As Acc Booklet 23

Syllabus
Cambridge International AS & A Level

Accounting 9706
Use this syllabus for exams in 2023, 2024 and 2025.
Exams are available in the June and November series.
Exams are also available in the March series in India only.
Version 2
Why choose Cambridge International?
Cambridge International prepares school students for life, helping them develop an informed curiosity and a lasting
passion for learning. We are part of the University of Cambridge.
Our Cambridge Pathway gives students a clear path for educational success from age 5 to 19. Schools can shape
the curriculum around how they want students to learn – with a wide range of subjects and flexible ways to offer
them. It helps students discover new abilities and a wider world, and gives them the skills they need for life, so they
can achieve at school, university and work.
Our programmes and qualifications set the global standard for international education. They are created by subject
experts, rooted in academic rigour and reflect the latest educational research. They provide a strong platform for
students to progress from one stage to the next, and are well supported by teaching and learning resources.
We review all our syllabuses regularly, so they reflect the latest research evidence and professional teaching
practice – and take account of the different national contexts in which they are taught.
We consult with teachers to help us design each syllabus around the needs of their learners. Consulting with
leading universities has helped us make sure our syllabuses encourage students to master the key concepts in the
subject and develop the skills necessary for success in higher education.
Our mission is to provide educational benefit through provision of international programmes and qualifications for
school education and to be the world leader in this field. Together with schools, we develop Cambridge learners
who are confident, responsible, reflective, innovative and engaged – equipped for success in the modern world.
Every year, nearly a million Cambridge students from 10 000 schools in 160 countries prepare for their future with
the Cambridge Pathway.
‘We think the Cambridge curriculum is superb preparation for university.’

Christoph Guttentag, Dean of Undergraduate Admissions, Duke University, USA
Quality management
Cambridge International is committed to providing exceptional quality. In line with this commitment, our
quality management system for the provision of international qualifications and education programmes for
students aged 5 to 19 is independently certified as meeting the internationally recognised standard,
ISO 9001:2015. Learn more at www.cambridgeinternational.org/ISO9001
Copyright © UCLES September 2020

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of
the University of Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
UCLES retains the copyright on all its publications. Registered centres are permitted to copy material from this booklet for their own
internal use. However, we cannot give permission to centres to photocopy any material that is acknowledged to a third party even for
internal use within a centre.
Contents
1 Why choose this syllabus? ................................................................................................................2
2 Syllabus overview .............................................................................................................................. 6

Aims 6
Content overview 7
Assessment overview 8
Assessment objectives 9
3 Subject content ................................................................................................................................. 10

AS Level content 10
A Level content 18
Appendix – Summary of commonly used ratios (AS & A Level) 26
4 Details of the assessment .............................................................................................................. 29

Paper 1 – Multiple Choice 29
Paper 2 – Fundamentals of Accounting 29
Paper 3 – Financial Accounting 30
Paper 4 – Cost and Management Accounting 30
Command words 31
5 What else you need to know ......................................................................................................... 32

Before you start 32
Making entries 33
After the exam 34
How students, teachers and higher education can use the grades 35
Grade descriptions 35
Changes to this syllabus for 2023, 2024 and 2025 36
Important: Changes to this syllabus

For information about changes to this syllabus for 2023, 2024 and 2025, go to page 36.
Cambridge International AS & A Level Accounting 9706 syllabus for 2023, 2024 and 2025.
1 Why choose this syllabus?
Key benefits
The best motivation for a student is a real passion for the subject
they’re learning. By offering students a variety of Cambridge
International AS & A Levels, you can give them the greatest chance
of finding the path of education they most want to follow. With
over 50 subjects to choose from, students can select the ones
they love and that they’re best at, which helps motivate them
throughout their studies.
Following a Cambridge International AS & A Level programme

helps students develop abilities which universities value highly,
including:
• a deep understanding of their subjects
• higher order thinking skills – analysis, critical thinking,
problem-solving
• presenting ordered and coherent arguments
• independent learning and research.
Cambridge International AS & A Level Accounting engages students with the relevance and applicability of
accounting in real-world contexts and encourages interest in the role and responsibilities of the accountant.
Studying this subject helps students to understand, apply, analyse and evaluate accounting information to aid
decision-making in business and communicate information to stakeholders.
These transferable skills are an ideal foundation for further study and for a future career within accounting or
related professions.
Our approach in Cambridge International AS & A Level Accounting encourages learners to be:
confident, using accounting terminology and formats, preparing and analysing financial statements and learning to
communicate accounting information to stakeholders
responsible, considering how the ethical behaviour of accountants and auditors impacts the business and other
stakeholders
reflective, considering how the concepts and accounting standards underpin the preparation of accounts and
impact on the actions of the accountant
innovative, approaching learning and application with flexible and substantiated thinking
engaged, developing an interest in broader and evolving accounting issues, and exploring the range of types of
business for which a robust accounting system is required.
‘Cambridge students develop a deep understanding of subjects and independent thinking skills.’
Principal, Rockledge High School, USA
2 www.cambridgeinternational.org/alevel Back to contents page

Cambridge International AS & A Level Accounting 9706 syllabus for 2023, 2024 and 2025. Why choose this syllabus?
Key concepts
Key concepts are essential ideas that help students develop a deep understanding of their subject and make links
between different aspects. Key concepts may open up new ways of thinking about, understanding or interpreting
the important things to be learned.
Good teaching and learning will incorporate and reinforce a subject’s key concepts to help students gain:
• a greater depth as well as breadth of subject knowledge
• confidence, especially in applying knowledge and skills in new situations
• the vocabulary to discuss their subject conceptually and show how different aspects link together
• a level of mastery of their subject to help them enter higher education.
The key concepts identified below, carefully introduced and developed, will help to underpin the course you will
teach. You may identify additional key concepts which will also enrich teaching and learning.
The key concepts for Cambridge International AS & A Level Accounting are:
• A true and fair view
Financial statements are designed to give a true and fair view of the financial position, performance and
changes in financial position of the business to internal and external stakeholders.
• Duality
Duality in accounting recognises that every financial transaction has a double (or dual) effect on the position of
a business as recorded in the accounts.
• Consistency
Consistency in the treatment of financial transactions enables the performance of a business to be compared
meaningfully over different time periods.
• Business entity
A business is a separate legal entity from the owner of a business. The accounting records must relate only to
the business and not to the personal assets and spending of the owner.
• Money measurement
Financial accounts only include items and transactions that can be expressed in terms of money. For example,
the purchase of raw material is recorded in the accounts whereas staff creativity is not.
• Planning and control
Management accounting provides a framework for a business to plan and control its finances and enables
informed decision-making.
Back to contents page www.cambridgeinternational.org/alevel 3

International recognition and acceptance

Our expertise in curriculum, teaching and learning, and assessment is the basis for the recognition of our
programmes and qualifications around the world. Every year thousands of students with Cambridge International
AS & A Levels gain places at leading universities worldwide. Our programmes and qualifications are valued by top
universities around the world including those in the UK, US (including Ivy League universities), Europe, Australia,
Canada and New Zealand.
UK NARIC, the national agency in the UK for the recognition and comparison of international qualifications and
skills, has carried out an independent benchmarking study of Cambridge International AS & A Level and found it to
be comparable to the standard of AS & A Level in the UK. This means students can be confident that their Cambridge
International AS & A Level qualifications are accepted as equivalent, grade for grade, to UK AS & A Levels by leading
universities worldwide.
Cambridge International AS Level Accounting makes up the first half of the Cambridge International A Level course
in accounting and provides a foundation for the study of accounting at Cambridge International A Level. Depending
on local university entrance requirements, students may be able to use it to progress directly to university courses
in accounting or some other subjects. It is also suitable as part of a course of general education.
Cambridge International A Level Accounting provides a foundation for the study of accounting or related courses in
higher education. Equally it is suitable as part of a course of general education.
For more information about the relationship between the Cambridge International AS Level and Cambridge
International A Level see the ‘Assessment overview’ section of the Syllabus overview.
We recommend learners check the Cambridge recognition database and university websites to find the most
up-to-date entry requirements for courses they wish to study.
Learn more at www.cambridgeinternational.org/recognition
The depth of knowledge displayed by the best A Level students makes them prime targets for
America’s Ivy League universities.’
Yale University, USA

Supporting teachers
We provide a wide range of resources, detailed guidance and innovative training and professional development so
that you can give your students the best possible preparation for Cambridge International AS & A Level. To find out
which resources are available for each syllabus go to our School Support Hub.
The School Support Hub is our secure online site for Cambridge teachers where you can find the resources you need
to deliver our programmes. You can also keep up to date with your subject and the global Cambridge community
through our online discussion forums.
Find out more at www.cambridgeinternational.org/support
Planning and preparation Teaching and assessment

• Next step guides • Endorsed resources
• Schemes of work • Online forums
• Specimen papers • Support for coursework and speaking tests
• Syllabuses
• Teacher guides Support
for Cambridge
International
Learning and revision AS & A Level Results
• Example candidate responses • Candidate Results Service
• Learner guides • Principal examiner reports for teachers
• Past papers and mark schemes • Results Analysis
• Specimen paper answers
Sign up for email notifications about changes to syllabuses, including new and revised products and services at
www.cambridgeinternational.org/syllabusupdates
Professional development
We support teachers through:
• Introductory Training – face-to-face or online
• Extension Training – face-to-face or online
• Enrichment Professional Development – face-to-face or online
Find out more at www.cambridgeinternational.org/events
• Cambridge Professional Development Qualifications

Find out more at www.cambridgeinternational.org/profdev
Supporting exams officers

We provide comprehensive support and guidance for all Cambridge exams officers. Find out more at:
www.cambridgeinternational.org/eoguide

2 Syllabus overview
Aims
The aims describe the purposes of a course based on this syllabus.
The aims are to enable students to:

• understand the role of accounting as an information system for monitoring, problem-solving and
decision-making
• appreciate the ethical issues that underpin the practice of accounting and their impact on the behaviour of the
accountant and of businesses
• appreciate the place of accounting in managing business change in response to economic, social and
technological developments
• develop the ability to apply and evaluate accounting concepts, principles, policies and practices
• develop skills of communication, analysis, interpretation and presentation of both qualitative and quantitative
accounting information
• develop skills and knowledge needed for further study or employment in accounting or business.
Cambridge Assessment International Education is an education organisation and politically neutral.

