Cambridge A Level Accounting 9706 — 2025 Oct/Nov Paper 3 · Variant 2

This document has 16 pages. Any blank pages are indicated. [Turn over Cambridge International AS & A Level ACCOUNTING 9706/32 Paper 3 Financial Accounting October/November 2025 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. * 1 6 4 0 3 2 4 8 9 7 * DC (SL) 341193/4 © UCLES 2025 ,










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2 9706/32/O/N/25 © UCLES 2025 1 Read Source A in the insert. (a) Suggest one reason why QW plc might want to purchase the partnership. … … [1] (b) Prepare the realisation account if option 1 is adopted. … … … … … … … … … … … … [5] * 0000800000002 * ,










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3 9706/32/O/N/25 © UCLES 2025 [Turn over (c) Calculate the amount of cash payable to or receivable from each partner if option 1 is adopted. Omira $ Peter $ … … … … … … … … … … … … … … … … … … … … … Cash … … [6] (d) Prepare the bank account of the partnership, showing the entries to close the business if option 1 is adopted. … … … … … … … … … … [3] * 0000800000003 * ,










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4 9706/32/O/N/25 © UCLES 2025 (e) Assess both options put forward by QW plc for the acquisition, recommending the better option for the partners. Your answer should cover both financial and non-financial factors. … … … … … … … … … … … … … … [5] * 0000800000004 * ,










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5 9706/32/O/N/25 © UCLES 2025 [Turn over Additional information One of the directors of QW plc has said that if the partners adopt option 2, then the company should record a provision for future redundancy payments for the partnership employees. (f) Discuss this statement made by the director. Support your answer by referring to the relevant international accounting standard (IAS). … … … … … … … … … … … … … … [5] [Total: 25] * 0000800000005 * ,










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6 9706/32/O/N/25 © UCLES 2025 2 Read Source B in the insert. (a) Calculate the following for Company AZ to two decimal places. (i) dividend per share … … [1] (ii) dividend cover. … … [1] (b) Describe the type of investor who might prefer to invest in Company AZ rather than Company BY after considering these ratios. Give a reason for your answer. description … … … … reason … … … … [4] * 0000800000006 * ,










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7 9706/32/O/N/25 © UCLES 2025 [Turn over (c) Explain how the investor’s decision might be different if Company AZ was paying interest of 12% per annum on a long-term loan of $440 000, while Company BY had interest cover of 9 times. Support your answer with relevant calculations. … … … … … … … … [4] (d) Suggest two investment ratios a prospective investor might consider, other than dividend per share and dividend cover. 1 … 2 … [2] Additional information The directors of Company BY are considering adopting ratio analysis to assess the performance of the business. (e) Advise the directors whether or not they should adopt ratio analysis to assess performance. Justify your answer. … … … … … … … … … … [5] * 0000800000007 * ,










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8 9706/32/O/N/25 © UCLES 2025 (f) Discuss whether the external auditors of a company would be interested in the ratios of a business. … … … … … … … … [4] (g) State two differences between external and internal auditors. 1 … … … … 2 … … … … [4] [Total: 25] * 0000800000008 * ,










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9 9706/32/O/N/25 © UCLES 2025 [Turn over 3 Read Source C in the insert. (a) State one reason why a business should treat some research and development costs as revenue expenditure. … … [1] (b) Name two items, other than research and development expenditure, which might be included in a statement of financial position as an intangible asset. 1 … 2 … [2] * 0000800000009 * ,










