Cambridge A Level Accounting 9706 — 2024 Oct/Nov Paper 3 · Variant 2

This document has 12 pages. Any blank pages are indicated. [Turn over Cambridge International AS & A Level ACCOUNTING 9706/32 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. DC (PQ) 337116/4 © UCLES 2024 * 5 6 1 6 7 1 0 2 5 0 * ,










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2 9706/32/O/N/24 © UCLES 2024 1 Read Source A in the insert. (a) Prepare the following for the year ended 30 September 2024: (i) the manufacturing account … … … … … … … … … … … … … … … … … … … … [6] * 0000800000002 * ,










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3 9706/32/O/N/24 © UCLES 2024 [Turn over (ii) the statement of profit or loss. … … … … … … … … … … … … … … … … … … … … [9] * 0000800000003 * ,










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4 9706/32/O/N/24 © UCLES 2024 (b) Suggest why the depreciation correctly charged on factory machinery is only $23 600 when the depreciation is calculated at 10% per annum on cost. … … … … … … [2] Additional information It is expected that there will be a shortage of suitably skilled labour during the year ending 30 September 2025. This would cause the company’s direct labour cost to increase by 20%. The buy-in cost of the product would increase by 10%. (c) Calculate, to two decimal places, the rate of factory profit which the company will apply in the year ending 30 September 2025. The transfer price is to remain equivalent to the buy-in price. Assume that production volumes and production costs, other than direct labour, will be unchanged. … … … … … … … … … [3] * 0000800000004 * ,










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5 9706/32/O/N/24 © UCLES 2024 [Turn over Additional information The company has never provided depreciation on the premises. One of the directors has suggested that this causes the calculation of factory profit to be flawed. (d) Advise the directors whether or not depreciation of premises should be included when calculating factory profit. Justify your answer. … … … … … … … … … … … … … … [5] [Total: 25] * 0000800000005 * ,










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6 9706/32/O/N/24 © UCLES 2024 2 Read Source B in the insert. (a) Calculate the correct division of profit between the two periods. Assume that revenue and other expenses accrued evenly throughout the year. … … … … … … … … [3] Additional information Goodwill on 1 July 2023 was valued at $114 000 and was not retained in the books of account. (b) Prepare: (i) corrected capital accounts for the year Capital accounts Amina $ Belinda $ Nigel $ Amina $ Belinda $ Nigel $ [4] * 0000800000006 * ,










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7 9706/32/O/N/24 © UCLES 2024 [Turn over (ii) corrected current accounts for the year. Current accounts Amina $ Belinda $ Nigel $ Amina $ Belinda $ Nigel $ Workings: [13] * 0000800000007 * ,










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8 9706/32/O/N/24 © UCLES 2024 Additional information Pyotr has been the partnership’s accountant since it was originally started. However, since noticing his errors Amina is now wondering if the partnership should appoint a new accountant. She has also discovered that Nigel’s wife is Pyotr’s sister. (c) Advise the partners whether or not they should appoint a new accountant. Justify your answer. … … … … … … … … … … … … … … … [5] [Total: 25] * 0000800000008 * ,










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9 9706/32/O/N/24 © UCLES 2024 [Turn over BLANK PAGE * 0000800000009 * ,










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10 9706/32/O/N/24 © UCLES 2024 3 Read Source C in the insert. (a) Calculate for X plc the required year-end balances and the required ratios to two decimal places for each year, 2022 and 2023. Use the space provided on page 11 to show your workings. 2022 2023 ordinary share capital ($) share premium ($) retained earnings ($) non-current liabilities ($) gearing ratio earnings per share ($) dividend per share ($) price earnings ratio * 0000800000010 * ,










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11 9706/32/O/N/24 © UCLES 2024 [Turn over Workings: 2022 2023 ordinary share capital ($) share premium ($) retained earnings ($) non-current liabilities ($) gearing ratio earnings per share ($) dividend per share ($) price earnings ratio [14] * 0000800000011 * ,









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12 9706/32/O/N/24 © UCLES 2024 (b) Discuss the performance of Vinisha’s investment in relation to each of her three objectives. … … … … … … … … … … … … … … … … … [8] (c) Suggest another solvency ratio which might be affected as the gearing ratio changes. Give a reason for your answer. Ratio … Reason … … [3] [Total: 25] 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. * 0000800000012 * ,









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This document consists of 16 printed pages. © Cambridge University Press & Assessment 2024 [Turn over Cambridge International AS & A Level ACCOUNTING 9706/32 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.

