Reconciliation and verification — Paper 2 · A Level Accounting 9706

1 The directors of AB Limited provide the following financial information: Income Statement (extract) for the year ended 30 April 2016 $ Revenue 300 000 Purchases (80% on credit) 250 000 Expenses 27 000 All sales earned a uniform gross margin of 20%. Statement of Financial Position at 30 April 2016 $ Non-current assets 160 000 Current assets Inventory 38 000 Trade receivables 35 000 Cash and cash equivalents 45 000 118 000 Total assets 278 000 Equity and liabilities Equity Ordinary share capital of $1 each 170 000 Share premium 5 000 Retained earnings 25 000 200 000 Current liabilities Trade payables 27 000 Other payables 51 000 78 000 Total equity and liabilities 278 000 REQUIRED (a) Prepare the income statement for AB Limited for the year ended 30 April 2016 in as much detail as possible. [4] (b) Suggest two reasons why the balance on a retained earnings account may be lower than the profit for the year. 1 2 [2] (c) Calculate the following ratios. (i) Rate of inventory turnover (to two decimal places) [2] (ii) Liquid (acid test) ratio (to two decimal places) [2] (iii) Trade payables turnover (days) [2] Additional information The following information is available for XY Limited, a competitor of AB Limited. Rate of inventory turnover 8.75 times Liquid (acid test) ratio 0.85 : 1 Trade payables turnover (days) 42 days REQUIRED (d) Discuss the performance of AB Limited by comparing the ratios calculated in part (c) with those of XY Limited. Rate of inventory turnover Liquid (acid test) ratio Trade payables turnover (days) [6] Additional information CD Limited has been asked by both AB Limited and XY Limited to become their supplier. The directors of CD Limited only wish to supply to one of the two companies. REQUIRED (e) Advise the directors of CD Limited which company they should supply. Give reasons for your answer. [4] Question 1(f) is on the next page. Additional information The financial statements of AB Limited for the year ended 30 April 2017 showed a draft profit for the year of $71 000. A review of the books of account revealed the following errors: 1 A sales invoice for $234 had been recorded as $324. 2 Returns outwards account had been overcast by $100. 3 Inventory of $1200 had been omitted from closing inventory. REQUIRED (f) Calculate the revised profit for the year ended 30 April 2017. [4] (g) Explain the difference between a capital reserve and a revenue reserve. [4] [Total: 30] Question 2 is on the next page.

30 marks

Mark scheme: Question Answer Marks 1(a) $ $ 4 Revenue 300 000 Opening inventory (bal. figure) 28 000 (1) OF Purchases 250 000 Closing inventory (38 000) Cost of sales 240 000 (1) OF Gross profit 60 000 (1) Expenses 27 000 Profit for the year 33 000 (1) OF 1(b) Previous loss brought forward (1) 2 Payment of dividends (1) Bonus issue of shares (1) Max 2 1(c)(i) Inventory turnover 2 240 000 / 33 000 (1)OF = 7.27 times (1)OF 1(c)(ii) Liquid (acid test) ratio 2 80 000 / 78 000 (1) = 1.03 : 1 (1) 1(c)(iii) Trade payables turnover (days) 2 (27 000 / 200 000) × 365 (1) = 50 days (1) 1(d) Rate of inventory turnover (days) – Better for XY Limited and worse for AB Limited 6 (1) The goods being sold by AB Limited are less popular or slower selling than those of XY Limited; or XY Limited may have offered sales promotions. (1) Liquid (acid test) ratio – Better for AB Limited and worse for XY (1) AB Limited have sufficient current assets to cover its short term debts; Or For every $1 of current liabilities AB Limited has enough liquid assets (1). Trade payables payment – Slower for AB Limited and faster for XY Limited (1) AB Limited’s suppliers may have poor credit control. They may not be offering AB Limited incentives to pay early, unlike XY Limited. (1) (2 marks) for each ratio 1 mark for basic point and 1 for development. 1(e) AB Limited: More liquidity, lower inventory turnover but has ability to pay trade 4 payables. XY Limited: Higher rate of inventory turnover, faster payment period 1 mark for decision and 3 for reasons. Accept other valid points. 1(f) $ 4 Original profit 71 000 Error 1 (90) (1) Error 2 (100) (1) Error 3 1 200 (1) Revised gross profit 72 010 (1)OF 1(g) A revenue reserve is profit retained by the directors and is the property of the 4 ordinary shareholders. Source of capital reserve is from issuing capital, that is, share premium. Revenue reserves can be used to pay cash dividends from retained profits. Capital reserves help protect creditors. Capital reserves cannot be used to pay cash dividends but can be used for bonus shares. (2 marks) × 2 points – 1 mark for basic point and 1 for development Total: 30

This question in 9706/21 May/June 2017

3 Meena did not keep full accounting records. She was advised to keep her books of account using the double entry system. REQUIRED (a) State three benefits a business gains from maintaining a system of double entry book-keeping. 1 2 3 [3] Additional information Meena now uses the double entry system of book-keeping. At the end of January the total of the balances in the sales ledger was $34 524. However, the balance on the sales ledger control account was $33 205. On investigation she found the following errors: 1 The sales journal had been undercast by $1649. 2 A cheque received had been correctly entered in the cash book as $650 but was entered in the sales ledger as $560. 3 An irrecoverable debt, $420, had been written off in the sales ledger but not entered in the control account. 4 A credit note issued for $160 had been completely omitted from the books of account. REQUIRED (b) Prepare a reconciliation between the sales ledger control account and the sales ledger balances at 31 January. Sales ledger control account Description Add ($) Less ($) Total ($) Opening balance 33 205 Sales ledger balances Description Add ($) Less ($) Total ($) Opening balance 34 524 [6] (c) State three reasons why there might be a credit balance on a customer’s account in the sales ledger. 1 2 3 [3] Additional information Meena is considering charging interest on the full account balances of her customers who do not pay promptly. REQUIRED (d) Advise Meena whether or not she should take this course of action. Justify your answer. [3] [Total: 15]

15 marks

Mark scheme: 3(a) It enables checking transactions through the use of a trial balance and control 3 accounts. It enables the production of the income statement and statement of financial position to be compiled more easily. It shows the amount due to individual customers and suppliers thus avoiding overpayment. Helps guard against errors / fraud. (1 mark) × 3 points 3(b) Sales ledger control account 6 Description Add ($) Less ($) Total ($) Opening balance 33 205 Error in sales journal 1 649 (1) Irrecoverable debt omitted 420 (1) Credit omitted 160 (1) Totals 1 649 580 1 069 Corrected balance 34 274 Sales ledger balances Description Add ($) Less ($) Total ($) Opening balance 34 524 Less error in cheque entry 90 (1) Less credit omitted 160 (1) Total 250 (250) Corrected balance 34 274 (1) both 3(c) A customer has overpaid in error 3 A credit has been given and the customer has not taken A contra has been put through but the customer has ignored it. A customer has paid in advance Not taking a discount There is a deposit on goods. Customer paid for the goods before returning them. Customer overpaid and invoice (1 mark) × 3 points 3(d) May improve trade receivables collection period. 3 Improve cash flows Meena may lose customers May need tighter credit control which may increase cost Decision (1 mark) Justification (2 marks) Total: 15

This question in 9706/21 May/June 2017

REQUIRED (b) Prepare an income statement for Huan for the year ended 31 March 2016. Huan Income statement for the year ended 31 March 2016 [13] Additional information All of Huan’s sales and purchases are made on a credit basis. He feels that his accounting records could be improved by preparation of control accounts. REQUIRED (c) State three benefits and one limitation of preparing a sales ledger control account. Benefits 1 2 3 Limitation 1 [4]

17 marks

This question in 9706/21 Oct/Nov 2017

2 Trott provided the following information for the year ended 30 April 2017: $ Sales ledger control account balance 93 185 Sales ledger balances 78 370 The following errors were identified: 1 The sales journal total had been overcast by $30 420. 2 A dishonoured cheque for $9745 had not been entered in the customer’s account. 3 Interest charged on an overdue amount, $720, had been completely omitted from the books of account. 4 The sales returns journal had been overcast by $4560. 5 Discount allowed of $1520 had been completely omitted from the books of account. 6 Receipts from credit customers entered in the cash book had been overcast by $18 965. 7 An irrecoverable debt of $1825 had been written off in the sales ledger control account but no entry had been made in the customer’s account. REQUIRED (a) Complete the following tables to update the sales ledger control account balance and the sales ledger balances at 30 April 2017. Sales ledger control account Description Add ($) Less ($) Total ($) Opening balance 93 185 Sales ledger balances Description Add ($) Less ($) Total ($) Opening balance 78 370 [11] (b) State four advantages to a business of preparing a sales ledger control account. 1 2 3 4 [4] [Total: 15]

15 marks

Mark scheme: 2(a) Sales ledger control account 11 Add Less Total Description ($) ($) ($) Opening balance 93 185 Sales journal 30 420 (1) Interest on late payment 720 (1) Sales returns journal 4 560 (1) Discount allowed 1 520 (1) Bank receipts 18 965 (1) Closing balance 85 490 (1cf) Sales ledger balances Add Less Total Description ($) ($) ($) Opening balance 78 370 Dishonoured cheque 9 745 (1) Interest on late payment 720 (1) Discount allowed 1 520 (1) Irrecoverable debt w/off 1 825 (1) Closing balance 85 490* 1OF Note: * Final balances must be the same amount in the sales ledger control account and the sales ledger balances to be awarded own figure mark. 2(b) Provides a total for trade receivables (1) 4 Helps in the preparation of the financial statements. (1) Helps deter/prevent/reduce fraud, as it is maintained by different person. (1) Verifies the arithmetical accuracy/identifies errors in the sales ledger. (1) Can be reconciled with the sales ledger balances to improve accuracy. (1) (1 mark for a valid point, up to max of 4 marks).

This question in 9706/22 Oct/Nov 2017

1 Delph started trading on 1 July 2016. For the year ended 30 June 2017 he provided the following information relating to his sales and purchases. $ Bank payments to credit suppliers 39 826 Cash purchases 692 Credit purchases 74 779 Credit purchases returns 6 813 Discount received 1 764 At 30 June 2017 Sales ledger control account balance 21 555 Debit REQUIRED (a) Explain two benefits of using control accounts. 1 2 [4] Additional information The following book-keeping errors have been discovered in the sales ledger: 1 The sales journal total for June 2017 was understated by $1470.

4 marks

Mark scheme: 1(a) They enable totals for trade payables and trade receivables to be quickly extracted (1) for the trial balance and financial statements (1) They are kept in the general ledger separately from the ledgers themselves / segregation of duties (1) thereby reducing the risk of errors / fraud (1) They improve the reliability of the ledgers (1) by identifying errors when ledger totals do not agree with the control account totals (1) The control account may help to identify problems in a particular ledger (1) If a trial balance does not balance (1). 1 mark for stating + 1 mark for development Any other suitable answers Max 4 marks 4 1(b) Delph Amended sales ledger control account $ $ Balance b/d 21 555 Discounts allowed 870 (1) Invoice omitted 1 520 (1) Balance c/d 24 395 Correction of SJ total 1 470 (1) Error in sales journal 720 (1) 25 265 25 265 Balance b/d 24 395 (1)OF 5 Question Answer Marks 1(c) Delph Purchases ledger control account $ $ Purchases returns 6 813 } Purchases 74 779 (1) Discount received 1 764 } (1) Balance c/d 384 Bank 39 826 (1) Balance c/d 26 760 75 163 75 163 Balance b/d 384 (1) Balance b/d 26 760 (1)OF 5 Question Answer Marks 1(d) Delph Statement of financial position at 30 June 2017 $ $ $ Assets Cost Accumulated depreciation Net book value Non-current assets Motor vehicle 13 560 3 390 10 170 (1) Current assets Inventory 3 700 Trade receivables 24 395 (1)OF Other receivables 650 (1) Cash in hand 360 (1) Total current assets 29 105 Total assets 39 275 Capital and Liabilities Owner’s capital Opening balance 10 500 Add: Profit for the year 9 778 (1)OF Less: Drawings (12 625) (1) Total capital 7 653 Non-current liabilities Long-term loan (3000–500) 2 500 (1) 9 Question Answer Marks 1(d) Current liabilities Trade payables 26 376 (1)OF Other payables 1 890 (1 for both) Bank overdraft 856 Total current liabilities 29 122 Total capital and liabilities 39 275 1(e) Nadia may have had to buy from new suppliers who were more expensive Suppliers may have increased their prices but Nadia may not have been able to pass these increases onto her customers Nadia may have started selling new products at lower prices or margin To maintain or increase sales, Nadia may have had to run promotions or offer higher discounts Nadia may have had old or obsolete inventory that had to be cleared at reduced prices Increased amounts of inventory may have been damaged or stolen Nadia may have been controlling her overheads better resulting in the higher profit margin If the business has been expanding, some overhead costs do not increase proportionately with sales Delph may be operating from larger premises with higher property costs Delph may experience low profitability due to first year of trading Advice Nadia’s business is more profitable (1) Any other suitable answers – max 7 7

This question in 9706/22 Feb/March 2018

3 Discounts allowed in June 2017 amounting to $435 were debited to the sales ledger control account.

0 marks

Mark scheme: 3(a)(i) More capital investment (1) Losses will be shared with more partners (1) New ideas (1) Shared workload (1) Shared responsibility (1) Shared risk (1) More specialist skills (1) Max 2 2 3(a)(ii) Profits must be shared (1) More potential disputes (1) Slower decision making (1) Loss of control (1) Max 2 Note: Allow sharing of profits / losses only once as an advantage or a disadvantage 2 3(b) $45 000 + 8000 – 21 000 = $32 000 Profit (1) Paul $19 200 } Angela $12 800 } (1OF for both) 2 Question Answer Marks 3(c) Capital Accounts Paul $ Angela $ Rachael $ Paul $ Angela $ Rachael $ Goodwill (1) 25 000 15 000 10 000 Bal b/d 145 000 95 000 Cash / Bank (1) 75 000 Goodwill (1) 30 000 20 000 Bal c/d 169 200 112 800 65 000 Revaluation (1) OF 19 200 12 800 194 200 127 800 75 000 194 200 127 800 75 000 Bal b/d (1) OF 169 200 112 800 65 000 5 3(d) To reward the existing partners (1) for having established the business and built the reputation (1) 1 mark for stating + 1 mark for development 2 3(e) A business making profits each year and these could be increasing over time An established reputation Customer loyalty and repeat business Brand name and image Value of the business as a going concern exceeds the value of the net separable assets. Good location Quality of staff / products Allow other suitable answers Max 2 2

This question in 9706/22 Feb/March 2018

4 A sales invoice for $1520 dated 30 June 2017 was omitted from the sales journal. REQUIRED (b) Prepare the amended sales ledger control account at 30 June 2017. Delph Amended sales ledger control account $ $ Balance b/d 21 555 [5] Additional information At 30 June 2017 there was a debit balance on the purchases ledger account of $384. REQUIRED (c) Prepare the purchases ledger control account for the year ended 30 June 2017. Delph Purchases ledger control account $ $ [5] Additional information Delph has also provided the following information. At 1 July 2016 $ Capital introduced 10 500 Loan from the bank (repayable 2021) 3 000 During the year ended 30 June 2017 Bank payments Motor vehicle 13 560 Loan 500 Drawings 12 625 At 30 June 2017 Inventory 3 700 Debit Cash in hand 360 Debit Rent 650 Debit Bank 856 Credit Wages 1 890 Credit The motor vehicle is to be depreciated at 25% using the reducing balance method. REQUIRED (d) Prepare the statement of financial position at 30 June 2017. Delph Statement of financial position at 30 June 2017 [9]

19 marks

Mark scheme: 4(a)(i) apportionment (1) 1 4(a)(ii) direct materials are allocated (1) because they are directly attributable to production units (1) 2 4(b)(i) factory rent – by floor area (1) 1 Question Answer Marks 4(b)(ii) depreciation of factory machinery – by cost or NBV of factory machinery (1) Machine hours (1) 1 4(c)(i) $34 (1) 1 4(c)(ii) $63 (1) 1 4(d)(i) $63 000 (1) + $15 000 (1) + $30 000 (1) = ($108 000 / 1000) × 25% = $27.00 (1) OF 4 4(d)(ii) $84 000 (1) + $18 000 (1) + $36 000 (1) = ($138 000 / 1200) × 25% = $28.75 (1) OF 4 4(e) Financial (max 3) The budgeted profit per unit is higher for scooters (1) as is the selling price (1) and it would appear that taking up the suggestion would increase profit (1). There might be staff retraining costs to be paid. (1) Would it be necessary to make staff redundant involving redundancy costs? (1) Non financial (max 3) Is there demand for the extra scooters? (1) If Department B is working at less than full capacity production of scooters could be increased without affecting Department A. (1) Machinery used in making bicycles might not be suitable for producing scooters. (1) Do staff have the necessary skills (1) It might only be possible to make say 400 extra scooters by using the resources freed from the 500 bicycles. (1) May lead to customer dissatisfaction (1) Decision (1) 7 4(f) OAR = 74 000 (1) / 2000 (1) = $37 per direct labour hour (1)OF 3 Question Answer Marks 4(g) $ overheads absorbed 2100 (1) × $37 (1)OF 77 700 actual 76 200 (1) 1 500 (1)OF over absorbed (1)OF 5

This question in 9706/22 Feb/March 2018

1 Ashir, Bo and Chan are in partnership. The partnership agreement includes the following terms: 1 Profits and losses are shared in the ratio of the partners’ capital accounts. 2 Interest on capital is 6% per annum. 3 Interest on drawings is 5% calculated on each partner’s total annual drawings. 4 Partners’ loan interest is 12% per annum. 5 Chan receives a salary of $1000 per month. The following information is available at 31 December 2016: $ Capital accounts Ashir 40 000 Bo 30 000 Chan 10 000 Current accounts Ashir 12 300 Bo 8 200 Chan 2 600 debit Drawings Ashir 15 400 Bo 12 200 Chan 16 400 Fixtures and fittings Cost 32 400 Provision for depreciation 21 400 Motor vehicles Cost 80 000 Provision for depreciation 48 000 Loan account  Ashir 10 000 Gross profit 171 620 Operating expenses 54 960 Staff wages 32 500 Additional information 1 Operating expenses include a payment of $600 for insurance covering the 12-month period to 31 August 2017. 2 Staff wages owing at 31 December 2016 were $860. 3 Depreciation is to be charged as follows: Fixtures and fittings 10% per annum using the reducing balance method Motor vehicles 20% per annum using the straight-line method REQUIRED (a) Prepare the income statement for the partnership for the year ended 31 December 2016. Start with the given gross profit of $171 620. [5] (b) Prepare the profit and loss appropriation account for the partnership for the year ended 31 December 2016. [5] (c) Prepare the partners’ current accounts for the year ended 31 December 2016 on the next page. [7] $ Chan $ Bo $ Ashir DetailAccounts $Current Chan $ Bo $ Ashir Detail Additional information On 1 January 2017, Chan decided that he wished to retire with immediate effect. The partners agreed that as part of his settlement, he could keep one of the motor vehicles at the net book value of $18 000. At that date it was agreed that the total value of goodwill was $124 000. REQUIRED (d) Prepare a statement to calculate the bank settlement due to, or from, Chan on his retirement. [4] Additional information Following Chan’s retirement, Ashir and Bo are considering converting their business to a limited company to continue the business. REQUIRED (e) State two advantages to a partnership of converting to a limited company. 1 2 [2] Additional information Ashir’s brother Bilal, a sole trader with three employees, has been running his business for four years. Turnover has doubled over the past year and the business is gradually becoming very profitable. Bilal does not maintain a full set of accounting records, but his friend has recommended that he should. REQUIRED (f) Advise Bilal whether or not he should maintain a full set of accounting records. Give reasons for your answer. [5] (g) State two reasons for maintaining a sales ledger control account. 1 2 [2] [Total: 30]

