Cambridge A Level Accounting 9706 — 2025 Oct/Nov Paper 1 · Variant 3

Question 1

1 What are advantages of operating as a partnership? 1 ideas and workload can be shared 2 no requirement to publish financial statements 3 separate legal identity A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

Accepted Answer

B

Question 2

2 A business acquired a non-current asset. One half of the purchase consideration was paid by cheque on the date of the purchase. The balance was paid to the supplier three months later. What was the credit entry to record this acquisition on the date of purchase? A bank B bank and loan C bank and other payables D bank and other receivables

Accepted Answer

C

Question 3

3 Which statements about the prudence concept are correct? 1 Assets should not be overstated. 2 Liabilities should be overstated. 3 Losses should only be provided for after they have occurred. A 1 and 2 B 1 only C 2 and 3 D 3 only

Accepted Answer

B

Question 4

4 Arya sells one type of product at a unit price of $100 and with a credit period of one month. Customers’ purchases in excess of 80 units are allowed a discount of 5%. Roy purchased 100 units but returned 10 units two weeks later. How should Arya record the sales returns? account to be debited account to be credited A sales returns $950 bank $950 B sales returns $1000 bank $1000 C sales returns $950 trade receivables – Roy $950 D sales returns $1000 trade receivables – Roy $1000

Accepted Answer

C

Question 5

5 What are correct descriptions of revenue and capital expenditure? 1 Capital expenditure includes the cost of improving non-current assets. 2 Capital expenditure includes the cost of purchasing non-current assets. 3 Revenue expenditure includes the everyday running costs of a business. A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

Accepted Answer

A

Question 6

6 A business has a financial year end of 31 December. New production machinery was purchased on 1 July in the current financial year. The business depreciates production machinery using the straight-line method at a rate of 20% per annum. Depreciation is charged for each month of ownership. The residual value of the new production machinery has been estimated at $20 000. Depreciation charged on the new production machinery was $8000 for the current financial year. What was the cost of the new production machinery? A $40 000 B $60 000 C $80 000 D $100 000

Accepted Answer

D

Question 7

7 A new business is deciding upon the methods to use for calculating depreciation on non-current assets. Which statements are correct? 1 Reducing balance method is used when a non-current asset is expected to lose more of its value early in its life. 2 Straight-line method is used for depreciating both land and buildings. 3 Straight-line method is used when the most benefit is gained from a non-current asset in the early years of its life. A 1 and 2 B 1 only C 2 only D 2 and 3

Accepted Answer

B

Question 8

8 A company has two non-current assets. Details are as follows: cost residual asset date purchased depreciation method $ value X 1 Jan 2023 10000 straight-line life 5 years $2000 Y 1 Jan 2023 20000 reducing balance rate 20% nil What was the total depreciation charge in the statement of profit or loss for the year ended 31 December 2024? A $4800 B $5200 C $5600 D $6000

Accepted Answer

A

Question 9

9 Closing inventory of $5000 at the end of the year on 31 December has been incorrectly entered in the financial statements as $3000. How does this affect the financial statements for the year? profit for the year total assets A no effect understated B overstated overstated C understated no effect D understated understated

Accepted Answer

D

Question 10

10 The cost of a new machine has been debited to the repairs account. What type of error is this? A commission B omission C principle D reversal of entries

Accepted Answer

C

Question 11

11 A suspense account was opened to record the difference on a trial balance. After further investigation, the following errors were discovered. 1 Discount received of $250 had been debited to the discount allowed account. The entry to the trade payable account was correctly made. 2 Electricity refund of $170, entered correctly in the cash book, had been treated as electricity expense. 3 Machine installation of $440 had been treated as machine repairs. After correcting the errors, the trial balance agreed. What was the opening credit balance on the suspense account? A $160 B $400 C $670 D $840

Accepted Answer

D

Question 12

12 An accountant prepared a bank reconciliation statement. He discovered the following differences between the bank statement and the cash book. 1 an amount received from a customer by credit transfer 2 bank charges 3 unpresented cheques Which differences will need to be entered in the cash book to update it? A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

