. Discounts
allowed totalled $530 and discounts received totalled $370.

4 A cheque for $560 received from W Limited had been dishonoured. The dishonoured cheque
was entered correctly in the cash book but had been posted as $650 to the customer’s
account.

© UCLES 2023 9706/23/M/J/23 [Turn over

 8

REQUIRED

(b) Prepare journal entries to correct each of the errors. Dates and narratives are not required.

Journal

Dr Cr
Account
$ $

[7]

(c) Prepare the suspense account at 31 March 2023. Dates are not required.

Suspense account

$ $

[4]

(d) Define the term ‘error of principle’.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]
© UCLES 2023 9706/23/M/J/23
 9

3 On 1 January 2022 the directors of J Limited made a bonus issue of two ordinary shares for every
three ordinary shares held. The following is an extract from the company’s statement of financial
position immediately after the bonus issue.

Equity $
Ordinary shares of $0.50 each 1 000 000
Retained earnings 120 000
Total equity 1 120 000

The directors financed the issue 60% from the share premium account and the remainder from
retained earnings.

REQUIRED

(a) Prepare an extract from the statement of financial position immediately before the bonus
issue, showing the equity section.

Equity $
Ordinary shares of $0.50 each
Share premium
Retained earnings
Total equity

Workings:

[5]

© UCLES 2023 9706/23/M/J/23 [Turn over

 10

Additional information

J Limited’s financial year ends on 31 March. On 31 March 2021 the directors paid an annual
ordinary share dividend of 20%. However, on 31 March 2022 the directors decided that the annual
ordinary share dividend would amount to $0.05 per share.

Hassan is a shareholder in the company. He owned 7200 shares before the bonus issue on
1 January 2022.

REQUIRED

(b) Calculate the change in the amount of dividend received by Hassan, comparing the dividend
at 31 March 2022 with the dividend at 31 March 2021.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

(c) State two differences between capital reserves and revenue reserves.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(d) State three reasons why the directors of a company might reduce the total dividends payable.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 15]

© UCLES 2023 9706/23/M/J/23

 11

4 V Limited is a manufacturing company which uses marginal costing.

REQUIRED

(a) Define:

marginal cost

...................................................................................................................................................

...................................................................................................................................................

contribution

...................................................................................................................................................

...................................................................................................................................................

break‑even point.

...................................................................................................................................................

...................................................................................................................................................
[3]

Additional information

The following information is available for a single type of product made at one of the company’s
factories.

Per unit $
Selling price 52
Direct materials 16
Direct labour 18

Fixed costs per month are $36 900. Maximum output per month is 2500 units. The factory operates
at full capacity.

REQUIRED

(b) Calculate the break‑even point:

(i) in units

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [2]

(ii) in sales value.

...........................................................................................................................................

..................................................................................................................................... [1]
© UCLES 2023 9706/23/M/J/23 [Turn over
 12

Additional information

The directors plan to increase factory capacity to meet increased demand. The following details
are available.

1 Factory capacity will be increased by 15%.

2 Additional machinery will be required at a cost of $72 000.

3 Machinery is depreciated at 20% per annum on cost.

4 The directors will apply for a bank loan of $60 000 at 8% per annum interest to finance the
cost of the additional machinery.

5 Direct materials will cost less per unit as a result of buying in greater bulk. Suppliers currently
give a 20% trade discount but will give a 25% trade discount in future.

6 Direct labour costs and selling price will remain unchanged.

REQUIRED

(c) Calculate the increase in the monthly margin of safety in units, assuming all production is
sold.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2023 9706/23/M/J/23

 13

Additional information

V Limited produces a different single type of product at another factory.

The following details are available:

Selling price per unit $26

Contribution per unit $8
Fixed costs per month $52 000
Factory capacity per month 18 000 units

Currently the factory is operating at 85% capacity. All products are sold to regular customers.

The directors are considering accepting an order from a new customer. The following details are
available:

1 The order is for 4200 units per month.

2 The customer is considering making a regular order for this quantity.

3 The customer wishes the product to be packaged differently. This will add $0.50 per unit to
variable costs and will require investment in new machinery, adding $1000 per month to fixed
costs.

4 The customer has offered to pay $24 per unit.

The directors are considering two options.

Option A: Reject the order from the new customer.

Option B: Accept the order from the new customer, operate the factory at full capacity and reduce
the number of units supplied to regular customers.

© UCLES 2023 9706/23/M/J/23 [Turn over

 14

REQUIRED

(d) Calculate the profit per month to be made under each option.

(i) Option A

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Option B

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [5]

© UCLES 2023 9706/23/M/J/23

 15

(e) Advise the directors which option they should choose. Justify your answer by considering
both financial and non‑financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2023 9706/23/M/J/23 [Turn over

 16

(f) Explain two advantages to a business of using absorption costing.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

[Total: 30]

Permission to reproduce items where third‑party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer‑related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/23/M/J/23

 Cambridge International AS & A Level
* 2 1 6 8 6 0 6 4 0 6 *

ACCOUNTING 9706/21
Paper 2 Fundamentals of Accounting October/November 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 16 pages. Any blank pages are indicated.

DC (LK) 316871/4
© UCLES 2023 [Turn over
 2

1 Laila, a retailer, did not maintain a full set of accounting records for her business. She has provided
the following information for the year ended 30 September 2023.

Balances at 1 October 2022

$
Inventory 12 030
Non-current assets at carrying value 22 180
Other payables: light and heat 210
Other receivables: insurance 480
Trade payables 3 840
Trade receivables 4 540

Summary of bank account for the year ended 30 September 2023

$ $
Receipts: trade receivables 55 390 Balance b/d 1 220
Sale of non-current assets 860 Payments: trade payables 46 280
Balance c/d 1 170 Insurance 2 560
Light and heat 3 510
Drawings 3 850
57 420 57 420
Balance b/d 1 170

The following information is also available at 30 September 2023.

1 Laila has started to prepare her financial statements for the year ended 30 September 2023.
The following figures are available to transfer to the statement of profit or loss with no
adjustment.

$
Insurance 2 720
Light and heat 3 880
Loss on disposal of non-current asset 120

2 All sales are made at a mark-up of 25%.

3 All sales and purchases are made on credit.

4 The balance of trade receivables at 30 September 2023 was $3650.

5 There were no additions to non-current assets during the year.

6 All non-current assets are to be depreciated at 10% per annum using the reducing balance
method.

7 Laila was unable to physically count the inventory at 30 September 2023. The inventory was
valued at $14 400 on 4 October 2023.

8 Between 1 October 2023 and 4 October 2023, Sales were $3400 and Purchases were $1850.

© UCLES 2023 9706/21/O/N/23

 3

(a) Calculate the value of closing inventory at 30 September 2023.

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(b) Prepare the statement of profit or loss for the year ended 30 September 2023. Use the space
provided on page 4 to show your workings.

Laila
Statement of profit or loss for the year ended 30 September 2023

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2023 9706/21/O/N/23 [Turn over

 4

Workings:

[8]

(c) Prepare the statement of financial position at 30 September 2023.

Workings:

Equity at 1 October 2022

Other receivables

Trade payables

Other payables

© UCLES 2023 9706/21/O/N/23

 5

Laila
Statement of financial position at 30 September 2023

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

........................................................................................................................................... [12]

© UCLES 2023 9706/21/O/N/23 [Turn over

 6

Additional information

Laila wishes to expand the business and is considering forming a partnership with her friend.

(d) State four provisions of the Partnership Act 1890 that would apply in the absence of a
partnership agreement.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................

4 ................................................................................................................................................

...................................................................................................................................................
[4]

(e) State three possible disadvantages to a business of maintaining a full set of accounting
records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 30]

© UCLES 2023 9706/21/O/N/23

 7

2 Q Limited has been in business for a number of years. One of the directors is unsure of the
difference between a capital reserve and a revenue reserve.

(a) Explain one difference between a capital reserve and a revenue reserve.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

The directors of Q Limited provided the following information for the year ended 30 June 2023.

Balances at 1 July 2022 $

Share capital: ordinary shares of $0.50 each 30 000
Share premium 4 500
Revaluation reserve 6 000
Retained earnings 50 240
Total equity 90 740
8% debenture (2024) 40 000

At 1 July 2022, land, original cost $80 000, had a valuation of $86 000. No other non-current assets
had been revalued.

The following transactions took place during the year ended 30 June 2023.

