Cambridge A Level Accounting 9706 — 2024 Oct/Nov Paper 3 · Variant 1

This document has 16 pages. Any blank pages are indicated. [Turn over Cambridge International AS & A Level ACCOUNTING 9706/31 Paper 3 Financial Accounting October/November 2024 1 hour 30 minutes You must answer on the question paper. You will need: Insert (enclosed) 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 diagrams, graphs or rough working. ● You may use a calculator. ● International accounting terms and formats should be used as appropriate. ● You should show your workings. INFORMATION ● The total mark for this paper is 75. ● The number of marks for each question or part question is shown in brackets [ ]. ● The insert contains all of the sources referred to in the questions. * 4 1 1 9 7 0 4 9 2 2 * DC (PQ) 337112/3 © UCLES 2024 ,










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2 9706/31/O/N/24 © UCLES 2024 1 Read Source A in the insert. (a) Calculate the profit for the period for both the six months ended 30 June 2023 and the six months ended 31 December 2023. … … … … … … … … … … … … … … … … … … … [8] * 0000800000002 * ,










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3 9706/31/O/N/24 © UCLES 2024 [Turn over (b) Prepare appropriation accounts for both the six months ended 30 June 2023 and the six months ended 31 December 2023. … … … … … … … … … … … … … … … Workings: [13] * 0000800000003 * ,










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4 9706/31/O/N/24 © UCLES 2024 (c) Calculate, to two decimal places, the profit margin of the partnership for the six months ended 31 December 2023. … … … [1] Additional information Harry is also a shareholder in a large company in a different industry. When he looked at the financial statements of the company, he found that it had a higher profit margin than the partnership. He also saw that it had a qualified audit report. (d) Discuss whether Harry should be comparing the profit margin of the company with that of the partnership. … … … … … … … … … [3] [Total: 25] * 0000800000004 * ,










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5 9706/31/O/N/24 © UCLES 2024 [Turn over BLANK PAGE * 0000800000005 * ,










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6 9706/31/O/N/24 © UCLES 2024 2 Read Source B in the insert. (a) Calculate at 31 December 2022: (i) the accumulated depreciation on Machine A … … … [1] (ii) the carrying value of Machine B … … … [1] (iii) the original cost of Machine B. … … … … … … [1] * 0000800000006 * ,










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7 9706/31/O/N/24 © UCLES 2024 [Turn over (b) Prepare the schedule of non-current assets at 31 December 2023. … … … … … … … … … … … … … … … … … … … … … … … Workings: [10] * 0000800000007 * ,










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8 9706/31/O/N/24 © UCLES 2024 Additional information The directors use ratio analysis to assess performance. (c) Name the efficiency ratio which would be affected by the outcome of the impairment review. … [1] Additional information 1 Revenue for the year ended 31 December 2023 was $322 500. 2 Assets and liabilities included the following: At 31 December 2023 2022 $ $ Inventory 112 000 76 000 Trade receivables 48 000 56 000 Trade payables 31 000 29 000 3 The directors calculate ratios using year-end balances. They are now considering using average figures in future. (d) Calculate the net working assets to revenue ratio for 31 December 2023 using year-end balances. … … … … … [2] (e) Assess the effect the change in formula would have on: (i) the company’s net working assets to revenue ratio (calculations are not required) … … … … … … [2] * 0000800000008 * ,










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9 9706/31/O/N/24 © UCLES 2024 [Turn over (ii) the perceived performance of the company. … … … … … … [2] (f) Advise the directors whether or not they should use average figures when calculating the net working assets to revenue ratio in future. Justify your answer. … … … … … … … … … … … … … … … … … [5] [Total: 25] * 0000800000009 * ,










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10 9706/31/O/N/24 © UCLES 2024 3 Read Source C in the insert. (a) Explain one reason why the rate of factory profit had changed between 2022 and 2023. … … … … … [2] (b) Prepare a corrected provision for unrealised profit account for the year ended 31 December 2023. … … … … … … … [2] * 0000800000010 * ,










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11 9706/31/O/N/24 © UCLES 2024 [Turn over (c) (i) Prepare a corrected statement of profit or loss for the year ended 31 December 2023. … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] * 0000800000011 * ,









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12 9706/31/O/N/24 © UCLES 2024 (ii) Prepare a corrected statement of financial position at 31 December 2023. … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] * 0000800000012 * ,