The contents of this syllabus, examination papers and associated materials do not endorse any political
view. We endeavour to treat all aspects of the exam process neutrally.

Cambridge International AS & A Level Accounting 9706 syllabus for 2023, 2024 and 2025. Syllabus overview
Content overview
Cambridge International AS Level students study topics 1.1–2.2.
Cambridge International A Level students study all topics 1.1–4.4.
AS Level topics A Level topics
Financial 1.1 Types of business entity 3.1 Preparation of financial statements

accounting 1.2 The accounting system 3.2 Regulatory and ethical
1.3 Accounting for non-current assets considerations
1.4 Reconciliation and verification 3.3 Business acquisition and merger
1.5 Preparation of financial statements 3.4 Computerised accounting systems
1.6 Analysis and communication of 3.5 Analysis and communication of
accounting information accounting information
Cost and 2.1 Costs and cost behaviour 4.1 Activity based costing (ABC)
management 2.2 Traditional costing methods 4.2 Standard costing
accounting
4.3 Budgeting and budgetary control
4.4 Investment appraisal
‘Cambridge International AS & A Levels prepare students well for university because they’ve
learnt to go into a subject in considerable depth. There’s that ability to really understand the
depth and richness and the detail of a subject. It’s a wonderful preparation for what they are
going to face at university.’
US Higher Education Advisory Council

Assessment overview
Paper 1 Paper 3
Multiple Choice 1 hour Financial Accounting 1 hour 30 minutes

30 marks 75 marks
30 multiple-choice questions Three structured questions
Questions are based on sections 1 and 2 of the Questions are based on section 3 of the subject
subject content. content; knowledge of material from the AS Level
Externally assessed subject content is assumed.
28% of the AS Level Externally assessed
14% of the A Level 30% of the A Level
Paper 2 Paper 4
Fundamentals of Accounting 1 hour 45 minutes Cost and Management Accounting 1 hour

90 marks 50 marks
Four structured questions Two structured questions
Questions are based on sections 1 and 2 of the Questions are based on section 4 of the subject
subject content content; knowledge of material from the AS Level
Externally assessed subject content is assumed.
72% of the AS Level Externally assessed
36% of the A Level 20% of the A Level
Information on availability is in the Before you start section.
There are three routes for Cambridge International AS & A Level Accounting:
Route Paper 1 Paper 2 Paper 3 Paper 4
1 AS Level only
(Candidates take all AS components  
in the same exam series)
2 A Level (staged over two years)

Year 1 AS Level*  
Year 2 Complete the A Level  
3 A Level
(Candidates take all components in    
the same exam series)
* Candidates carry forward their AS Level result subject to the rules and time limits described in the Cambridge Handbook.
Candidates following an AS Level route are eligible for grades a–e. Candidates following an A Level route are eligible
for grades A*–E.

Assessment objectives
The assessment objectives (AOs) are:
AO1 Knowledge and understanding

• Demonstrate knowledge and understanding of facts, terms, concepts, policies, procedures and techniques
relating to financial accounting and cost and management accounting.
• Apply this knowledge and understanding to a variety of accounting situations and problems, and present
outcomes in the most appropriate form.
AO2 Analysis
• Analyse financial accounting information and cost and management accounting information.
• Select, calculate and interpret relevant data and information.
• Communicate outcomes in the most appropriate form.
AO3 Evaluation
• Evaluate financial accounting information and cost and management accounting information to make informed
recommendations and decisions.
• Make judgements and draw conclusions based on financial and non-financial data.
Weighting for assessment objectives

The approximate weightings allocated to each of the assessment objectives (AOs) are summarised below.
Assessment objectives as a percentage of each qualification
Assessment objective Weighting in AS Level % Weighting in A Level %
AO1 Knowledge and understanding 63 55
AO2 Analysis 25 30
AO3 Evaluation 12 15
Total 100 100
Assessment objectives as a percentage of each component

Assessment objective Weighting in components %
Paper 1 Paper 2 Paper 3 Paper 4
AO1 Knowledge and understanding 70 60 54 44
AO2 Analysis 30 23 33 28
AO3 Evaluation – 17 13 28
Total 100 100 100 100

3 Subject content
This syllabus gives you the flexibility to design a course that will interest, challenge and engage your learners.
Where appropriate you are responsible for selecting subject contexts, resources and examples to support your
learners’ study. These should be appropriate for the learners’ age, cultural background and learning context as well
as complying with your school policies and local legal requirements.
Cambridge International AS Level candidates study topics 1.1–2.2.
Cambridge International A Level candidates study all topics 1.1–4.4.
The AS Level content is assumed knowledge for A Level Paper 3 and Paper 4.
AS Level content
1 Financial accounting (AS Level)
1.1 Types of business entity
Candidates will explore the various ways in which a business may be structured with reference to legal form,
ownership, management and control. Candidates will investigate the benefits and drawbacks of each type of
entity from the point of view of owners and other stakeholders which will provide a context for the preparation
of financial statements.
1.1.1 Types of business entity

Candidates should have an understanding of:
• the different types of business entity:
– sole trader
– partnership
– limited company (including public limited company (plc))
• the advantages and disadvantages of these types of business entity
• sources of finance and methods of funding for these types of business entity including:
– loans (secured and unsecured)
– bank overdrafts
– payment by instalments
– rental/leasing as an alternative to purchase
– trade credit
– sources of finance for limited companies as in 1.5.4
Candidates are expected to use their understanding of types of business entity to take relevant decisions.
Note: Questions on Limited Liability Partnerships will not be set.

Cambridge International AS & A Level Accounting 9706 syllabus for 2023, 2024 and 2025. Subject content
1.2 The accounting system
Candidates will examine the need for the systematic recording of business transactions and explore how the
double entry system can be used to achieve this aim both in manual and computerised accounting systems.
Additionally, candidates will consider the accounting theories and concepts which form the basis of financial
accounting.
1.2.1 The accounting system

• the principles of the double entry system to record business transactions
• the accounting equation
• the role of books of prime entry in the recording of business transactions
– sales journal
– sales returns journal
– purchases journal
– purchases returns journal
– cash book
– general journal
• preparation of ledger accounts
• the purpose of a trial balance
• the advantages and disadvantages of maintaining full accounting records
• the accounting concepts underpinning the preparation of accounts: business entity, historic cost, money
measurement, going concern, consistency, prudence, realisation, duality, materiality, objectivity, matching /
accruals and substance over form
• the use of computerised accounting systems in recording financial transactions
• the advantages and disadvantages of introducing a computerised accounting system
• the ways in which the security of data can be ensured within a computerised accounting system
Candidates are expected to use their understanding of the accounting system to evaluate relevant information
and make informed business decisions.
Note: Knowledge of specific applications or software is not required.

1.3 Accounting for non-current assets
Candidates will look at the classification of business expenditure with particular reference to the treatment of
assets used in the longer term in a business. Candidates will also consider the purpose and methods of recording
the cost of using those assets over time and the subsequent change in value.
1.3.1 Capital and revenue income and expenditure

• the difference between the treatment of capital and revenue income and capital and revenue expenditure
• the effect on profit/loss and asset value of the incorrect treatment of capital and revenue expenditure
1.3.2 Changing asset values

• factors that cause the value of non-current assets to depreciate
• the purpose of accounting for depreciation of non-current assets and the associated application of relevant
accounting concepts
• how to calculate depreciation using the reducing balance and straight-line methods
• the most appropriate method of calculating depreciation
• how to measure the value of non-current assets by the cost model or the revaluation model
• how to prepare ledger accounts and journal entries for:
– non-current assets (acquisition and revaluation)
– depreciation and disposal (including entries for part exchange)
• how to calculate profit or loss on disposal of a non-current asset
• how to record the effect of a charge for depreciation in the statement of profit or loss and statement of
financial position
1.4 Reconciliation and verification
Candidates will assess the importance of being able to prepare complete and accurate financial statements
from underlying business records. In doing so candidates will consider the various methods available to identify
and rectify errors and omissions using internal procedures and third-party documentation, as well as exploring
possible limitations of such measures.
1.4.1 Reconciliation and verification

• the need to reconcile and verify ledger accounts using documentation from internal and external sources
• the benefits and limitations of reconciliation and verification procedures

1.4 Reconciliation and verification continued
1.4.2 Trial balance

• errors which affect the trial balance
• errors which do not affect the trial balance:
– omission
– commission
– principle
– original entry
– reversal
– compensating
• how to prepare ledger accounts and journal entries to correct errors using a suspense account
• the effect on the financial statements of the correction of errors
• the benefits and limitations of a trial balance
1.4.3 Bank reconciliation statements

• updating of cash books
• how to prepare bank reconciliation statements
• the benefits and limitations of preparing a bank reconciliation statement
1.4.4 Control accounts

• entries in control accounts
• sales ledger control accounts and purchases ledger control accounts
• reconciliation statements between control account balances and ledger balances
• the effects on financial statements of the correction of errors
• the benefits and limitations of control accounts
Candidates are expected to use their understanding of reconciliation and verification to evaluate relevant
information and make informed business decisions.