Date
1 August 2022 Made a bonus issue of one ordinary share for every six shares held. The
directors maintained the reserves in the most flexible form.
1 October 2022 Paid a final dividend of $0.04 per share on all shares in issue at that date.
1 January 2023 Made a rights issue of two ordinary shares for every seven shares held at
a price of $0.65 per share. The issue was fully subscribed.
1 April 2023 Paid an interim dividend of $0.02 per share on all shares in issue at that
date.
30 June 2023 Land was revalued at $75 000.

The draft profit for the year ended 30 June 2023 was $43 600.

© UCLES 2023 9706/21/O/N/23 [Turn over

 8

(b) Prepare the statement of changes in equity for the year ended 30 June 2023.

Q Limited
Statement of changes in equity for the year ended 30 June 2023

Share Share Revaluation Retained

capital premium reserve earnings Total
$ $ $ $ $
At 1 July 2022

[8]

© UCLES 2023 9706/21/O/N/23

 9

Additional information

The directors of Q Limited have plans to expand the business at a total cost of $54 000 and are
considering two options to raise finance.

Option 1:

Make a rights issue of four ordinary shares for every five shares held at a price of $0.75 per share.

Option 2:

Issue a 10% debenture (2026–2027) of $54 000.

(c) Advise the directors which option, if either, they should choose. Justify your decision.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 15]

© UCLES 2023 9706/21/O/N/23 [Turn over

 10

3 Yasmine has a retail business. She extracted a trial balance at 30 June 2023, the totals of which
did not agree.

(a) State two types of error that will be revealed by a trial balance.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

(b) Explain the meaning of each of the following types of error.

(i) Error of original entry

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) Error of principle

...........................................................................................................................................

..................................................................................................................................... [1]

(iii) Error of commission

...........................................................................................................................................

..................................................................................................................................... [1]

Additional information

The difference in the trial balance was posted to a suspense account to enable the financial
statements to be produced.

Yasmine discovered the following errors, correction of which would clear the difference.

1 The sales journal total had been overstated by $300.

2 The total of the purchases returns journal, $2450, had not been posted to the general ledger.

3 Discounts allowed, $1660, had been posted to the credit of the discounts received account.

4 The balance of the carriage inwards account at 30 June 2023, $3570, had been brought
down as $3750.

© UCLES 2023 9706/21/O/N/23

 11

(c) Prepare the suspense account to show the correction of the errors, clearly identifying the
difference that was present in the trial balance before the errors were corrected.

Suspense account

$ $

[5]

Additional information

Before discovering the errors, Yasmine had prepared a draft statement of profit or loss showing
a profit for the year of $36 165. The suspense account balance was not included in the profit
calculation.

(d) Calculate the revised profit for the year after correction of the errors.

Increase Decrease

$ $ $
Draft profit for the year 36 165
Error 1
Error 2
Error 3
Error 4
Revised profit for the year
[5]

[Total: 15]

© UCLES 2023 9706/21/O/N/23 [Turn over

 12

4 Javid manufactures a single product. He currently uses a system of absorption costing but is
considering changing to marginal costing.

The following budgeted information is available for one unit of the product.

$
Selling price 18
Direct material 7
Direct labour 5

Budgeted production 12 000 units per month

Budgeted fixed overheads $36 000 per month

At 1 August, Javid held no inventory.

The following actual results are available.

August September
Sales (units) 8 000 12 000
Production (units) 10 000 10 000
Fixed overheads $36 000 $36 000

(a) Prepare a profit statement for each of the months August and September using absorption
costing.

Javid
Absorption cost profit statement

August September
$ $ $ $

[6]

© UCLES 2023 9706/21/O/N/23

 13

(b) Prepare a profit statement for each of the months August and September using marginal
costing.

Javid
Marginal cost profit statement

August September
$ $ $ $

[6]

(c) Prepare a statement reconciling the absorption cost profit for August with the marginal cost
profit for August.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2023 9706/21/O/N/23 [Turn over

 14

(d) Advise Javid whether or not he should change from absorption costing to marginal costing.
Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

(e) State two possible causes of over-absorption of overheads.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2023 9706/21/O/N/23

 15

(f) Explain one difference between a cost centre and a cost unit.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(g) State how closing inventory is valued using each method of inventory valuation:

(i) first in first out (FIFO)

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) weighted average cost (AVCO).

...........................................................................................................................................

..................................................................................................................................... [1]

Additional information

Javid is investigating the just in time (JIT) method of inventory management.

(h) Explain a principle of the JIT method of inventory management.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 30]

© UCLES 2023 9706/21/O/N/23

 16

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/21/O/N/23

 Cambridge International AS & A Level
* 9 0 4 9 2 7 5 2 8 5 *

ACCOUNTING 9706/22
Paper 2 Fundamentals of Accounting October/November 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (RW) 316872/3
© UCLES 2023 [Turn over
 2

1 P Limited sells electronic goods online.

The directors provided the following information.

At At
Balances 31 July 2023 1 August 2022
$ $
8% debenture (2026) 36 000 –
Inventory 43 190 36 800
Other payables: administrative expenses – 960
Other receivables: administrative expenses 160 1 820
Other receivables: distribution costs 1 490 –
Trade payables 25 250 29 610

Bank account extract for the year ended 31 July 2023

$
Payments
To credit suppliers 122 050
Administrative expenses 66 920
Distribution costs 51 730
Receipts
From customers 284 200

The following information is also available.

1 All goods are despatched to customers immediately on receipt of payment.

2 Inventory at 31 July 2023 included damaged items that had cost $3600. One half of these
items will be scrapped and have no value. The remaining items will be sold for $900 after
repairs costing $420.

3 The 8% debenture (2026) was issued on 1 April 2023.

4 The charge for taxation was estimated to be $10 700.

© UCLES 2023 9706/22/O/N/23

 3

(a) Prepare the statement of profit or loss for the year ended 31 July 2023. Use the space
provided to show your workings.

P Limited
Statement of profit or loss for the year ended 31 July 2023

Workings:

Cost of sales

Administrative expenses

Distribution costs

[15]

© UCLES 2023 9706/22/O/N/23 [Turn over

 4

Additional information

1 Balances at 1 August 2022

$
Share capital (ordinary shares of $0.50 each) 120 000
Share premium 19 000
Retained earnings 23 560

2 On 1 September 2022, a bonus issue of shares was made of one ordinary share for every six
shares held. Reserves were maintained in their most flexible form.

3 On 1 January 2023, a final dividend of $0.07 per share was paid on all shares in issue at
1 August 2022.

4 On 31 March 2023, a rights issue of one ordinary share for every four shares held was made
at a premium of $0.15 per share. The issue was fully subscribed.

(b) Prepare the statement of changes in equity for the year ended 31 July 2023.

P Limited
Statement of changes in equity for the year ended 31 July 2023

Share Share Retained

capital premium earnings Total
$ $ $ $

At 1 August 2022 120 000 19 000 23 560 162 560

[6]

(c) State two examples of revenue reserves of a limited company.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

© UCLES 2023 9706/22/O/N/23

 5

(d) Advise the directors whether or not they were correct to make a bonus issue of shares rather
than make a new issue of shares. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/22/O/N/23 [Turn over

 6

2 Simon formed a parcel delivery business on 1 July 2021.

On 1 July 2021, he purchased a delivery vehicle for $29 000 from his business bank account.

He decided to depreciate delivery vehicles on a monthly basis using the straight‑line method. He
estimated that the delivery vehicle would have a useful working life of four years and would have a
residual value of $5000.

On 1 November 2022, a new delivery vehicle was purchased at a cost of $44 000. The old delivery
vehicle was part exchanged at a value of $16 800. The balance was settled by a bank loan
repayable over two years.

He estimated that the new delivery vehicle would have a useful working life of five years and
would have a residual value of $8000.

(a) State two factors that cause the value of non‑current assets to depreciate.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

© UCLES 2023 9706/22/O/N/23

 7

(b) Prepare the following accounts for the year ended 30 June 2023. Use the space provided to
show your workings.

Delivery vehicles at cost

Date Details $ Date Details $

Delivery vehicles provision for depreciation

Date Details $ Date Details $

Workings:

[8]

© UCLES 2023 9706/22/O/N/23 [Turn over

 8

(c) Calculate the profit or loss on disposal of the delivery vehicle sold on 1 November 2022.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(d) Explain why it may be more appropriate to depreciate motor vehicles using the reducing
balance method rather than the straight‑line method.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

[Total: 15]

© UCLES 2023 9706/22/O/N/23

 9

BLANK PAGE

© UCLES 2023 9706/22/O/N/23 [Turn over

 10

3 Malik prepared a sales ledger control account for July 2023. However, the balance of the control
account did not agree with the total of customers’ account balances in the sales ledger.