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13 9706/31/O/N/24 © UCLES 2024 Additional information One of the directors is concerned that, after ten years of trading, the balance on the retained earnings account is low in relation to the profit for the year. He says this shows that the dividends paid were too high. (d) Advise the directors whether or not the balance on the retained earnings account is too low as a result of paying excessive dividends. Justify your answer. … … … … … … … … … … … … … … … … [5] [Total: 25] * 0000800000013 * ,









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16 9706/31/O/N/24 © UCLES 2024 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. * 0000800000016 * ,









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This document consists of 16 printed pages. © Cambridge University Press & Assessment 2024 [Turn over Cambridge International AS & A Level ACCOUNTING 9706/31 Paper 3 Financial Accounting October/November 2024 MARK SCHEME Maximum Mark: 75 Published This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the details of the discussions that took place at an Examiners’ meeting before marking began, which would have considered the acceptability of alternative answers. Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for Teachers. Cambridge International will not enter into discussions about these mark schemes. Cambridge International is publishing the mark schemes for the October/November 2024 series for most Cambridge IGCSE, Cambridge International A and AS Level components, and some Cambridge O Level components.

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 2 of 16 Generic Marking Principles These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the specific content of the mark scheme or generic level descriptions for a question. Each question paper and mark scheme will also comply with these marking principles. GENERIC MARKING PRINCIPLE 1: Marks must be awarded in line with: • the specific content of the mark scheme or the generic level descriptors for the question • the specific skills defined in the mark scheme or in the generic level descriptors for the question • the standard of response required by a candidate as exemplified by the standardisation scripts. GENERIC MARKING PRINCIPLE 2: Marks awarded are always whole marks (not half marks, or other fractions). GENERIC MARKING PRINCIPLE 3: Marks must be awarded positively: • marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the scope of the syllabus and mark scheme, referring to your Team Leader as appropriate • marks are awarded when candidates clearly demonstrate what they know and can do • marks are not deducted for errors • marks are not deducted for omissions • answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the question as indicated by the mark scheme. The meaning, however, should be unambiguous. GENERIC MARKING PRINCIPLE 4: Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level descriptors.

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 3 of 16 GENERIC MARKING PRINCIPLE 5: Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may be limited according to the quality of the candidate responses seen). GENERIC MARKING PRINCIPLE 6: Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or grade descriptors in mind.

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 4 of 16 Social Science-Specific Marking Principles (for point-based marking) 1 Components using point-based marking: • Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer shows confusion. From this it follows that we: a DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark scheme requires a specific term) b DO credit alternative answers/examples which are not written in the mark scheme if they are correct c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended writing is required rather than list-type answers. For example, questions that require n reasons (e.g. State two reasons …). d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used wrongly.) e DO NOT credit answers which are obviously self-contradicting or trying to cover all possibilities f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested. This applies equally to ‘mirror statements’ (i.e. polluted/not polluted). g DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for clear and unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion) 2 Presentation of mark scheme: • Slashes (/) or the word ‘or’ separate alternative ways of making the same point. • Semi colons (;) bullet points (•) or figures in brackets (1) separate different points. • Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to earn the mark (except Accounting syllabuses where they indicate negative numbers).

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 5 of 16 3 Calculation questions: • The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and the mark for each answer • If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all other instances, the correct answer to a calculation should be given full credit, even if no supporting working is shown. • Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivalent stages. • Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full marks will be given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary and any exceptions to this general principle will be noted. 4 Annotation: • For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct relationship between ticks and marks. Ticks have no defined meaning for levels of response marking. • For levels of response marking, the level awarded should be annotated on the script. • Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all examiners who marked that paper.

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 6 of 16 ANNOTATIONS The following annotations are used in marking this paper and should be used by examiners. Annotation Use or meaning P Correct and relevant point made in answering the question. × Incorrect point or error made. LNK Two statements are linked. REP Repeat A An extraneous figure N0 No working shown AE Attempts evaluation R1 Required item 1 R2 Required item 2 OF Own figure EVAL Evaluation NAQ Not answered question BOD Benefit of the doubt given. SEEN Noted but no credit given Highlight Highlight Off page Comment Off page comment

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 7 of 16 Abbreviations and guidance The following abbreviations may be used in the mark scheme: OF = own figure. The answer will be marked correct if a candidate has correctly used their own figure from a previous part or calculation. W = working. The working for a figure is given below. Where the figure has more than one mark associated with it, the working will show where individual marks are to be awarded. CF = correct figure. The figure has to be correct i.e. no extraneous items have been included in the calculation Extraneous item = an item that should not have been included in a calculation, including indirect expenses such as salaries in calculation of gross profit when there is one OF mark for gross profit’ Curly brackets, }, are used to show where one mark is given for more than one figure. If the figures are not adjacent, each is marked with a curly bracket and a symbol e.g. }* row = all figures in the row must be correct for this mark to be awarded Marks for figures are dependent on correct sign/direction Accept other valid responses. This statement indicates that marks may be awarded for answers that are not listed in the mark scheme but are equally valid.