9706/32 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.

9706/32 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.

9706/32 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).

9706/32 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.

9706/32 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  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

9706/32 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.

9706/32 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)(i) Prepare the following for the year ended 30 September 2024: the manufacturing account H plc Manufacturing account for the year ended 30 September 2024 $ $ Raw materials at 1 October 2023 23 000 Purchases 141 000 Carriage inwards 4 900 (1) 145 900 168 900 Raw materials at 30 September 2024 (21 000) Cost of raw materials consumed 147 900 (1)OF Direct labour 180 900 Prime cost 328 800 (1)OF Factory overheads 191 100 (1) Cost of production 519 900 Factory profit 98 781 (1)OF Transfer price of manufactured goods 618 681 (1)OF 6

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 9 of 16 Question Answer Marks 1(a)(ii) Prepare the following for the year ended 30 September 2024: the statement of profit or loss. Statement of profit or loss for the year ended 30 September 2024 $ $ Revenue 866 000 Inventory of finished goods at 1 October 2023 28 080 Transfer price of manufactured goods 618 681 646 761 Inventory of finished goods at 30 September 2024 (17 850) (1) Cost of sales 628 911 (1)OF Gross profit 237 089 (1)OF Factory profit 98 781 (1)OF Decrease in provision for unrealised profit W1 1 230 (1) Administrative expenses W2 120 300 (1) Distribution costs W3 99 360 (1) 219 660 Profit from operations 117 440 Finance costs 16 000 (1) Profit for the year 101 440 (1)OF W1 4 080 – (0.19  15 000) = $1 230 W2 109 800 + 10 500 = 120 300 W3 87 200 + 12 160 = 99 360 9 1(b) Suggest why the depreciation correctly charged on factory machinery is only $23 600 when the depreciation is calculated at 10% per annum on cost. Some machinery may have been acquired during the year (1) and depreciation may be based on a time basis / not provided in the year of acquisition (1) 2

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 10 of 16 Question Answer Marks 1(c) Calculate, to two decimal places, the rate of factory profit which the company will apply in the year ending 30 September 2025. The transfer price is to remain equivalent to the buy-in price. Assume that production volumes and production costs, other than direct labour, will be unchanged. New buy-in price (new transfer price) = 618 681  110% = $680 549 (1)OF New cost of production = 519 900 + (180 900  20%) = $556 080 (1)OF New rate of profit = (680 549 – 556 080)/556 080  100 = 22.38% (1)OF 3 1(d) Advise the directors whether or not depreciation of premises should be included when calculating factory profit. Justify your answer. Including (max 2) The depreciation charge would increase factory overheads / cost of production (1). Therefore, factory profit would increase (1). If the factory profit is used to set staff bonuses it might mean that they are more realistic (1). It would match the cost of using the premises with the revenue earned from their use (1). It would comply with IAS 16 (1). Not including (max 2) An increase in factory profit does not increase the overall profit of the business (1). If the rate of factory profit is based on the buy-in price, then the increase in factory overheads would be matched with a decrease in the rate of factory profit (1). It would involve the value of the premises being split between land and buildings (1). The life of the buildings would be an estimate (1). Decision supported with a comment (1) Accept other valid responses. 5

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 11 of 16 Question Answer Marks 2(a) Calculate the correct division of profit between the two periods. Assume that revenue and other expenses accrued evenly throughout the year. Adjustments = 13 000 + 5 000 = $18 000 (1) January to June (124 000 + 18 000)/2 = $71 000 (1) OF July to December (124 000 – 18 000)/2 = $53 000 (1) OF 3 2(b)(i) Prepare: corrected capital accounts for the year Capital accounts Amina $ Belinda $ Nigel $ Amina $ Belinda $ Nigel $ Goodwill 38 000 38 000 38 000 Balance b/d 60 000 60 000 } Bank 80 000}(1) Balance c/d 79 000(1) 79 000(1) 42 000(1) Goodwill 57 000 57 000 117 000 117 000 80 000 117 000 117 000 80 000 4