1.5 Preparation of financial statements
Candidates will consider how figures in a trial balance need to be adjusted in order to prepare a complete set
of financial statements in accordance with the matching/accruals concept and other fundamental accounting
concepts. In particular, candidates will examine the differing formats of financial statements necessary for
sole traders, partnerships and limited companies. Candidates will address specific aspects relating to how
partnerships account for individual partners’ shares of profits and losses, and study the characteristics of limited
company financial statements, particularly share capital and reserves. This gives an opportunity to build on the
background information relating to types of business entity introduced in 1.1.
Note: For the expected formats for the standard financial statements, see the document Teacher Guidance for
9706 Accounting which accompanies this syllabus.
1.5.1 Adjustments to draft financial statements

• how to calculate and record the adjustments needed and the effect on financial statements in respect of:
– accruals and prepayments of income and expenses
– irrecoverable debts, irrecoverable debts recovered and allowance for irrecoverable debts
– depreciation
– inventory valuation
– correction of errors
1.5.2 Sole traders

• how to prepare a statement of profit or loss and statement of financial position for a sole trader from full or
incomplete accounting records. The business may be a trading or a service business
1.5.3 Partnerships
• how to prepare a statement of profit or loss, appropriation account and statement of financial position for a
partnership from full or incomplete accounting records. The business may be a trading or a service business
• why partners may maintain separate capital accounts and current accounts
• how to prepare partners’ capital and current accounts
• the contents of a partnership agreement
• the advantages and disadvantages to partners of maintaining a partnership agreement
• the provisions of the Partnership Act 1890 in respect of partners’ salaries, division of profit or loss, interest
on partners’ loans, interest on capital and interest on drawings

1.5 Preparation of financial statements continued
1.5.4 Limited companies

• the features and accounting treatment of ordinary shares, bonus issues, rights issues, debentures, dividends
and reserves
Note: Questions will not be set on preference shares.
• the advantages and disadvantages to the company and to the shareholders of a company making a bonus
issue of shares and a rights issue of shares
• the advantages and disadvantages to the company and to the shareholders of a company issuing shares and
issuing debentures
• the distinction between capital reserves (share premium and revaluation reserve) and revenue reserves
(retained earnings and general reserve)
• how to prepare ledger accounts to record:
– an issue of ordinary shares at par or at a premium
– a rights issue of shares at par or at a premium
– a bonus issue of shares
Note: For the purpose of a bonus issue of shares, the revaluation reserve is not to be used.
• how to prepare a statement of profit or loss, statement of financial position and statement of changes in
equity for a limited company. The business may be a trading or a service business
• sources of finance for specified purposes
Candidates are expected to use their understanding of financial accounts of sole traders, partnerships and limited
companies to evaluate relevant information and make informed business decisions.
1.6 Analysis and communication of accounting information
Candidates will evaluate the diverse interests and range of information needs of parties who may have an
interest in a business. Candidates will assess how financial information can be analysed and interpreted using a
range of financial ratios in order to allow users of financial statements to gain an understanding of the business
performance. They will explore the use of such ratios in comparison with other similar businesses and industry
benchmarks, including having an appreciation of problems which may limit the usefulness of such an analysis.
1.6.1 Users of accounting information

• the differing requirements for information of stakeholders including:
– owners
– managers
– employees
– investors
– lenders
– suppliers
– customers
– government
– public and environmental bodies
• how to communicate and analyse the information required by these different stakeholders

1.6 Analysis and communication of accounting information continued
1.6.2 Calculation and evaluation of ratios

• how to calculate key accounting ratios to measure profitability, liquidity and efficiency:
– profitability ratios: gross profit margin, mark-up, profit margin, return on capital employed, expenses to
revenue ratio (operating expenses to revenue ratio)
– liquidity ratios: current ratio, acid test ratio
– efficiency ratios: non-current asset turnover, trade receivables turnover (days),
trade payables turnover (days), inventory turnover (days), rate of inventory turnover (times)
Note: Candidates must use the formulae given in the appendix to section 3. These are the only formulae
accepted in candidate responses.
• how to evaluate the profitability, liquidity and efficiency of an organisation by interpreting ratios
• possible measures to improve the profitability, liquidity and efficiency of an organisation
• the limitations of accounting information
Candidates are expected to use their understanding of the calculation and evaluation of ratios to make informed
business decisions using relevant information.
2 Cost and management accounting (AS Level)

2.1 Costs and cost behaviour
Candidates will examine the classification of costs and the need to distinguish between the ways in which
costs may be treated in terms of traceability and behaviour. This will be explored within the context of why
businesses need to understand the nature of costs for the purposes of pricing and decision-making, serving as an
introduction to examining traditional costing methods (as defined in 2.2).
2.1.1 Materials and labour

• accounting for material and labour costs
• how to identify and calculate fixed costs, variable costs, semi-variable costs and stepped costs
• how to identify and calculate the elements of direct and indirect costs
• how to calculate the value of closing inventory using the first in first out (FIFO) and weighted average cost
(AVCO) methods (perpetual and periodic)
• the principles of just in time (JIT) management of inventory
Candidates are expected to use their understanding of accounting for materials and labour to evaluate relevant
information and make informed business decisions.

2.2 Traditional costing methods
Candidates will consider how to account for costs using absorption and marginal costing systems, as well as
exploring the impact of changes in business activity. In so doing, candidates will evaluate the benefits and
limitations of the contrasting approaches and examine how these tools may be used in determining the cost
and the selling price of a product or service, and for management decision-making and determining business
opportunities.
2.2.1 Costing applications

• how to apply traditional costing methods to prepare costing statements using unit, job and batch costing
principles in both manufacturing and service businesses as applicable
2.2.2 Absorption costing

• the difference between a cost centre and a cost unit
• how to allocate and apportion overhead expenditure between production and service departments
• how to calculate overhead absorption rates using an appropriate basis
• the causes and the calculation of under absorption and over absorption of overheads
• how to prepare costing and profit statements using absorption costing
• the uses and limitations of absorption costing
• the usefulness of absorption cost data as a support for management decision-making
• non-financial factors and their significance
2.2.3 Marginal costing

• how to calculate the contribution of a product
• how to interpret a break-even chart
Note: Candidates will not be asked to prepare a break-even chart.
• how to calculate the break-even point, contribution to sales ratio, level of output or sales to achieve a target
profit, and margin of safety
• the use and limitations of break-even analysis
• how to prepare costing and profit statements using marginal costing
• how to prepare a statement reconciling the reported profits using marginal costing and absorption costing
• the uses and limitations of marginal costing
• the usefulness of marginal costing data as a support for management decision-making, including make-or-
buy, special orders, closure of business unit, limiting factors, target profit

2.2 Traditional costing methods continued
2.2.4 Cost–volume–profit analysis

• the advantages and limitations of cost–volume–profit analysis
• the usefulness of cost–volume–profit data as a support for management decision-making
• how to apply costing concepts to make business decisions and recommendations using supporting data
Candidates are expected to use their understanding of costing to evaluate relevant information and make
informed business decisions.
A Level content
3 Financial accounting (A Level)
3.1 Preparation of financial statements
Candidates will develop the skills established in 1.5 in respect of the preparation of financial statements. This will
involve exploring the impact of changes in the composition of a partnership, in addition to extending the range
of financial statements and associated notes required for limited companies. Candidates will further encounter
the specific requirements for how manufacturing businesses account for the cost of production, and those for
non-profit making organisations in the form of clubs and societies.
Note: For the expected formats for the standard financial statements, see the document Teacher Guidance for
9706 Accounting which accompanies this syllabus.
3.1.1 Financial statements

• the need for and purpose of financial statements for specific types of business
3.1.2 Partnerships
• goodwill and the difference between purchased goodwill and inherent goodwill
• how to prepare partners’ capital and current accounts to record changes required in respect of goodwill and
revaluation of assets on:
– a change in the partners’ profit-sharing ratio
– the introduction of a new partner
– the retirement of an existing partner
– the dissolution of a partnership
• how to prepare the partnership appropriation account, statement of profit or loss and statement of financial
position including changes in a partnership occurring part-way through an accounting year
• how to prepare a realisation account and a revaluation account

3.1 Preparation of financial statements continued
3.1.3 Clubs and societies

• the distinction between a receipts and payments account and an income and expenditure account
• how to define and calculate the accumulated fund
• how to prepare, from full or incomplete accounting records:
– a receipts and payments account
– accounts for trading and revenue-generating activities
– a subscriptions account
– an income and expenditure account
– a statement of financial position
• how to account for other receipts, including life memberships and donations
• how to make adjustments to financial statements (as detailed in 1.5.1)
• how to evaluate possible sources of finance and methods of fundraising
3.1.4 Manufacturing businesses

• how to prepare a manufacturing account, to differentiate between direct and indirect expenses and to
include factory profit
• how to prepare, for a manufacturing business, a statement of profit or loss and a statement of financial
position
• how to account for manufacturing profit and the elimination of unrealised profit from unsold inventory
• the reasons why a business may account for manufacturing profit
3.1.5 Limited companies

• how to prepare for a limited company in line with the relevant international accounting standards and legal
requirements:
– statement of profit or loss
– statement of financial position
– statement of cash flows
– statement of changes in equity
– schedule of non-current assets
Candidates are expected to use their understanding of the financial accounts of partnerships, clubs and societies,
manufacturing businesses and limited companies to evaluate relevant information and make informed business
decisions.