30 marks

Mark scheme: 1(a) Ashir, Bo and Chan Income statement for the year ended 31 December 2016 $ $ $ Gross profit 171 620 Operating expenses 54 560 (1) Staff Wages 33 360 (1) Loan interest 1 200 (1) Depreciation – Fixtures and fittings 1 100 Depreciation – motor vehicles 16 000 17 100 (1) 106 220 Profit for the year 65 400 (1) OF 5 1(b) Ashir, Bo and Chan Profit and loss appropriation account for the year ended 31 December 2016 $ $ Profit for the year 65 400 (1) OF Interest on drawings Ashir 770 Bo 610 Chan 820 2 200 (1 for all) Interest on capital Ashir (2 400) Bo (1 800) Chan (600) (4 800) (1 for all) Salary Chan (12 000) (1) Attributable profit 50 800 Divisible Ashir 25 400 Bo 19 050 Chan 6 350 50 800 (1 OF for all) 5 Question Answer Marks 1(c) Detail Ashir $ Bo $ Chan $ Detail Ashir $ Bo $ Chan $ Balance b/f 2 600 Balance b/f 12 300 8 200 Interest on drawings (1OF for line) 770 610 820 Interest on capital (1OF for line) 2 400 1 800 600 Drawings (1 for line) 15 400 12 200 16 400 Loan interest 1 200 (1) Balance c/d 25 130 16 240 Salary Profit for the year (1OF for line) 25 400 19 050 12 000 (1) 6 350 Balance c/d 870 41 300 29 050 19 820 41 300 29 050 19 820 Balance b/d (1OF for line) 870 Balance b/d 25 130 16 240 7 1(d) $ Capital account 10 000 Current account (870) (1)OF Motor vehicle (18 000) (1) Goodwill 15 500 (1) Due to Chan (correct label only) 6 630 (1)OF 4 1(e) Separate entity Limited liability for owners Ability to raise finance 1 mark for each advantage – maximum 2 marks Question Answer Marks 1(f) Advice Yes he should maintain a full set of accounting records (1) Reasons Advantages (Max 2) Business is growing fast Enables closer monitoring of performance Enables Bilal to control the business performance Enable Bilal to maximise opportunities Disadvantages (Max 2) More time consuming Need to employ specialist staff 1 mark for advice, maximum 2 marks for advantages and max 2 marks for disadvantages 5 1(g) Minimises possibility of bad debts Independent check on arithmetic accuracy Reduces possibility of fraud Provides instant record of total trade receivables Facilitates preparation of financial statements 1 mark for each benefit – maximum 2 marks 2

This question in 9706/21 May/June 2018

3 Inventory at 30 June 2017 was overvalued by $380.

0 marks

Mark scheme: 3(a)(i) Plant and machinery at cost $ $ Balance b/d 195 000 Disposal 35 000 (1) Bank 42 000 (1) Balance c/d 202 000 237 000 237 000 Balance b/d 202 000 (1)OF 3 3(a)(ii) Provision for depreciation on plant and machinery $ $ Disposal 7 000 (1) Balance b/d 68 250 Balance c/d 89 400 Income statement 28 150 (1)OF 96 400 96 400 Balance b/d 89 400 (1)OF 3 3(b) Responses could include: Plant and machinery often loses more value in the earlier years of its life (1) due to usage (1) and maintenance costs may be higher in the later years (1) 3 3(c) It is written off as an expense (1) If the cost of the item is not material (1) The revaluation method should be used (1) If the cost is significant (1) 4 3(d) Prudence (1) Not over-state the value of non-current assets or profit (1) or Consistency (1) Using the same depreciation method each year to assist comparisons (1) or Accruals/matching (1) To match the cost with the income earned by the asset (1) 2

This question in 9706/22 May/June 2018

2 Warren is a sole trader. He started trading on 1 February 2016. During the year ended 31 January 2017 he did not keep detailed accounting records but he has provided the following information: $ Revenue 248 758 Carriage inwards 12 371 Carriage outwards 5 873 Returns inwards 6 250 Returns outwards 11 875 Goods taken for own use 2 246 Inventory at 31 January 2017 27 450 Warren applies a 50% mark-up on cost. REQUIRED (a) Prepare the trading section of the income statement for the year ended 31 January 2017. [6] (b) Explain two advantages of maintaining control accounts. 1 2 [4] Additional information Whilst preparing his accounts, Warren discovered the following: 1 Goods costing Warren $2400 had been sent to a customer on a sale or return basis on 29 January 2017. The goods had been invoiced with the usual mark-up, but the customer had not yet decided to keep them. 2 Trade receivables were shown as $49 532, but irrecoverable debts of $572 had not been written off and a provision for irrecoverable debts of 5% was required. REQUIRED (c) Explain how these transactions would affect the financial statements for the year ended 31 January 2017. [5] [Total: 15]

15 marks

Mark scheme: 2(a) Trading section of Income Statement for year ended 31 January 2016 $ $ Revenue 248 758 Less: Returns inwards (6 250) 242 508 (1) Purchases (bal fig) 190 872 (1)OF Add: Carriage inwards 12 371 (1) 203 243 Less: Returns outwards (11 875) 191 368 Less: Goods for own use (2 246) (1) 189 122 Less: Closing inventory (27 450) (1) Cost of sales 161 672 Gross profit 80 836 (1)OF 6 2(b) Control accounts help to reduce fraud (1) as a result of segregation of duties (1). Control accounts check the arithmetical accuracy of the ledgers/help in locating errors (1) but not all errors are identified (1). Control accounts can provide total trade receivables/trade payables amounts quickly (1) assisting in the preparation of financial statements (1). 1 mark for identification and 1 mark for development for each advantage Max 2 marks 4 Question Answer Marks 2(c) Revenue decreases by $3600 (1) Inventory increases by $2400 (1) Profit decreases by $1200 (1) + $572 (1) + $2448 (1) = $4220 Trade receivables decrease by $3600 (1) + $572 (1) + $2448 (1) = $6620 Max 5 marks 5

This question in 9706/23 May/June 2018

3 David, a sole trader, has prepared a trial balance at 31 December 2017 which did not balance. He entered the difference in a suspense account. REQUIRED (a) State two other uses of a suspense account. 1 2 [2] (b) State four types of error that will not be revealed by the trial balance. 1 2 3 4 [4] Additional information On checking the financial records, David discovered the following errors. 1 The credit balance on the bank current account of $1650 had been entered in the trial balance as a debit balance. 2 The total of the purchases returns journal of $960 had been debited to the returns inwards account. 3 A prepayment of $450 for telephone charges at 1 January 2017 had not been brought down as an opening balance. 4 The balance on sales ledger control account at 31 December 2017 of $13 625 had been carried down as $13 652. REQUIRED (c) Prepare the suspense account at 31 December 2017 clearly showing the opening balance on the account. Suspense account $ $ [6] REQUIRED (d) State three benefits to a business of preparing annual financial statements. 1 2 3 [3] [Total: 15]

15 marks

Mark scheme: 3(a) The bookkeeper does not know where to post an entry. (1) In order to prepare draft financial statements. (1) 2 3(b) Error of omission Error of commission Error of principle Compensating error Error of original entry Error of reversal 1 mark for each type of error – Max 4 marks 4 3(c) Suspense account $ $ Bank 3 300 (1) Opening balance 4 797 (1)OF Purchases returns 960 (1) Telephone 450 (1) Returns inwards 960 (1) Sales ledger control account 27 (1) 5 247 5 247 6 Question Answer Marks 3(d) Helps future planning/targets/goals (1) Decision making (1) Able to assess performance/comparisons (1) Valuation of assets, liabilities and capital (1) For tax purposes (1) To present to bank for additional finance (1) Accept other valid points. Max 3 marks 3 $3.60 × 45% = $1.62 (1) × 2000 units = $3240 × 4 weeks = $12 960 (1)

This question in 9706/23 May/June 2018

1 Finn started business on 1 January 2017. He did not keep full accounting records. A summary of his bank statements for the year ended 31 December 2017 was as follows. Receipts $ Capital introduced 15 000 From credit customers 98 600 Loan taken out 4 000 117 600 Payments To credit suppliers 65 100 Rent 12 000 Cash 35 600 Purchase of fixtures and fittings 14 000 126 700 The following information was available. 1 Receipts from customers paid into the bank but not yet showing on the bank statement were $1800. 2 Cheques paid to suppliers not yet presented to the bank amounted to $1600. REQUIRED (a) Calculate the balance at bank which would appear in the statement of financial position at 31 December 2017. [3] Additional information 1 All sales were made on a credit basis. There were no sales returns during the year. 2 The total value of sales invoices issued during the year was $144 200. 3 Finn had allowed one customer to pay $100 less than the invoice amount because he had paid promptly. REQUIRED (b) Prepare a total trade receivables account for the year ended 31 December 2017 to show the amount owed to Finn at the year end. Total trade receivables account $ $ [4] Additional information 1 All purchases were made on a credit basis. There were no purchases returns during the year.

7 marks

Mark scheme: 1(a) (9100) + 1800 (1) – 1600 (1) = $(8900) overdrawn (1) OF 3 1(b) Total trade receivables account $ $ Sales 144 200 Bank W1 100 400 (2) Discount allowed 100 (1) Balance c/d 43 700 144 200 144 200 Balance b/d 43 700 (1) OF W1 98 600 (1) + 1 800 (1) = 100 400 4 1(c) Total trade payables account $ $ Bank W1 66 700 (2) Purchases 79 300 Discount received 500 (1) OF Balance c/d 12 100 79 300 79 300 Balance b/d 12 100 (1) W1 65 100 (1) + 1 600 (1) = 66 700 4 1(d) Cash account $ $ Bank 35 600 Wages 14 400 (1) Drawings 6 000 (1) Other operating expenses 15 100 (1) OF Balance c/d 100 35 600 35 600 Balance b/d 100 (1) 4 Question Answer Marks 1(e) Finn Income statement for the year ended 31 December 2017 $ $ Revenue 144 200 Purchases 79 300 Inventory at 31 December 2017 6 200 Cost of sales 73 100 Gross profit 71 100 (1) Discount received 500 (1)OF 71 600 Expenses Discount allowed 100 (1) Rent 12 000 Wages 14 400 (1)OF Other operating expenses W1 16 100 (2)OF Depreciation 1 400 (1) Interest charges 200 (1) 44 200 Profit for the year 27 400 (1)OF W1 15 100 (1)OF + 1 000 (1) = 16 100 9 Question Answer Marks 1(f) Could maintain full up-to-date accurate records (1) Will improve decision-making (1) Could provide credit control systems (1) Improve cash flow / reduce irrecoverable debts (1) Making sufficient profits to afford bookkeeper’s wages (1) Increased wages ($6 000) / affordability would result in decreased profits (1) Failure to maintain full up to date records could lead to business failure (1) Accept other valid responses (max 3) for comments, plus (1) for decision 4 1(g) To avoid trade receivables / current assets being overstated (1) To avoid profit being overstated (1) To comply with the prudence concept (1) To comply with the matching concept (1) Max 2 marks 2

This question in 9706/22 Oct/Nov 2018

3 Finn knew that he had sometimes taken a cash discount but had kept no record of the amounts involved. REQUIRED (c) Prepare a total trade payables account for the year ended 31 December 2017 to show the total discount Finn had taken. Total trade payables account $ $ [4] Additional information 1 Finn paid wages of $1200 in cash each month. He also took cash drawings of $500 every month. 2 Other operating expenses were all paid in cash. 3 Cash in hand was $100 at the year end. REQUIRED (d) Prepare a cash account for the year ended 31 December 2017 to show the amount paid for other operating expenses. Cash account $ $ [4] Additional information 1 The loan carried an interest rate of 10%. The loan had been received on 1 July 2017 and no interest had been paid by the year end. 2 The fixtures and fittings were expected to last for 10 years and have no scrap value. They are to be depreciated using the straight-line method. The policy is to provide for a full year’s depreciation in the year of purchase. 3 At the year end other operating expenses, $1000, were accrued.

8 marks

Mark scheme: 3(a)(i) Improves the perception of the company size (1) by increasing the issued share capital of the company (1) To capitalise non-distributable reserves (1) but overall, total equity will remain the same (1) To reward the company’s investors (1) when profits are not sufficient to pay dividends (1) Can be used to keep existing shareholders happy (1) and may be attractive to potential investors (1) 1 mark per valid point + 1 for development to max of 4 4 3(a)(ii) To write off expenses relating to: company formation the issue of debentures the issue of shares redemption of debentures 1 mark per valid point to max of 3 3 Question Answer Marks 3(b) S Limited Statement of changes in equity for the year ended 31 December 2017 Ordinary share capital $ Share premium $ General reserve $ Retained earnings $ Total $ Brought forward at 1 January 2017 1 250 000 – 130 000 65 000 1 445 000 Profit for the year 255 000 (2) / (1)* 255 000 Dividend – final 2016 – interim 2017 (125 000) (1) (46 875) (1) (125 000) (46 875) Issue of ordinary shares 312 500 (1) 593 750 (1) 906 250 Balance at 31 December 2017 1 562 500 593 750 130 000 148 125 2 434 375 * $268 500 (1) / $255 000 (2) 6 3(c) Debit Non-current asset (1) Credit Revaluation reserve (1) 2

This question in 9706/22 Oct/Nov 2018

REQUIRED (e) Prepare the income statement for the year ended 31 December 2017. [9] (f) Advise Finn whether or not he should employ a book-keeper at a cost of $500 a month. Justify your answer. [4] (g) State two reasons why a trader might maintain a provision for doubtful debts. 1 2 [2] [Total: 30] PLEASE TURN OVER 2 Jack and Kelly are in partnership. They share profits and losses in the ratio of 2 : 5 respectively. The partners decided to admit Liam as a partner with effect from 1 July 2018. The partnership’s statement of financial position immediately prior to Liam’s admission was as follows. Jack and Kelly Summarised statement of financial position at 30 June 2018 $ Assets Non-current assets 91 400 Current assets 21 700 Total assets 113 100 Capital and liabilities Capital accounts Jack 33 000 Kelly 71 000 Current liabilities 9 100 Total capital and liabilities 113 100 The partners do not maintain separate current accounts. The following was agreed. 1 Assets were revalued upwards by $21 000. 2 Goodwill was valued at $52 500. No goodwill account was to be maintained in the partnership’s books of account. 3 In the future profits and losses would be shared in the ratio Jack : Kelly : Liam, 2 : 5 : 3 respectively. 4 The balances of the partners’ capital accounts immediately after Liam’s admission should total $120 000 and be in the same ratio as the profit sharing ratio. Each partner would either pay funds into, or withdraw funds from, the business bank account in order to achieve this requirement. REQUIRED (a) Prepare the partners’ capital accounts to record Liam’s admission as a partner on the next page. [6] $ Liam $ Kelly $ Jack Accounts Capital $ Partners’ Liam $ Kelly $ Jack (b) State what is meant by the term ‘goodwill’. [1] (c) Explain why a partnership may make an adjustment for goodwill when they admit a new partner. [2] (d) Explain why partners may agree not to maintain a goodwill account in the books of the partnership on the admission of a new partner. [2] Additional information The partners forecast that profit for the year ending 30 June 2019 will be $60 000. This is an increase of 25% on the current year’s profit. The partners believe that Liam’s admission will result in an improved return on capital employed. REQUIRED (e) Advise the partners whether or not they are correct in believing that Liam’s admission will result in an improved return on capital employed in the year ending 30 June 2019. Support your answer with calculations. [4] [Total: 15] 3 Part of the equity of a limited company consists of ordinary shares. REQUIRED (a) (i) Explain two reasons why a company may make a bonus share issue. 1 2 [4] (ii) State three uses of the share premium account, other than the issue of bonus shares. 1 2 3 [3] Additional information On 1 January 2017 the issued share capital of S Limited consists of ordinary shares of $0.40 each. The following information is available for the year ended 31 December 2017: 1 On 1 April 2017 the company issued a 6% debenture of $300 000. 2 On 1 May 2017 the company paid a final dividend of $0.04 per ordinary share. 3 On 1 October 2017 the company made a rights issue of 1 ordinary share for every 4 held. The shares were offered at a 20% discount on the market price of $1.45. The rights issue was fully subscribed. 4 On 15 October 2017 the company paid an interim dividend of $0.015 per share to the shareholders who were on the share register at 1 August 2017.