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10 9706/32/O/N/25 © UCLES 2025 Additional information The following information is available for the company. 1 The statements of financial position of the company recorded the following values. at 31 December 2024 2023 $ $ Non-current assets at carrying value Premises 304 000 308 000 Machinery 157 000 96 000 Motor vehicles 63 000 54 000 524 000 458 000 Intangible assets 139 000 58 000 663 000 516 000 Current assets Inventory 84 000 76 000 Trade receivables 54 000 51 000 Bank 6 000 15 000 144 000 142 000 Total assets 807 000 658 000 Equity Ordinary share capital ($1 shares) 500 000 400 000 Share premium 25 000 0 Retained earnings 93 000 102 000 General reserve 50 000 30 000 668 000 532 000 Non-current liabilities Bank loans 85 000 60 000 Current liabilities Trade payables 33 000 41 000 Other payables Tax charge for the year 15 000 21 000 Interest payable 6 000 4 000 54 000 66 000 Total equity and liabilities 807 000 658 000 2 Profit for the year ended 31 December 2024, after allowing for tax and for interest of $7000, amounted to $156 000. A dividend was paid and a transfer to the general reserve was made. 3 Premises are depreciated over the expected lifetime of the buildings. New machinery costing $103 000 was purchased during the year. An old machine with a carrying value of $23 000 was sold for $13 000. The depreciation charge for the year for motor vehicles was $13 000. One motor vehicle with a carrying value of $7000 was sold at a profit of $2000. * 0000800000010 * ,










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11 9706/32/O/N/25 © UCLES 2025 [Turn over (c) Prepare the statement of cash flows for the year ended 31 December 2024 in accordance with IAS 7. Include in your answer a value for the amortisation (depreciation) of intangible assets. Workings: * 0000800000011 * ,









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16 9706/32/O/N/25 © UCLES 2025 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. BLANK PAGE * 0000800000016 * ,









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This document consists of 19 printed pages. © Cambridge University Press & Assessment 2025 [Turn over Cambridge International AS & A Level ACCOUNTING 9706/32 Paper 3 Structured Questions October/November 2025 MARK SCHEME Maximum Mark: 150 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 2025 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 2025 © Cambridge University Press & Assessment 2025 Page 2 of 19 Generic Marking Principles These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alon gside 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 2025 © Cambridge University Press & Assessment 2025 Page 3 of 19 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 thre sholds or grade descriptors in mind.

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 4 of 19 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 2025 © Cambridge University Press & Assessment 2025 Page 5 of 19 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 equivale nt 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 an d 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 2025 © Cambridge University Press & Assessment 2025 Page 6 of 19 Annotations guidance for centres Examiners use a system of annotations as a shorthand for communicating their marking decisions to one another. Examiners are trained during the standardisation process on how and when to use annotations. The purpose of annotations is to inform the standard isation and monitoring processes and guide the supervising examiners when they are checking the work of examiners within their team. The meaning of annotations and how they are used is specific to each component and is understood by all examiners who mark the component. We publish annotations in our mark schemes to help centres understand the annotations they may see on copies of scripts. Note that there may not be a direct correlation between the number of annotations on a script and the mark awarded. Similarly, the use of an annotation may not be an indication of the quality of the response. The annotations listed below were available to examiners marking this component in this series. Annotations Annotation Meaning Correct and relevant point made in answering the question. Incorrect point or error made. Two statements are linked. Repeat An extraneous figure No working shown Addition error (Arithmetic error) Required item 1 Required item 2 Own figure

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 7 of 19 Annotation Meaning Evaluation Not answered question Benefit of the doubt given. 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 2025 © Cambridge University Press & Assessment 2025 Page 8 of 19 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 2025 © Cambridge University Press & Assessment 2025 Page 9 of 19 Question Answer Marks 1(a) Suggest one reason why QW plc might want to purchase the partnership. Economies of scale / synergy (1) Greater geographical coverage (1) Increased market share / more customers / more sales (1) Diversification of markets (1) Elimination of competitors (1) Max 1 Accept other valid responses. 1 1(b) Prepare the realisation account if option 1 is adopted. Realisation account $ $ Non-current assets 51 500 * Trade payables 7 900 *(1) all three Current assets 20 900 * Capital – Omira (motor vehicle) 12 200 }** Bank (legal fees) 3 100 } Capital – Peter (motor vehicle) 5 200 }**(1) Bank (redundancy pay) 20 000 }(1) QW plc – purchase consideration 200 000 (1) Capital – Omira (profit) 77 880 }* Capital – Peter (profit) 51 920 }*(1)OF 225 300 225 300 5