Accepted Answer

B

Question 13

13 A business maintains control accounts as a part of the double entry system. At 31 December, the balance of $23 400 in the sales ledger control account did not agree with the total of the individual sales ledger balances. The following errors were discovered. 1 A sales invoice for $1800 had been entered in the sales journal as $1880. 2 A discount allowed of $200 to a customer had not been recorded. 3 Sales of $1200 had been entered on the wrong side of a customer’s account. What is the correct balance in the sales ledger control account at 31 December? A $23120 B $23520 C $25520 D $25600

Accepted Answer

A

Question 14

14 A statement of profit or loss shows a draft loss for the year of $9450. However, the following errors have been discovered. 1 Depreciation of $10 000 on non-current assets has been incorrectly charged using the straight-line method at 25% per annum. The correct depreciation rate is 20% per annum. 2 No record has been made of goods taken for own use by the owner, $720. What is the corrected draft loss? A $6730 B $8170 C $8230 D $9670

Accepted Answer

A

Question 15

15 The amount of trade receivables at the year end of Year 2, before deducting the allowance for irrecoverable debts, was the same as at the end of Year 1. There were no irrecoverable debts in either year. The sole trader reduced the rate of allowance for irrecoverable debts in Year 2. What is the effect of this action on profit for the year and on current assets? profit for the year current assets A increased increased B increased decreased C decreased increased D decreased decreased

Accepted Answer

A

Question 16

16 Jane has just completed her first year in business as a sole trader. The following details are available for the year ended 31 December. $ profit for the year 89200 bank loan at 31 December 10000 drawings for the year 46500 capital at 31 December 202000 capital introduced during the year 20000 How much capital did Jane begin the business with? A $92800 B $129300 C $139300 D $159300

Accepted Answer

C

Question 17

17 How is a partnership appropriation account prepared? added to profit for the subtracted from profit year for the year A interest on capital interest on drawings, partners’ salaries B interest on capital, interest on drawings, partners’ salaries drawings C interest on drawings, interest on capital, drawings partners’ salaries D interest on drawings interest on capital, partners’ salaries

Accepted Answer

D

Question 18

18 Tom had a credit balance on his current account. He had a partner’s salary of $5000 and interest on drawings of $800. These were both posted to the wrong side of his current account. What was the effect of these errors on the balance on his current account? A $8400 overstated B $8400 understated C $11600 overstated D $11600 understated

Accepted Answer

B

Question 19

19 A company provides the following information. $ ordinary shares of $0.50 each 84000 retained earnings 50000 total equity 134000 The following transactions then take place. 1 The company makes a rights issue of one new ordinary share for every two held, at $1.30. The issue is fully subscribed. 2 A bonus issue of two ordinary shares for every three held is then made. What is the maximum possible balance of the retained earnings after these transactions? A $8400 B $16800 C $33200 D $41600

Accepted Answer

C

Question 20

20 A company has an ordinary share capital of $400000 made up of ordinary shares of $0.50 each. The following information is available about dividends for the year ended 31 December. dividends paid during the year $0.10 per share proposed dividends at year end $60000 Which entry should be made for dividends in the statement of changes in equity for the year ended 31 December? A $40000 B $80000 C $100000 D $140000

Accepted Answer

B

Question 21

21 Why do shareholders in a public limited company review the published financial statements? 1 to assess the return on their investment 2 to check the current price of a share in the company 3 to consider the security of their investment A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

Accepted Answer

C

Question 22

22 A trader calculates his rate of inventory turnover as eight times a year. What was the numerator (top figure) in his calculation? A average inventory B closing inventory C cost of sales D credit purchases

Accepted Answer

C

Question 23

23 A new manufacturing business has just completed its first year of operation. The following details relate to its inventory of direct materials. date units $ 2 January 700 20 2 July 300 26 The following items were taken from inventory for production. items 4 January 250 5 July 450 What would be the value of inventory at the end of the year using the AVCO (periodic) method? A $6540 B $6720 C $6900 D $7800