3.2 Regulatory and ethical considerations
Candidates will examine the regulatory framework by exploring a number of International Accounting Standards
and how they are applied within a set of financial statements. Candidates will further consider the wider ethical
issues which underpin the practice of accounting and the need for accountants and businesses to behave in an
appropriate manner. Related to this, candidates will assess the nature of stewardship in the context of a limited
company, which will enable candidates to develop a more detailed appreciation of the issues of ownership
and control introduced in 1.1.1 and the associated requirement for an independent examination of financial
statements by an auditor.
3.2.1 International Accounting Standards

• the main provisions of each of the following International Accounting Standards (IAS):
– IAS 1 Presentation of financial statements
– IAS 2 Inventories
– IAS 7 Statement of cash flows
– IAS 8 Accounting policies, changes in accounting estimates and errors
– IAS 10 Events after the reporting period
– IAS 16 Property, plant and equipment
– IAS 36 Impairment of assets
– IAS 37 Provisions, contingent liabilities and contingent assets
– IAS 38 Intangible assets
Note: For guidance on the scope of each IAS that candidates are expected to be familiar with, teachers are
advised to consult the document Teacher Guidance for 9706 Accounting which accompanies this syllabus.
3.2.2 Ethical considerations

• the need for an ethical framework in accounting
• the fundamental principles of:
– integrity
– objectivity
– professional competence and due care
– confidentiality
– professional behaviour
• how the ethical behaviour of accountants and auditors impacts the business and other stakeholders
• the social implications of decision-making

3.2 Regulatory and ethical considerations continued
3.2.3 Auditing and stewardship of limited companies

• the role and responsibilities of the auditor
• the differences between an external audit and an internal audit
• the difference between a qualified and unqualified audit report
• stewardship and the role of directors and their responsibilities to shareholders
• the importance of a true and fair view in respect of financial statements
Candidates are expected to use their understanding of ethical considerations and auditing to evaluate relevant
information and make informed business decisions
3.3 Business acquisition and merger
Candidates will investigate reasons why businesses may choose to grow by acquiring or merging with different
types of business entity and how to account for the acquisition or merger. This will involve assessing the
distinction between the acquisition of a business as a whole and the individual assets of a business, as well as an
appraisal of business valuation and types of purchase consideration.
3.3.1 Business acquisition and merger

• the nature and purpose of the merger of different types of businesses to form a new business entity
• how to prepare journal entries and make entries in the relevant ledger accounts to record the:
– merger of two or more sole trader businesses to form a partnership or a limited company
– merger of a sole trader’s business with an existing partnership to form a new partnership
– acquisition of a sole trader’s business or partnership by a limited company
• how to calculate the value of goodwill on the acquisition of a business by another entity
• how to prepare statements of profit or loss and statements of financial position for the newly formed
business entity following the acquisition or merger, for example the limited company acquiring the
partnership
• the advantages and disadvantages of the acquisition or merger
Candidates are expected to use their understanding of business acquisition and merger to evaluate relevant
information and make informed business decisions

3.4 Computerised accounting systems
Candidates will further expand their understanding of accounting systems gained in 1.2 to encompass the
specific challenges posed by the introduction of a computerised accounting system. Candidates will explore
approaches to managing the transfer of accounting data to a computerised system and the necessary safeguards
required to ensure that the manual data is transferred completely and accurately to the new system.
3.4.1 Computerised accounting systems

• the process of transferring the business accounts to a computerised accounting system
• ways in which the integrity of the accounting data can be ensured during the transfer to a computerised
accounting system
Note: Knowledge of specific applications or software is not required.
3.5 Analysis and communication of accounting information
Candidates will further enhance their appreciation of the use of accounting ratios by extending knowledge of
the range of ratios beyond those introduced in 1.6, in particular with reference to investment ratios applicable
to limited companies. Candidates will assess how these ratios may be interpreted with a view to linking
performance indicators and providing justified advice to stakeholders, as well as being able to suggest possible
measures for improvement.
3.5.1 Analysis and communication of accounting information

• how to calculate the following ratios:
– working capital cycle (in days)
– net working assets to revenue (sales)
– interest cover
– gearing ratio
– earnings per share
– price/earnings ratio
– dividend per share
– dividend yield
– dividend cover
Note: Candidates must use the formula given in the appendix to section 3. These are the only formulae
accepted in candidate responses.
• how to analyse and evaluate the results of the ratios and draw conclusions
• how to make appropriate recommendations to stakeholders on the basis of the analysis undertaken
• the interrelationships between ratios
Candidates are expected to use their understanding of the calculation and evaluation of ratios to make informed
business decisions using relevant information.

4 Cost and management accounting (A Level)

4.1 Activity based costing (ABC)
Candidates will explore the application of activity based costing as a contrast to the traditional costing methods
encountered in 2.2. Candidates will gain an insight into how overheads may be allocated to products using
measures which are not directly related to traditional overhead absorption bases, such as direct labour hours, but
rather to the activities which cause the costs to be incurred in the production process (cost drivers). Candidates
will also assess the uses and limitations of such a system.
4.1.1 Activity based costing

• the application of activity based costing (ABC)
• the uses and limitations of ABC
• what is meant by a cost driver
• how to use ABC to:
– identify the appropriate cost driver
– apportion and allocate overheads
– calculate the total cost and selling price of a unit
• the effect of different methods of overhead absorption on cost and profit
• how to apply ABC costing techniques to make business decisions and recommendations using supporting
data
4.2 Standard costing
Candidates will consider how a business may use a system of predetermined values as a basis for comparison
with actual costs and revenues in order to assess performance. Candidates will explore possible reasons for the
differences between actual and expected costs and revenues and how there may be interrelationships between
these differences. This will require an evaluation of how such information can be used to improve the budget
preparation process and business performance. Candidates will also evaluate non-financial considerations which
may have an impact on business decisions.
4.2.1 Standard costing

• the meaning of a system of standard costing in an organisation
• the advantages and disadvantages of a standard costing system
• how standard costing can be used as an aid to improve the performance of a business
• how to calculate the following variances:
– direct material price and usage
– direct labour rate and efficiency
– fixed overhead expenditure and volume
– fixed overhead capacity and efficiency sub-variances
– sales price and volume
• possible causes of favourable or adverse variances and their relationship to each other
• how to make business decisions and recommendations using supporting data
• the significance of non-financial factors

4.3 Budgeting and budgetary control
Candidates will investigate the reasons why an organisation uses a system of budgetary control. This will involve
exploring the nature, purpose and contents of budgets and how they may be used for the purposes of planning
and control to meet an organisation’s objectives. Candidates will consider how an organisation may compare
expected and actual results and in so doing assess how the budgeting process can affect human responses to
achievement of budget targets. Candidates will also evaluate non-financial considerations which may have an
impact on business decisions.
4.3.1 Budgeting and budgetary control

• the advantages and disadvantages of a budgetary control system to an organisation
• the advantages and disadvantages of preparing budgets using spreadsheets
• what is meant by a master budget
• how to prepare the following budgets:
– sales
– production
– purchases
– labour
– trade receivables
– trade payables
– cash
– budgeted statement of profit or loss
– budgeted statement of financial position
• the effect of limiting factors on the preparation of budgets
• the benefits of flexible budgeting over fixed budgeting
• how to prepare a flexible budget statement
• possible causes of differences between actual and flexible budgeted data
• how to prepare a statement reconciling the flexible budgeted cost of production with the actual cost of
production
• how to prepare a statement reconciling the flexible budgeted profit with the actual profit
• how to make business decisions and recommendations using supporting data
• the behavioural aspects of budgeting, including targets, incentives and motivation

4.4 Investment appraisal
Candidates will address ways in which a business may make a decision about a prospective capital investment.
This will require an assessment of the strengths and limitations of various investment appraisal techniques,
including examining the time value of money and discerning the difference between accounting profits and
cash flows. Candidates will also evaluate non-financial considerations which may have an impact on investment
decisions.
4.4.1 Investment appraisal

• future net cash inflows and outflows arising from the project
• how to apply the following capital investment appraisal techniques:
– payback
– accounting rate of return (ARR = (average profit / average investment) × 100)
– net present value (NPV)
– internal rate of return (IRR)
• the advantages and disadvantages of these capital investment appraisal techniques
• how to make investment decisions and recommendations using supporting data
Note: Questions on discounted payback will not be set.

Note: Questions involving a residual value of an investment at the end of a project will not be set.

Appendix – Summary of commonly used ratios (AS & A Level)

Profitability ratios
Gross profit
Gross profit margin (%) × 100
Revenue
Gross profit
Mark-up (%) × 100
Cost of sales
Profit for the year

× 100
Revenue
Profit margin (%) can also be expressed as
Profit for the year (after interest)
× 100
Revenue
Profit from operations

× 100
Return on capital employed (%) Capital employed
Capital employed = issued shares + reserves + non-current liabilities
Expenses
Expenses to revenue ratio (%) × 100
Revenue
Operating expenses to revenue Operating expenses

× 100
ratio (%) Revenue
Liquidity ratios
Current assets
Current ratio Current liabilities
Answer presented as a ratio
Current assets – inventory

Acid test ratio Current liabilities
Answer presented as a ratio

Efficiency ratios
Net revenue
Non-current asset turnover (times)
Total net book value of non-current assets
Trade receivables
Trade receivables turnover (days) × 365 days
Credit sales
Trade payables
Trade payables turnover (days) × 365 days
Credit purchases
Average inventory
Inventory turnover (days) × 365 days
Cost of sales
Cost of sales
Rate of inventory turnover (times)
Average inventory
Solvency and other ratios (A Level only)

Trade receivables turnover (days) + inventory turnover (days) –
Working capital cycle (days)
trade payables turnover (days)
Net working assets

× 100
Net working assets to revenue Revenue (sales)
(sales) (%)
Net working assets = inventories + trade receivables – trade payables

Interest cover (times)
Interest payable
Fixed cost capital

× 100
Total capital
Gearing (%) which is
Non-current liabilities
× 100
Issued ordinary share capital + all reserves + non-current liabilities

Investment ratios (stock exchange ratios) (A Level only)

Profit for the year
Earnings per share
Number of issued ordinary shares
Market price per share

Price/earnings
Earnings per share
Annual ordinary dividend

Number of issued ordinary shares
Dividend per share where
Annual ordinary dividend = interim dividend paid + final dividend
proposed
Dividend per share

Dividend yield
Market price per share
Profit for the year available to pay ordinary dividend

Dividend cover
Annual ordinary dividend
Calculate ratios using year-end balances where appropriate, unless the question specifies the use of
average figures.
Calculate ratios to the number of decimal places required by the question.