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 8 of 16 Question Answer Marks 1(a) Calculate the profit for the period for both the six months ended 30 June 2023 and the six months ended 31 December 2023. Jan – June $ July – Dec $ Gross profit Less: 44 900 (1) 55 210 (1) Depreciation – premises 900 } 1 500 }* – other 1 600 }(1) 1 600 }*(1) Wages and salaries 19 700 – 5 000 27 320 – 5 000 – 6 000 14 700 (1) 16 320 (1) Other operating costs 22 100 23 200 Profit for the period 5 600 (1)OF 12 590 (1)OF 8

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 9 of 16 Question Answer Marks 1(b) Prepare appropriation accounts for both the six months ended 30 June 2023 and the six months ended 31 December 2023. Jan – June $ July-Dec $ Profit for the period 5 600 12 590 Less interest on capital Angie 2 500 } 3 872 Harry 1 500 4 000 }(1) 3 623 7 495 W1 Less salary Angie 5 000 } 5 000 } Harry 0 5 000 }(1) 6 000 11 000 }(1) Residual loss (3 400) (5 905) Share of loss Angie (1 700) (1)OF (4 429) (1)OF Harry (1 700) (3 400) (1)OF (1 476) (5 905) (1)OF W1 Angie $ Harry $ Original capital 50 000 30 000 Revaluation (150 000 – 80 100) 34 950 (1) 34 950 (1)OF Goodwill added 15 000 15 000 (1) both Goodwill removed (22 500) (7 500) (1) both Revised capital 77 450 72 450 Interest on capital 10%  6/12 3 872 (1)OF 3 623 (1)OF 13 1(c) Calculate, to two decimal places, the profit margin of the partnership for the six months ended 31 December 2023. 12590/119000  100 = 10.58% (1)OF 1

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 10 of 16 Question Answer Marks 1(d) Discuss whether Harry should be comparing the profit margin of the company with that of the partnership. As the audit report is qualified the financial statements may well not give a true and fair view (1) and the profit margin he has calculated may not be reliable (1). Because the company is in a different industry it may not be useful to compare the results of the two businesses (1). However a review of the financial statements may help him to identify areas in the partnership where improvements could be made (1). Max 3 Accept other valid responses. 3 Question Answer Marks 2(a)(i) Calculate at 31 December 2022: the accumulated depreciation on Machine A 90 000  0.1  3.5 years = $31 500 (1) 1 2(a)(ii) Calculate at 31 December 2022: the carrying value of Machine B 151 500 – (90 000 – 31 500) = $93 000 (1)OF 1 2(a)(iii) Calculate at 31 December 2022: the original cost of Machine B. 93 000 1 (2.25 0.1) −  = $120 000 (1)OF 1

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 11 of 16 Question Answer Marks 2(b) Prepare the schedule of non-current assets at 31 December 2023. T plc Schedule of non-current assets at 31 December 2023 Property, plant and equipment Plant and machinery Motor vehicles Total $ $ $ Cost At 1 January 2023 W1 210 000 (1)OF 40 000 250 000 Additions 150 000 150 000 Disposals (90 000) (90 000) At 31 December 2023 270 000 (1)OF 40 000 310 000 Depreciation and impairment At 1 January 2023 58 500 (1)OF 14 400 (1) 72 900 Disposals W2 (32 250) (1)OF (32 250) Charge for year W3 26 500 (1)OF 5 120 (1) 31 620 Impairment loss 2 480 (1) 2 480 At 31 December 2023 52 750 22 000 74 750 Carrying amount at 31 December 2023 217 250 18 000 (1)OF 235 250 Carrying amount at 1 January 2023 151 500 25 600 (1) 177 100 W1 90 000 + 120 000 (OF) = 210 000 W2 31 500 OF + 750 = 32 250 W3 750 + (12 000 + 13 750) = 26 500 10 2(c) Name the efficiency ratio which would be affected by the outcome of the impairment review. non-current asset turnover (1) 1