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 10 of 19 Question Answer Marks 1(c) Calculate the amount of cash payable to or receivable from each partner if option 1 is adopted. Omira $ Peter $ Capital account 35 000 25 000 (1) both Current account (2 900) 6 000 (1) both Realisation (profit) 77 880 51 920 (1)OF both Realisation (vehicles) (12 200) (5 200) (1) both QW plc (Shares) (50 000) (50 000) (1) both Cash 47 780 27 720 (1)OF both 6 1(d) Prepare the bank account of the partnership showing the entries to close the business if option 1 is adopted. Bank account $ $ QW plc 100 000 (1) Balance b/d 1 400 Legal fees 3 100 } Redundancy pay 20 000 }(1) Capital – Omira 47 780 }* Capital – Peter 27 720 }*(1)OF 100 000 100 000 3

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 11 of 19 Question Answer Marks 1(e) Assess both options put forward by QW plc for the acquisition, recommending the better option for the partners. Your answer should cover both financial and non-financial factors. Financial (Max 3) The purchase consideration / realisation profit is higher for option 1 (1). The salaries on offer under option 1 would be attractive as they are very generous (1). Partners might prefer to own shares as they might increase in value over time (1). Partners might prefer to be in receipt of dividends as these might increase (1). Partners might prefer to receive debenture interest as it is fixed / payable whether profits are made or not (1). Non-financial (Max 3) Staff being made redundant may adversely affect the partners’ reputation (1). Training new staff could be stressful (1). Option 1 provides voting rights (1). Partners may be hoping for a quiet retirement / do not want to work for an extra year (1). Decision supported with a reason (1) Accept other valid responses. 5

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 12 of 19 Question Answer Marks 1(f) Discuss this statement made by the director. Support your answer by referring to the relevant international accounting standard (IAS). Provisions are covered in IAS 37 (1). A provision needs to be made if there is a greater than 50% likelihood (probable) of an obligation requiring settlement (1). The provision would be included in the financial statements of the company (1). If the likelihood is less than 50% (possible) it is a contingent liability (1) and it needs to be shown as a note to the financial statements (1). No action is needed if the likelihood is remote (1). The directors need to make an assessment of how likely it is that the staff will be made redundant (1). The directors might decide that the redundancy payment would not be material in relation to the size of the company and therefore not make the provision (1). Max 5 (1 mark for IAS and 4 marks for discussion) Accept other valid responses 5 Question Answer Marks 2(a)(i) Calculate the following for Company AZ to two decimal places. dividend per share dividend per share $18 000/300 000 = $0.06 (1) 1 2(a)(ii) Calculate the following for Company AZ to two decimal places. Dividend cover dividend cover $80 000/$18 000 = 4.44 times (1) 1

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 13 of 19 Question Answer Marks 2(b) Describe the type of investor who might prefer to invest in Company AZ rather than Company BY after considering these ratios. Give a reason for your answer. Description (max 2) A long-term investor (1) who is prepared to wait to receive a capital gain (1) and accepts lower dividends now / expects increased dividends in the future (1). Reason Company AZ pays out a lower proportion of profit in the form of dividends / ploughs back a higher proportion of profit into the business / presents less risk (1) which may result in its expansion (1). Accept other valid responses. Answers on OF basis 4 2(c) Explain how the investor’s decision might be different if Company AZ was paying interest of 12% per annum on a long-term loan of $440 000 while Company BY had interest cover of 9 times. Support your answer with relevant calculations. Interest cover for Company AZ = + (80000 52800) 52800 (1) = 2.52 times (1)OF This suggests that Company AZ is much more highly geared than Company BY (1) and therefore an investment in Company AZ is much riskier (1) and the company is more likely to go into liquidation if profit falls (1). Max 2 for calculation and Max 2 for comments 4

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 14 of 19 Question Answer Marks 2(d) Suggest two investment ratios a prospective investor might consider, other than dividend per share and dividend cover. earnings per share (1) price/earnings (1) dividend yield (1) Max 2 2