Accepted Answer

A

Question 24

24 What is the purpose of a job cost sheet? A to enable the business to recover its overheads B to ensure the customer knows the split between materials and labour C to inform the customer of the profit margin D to let the business find the price for a quotation

Accepted Answer

D

Question 25

25 The following information is available. budgeted labour hours 10000 budgeted production overheads $80000 actual labour hours 11000 actual production overheads $82000 By how much are production overheads under-absorbed or over-absorbed? A $6000 over-absorbed B $6000 under-absorbed C $8000 over-absorbed D $8000 under-absorbed

Accepted Answer

A

Question 26

26 Which basis should be used to apportion stores overheads to production departments? A number of employees in each production department B number of machines in each production department C number of requisitions made by each production department D number of units produced in each production department

Accepted Answer

C

Question 27

27 The following information relates to a company’s previous accounting period. opening inventory 10000 units closing inventory 20000 units absorption cost profit $180000 marginal cost profit $100000 What was the overhead absorption rate per unit during the accounting period? A $4 B $8 C $9 D $18

Accepted Answer

B

Question 28

28 A business has the following budgeted figures for its next financial period. $ budgeted total fixed cost 100000 budgeted profit 200000 budgeted sales 800000 What is the budgeted total contribution for the period? A $300000 B $500000 C $600000 D $700000

Accepted Answer

A

Question 29

29 The following information is available for a business. $ budgeted fixed costs per month 2000 target profit per month 3000 budgeted variable cost per unit 15 budgeted selling price per unit 40 Fixed costs are expected to increase by $500 per month and variable costs are expected to increase by $5 per unit. Which value of revenue will be required to achieve the target profit? A $8000 B $8800 C $10000 D $11000

Accepted Answer

D

Question 30

30 Which statements describe assumptions that are made when using cost–volume–profit analysis? 1 Costs can be accurately divided into their fixed and variable parts. 2 Costs cannot be accurately divided into their fixed and variable parts. 3 There are multiple products or a varying sales mix. 4 There is a single product or constant sales mix. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

Accepted Answer

B

Cambridge A Level Accounting 9706 — 2025 Oct/Nov Paper 1 · Variant 3

Question paper12 pages

Mark scheme3 pages

Questions as text

Q1 · What are advantages of operating as a partnership?

Q2 · A business acquired a non-current asset

Q3 · Which statements about the prudence concept are correct?

Q4 · Arya sells one type of product at a unit price of $100 and with a credit period of one…

Q5 · What are correct descriptions of revenue and capital expenditure?

Q6 · A business has a financial year end of 31 December

Q7 · A new business is deciding upon the methods to use for calculating depreciation on…

Q8 · A company has two non-current assets

Q9 · Closing inventory of $5000 at the end of the year on 31 December has been incorrectly…

Q10 · The cost of a new machine has been debited to the repairs account

Q11 · A suspense account was opened to record the difference on a trial balance

Q12 · An accountant prepared a bank reconciliation statement

Q13 · A business maintains control accounts as a part of the double entry system

Q14 · A statement of profit or loss shows a draft loss for the year of $9450

Q15 · The amount of trade receivables at the year end of Year 2, before deducting the allowance…

Q16 · Jane has just completed her first year in business as a sole trader

Q17 · How is a partnership appropriation account prepared?

Q18 · Tom had a credit balance on his current account

Q19 · A company provides the following information

Q20 · A company has an ordinary share capital of $400000 made up of ordinary shares of $0.50…

Q21 · Why do shareholders in a public limited company review the published financial statements?

Q22 · A trader calculates his rate of inventory turnover as eight times a year

Q23 · A new manufacturing business has just completed its first year of operation

Q24 · What is the purpose of a job cost sheet?

Q25 · The following information is available

Q26 · Which basis should be used to apportion stores overheads to production departments?

Q27 · The following information relates to a company’s previous accounting period

Q28 · A business has the following budgeted figures for its next financial period

Q29 · The following information is available for a business

Q30 · Which statements describe assumptions that are made when using cost–volume–profit…

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