Cambridge International AS & A Level Accounting 9706 syllabus for 2023, 2024 and 2025. Details of the assessment
4 Details of the assessment
Calculators
Calculators are essential for all papers.
Ratios
Candidates must use the formulae given in the appendix to section 3 of this syllabus for the accounting ratios.
Where a candidate uses an incorrect formula, this will not be credited, but the resulting figure will be credited as
the candidate’s own figure when used in following calculations.
Ratios are not given in the question paper.
Paper 1 – Multiple Choice

Multiple choice paper, 1 hour, 30 marks
Candidates answer all 30 questions and indicate their answers on the answer sheet provided.
The questions are based on the AS Level subject content only.
Twenty-two questions focus on financial accounting and eight questions focus on cost and management
accounting.
Candidates must use the formulae given in the appendix to section 3 to obtain their answers.
Paper 1 assesses AO1 Knowledge and understanding and AO2 Analysis.
Paper 2 – Fundamentals of Accounting

Written paper, 1 hour 45 minutes, 90 marks
This paper has four structured questions. Candidates answer all questions. Candidates answer on the question
paper.
The questions are based on the AS Level subject content only.
Questions 1, 2 and 3 focus on financial accounting. Question 1 has 30 marks; questions 2 and 3 have 15 marks each.
Question 4 focuses on cost and management accounting and has 30 marks.
Candidates must use the formulae given in the appendix to section 3. These are the only formulae accepted in
candidate responses.
Candidates should use international accounting terminology and formats as appropriate.
Where candidates are asked to make recommendations or decisions they are expected to support their answer with
a balance of reasons, and to justify their recommendation or decision.
Paper 2 assesses AO1 Knowledge and understanding, AO2 Analysis and AO3 Evaluation.

Paper 3 – Financial Accounting

Written paper, 1 hour 30 minutes, 75 marks
This paper has three structured questions. Each question is worth 25 marks. Candidates answer all questions.
Candidates answer on the question paper.
The questions are based on the A Level Financial Accounting subject content.
The content of the AS Level is assumed knowledge for the assessment of Paper 3.
Source materials for each question are supplied on a separate insert to the paper. Additional information is included
within each question on the question paper.
Candidates must use the formulae given in the appendix to section 3. These are the only formulae accepted in
candidate responses.
Candidates should use international accounting terminology and formats as appropriate.
Paper 4 – Cost and Management Accounting

Written paper, 1 hour, 50 marks
This paper has two structured questions. Each question is worth 25 marks. Candidates answer all questions.
Candidates answer on the question paper.
The questions are based on the A Level Cost and Management Accounting subject content.
The content of the AS Level is assumed knowledge for the assessment of Paper 4.
Source materials for each question are supplied on a separate insert to the paper. Additional information is included
within each question on the question paper.

Cambridge International AS & A Level Accounting 9706 syllabus for 2023, 2024 and 2025. Details of the assessment
Command words
Command words and their meanings help candidates know what is expected from them in the exam. The table
below includes command words used in the assessment for this syllabus. The use of the command word will relate
to the subject context.
Command word What it means
Advise write down a suggested course of action in a given situation
Allocate charge overheads that can be directly attributed to a specific cost centre to that centre
Analyse examine in detail to show meaning, identify elements and the relationship between them
Apportion charge overheads that cannot be directly attributable to a cost centre, to other centres
using that overhead, on an appropriate basis
Assess make an informed judgement
Calculate work out from given facts, figures or information
Comment give an informed opinion
Compare identify/comment on similarities and/or differences
Define give precise meaning
Describe state the points of a topic / give characteristics and main features
Discuss write about issue(s) or topic(s) in depth in a structured way
Evaluate judge or calculate the quality, importance, amount, or value of something
Explain set out purposes or reasons / make the relationships between things evident / provide
why and/or how and support with relevant evidence
Identify name/select/recognise
Justify support a case with evidence/argument
Prepare present information in a suitable format
Reapportion recharge overheads from non-production cost centres on an appropriate basis
Reconcile process two sets of figures to confirm their agreement
State express in clear terms
Suggest apply knowledge and understanding to situations where there are a range of valid
responses in order to make proposals / put forward considerations

Cambridge International AS & A Level Accounting 9706 syllabus for 2023, 2024 and 2025. What else you need to know
5 What else you need to know
This section is an overview of other information you need to know about this syllabus. It will help to share the
administrative information with your exams officer so they know when you will need their support. Find more
information about our administrative processes at www.cambridgeinternational.org/eoguide
Before you start

Previous study
We recommend that learners starting this course have studied a Cambridge IGCSE™ (Extended) or Cambridge
O Level course in Mathematics or the equivalent.
Guided learning hours

We design Cambridge International AS & A Level syllabuses based on learners having about 180 guided
learning hours for each Cambridge International AS Level and about 360 guided learning hours for a Cambridge
International A Level. The number of hours a learner needs to achieve the qualification may vary according to local
practice and their previous experience of the subject.
Availability and timetables

All Cambridge schools are allocated to one of six administrative zones. Each zone has a specific timetable.
You can view the timetable for your administrative zone at www.cambridgeinternational.org/timetables
You can enter candidates in the June and November exam series. If your school is in India, you can also enter your
candidates in the March exam series.
Check you are using the syllabus for the year the candidate is taking the exam.
Private candidates can enter for this syllabus. For more information, please refer to the Cambridge Guide to Making
Entries.
Combining with other syllabuses

Candidates can take this syllabus alongside other Cambridge International syllabuses in a single exam series. The
only exceptions are:
• syllabuses with the same title at the same level.
Group awards: Cambridge AICE

Cambridge AICE (Advanced International Certificate of Education) is a group award for Cambridge International
AS & A Level. It allows schools to offer a broad and balanced curriculum by recognising the achievements of
learners who pass exams in a range of different subjects.
Learn more about Cambridge AICE at www.cambridgeinternational.org/aice

Making entries
Exams officers are responsible for submitting entries to Cambridge International. We encourage them to work
closely with you to make sure they enter the right number of candidates for the right combination of syllabus
components. Entry option codes and instructions for submitting entries are in the Cambridge Guide to Making
Entries. Your exams officer has a copy of this guide.
Exam administration
To keep our exams secure, we produce question papers for different areas of the world, known as administrative
zones. We allocate all Cambridge schools to one administrative zone determined by their location. Each zone has
a specific timetable. Some of our syllabuses offer candidates different assessment options. An entry option code
is used to identify the components the candidate will take relevant to the administrative zone and the available
assessment options.
Support for exams officers

We know how important exams officers are to the successful running of exams. We provide them with the support
they need to make your entries on time. Your exams officer will find this support, and guidance for all other phases
of the Cambridge Exams Cycle, at www.cambridgeinternational.org/eoguide
Retakes and carry forward

Candidates can retake Cambridge International AS Level and Cambridge International A Level as many times as
they want to. Information on retake entries is at www.cambridgeinternational.org/entries. To confirm what entry
options are available for this syllabus, refer to the Cambridge Guide to Making Entries for the relevant series.
Candidates can carry forward the result of their Cambridge International AS Level assessment from one series to
complete the Cambridge International A Level in a following series, subject to the rules and time limits described in
the Cambridge Handbook.
Regulations for carrying forward entries for staged assessment (Cambridge International AS & A Level) can be found
in the Cambridge Handbook for the relevant year of assessment at www.cambridgeinternational.org/eoguide
Equality and inclusion

We have taken great care to avoid bias of any kind in the preparation of this syllabus and related assessment
materials. In our effort to comply with the UK Equality Act (2010) we have taken all reasonable steps to avoid any
direct and indirect discrimination.
The standard assessment arrangements may present barriers for candidates with impairments. Where a candidate
is eligible, we may be able to make arrangements to enable that candidate to access assessments and receive
recognition of their attainment. We do not agree access arrangements if they give candidates an unfair advantage
over others or if they compromise the standards being assessed.
Information on access arrangements is in the Cambridge Handbook at www.cambridgeinternational.org/eoguide
Language
This syllabus and the related assessment materials are available in English only.