37 marks

Mark scheme: 4(a) The point where the business is making neither a profit nor a loss (1) 1 4(b) Make or buy decisions (1) Limited resources (1) Special orders (1) Production scheduling (1) Product / departmental closure (1) Accept other valid responses. Max (3) 3 4(c)(i) bulk buying / economies of scale / supplier price reduction Max (1) 1 4(c)(ii) overtime rates / increase basic wage rates 1 4(d) Fixed costs are only fixed over a given range of activity (1) As this business is expanding its capacity, some fixed costs may increase (1) Such as: • Rates – larger floor area used (1) • Supervisors’ salaries – increase in staff numbers (so more supervisors required) (1) • Depreciation – additional machinery required (1) • Maintenance – increased operations (therefore more servicing required) (1) Max (1) for developed examples. Overall max (3) 3 Question Answer Marks 4(e)(i) $ Revenue ($195 × 8 000) 1 560 000 (1) Direct materials ($23.20 × 8 000) 185 600 (1) Direct labour ($86.40 × 8 000) 691 200 (1) Variable overheads ($12 × 8 000) 96 000 (1) Total contribution ($73.40 × 8 000) 587 200 Fixed costs 302 400 (1) Profit for the year 284 800 (1)OF 6 4(e)(ii) Profit per unit = 8000 800 284 = $35.60 (1)OF 1 4(e)(iii) Based on (e)(i) = 37.64 % (2) / (1)OF 2 4(f) 302400 37.64  %  1(OF) = $803 400 (1) OF / $195 = 4 120 units (1)OF Alternative presentation 302400 73.40  (1OF) = 4 120 units (1) OF × $195 = $803 400 (1OF) 3 Question Answer Marks 4(g) Shareholders’ investment has become riskier (1) because of the increased external borrowing (1). Loan interest has to be paid (1) whether profit is earned or not (1), but overall profit should increase (1). Repayment of the external borrowing may result in future cash flow problems (1) Accept other valid responses. 4 4(h) Positive Market share should increase (1) overall profit may increase (1). Expansion may encourage further shareholder investment (1) Negative As a result of reducing the selling price and increased costs, the profit per unit will fall (1) and the breakeven point will increase (1) The directors should consider how certain the company are that all of the increased production will be sold (1) how reliable the directors other estimates are (1) and whether suitable labour and other resources will be available (1). They must also ensure that funds will be available to repay the loan. (1) Max (4) for comments 1 mark for decision. 5

This question in 9706/22 Oct/Nov 2018

3 Noor, a sole trader, was preparing her business’s financial statements for the year ended 31 December 2018. The following information is available. At 1 January 2018 $ General expenses prepaid 480 During the year ended 31 December 2018 $ General expenses paid 12 400 Insurance premiums paid 6 480 Rent received 5 460 At 31 December 2018 1 General expenses, $1210, were due but unpaid. 2 Insurance premiums paid included $630 covering the six months ended 31 January 2019. 3 Rent receivable of $1200 for the three months ended 28 February 2019 had not yet been received. 4 Inventory had been valued at a cost of $11 400. However, it included several damaged items which had a selling price of $840. All goods are sold with a mark-up of 50%. The damaged items could be sold but would require repairs costing $360. REQUIRED (a) Calculate the amount to be recorded in the income statement for the year ended 31 December 2018 for each of the following items. (i) General expenses [3] (ii) Insurance [1] (iii) Rent receivable [1] (iv) Closing inventory [3] Additional information Noor’s policy is to maintain a provision for doubtful debts at 5% of trade receivables at the end of the financial year. REQUIRED (b) State two accounting concepts which are applied when recording a provision for doubtful debts. 1 2 [2] Additional information At 31 December 2017 Noor’s trade receivables were $34 200 after deducting the provision for doubtful debts. At 31 December 2018 total trade receivables were $37 200. This total included the accounts of the following two credit customers. $ MN Limited 680 S Wells 360 Noor decided to write off these two accounts. She will maintain her provision for doubtful debts at 5% of trade receivables. REQUIRED (c) Calculate the increase or decrease in the provision for doubtful debts at 31 December 2018. [5] [Total: 15]

15 marks

Mark scheme: 3(a)(i) General expenses $ Opening balance prepaid 480 (1) Payment 12 400 Closing balance due 1 210 (1) 14 090 (1) OF 3 3(a)(ii) Insurance $ Premiums paid 6 480 Less prepayment 1 6 × $630 (105) 6 375 (1) 1 3(a)(iii) Rent receivable $ Rent received 5 460 Add amount due 1 3 × $1200 400 5 860 (1) 1 3(a)(iv) Closing inventory at 31 December 2018 $ Valuation at cost 11 400 Valuation of damaged products Cost $840 × 2 3 = 560 (1) NRV $840 – $360 = 480 (1) Reduction in value (80) Closing valuation 11 320 (1) OF 3 3(b) Accounting concepts: accruals (matching) (1); prudence (1) 2 Question Answer Marks 3(c) The original provision for doubtful debts was: 5 95 × $34 200 = $1800 (1) The new provision for doubtful debts will be: $ Total balances of trade receivables at 31 December 2018 37 200 Less irrecoverable debts ($680 + $360) 1 040 Net 36 160 (1) New provision for doubtful debts (5% × $36 160) 1 808 (1) OF Entry in income statement will be for an increase (1) OF $8 (1) OF 5

This question in 9706/22 Feb/March 2019

1 Ahmed and Raji are in partnership as retailers but have not maintained full accounting records. They have been advised to use a double entry system of book-keeping. REQUIRED (a) State three advantages to business owners of using the double entry system of book-keeping. 1 2 3 [3] Additional information The following information is available for the partnership: 1 Assets and liabilities 30 April 2019 1 May 2018 $ $ Equipment at net book value 17 600 20 500 Motor vehicles at net book value (Cost $25 000 at 1 May 2018) ? 16 500 Inventory 5 470 6 750 Trade receivables 3 790 3 260 Trade payables 4 560 4 390 Wages owing 2 300 1 500 Rent paid in advance 1 600 950 Cash and bank balances 6 470 credit 5 430 debit 2 The summary of the partnership bank receipts and payments for the year ended 30 April 2019 was as follows. $ Receipts From credit customers 57 900 Payments To credit suppliers 25 800 New motor vehicle 6 800 Partners’ drawings 16 700 Wages 10 700 Rent 7 500 General expenses 2 300 All purchases and sales were made on credit. 3 The partners wish to create a provision for doubtful debts of 5% of trade receivables. 4 Depreciation on the motor vehicles is charged at 20% using the straight-line method. Depreciation is charged on a monthly basis. 5 On 1 November 2018 a motor vehicle which had cost $7000 on 1 May 2016 was part-exchanged for a new motor vehicle. The amount of the part-exchange was $3300. The balance of the purchase cost of the new vehicle, $6800, was paid by cheque. 6 There were no additions or disposals of equipment during the year. REQUIRED (b) Calculate: (i) the profit or loss on the disposal of the motor vehicle [3] (ii) the total depreciation charge for motor vehicles for the year ended 30 April 2019. [4] (c) Prepare the income statement for the partnership for the year ended 30 April 2019. [9] (d) Explain why a business may create a provision for doubtful debts. [4] Additional information When the partners started the business they each invested $25 000 and agreed to share profits and losses equally. The partners are concerned that the business has low profit and a high bank overdraft. Ahmed’s brother is prepared to invest $25 000 into the business. He has suggested two options to Ahmed and Raji. Option 1: To loan this amount to the partnership and receive an annual interest of 10%. Option 2: To invest the full amount and become an equal partner. Through his business contacts he feels that he will be able to improve the total revenue. REQUIRED (e) Advise the partners which option, if either, they should accept. Justify your answer. [7] [Total: 30] PLEASE TURN OVER

30 marks

Mark scheme: 1(a) It will have up-to-date information of assets and liabilities / and will inform decision making (1) The business can more easily chase trade receivables and keep up to date with trade payables (1) The preparation of the financial statements is easier and more accurate / reducing the possibility of errors (1) Accept other valid points. 3 1(b)(i) $ $7000 − 2800 4200 (1) Depreciation for 6 months (700) (1) Net book value on disposal 3500 Part-exchange 3300 Loss on disposal (200) (1) 3 1(b)(ii) Total depreciation charge for motor vehicles for the year ended 30 April 2019 $ Depreciation on vehicles disposed 700 (1) OF New vehicle 10 100 × 10% 1010 (1) Remaining vehicles 18 000 × 20% 3600 (1) Charge for the year 5310 (1) OF 4 Question Answer Marks 1(c) Income statement for the year ended 30 April 2019 $ $ Revenue W1 58 430 (1) Inventory on 1 May 2018 6 750 Purchases W2 25 970 32 720 Inventory on 30 April 2019 5 470 27 250 (1) Gross profit 31 180 Wages W3 11 500 (1) Rent W4 6 850 (1) General expenses 2 300 Provision for doubtful debts 190 (1) Loss on sale of motor vehicle 200 (1) OF Depreciation on motor vehicles 5 310 (1) OF Depreciation on equipment W5 2 900 (1) 29 250 Profit for the year 1 930 (1) OF Workings: W1 Revenue 57 900 + 3790 − 3260 = 58 430 W2 Purchases 25 800 + 4560 − 4390 = 25 970 W3 Wages 10 700 + 2300 − 1500 = 11 500 W4 Rent 7500 − 1600 + 950 = 6850 W5 Depreciation equipment 20 500 − 17 600 = 2900 9 1(d) Application of concept of prudence (1) Application of matching concept (1) Profit may be overstated in the event of irrecoverable debts (1) Trade receivables / current assets may be overstated (1) Accept other valid points. 4 Question Answer Marks 1(e) Loan Max 3 Annual interest will reduce / eliminate profit (1) Does he want any security? (1) Will he want capital repaid? (1) However, it will clear the overdraft in the short-term. (1) Accept other valid points. Becoming a partner Max 3 Will bring in expertise / new ideas (1) May generate additional gross profit (1) May be able to reduce wages which is the main expense (1) There may be conflict between the three partners (1) Possibly less profit for Ahmed and Raji (1) Accept other valid points. 1 for Advice 7

This question in 9706/21 May/June 2019

2 Lawrence provided the following information at 30 November 2018. $ Purchases ledger control account balance 16 970 Sales ledger control account balance 42 350 These did not agree with the list of balances taken from the purchases ledger and sales ledger respectively. The following items were discovered: 1 A discount received of $280 had been omitted from the books. 2 A credit note for a sales returns of $230 had been treated as a sales invoice and entered in the sales journal. 3 An irrecoverable debt of $190 had been written off in the sales ledger. No entry had been made in the control account. 4 A contra entry for $1070 had been debited twice in the purchases ledger control account. 5 A payment of $120 to a credit supplier had not been recorded. 6 Discount allowed of $70 had been posted to the debit side of both the sales ledger control account and the purchases ledger control account. 7 Lawrence owes Kalim $380 and Kalim owes Lawrence $1590. They have agreed to set off the balance, on Lawrence’s account in Kalim’s sales ledger. 8 A customer’s dishonoured cheque had been entered in the cash book as $1560 instead of $1650. REQUIRED (a) (i) Prepare the corrected purchases ledger control account at 30 November 2018. $ $ Balance b/d 16 970 [4] (ii) Prepare the corrected sales ledger control account at 30 November 2018. $ $ Balance b/d 42 350 [5] (b) Explain what is meant by the term ‘error of commission’. [2] (c) Explain the effect on a business of not updating: (i) customers’ accounts in the sales ledger [2] (ii) suppliers’ accounts in the purchases ledger. [2] [Total: 15] PLEASE TURN OVER

15 marks

Mark scheme: 2(a)(i) Lawrence Corrected purchases ledger control account $ $ Discount received 280 (1) Balance b/d 16 970 Cash payment 120 (1) Contra 1 070 (1) Contra 380 Discount allowed 70 (1) Corrected balance c/d 17 330 18 110 18 110 Balance b/d 17 330 4 2(a)(ii) Lawrence Corrected sales ledger control account $ $ Balance b/d 42 350 Sales return 460 (1) Dishonoured cheque 90 (1) Irrecoverable debt 190 (1) Discount 140 (1) Contra 380 (1) Corrected balance c/d 41 270 42 440 42 440 Balance b/d 41 270 5 2(b) A transaction recorded in the wrong account of the same class (1) but using the correct amount and on the correct side. (1) 2 2(c)(i) Incorrect sales ledger balances could mean Lawrence not collecting the right amount from credit customers. (1) It may also risk resulting in irrecoverable debts. (1) Non-collection of debts would negatively impact cash balances. (1) May lead to incorrect financial statements (1) Max 2 Accept other valid points. 2 Question Answer Marks 2(c)(ii) Incorrect purchase ledger balances could mean possible disputes with suppliers affecting deliveries (1) and may result in credit facilities being withdrawn. (1) May lead to overpaying suppliers (1) May result in loss of opportunities of settlement discount. (1) Max 2 Accept other valid points. 2

This question in 9706/21 May/June 2019

2 Jacques is a sole trader. On 31 January 2019, the balance on the bank statement was $1875 debit. This did not agree with Jacques’s cash book balance of $4327 credit. The following transactions were included only on the bank statement. 1 A payment for wages of $850. 2 A transfer of $3500 from Smith, a credit customer. The following transactions were included only in the cash book. 1 A cheque payment to a supplier for $340. 2 A receipt of $560 from a customer. The following errors have also been identified. 1 A direct debit payment for insurance of $180 had been incorrectly recorded on the bank statement as $108. 2 A standing order for electricity of $175 had been incorrectly recorded in the cash book as $275. 3 Bank interest paid of $75 had been recorded as interest received in the cash book. REQUIRED (a) Prepare the updated cash book at 31January 2019. Dates are not required. [5] (b) Prepare the bank reconciliation statement at 31 January 2019. [4] (c) State two reasons why a business would prepare a bank reconciliation statement. 1 2 [2] Additional information Jacques calculated a draft profit for the year ended 31 January 2019 of $10 340. He has identified the following. 1 An item of inventory had been included at cost, $800. It was found to be damaged. It could be sold for $900 if repairs costing $150 were carried out. 2 On 25 January 2019 Jacques had sent goods to a customer on a sale or return basis. These had been invoiced to the customer at $2800. Jacques marks up his goods at 40%. The customer had not decided whether to keep the goods.

11 marks

Mark scheme: 2(a) Cash book $ $ Smith 3 500 (1) Balance b/d 4 327 Standing order error 100 (1) Wages 850 (1) Balance c/d 1 727 Interest error 150 (1) 5 327 5 327 Balance b/d * 1 727 (1) OF 5 2(b) Bank reconciliation Balance per bank statement (1 875) Add uncleared lodgements 560 (1) Less unpresented cheques (340) (1) Less direct debit correction (72) (1) Balance per cash book * (1 727) (1) OF (*) 1 mark if figure is correct/same amount as cash book from (a) 4 Question Answer Marks 2(c) To identify errors in the cash book (1) To identify errors on the bank statement (1) To identify uncleared lodgements (1) To identify unpresented cheques (1) To verify accuracy of accounting records (1) To update the cash book with transactions only on the bank statement (1) To identify out of date cheques (1) Accept other valid points. Max 2 2 2(d) Adjusted profit for the year Draft profit 10 340 Damaged inventory (800 − (900 − 150)) (50) (1) Goods on sale or return (2800-2000) (800) (1) Accrued rental (1 200) (1) Revised profit 8 290 (1) OF 4

This question in 9706/21 Oct/Nov 2019

3 A final dividend of $0.09 per ordinary share was proposed on 31 December 2019. REQUIRED (b) Explain what is meant by ‘Reserves were maintained in their most flexible form’. … … … … [2] (c) Prepare the ordinary share capital account for the year ended 31 December 2019. Ordinary share capital account $ $ [4] (d) Prepare the statement of changes in equity for the year ended 31 December 2019. S Limited Statement of changes in equity for the year ended 31 December 2019 Share Retained Share capital premium earnings Total $ $ $ $ [5] Additional information The directors are planning to acquire more machinery in the following year and require a further investment of $50 000. They are considering two options: option 1: issue an additional 6% debenture for $50 000 option 2: make a rights issue of one ordinary share for every five shares held at a premium of $1 per share. REQUIRED (e) Advise the directors on which option they should choose. Justify your answer. … … … … … … … … … … … … … … … … … … [9] [Total: 30] 2 Depreciation is provided for by a business when accounting for non-current assets. (a) (i) State three possible causes of depreciation. 1 … 2 … 3 … [3] (ii) Explain two accounting concepts which are applied when providing for depreciation. 1 Concept … Explanation … … … … 2 Concept … Explanation … … … … [4] The directors of K Limited prepare financial statements to 31 December. They have provided the following information. Balances at 1 January 2019 $ Motor vehicles cost 180 000 Motor vehicles provision for depreciation 105 000 During the year ended 31 December 2019 1 A new motor vehicle was acquired for $50 000. 2 A motor vehicle which had cost $40 000 and been depreciated by $17 500 was sold for $16 500. The company policy is to depreciate motor vehicles at 25% per annum using the reducing balance method. A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. REQUIRED (b) Prepare for the year ended 31 December 2019: (i) motor vehicles provision for depreciation account Motor vehicles provision for depreciation account $ $ [6] (ii) disposal account Disposal account $ $ [2] [Total: 15] 3 Eden runs a small business and has provided the following information for the year ended 31 December 2019. $ Trade receivables at 1 January 2019 45 000 Contra sales ledger to purchases ledger 780 Discounts allowed 1 025 Discounts received 695 Interest charged on a customer’s overdue account 65 Irrecoverable debt 945 Receipts from trade receivables 128 600 Returns inwards 2 500 Returns outwards 1 800 Total sales 190 000 20% of total sales are cash sales; the remainder are credit sales. REQUIRED (a) Explain three advantages to a business of preparing control accounts. 1 … … … … 2 … … … … 3 … … … … [6] (b) Prepare the sales ledger control account for the year ended 31 December 2019. Sales ledger control account $ $ [9] [Total: 15]

50 marks

Mark scheme: 3(a) They provide a check on the arithmetical accuracy of the balances on the sales and 6 purchases ledger/helps in locating errors (1). The balance on the control account should equal the total of the individual balances (1). Prevents fraud (1). Division of duties – different person working on the control account to the sales and purchases ledger (1). Helps in preparation of financial statements (1). Speedier as total entered in trial balance rather than individual balances (1). Max 6 Accept other valid responses. 3(b) Sales ledger control account 9 2019 2019 Jan 1 Balance b/d 45 000 (1) Dec 12 Ret. Inwards 2 500 (1) Dec 31 Sales 152 000 (1) Irrec. Debts 945 (1) Interest 65 (1) Bank 128 600 (1) Disc. Allowed 1 025 (1) Contra 780 (1) Balance c/d 63 215 197 065 197 065 Jan 1 Balance b/d 63 215 (1)OF