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 15 of 19 Question Answer Marks 2(e) Advise the directors whether or not they should adopt ratio analysis to assess performance. Justify your answer. Adopt (Max 2) Identify trends over time (1) Identify problem areas (1) Aids decision making by stakeholders e.g. investors (1) Comparison with other businesses (1) Don’t adopt (Max 2) Based on historic data (1) Not necessarily comparable with other companies / companies may use different accounting policies (1) Doesn’t take into account non-financial factors (1) Doesn’t take into account external factors (1) Doesn’t explain cause or reason (1) Decision supported with a comment (1) Accept other valid responses 5

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 16 of 19 Question Answer Marks 2(f) Discuss whether the external auditors of a company would be interested in the ratios of a business. The auditors may not be interested (1) as the ratios do not make up part of the financial statements (1) and the auditors do not have to give an opinion on them (1). The auditors may be interested (1) to identify areas of concern where their attention should be directed (1). Accept other valid responses. Max 4 4 2(g) State two differences between external and internal auditors. External auditors Internal auditors Appointed by the shareholders (1) Appointed by the company / directors (1) Paid a fee / independent / hired (1) Paid a salary / employee (1) Should be professionally qualified (1) May not be professionally qualified (1) Usually perform one annual audit (1) Usually audit throughout the year (1) Give an opinion / audit report on the financial statements (1) Review business practices and internal control measures and make recommendations (1) Max 4 4

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 17 of 19 Question Answer Marks 3(a) State one reason why a business should treat some research and development costs as revenue expenditure. Because there is no expectation that the expenditure will benefit future years (1) To comply with IAS 38 (1) To avoid profits/assets being overstated (1) For prudence (1) Accept other valid responses Max 1 1 3(b) Name two items, other than research and development expenditure, which might be included in a statement of financial position as an intangible asset. Patent (1) Trademark / Logos / Brands (1) Licence (1) Goodwill (1) Copyright (1) Accept other valid responses Max 2 2

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 18 of 19 Question Answer Marks 3(c) Prepare the statement of cash flows for the year ended 31 December 2024 in accordance with IAS 7. Include in your answer a value for the amortisation (depreciation) of intangible assets. AP plc Statement of cash flows for the year ended 31 December 2024 $ $ Profit from operations W1 178 000 (1) Depreciation W2 36 000 (3) Amortisation (depreciation) of intangible assets W3 9 000 (2) Loss on disposal 10 000 (1) Profit on disposal (2 000) (1) Increase in inventory (8 000) } Increase in trade receivables (3 000) } Decrease in trade payables (8 000) } (1) Cash from operations 212 000 Interest paid W4 (5 000) (1) Tax paid (21 000) (1) Net cash from operating activities 186 000 (1)OF 22

9706/32 Cambridge International AS & A Level – Mark Scheme PUBLISHED October/November 2025 © Cambridge University Press & Assessment 2025 Page 19 of 19 Question Answer Marks 3(c) $ $ Cash flow from investing activities Purchases of machinery (103 000) } Purchases of motor vehicles W5 (29 000) }(1) Expenditure on research and development (90 000) (1) Proceeds of sale of machinery 13 000 }* Proceeds of sale of motor vehicles (7 + 2) 9 000 }*(1) Net cash used in investing activities (200 000) (1)OF Cash flow from financing activities Loan received 25 000 }** Share issue 125 000 }**(1) Dividends paid W6 (145 000) (2) Net cash from financing activities 5 000 (1)OF Net increase / (decrease) in cash and cash equivalents (9 000) (1) Cash and cash equivalents at 31 December 2023 15 000 }*** Cash and cash equivalents at 31 December 2024 6 000 } ***(1) W1 156 000 + 15 000 + 7000 = 178 000 (1) W2 Premises (308 000 – 304 000) = 4000 Machinery (96 000 + 103 000 – 23 000 – 157 000) = 19 000 4000 (1) + 19 000 (1) + 13 000 (1) = 36 000 W3 58 000 + 90 000 (1) – 139 000 = 9000 (1) W4 7000 + (4000 – 6000) = 5000 (1) W5 (63 000 + 13 000 + 7000 – 54 000) = 29 000 (1) W6 (102 000 – 93 000) (1) + (156 000 – 20 000) (1) = 145 000