After the exam

Grading and reporting
Grades A*, A, B, C, D or E indicate the standard a candidate achieved at Cambridge International A Level. A* is the
highest and E is the lowest grade.
Grades a, b, c, d or e indicate the standard a candidate achieved at Cambridge International AS Level. ‘a’ is the
highest and ‘e’ is the lowest grade.
‘Ungraded’ means that the candidate’s performance did not meet the standard required for the lowest grade
(E or e). ‘Ungraded’ is reported on the statement of results but not on the certificate. In specific circumstances
your candidates may see one of the following letters on their statement of results:
• Q (PENDING)
• X (NO RESULT).
These letters do not appear on the certificate.
If a candidate takes a Cambridge International A Level and fails to achieve grade E or higher, a Cambridge
International AS Level grade will be awarded if both of the following apply:
• the components taken for the Cambridge International A Level by the candidate in that series included all the
components making up a Cambridge International AS Level
• the candidate’s performance on the AS Level components was sufficient to merit the award of a Cambridge
International AS Level grade.
On the statement of results and certificates, Cambridge International AS & A Levels are shown as General
Certificates of Education, GCE Advanced Subsidiary Level (GCE AS Level) and GCE Advanced Level (GCE A Level).
‘Cambridge International A Levels are the ‘gold standard’ qualification. They are based on
rigorous, academic syllabuses that are accessible to students from a wide range of abilities yet
have the capacity to stretch our most able.’
Director of Studies, Auckland Grammar School, New Zealand

How students, teachers and higher education can use the grades
Cambridge International A Level
Assessment at Cambridge International A Level has two purposes:
• to measure learning and achievement
The assessment:
– confirms achievement and performance in relation to the knowledge, understanding and skills specified in
the syllabus, to the levels described in the grade descriptions.
• to show likely future success

The outcomes:
– help predict which students are well prepared for a particular course or career and/or which students are
more likely to be successful
– help students choose the most suitable course or career.
Cambridge International AS Level

Assessment at Cambridge International AS Level has two purposes:
• to measure learning and achievement
The assessment:
– confirms achievement and performance in relation to the knowledge, understanding and skills specified in
the syllabus.
• to show likely future success

The outcomes:
– help predict which students are well prepared for a particular course or career and/or which students are
more likely to be successful
– help students choose the most suitable course or career
– help decide whether students part way through a Cambridge International A Level course are making
enough progress to continue
– guide teaching and learning in the next stages of the Cambridge International A Level course.
Grade descriptions
Grade descriptions are provided to give an indication of the standards of achievement candidates awarded
particular grades are likely to show. Weakness in one aspect of the examination may be balanced by a better
performance in some other aspect.
Grade descriptions for Cambridge International A Level Accounting will be published after the first assessment of
the A Level in 2023. Find more information at www.cambridgeinternational.org/alevel

Changes to this syllabus for 2023, 2024 and 2025

The syllabus has been reviewed and revised for first examination in 2023.
You must read the whole syllabus before planning your teaching programme.
From 2023, the A Level components will assume knowledge of the revised AS Level content. All candidates should
therefore be familiar with the AS Level content in this syllabus.
Changes to syllabus • Learner attributes have been added at the beginning of the syllabus.
content • A key concept of planning and control has been added.
• The syllabus aims have updated for clarity.
• The subject content has been rewritten to provide greater clarity on the
depth to which each topic should be taught. At first glance, there may
seem to be more subject content but this is because more detail has been
provided.
• The distinction between AS Level and A Level content has been made clearer
by renumbering the sections.
• Some content has moved from AS Level to A Level and the volume of
content at AS Level is reduced.
• The topic ‘Consignment and joint venture accounts’ has been removed from
the subject content.
• Some content has been removed and some content has been added to
ensure the subject content is coherent and relevant.
• Terminology has been updated to align with current International
Accounting Standards.
• Topic introductions give an overview of the content and the skills and
knowledge candidates will gain.
• The command words have been updated with revised definitions that apply
across all subjects.
Changes to assessment • The number of assessment objectives (AOs) has been reduced to three, with
(including changes to Application integrated into all three AOs.
specimen papers) • The AO descriptions have been revised to include application skills and the
AO weightings adjusted.
• Paper 2 has an extended duration of 1 hour 45 minutes and is titled
Fundamentals of Accounting.
• The A Level assessment has been split into two papers:
– Paper 3, Financial Accounting, is 1 hour 30 minutes duration and 75
marks.
– Paper 4, Cost and Management Accounting, is 1 hour duration and 50
marks.
• The inserts for Paper 3 and Paper 4 contain only the source materials. They
do not contain the questions or additional information.
• The specimen assessment materials have been updated and include materials
for the new Paper 4.

In addition to reading the syllabus, you should refer to the updated specimen papers. The specimen papers will help
your students become familiar with exam requirements and command words in questions. The specimen mark
schemes explain how students should answer questions to meet the assessment objectives.
Any textbooks endorsed to support the syllabus for examination from 2023 are suitable for use with
this syllabus.

‘While studying Cambridge IGCSE and Cambridge International A Levels, students broaden their horizons
through a global perspective and develop a lasting passion for learning.’
Zhai Xiaoning, Deputy Principal, The High School Affiliated to Renmin University of China
This document was initially designed for print and as such does not reach accessibility standard WCAG 2.1 in various ways
including missing text alternatives and missing document structure. If you need this document in a different format contact us at
info@cambridgeinternational.org (with the subject heading: Digital accessibility) and we will respond within 15 working days.
Cambridge Assessment International Education

The Triangle Building, Shaftesbury Road, Cambridge, CB2 8EA, United Kingdom
Tel: +44 (0)1223 553554 Fax: +44 (0)1223 553558
Email: info@cambridgeinternational.org www.cambridgeinternational.org
Copyright © UCLES September 2020

ACCOUNTING 9706/13
Paper 1 Multiple Choice May/June 2022
1 hour
You must answer on the multiple choice answer sheet.

*8650445070*
You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)
INSTRUCTIONS
 There are thirty questions on this paper. Answer all questions.
 For each question there are four possible answers A, B, C and D. Choose the one you consider correct
and record your choice in soft pencil on the multiple choice answer sheet.
 Follow the instructions on the multiple choice answer sheet.
 Write in soft pencil.
 Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
 Do not use correction fluid.
 Do not write on any bar codes.
 You may use a calculator.
INFORMATION
 The total mark for this paper is 30.
 Each correct answer will score one mark.
 Any rough working should be done on this question paper.
This document has 12 pages. Any blank pages are indicated.
IB22 06_9706_13/4RP
© UCLES 2022 [Turn over
2
1 Mia has agreed to supply goods to a customer on a sale or return basis. At the end of her
financial year, the customer has not indicated whether they will keep the goods.
Which accounting concept should Mia apply to these items in her financial accounts?
A matching
B prudence
C realisation
D substance over form
2 Which item should be treated as capital expenditure?
A cost of a printer for an existing computer system

B rent paid on a factory, whilst the company negotiated the purchase of the factory
C repainting the wooden office door
D repair costs to a car which are not covered by insurance
3 A business has a financial year end of 31 December. It purchased a vehicle on 1 January 2019
for $30 000.
The business depreciates vehicles at the rate of 20% per annum using the reducing balance
method. Depreciation is charged on a month-by-month basis.
The vehicle was sold on 30 September 2021.
A profit on disposal of $3000 had been calculated. However, no entries had been made to record
the depreciation for 2021.
What was the effect of not recording the depreciation for 2021 on the profit on disposal?
A $2880 overstated
B $3840 overstated
C $2880 understated
D $3840 understated
4 A trader bought a machine on 1 January 2019. He depreciated it at the rate of 10% per annum
using the straight-line method.
He sold this machine on 1 January 2021 for $4000. The profit on disposal was $200.
How much had the machine cost on 1 January 2019?
A $4560 B $4750 C $5040 D $5250
© UCLES 2022 9706/13/M/J/22

3
5 Which item is recorded on the credit side of a sales ledger control account?
A discount received
B dishonoured cheques
C interest on overdue accounts
D set-off of amounts in the purchases ledger
6 The bank column of the cash book showed a credit balance of $2915. This did not agree with the
balance shown on the bank statement.
It was then discovered that:
1 a bank transfer, $150, from a customer was not recorded in the cash book
2 a cheque, $450, received from a customer was not recorded on the bank statement
3 a cheque, $530, issued to a supplier was incorrectly recorded in the cash book as
$350 but was correctly recorded by the bank
4 bank charge, $25, was not recorded in the cash book.
When these items were adjusted, the cash book balance agreed with the bank statement
balance.
What was the balance shown on the bank statement before any adjustments were made?
A $2520 debit
B $2520 credit
C $3420 debit
D $3420 credit
7 The correction of which error would require an entry in the suspense account?
A A sales invoice, $45, was omitted from the sales journal.