This question in 9706/22 Feb/March 2020

3 Remaining profits and losses are to be shared in the ratio Hamza : Noor, 3 : 2. The following balances were available. $ Current account balances at 1 January 2019 Hamza 1 290 Debit Noor 4 350 Credit Drawings for the year ended 31 December 2019 Hamza 16 900 Noor 13 200 REQUIRED (d) Prepare the appropriation account for the year ended 31 December 2019. Hamza and Noor Appropriation account for the year ended 31 December 2019 … … … … … … … … … … … … [4] (e) Calculate the balance of Hamza’s current account at 31 December 2019. … … … … … … … … [5] Additional information Hamza and Noor have been considering expanding their business which will require additional finance of $90 000. In order to finance the expansion they are considering two options. Option 1: admit a new partner Option 2: apply for a bank loan REQUIRED (f) Advise which option the partners should choose. Justify your advice. … … … … … … … … … … … … [5] [Total: 30] 2 Ayesha has provided the following extracts from her business’s financial statements. Extract from the Income Statement for the year ended 31 December 2019 $ $ Revenue 145 500 Opening inventory 11 440 Purchases 120 120 131 560 Closing inventory 14 560 Cost of sales 117 000 Gross profit 28 500 Extract from the Statement of Financial Position at 31 December 2019 $ Current assets Inventory 14 560 Trade receivables 9 300 Cash and cash equivalents 4 240 28 100 Current liabilities Bank overdraft 8 000 Trade payables 10 400 18 400 All purchases are on credit. Two-thirds of all sales are on a credit basis. REQUIRED (a) Calculate the following ratios. State the formula used. (i) Trade payables turnover (in days) Formula … … … Calculation … … … … (ii) Trade receivables turnover (in days) Formula … … … Calculation … … … … (iii) Current ratio (to two decimal places) Formula … … … Calculation … … … … [6] Additional information Ayesha is concerned about her business’s liquidity. She has provided the following ratios based on the year ended 31 December 2018. Trade payables turnover 34 days Trade receivables turnover 32 days Current ratio 1.90 : 1 (b) Analyse the trend in Ayesha’s business’s liquidity. … … … … … … … … … … … … … … … … … … … … [7] (c) State two factors that should be considered when choosing businesses with which to compare a business. 1 … … 2 … … [2] [Total: 15] 3 Jason is responsible for preparing his business’s accounting records. He has discovered some errors in this year’s accounts. REQUIRED (a) State two types of error which do not affect the agreement of the totals of a trial balance. 1 … 2 … [2] Additional information When Jason prepared a trial balance on 30 September 2019 the totals did not agree. The total of debit entries was greater than the total of credit entries by $1140. A suspense account was opened for the difference. Subsequently the following errors were found. 1 The total of the sales returns journal was undercast by $90. 2 The owner had withdrawn inventory valued at cost, $870. The only entry made was to debit the drawings account. 3 The total of the discount received column in the cash book, $180, had been debited to the discounts allowed account. There were no other errors. REQUIRED (b) Prepare entries in the general journal to correct these errors. Narratives are not required. General Journal Dr Cr $ $ 1 2 3 [5] (c) Prepare the suspense account. Suspense Account $ $ [4] Additional information The business’s draft profit for the year ended 30 September 2019 was $68 440 before taking account of the errors. REQUIRED (d) Calculate the corrected profit for the year ended 30 September 2019. … … … … … … … … [4] [Total: 15]

44 marks

Mark scheme: 3(a) Commission (1) Reversal (1) Omission (1) Principle (1) Original entry (1) Compensating (1) Max 2 2 3(b) General Journal Dr Cr $ $ 1 Sales returns 90 (1) Suspense 90 2 Suspense 870 (1) Purchases 870 3 Suspense 360 (1) Discounts allowed 180 (1) Discounts received 180 (1) 5 Question Answer Marks 3(c) Suspense Account $ $ Purchases 870 (1) Difference in TB totals 1 140 (1) Discounts allowed 180 (1) Sales returns 90 (1) Discounts received 180 1 230 1 230 Do not accept a single debit entry for $360 in a discounts account. 4 3(d) Corrected profit for year ended 30 September 2019 $ Draft profit 68 440 Less sales returns (90) (1) Add reduction in purchases 870 (1) Add change to discounts 360 (1)OF Corrected profit 69 580 (1)OF 4

This question in 9706/21 May/June 2020

2 Daniel, a retailer, receives rent from a tenant. The balance on the rent receivable account on 1 January 2019 was $700. This represented rent received in advance at the beginning of the year. During the year ended 31 December 2019 Daniel received total rent of $4800 covering the 12-month period beginning 1 March 2019. REQUIRED (a) Prepare the rent receivable account for the year ended 31 December 2019. Rent receivable account $ $ [4] (b) State in which section of the income statement for the year ended 31 December 2019 Daniel’s rent receivable should appear. … [1] (c) State in which section of the statement of financial position at 31 December 2019 the balance of the rent receivable account should appear. … [1] Additional information Daniel had created a provision for doubtful debts of $672 on 31 December 2018. At this date trade receivables appeared on the statement on financial position with a net value of $16 128. At 31 December 2019 Daniel decided to maintain the provision for doubtful debts at the same rate as in the previous year. Total trade receivables at 31 December 2019 were $15 300 before making any adjustment for provision for doubtful debts. REQUIRED (d) Calculate the increase or decrease in the provision for doubtful debts at 31 December 2019. … … … … … … [5] (e) State two accounting concepts which are applied when creating a provision for doubtful debts. 1 … 2 … [2] (f) State two factors that a business could consider when setting a rate for provision for doubtful debts. 1 … … 2 … … [2] [Total: 15]

15 marks

Mark scheme: 2(a) Rent receivable account 4 $ $ Income statement 4700 (1) Balance b/d 700 (1) Balance c/d 800 Bank 4800 (1) 5500 5500 Balance b/d 800 (1) 2(b) Rent receivable appears in the profit and loss section of the income 1 statement/it follow immediately after gross profit (1) 2(c) Closing balance will appear in the current liabilities section (1). 1 2(d) Calculation of change in the provision for doubtful debts. 5 Rate used: 672/($16 128 + 672, i.e. $16 800)(1) = 4% (1) $ Old provision 672 New provision = 4%(OF) × $15 300 612 (1) OF Change in provision 60 (1) OF decrease (1) OF 2(e) Accounting concepts and provisions for doubtful debts 2 Accruals concept (1) Prudence concept (1) 2(f) The business’s past experience of irrecoverable debts (1) 2 The usual rate applied for businesses of this type (1) Analysis of the existing debts and how long they have been outstanding/based on ageing schedule of trade receivables (1) Max 2 Accept other valid responses

This question in 9706/23 May/June 2020

3 The following balances appear in Reena’s purchases ledger control account at 29 February 2020. $ Total of amounts due to credit suppliers 27 450 Total of a credit supplier’s account which had been overpaid 290 The bookkeeper extracted the following information from the books of prime entry for March 2020. $ Purchases journal 32 480 Purchases returns journal 1 430 Cash book: cash purchases 7 290 Cash book: payments to credit suppliers 26 980 Cash book: totals of discounts columns Debit column in cash book 1 780 Credit column in cash book 1 060 General journal Contra entries sales ledger to purchases ledger 810 Interest charged by credit suppliers on overdue accounts 470 At 31 March 2020 there were no overpaid suppliers’ accounts. REQUIRED (a) Prepare the purchases ledger control account for March 2020. Purchases ledger control account $ $ [7] (b) State three reasons why a business may prepare a purchases ledger control account. 1 … … … 2 … … … 3 … … … [3] Additional information The bookkeeper also prepared a sales ledger control account for March 2020. However, the balance of the control account did not agree with the total of balances of accounts in the sales ledger. The following errors were discovered which accounted for the difference. 1 The total of the sales returns journal had been overcast by $160. 2 The balance of a sales ledger account had been undercast by $150. 3 An entry in the sales journal for Susan Baker, $370, had been posted as a debit entry in the sales ledger account of Sarah Barker.

10 marks

Mark scheme: 3(a) Purchases ledger control account for September 2019 7 $ $ Opening balance 290 Opening balance 27 450 (1)* Purchases returns 1 430 Purchases 32 480 (1)** Bank 26 980 (1) Interest charges 470 (1) Discounts received 1 060 (1) Contras 810 (1) Closing balance c/d 29 830 00 000 60 400 60 400 Balance b/d 29 830 (1)OF *for recording both opening balances correctly ** for recording both purchases and purchases returns correctly 3(b) Reasons for preparing purchase ledger control accounts 3 • To check the arithmetical accuracy of the purchases ledger (1) • To provide managers with a quick method of finding total trade payables (1) • To facilitate the preparation of financial statements (1) • To act as a deterrent to fraud (1) Max 3 Accept other valid responses. 3(c) 5 Correction of sales Correction of total ledger control of sales ledger account balance balances $ $ Incorrect figures 14 850 15 320 Error (1) 160 Error (2) 150 (1) Error (3) – – (1) Error (4) 420 420 (1) Error (5 (460) (1) Corrected figures 15 430 15 430 (1)OF

This question in 9706/23 May/June 2020

4 The bank statement for 31 March 2020 recorded the return of a cheque for $420 received from a credit customer. This transaction had not yet been recorded in the books of account.

0 marks

Mark scheme: 4(a) Advantages of break-even analysis 3 • Identifies point at which product will make a profit (1) • Identifies margin of safety (1) • Helps cost control by showing relative importance of fixed costs and variable costs (1) • Provides information in a concise/straightforward/easy to understand format (1) Max 3 Accept other valid responses 4(b)(i) Break-even point 2 $66 000 / ($75 – $60) (1) = 4400 units (1) 4(b)(ii) Break-even point 1 4400 units × $75 = $330 000 (1)OF 4(c) Forecast profit per month 2 5800 – 4400 = 1400 (1of) × $15 = $21 000 (1)OF 4(d) Margin of safety 1 Is the difference between maximum possible production/sales and break-even point (1)/the range of production which will ensure a profit is made (1)/the amount of sales which can be lost before a making a loss (1). Max 1 4(e) 10 Marginal costing statement for one month Workings $ $ Revenue 8120 units (W1) (1) × $82 665 840 (1)OF Less Variable costs Direct materials 2.2 kg × $15, i.e. 267 960 (1)OF $33 (1) × 8120 units OF Direct labour Normal working: (1)OF 7 500 units × 3.5 hr × $10, i.e. $262 500 (1) 289 625 Overtime working: (1)OF [8120 (of) – 7500) = 620 units × 3.5 hr × $12.50, i.e. $27 125 557 585 Contribution 108 255 (1)OF Less fixed costs $66 000 + depreciation of 66 400 (1) new machinery ($24 000/5 = $4800/12) i.e. $400 Profit per month 41 855 (1)OF W1 New demand: 5800 × 140% = 8120 4(f) 6 Product A Product B $ $ Direct labour 9 6 (1) Total variable cost 14 20 (1) Contribution per unit 6 5 (1)OF Contribution per labour hour 8 10 (1)OF Priority 1: Product B (1) 200 units produced (taking 100 labour hours) Priority 2: Product A 246 (1) units produced (taking remaining 185 hours) 4(g) 5 Reasons for agreeing • The plan will ensure the factory makes the optimum profit (1). • This is because Product B has the higher contribution per $1 of direct labour (1). Reasons for disagreeing • The company risks losing regular customers for Product A (1). • As a result in the longer term the profits of the company may be reduced (1) if regular customers cannot be won back. • Regular customers for Product A may also cancel their orders for Product B (1). • The directors need to consider how the suppliers of direct materials for Product A will react to a reduction in orders (1). • Will it be possible to continue to make usual orders with these suppliers when the problem is overcome? (1). • Trade discounts for ordering in bulk may be lost causing a decrease in the profitability of this unit (1). Advice (1) Max 4 marks for comments Accept other valid responses.

This question in 9706/23 May/June 2020

5 An entry in the general journal to write off the balance of the account of J Limited, $230, as irrecoverable had been posted to the debit side of the customer’s account. REQUIRED (c) Complete the following table to reconcile the sales ledger control account balance with the total of the sales ledger balances. Error 1 has been completed for you as an example. sales ledger control account total of sales ledger balance balances $ $ Incorrect figures 14 850 15 320 Error 1 160 – Error 2 Error 3 Error 4 Error 5 Corrected figures [5] [Total: 15] 4 Y Limited is a large manufacturing company with factories at several locations. The company uses a marginal costing system. REQUIRED (a) State three benefits to a business of break-even analysis. 1 … … … 2 … … … 3 … … … [3] Additional information At one factory a single product is manufactured which sells for $75 per unit. The budgeted costs of manufacture for one unit are as follows: $ Direct materials 2 kg at $12.50 per kg 25 Direct labour 3.5 hrs at $10 per labour hour 35 Fixed costs are budgeted to be $66 000 per month. It is possible to produce 7500 units in normal working conditions. Currently 5800 units are made and sold each month.

8 marks

This question in 9706/23 May/June 2020

2 Noor, a sole trader, prepares bank reconciliation statements at the end of each month. REQUIRED (a) State four benefits to a business of preparing a bank reconciliation statement. 1 … … 2 … … 3 … … 4 … … [4] (b) State two differences between a bank standing order and a direct debit. 1 … … … 2 … … … [2] Additional information On 31 October 2019 Noor received the following bank statement for her business account. Date Details Dr Cr Balance $ $ $ 1 Oct Balance b/d 292.22 Cr 3 Oct Credit 927.40 1 219.62 Cr 6 Oct Direct debit: P Ltd 334.80 884.82 Cr 7 Oct Cheque 626344 118.48 766.34 Cr 9 Oct Cheque 626346 723.21 43.13 Cr 18 Oct Credit transfer: Tahir 184.95 228.08 Cr 21 Oct Bank charges 59.60 168.48 Cr 22 Oct Direct debit: Ayesha 172.80 4.32 Dr 24 Oct Credit 841.67 837.35 Cr 27 Oct Cheque 626347 1 206.22 368.87 Dr 29 Oct Credit transfer: H Ltd 229.48 139.39 Dr Noor’s cash book (bank columns) for October 2019 was as follows. Cash Book (bank columns) $ $ Oct Oct 2 Z Ltd (cheque 626344) 118.48 1 Balance b/d 292.22 4 J Ltd (cheque 626345) 276.93 1 Sales 927.40 5 Ayan (cheque 626346) 723.21 22 Tahir (credit transfer) 184.95 6 P Ltd (direct debit) 334.80 23 Sales 841.67 22 Huma (cheque 626347) 1206.22 29 Sales 773.25 26 Usman (cheque 626348) 985.33 31 Balance c/d 625.48 3644.97 3644.97 Nov 1 Balance b/d 625.48 REQUIRED (c) Prepare Noor’s updated cash book. Cash Book (bank columns) $ $ Balance b/d 625.48 [4] (d) Prepare a bank reconciliation statement at 31 October 2019. Start with the balance per the bank statement. Bank reconciliation statement at 31 October 2019 $ Balance per bank statement [5] [Total: 15]

15 marks

Mark scheme: 2(a) • Helps identify errors made by the bank (1) 4 • Helps identify errors in the cash book (1) • Accurate preparation of financial statements (1) • Helps prevent/identify fraud (1) • Ensures cash book is up to date (1) • Helps identify out of date/dishonoured cheques (1) Max 4 2(b) Standing order is for a fixed amount; amount of direct debit varies (1) 2 Bank triggers payment of standing order; recipient triggers payment of direct debit (1) Standing order is paid at fixed intervals; direct debit payments occur irregularly (1) Max 2 differences Accept other valid responses. 2(c) $ $ 4 H Ltd 229.48 Balance b/d 625.48 (credit (1) transfer) Balance 628.40 Bank charges 59.60 (1) c/d Ayesha (direct 172.80 (1) debit) 857.88 857.88 Balance b/d 628.40 (1)OF 2(d) 5 Bank Reconciliation Statement at 31 October 2019 $ $ Balance per bank statement (overdrawn) (139.39) Add: uncredited deposits 773.25 (1) 633.86 Less: unpresented cheques: J Ltd (cheque (276.93 (1) 626345) ) Usman (cheque 626348) (985.33 (1) ) (1262.26) Balance per cash book (1) (628.40) (1)

This question in 9706/21 Oct/Nov 2020

2 Simone operates a double entry system of book-keeping. REQUIRED (a) Explain why a trial balance may be arithmetically correct even though errors have been identified. … … … … [2] Additional information Simone extracted a trial balance before preparing the financial statements for the year ended 30 June 2020. The totals of the trial balance did not agree. The following errors were discovered. 1 A total of $5600 from the sales returns journal had been credited to the purchases returns account. 2 A motor vehicle costing $15 000, acquired on 1 March 2020, had been posted to the motor expenses account. Simone does not own any other vehicles. 3 Discount received of $750 had not been posted to the discount received account. 4 A payment of $300 for insurance had been entered correctly in the cash book. No other entry had been made. REQUIRED (b) Prepare the journal entries to correct the errors. Narratives are not required. Simone General journal Dr Cr $ $ [4] Additional information Simone’s policy is to depreciate motor vehicles at 25% using the straight-line method on a monthly basis. She prepared a draft income statement that showed a profit for the year of $47 835 before the correction of errors. REQUIRED (c) Calculate the revised profit for the year after the correction of errors. … … … … … … … … … … … … [6] (d) State three uses of the general journal other than the correction of errors. 1 … … 2 … … 3 … … [3] [Total: 15] PLEASE TURN OVER

15 marks

Mark scheme: 2(a) Some errors (e.g. omission, commission, principle, original entry, reversal, 2 compensating) will not show in the trial balance (1) as a result the trial balance will still balance despite errors being present (1). 2(b) $ $ 4 Purchases returns 5 600 Sales returns 5 600 Suspense 11 200 (1) Motor vehicles – cost 15 000 Motor expenses 15 000 (1) Suspense 750 Discount received 750 (1) Insurance 300 Suspense 300 (1) 2(c) + - $ 6 Draft profit for the year 47 835 Sales returns 11 200 (1) Motor vehicle 15 000 (1) Depreciation 1 250 (1) Discount received 750 (1) Insurance 300 (1) 15 750 12 750 3 000 Revised profit for the year 50 835 (1)OF 2(d) To record: 3 opening or closing entries (1) the purchase or sale of a non-current asset (1) non-cash drawings (1) depreciation (1) provision for doubtful debts (1) non-cash capital contributions (1) transfer of profit or loss to capital account (1) Max 3 marks Accept other valid responses

This question in 9706/23 Oct/Nov 2020

2 Summary of bank statements for the year ended 31 July 2020. $ Receipts Cash sales banked 79 480 Proceeds from the sale of equipment (net book value $490) 550 Payments Drawings 24 070 Shop rent 3 580 General expenses 16 810 Carriage inwards 610 Insurance 2 950 Trade payables (after deducting 2.5% cash discounts) 46 800

0 marks

Mark scheme: 2(a) Partners may want separate capital accounts to: Show the permanent investment (1) Show the impact of any changes in capital (1) (e.g. goodwill, capital introduced, revaluations) Facilitate the calculation of interest on capital (1) Partners may want separate current accounts to: Show the ongoing transactions between the partners and the partnership (1) Show the amount of drawings compared with the share of profit (1) Identify partners making excessive drawings (1) Facilitate the calculation of interest on drawings (1) Max 2 Accept other valid responses. Question Answer Marks 2(b) Capital accounts Karis Lara Megan Karis Lara Megan $ $ $ $ $ $ Motor vehicles 15 000 (1) Bal b/d 35 700 24 500 Current account 540 (1) Current a/c 3 110 Goodwill 22 400 16 000 9 600 (1 Row) Goodwill 28 800 19 200 (1)Row Loss on revaluation 2 040 1 360 (1)OF Row Motor vehicle 23 000 (1) Bal c/d 28 170 25 800 25 800 Bank 12 400 (1)OF 67 610 43 700 35 400 67 610 43 700 35 400 Bal b/d 28 170 25 800 25 800 (1)OF 8 2(c) 25% return on capital = 25% × $25 800 = $6 450 (1)OF $6 450 is 3/15ths of residual profit, so residual profit is $32 250 (1)OF Minimum profit is $32 250 + salary for $12 000 = $44 250 (1)OF 3 2(d) Profits have to be shared (1) Decision making may take longer as there will now more partners who need to agree (1) Risk of disagreements (1) Max 2 Accept other valid responses. 2