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 12 of 16 Question Answer Marks 2(b)(ii) Prepare: corrected current accounts for the year. Current accounts Amina $ Belinda $ Nigel $ Amina $ Belinda $ Nigel $ Balance b/d 1 100 Balance b/d 4 900 Drawings 38 500 47 100 18 20 0 Interest on capital (first period) 1 500 (1) 1 500 (1) Interest on capital (second period) 1 975 (1)OF 1 975 (1)OF 1 050 (1)OF Share of profit (first period) 34 000 (1)OF 34 000 (1)OF Share of profit (second period) 16 000 (1)OF 16 000 (1)OF 16 000 (1)OF Balance c/d 19 87 5 (1)O F 5 275 (1)OF Balance c/d 1 150 (1)OF 58 375 53 475 18 20 0 58 375 53 475 18 200 13

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 13 of 16 Question Answer Marks 2(c) Advise the partners whether or not they should appoint a new accountant. Justify your answer. Pyotr will be very familiar with the workings and accounts of the partnership (1). Pyotr may have a good working relationship with the partners (1). Pyotr may work for the partners at a very competitive price / a new accountant may increase costs (1). If Pyotr made these errors inadvertently then he has infringed the fundamental principle of professional competence and due care (1). If he made these errors deliberately to benefit his relation then he has infringed the principles of integrity (independence) / professional behaviour (1). He may have a conflict of interest / be biased (1). Max (4) for comments Decision supported with a comment (1) Accept other valid responses. 5

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 14 of 16 Question Answer Marks 3(a) Calculate for X plc the required year-end balances and the required ratios to two decimal places for each year 2022 and 2023. 2022 2023 ordinary share capital ($) 300 000 390 000 (1) both share premium ($) 60 000 (1) 0 (1) retained earnings ($) 187 500 (1) 208 200 (1)OF non-current liabilities ($) 205 000 (1) 395 000 (1)OF gearing ratio 27.24% (1)OF 39.77% (1)OF earnings per share ($) 0.60 (1)OF 0.66 (1)OF dividend per share ($) 0.45 (1)OF 0.40 (1)OF price earnings ratio 4 5 (1) OF both 14

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 15 of 16 Question Answer Marks 3(a) workings 2022 2023 ordinary share capital 100 000 + 50 000 = 150 000 150 000  2 = $300 000 150 000  13/10 = 195 000 195 000  2 = $390 000 share premium 20 000 + [140 000 – (50 000  2) ] = $60 000 60 000 – 60 000 = $0 retained earnings 165 000 + 90 000 – 67 500 = $187 500 187 500 + 128 700 – 78 000 – 30 000 = $208 200 non-current liabilities 215 000 – 10 000 (transfer to CL) = $205 000 205 000 + 190 000 = $395 000 gearing ratio 205 000/(300 000 + 60 000 + 187 500 + 205 000) 395 000/(390 000 + 208 200 + 395 000) earnings per share 90 000/150 000 128 700/195 000 dividend per share 67 500/150 000 78 000/195 000 price earnings ratio 2.40/0.60 3.30/0.66

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 16 of 16 Question Answer Marks 3(b) Discuss the performance of Vinisha’s investment in relation to each of her three objectives. Objective 1 – risk (max 3) The company’s gearing ratio was 35.83% (1) in 2021. This fell in 2022 but rose in 2023, and was very close to her target limit in 2023 (1). However, the company would still be considered to have low gearing as it is below 50% / a low risk company (1). Objective 2 – dividends (max 3) When Vinisha invested she wanted to receive dividend income of $1600 / $0.32 per share (1). Vinisha received dividends of $2 250 in 2022 and $2 600 in 2023 (1). In both years this was above her target income (1). The dividend per share fell between 2022 and 2023 but because of the bonus issue the number of shares she held was increased which more than compensated (1). Objective 3 – profit on sale (max 3) Vinisha paid $3.20 per share in 2021 (1). If she sold her shares at the end of 2023 she would have made a profit (1). The share price rose despite the bonus issue (1). The PE ratio is increasing which indicates that confidence in the performance of the company is increasing (1) which indicates that the share price may well increase further (1). Overall, Max 8 marks. OF basis Accept other valid responses. 8 3(c) Suggest another solvency ratio which might be affected as the gearing ratio changes. Give a reason for your answer. Interest cover (1) The investment of the borrowed funds should increase profits (1) and increased interest will be payable (1). Accept other valid responses. 3