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

[Turn over Cambridge International AS & A Level This document has 12 pages. DC (WW) 337216/2 © UCLES 2024 ACCOUNTING 9706/33 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. * 9 9 7 4 6 4 1 7 3 4 * ,










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2 9706/33/O/N/24 © UCLES 2024 1 Read Source A in the insert. (a) Explain why the partners were not sure of the value of the goodwill. … … … … … … [2] (b) State which partner would prefer the value given to the goodwill to be as low as possible. Give a reason for your answer. Partner … Reason … … … [2] Additional information The partners finally agreed on a value of $100 000 for the goodwill and the capital accounts were adjusted. Later that year Andy decided that he no longer wanted to work the extra hours, and the partners decided to sell the business. The business was acquired by AD plc on 31 December 2023. It took over all the assets and liabilities of the partnership except for the bank account for a purchase consideration of $620 000. The partnership’s statement of financial position immediately prior to the acquisition showed the following: $ Andy’s capital and current accounts 221 500 Betty’s capital and current accounts 291 300 Bank 49 900 debit The partnership also paid legal fees of $3000 in relation to the sale of the business. * 0000800000002 * ,










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3 9706/33/O/N/24 © UCLES 2024 [Turn over (c) Calculate the profit on realisation made by the partnership. … … … … … … [4] (d) Discuss how Betty’s decision to agree to Andy’s suggestion to change the partnership agreement impacted Betty. Support your answer with calculations. … … … … … … … … … … … … … … … … … … … … [6] * 0000800000003 * ,










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4 9706/33/O/N/24 © UCLES 2024 Additional information The purchase consideration was settled by $200 000 in cash and 600 000 ordinary shares of $0.50 each. Assets and liabilities were taken over at the following values. $ Premises 510 000 Fixtures 18 000 Inventory 42 200 Trade payables 15 600 (e) Prepare the journal entry in the books of AD plc to record the acquisition of the partnership. A narrative is required. … … … … … … … … … … … … … [6] * 0000800000004 * ,










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5 9706/33/O/N/24 © UCLES 2024 [Turn over (f) Advise Betty whether she should keep her shares in AD plc or sell them. Justify your answer. … … … … … … … … … … … … … … [5] [Total: 25] * 0000800000005 * ,










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6 9706/33/O/N/24 © UCLES 2024 2 Read Source B in the insert. (a) Explain why the figure for coloured jackets in the receipts and payments account is different from the figure in the income and expenditure account. … … … … … … [3] (b) Explain why the income from grants and donations is different in the receipts and payments account from the income and expenditure account. … … … … … … [3] * 0000800000006 * ,










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7 9706/33/O/N/24 © UCLES 2024 [Turn over (c) Prepare the income and expenditure account for the year ended 31 December 2023. … … … … … … … … … … … … … … [5] (d) Complete the following table by calculating the following values for inclusion in the statement of financial position at 31 December 2023. State the section of the statement where each would be shown. $ Section of statement of financial position Coloured jackets Deferred income [4] * 0000800000007 * ,










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8 9706/33/O/N/24 © UCLES 2024 (e) Advise the managing committee whether or not they should start to include the value of the inventory of refreshments and refuse bags in the financial statements. Justify your answer. … … … … … … … … … … … … … … [5] * 0000800000008 * ,










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9 9706/33/O/N/24 © UCLES 2024 [Turn over Additional information Members wear coloured jackets belonging to C Society whilst on the beaches. Every year four or five jackets go missing and have to be replaced. In 2023 four new jackets were purchased. A local pharmaceutical company with a factory on the coast nearby has made a cash donation of $400 to C Society every year since it started. It has now suggested that it stops making the cash donation and instead provides C Society with nine new jackets each year. These would bear a large logo of the pharmaceutical company across the back. (f) Discuss how this suggestion from the pharmaceutical company may impact C Society. … … … … … … … … … … … … … … … … [5] [Total: 25] * 0000800000009 * ,










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10 9706/33/O/N/24 © UCLES 2024 3 Read Source C in the insert. (a) Calculate a revised value for the profit from operations for the year ended 31 December 2023. … … … … … … … … … … … … … Workings: [9] * 0000800000010 * ,










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11 9706/33/O/N/24 © UCLES 2024 [Turn over (b) Prepare the revised statement of cash flows for the year ended 31 December 2023 in accordance with IAS 7. … … … … … … … … … … … … … … … … … … … … … … … … … … … [10] * 0000800000011 * ,









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12 9706/33/O/N/24 © UCLES 2024 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. (c) Explain how an event can be determined to be adjusting or non-adjusting. … … … … … [2] (d) Explain what is meant by the term ‘recoverable amount’ when undertaking impairment reviews. … … … … … [2] (e) State two reasons why the company should continue undertaking impairment reviews. 1 … … 2 … … [2] [Total: 25] * 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 9706/33 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.