This question in 9706/21 May/June 2021

2 Zak owns a wholesale business. He makes sales on credit. REQUIRED (a) Explain why it may be important for a business to maintain a provision for doubtful debts. … … … … [2] Additional information Zak has prepared an aged schedule of trade receivables at 31 December 2020. Amount Estimated Period outstanding $ irrecoverable debts Less than 1 month 34 200 1% Between 1 month and 3 months 6 680 5% Between 4 and 6 months 2 130 10% In addition, two accounts had been outstanding for over 6 months. $ P Limited 340 Q Limited 510 Zak’s policy is to write off as irrecoverable any amounts outstanding for more than 6 months. Zak updates the provision for doubtful debts at each financial year end based on the estimated percentage of irrecoverable debts. REQUIRED (b) Prepare a journal entry to write off the irrecoverable debts. A narrative is not required. Journal Dr Cr $ $ [2] (c) State two ways in which the risk of irrecoverable debts may be reduced. 1 … … 2 … … [2] Additional information At 1 January 2020 the business had a provision for doubtful debts of $980. REQUIRED (d) Calculate the adjustment required to the provision for doubtful debts at 31 December 2020. … … … … … … [4] (e) Prepare the provision for doubtful debts account for the year ended 31 December 2020. Provision for doubtful debts account $ $ [3] (f) State two factors that should be taken into account when setting a provision for doubtful debts. 1 … … 2 … … [2] [Total: 15]

15 marks

Mark scheme: 2(a) To avoid overstating profit/current assets/trade receivables (1) – prudence concept (1) To match costs with revenue (1) – accruals/matching concept (1) Max 2 Accept other valid responses. Question Answer Marks 2(b) Journal Dr Cr $ $ Irrecoverable debts 850 (1) (Trade receivable): P Limited 340 (1) (Trade receivable): Q Limited 510 2 2(c) • Reduce credit sales (1) • Better credit control (1) • Regular telephone contact with customers (1) • Credit checks on customers (1) • Issue regular statements of account/invoices (1) • Setting credit limits for customers (1) • Stop supply to late paying customers (1) Max 2 Accept other valid responses. 2 Question Answer Marks 2(d) ($91) decrease (4) Working $ $ Existing provision 980 Outstanding less than 1 month: 1% × $34 200 342 (1) Outstanding 1–3 months: 5% × $6 680 334 (1) Outstanding 4–6 months 10% × $2 130 213 (1) 889 Decrease in provision 91 (1)OF 4 2(e) Provision for doubtful debts account $ $ Income statement 91 (1)OF Balance b/d 980 (1) Balance c/d 889 980 980 Balance b/d 889 (1)OF 3 Question Answer Marks 2(f) • Amount of trade receivables (1) • Past experience of irrecoverable debts (1) • State of the economy (1) • Specific knowledge of credit customers (1) • Age of the debts (1) Max 2 Accept other valid responses. 2 5

This question in 9706/22 May/June 2021

3 Jason prepared the following statement of financial position which contained errors. Statement of financial position at 31 December 2020 $ $ Non-current assets Cost 65 000 Provision for depreciation 31 000 34 000 Current assets Inventory 17 390 Trade receivables 14 800 Other payables 700 Bank overdraft 490 33 380 67 380 Capital Opening balance 56 950 Profit for the year 11 270 Drawings (18 450) 49 770 Non-current liabilities Bank loan (repayable March 2021) 4 900 Current liabilities Provision for doubtful debts 480 Other receivables 490 Trade payables 11 360 12 330 67 000 In addition to some items being recorded in the incorrect sections of the statement of financial position, the following errors have also been discovered. 1 Closing inventory had been overvalued by $510. 2 The balance of the rent receivable account, debit $220, had been included in other payables in the statement of financial position. 3 Depreciation at 20% per annum had been charged using the straight-line method instead of the reducing balance method at 20% per annum. 4 The balance of the drawings account had been understated by $580. REQUIRED (a) Calculate the revised profit for the year ended 31 December 2020. … … … … … … … … … … … … … … … … [5] (b) Prepare the corrected statement of financial position at 31 December 2020. Corrected statement of financial position at 31 December 2020 $ $ … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [7] (c) Identify three types of error which do not affect the balancing of the trial balance. 1 … 2 … 3 … [3] [Total: 15]

15 marks

Mark scheme: 3(a) $14 360 (5) Workings $ Draft profit for the year 11 270 Less: overvalued inventory (510) (1) Add: decrease in provision for depreciation (W) 3 600 (3)OF Revised profit for the year 14 360 (1) W Incorrect charge for the year 20% × $65 000 = $13 000 Provision at beginning of year ($31 000 – $13 000) = $18 000 Net book value at beginning of year ($65 000 – $18 000) = $47 000 Correct depreciation charge for the year ($47 000 × 20%) i.e. $9 400 Decrease in depreciation charge: $13 000 (1) – $9 400 (1) = $3 600 (1)OF Question Answer Marks 3(b) Corrected statement of financial position at 31 December 2020 $ $ Non-current assets Cost 65 000 Provision for depreciation 27 400 37 600 (1)OF Current assets Inventory 16 880 (1) Trade receivables 14 320 (1) Other receivables 710 (1) 31 910 Total assets 69 510 Capital Opening balance 56 950 Profit for year 14 360 Drawings (19 030) (1) 52 280 7 Question Answer Marks 3(b) Current liabilities Bank loan (2021) 4 900 Other payables 480 (1) Trade payables 11 360 Bank overdraft 490 17 230 (1) Total capital and liabilities 69 510 3(c) Errors of: • commission (1) • principle (1) • omission (1) • complete reversal (1) • compensating (1) • original entry (1) Max 3 3

This question in 9706/22 May/June 2021

3 Martina has prepared the following sales ledger control account for the month of August 2021. All sales are on credit. Sales ledger control account for the month of August 2021 $ $ Balance b/d 14 280 Sales returns journal 210 Sales journal 9 540 Bank 11 860 Discounts received 280 Balance c/d 11 470 23 820 23 820 Balance b/d 11 470 Martina produced a list of all customer account balances at 31 August 2021 totalling $10 020. She discovered that the following errors had been made in the records. 1 Discounts allowed of $1190 had been entered in customers’ accounts but had not been entered in the control account. 2 A credit transfer from a customer of $420 had been correctly entered in the cash book but had been credited to the customer’s account as $240. 3 A credit balance of $60 on a customer’s account had been recorded on the list of balances as a debit balance. 4 A contra to the purchases ledger of $860 had been entered in the customer’s sales ledger account but had not been entered in the control account. 5 A cheque received from a customer of $380 had been returned unpaid by the bank. No entries had been made in Martina’s books of account in respect of the unpaid cheque. 6 Martina had sent a cheque for $20 to a customer who had overpaid his account. The payment had been correctly processed in both the cash book and the customer’s account but had been posted to the purchases ledger control account in error. REQUIRED (a) Prepare an adjusted sales ledger control account. Sales ledger control account $ $ Balance b/d 11 470 [6] (b) Prepare an adjusted list of sales ledger balances to agree with the adjusted sales ledger control account balance in part (a). $ Original total of sales ledger balances 10 020 Adjusted total of sales ledger balances [4] (c) Explain how the preparation of a sales ledger control account assists in the prevention of fraud. … … … … … [2] (d) State three types of error that will not be identified by preparing a sales ledger control account. 1 … 2 … 3 … [3] [Total: 15]

15 marks

Mark scheme: 3(a) Sales ledger control account $ $ Balance b/d 11 470 Discount allowed 1 190 (1) Bank 380 (1) Purchase ledger control account 860 (1) Purchases ledger control account 20 (1) Balance c/d 10 100 Discount received 280 (1) 12 150 12 150 Balance b/d 10 100 (1) OF 6 3(b) $ Original sales ledger balances extracted 10 020 Bank (180) (1) Credit balance correction (120) (1) Unpaid cheque 380 (1) Amended sales ledger balances 10 100 (1) OF 4 3(c) The sales ledger control account should be maintained by a supervisor or member of staff who is not responsible for that particular ledger (1). This segregation of duties will both act as a deterrent to fraud and also make the discovery of fraud much easier (1). 2 3(d) Error of omission (1) Compensating error (1) Error of commission (1) Error of original entry (1) Max 3 marks 3

This question in 9706/21 Oct/Nov 2021

2 Shamal maintains a full set of accounting records. He has extracted a trial balance at 30 September 2021 that does not balance and he has opened a suspense account for the difference. Shamal has now identified the following six errors. There were no other errors. 1 A payment of $169 for motor repairs had been correctly entered in the cash book but had been debited to the motor repairs account as $196. 2 The purchase of new machinery, $670, had been debited to general expenses. 3 Discount allowed of $175 had been entered correctly in the cash book but had not been posted to the discount allowed account. 4 The sales journal was totalled at $86 961. The total should have been $86 741. 5 A cheque for $425 received from McCann, a credit customer, had been correctly entered in the cash book but had been debited to the sales ledger control account. 6 The total of the discount received column in the cash book, $490, had been entered twice on the correct side of the discount received account. REQUIRED (a) Prepare the suspense account at 30 September 2021, clearly identifying the opening balance. Suspense Account Details $ Details $ [6] (b) Complete the table to name the type of error in each of the errors 1, 2 and 3 identified by Shamal. Error Type of error 1 2 3 [3] (c) Explain two benefits to a business of preparing a purchases ledger control account. 1 … … … … 2 … … … … [4] (d) State two items that would appear on the credit side of a purchases ledger control account. 1 … 2 … [2] [Total: 15]

15 marks

Mark scheme: 2(a) Suspense Account $ $ Trial balance difference 8 (1)OF Discount allowed 175 (1) Motor repairs 27 (1) Sales 220 (1) Sales ledger control 850 (1) Discount received 490 (1) 885 885 6 2(b) Error Type of error 1 Transposition (1) 2 Principle (1) 3 Partial omission (1) 3 2(c) Reduces the possibility of fraud (1) as a result of segregation of duties (1) Identifies total trade payables (1) and so aids the preparation of financial statements (1) Checks the arithmetical accuracy of the purchases’ ledger (1) the balance on control accounts should equal the total of the individual balances in the purchases’ ledger (1) Max 2 benefits x 2 marks (1 mark for identification, 1 mark for development) Accept other valid responses 4 Question Answer Marks 2(d) Credit purchases (1) Returned cheque (1) Interest charged by supplier (1) Brought forward balance (1) Supplier refund (1) Max 2 marks Accept other valid responses 2

This question in 9706/22 Oct/Nov 2021

8 The directors wish to make a provision for doubtful debts as follows: Debts 61–90 days 2.5% Debts over 90 days 10% The movement in the provision is to be charged to administrative expenses. REQUIRED (b) Calculate the balance of the provision for doubtful debts at 30 June 2021. … … … … … … [4] (c) Prepare the income statement for the year ended 30 June 2021. Use the space on the next page for your workings. T Limited Income Statement for the year ended 30 June 2021 $ Revenue Cost of sales Gross profit Administrative expenses Distribution costs Profit from operations Finance costs Profit for the year Workings Administrative expenses Distribution costs Finance costs Other workings [11]

15 marks

This question in 9706/23 Oct/Nov 2021

1 Khin is a retailer. The following balances have been extracted from his books of account at 31 January 2022. $ Advertising 4 900 Carriage inwards 2 140 Carriage outwards 1 730 Furniture and equipment at cost 18 900 Furniture and equipment provision for depreciation at 1 February 2021 7 300 General expenses 13 450 Inventory at 1 February 2021 12 310 Irrecoverable debts 670 Loss on disposal of delivery vehicle 1 350 Premises at cost 360 000 Premises provision for depreciation at 1 February 2021 21 600 Provision for doubtful debts at 1 February 2021 840 Purchases 118 220 Rent receivable 7 000 Revenue 197 300 Trade receivables 15 580 Wages and salaries 34 640 The following information is also available at 31 January 2022. 1 Closing inventory was valued at $13 480. 2 No record had been made of goods taken for own use by Khin, $910. 3 An irrecoverable debt of $380 is to be written off. 4 The provision for doubtful debts is to be maintained at 5% of trade receivables. 5 Advertising includes a payment of $3250 for a campaign which will last from 1 December 2021 to 30 April 2022. 6 Rent receivable is $500 per month. 7 Wages, $1440, are outstanding. 8 Khin sold his business’s only delivery vehicle in January 2022 resulting in the loss of $1350 shown in the balances at 31 January 2022. 9 The business’s depreciation policy is as follows: i Premises to be depreciated by 2% per annum using the straight-line method. ii Furniture and equipment to be depreciated by 15% using the reducing balance method. REQUIRED (a) Prepare the income statement for the year ended 31 January 2022. Use the space provided on page 4 for your workings. Khin Income statement for the year ended 31 January 2022 … … … … … … … … … … … … … … … … … … … … … … … … Workings: [15] Additional information There was no opening balance on the rent receivable account at 1 February 2021. REQUIRED (b) Prepare the rent receivable account for the year ended 31 January 2022. Rent receivable account $ $ [2] (c) Prepare a journal entry to record the adjustment to the provision for doubtful debts account at 31 January 2022. A narrative is not required. Journal Dr Cr $ $ [2] Additional information Khin intends to purchase a new delivery vehicle. He is not sure whether the delivery vehicle should be depreciated using the straight-line method or reducing balance method of depreciation. REQUIRED (d) Explain the reason for recording depreciation in a business’s income statement. … … … … … [2] (e) State one benefit of using each of the following methods of depreciation. (i) Straight-line … … [1] (ii) Reducing balance … … [1] Additional information Khin is concerned about a decline in the business’s profitability. He is considering two options. Option 1: decrease the amount spent on advertising whilst also reducing the selling price by a small amount. Option 2: purchase goods from cheaper suppliers. REQUIRED (f) Advise Khin which option he should choose. Justify your advice by discussing both options. … … … … … … … … … … … … … … … … [7] [Total: 30]

30 marks

Mark scheme: 1(a) Khin Income statement for the year ended 31 January 2022 $ $ Revenue 197 300 Less: cost of sales Opening inventory 12 310 Purchases (less goods own use $910) 117 310 (1) Carriage inwards 2 140 (1) 131 760 Closing inventory (13 480) (118 280) (1)OF Gross profit 79 020 (1)OF Add income Decrease in provision for doubtful debts W1 80 (1) Rent received W2 6 000 (1) 6 080 85 100 15 Question Answer Marks 1(a) $ $ Less expenses Advertising W3 2 950 (1) Carriage outwards 1 730 (1) General expenses 13 450 (1) Loss on disposal of delivery vehicle 1 350 (1) Irrecoverable debts ($670 + $380) 1 050 (1) Wages and salaries ($34 640 + $1440) 36 080 (1) Depreciation Premises (2% x $360 000) 7 200 (1) Furniture and equipment (15% x $11 600) 1 740 (1) (65 550) Profit for the year 19 550 (1) W1 Decrease in provision for doubtful debts: $840 – [5%  ($15 580 – $380) i.e. $760] = $80 (1) W2 Rent received: $500  12 = $6000 (1) W3 Advertising: $4900 – (3/5  $3250, i.e. $1950) = $2950 (1) Question Answer Marks 1(b) Rent receivable account $ $ Income statement 6 000 (1) Bank 7 000 Balance c/d 1 000 7 000 7 000 Balance b/d 1 000 (1)OF 2 1(c) Journal Dr Cr $ $ Provision for doubtful debts 80 (1)OF Income statement 80 (1)OF 2 1(d) To apply the matching concept so that profits are based on matching costs and revenues for an accounting period (1) irrespective of actual receipts and payments (1). Accept other valid responses. 2 1(e)(i) Straightforward to apply/calculate/understand (1) May correspond to actual usage of non-current asset (1) Max 1 Accept other valid responses. 1 Question Answer Marks 1(e)(ii) Produces an even annual charge when repairs and maintenance are taken into account (1) May correspond to actual usage of non-current assets (1) Max. 1 Accept other valid responses. 1 1(f) Option 1 (Max. 3) Will reduce costs and increase profits (1) May reduce demand if advertising has been successful (1) Reducing selling price may stimulate demand and therefore increase turnover and profits (1) Profits will be reduced if demand is unaffected (1) Option 2 (Max. 3) Will increase profits as costs are reduced (1) May reduce demand and profits if goods are of poorer quality (1) Will cheaper suppliers offer same credit terms/trade discounts/free carriage (1) Will new suppliers prove to be reliable (1) Advice (1) Accept other valid responses. 7

This question in 9706/21 May/June 2022

2 Yasmin is a sole trader. She has prepared a trial balance. Some errors are not revealed by a trial balance. REQUIRED (a) Describe each of the following errors. Examples are not required. (i) Error of commission … … … … [2] (ii) Error of original entry … … … … [2] (iii) Error of principle … … … … [2] Additional information When Yasmin prepared a trial balance for her business at the year-end, 31 December 2021, the totals did not agree. The difference was entered in a suspense account. The following errors were discovered which accounted for the difference. 1 Goods for own use, $430, had been debited to the drawings account but no other entry had been made. 2 Returns inwards of $740 had been credited to the returns outwards account. 3 An irrecoverable debt of $260 had been correctly recorded in the journal and in the account of the customer, but had been posted to the wrong side of the irrecoverable debts account. REQUIRED (b) Prepare the suspense account clearly identifying the original difference in the trial balance totals. Suspense account $ $ [5] Additional information The business’s draft profit before correcting the errors was $28 750 for the year ended 31 December 2021. REQUIRED (c) Complete the following table to calculate the corrected profit for the year ended 31 December 2021. $ Draft profit 28 750 Error 1 Error 2 Error 3 Corrected profit [4] [Total: 15] PLEASE TURN OVER

15 marks

Mark scheme: 2(a)(i) An error of commission occurs when a transaction is entered using the correct amount and on the correct side (1) but in the wrong account of the same class (1). 2 2(a)(ii) An error of original entry occurs when an incorrect amount (1) is entered in a book of prime entry (1). 2 2(a)(iii) Error of principle occurs when a transaction is entered using the correct amount and on the correct side (1) but in the wrong class of account (1) 2 Question Answer Marks 2b) Suspense account $ $ Balance b/d 1 570 (1) OF Returns inwards 740 (1) Purchases 430 (1) Returns outwards 740 (1) Irrecoverable debts 520 (1) 2 000 2 000 5 2(c) $ Draft profit 28 750 Error 1 430 (1) Error 2 (1 480) (1) Error 3 (520) (1) Corrected profit 27 180 (1) OF 4

This question in 9706/21 May/June 2022

3 At 30 September 2021, rent of $1125 had been received in advance. REQUIRED (c) Prepare the rent receivable account in Rakesh’s books of account. Rent receivable account $ $ [4] Additional information The business owns equipment which cost $24 000 when it was purchased on 1 October 2018. The policy is to provide depreciation at 20% per annum using the reducing balance method. REQUIRED (d) Prepare the provision for depreciation of equipment account for the year ended 30 September 2021. Provision for depreciation of equipment account $ $ [3] [Total: 15] 3 Nibras purchases and sells goods for cash and on credit. Control accounts are used to check the accuracy of the business’s purchases and sales ledgers. The following information is available for January 2022. 1 Purchases ledger account balances at 1 January 2022 were: $ Amounts owed to suppliers 23 490 Amount overpaid to one supplier 320 2 Totals from the books of prime entry were as follows: $ Cash book Cash purchases 18 540 Payments to trade payables 202 950 Discounts received 4 920 Purchases journal 212 480 Returns outwards journal 3 770 General journal Contras to sales ledger 810 3 There were no overpaid accounts in the purchases ledger at the end of the month. REQUIRED (a) Prepare the purchases ledger control account for January 2022. Purchases ledger control account $ $ [5] Additional information On 31 January 2022 the following information was available concerning trade receivables. $ Balance of the sales ledger control account 25 310 Total of balances in the sales ledger 23 980 The following errors were discovered. When corrected, the total of balances in the sales ledger agreed with the balance of the sales ledger control account. 1 An irrecoverable debt of $540 had been recorded as $450 in both the general ledger and the customer’s sales ledger account. 2 The total of the returns inwards journal, $1390, had been omitted from the sales ledger control account. 3 The balance of a customer’s account had been understated by $120.