He provided the following information.

$
At 1 July 2023
Sales ledger control account balance 76 250
For the month of July 2023
Contra purchases ledger 420
Sales journal 69 634
Cash book: customer cheques dishonoured 22
Cash book: discounts allowed 892
Journal: irrecoverable debts 410
Cash book: receipts from credit customers 74 118
Sales returns journal 2 090

The following errors were discovered which accounted for the difference.

1 The balance of a sales ledger customer’s account had been undercast by $300.

2 The total of the sales returns journal had been overcast by $580.

3 A journal entry to write off a customer account balance of $95 as irrecoverable had been
correctly entered in the general ledger but had been posted to the debit side of the customer’s
account.

4 A cheque received from a customer, $320, had been correctly entered in the cash book but
had been posted to the debit side of the customer’s account as $230.

5 A further dishonoured cheque from a customer, $215, had not been entered in the cash book
but had been correctly entered in the customer’s account.

The list of customer account balances extracted from the sales ledger totalled $69 211.

© UCLES 2023 9706/22/O/N/23

 11

(a) Prepare the sales ledger control account for the month of July 2023, taking into account the
errors discovered. Dates are not required.

Sales ledger control account

Details $ Details $

[9]

(b) Prepare a schedule of the corrected sales ledger account balances.

Increase Decrease Total

$ $ $

Per original list 69 211

Corrected balances

[4]

© UCLES 2023 9706/22/O/N/23 [Turn over

 12

(c) State two limitations of preparing a control account.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

[Total: 15]

© UCLES 2023 9706/22/O/N/23

 13

4 Andreas owns a business manufacturing bicycles. The business operates two production
departments, Machining and Assembly, and two service departments, Stores and Maintenance.

The following information is available for one bicycle.

Direct materials $45.60

Direct labour: Machining ($10 per hour) 30 minutes
Direct labour: Assembly ($12 per hour) 105 minutes
Machine hours: Machining 20 minutes
Machine hours: Assembly 15 minutes

Total budgeted overheads for the year ended 31 August 2023 are as follows:

$
Indirect wages 420 000
Factory rent and rates 30 000
Machine overheads 22 000

The following information is also available.

Production departments Service departments

Machining Assembly Stores Maintenance
Floor space (square metres) 4 000 5 600 1 800 600
Number of orders from stores 2 100 1 600 500
Maintenance call outs 210 40
Budgeted direct labour hours 22 200 77 700
Budgeted machine hours 34 300 25 700
Number of indirect employees 4 12 2 2

Machine overheads are apportioned on the basis of machine hours.

© UCLES 2023 9706/22/O/N/23 [Turn over

 14

(a) Complete the table to show the apportionment of the budgeted overheads for the year ended
31 August 2023.

Production departments Service departments

Total Machining Assembly Stores Maintenance
$ $ $ $ $

Indirect wages 420 000

Factory rent and rates 30 000

Machine overheads 22 000

Total overheads 472 000

Apportion Stores

Subtotal

Apportion Maintenance

Total overhead costs

[6]

(b) Calculate, to two decimal places, an overhead absorption rate for each production
department, using a suitable basis.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2023 9706/22/O/N/23

 15

Additional information

The actual results for the year ended 31 August 2023 were as follows:

Machining Assembly
Total overheads $226 952 $267 465
Direct labour hours 28 450 72 580
Machine hours 44 120 15 270

(c) Calculate the over‑absorption or under‑absorption of overheads for each production

department.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

Additional information

Andreas has been approached by a new customer wishing to make a special order for 120 bicycles
with modifications to the customer’s own specification. In order to complete the order, the following
would apply for the manufacture of one bicycle.

1 The total material cost would increase by 30%.

2 The direct labour hours in the machinery department would increase by 50% and an additional
15 minutes of direct labour hours would be required in the assembly department.

3 Due to workers in the assembly department already working at full capacity, these workers
would have to work overtime to complete the order at a premium of 25% on the usual direct
labour rate.

(d) Calculate the direct cost of producing one bicycle for the special order.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2023 9706/22/O/N/23 [Turn over

 16

Additional information

In order to remain competitive, Andreas wishes to achieve a 30% gross profit margin on all work.

(e) Prepare a statement to show the total selling price that Andreas should quote to the customer
in order to achieve a 30% gross profit margin on the order.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2023 9706/22/O/N/23

 17

Additional information

Having received the quotation from Andreas, the customer has stated that he will commit to a
regular monthly order of 100 of the special bicycles if Andreas will offer a 10% discount on the
quoted price and allow 2 months’ credit.

Andreas’s business is successful, though managing cash flow is often difficult.

(f) Advise Andreas whether he should accept the terms offered by the customer. Justify your
answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2023 9706/22/O/N/23

 18

BLANK PAGE

© UCLES 2023 9706/22/O/N/23

 19

BLANK PAGE

© UCLES 2023 9706/22/O/N/23

 20

BLANK PAGE

Permission to reproduce items where third‑party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer‑related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/22/O/N/23

 Cambridge International AS & A Level
* 2 5 4 2 2 1 3 6 5 1 *

ACCOUNTING 9706/23
Paper 2 Fundamentals of Accounting October/November 2023

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (DE) 321962/3
© UCLES 2023 [Turn over
 2

1 B Limited provided the following information for the year ended 30 September 2023.

$
8% debenture (2025) 60 000
Administrative expenses 161 100
Allowance for irrecoverable debts at 1 October 2022 3 820
Cash and cash equivalents 4 680
Distribution costs 84 650
Dividend paid 4 000
Finance costs 3 950
Inventory 74 000
Other payables 1 860
Other receivables 940
Property plant and equipment at 1 October 2022
Cost / valuation 408 400
Accumulated depreciation 110 650
Retained earnings at 1 October 2022 45 850
Revaluation reserve at 1 October 2022 10 000
Share capital (ordinary shares of $1 each) at 1 October 2022 200 000
Share premium at 1 October 2022 14 000
Trade payables 57 150
Trade receivables 82 680

The revaluation reserve relates to land only.

The gross profit for the year ended 30 September 2023 was $321 070.

The following information is also available.

Property plant and equipment at 1 October 2022

Cost / Accumulated Depreciation Allocation of

valuation depreciation method depreciation
$ $
Land 95 000 Nil – Nil
Buildings 215 000 53 750 5% per annum 60% administrative
straight line expenses
Equipment 98 400 56 900 20% per annum 40% distribution
reducing balance costs
Total 408 400 110 650

There were no acquisitions or disposals of non-current assets during the year.

© UCLES 2023 9706/23/O/N/23

 3

The following have not yet been accounted for:

On 30 September 2023

1 Land was revalued at $80 000.

2 A bonus issue of one ordinary share for every ten shares held was made.

At 30 September 2023

1 Irrecoverable debts of $1480 were to be written off.

2 The directors proposed to maintain the allowance for irrecoverable debts at 5% of trade
receivables.

3 Depreciation was to be charged for the year ended 30 September 2023.

4 Administrative expenses of $2480 were owing.

5 Distribution costs of $750 were prepaid.

6 Debenture interest for five months was owing.

7 The charge for taxation was estimated to be $12 500.

© UCLES 2023 9706/23/O/N/23 [Turn over

 4

(a) Prepare an extract from the statement of profit or loss for the year ended 30 September 2023
commencing with the gross profit for the year.

B Limited
Statement of profit or loss for the year ended 30 September 2023

Gross profit for the year

Distribution costs

Administrative expenses

Profit from operations

Finance costs

Profit before taxation

Taxation

Profit for the year

Workings:

Distribution costs

Administrative expenses

[10]

© UCLES 2023 9706/23/O/N/23

 5

BLANK PAGE

© UCLES 2023 9706/23/O/N/23 [Turn over

 6

(b) Prepare the statement of financial position at 30 September 2023. Use the space provided on
page 7 to show your workings.

B Limited
Statement of financial position at 30 September 2023

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2023 9706/23/O/N/23

 7

Workings:

Non-current assets

Trade and other receivables

Retained earnings

Trade and other payables

[15]

© UCLES 2023 9706/23/O/N/23 [Turn over

 8

Additional information

The directors wish to raise additional finance and they are considering two options.