9706/33 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.

9706/33 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.

9706/33 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).

9706/33 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.

9706/33 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

9706/33 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.

9706/33 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) Explain why the partners were not sure of the value of the goodwill. Because it is inherent/non-purchased goodwill (1) and there is no universally accepted, objective formula for calculation / no cash value is available (1). 2 1(b) State which partner would prefer the value given to the goodwill to be as low as possible. Give a reason for your answer. Partner Andy (1) Reason: Because the higher the value given to goodwill the more his capital account balance will decrease/ the lower the value given to goodwill the less his capital account balance will decrease (1) 2 1(c) Calculate the profit on realisation made by the partnership. Total net assets = $221 500 + $291 300 = $512 800 Profit = $620 000 – ($512 800 (1) – $49 900 (1) ) – $3 000 (1) = $154 100 (1)OF 4

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 9 of 16 Question Answer Marks 1(d) Discuss how Betty’s decision to agree to Andy’s suggestion to change the partnership agreement impacted Betty. Support your answer with calculations. As the profit-sharing ratio had changed, Betty would have had a net increase in her capital from the value of goodwill (1) of [(100 000  50%) – (100 000  20%)] = $30 000 (1). As the partnership had been operating for 30 years it is likely that some of the assets have increased in value, and that should have been adjusted for as well as the goodwill (1). Betty’s share of the profit on realisation is only (154 100  20%) = $30 820 (1)OF. If the profit sharing ratio had not changed her share would have been (154 100  50%) = $77 050 (1)OF. Therefore the amount she will finally receive will be less by $46 230 (1)OF which more than outweighs the additional $30 000. Therefore, she is financially worse off than if the partnership had been sold at the end of September rather than continuing for the extra three months (1). However, the strategy gave the partners the opportunity to see if they could continue with the partnership themselves (1). An alternative strategy could have been to admit another partner (1) or to take on an assistant/manager (1). Max 3 for comments Max 3 for calculations Accept other valid responses. 6

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 10 of 16 Question Answer Marks 1(e) Prepare the journal entry in the books of AD plc to record the acquisition of the partnership. A narrative is required. Debit $ Credit $ Goodwill 65 400 (1) Premises 510 000 } Fixtures 18 000 } Inventory 42 200 } Trade payables 15 600 }(1) Bank 200 000 (1) Ordinary share capital 300 000 (1) Share premium 120 000 (1) Being the acquisition of partnership business of Andy and Betty on 31 December 2023 (1) 6

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 11 of 16 Question Answer Marks 1(f) Advise Betty whether she should keep her shares in AD plc or sell them. Justify your answer. Keep (max 2) She would hopefully get a steady income from dividends to replace the share of profit from the partnership (1). There is a chance of a profit on sale if she keeps them for some time (1). There would be commission involved in selling them (1). Sell (max 2) Since it is a plc there should be a ready market for the shares (1). She might want a good sum of money to fund a comfortable retirement (1). She might want to invest the funds in another business (1). She might be concerned that dividends/share price might decrease (1). Decision supported with a comment (1) Accept other valid responses. 5 Question Answer Marks 2(a) Explain why the figure for coloured jackets in the receipts and payments account is different from the figure in the income and expenditure account. The cost in the receipts and payments account is based on cash paid (1) whereas in the income and expenditure account it is based on change in valuations (1). The jackets will have been subject to wear and tear during the year, and this has been provided for (1). Max 3 Accept other valid responses. 3 2(b) Explain why the income from grants and donations is different in the receipts and payments account from the income and expenditure account. Not all grants and donations are released to income in the year in which they are received (1). Some are released to income over a period of years (1) in accordance with the accruals / matching concept (1) 3

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 12 of 16 Question Answer Marks 2(c) Prepare the income and expenditure account for the year ended 31 December 2023. C Society Income and Expenditure account for the year ended 31 December 2023 Income $ $ Subscriptions (3 200 + 120 – 300) 3 020 (1) Grants and donations 5 000 8 020 Expenditure Refreshments 500 } Rent 3 900 } Refuse bags 100 }(1) Depreciation of minibus (16 200 – 14 100) 2 100 (1) Depreciation of jackets 190 Minibus expenses (3 580 – 260 + 200) 3 520 (1) 10 310 Deficit 2 290 (1)OF 5 2(d) Complete the following table by calculating the following values for inclusion in the statement of financial position at 31 December 2023. State the section of the statement where each would be shown. $ Section of statement of financial position Coloured jackets 1 150 (1) Non-current assets (1) Deferred income 1 800 (1) Current / non-current liabilities (1) 4