12 marks

Mark scheme: 3(a) Purchases ledger control account $ $ Balance b/d 320 (1) both Balance b/d 23 490 Returns outwards 3 770 (1) both Purchases 212 480 Bank 202 950 (1) both Discounts received 4 920 Contras 810 (1) Balance c/d 23 200 235 970 235 970 Balance b/d 23 200 (1)OF 5 3(b)(i) $ Incorrect total 25 310 Less irrecoverable debt (90) (1) Less returns in (1 390) (1) 23 830 (1)OF 3 3(b)(ii) $ Incorrect total 23 980 Less irrecoverable debt (90) (1) Add understated balance 120 (1) Less credit note error (180) (1) 23 830 (1)OF 4 Question Answer Marks 3(c) Commission (1) Omission (1) Original entry (1) Compensating error (1) Max 3 3

This question in 9706/23 May/June 2022

4 A credit note, $90, issued to a credit customer had been recorded correctly in the sales return journal but posted to the debit side of the customer’s account. REQUIRED (b) (i) Calculate the correct balance of the sales ledger control account. … … … … … … [3] (ii) Calculate the correct total of balances in the sales ledger. … … … … … … [4] Additional information Control accounts do not reveal every type of error. REQUIRED (c) State three types of error which are not revealed by a control account. 1 … 2 … 3 … [3] [Total: 15] 4 G Limited manufactures products at two factories. The company uses marginal costing. REQUIRED (a) State four assumptions used in break‑even analysis. 1 … … 2 … … 3 … … 4 … … [4] (b) State the formula for calculating the margin of safety in units and sales value. (i) Units … … [1] (ii) Sales value … … [1] Additional information At one factory a single product is made. The following budgeted details are available. Direct materials per unit 3 kg at $5 per kg Direct labour per unit 2 hours at $9.50 per hour Fixed costs per month $66 000 Selling price per unit $48 Sales 8 000 units per month REQUIRED (c) Calculate the monthly margin of safety in units. … … … … … … [4] Additional information The directors are concerned that there could be a fall in demand for this product. They plan to make some changes to reduce the product’s break‑even point and encourage sales. 1 Use a different grade of material. The list price of this material is 10% less per kilogram than the existing material. 2 Each unit will require 5% more kilograms of this material. 3 The supplier of materials has agreed to give a 20% trade discount. 4 Make alterations to machinery to improve efficiency at a cost of $24 000. Machinery is depreciated at 25% per annum.

20 marks

Mark scheme: 4(a) no changes in levels of inventory (1) a single product/ constant mix is made (1) costs are either fixed or variable/semi-variable costs are not considered (1) total fixed costs remain unchanged/stepped costs are ignored (1) variable cost per unit remain perfectly linear (1) selling price per unit does not change (1) Max 4 Accept other valid responses. 4(b)(i) Margin of safety in units: Sales in units less Break-even point in units (1) 1 4(b)(ii) Margin of safety in sales value: (Sales in units– Break-even point in units)  Selling price per unit (1) 1 4(c) Variable costs: Direct materials $15 + Direct labour $19 = $34 (1) Contribution: Selling price $48 – Variable costs $34 = $14 (1) Break-even = $66000 $14 = 4715 (1) OF Margin of safety: 8000 – 4715 = 3285 (1) OF 4 Question Answer Marks 4(d) New material cost: 3.15kg (1)  $3.60 (1) = $11.34 New variable costs: $11.34 + $19 + $0.50 commission = $30.84 (1) OF New contribution: $47.28 (1) - $30.84 = $16.44 (1) OF New break-even point: $66500 $16.44 (1) = 4046 units (1) OF Decrease in break-even point = 4715 – 4046 = 669 (1) OF 8 4(e)(i) Option A $ 10 000 units  $17 170 000 (1) Less Fixed costs + $2 200 130 200 (1) 39 800 (1) OF 3 4(e)(ii) Option B $ 8 500 units  $17 144 500 (1) 5 500 units  ($5 – $1.80, i.e. $3.20) 17 600 (1) 162 100 Less Fixed costs $128 000 + $6 000 storage costs 134 000 (1) 28 100 (1) OF 4 4(f) Option A (max 2) Produces larger profit (1) Will advertising campaign be successful? (1) Effect on workforce of reduced production (1) Option B (max 2) Produces less profit (1) Will goods deteriorate while stored? (1) Effect on existing customers of offering special price (1) Decision (1) Accept other valid responses 5

This question in 9706/23 May/June 2022

2 Usman has extracted the following information from his books of account in order to update the sales ledger control account for the month of August 2022. $ Balance brought down at 1 August 2022 34 210 Cheque receipts from credit customers 32 840 Customers’ dishonoured cheques 1 020 Sales journal totals 29 760 Sales returns journal totals 980 Usman has produced a list of all customer account balances at 31 August 2022 totalling $30 477. He has discovered the following: 1 The total of the sales journal had been overcast by $600. 2 Discounts allowed of $218 had been entered in customers’ accounts but no entries had been made in the control account. 3 A contra for $325 had been correctly entered in both the customer’s account and the supplier’s account. 4 A customer’s overpayment of $65 had been repaid by cheque but no entries had been made in the books of account. 5 A cheque received from Musa for $250 had been posted to the account of Hussein. 6 An irrecoverable debt of $180 had been correctly written off in a customer’s account but had not been entered in the control account. 7 A credit balance of $315 on a customer’s account had been incorrectly entered as a debit balance in the list of customer account balances at 31 August 2022. REQUIRED (a) Prepare the updated sales ledger control account for the month of August 2022. Sales ledger control account $ $ Balance b/d 34 210 [9] (b) Prepare an amended total of customer account balances to agree with the sales ledger control account balance in (a). $ Original total of customer account balances 30 477 [3] (c) State one limitation of preparing a control account. … … [1] (d) Explain why a sales ledger control account would help in the prevention of fraud. … … … … [2] [Total: 15] PLEASE TURN OVER

15 marks

Mark scheme: 2(a) Sales ledger control account 9 $ $ Balance b/d 34 210 Cash book (Bank) 32 840 (1) Sales (book) 29 160 Sales returns (book) 980 (1) (1) Cash book (Bank) 1 020 Cash book (discount allowed) 218 (1) (1) Cash book (Bank) 65 Purchases ledger control 325 (1) account (contra) (1) Journal (irrecoverable) 180 (1) Balance c/d 29 912 64 455 64 455 Balance b/d 29 912 (1) OF 2(b) $ 3 Original total from list of sales ledger balances 30 477 Customer overpayment 65 (1) Correction of credit balance (630) (1) Amended total of sales ledger balances 29 912 (1) 2(c) Does not identify all types of error / only proves the arithmetical accuracy of the ledger (1) 1 2(d) Preparation of the sales ledger control account should be carried out by a different member of staff / segregation of 2 duties(1) so collusion between two people would be required for fraud to be present (1) Accept other valid responses.

This question in 9706/22 Oct/Nov 2022

3 The value of inventory at 31 December 2022 was understated by $4940 when calculating the cost of sales of $483 900.

0 marks

Mark scheme: 3(a) State two features of revenue reserves which do not apply to capital 2 reserves. Revenue reserves can be used to finance dividend payments (1) Revenue reserves arise from the everyday activities of a business (1) Max 2 Accept other valid responses. 3(b) Calculate the amount raised by the rights issue of shares. 3 There were 2 400 000 shares (1) So the rights issue is of 1 600 000 shares (1) Amount raised 1 600 000  $0.35 = $560 000 (1) 3(c) Identify two reasons why the directors of J Limited might prefer to raise 2 additional finance through a rights issue rather than by issuing debentures. A share issue is a permanent source of finance/a debenture issue would be a temporary source of finance (1) Payment of dividends is discretionary and will not affect the profit of the company/a debenture issue will lead to finance charges reducing annual profits (1) Max 2 Accept other valid responses. 3(d) Calculate the total amount of the interim dividend. 2 4 000 000 (1)  $0.12 = $480 000 (1) OF 3(e) Prepare the statement of changes in equity for the year ended 31 December 6 2022. J Limited Statement of changes in equity at 31 December 2022 Share Share Retained Total capital premium earnings $ $ $ $ Balances at 1 600 000 175 000 54 000 829 000 (1) for row January 2022 Rights issue 400 000 160 000 560 000 (1)OF (1)OF Profit for year 535 000 535 000 (1) Dividend paid (480 000) (480 000) (1) Balances at 31 1 000 000 335 000 109 000 1 444 000 (1) OF for December 2022 row

This question in 9706/21 May/June 2023

REQUIRED (c) Prepare the statement of profit or loss for the year ended 31 December 2022. Use the space provided on the next page to show your workings. Mima Supplies Statement of profit or loss for the year ended 31 December 2022 … … … … … … … … … … … … … … … … … … … … … … Workings: [13] (d) Explain the importance of making an allowance for irrecoverable debts in a business’s financial statements. … … … … … [2] Additional information Mima would like to assess her business’s liquidity position at 31 December 2022. REQUIRED (e) Identify two ratios which could be used to assess a business’s liquidity position. 1 … 2 … [2] Additional information Mima has noticed that her business’s rate of inventory turnover has decreased since last year. She is considering two options to increase the rate of inventory turnover. Option A: reduce inventory levels. Option B: reduce selling prices by 2% and increase the annual advertising budget by 5%. REQUIRED (f) Advise Mima which option she should choose. Justify your choice by considering both options. … … … … … … … … … … … … … … … [7] [Total: 30] 2 Param uses control accounts to verify the accuracy of his business’s sales and purchases ledgers. He provided the following information for the month ended 30 April 2023 relating to trade receivables. $ Sales ledger balances, 1 April 2023 Debit 14 890 Credit 610 Contra entries with the purchases ledger 1 850 Credit sales 153 480 Credit customers’ cheques returned 880 Discounts allowed 4 830 Interest charged on overdue accounts 540 Irrecoverable debts written off 1 830 Receipts from credit customers 148 200 Returns inwards 2 790 There were no credit balances in the sales ledger on 30 April 2023. REQUIRED (a) Prepare the sales ledger control account for April 2023. Dates are not required. Sales ledger control account $ $ [6] (b) Identify the books of prime entry for each of the following: (i) discounts allowed … [1] (ii) irrecoverable debts written off. … [1] (c) State three benefits of maintaining control accounts. 1 … … 2 … … 3 … … [3] Additional information The balance of the sales ledger control account at 30 April 2023 did not agree with the total of the individual customer account balances at this date. The following errors were discovered, some of which affected the sales ledger control account and some of which affected the customer account balances. 1 Returns inwards of $720 had been credited to the account of Rafiq Stores instead of Raif Stores. 2 A sales invoice for $820 had been omitted from the books of account. 3 The balance of a credit customer’s account, $430, had been brought down as $340. 4 The total of the returns inwards journal had been understated by $470. 5 Interest of $40 charged on an overdue account had been correctly entered in the journal but had been credited to the customer’s account. REQUIRED (d) Calculate the revised sales ledger control account balance at 30 April 2023. … … … … … … … … [4] [Total: 15] 3 The following extract from J Limited’s statement of financial position at 1 January 2022 is available. $ Equity Issued capital: ordinary shares of $0.25 each 600 000 Share premium 175 000 Retained earnings 54 000 Total equity 829 000 Non‑current liabilities 7% Debentures (2028) 200 000 REQUIRED (a) State two features of revenue reserves which do not apply to capital reserves. 1 … … … 2 … … … [2] Additional information The directors wished to raise additional finance. On 1 April 2022 the company made a rights issue of 2 ordinary shares for every 3 shares held at a price of $0.35 per share. The issue was fully subscribed. REQUIRED (b) Calculate the amount raised by the rights issue of shares. … … … … … … [3] Additional information The directors had considered making an issue of debentures rather than a rights issue. (c) Identify two reasons why the directors of J Limited might prefer to raise additional finance through a rights issue rather than by issuing debentures. 1 … … 2 … … [2] Additional information The directors paid an interim dividend of $0.12 per share on 1 July 2022. REQUIRED (d) Calculate the total amount of the interim dividend. … … … … [2] Additional information The company made a profit of $535 000 for the year ended 31 December 2022. REQUIRED (e) Prepare the statement of changes in equity for the year ended 31 December 2022. J Limited Statement of changes in equity at 31 December 2022 Share capital Share Retained Total premium earnings $ $ $ $ [6] [Total: 15] 4 D Limited has two production departments and two service departments at one of its factories where absorption costing is used. Some forecast factory overheads have already been allocated and apportioned as follows: Production departments Service departments Cutting Assembly Maintenance Canteen $ $ $ $ Factory overheads 223 480 217 980 45 270 36 260 The following forecast factory overheads are still to be apportioned. $ Depreciation of machinery 48 000 Power 40 200 Canteen department overheads should be reapportioned on the basis of the number of employees. Maintenance department overheads should be reapportioned on the basis of the number of machines in production departments. The following data is available. Production departments Service departments Cutting Assembly Maintenance Canteen Machinery at carrying value $90 000 $66 000 $18 000 $6 000 Number of machines 43 27 Kilowatt hours 1 800 1 500 100 200 Number of employees 27 18 5 Budgeted machine hours 40 000 33 500 Budgeted direct labour hours 23 000 62 500 REQUIRED (a) Complete the following table to show the apportionment of factory overheads and the reapportionment of service department overheads. Production departments Service departments Cutting Assembly Maintenance Canteen $ $ $ $ Factory overheads 223 480 217 980 45 270 36 260 Depreciation of machinery Power Total overheads Reapportionment Subtotal Reapportionment Total overheads [5] (b) Calculate, to two decimal places, an overhead absorption rate for each production department, using a suitable basis. … … … … … … [2] Additional information The following information is available. Cutting department Assembly department Direct labour rate per hour $10.90 $8.20 Machine hours per unit 8 6 Labour hours per unit 3 4 Direct materials cost $6.95 per unit. Selling prices are set to achieve a profit margin of 25%. A customer has placed an order for 40 units. REQUIRED (c) Calculate the selling price to be quoted for this order of 40 units. … … … … … … … … … … … … [5] (d) State two causes of under absorption of overheads. 1 … … 2 … … [2] Additional information At the other factory a single product, Product Exe, is currently being made. Marginal costing is used at this factory. The following information is available. Selling price per unit $48 Contribution per unit $13 Direct labour 2.5 hours per unit at $10 per hour Fixed costs $96 000 per annum Factory capacity 28 000 labour hours per year Current production level 80% of factory capacity All units produced are sold. REQUIRED (e) Calculate the profit made each year from Product Exe. … … … … … … [4] Additional information The directors plan to make a new product, Product Wye, at this factory at the request of an important customer. The following details are available. 1 The factory will be able to operate at full capacity. 2 All units produced will be sold. 3 Product Wye will have a selling price of $64 per unit and a contribution of $8 per unit. 4 Product Wye will require direct labour at $10 per hour for 1.5 hours per unit. 5 The customer requires 10 000 units of Product Wye each year. The customer will only accept this quantity each year. 6 In order to complete the customer’s order, production of Product Exe will be reduced. 7 Some new machinery will be required costing $36 000. Machinery is depreciated by 20% per annum.