Option 1: make a rights issue of one ordinary share for every four shares held at a premium of
$0.10 per share.

Option 2: issue a further 8% debenture (2028) to raise $50 000.

(c) Advise the directors which option they should choose. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2023 9706/23/O/N/23

 9

2 Alex owns a business selling computer equipment. He provided the following information for the
year ended 31 July 2023.

1 Opening inventory at 1 August 2022 was $19 100.

2 Gross profit for the year ended 31 July 2023 was $56 380.

3 Cash sales were $36 870. All other sales were made on credit.

4 All sales were made to achieve a gross margin of 25%.

5 All purchases were made on credit.

6 Inventory turnover was 8 times per annum.

7 Trade receivables at 31 July 2023 were $23 150.

8 Trade payables at 31 July 2023 were $17 370.

(a) Calculate the trade receivables turnover (days) for the year ended 31 July 2023. State the
formula used.

Formula

...................................................................................................................................................

...................................................................................................................................................

Calculation

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[3]

(b) (i) State the formula used to calculate the rate of inventory turnover (times).

...........................................................................................................................................

..................................................................................................................................... [1]

© UCLES 2023 9706/23/O/N/23 [Turn over

 10

(ii) Calculate the closing inventory at 31 July 2023.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

(c) Calculate the trade payables turnover (days) for the year ended 31 July 2023. State the
formula used.

Formula

...................................................................................................................................................

...................................................................................................................................................

Calculation

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[3]

© UCLES 2023 9706/23/O/N/23

 11

Additional information

Alex understands that by comparing his business’s financial results with those of various other
businesses he will learn how successful his own business is.

(d) Advise Alex whether his understanding is correct. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 15]

© UCLES 2023 9706/23/O/N/23 [Turn over

 12

3 The directors of J Limited provided the following information at 1 September 2022.

$
Share capital (ordinary shares of $0.50 each) 60 000
Share premium 21 800
Retained earnings 32 600
Total equity 114 400

During the year ended 31 August 2023 the following transactions took place.

1 December 2022 Made a rights issue of one ordinary share for every five shares held at a
premium of $0.20. The issue was fully subscribed.

1 January 2023 Paid a final dividend of 4% on all shares in issue at 1 September 2022.

1 April 2023 Made a bonus issue of three ordinary shares for every eight shares held at
that date. The directors wish to leave reserves in the most flexible form.

1 June 2023 Paid an interim dividend of $0.02 per ordinary share on all shares in issue at
that date.

Profit for the year ended 31 August 2023 was $16 500.

© UCLES 2023 9706/23/O/N/23

 13

(a) Prepare the following ledger accounts to record the transactions. Dates are not required.

Share capital

Details $ Details $

Balance b/d 60 000

Share premium

Details $ Details $

Balance b/d 21 800

Retained earnings

Details $ Details $

Balance b/d 32 600

[9]

© UCLES 2023 9706/23/O/N/23 [Turn over

 14

Additional information

J Limited currently operates a manual system of bookkeeping and the directors are now
considering introducing a computerised accounting system.

(b) State three disadvantages of introducing a computerised accounting system.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

(c) State three ways in which the security of data in a computerised accounting system can be
assured.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 15]

© UCLES 2023 9706/23/O/N/23

 15

4 Dev manufactures two products, Aye and Bee. He operates a system of marginal costing.

(a) Explain one difference between marginal costing and absorption costing.

...................................................................................................................................................

............................................................................................................................................. [2]

(b) Explain one difference between a direct cost and an indirect cost.

...................................................................................................................................................

............................................................................................................................................. [2]

(c) State the meaning of the following terms:

(i) break-even point

...........................................................................................................................................

..................................................................................................................................... [1]

(ii) margin of safety.

...........................................................................................................................................

..................................................................................................................................... [1]

(d) State three situations where marginal costing can help in decision-making.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

© UCLES 2023 9706/23/O/N/23 [Turn over

 16

Additional information

Dev’s business operates from one rented factory.

The forecast data for the year ending 31 December 2024 is as follows:

Aye Bee
$ $
Revenue (60 000 units at $11.00) 660 000
Revenue (80 000 units at $8.50) 680 000
Direct materials (192 000) (256 000)
Direct labour (156 000) (208 000)
Supervisor fixed salaries (60 000) (35 000)
Variable overheads (114 000) (152 000)
Fixed factory overheads (33 000) (44 000)
Profit / (loss) 105 000 (15 000)

The fixed factory overheads are allocated on the basis of units produced.

(e) Calculate the break-even point in units for Aye.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(f) Calculate the break-even point in units for Bee.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2023 9706/23/O/N/23

 17

Additional information

Dev is concerned about the forecast loss for Bee. He is considering two options.

Option 1

Replace the current model Bee with an upgraded model Bee.

Increase the selling price of Bee by 10%.

Increase the direct material price by $0.45 per unit using an upgraded material.

Pay $18 000 for an advertising campaign to announce the upgraded model.

Dev believes that this will result in a 20% increase in units of Bee sold.

Option 2

Discontinue production of Bee.

Make the supervisor of Bee redundant thereby incurring redundancy costs of $6000.

Increase the advertising budget for Aye initially by $8000.

Reduce the selling price of Aye by $0.44 per unit.

Dev believes that this will result in a 50% increase in units of Aye sold.

(g) Calculate the revised total profit of the business if option 1 is adopted.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2023 9706/23/O/N/23 [Turn over

 18

(h) Calculate the revised total profit of the business if option 2 is adopted.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

(i) Advise Dev which option he should choose. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

[Total: 30]

© UCLES 2023 9706/23/O/N/23

 19

BLANK PAGE

© UCLES 2023 9706/23/O/N/23

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9706/23/O/N/23

 Cambridge International AS & A Level
* 4 5 2 7 2 9 1 2 8 3 *

ACCOUNTING 9706/22
Paper 2 Fundamentals of Accounting February/March 2024

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (LK) 326544/4
© UCLES 2024 [Turn over
 2

1 The following trial balance was extracted from the books of V Limited at 31 December 2023.

$ $
8% debentures (2029) 240 000
Administrative expenses 17 200
Bank loan 32 000
Bank loan interest 2 600
Carriage inwards 4 500
Carriage outwards 8 700
Cash and cash equivalents 8 200
Distribution costs 30 700
Dividends paid 37 500
Furniture and equipment at carrying value, 1 January 2023 956 000
Inventory at 1 January 2023 47 800
Property at valuation 980 000
Purchases 522 000
Rental income 13 300
Retained earnings 174 000
Returns 5 100
Revenue 997 100
Share capital: 4 000 000 ordinary shares of $0.25 each 1 000 000
Share premium 215 000
Trade payables 57 800
Trade receivables 47 900
Wages: office staff 49 300
Wages: sales staff 38 300
2 742 500 2 742 500

The following information is also available.

1 At 31 December 2023 inventory was valued at $49 500.

2 Distribution costs include a prepayment of $6000.

3 At 31 December 2023, rental income of $3000 had been received in advance.

4 Provision should be made for depreciation of furniture and equipment at 20% per annum
using the reducing balance method.

Depreciation charges should be allocated: 60% administrative expenses; 40% distribution

costs.

5 At 31 December 2023, office wages of $5800 were due but unpaid.

6 The debentures had been issued on 1 October 2023. The first interest payment is due on
31 March 2024.

7 Tax for the year ended 31 December 2023 is estimated to be $27 900.

© UCLES 2024 9706/22/F/M/24

 3

(a) Prepare the statement of profit or loss for the year ended 31 December 2023. Use the space
provided on page 4 to show your workings.

V Limited
Statement of profit or loss for the year ended 31 December 2023

Revenue

Cost of sales

Gross profit

Other income

Distribution costs

Administrative expenses

Profit from operations

Finance costs

Profit before tax

Tax

Profit for the year

© UCLES 2024 9706/22/F/M/24 [Turn over

 4

Workings:

Cost of sales

Distribution costs

Administrative expenses

Finance costs

[14]

Additional information

During the year ended 31 December 2023 the following transactions had been recorded in the
books of account.

1 September A rights issue had been made of one ordinary share for every three ordinary
shares currently held. The issue was made at a premium of $0.05 per share.
The rights issue was fully subscribed.
31 December Property had been revalued and the value reduced by $60 000.

(b) Complete the statement of changes in equity for the year ended 31 December 2023 on
page 5.