B Drawings, $60, were debited in the cash book and were credited to the drawings account.
C Vehicle repairs, $100, were debited to the vehicles at cost account.
D Wages, $150, were correctly recorded in the wages account and debited in the cash book.
© UCLES 2022 9706/13/M/J/22 [Turn over

4
8 The amount of the expense for rent and rates recorded in the income statement for the year
ended 31 December 2021 was $76 230.
The following information was also available.
balance brought forward balance carried forward

1 January 2021 31 December 2021
$ $
rent accrued 4000 6500

rates prepaid 770 820
How much was paid from the bank account for rent and rates during the year ended
31 December 2021?
A $73 680 B $73 780 C $78 680 D $78 780
9 Which statements regarding the financial statements of a sole trader are correct?
1 Cash drawings for the year are recorded in the income statement.
2 Gross profit for the year is shown in the statement of financial position.
3 Prepayments only appear in the income statement.
4 Trade receivables appear in the statement of financial position.
A 1 and 2 B 2 and 3 C 3 and 4 D 4 only
10 A business provided the following information regarding its first year of trading.
credit sales 93 730

receipts from credit customers 76 500
irrecoverable debt written off 150
contra recorded between purchases ledger and sales ledger 80
The net trade receivables recorded in the statement of financial position at the end of the year
were $16 660.
What was the balance on the provision for doubtful debts account at the end of the year?
A $340 B $490 C $500 D $650
© UCLES 2022 9706/13/M/J/22

5
11 Which items are recorded in the income statement of a sole trader?
1 interest payable on bank loan

2 interest on capital
3 transfer to general reserve
A 1 and 2 B 1 and 3 C 1 only D 2 and 3
12 A summary of a trader’s bank statements for his first year of trading showed the following
amounts.
receipts from credit customers 25 000

cash sales takings banked 82 000
The trader took $2000 every month from takings as drawings before banking the remaining
takings. Trade receivables at the year end amounted to $9500.
What was total revenue for the year?
A $73 500 B $92 500 C $121 500 D $140 500
13 Jane provided the following information about her business.
1 January 2021 31 December 2021

$ $
total assets 108 000 119 000

current liabilities 7 500 11 500
During the year, the business took a long-term loan of $10 000 and Jane’s drawings totalled
$12 000.
What was Jane’s profit for the year ended 31 December 2021?
A $7000 B $9000 C $19 000 D $29 000
14 Which factors may cause a partnership to revalue its tangible non-current assets?
1 admission of a new partner

2 change in the profit-sharing ratios
3 retirement of a partner
A 1 and 2 B 1 and 3 C 1 only D 2 and 3

6
15 L and M were in partnership sharing profits and losses in the ratio of 2 : 1.
At 31 December 2021, the assets and liabilities of the partnership were as follows.
non-current assets at net book value 600 000

inventory 50 000
trade receivables 40 000
bank 5 000 debit
trade payables 20 000
capital and current account L 350 000
capital and current account M 325 000
The partnership closed on 31 December 2021.
At that date the following took place.
1 The non-current assets were sold for $654 000.

2 Inventory was sold for $80 000.
3 All trade receivables were collected and trade payables were settled at their book
values.
4 Realisation expenses were $6000.
What was L’s share of the profit on realisation?
A $50 000 B $52 000 C $56 000 D $60 000
© UCLES 2022 9706/13/M/J/22

7
16 X, Y and Z are in partnership sharing profits and losses in the ratio 5 : 2 : 3.
Y is entitled to a salary of $18 000 per annum.
Partners receive interest at 6% per annum on their capital account balances at the beginning of
the year.
At the beginning of the year, capital account balances were as follows.
X 30 000
Y 22 000
Z 20 000
The profit for the year before Y’s salary and partners’ interest on capital is $140 000.
What is Y’s share of the total profits?
A $23 536 B $28 000 C $42 856 D $46 000
17 During the year, a business issued $1 ordinary shares at $1.20 each. The directors proposed a
final dividend at the end of the year.
Which balances in the statement of changes in equity were affected by these transactions?
ordinary share general retained

share capital premium reserve earnings
A
B
C
D
18 The following items were taken from the bank transactions of a company for a period.
share issue proceeds 30 000

sale of non-current assets 5 000
dividend paid 9 000
increase in bank loan 6 000
What was the net increase in the company’s bank balance as a result of these?
A $28 000 B $32 000 C $38 000 D $40 000

8
19 On 1 January 2021, W Limited had total revenue reserves of $122 000.
During the year ended 31 December 2021, the following took place.
1 A dividend of $7500 was paid.

2 An amount of $10 000 was transferred from retained earnings to general reserve.
3 Premises were revalued upwards by $19 800.
For the year ended 31 December 2021, W Limited made a profit for the year of $32 000.
What was the total of revenue reserves at 31 December 2021?
A $136 500 B $141 800 C $146 500 D $156 300
20 What would increase the current ratio of a business?
A buying goods on credit for $2000 and selling immediately for $3000 cash
B paying wages of $1000 in cash
C purchasing a non-current asset of $10 000 on credit
D selling goods of $1000 at cost price on credit
21 The following information is available for a business.
sales 36 000
purchases 21 000
inventory at 1 January 2021 3 500
inventory at 31 January 2021 2 800
What is the rate of inventory turnover for January?
A 6.67 times
B 6.89 times
C 7.75 times
D 11.43 times
22 Which statements about a semi-variable cost are correct?
1 Part of the amount always changes for any level of output.

2 Part of the amount changes for a given level of output.
3 The amount always changes for a given level of output.
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9
23 A company has a financial year end of 30 November. It has no opening inventory at the
beginning of the financial year.
During the year, the following amounts of inventory are purchased.
unit cost
date quantity
$
30 March 330 40
1 November 288 50
Sales for the period are 500 units at $100 each.
Inventory is valued using the average cost (AVCO) method.
What is the value of inventory, to the nearest dollar, at the end of the year?
A $4720 B $5270 C $5900 D $11 800
24 A business has the following budgeted data for a production of 50 000 units.
direct production cost 300 000

indirect labour 20 000
factory supervisor salaries 60 000
sales staff salaries 70 000
depreciation on machinery for production 80 000
depreciation on motor vehicles for delivery 50 000
administrative expenses 360 000
total costs 940 000
To determine the selling price, the business adds 40% on the cost of production.
What would be the total selling price of 500 units?
A $4200 B $5600 C $6440 D $7140

10
25 A trader rents a vehicle for $10 000 which allows him to cover 20 000 miles per financial year. If
this mileage is exceeded, an additional charge of $5000 is made.
Which type of cost is this an example of?
A fixed
B semi-variable
C stepped
D variable
26 When might a business calculate its contribution to sales ratio rather than contribution per unit?
A when the break-even point needs to be expressed in units

B when the business produces and sells several different products
C when the value of fixed costs is uncertain
D when there are limiting factors affecting production
27 The following information is available.
selling price per unit 50

variable manufacturing expense per unit 26
variable selling expense per unit 4
total manufacturing overhead 360 000
total administrative overhead 120 000
What is the break-even point in units?
A 15 000 B 18 000 C 20 000 D 24 000
28 K Limited manufactures and sells a single type of product. The following budgeted information is
available in respect of it.
selling price $80 per unit

variable costs $28 per unit
total fixed costs $70 000
production and sales 3500 units
How many extra units would the company need to produce and sell to increase the budgeted
profit by $26 000?
A 325 B 362 C 500 D 813
© UCLES 2022 9706/13/M/J/22

11
29 M Limited manufactures and sells two different colours of paint. The following actual information
is available for last year.
red paint blue paint total

$ $ $
revenue 350 000 150 000 500 000

direct materials and labour 180 000 65 000 245 000
allocated fixed overheads 110 000 88 000 198 000
profit / (loss) 60 000 (3 000) 57 000
The company is considering closing the blue paint department and using the extra space to
increase revenue in red paint by 20%. Variable costs will increase in the same proportion as the
increase in revenue.
What would be the change in the total profit if this action is taken?
A $3000 increase
B $29 000 increase
C $51 000 decrease
D $85 000 decrease
30 Why might a business prepare budgets?
1 to encourage planning and decision-making

2 to improve coordination between departments
3 to monitor and control costs
A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only
© UCLES 2022 9706/13/M/J/22

ACCOUNTING 9706/12
1 hour

*8276462329*

Soft clean eraser
INSTRUCTIONS
INFORMATION
IB22 06_9706_12/4RP
2
1 Which accounting concept states that revenue can only be recognised after it has been earned?
A consistency
B going concern
C money measurement
D realisation
2 A sole trader has changed the method of depreciating his machinery from the reducing balance
method in the year 1 to the straight-line method in the year 2 of trading. The same percentage
rate of depreciation is used in both cases.
What is the effect on the net book value of machinery and profit for the year 2?
net book value profit for the year 2
A higher higher
B higher lower
C lower higher
D lower lower
3 Paul has a year end of 31 December.
On 1 January 2020, he bought a non-current asset for $10 000. He sold it on 1 January 2021 for
$8500.
Paul usually provides depreciation at the rate of 10% per annum. A full year’s depreciation is
charged in the year of acquisition and none in the year of disposal. He forgot to provide for any
depreciation on this non-current asset.
What was the effect of this error on Paul’s profit for the year ended 31 December 2021?
A $1000 higher
B $1000 lower
C $1500 higher
D $1500 lower
4 A business depreciates its machinery at 10% per annum using the straight-line method on a
month-by-month basis. The business’s financial year end is 30 June.
Machinery which had cost $6600 on 1 April 2020 was sold on 30 November 2021. The profit on
sale was $350.
What were the sale proceeds?
A $5150 B $5425 C $5850 D $6125
© UCLES 2022 9706/12/M/J/22

3
5 Why does a business maintain sales and purchases ledger control accounts as part of the double
entry accounting system?
1 It allows a trial balance to be prepared easily from the nominal ledger.