72 marks

This question in 9706/21 May/June 2023

2 Rudra prepares bank reconciliation statements for his business at the end of each month. REQUIRED (a) State three reasons why it is important to a business to prepare bank reconciliation statements at regular intervals. 1 … … 2 … … 3 … … [3] Additional information On 31 March 2022 the balance shown in the business’s cash book (bank columns) was $3060 overdrawn. This did not agree with the balance shown on the business’s bank statement on this date. The difference in the two balances was accounted for by the following: 1 Rudra had omitted to record a direct debit for water charges of $442. 2 There were unpresented cheques: TK Stores $482, RH Supplies $1043. 3 Bank charges, $85, appeared on the bank statement but had not yet been recorded in the cash book. 4 Rudra had debited the cash book with cash takings, $893, but this had not yet been recorded by the bank. 5 A cheque payment to Peter, $320, had been correctly recorded in the bank statement, but had been entered in the cash book as $230. 6 The bank statement included an entry for a dishonoured cheque for $582 received by Rudra from Jamia. No entries had been made in the cash book to record the dishonoured cheque. 7 An error had been made in the cash book. Interest received, $225, had been correctly recorded in the bank statement, but had been credited in the cash book. REQUIRED (b) Prepare the cash book to show the updated balance at 31 March 2022. Dates are not required. Cash book (bank columns) $ $ [6] (c) Prepare a bank reconciliation statement to show the bank statement balance at 31 March 2022. Rudra Bank reconciliation statement at 31 March 2022 $ $ Balance as per updated cash book [4] (d) Define each of the following terms: (i) unpresented cheque … … [1] (ii) dishonoured cheque. … … [1] [Total: 15]

15 marks

Mark scheme: 2(a) State three reasons why it is important to a business to prepare bank 3 reconciliation statements at regular intervals. To identify errors in the cash book/in the bank statement (1) To help reduce the chance/assist in the discovery of fraud (1) To identify unpresented cheques/outstanding lodgements/dishonoured cheques (1) To ensure accurate (bank balance in the) financial statements (1) Max 3 Accept other valid responses. 2(b) Prepare the cash book to show the updated balance at 31 March 2022. Dates 6 are not required. Cash book (bank columns) $ $ Interest (received) 450 (1) Balance b/d 3 060 Balance c/d 3 809 Water charges 442 (1) Bank charges 85 (1) Peter 90 (1) Jamia 582 (1) 4 259 4 259 Balance b/d 3 809 (1)OF 2(c) Prepare a bank reconciliation statement to show the bank statement balance 4 at 31 March 2022. Rudra Bank reconciliation statement at 31 March 2022 $ $ Balance as per updated cash book (3 809) (1)OF Unpresented cheques: TK Stores 482 RH Supplies 1 043 1 525 (1) Outstanding bankings (893) (1) Balance as per bank statement (3 177) (1)OF 2(d)(i) Define each of the following terms: 1 Unpresented cheque: a cheque payment (recorded in the cash book but) not yet presented to the bank for payment (1) 2(d)(ii) Define each of the following terms: 1 Dishonoured cheque: a cheque which a bank refused to pay due to an error or lack of funds in the account (1)

This question in 9706/22 May/June 2023

2 Veda owns a retail business. Her accountant advised her to prepare a trial balance. REQUIRED (a) State two benefits of preparing a trial balance. 1 … … 2 … … [2] Additional information On 31 March 2023 Veda prepared a trial balance but the totals did not agree. The debit column totalled $84 050 and the credit column totalled $83 350. The difference was posted to a suspense account. The following errors were identified and corrected after which the trial balance totals agreed. 1 A payment of $740 to Opal Stores was recorded in the account of Opal Wholesale. 2 Sales returns of $340 from Kali had been correctly recorded in the sales returns journal, but $430 had been posted to the debit side of Kali’s account. 3 The discount columns in the cash book had not been posted to the general ledger. Discounts allowed totalled $530 and discounts received totalled $370. 4 A cheque for $560 received from W Limited had been dishonoured. The dishonoured cheque was entered correctly in the cash book but had been posted as $650 to the customer’s account. REQUIRED (b) Prepare journal entries to correct each of the errors. Dates and narratives are not required. Journal Dr Cr Account $ $ [7] (c) Prepare the suspense account at 31 March 2023. Dates are not required. Suspense account $ $ [4] (d) Define the term ‘error of principle’. … … … … [2] [Total: 15]

15 marks

Mark scheme: Question Answer Marks 2(a) State two benefits of preparing trial balances. 2 Provides a check on arithmetical accuracy of double-entry (1) Provides a source of information for preparing financial statements (1) Provides quick access to information about account balances (1) Max 2 Accept other valid responses. 2(b) 7 Prepare journal entries to correct each of the errors. Journal Account Dr Cr $ $ Opal Stores 740 (1) Opal Wholesale 740 Suspense 770 (1) Kali /Sales ledger control 770 (1) account Discounts allowed 530 (1) Discounts received 370 Suspense 160 (1) Suspense 90 (1) W Limited 90 (1) 2(c) Prepare the suspense account at 31 March 2023. 4 Suspense account $ $ Kali/ Sales Difference on 700 (1) ledger control 770 (1) trial balance account Discount 530 (1) line Discount allowed 370 received W Limited 90 (1) 1 230 1 230 2(d) Define the term ‘error of principle’. 2 Where the correct amount is entered on the correct side (1) but in the wrong class of account (1). Accept other valid responses.

This question in 9706/23 May/June 2023

1 Laila, a retailer, did not maintain a full set of accounting records for her business. She has provided the following information for the year ended 30 September 2023. Balances at 1 October 2022 $ Inventory 12 030 Non-current assets at carrying value 22 180 Other payables: light and heat 210 Other receivables: insurance 480 Trade payables 3 840 Trade receivables 4 540 Summary of bank account for the year ended 30 September 2023 $ $ Receipts: trade receivables 55 390 Balance b/d 1 220 Sale of non-current assets 860 Payments: trade payables 46 280 Balance c/d 1 170 Insurance 2 560 Light and heat 3 510 Drawings 3 850 57 420 57 420 Balance b/d 1 170 The following information is also available at 30 September 2023. 1 Laila has started to prepare her financial statements for the year ended 30 September 2023. The following figures are available to transfer to the statement of profit or loss with no adjustment. $ Insurance 2 720 Light and heat 3 880 Loss on disposal of non-current asset 120 2 All sales are made at a mark-up of 25%. 3 All sales and purchases are made on credit. 4 The balance of trade receivables at 30 September 2023 was $3650. 5 There were no additions to non-current assets during the year. 6 All non-current assets are to be depreciated at 10% per annum using the reducing balance method. 7 Laila was unable to physically count the inventory at 30 September 2023. The inventory was valued at $14 400 on 4 October 2023. 8 Between 1 October 2023 and 4 October 2023, Sales were $3400 and Purchases were $1850. (a) Calculate the value of closing inventory at 30 September 2023. … … … [3] (b) Prepare the statement of profit or loss for the year ended 30 September 2023. Use the space provided on page 4 to show your workings. Laila Statement of profit or loss for the year ended 30 September 2023 … … … … … … … … … … … … … … … Workings: [8] (c) Prepare the statement of financial position at 30 September 2023. Workings: Equity at 1 October 2022 Other receivables Trade payables Other payables Laila Statement of financial position at 30 September 2023 … … … … … … … … … … … … … … … … … … … … … … … … … … [12] Additional information Laila wishes to expand the business and is considering forming a partnership with her friend. (d) State four provisions of the Partnership Act 1890 that would apply in the absence of a partnership agreement. 1 … … 2 … … 3 … … 4 … … [4] (e) State three possible disadvantages to a business of maintaining a full set of accounting records. 1 … … 2 … … 3 … … [3] [Total: 30]

30 marks

Mark scheme: Question Answer Marks 1(a) Calculate the value of closing inventory at 30 September 2023. 3 $15 270 (3) W1 W1 14 400 + 2 720 (1) – 1 850 (1) = $15 270 (1)OF 1(b) Prepare the statement of profit or loss for the year ended 30 September 2023. 8 Laila Statement of profit or loss for the year ended 30 September 2023 $ $ Revenue W1 54 500 (2) Cost of sales Opening inventory 12 030 Purchases 46 840 (1)OF Closing inventory (15 270) (1)OF 43 600 (1) Gross profit 10 900 (1)OF Insurance 2 720 Light and heat 3 880 Loss on disposal 120 Depreciation 2 120 8 840 (1) Profit for the year 2 060 (1)OF Workings W1 55 390 – 4 540 (1) + 3 650 (1) = 54 500 1(c) Prepare the statement of financial position at 30 September 2023. 12 Laila Statement of financial position at 31 September 2023 $ $ Non-current assets 19 080 (1) Current assets Inventory 15 270 (1)OF Trade receivables 3 650 (1) Other receivables 320 (1) 19 240 Total assets 38 320 (1)OF Equity Opening balance 33 960 (1) Profit for the year 2 060 (1)OF Drawings (3 850) (1) Total equity 32 170 Current liabilities Bank 1 170 (1) Trade payables 4 400 (1) 1(c) Other payables 580 (1) 6 150 Total equity and liabilities 38 320 (1)OF 1(d) State four provisions of the Partnership Act 1890 that would apply in the absence of a partnership agreement. 4 • Profits and losses are shared equally. (1) • No interest is charged on drawings. (1) • No interest is allowed on capital. (1) • Interest of 5% is allowed on partners’ loans. (1) Accept other valid responses. 1(e) State three possible disadvantages to a business of maintaining a full set of accounting records. 3 • The business owner may lack the experience or skills to maintain a full set of accounting records (1) • The owner may have to employ someone to maintain the records (1) • There may be an increase in costs resulting in a decrease in profits (1) Accept other valid responses.

This question in 9706/21 Oct/Nov 2023

3 Yasmine has a retail business. She extracted a trial balance at 30 June 2023, the totals of which did not agree. (a) State two types of error that will be revealed by a trial balance. 1 … 2 … [2] (b) Explain the meaning of each of the following types of error. (i) Error of original entry … … [1] (ii) Error of principle … … [1] (iii) Error of commission … … [1] Additional information The difference in the trial balance was posted to a suspense account to enable the financial statements to be produced. Yasmine discovered the following errors, correction of which would clear the difference. 1 The sales journal total had been overstated by $300. 2 The total of the purchases returns journal, $2450, had not been posted to the general ledger. 3 Discounts allowed, $1660, had been posted to the credit of the discounts received account. 4 The balance of the carriage inwards account at 30 June 2023, $3570, had been brought down as $3750. (c) Prepare the suspense account to show the correction of the errors, clearly identifying the difference that was present in the trial balance before the errors were corrected. Suspense account $ $ [5] Additional information Before discovering the errors, Yasmine had prepared a draft statement of profit or loss showing a profit for the year of $36 165. The suspense account balance was not included in the profit calculation. (d) Calculate the revised profit for the year after correction of the errors. Increase Decrease $ $ $ Draft profit for the year 36 165 Error 1 Error 2 Error 3 Error 4 Revised profit for the year [5] [Total: 15]

15 marks

Mark scheme: 3(a) State two types of error that will be revealed by a trial balance. 2 Transposition error (1) Arithmetic error (1) Partial omission error (1) Unequal posting error (1) Max 2 3(b)(i) Explain the meaning of each of the following types of error. 1 Error of original entry An incorrect figure is used when a transaction is first entered in the accounting records (1) 3(b)(ii) Error of principle 1 A transaction is entered in an incorrect class of account (1) 3(b)(iii) Error of commission 1 A transaction is entered in an incorrect account of the same class of account (1) 3(c) Prepare the suspense account to show the correction of the errors, clearly identifying the opening balance that 5 was present in the trial balance before the errors were corrected. Suspense account $ $ Balance b/d 990 (1)OF Sales 300 (1) Carriage inwards 180 (1) Discounts allowed 1 660 (1) Purchase returns 2 450 (1) Discounts received 1 660 3 620 3 620 3(d) Calculate the revised profit for the year after correction of the errors. 5 Increase Decrease $ $ $ Draft profit for the year 36 165 Error 1 300 (1) Error 2 2 450 (1) Error 3 3 320 (1) Error 4 180 (1) Revised profit for the year 35 175 (1)

This question in 9706/21 Oct/Nov 2023

3 Rahul owns a retail business. He has not maintained full accounting records. He is able to supply the following information about the financial year ended 31 January 2024. 1 Valuation of inventories 1 February 2023 31 January 2024 $21 400 $19 800 2 Rahul sells goods so as to achieve a gross profit margin of 40%. 3 The usual rate of inventory turnover is 9 times a year. (a) Calculate the revenue for the year ended 31 January 2024. … … … … … [4] Additional information Rahul has not kept a record of his cash drawings during the year ended 31 January 2024. However, the following information is available concerning cash transactions. 1 On 1 February 2023 there was cash in hand of $840. 2 Cash sales accounted for 70% of all sales. 3 Bank statements recorded total cash takings of $187 300 for the year ended 31 January 2024. However, at 31 January 2024 there were cash takings banked but not yet credited of $3800. 4 Cash was used to pay a part-time assistant’s wages of $320 per week. The assistant worked for 44 weeks during the year ended 31 January 2024. 5 At 31 January 2024 cash in hand was $1830. (b) Calculate Rahul’s cash drawings for the year ended 31 January 2024. … … … … … … … … … … [5] Additional information Rahul’s accountant has suggested he should start keeping full accounting records and that he should use an accounting software package. (c) State two ways in which Rahul will benefit from the accountant’s suggestions. 1 … … 2 … … [2] (d) Explain two possible reasons for not accepting the accountant’s suggestions. 1 … … … … 2 … … … … [4] [Total: 15]

15 marks

Mark scheme: 3(a) Calculate the revenue for the year ended 31 January 2024. 4 Cost of sales = 9  average inventory $20 600 (1) = $185 400 (1) Revenue = $185 400  5/3 (1) = $309 000 (1) OF 3(b) Calculate Rahul’s cash drawings for the year ended 31 January 2024. 5 $10 130 (5) W W $ Cash sales 216 300 (1) OF Cash sales banked (191 100) (1) Wages paid (14 080) (1) Increase in cash balance (990) (1) Drawings (balancing figure) 10 130 (1) OF 3(c) State two ways in which Rahul will benefit from the accountant’s 2 suggestions. Access to more valid information about business (1) Possibility of improved decision making (1) Easier to provide details required by external organisations (1) Less expenditure on accountant’s fees (1) Helps to identify errors (1) Max 2 Accept other valid responses 3(d) Explain two possible reasons for not accepting the accountant’s 4 suggestions. There will be additional costs (1). These costs could include the equipment and software programme/the cost of paying someone to maintain the accounting records/training costs for Rahul should he wish to use the accounting package (1). Rahul may feel he does not need any more detailed information about the business (1) and is satisfied with the how the business operates and the rewards he receives/does not have the time or skills to use an accounting software package (1). Max 4 Accept other valid responses

This question in 9706/22 Feb/March 2024

1 The financial year end of T Limited was 30 June 2024. On that date the following balances were extracted from the books of account. Debit Credit $ $ 8% Bank loan (2024) 54 000 Administrative expenses 131 310 Bank overdraft 12 380 Cash 240 Carriage inwards 820 Distribution costs 114 870 Finance costs 5 180 Fixtures and fittings Cost 16 200 Provision for depreciation at 1 July 2023 9 560 Inventory at 1 July 2023 93 400 Land and buildings Cost 165 000 Provision for depreciation at 1 July 2023 6 300 Motor vehicles Cost 82 000 Provision for depreciation at 1 July 2023 34 590 Purchases 293 780 Retained earnings 38 450 Revenue 705 100 Share capital 80 000 Trade payables 32 160 Trade receivables 69 740 The following information is also available. 1 On 15 June 2024, goods were delivered and invoiced to a credit customer on a sale or return basis. The goods had a selling price of $12 000 including a mark-up of 25%. On 30 June 2024, inventory was counted and valued at cost, $86 400. On the same date, the customer informed T Limited that he had not yet decided whether to keep the goods. 2 Distribution costs include a charge of $3120 for motor insurance for the year ending 30 November 2024. 3 An irrecoverable debt of $540 is to be written off to administrative expenses. 4 The directors have decided to create an allowance for irrecoverable debts of 5% of trade receivables to be charged to administrative expenses. 5 Administrative expenses, $680, are outstanding at 30 June 2024. 6 On 30 June 2024, T Limited took out a 5% debenture (2028–2029) of $45 000. On the same date the company repaid one half of the 8% bank loan (2024) together with the three months’ interest outstanding at 30 June 2024. None of these transactions have yet been recorded in the books of account. 7 Land and buildings included land at cost, $60 000. Land is not depreciated. 8 Depreciation is to be provided as follows: Non-current asset Annual rate Method Charge to Fixtures and fittings 10% Reducing balance Administrative expenses Land and buildings 2% Straight-line Distribution costs Motor vehicles 20% Reducing balance Distribution costs 9 Taxation for the year is estimated to be $26 000. (a) Prepare the statement of profit or loss for the year ended 30 June 2024. Use the space provided on page 5 to show your workings. T Limited Statement of profit or loss for the year ended 30 June 2024 $ Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit from operations Finance costs Profit before Taxation Taxation Profit for the year Workings: Cost of sales Allowance for irrecoverable debts Depreciation Distribution costs Administrative expenses Finance costs [15] (b) Calculate the balance of cash and cash equivalents at 30 June 2024. … … … … … [4] (c) Prepare an extract from the statement of financial position at 30 June 2024 to show the equity and liabilities section only. T Limited Statement of financial position at 30 June 2024 $ Equity Total equity Liabilities Non-current liabilities Current liabilities Total liabilities Total equity and liabilities Workings: [6] (d) Assess the directors’ decision on 30 June 2024 to take out the 5% debenture (2028–2029). Justify your assessment by considering both advantages and disadvantages of the decision to the company. … … … … … … … … … … … … … … … … … … [5] [Total: 30]

30 marks

Mark scheme: Question Answer Marks 1(a) Prepare the statement of profit or loss for the year ended 30 June 2024. 15 T Limited Statement of profit or loss for the year ended 30 June 2024 $ Revenue W1 693 100 (1) Cost of sales W2 (292 000) (3)OF Gross profit 401 100 Distribution costs W3 (125 152) (4)OF Administrative expenses W4 (136 054) (5)OF Profit from operations 139 894 Finance costs W5 (6 260) (1) Profit before Taxation 133 634 Taxation (26 000) Profit for the year 107 634 (1)OF W1 – Revenue $705 100 – $12 000 = $693 100 (1) W2 – Cost of sales $93 400 + 293 780 + $820 (1) – ($86 400 + $9 600) (1) = $292 000 (1)OF W3 – Distribution $114 870 – $1 300 (1) + $2 100 (1) + $9 482 costs (1) = $125 152 (1)OF W4 – Administrative $131 310 + $2 860 (1) + $680 (1) + $664 (1) + expenses $540 (1) = $136 054 (1)OF W5 – Finance costs $5 180 + $1 080 = $6 260 (1) 1(b) Calculate the balance of cash and cash equivalents at 30 June 2024. 4 ($240 – $12 380) (1) + $45 000 (1) – $28 080 (1) = $4 780 (1 )OF 1(c) Prepare an extract from the statement of financial position at 30 June 6 2024 to show the equity and liabilities section only. T Limited Statement of financial position at 30 June 2024 $ Equity Share capital 80 000 Retained earnings W1 146 084 (1) OF Total equity 226 084 Liabilities Non-current liabilities 5% Debentures (2028-2029) 45 000 (1) Current liabilities Trade and other payables W2 32 840 (1) Taxation 26 000 8% bank loan (2024) 27 000 (1) Total liabilities 130 840 (1) OF Total equity and liabilities 356 924 (1) OF W1: $38 450 + 107 634 = 146 084 (1) OF W2: $32 160 + 680 = 32 840 (1) 1(d) Assess the directors’ decision on 30 June 2024 to take out the 5% 5 debenture (2028-2029). Justify your assessment by considering both advantages and disadvantages of the decision to the company. Advantages (Max 2 marks) • Removed the negative cash balance (1) • Repaid one half of the 8% bank loan that was due for repayment with the next six months (1) • Beneficial interest rate compared to the bank loan (1) Disadvantages (Max 2 marks) • Tied the company into a further five years of debt (1) • Weakened the immediate capital structure of the company (1) • May cause longer-term cash flow problems to meet repayment terms (1) • Security is required (1) Decision supported with a comment (1) Accept other valid responses