© UCLES 2024 9706/22/F/M/24

 Statement of changes in equity for the year ended 31 December 2023

Share Share premium Revaluation Retained Total

capital $ reserve earnings

© UCLES 2024
$ $ $ $
Balances, 1 January 2023 60 000 174 000
5

9706/22/F/M/24
Balances, 31 December 2023 1 000 000 215 000 -
[7]

[Turn over
 6

(c) State two factors that directors should take into account when declaring a dividend.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

Additional information

The directors wish to improve the company’s performance. They are considering two options.

Option A: Delaying payments to credit suppliers by an extra eight days.

Option B: Switching to a new supplier who is prepared to offer a trade discount if large orders are
made.

(d) Advise the directors which option they should choose. Justify your choice by considering the
effect on both profitability and liquidity.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2024 9706/22/F/M/24

 7

2 Zainab uses the straight-line method of depreciation for business vehicles.

The non-current assets of the business include two vehicles.

Vehicle Cost Date of purchase

$
1 26 000 1 January 2021
2 28 200 1 September 2022

Vehicles are depreciated by 20% per annum. Depreciation is calculated on a month-by-month

basis in the year of purchase. No depreciation is provided in the year of disposal. The financial
year ends on 31 December.

(a) Prepare the journal entry to record the depreciation charge for the year ended
31 December 2022. A narrative is not required.

Journal

Dr Cr
$ $

[3]

(b) Prepare the provision for depreciation – vehicles account for the year ended
31 December 2022.

Provision for depreciation – vehicles

$ $

[3]

© UCLES 2024 9706/22/F/M/24 [Turn over

 8

Additional information

On 15 February 2023 Vehicle 1 was disposed of at a profit of $4200 and the proceeds were paid
into the business’s bank account.

(c) Prepare the vehicle disposal account.

Vehicle disposal

$ $

[4]

(d) State one reason why it may be better to use the reducing balance method of depreciation for
vehicles.

...................................................................................................................................................

............................................................................................................................................. [1]

(e) Explain two accounting concepts which apply to depreciation.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

[Total: 15]

© UCLES 2024 9706/22/F/M/24

 9

BLANK PAGE

© UCLES 2024 9706/22/F/M/24 [Turn over

 10

3 Rahul owns a retail business. He has not maintained full accounting records. He is able to supply
the following information about the financial year ended 31 January 2024.

1 Valuation of inventories

1 February 2023 31 January 2024

$21 400 $19 800

2 Rahul sells goods so as to achieve a gross profit margin of 40%.

3 The usual rate of inventory turnover is 9 times a year.

(a) Calculate the revenue for the year ended 31 January 2024.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

Additional information

Rahul has not kept a record of his cash drawings during the year ended 31 January 2024.
However, the following information is available concerning cash transactions.

1 On 1 February 2023 there was cash in hand of $840.

2 Cash sales accounted for 70% of all sales.

3 Bank statements recorded total cash takings of $187 300 for the year ended 31 January 2024.
However, at 31 January 2024 there were cash takings banked but not yet credited of $3800.

4 Cash was used to pay a part-time assistant’s wages of $320 per week. The assistant worked
for 44 weeks during the year ended 31 January 2024.

5 At 31 January 2024 cash in hand was $1830.

© UCLES 2024 9706/22/F/M/24

 11

(b) Calculate Rahul’s cash drawings for the year ended 31 January 2024.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

Additional information

Rahul’s accountant has suggested he should start keeping full accounting records and that he
should use an accounting software package.

(c) State two ways in which Rahul will benefit from the accountant’s suggestions.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2024 9706/22/F/M/24 [Turn over

 12

(d) Explain two possible reasons for not accepting the accountant’s suggestions.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

[Total: 15]

© UCLES 2024 9706/22/F/M/24

 13

4 K Limited uses absorption costing at one of its factories. The product manufactured in this factory
goes through two production departments: cutting department and finishing department.

The following budgeted information was available for the year ended 31 December 2023.

Cutting department Finishing department

Overhead absorption rate $3.62 $2.34
Labour hours 17 400 8 400
Machine hours 22 900 5 200

A customer placed an order for 250 units in November 2023. The following budgeted information
is available about the production of one unit.

Per unit
Direct materials $17.28
Direct labour
Cutting department 1.2 hours at $11.50 per hour
Finishing department 3.1 hours at $11.50 per hour
Machine hours
Cutting department 2.2 hours
Finishing department 1.4 hours

Selling prices are set to achieve a profit margin of 40%.

(a) Prepare a statement to show the total selling price for the customer’s order.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2024 9706/22/F/M/24 [Turn over

 14

Additional information

Actual production hours for the year ended 31 December 2023 were as follows:

Cutting department Finishing department

Labour hours 16 200 7 900
Machine hours 24 300 5 800

Total actual overheads were the same as budgeted overheads.

(b) Calculate the over-absorption or under-absorption of overheads for each production

department for the year ended 31 December 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [4]

© UCLES 2024 9706/22/F/M/24

 15

Additional information

K Limited uses marginal costing at another factory where a single type of product is made.

The following budgeted information is available.

$ per unit
Selling price 42
Direct materials 12
Direct labour (1.5 hours per unit) 18
Other variable costs 3

Fixed costs per month are $38 500.

Currently the factory is producing 9920 units per month.

(c) Calculate both the total monthly contribution and the total monthly profit currently being
made in this factory.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

© UCLES 2024 9706/22/F/M/24 [Turn over

 16

Additional information

The directors hope to increase demand by changing the selling price. They are considering the
following two options.

Option A

1 Reduce the selling price per unit by 5%.

2 Increase production by 4000 units on the current production level.

3 A commission of $0.25 per unit will be paid.

4 Overtime will be required on all units produced over 12 400 units and is paid at a premium
of 25%.

5 Cancel the current advertising campaign costing $8000 a month.

Option B

1 Reduce the selling price per unit to $41.

2 Increase production by 10% on the current production level.

3 Invest in more up-to-date machinery at a cost of $180 000.

4 It is proposed to partly finance the purchase of new machinery by borrowing $150 000 at
8% per annum interest.

5 Machinery is depreciated by 25% per annum on cost.

6 As a result of improvements to machinery, the time each worker takes to produce one unit will
be reduced by 8% and a higher quality product can be made.

© UCLES 2024 9706/22/F/M/24

 17

(d) Prepare marginal costing statements to show the monthly forecast profit, rounded to the
nearest dollar, for each option.

(i) Option A

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2024 9706/22/F/M/24 [Turn over

 18

(ii) Option B

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2024 9706/22/F/M/24

 19

(e) Advise the directors which option they should choose. Justify your advice by discussing both
financial and non-financial factors.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2024 9706/22/F/M/24

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 9706/22/F/M/24

 Cambridge International AS & A Level
* 7 5 9 0 1 2 0 0 2 3 *

ACCOUNTING 9706/21
Paper 2 Fundamentals of Accounting May/June 2024

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 20 pages. Any blank pages are indicated.

DC (DE) 325884/3
© UCLES 2024 [Turn over
 2

1 Haroon and Rakesh are in partnership. They provide cleaning services for local businesses. They
started their business on 1 January 2023 when the partners introduced the following assets.

Haroon Rakesh
$ $
Cash at bank 4 000 2 000
Furniture and equipment 14 000
Motor vehicle 16 000

The partners have not maintained full accounting records. However, they provided the following
information for the year ended 31 December 2023.

1 Bank statements included the following receipts.

$
Cash takings 9 410
Receipts from credit customers 60 230

2 Amounts received from credit customers were after deducting cash discounts of 5%.

3 At 31 December 2023, credit customers owed $5580.

4 Before banking cash takings, the partners withdrew the following amounts each month for
personal use.

$
Haroon 1200
Rakesh 750

5 The business does not keep any cash in hand.

(a) Calculate the total revenue for the year ended 31 December 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2024 9706/21/M/J/24

 3

Additional information

1 Bank statements recorded the following payments for the year ended 31 December 2023.

$
Cleaning materials 11 420
Rent of premises 8 960
Electricity charges 3 450
Accountant’s fees 3 800
Staff wages 29 870
Vehicle running costs 1 480

2 On 1 July 2023, the partners disposed of their motor vehicle for cash, $11 700, which was
banked immediately. On this date Rakesh transferred his privately owned motor vehicle,
valued at $15 000, into the partnership.