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 12 of 16 Question Answer Marks 2(d) Calculate the net working assets to revenue ratio for 31 December 2023 using year end balances. 129 000/322 500 (1)  100 whole formula = 40% (1)OF 2 2(e)(i) Assess the effect the change in formula would have on: the net working assets to revenue ratio Because the value of the net working assets has increased during the year, the average value would be lower than the closing value (1). This would cause the ratio to be lower (1). 2 2(e)(ii) Assess the effect the change in formula would have on: the perceived performance of the company. The lower ratio makes the business look more efficient (1) as the business seems to require fewer net working assets to generate the same amount of revenue (1). 2 2(f) Advise the directors whether or not they should use average figures when calculating the net working assets to revenue ratio in the future. Justify your answer. For (Max 2) Sales take place throughout the year not just at the year end. (1) Changes arising late on in the year would distort the result less if an average was used. (1) It would give a more adequate comparison of the use of net working assets through the year with sales made through the year. (1) Against (Max 2) Changes in net working assets do not take place evenly over the year. (1) Change in calculation would not have any effect on actual performance. (1) The assessment of performance requires consistency in calculation. (1) Decision supported with a comment (1) Accept other valid responses. 5

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 13 of 16 Question Answer Marks 3(a) Suggest one reason why the rate of factory profit had changed between 2022 and 2023. The rate of factory profit is set so that the transfer price reflects the buy in price/to enable true comparisons with other businesses trading in the same product (1) and the difference between production cost and buy-in price had increased (1). Accept other valid responses. 2 3(b) Prepare a corrected provision for unrealised profit account for the year ended 31 December 2023. Provision for unrealised profit account $ $ Statement of profit or loss 500 (1)OF Balance b/d 13 300 Balance c/d 12 800 (1) 13 300 13 300 Balance b/d 12 800 2

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 14 of 16 Question Answer Marks 3(c)(i) Prepare a corrected statement of profit or loss for the year ended 31 December 2023. $ $ Revenue 681 000 Opening inventory of finished goods (at transfer price) 83 300 Transfer price of manufactured goods W1 337 440 (1) 420 740 Closing inventory of finished goods (at transfer price) (76 800) Cost of sales 343 940 Gross profit 337 060 (1)OF Factory profit W2 56 240 (1)OF Provision for unrealised profit 500 (1)OF Administrative expenses W3 (41 700) (1) Distribution costs W4 (46 300) (1) Profit from operations 305 800 Finance costs W5 (25 100) (1) Profit for the year 280 700 (1)OF W1 (273 200 – 2 000 +10 000)  120% = 337 440 W2 337 440  20/120 = 56 240 W3 51 700 – 10 000 = 41 700 W4 44 200 + (22 000 –19 900) = 46 300 W5 21 600 + 3 500 = 25 100 8

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 15 of 16 Question Answer Marks 3(c)(ii) Prepare a corrected statement of financial position at 31 December 2023. $ Non-current assets W1 759 900 (1) Current assets Inventory – raw materials 72 000 (1) – work in progress 11 800 (1) – finished goods at transfer price 76 800 less provision for unrealised profit (12 800) (1)OF 147 800 Trade receivables 101 100 248 900 Total assets 1 008 800 (1)OF Equity Ordinary share capital 500 000 Retained earnings W2 234 300 (1)OF 734 300 Non-current liabilities 7% debentures 200 000 Current liabilities Trade and other payables W3 73 500 (1) Bank overdraft 1 000 74 500 Total equity and liabilities 1 008 800 (1)OF W1 762 000 – (22 000 – 19 900) = 759 900 (1) W2 (182 760 – 229 160) (1) + 280 700 (1)OF = 234 300 W3 70 000 + 3 500 (1) = 73 500 8

9706/31 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 16 of 16 Question Answer Marks 3(d) Advise the directors whether or not the balance on the retained earnings account is too low as a result of paying excessive dividends. Justify your answer. The balance on the account is less than the profit for the year for 2023 (1). This may not necessarily be because of dividends (1) as the company might have made losses in earlier years / had accumulated losses brought forward (1). Alternatively, the company might have used retained earnings to fund a bonus issue of shares (1). It may indicate that profits are being ploughed back into the business and funding expansion (1). It also provides a buffer against any future year when performance is poorer (1). Shareholders will have expectations of a reasonable rate of return (1) and the dividend policy of the company could be compared with that of similar businesses (1). Accept other valid points Max (4) Accept other valid responses. Decision supported with a comment (1) 5