This question in 9706/21 Oct/Nov 2024

2 Deepak maintains a full set of accounting records. The trial balance at 30 September 2024 did not balance and the difference was posted to a suspense account. The sales ledger control account and the purchases ledger control account are part of the double entry system. The following errors were discovered. 1 A cheque received, $610, from Sanjay, a credit customer, had been dishonoured by the bank but no entry had been made in the books of account. 2 Goods returned, $240, by Kamal, a credit customer, had been credited to the sales ledger control account and debited to the purchases account. 3 Goods returned, $150, to Kohli, a credit supplier, had been correctly entered in both the purchases returns journal and the purchases ledger control account but had been posted to the debit of the sales returns account. 4 A credit note, $498, received from Bharti, a credit supplier, had been correctly entered in the purchases returns journal but had been debited to the purchases ledger control account as $489. (a) Prepare journal entries to correct each error. Narratives are not required. Journal Error Debit Credit $ $ 1 2 3 4 [9] (b) Prepare the suspense account at 30 September 2024 clearly showing the opening balance brought down. Dates are not required. Suspense account Details $ Details $ [4] Additional information The trial balance included the following balances: Debit Credit $ $ Purchases ledger control account 8 640 Sales ledger control account 12 420 (c) Calculate the revised balances of the: (i) Purchases ledger control account … … [1] (ii) Sales ledger control account. … … [1] [Total: 15]

15 marks

Mark scheme: 2(a) Prepare journal entries to correct each error. Narratives are not required. 9 Journal Debit. Credit $ $ Sales ledger control account 610 (1) Bank 610 (1) Sales returns 240 (1) Purchases 240 (1) Suspense 300 (1) Sales returns 150 (1) Purchases returns 150 (1) Suspense 987 (1) Purchases ledger control account 987 (1) 2(b) Prepare the suspense account at 30 September 2024 clearly showing the 4 opening balance brought down. Dates are not required. Suspense account Details $ Details $ Sales returns 150 (1) Balance b/d 1 287 (1)OF Purchases returns 150 (1) Purchases ledger contro 987 (1) account 1 287 1 287 2(c)(i) Calculate the revised balances of the: 1 Purchases ledger control account $8 640 + $987 = $9 627 (1) 2(c)(ii) Calculate the revised balances of the: 1 Sales ledger control account $12 420 + $610 = $13 030 (1)

This question in 9706/21 Oct/Nov 2024

2 Alex owns a wholesale business purchasing and selling goods on cash and on credit. Control accounts are used to check the accuracy of the individual purchases and sales ledger accounts. The following information is available for September 2024. 1 Sales ledger account balances on 1 September 2024: $ Amounts owed by customers 64 280 Amount overpaid by one customer 215 2 Totals from the books of prime entry: $ Cash book Cash sales 15 230 Receipts from credit customers 196 380 Discounts allowed 2 440 Refund of overpayment 215 Sales journal 188 740 Sales returns journal 2 560 General journal Contras to purchases ledger 1 150 (a) Prepare the sales ledger control account for September 2024. Sales ledger control account $ $ [8] Additional information On 30 September 2024 the following information was available relating to trade payables. $ Total of balances in the purchases ledger 41 350 Balance of the purchases ledger control account 40 592 The following errors were discovered. When corrected the balance of the purchases ledger control account agreed with the total of the balances of the purchases ledger. 1 The total of the purchases returns journal, $1 560, had been entered in the purchases ledger control account as $1 650. 2 The balance of a trade payables account had been overstated by $80.

8 marks

Mark scheme: 2(a) Prepare the sales ledger control account for September 2024. 8 Sales ledger control account $ $ Balance b/d 64 280 Balance b/d 215 (1) Sales journal 188 740 Sales returns journal 2 560 (1) (1) Bank 215 Bank 196 380 (1) (1) Discounts allowed 2 440 (1) Contra 1 150 (1) Balance c/d 50 490 253 235 253 235 Balance b/d 50 490 (1)OF 2(b)(i) Calculate the corrected total of balances in the purchases ledger. 3 $ Original total 41 350 Overstated balance (80) (1) Refund (640) (1) Corrected total 40 630 (1) 2(b)(ii) Calculate the corrected balance of the purchases ledger control 4 account. $ Original balance 40 592 Purchases returns journal 90 (1) Discounts received (68) (1) Interest charged 16 (1) Corrected balance 40 630 (1)

This question in 9706/23 Oct/Nov 2024

3 A refund of $320 to a credit supplier had been recorded correctly in the cash book but posted to the credit side of the supplier’s account.

0 marks

Mark scheme: 3(a) Prepare the following accounts for the year ended 30 September 2024. 11 Dates are not required. Share Capital Details $ Details $ Balance c/d 371 250 Balance b/d 250 000 Bank / Cash Book 25 000 (1) Bank / Cash Book 55 000 (1) Share premium 39 900 (1) Retained earnings 1 350 371 250 371 250 Balance b/d 371 250 (1)OF Share premium Details $ Details $ Share capital 39 900 (1)OF Balance b/d 13 400 Bank / Cash Book 10 000 (1) Bank / Cash Book 16 500 (1) 39 900 39 900 Retained earnings Details $ Details $ Bank / Cash Book 13 200 (1) Balance b/d 71 800 Share capital 1 350 (1)OF Statement of profit 41 800 (1) or loss Balance c/d 99 050 113 600 113 600 Balance b/d 99 050 (1)OF 3(b) State two features of a debenture. 2 • Long term loan (1) • Fixed interest rate (1) • Repayable at specified date (1) • No voting rights (1) Max 2 marks Accept other valid responses. 3(c) State two features of ordinary shares. 2 • Variable rate of dividend (1) • Dividend not guaranteed (1) • Voting rights (1) Max 2 marks Accept other valid responses.

This question in 9706/23 Oct/Nov 2024

2 Sara is entitled to a salary of $12 000 per annum. (b) Prepare the appropriation account for the year ended 31 December 2024. Appropriation account for the year ended 31 December 2024 … … … … … … … … … … … … … … [3] (c) Prepare the current account of Viraj for the year ended 31 December 2024. Dates are not required. Viraj Current account $ $ [4] Additional information On 31 December 2024, the balance of Sara’s current account was $15 070 debit. (d) Prepare an extract from the statement of financial position at 31 December 2024 showing the capital and liabilities section only. Statement of financial position at 31 December 2024 Capital and liabilities … … … … … … … … … … … … … … … … … … … … [4] (e) Explain, with reference to an accounting concept, the correct treatment of: (i) goods taken for own use by the owner of a business Concept: … Explanation: … … … [2] (ii) irrecoverable debts. Concept: … Explanation: … … … [2] Additional information The partners are concerned about the liquidity of the business. The current credit terms are 30 days for both credit suppliers and credit customers. They have noticed that some credit customers are delaying the settlement of their invoices, whilst credit suppliers are always paid within 30 days. They are considering two options: Option A: introducing a 5% cash discount for all credit customers’ invoices settled within 25 days. Option B: paying credit suppliers within 35 days. (f) Advise the partners which option they should choose. Justify your answer by discussing both options. … … … … … … … … … … … … … … … … … … … … [7] [Total: 30] 2 Moe runs a trading business and maintains control accounts as a part of the double entry. The following information is available for the month of November 2024. $ Balance of sales ledger control account at 1 November 2024 18 320 Contra entry with purchases ledger control account 139 Credit sales 41 735 Discounts allowed 3 071 Interest charged on overdue accounts 84 Irrecoverable debt written off 478 Receipts from credit customers 39 202 Sales returns 883 (a) Prepare the sales ledger control account for November 2024. Dates are not required. Sales ledger control account $ $ [5] Additional information On 31 December 2024, the following information was available. $ Total of balances in the sales ledger 22 350 Sales ledger control account balance 23 964 The following errors were discovered, which accounted for the difference. 1 The balance of a credit customer’s ledger account had been overstated by $189. 2 The total of the sales returns journal, $210, had been posted to the debit side of the control account as $120.

27 marks

Mark scheme: 2(a) Prepare the sales ledger control account for November 2024. Dates are not 5 required. Sales ledger control account $ $ Balance b/d 18 320 Purchases ledger 139 (1) all control/Contra Sales 41 735 (1) Sales returns 883 Interest 84 (1) Irrecoverable 478 (received) debts Bank 39 202 (1) both Discounts allowed 3 071 Balance c/d 16 366 60 139 60 139 Balance b/d 16 366 (1) OF 2(b)(i) Calculate the corrected figure for: 3 the total of balances in the sales ledger Corrected total of balances in sales ledger $ Original total 22 350 Less overstated balance (189) (1) Add dishonoured cheque 640 (1) Corrected total 22 801 (1)OF 2(b)(ii) Calculate the corrected figure for: 5 The sales ledger control account balance $ original sales ledger control 23 964 account balance Less sales returns (330) (1) Less discounts allowed (283) (1) Add dishonoured cheque 640 (1) Less irrecoverable debt (1 190) (1) Corrected balance 22 801 (1) 2(c) State two benefits of preparing control accounts. 2 Check the arithmetical accuracy of the double entry OR ledger accounts (1) Helps to locate errors or indicates errors (1) Helps to prevent/reduce fraud (1) Provides easily accessible information for management (1) Provides information for entry in financial statements OR finds totals for trade receivables OR finds totals for trade payables (1) Improves internal control (1) Max 2 Accept other valid responses

This question in 9706/22 Feb/March 2025

3 The discount column totals in the cash book had not been posted: column on debit side total $283 column on credit side total $319.

0 marks

Mark scheme: 3(a) Prepare the following ledger accounts for the year ended 31 December 2024. 9 Ordinary share capital account 2024 $ 2024 $ Dec Balance 1 250 000 Jan 1 Balance 750 000 31 c/d b/d Oct 1 Bank W1 500 000 (1) 1 250 000 1 250 000 2025 Jan 1 Balance 1 250 000 (1)OF b/d Share premium account 2024 $ 2024 $ Dec Balance 345 000 Jan 1 Balance 145 000 31 c/d b/d Oct 1 Bank W1 200 000 (1) 345 000 345 000 2025 Jan 1 Balance 345 000 (1) OF b/d 3(a) Retained earnings account 2024 $ $ April 1 Property 20 000 (1) Jan 1 Balance 154 000 b/d June Bank 75 000 (1) Dec Statement 148 000 (1) 30 W2 31 of profit or loss Dec Balance 207 000 31 c/d 302 000 302 000 2025 Jan 1 Bal b/d 207 000 (1) OF Revaluation reserve account 2024 $ 2024 $ April 1 Property 90 000 (1) Jan 1 Balance b/d 90 000 W1 Rights issue Share capital: 1 500 000  2/3  $0.50 = $500 000 (1) Share premium: 1 500 000  2/3  $0.20 = $200 000 (1) W2 Interim dividend = $75 000 Interim dividend: 750 000  2 shares  $0.05 = $75 000 (1) 3(b) State two features of capital reserves. 2 Cannot be used to finance dividend payments (1) Arise from non-trading activities of a company (1) Can be used for bonus issue of shares (1) Max 2 Accept other valid responses 3(c) State two differences between a rights issue of shares and an issue of debentures. 4 Debenture interest will have to be paid annually affecting/reducing cashflows and profits (1) whereas dividends on shares are discretionary (1). Rights issue of shares is a permanent source of finance (1) whereas debentures have to be repaid at a future date OR long term loan (1). Shareholders have voting rights (1) debenture holders do not have voting rights (1). Debentures may require collateral (1) no collateral needed for rights issue (1). Max 4 Accept other valid responses

This question in 9706/22 Feb/March 2025

5 An irrecoverable debt of $892 had been recorded correctly in the customer’s ledger account but had been debited to the sales ledger control account as $298. (b) Calculate the corrected figure for: (i) the total of balances in the sales ledger $ Original total of balances in the sales ledger 22 350 Corrected total of balances in the sales ledger [3] (ii) the sales ledger control account balance $ Original sales ledger control account balance 23 964 Corrected sales ledger control account balance [5] (c) State two benefits of preparing control accounts. 1 … … 2 … … [2] [Total: 15]

10 marks

This question in 9706/22 Feb/March 2025

2 Virat prepared the trial balance at 28 February 2025, the end of his financial year. However, the totals did not agree. Control accounts are not maintained by the business. A check of the entries in the books of account revealed the following errors. 1 A sales invoice, $80, had been debited to the account of Rafiq instead of Raif. 2 A credit note, $170, received from P Limited had been correctly recorded in the book of prime entry but had not been posted to the personal account. 3 No record has been made of goods taken by Virat for personal use, valued at cost, $330. 4 The total of the discount received column in the cash book, $97, had been debited to the discounts allowed account as $79. 5 No entries had been made to record the receipt of $370 from Abdul, a credit customer. The balance of his account had been written off in 2024. (a) Prepare journal entries to correct the errors. Narratives are not required. Journal Error Dr Cr $ $ 1 2 3 4 5 [8] Additional information Before the errors were corrected, a draft statement of profit or loss for the year ended 28 February 2025 had been prepared, showing a draft profit for the year of $37 320. (b) Calculate a revised figure for profit for the year ended 28 February 2025. $ Draft profit for the year 37 320 [5] (c) Explain why an error of principle would have no effect on the agreement of trial balance totals. … … … … [2] [Total: 15]

15 marks

Mark scheme: Question Answer Marks 2(a) Prepare journal entries to correct the errors. Narratives are not required. 8 Journal Error Dr Cr $ $ 1 Raif 80 (1) For both Rafiq 80 2 P Limited 170 (1) For both Suspense 170 3 Drawings 330 (1) For both Purchases 330 4 Suspense 176 (1) Discounts allowed 79 (1) Discounts received 97 (1) 5 Bank 370 (1) (1) Irrecoverable debts recovered 370 2(b) Calculate a revised figure for profit for the year ended 28 February 2025. 5 $ Draft profit for the year 37 320 Add: goods own use 330 (1) Add discounts allowed 79 (1) Add discounts received 97 (1) Add irrecoverable debts recovered 370 (1) Revised profit for the year 38 196 (1) 2(c) Explain why an error of principle would have no effect on the agreement of 2 trial balance totals. An error of principle results in matching (1) debit and credit entries (1) so agreement of the trial balance totals is not affected.

This question in 9706/22 May/June 2025

28 February 2025 had been prepared, showing a draft profit for the year of $37 320. (b) Calculate a revised figure for profit for the year ended 28 February 2025. $ Draft profit for the year 37 320 [5] (c) Explain why an error of principle would have no effect on the agreement of trial balance totals. … … … … [2] [Total: 15] 3 Zak has not maintained full accounting records for his retail business. He has provided the following details for the year ended 31 December 2024. $ Purchases 82 980 Returns outwards 1 050 Inventory levels increased by $2730 during the year ended 31 December 2024. Zak’s policy is to sell all goods to achieve a gross profit margin of 40%. (a) Calculate the revenue for the year ended 31 December 2024. … … … … … … … … [4] Additional information Zak is not certain how much the business is owed by its credit customers at 31 December 2024. The following information is available. 1 At 1 January 2024, credit customers owed $11 880. 2 Credit sales are 75% of total sales. 3 Bank statements show that $96 900 was received from credit customers during the year ended 31 December 2024. 4 Some credit customers were given a 5% cash discount for prompt payment. Zak estimates that 20% of all receipts from credit customers were made after deducting the cash discount. (b) Calculate the amount owed by credit customers at 31 December 2024. … … … … … … … … [4] Additional information Zak would like to improve the credit control of his business. (c) Identify two ways, other than allowing a cash discount, in which credit control can be improved. 1 … … 2 … … [2]

17 marks

This question in 9706/22 May/June 2025

2 Samira owns a business called SJB Supplies. She prepares a bank reconciliation statement for her business at the end of each month. On 31 January 2025, the balance in the business cash book (bank columns) was $324 debit. On the same date, the balance as per the bank statement was $160 debit. (a) Explain why a positive balance is shown as a debit balance in a cash book and an overdrawn balance is also shown as a debit balance on a bank statement. … … … … … … [2] Additional information A comparison of the cash book and bank statement has revealed the following: 1 The bank statement included bank charges of $83 which had not yet been recorded in the cash book. 2 A cheque for $140, received from Ella, a trade receivable, had been recorded in the cash column in the cash book. 3 Cash paid into the bank amounting to $230 had been correctly recorded on the bank statement but had been entered in the cash book (bank column) as $200. 4 A dishonoured cheque for $328, received from P Limited, had been entered on the wrong side of the cash book as $238. 5 A direct debit of $214, for insurance, had been omitted from the cash book. 6 The bank had entered a cheque payment for $138, drawn by SJK Supplies, into Samira’s business account in error. 7 There were unpresented cheques totalling $533. 8 Lodgements not yet credited by the bank totalled $186. (b) Prepare an updated cash book at 31 January 2025. Dates are not required. Cash book (bank columns) Details $ Details $ Balance b/d 324 [7] (c) Prepare a bank reconciliation statement at 31 January 2025. Bank Reconciliation Statement at 31 January 2025 $ Balance as per bank statement (160) [4] (d) State two features of a direct debit. 1 … 2 … [2] [Total: 15]

15 marks

Mark scheme: 2(a) Explain why a positive balance is shown as a debit balance in a cash book and 2 an overdrawn balance is also shown as a debit balance on a bank statement. A positive balance in a cash book/for the business is an asset/owned by the business (1); an overdrawn balance from the bank’s point of view is also an asset (1). OR Business has money/savings/cash in their bank account (1) and if the balance is overdrawn then the business owes money to the bank. (1) 2(b) Prepare an updated cash book at 31 January 2025. Dates are not required. 7 Cash book (bank columns) $ $ Balance b/d 324 Bank charges 83 (1) Ella 140 (1) P Limited 238 (1) Cash 30 (1) P Limited 328 (1) Balance c/d 369 Insurance 214 (1) 863 863 Balance b/d 369 (1) OF 2(c) Prepare a bank reconciliation statement at 31 January 2025. 4 Bank Reconciliation Statement at 31 January 2025 $ Balance as per bank statement (160) Bank error 138 (1) (22) Unpresented cheques (533) (1) Lodgements not yet credited 186 (1) Balance as per (updated) cash book (369) (1) OF 2(d) State two features of a direct debit. 2 The bank is authorised by the payee/payee controls the amount (1) Regular/monthly payment from an account/used for recurring payments (1) Automatically deducted from the individual’s bank account/paid directly by bank/does not require constant approval by account holder (1) The amount paid varies/not fixed amount (1) Max 2 Accept other valid responses

This question in 9706/22 Oct/Nov 2025