3 Non-current assets are to be depreciated by 20% per annum using the straight-line method.
Depreciation is provided on a month-by-month basis and is applied in the year of acquisition
and the year of disposal.

4 Rent of premises included a payment of $2460 for the three months ended 29 February 2024.

5 At 31 December 2023, there was an unpresented cheque for $430 for electricity charges.

6 At 31 December 2023, there was an inventory of unused cleaning materials valued at $290.

© UCLES 2024 9706/21/M/J/24 [Turn over

 4

(b) Prepare the statement of profit or loss for the year ended 31 December 2023.

Haroon and Rakesh

Statement of profit or loss for the year ended 31 December 2023

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

© UCLES 2024 9706/21/M/J/24

 5

Workings:

[10]

(c) Prepare an extract from the statement of financial position at 31 December 2023 to show the
current assets section only.

$
Current assets

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Workings:

[4]

© UCLES 2024 9706/21/M/J/24 [Turn over

 6

Additional information

Partnership current accounts are not maintained.

Interest on capital has been agreed at:

$
Haroon 2000
Rakesh 2350

Haroon is entitled to an annual salary of $5000.

Profits and losses are to be shared in the ratio Haroon three-fifths : Rakesh two-fifths.

(d) Calculate the balance on Rakesh’s capital account at 31 December 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

© UCLES 2024 9706/21/M/J/24

 7

Additional information

The partners have considered maintaining a full accounting system using an accounting software
package.

(e) Advise the partners whether or not they should maintain a full accounting system using an
accounting software package. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2024 9706/21/M/J/24 [Turn over

 8

2 Sana maintains full accounting records. She has prepared a trial balance, but the totals do not
agree.

(a) State two benefits of preparing a trial balance.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

Sana discovered some errors which did not affect the agreement of the trial balance totals.

Type of error Error

Omission A dishonoured cheque for $80 received from Aryan Stores.
Commission An entry was made in the account of K Limited for goods
returned to JK Limited, $110.
Complete reversal Goods taken for own use, cost $260.
Compensating The total of the discounts allowed column in the cash book,
$320, was not posted to the general ledger.

The total of one of the returns journals was also not posted to
the general ledger.

© UCLES 2024 9706/21/M/J/24

 9

(b) Prepare journal entries to correct the errors. Narratives are not required.

Journal

Debit Credit
$ $

[8]

(c) State what is meant by an error of principle. Support your answer with one example.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

(d) Explain, with reference to an accounting concept, why Sana needs to make an entry for
goods taken for own use.

Accounting concept ..................................................................................................................

Explanation ...............................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 15]

© UCLES 2024 9706/21/M/J/24 [Turn over

 10

3 J Limited’s financial year ended on 31 March 2024.

The following information is available.

1
$
At 1 April 2023
Retained earnings 98 000
At 31 March 2024
Issued share capital: ordinary shares of $0.25 each 1 000 000
Share premium 360 000

2 On 1 August 2023 the directors made a rights issue of two ordinary shares for every three
ordinary shares held at that date. The shares were issued at a premium of $0.10 per share.
The rights issue was fully subscribed.

3 On 1 October 2023 the directors paid an interim dividend of $0.02 per share on all shares in
issue at that date.

4 On 31 March 2024 the directors revalued property at $390 000. Property had previously been
revalued at $450 000 in 2020.

5 The profit for the year ended 31 March 2024 was $37 000.

(a) Complete, on page 11, the statement of changes in equity for the year ended 31 March 2024.

© UCLES 2024 9706/21/M/J/24

 J Limited
Statement of changes in equity for the year ended 31 March 2024

© UCLES 2024
Share Share Revaluation Retained Total
capital premium reserve earnings
$ $ $ $ $
Balances, 1 April 2023 45 000 98 000

Balances, 31 March 2024 1 000 000 360 000

11

9706/21/M/J/24
Workings:

[8]

[Turn over
 12

Additional information

The directors are considering raising additional finance. They believe investors will prefer to invest
in debentures rather than in ordinary shares.

(b) Explain two reasons why investors may prefer to invest in debentures rather than in ordinary
shares.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

(c) State three uses of a share premium account.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 15]

© UCLES 2024 9706/21/M/J/24

 13

4 K Limited is a manufacturing company which has recently changed from using absorption costing
to using marginal costing.

(a) Explain two reasons why a manufacturing company might change from using absorption
costing to using marginal costing.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

Additional information

At one of K Limited’s factories a single type of product is manufactured. This month’s marginal
cost statement is as follows:

Marginal cost statement

$
Sales revenue 660 000
Variable costs (462 000)
Contribution 198 000
Fixed costs (95 000)
Profit 103 000

(b) Calculate the contribution to sales ratio.

...................................................................................................................................................

............................................................................................................................................. [1]

(c) Calculate the break-even point in sales revenue.

...................................................................................................................................................

............................................................................................................................................. [2]

© UCLES 2024 9706/21/M/J/24 [Turn over

 14

Additional information

The directors require a target profit of $140 000 to be made next month.

(d) Calculate the sales revenue required to achieve the target profit.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

The directors are prepared to accept a special order with a negative contribution.

(e) State three reasons why a special order with a negative contribution might be accepted.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

© UCLES 2024 9706/21/M/J/24

 15

Additional information

At another factory of K Limited three different types of product are made. The following details are
available.

Aye Bee Cee

Selling price per unit $35 $43 $28
Maximum monthly demand per product 2400 units 3200 units 1800 units
Materials used per unit 6 kg 8 kg 4 kg
Labour cost per unit $12 $14 $10

Materials cost $1.50 per kg.

Only 35 000 kg of material are forecast to be available in January 2025.

Forecast fixed costs are $63 000 per month.

(f) Calculate the optimum profit to be made in January 2025.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [8]

© UCLES 2024 9706/21/M/J/24 [Turn over

 16

Additional information

A director has found an overseas supplier of materials who is prepared to make up the shortfall in
materials. The supplier will charge $2.60 per kg and there will be a delivery charge of $8000.

(g) Calculate the additional profit to be made if the shortfall in materials is made up by the
overseas supplier.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

(h) Advise the directors whether or not they should purchase the shortfall in materials from the
overseas supplier. Justify your answer, considering both advantages and disadvantages.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2024 9706/21/M/J/24

 17

BLANK PAGE

© UCLES 2024 9706/21/M/J/24

 18

BLANK PAGE

© UCLES 2024 9706/21/M/J/24

 19

BLANK PAGE

© UCLES 2024 9706/21/M/J/24

 20

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 9706/21/M/J/24

 Cambridge International AS & A Level
* 0 7 2 5 5 1 5 0 8 1 *

ACCOUNTING 9706/22
Paper 2 Fundamentals of Accounting May/June 2024

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 16 pages.

DC (PQ) 325885/4
© UCLES 2024 [Turn over
 2

1 Zahid owns a small retail business. He has not maintained a full set of accounting records.

Zahid supplied the following information for the year ended 31 December 2023.

1 All sales were made on a cash basis. Cash sales totalled $195 000.

2 All goods were sold with a mark-up of 50%.

(a) Calculate the gross profit of the business for the year ended 31 December 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [1]

Additional information

The following information is also available.

1 Inventory and trade payables

At 1 January 2023 At 31 December 2023

$ $
Inventory 16 400 22 460
Trade payables 13 500 15 600

2 All purchases were made on credit. Trade suppliers were paid $134 240 after deducting cash
discounts totalling $560.

3 Zahid took goods for his own use during the year. However, no record was made of the value
of these goods.

© UCLES 2024 9706/22/M/J/24

 3

(b) Calculate for the year ended 31 December 2023:

(i) purchases

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [3]

(ii) the value of goods taken for own use by Zahid.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

..................................................................................................................................... [4]

© UCLES 2024 9706/22/M/J/24 [Turn over

 4

Additional information

The following information is available for Zahid’s business.

1 Non-current assets

Non-current assets had the following values.

$
1 January 2023 194 000
31 December 2023 188 000

During the year ended 31 December 2023, a non-current asset was sold for $5600, resulting
in a profit on disposal of $2400. Additional non-current assets were purchased for $9200.

2 Income from rent receivable

At 1 January 2023 Bank receipts during the At 31 December 2023

year
owing to Zahid’s business $280 $5360 received in advance $600

3 Expenses

At 1 January 2023 Bank payments during At 31 December 2023

the year
Advertising prepaid $490 $5 960 accrued $610

General expenses accrued $570 $8 480 –

Insurance prepaid $330 $4 510 prepaid $390

Wages – $12 400 accrued $470

(c) Prepare an extract from the statement of profit or loss for the year ended 31 December 2023,
starting with the gross profit calculated in (a).