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 13 of 16 Question Answer Marks 2(e) Advise the managing committee whether or not they should start to include the value of the inventory of refreshments and refuse bags in the financial statements. Justify your answer. Include (max 2) The first time this is done it will reduce the expenses / increase the current assets (1). If the amounts vary considerably from year to year it will even out the changes in the expenses (1). Don’t include (max 2) The values may well not be material (1). It will take some effort and is unlikely to come to an exact value (1). Unless the values change considerably from year to year the reduction in expenses will be a one-off (1). Decision supported with a comment (1) Accept other valid responses. 5 2(f) Discuss how this suggestion from the pharmaceutical company may impact C Society. Nine jackets are worth $540 which is more than the cash donation (1). Since nine per year is more than currently go missing, then old jackets can be replaced (1). Some old jackets could be sold to raise funds (1). If the new jackets bear a logo they may be less likely to go missing (1). If they don’t accept the jackets they may lose the cash donation anyway (1). As the bank balance is falling quickly the more urgent need may be for the cash (1). If only four or five jackets go missing, the replacement cost is a maximum of $300 which is less than the cash donation foregone (1). Members may not want to be wearing what amounts to advertising of a business (1). Other people may mistake society members for employees of the business (1). If the pharmaceutical company has a bad reputation for pollution the society may not want to display an obvious association (1). Donations from other sources might be reduced (1). It might be better to have the society’s name on the jackets (1). If the society is a registered charity there may be legal restrictions on its ability to be involved in advertising (1). Max 5 Accept other valid responses 5

9706/33 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 a revised value for the profit from operations for the year ended 31 December 2023. $ Original profit from operations 76 000 1 inventory (5 000) (1) 2 disposal proceeds (26 000) (1) 2 profit on disposal W1 6 000 (2) OF 2 overstated depreciation W2 2 000 (1) 3 impairment loss (3 000) (1) 4 allowance for irrecoverable debts (1 000) (1) 6 irrecoverable debt (4 000) (1) Revised profit from operations 45 000 (1)OF W1 accumulated depreciation = 32 000  0.15  30/12 = 12 000 net book value at disposal = 32 000 – 12 000 = 20 000 (1) profit on disposal = 26 000 – 20 000 = $6 000 (1)OF W2 32 000  0.15  5/12 = $2 000 (1) 9

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 15 of 16 Question Answer Marks 3(b) Prepare the revised statement of cash flows for the year ended 31 December 2023 in accordance with IAS 7. CD plc Statement of cash flows for the year ended 31 December 2023 $ $ Profit from operations 45 000 (1)OF Depreciation (19 000 – 2 000) 17 000 (1) Impairment loss 3 000 (1) Profit on disposal (6 000) (1)OF Increase in inventory (8 000 – 5 000) (3 000) (1) Decrease in trade receivables (2 000 – 4 000 – 1 000) 3 000 (1) Increase in trade payables 7 000 Cash from operations 66 000 Tax paid (15 000) Net cash from operating activities 51 000 (1)OF Cash flow from investing activities Proceeds of sale of machinery 26 000 Purchase of fixtures and fittings (39 000) Net cash used in investing activities (13 000) (1) Cash flow from financing activities Loan received 20 000 Dividends paid (28 000) Net cash used in financing activities (8 000) (1) Net increase in cash and cash equivalents 30 000 Cash and cash equivalents on 31 December 2022 (22 000) } Cash and cash equivalents on 31 December 2023 8 000 }(1)OF 10 3(c) Explain how an event can be determined to be adjusting or non-adjusting. An adjusting event is one which provides evidence of conditions existing at the end of the reporting period (1) A non-adjusting event is one which is indicative of conditions arising after the reporting period (1). 2 3(d) Explain what is meant by the term ‘recoverable amount’. The recoverable amount is the higher (1) of the value in use and the fair value less costs to sell (1). 2

9706/33 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2024 © Cambridge University Press & Assessment 2024 Page 16 of 16 Question Answer Marks 3(e) State two reasons why the company should continue undertaking impairment reviews. They should stop the company’s assets from being overstated. (1) The company’s audit report may otherwise be qualified / The financial statements may otherwise not show a true and fair view. (1) IAS 36 applies to all assets except those covered under other standards. (1) Accept other valid responses. Max (2) 2