Workings:

© UCLES 2024 9706/22/M/J/24

 5

Zahid
Statement of profit or loss for the year ended 31 December 2023 (extract)

Gross profit ............................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[12]

(d) Explain, with reference to an accounting concept, why Zahid made adjustments to his income
and expenses when preparing the statement of profit or loss.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [3]

© UCLES 2024 9706/22/M/J/24 [Turn over

 6

Additional information

Zahid plans to expand his business. This would mean he would no longer operate as a sole trader.
He is considering the following options.

Option A: form a partnership with Talha who currently owns a similar business.

Option B: form a limited liability company with himself and Talha as shareholders and
directors.

(e) Advise Zahid which option he should choose. Justify your answer by considering both the
advantages and the disadvantages of each option.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

[Total: 30]

© UCLES 2024 9706/22/M/J/24

 7

2 J Limited’s financial year ended on 31 December 2023. At this date the following balances
remained in the books of account from which the statement of financial position is to be prepared.

8% Debentures (2024) 90 000

Cash and cash equivalents (debit balance) 28 900

Furniture and equipment at carrying value 180 000

Inventory 84 000

Issued share capital: shares of $0.50 each 750 000

Property at valuation 1 060 000

Retained earnings 242 400

Revaluation reserve 70 000

Share premium 220 000

Trade and other payables 19 700

Trade and other receivables 39 200

The following errors have been discovered in the information shown.

1 Inventory at 31 December 2023 had been undervalued by $3600.

2 Furniture and equipment had been depreciated by 25% instead of 20%, using the reducing
balance method of depreciation.

3 Sales returns of $1100 had been recorded in the books of prime entry as purchases returns.
The error affected the general ledger and the personal accounts of credit customers and
credit suppliers.

(a) Calculate the corrected balance of retained earnings at 31 December 2023.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [5]

© UCLES 2024 9706/22/M/J/24 [Turn over

 8

(b) Prepare the statement of financial position at 31 December 2023.

J Limited
Statement of financial position at 31 December 2023

...................................................................................................................................................

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[Total: 15]
© UCLES 2024 9706/22/M/J/24
 9

3 Suki uses ratios to assess her business’s efficiency.

The following information is available.

1 For the year ended 31 December 2023:

$
Purchases 323 000
Revenue 482 500

2 At 31 December 2023:

$
Trade payables 33 600
Trade receivables 34 100

All goods are purchased on credit.

80% of sales are on credit.

(a) Calculate the following ratios, stating the formula used.

(i) Trade payables turnover (days)

Formula Calculation

[2]

(ii) Trade receivables turnover (days)

Formula Calculation

[2]
© UCLES 2024 9706/22/M/J/24 [Turn over
 10

Additional information

At 31 December 2022 the following ratios were calculated.

Trade payables turnover (days) 32 days

Trade receivables turnover (days) 36 days

(b) Discuss the performance of Suki’s business, comparing the results for 2023 with those for
2022.

...................................................................................................................................................

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Additional information

Inventories were valued as follows:

$
1 January 2023 36 700
31 December 2023 42 100

© UCLES 2024 9706/22/M/J/24

 11

(c) Calculate, to two decimal places, the rate of inventory turnover, stating the formula used.

Formula Calculation

[3]

(d) Explain the importance of the rate of inventory turnover to a business.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

[Total: 15]

© UCLES 2024 9706/22/M/J/24 [Turn over

 12

4 D Limited is a manufacturing company.

(a) Explain two uses of absorption costing.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[4]

Additional information

D Limited uses marginal costing. At one of its factories a single type of product is made. The
following budgeted information is available.

Per unit $
Selling price 92
Direct materials 33
Direct labour 39
Fixed costs 8

The factory has a budgeted capacity of 15 000 units per month.

(b) Calculate the monthly break-even point in units.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

© UCLES 2024 9706/22/M/J/24

 13

Additional information

It was forecast that only 4920 units would be sold in January 2024.

(c) Calculate the forecast profit or loss for January 2024.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

The directors have set a target profit of $150 000 per month.

(d) Calculate the number of units to be sold in order to achieve the target profit.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [2]

Additional information

At another factory of D Limited a single different type of product is made. The following budgeted
details are available for one month’s production:

Per unit $
Direct materials 16
Direct labour 17
Other variable costs 3
Contribution 24

Normal capacity at this factory is 18 000 units per month. Recently, the factory has been operating
at 80% capacity and this has resulted in a monthly profit of $150 600.

© UCLES 2024 9706/22/M/J/24 [Turn over

 14

The directors have been informed that a major competitor manufacturing the same product plans
to stop production. The directors plan to take advantage of the situation and are considering two
options.

Option A

1 Increase monthly production by 6000 units on current output levels.

2 Sell all production at a price per unit 2% above the current price.

3 Any production above normal factory capacity will require direct labour to be paid an overtime
premium of 50%.

Option B

1 Increase factory capacity to 22 000 units per month.

2 Sell all production at a price per unit 3% above the current price.

3 Suppliers of direct materials will be expected to offer a trade discount of 25% instead of the
current trade discount of 20%.

4 The direct labour rate per unit will be increased to $18.50.

5 Some additional machinery will be purchased at a cost of $120 000. Machinery is depreciated
by 20% per annum, using the straight-line method.

6 An additional $20 000 per month will be spent on advertising.

(e) Calculate the monthly profit to be made from Option A.

...................................................................................................................................................

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............................................................................................................................................. [6]

© UCLES 2024 9706/22/M/J/24

 15

(f) Prepare a monthly marginal costing statement for Option B.

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............................................................................................................................................. [7]

© UCLES 2024 9706/22/M/J/24 [Turn over

 16

(g) Advise the directors whether or not they should go ahead with either of these options. Justify
your choice by discussing both financial and non-financial factors.

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............................................................................................................................................. [7]

[Total: 30]
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2024 9706/22/M/J/24

 * 0019655310701 *

,

 

,

Cambridge International AS & A Level

¬OŠ. 3mGyY‘]¢Zq5W
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ACCOUNTING 9706/23
Paper 2 Fundamentals of Accounting May/June 2024

1 hour 45 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 16 pages.

DC (DE) 325886/3
© UCLES 2024 [Turn over
 * 0019655310702 *

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2
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1 K Limited provided the following extract from the company’s draft statement of profit or loss for the
year ended 31 December 2023.

$
Revenue 870 500
Cost of sales (493 000)
Gross profit 377 500

It has now been discovered that adjustments are required for the following:

1 Opening inventory at 1 January 2023 had been understated by $14 000.

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2 Sales returns, $8600, had been deducted from purchases.

3 Closing inventory at 31 December 2023 included 40 damaged items costing $30 each. It is
estimated that after repairs, costing a total of $420, the items could be sold for $38 each.

(a) Explain the accounting concept which is applied to the valuation of damaged inventory.

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(b) Calculate the revised gross profit for the year ended 31 December 2023.

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Workings:
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[5]

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9706/23/M/J/24
 * 0019655310703 *
DO NOT WRITE IN THIS MARGIN

3
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,

Additional information

1 At 1 January 2023

$
6% Debentures (2024) 300 000
Property at valuation 840 000
Plant and equipment
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Cost 160 000

Provision for depreciation 32 000
Retained earnings 132 000
Revaluation reserve 90 000
Share capital: ordinary shares of $0.50 each 900 000
Share premium 55 000

2 During the year ended 31 December 2023 the following payments had been made.
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$
Administrative expenses 111 400
Debenture interest 9 000
Distribution costs 97 100
Dividends 45 000
Equipment (purchased 1 April 2023) 20 000

3 Plant and equipment is depreciated by 20% per annum using the straight-line method on a
month-by-month basis.
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Depreciation should be allocated: administrative expenses 60%; distribution costs 40%.

4 Distribution costs includes the cost of a five-month advertising campaign, $22 000, which will
end on 31 March 2024.

5 Debenture interest is outstanding at 31 December 2023. The debentures had been issued in
2021.

6 Tax for the year ended 31 December 2023 is estimated to be $11 300.

7 On 1 March 2023 property was revalued at $720 000.

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8 On 1 May 2023 a rights issue of shares was made. Shareholders were offered three ordinary
shares for every five ordinary shares held at 1 January 2023. The shares were issued at a
premium of $0.20 per share. The rights issue was fully subscribed.

9 Trade payables totalled $38 000 on 31 December 2023.

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9706/23/M/J/24 [Turn over
 * 0019655310704 *

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4
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(c) Prepare the statement of profit or loss for the year ended 31 December 2023. Start the
statement with the revised figure for gross profit from (b). Use the space provided on page 5
to show your workings.

K Limited
Statement of profit or loss for the year ended 31 December 2023

Gross profit ..............................

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ĬÍĊ®Ġ³íÇùÙđÝĢÙó·Đ×
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9706/23/M/J/24
 * 0019655310705 *
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5
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Workings:

Depreciation of plant and equipment

Distribution costs
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Administrative expenses

Finance charges

[8]
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ĬÏĊ®Ġ³íÇùÙđÝĢÙñ·Đ×
© UCLES 2024 ĬěĚäËĬçĘÐúûćĘđ¶Ñ¼Ă
ĥĥąÕõĕåµĥĕµĕĕõŵõÕ
9706/23/M/J/24 [Turn over
 * 0019655310706 *

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6
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,

(d) Prepare an extract from the statement of financial position at 31 December 2023 to show the
equity and liabilities section only.

Statement of financial position at 31 December 2023 (Extract)

Equity and liabilities

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Workings:
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[8]

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9706/23/M/J/24
 * 0019655310707 *
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7
,

 

,

Additional information

The directors are planning to expand the business in 2024. The expansion will be financed by one
of the following options:

Option A: issuing 8% debentures (2030)

Option B: making a general issue of ordinary shares.

(e) Advise the directors which option they should choose. Justify your choice by discussing both
options.
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[Total: 30]
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9706/23/M/J/24 [Turn over
 * 0019655310708 *

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8
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,

2 Nadiya maintains control accounts as part of the double-entry system of her business. The
purchases ledger and sales ledger contain memorandum accounts only.

(a) State three benefits of maintaining control accounts.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

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...................................................................................................................................................

3 ................................................................................................................................................

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[3]

Additional information

On 31 March 2024 Nadiya found that the closing balance of the control accounts did not agree
with the totals of the individual account balances in the purchases and sales ledgers.

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$
Purchases ledger control account balance 28 540
Total of trade payables in purchases ledger 31 790
Sales ledger control account balance 35 790
Total of trade receivables in sales ledger 36 410

Nadiya discovered the following errors which accounted for the differences.

1 A credit note issued by Nadiya for $490 had been entirely overlooked.

2 The total of the purchases journal had been understated by $3250.

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3 A cheque for $380 received from a credit customer had been dishonoured by the bank.
This had been incorrectly recorded on the debit side of the cash book but had been posted
correctly to the ledger account.

4 An error of original entry had occurred when a purchases invoice for $4650 had been recorded
as $5640.

5 Interest of $70 charged on an overdue customer’s account had been credited to the
customer’s account.
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ĬÑĊ®Ġ³íÇùÙđÝĢÚñ¶Đ×
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ĥąąĕõÕÅÕÕåµĕĕĕåµåÕ
9706/23/M/J/24
 * 0019655310809 *
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9
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(b) Complete the following statements to correct the accounting records for trade payables.

Correction of purchases ledger control Correction of total of purchases ledger

account balances
$ $
Incorrect balance 28 540 Incorrect total 31 790
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[4]

(c) Complete the following statements to correct the accounting records for trade receivables.

Correction of sales ledger control Correction of total of sales ledger

account balances
$ $
Incorrect balance 35 790 Incorrect total 36 410
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[6]

Additional information

Control accounts sometimes contain contra entries.

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(d) Explain why contra entries may be made in control accounts.

...................................................................................................................................................

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............................................................................................................................................. [2]

[Total: 15]
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ĬÓĉ¯Ġ³íÇùÙđÝĢÙñ¶Đ×
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9706/23/M/J/24 [Turn over
 * 0019655310810 *

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10
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,

3 Usman began selling goods on credit on 1 January 2021. He maintains an allowance for
irrecoverable debts at each financial year end.

(a) Explain two accounting concepts which are applied when making an allowance for
irrecoverable debts.

1 ................................................................................................................................................

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...................................................................................................................................................

2 ................................................................................................................................................

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[4]

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(b) State two factors which should be considered when deciding the percentage that should be
used for an allowance for irrecoverable debts.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

Additional information

The following information is available about total trade receivables at the financial years ended
31 December:

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$
2021 18 200
2022 17 300
2023 19 600

The allowance for irrecoverable debts has been maintained at 4% each year.
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ĬÑĉ¯Ġ³íÇùÙđÝĢÜó¸Ď×
© UCLES 2024 ĬěĜãÂĥÆīÎùöĬāćđġ´Ă
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9706/23/M/J/24
 * 0019655310811 *
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11
,

 
,

(c) Prepare the allowance for irrecoverable debts account for the years 2022 and 2023.

Allowance for irrecoverable debts account

$ $
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[5]

Additional information
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On 5 January 2024 it was decided to write off $3470 as irrecoverable, being the balance on the
account of a credit customer, T Limited.

However, on 29 March 2024 a cheque was received in full settlement of the amount owed by
T Limited.

(d) State the double-entry necessary to record the following transactions:

Writing off the account on 5 January 2024

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...................................................................................................................................................

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The settlement of the amount due on 29 March 2024

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...................................................................................................................................................
[4]

[Total: 15]

ĬÓĉ¯Ġ³íÇùÙđÝĢÜñ¸Ď×
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9706/23/M/J/24 [Turn over
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12
,

 
,

4 J Limited is a manufacturing company. Recently the directors decided to change the costing
system from marginal costing to absorption costing.

(a) Explain each of the following terms used in absorption costing.

(i) Allocation

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(ii) Apportionment

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..................................................................................................................................... [2]

Additional information

The factory has two production departments: preparation and finishing. There are two service
departments: stores and canteen.

Some overheads have already been allocated to departments. The following budgeted overheads
for the year ended 31 March 2024 have yet to be apportioned.

$
Electricity 63 000
Rent 44 000

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The following information is available about the departments.

Production departments Service departments

Preparation Finishing Stores Canteen
Floor area (square metres) 2400 1800 50 150
Issues from stores 600 250 – –
Number of employees 64 40 8 –
Power (kilowatt hours) 32 000 8000 400 1600
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ĬÑĉ¯Ġ³íÇùÙđÝĢÚó¸Đ×
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9706/23/M/J/24
 * 0019655310813 *
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13
,

 
,

(b) Complete the table to show the apportionment of the budgeted overheads for the year ended
31 March 2024.

Production departments Service departments

Total Preparation Finishing Stores Canteen
$ $ $ $ $
Overheads allocated 272 120 184 100 60 800 10 960 16 260
Electricity 63 000
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Rent 44 000
Total overheads 379 120
Apportion canteen
Subtotal
Apportion stores
Subtotal
[6]

Additional information
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The following budgeted information is available for the two production departments for the year
ended 31 March 2024.

Preparation Finishing
Machine hours 17 500 14 200
Labour hours 16 800 20 300

(c) Calculate, to two decimal places, the overhead absorption rate for each production
department for the year ended 31 March 2024.

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............................................................................................................................................. [4]

ĬÓĉ¯Ġ³íÇùÙđÝĢÚñ¸Đ×
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9706/23/M/J/24 [Turn over
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14
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,

Additional information

For the year ended 31 March 2024, actual hours for the preparation department were:

Machine hours 16 920

Labour hours 16 350

Total actual overheads were the same as budgeted overheads.

(d) Calculate the over absorption or under absorption of overheads for the preparation department
for the year ended 31 March 2024.

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Additional information

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An order has been received from a customer. The following information is available.

Direct materials $800

Direct labour
Preparation department 52 hours at $12.20 per hour
Finishing department 90 hours at $14.50 per hour
Machine hours
Preparation department 140 hours

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Finishing department 48 hours

Products are sold so as to achieve a gross margin of 50%.

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ĬÍĉ¯Ġ³íÇùÙđÝĢÙòµĒ×
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9706/23/M/J/24
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15
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(e) Calculate the selling price for the order.

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16
,

 
,

Additional information

It has been suggested that the company would benefit if it switched to a just in time (JIT) method
of inventory control.

(f) Advise the directors whether or not they should switch to a JIT method of inventory control.
Justify your answer by considering both financial and non-financial factors.

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To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
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at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.
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