2 It can involve separate employees which makes fraud more difficult.
3 There is no need to keep sales and purchases journals.
4 There is no need to reconcile with personal accounts for customers and suppliers.
A 1 and 2 only B 1, 2 and 3 C 1, 3 and 4 D 2, 3 and 4
6 Doug received his business bank statement. He updated the cash book and prepared the bank
reconciliation statement.
Which items appeared on the bank reconciliation statement?
customer
bank uncredited
payments by
charges deposits
direct debit
A no no yes
B no yes yes
C yes no no
D yes yes no
7 At 31 December 2021, the sales ledger control account had a balance of $19 100 while the total
balances in the sales ledger were $20 900.
The following reconciliation statement had been prepared after the errors were located.
balance of sales ledger control account 19 100

credit sales omitted from the sales journal 1 600
discount allowed understated in sales ledger 200
total of balances in the sales ledger 20 900
What is the correct amount of total trade receivables as shown in the statement of financial
position?
A $17 500 B $18 900 C $19 300 D $20 700

4
8 At the year-end, Victor had 100 units of inventory which had cost $12 per unit.
Of these, eight units had been received on the last day of the year and had not yet been paid for.
An additional six units were damaged and would be sold for $10 each once repairs to them
totalling $20 were made.
What was the value of inventory in Victor’s financial statements at the year-end?
A $1072 B $1092 C $1168 D $1188
9 Which items are treated as expenses in the income statement?
accrued wages prepaid telephone increase in

at the end of charges at the provision for
the year end of the year doubtful debts
A
B
C
D
10 At 31 December 2021, the draft statement of financial position for a business showed total assets
of $1 000 000.
The following was then discovered.
1 An increase in the provision for doubtful debts, $5000, had not been recorded.
2 Closing inventory had been overvalued by $20 000.
3 Depreciation, $10 000, had not been recorded.
What was the corrected total assets value?
A $965 000 B $985 000 C $1 005 000 D $1 015 000
11 On what basis does a trading business produce an income statement?
1 cash received and paid out by the business in the year

2 income earned less costs incurred by the business during the year
3 revenue received less any cash paid out by the business during the year
© UCLES 2022 9706/12/M/J/22

5
12 A business provides the following information.
revenue 140 000

opening inventory 22 000
closing inventory 24 500
purchases 120 000
Goods are sold at cost plus 25%.
The owner has taken goods for own use but has not recorded these as drawings.
What is the value of the goods taken for own use?
A $5500 B $10 500 C $12 500 D $17 500
13 A business owner does not maintain a full set of accounting records. At the end of the financial
year the following information is available.
trade payables
opening balance 22 500
closing balance 27 400
returns outwards 1 000
payments to trade payables 110 600
There were no cash purchases.
The opening and closing inventory has remained at the same amount.
What was the amount of the cost of sales?
A $105 700 B $106 700 C $115 500 D $116 500
14 The provisions of the Partnership Act apply if partners do not draw up a partnership agreement.
Which statement is true as a provision of the Partnership Act?
A Interest on drawings is charged at 5% a year.

B Interest on loans from partners is to be at 8% a year.
C Partners are not entitled to salaries.
D Profits are to be shared in the ratio of fixed capitals.

6
15 Dua and Noor are in partnership sharing profits and losses equally.
They admitted Zee and now share profits and losses in the ratio Dua : Noor : Zee, 2 : 2 : 1.
On admission of Zee, tangible assets were reduced in value by $20 000 and goodwill was valued
at $60 000, but was not retained in the books of account.
What was the net decrease on Noor’s capital account?
A $4000 B $8000 C $10 000 D $14 000
16 The following information is available for a partnership.
profit for the year before interest 15 000

interest on partner’s loan to the firm 1 000
interest on capital 2 000
drawings 10 000
Which profit figure is to be appropriated between the partners?
A $3000 B $13 000 C $14 000 D $15 000
17 Which item should not be recorded in a statement of changes in equity?
A bonus issue of ordinary shares
B dividends paid on ordinary shares

C profit from operations for the year
D transfer to general reserve
18 The following information has been extracted from the statement of financial position of a limited
company.
6% debenture (2026–2028) 20 000

400 000 ordinary shares of $1 each 400 000
5-year bank loan 200 000
share premium account 50 000
retained earnings 75 000
What is the value of the total equity?
A $525 000 B $545 000 C $695 000 D $725 000
© UCLES 2022 9706/12/M/J/22

7
19 On 1 January, X Limited had share capital of 100 000 ordinary shares which had been issued at
their par value of $1 each. There was no share premium account.
On 1 March, a bonus issue of one new ordinary share for every five ordinary shares held was
made from retained earnings.
On 1 June, the company made a rights issue of one new ordinary share for every four ordinary
shares held at a price of $1.50 each. All the rights were taken up.
How much was recorded in the share premium account?
A $12 500 B $15 000 C $30 000 D $45 000
20 The following information is available for a business.
sales revenue $500 000

purchases $365 000
gross margin 25%
mark-up 33 31 %
inventory at start of the period $20 000
What was the value of closing inventory?
A $10 000 B $20 000 C $30 000 D $50 000
21 The following shows extracts from the statement of financial position of a company.
at 30 September
$
non-current assets 120 000

inventory 35 000
trade receivables 23 000
cash at bank (debit balance) 12 000
trade payables 15 000
bank loan repayable within 12 months 40 000
What is the liquid (acid test) ratio?
A 0.64 : 1 B 1.27 : 1 C 2.33 : 1 D 4.67 : 1

8
22 The cost of direct materials is increasing.
What is the effect if a business uses first-in-first-out (FIFO) instead of average cost (AVCO) for
inventory valuation in this situation?
closing inventory
cost of sales profit for the year
value
A increases decreases increases

B increases decreases decreases
C decreases increases decreases
D decreases increases increases
23 Q Limited employs machine operators and supervisors.
Each machine operator produces 100 units per week.
One supervisor can supervise up to 10 machine operators and is paid $550 per week.
Production is 7700 units per week.
Which type of cost is the supervisors’ pay and how much is their total pay per week?
total pay per

type of cost week
$
A stepped 4235
B stepped 4400
C variable 4235
D variable 4400
24 What is a limitation of absorption costing?
A It does not comply with accounting principles.

B It does not take into account all costs of production.
C It is not accepted for preparing published financial statements.
D It is not useful for improving the organisation’s performance.
© UCLES 2022 9706/12/M/J/22

9
25 The following information relates to one accounting period.
opening inventory 40 000 units

closing inventory 44 000 units
absorption cost profit $284 000
marginal cost profit $250 000
What was the overhead absorption rate per unit during the accounting period?
A $6.25 B $6.45 C $7.10 D $8.50
26 The selling price of a product remains constant.
In which circumstances will the break-even point in units decrease?
1 increase in labour costs per unit

2 decrease in material costs per unit
3 decrease in variable costs per unit
4 increase in total fixed costs
A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4
27 A company makes and sells a single product type.
The product is sold for $50 per unit and variable costs are $30 per unit.
Total fixed costs are $500 000.
How many units of the product does the company need to sell to make a profit of $300 000?
A 6400 B 15 000 C 25 000 D 40 000

10
28 A business makes and sells three different product types, M, N and O. The following information
is available.
product
M N O
per unit
$ $ $
selling price 240 280 250

direct material 110 120 90
direct labour 65 90 100
variable overheads 20 30 25
fixed overheads 50 30 18
profit / (loss) (5) 10 17
Each product uses the same direct material, which is in short supply.
In which order of priority should the products be produced to maximise the profit?
A MNO
B MON
C NOM
D ONM
29 A business has the following information.
break-even point 5000 units

variable costs per unit $27
contribution to sales ratio 40%
What is the total fixed cost?
A $54 000 B $81 000 C $90 000 D $135 000
30 Why does a business prepare budgets?
A to assess their non-financial performance

B to control their expenditure
C to strategically plan several years ahead
D to value the assets and liabilities of the organisation
© UCLES 2022 9706/12/M/J/22

ACCOUNTING 9706/11
1 hour

*9177817688*

Soft clean eraser
INSTRUCTIONS
INFORMATION
IB22 06_9706_11/5RP
2
1 Which statements are correct?
1 A book of prime entry is also part of the double entry system.

2 All sales made by the business are included in the sales ledger.
3 Ledger accounts for income and liabilities have credit balances.
4 Trade discounts appear in the income statement.
A 1 and 2 B 1 and 3 only C 1, 3 and 4 D 3 and 4 only
2 Which accounting concepts are not reasons for including depreciation in the income statement?
1 matching
2 materiality
3 prudence
4 realisation
A 1 and 4 B 2 and 3 C 3 only D 4 only
3 On 1 January 2019, a non-current asset was purchased at a cost of $290 000. Delivery and
installation costs of $10 000 were also paid.
The reducing balance method is used to depreciate the asset at a rate of 20% per annum. A full
year’s depreciation is charged in the year of acquisition and none in the year of disposal.
On 31 December 2021, the non-current asset was sold for $205 000. Disposal costs of $5000
were also paid.
What was the profit on disposal?
A $8000 B $13 000 C $14 400 D $46 400
4 A sole trader purchased a machine costing $30 000 with an estimated residual value of $5000. It
was expected to have a useful life of five years.
At the end of the fourth year, the machine was sold at a profit of $200.
Depreciation is charged using the straight-line method. A full year’s depreciation is charged for
each year the asset is owned.
What was the amount of sale proceeds?
A $5200 B $6200 C $10 200 D $15 200
© UCLES 2022 9706/11/M/J/22

3
5 Which statement about control accounts is not correct?
A Only cash book entries need to be checked to identify errors.

B They help to identify where errors have been made.
C They make the totals of trade receivables and trade payables more easy to obtain.
D They reduce the possibility of fraud.
6 At the end of a financial period, the trial balance of a business did not agree and a suspense
account was opened.
The following was then discovered.
1 A cheque for $7800 was correctly entered in the customer’s account but had been
debited in the bank account as $7000.
2 A credit purchase of $2500 had been omitted from the books of account.
3 Discounts received of $9600 had been entered on the debit side of discounts
allowed account.
4 The sales account had been overcast by $18 200.
After adjusting these items, the suspense account was cleared.
What was the opening balance of the suspense account?
A $200 credit
B $2700 credit
C $9400 debit
D $19 000 debit
7 Which statements about a bank reconciliation are correct?
1 Cleared cheques are excluded.

2 It locates all errors.
3 It locates any fraud.
4 Uncredited deposits are included.

4
8 At the beginning of the financial year, inventory was valued at $15 000. During the year, sales of
$21 000 and purchases of $18 000 were made. Unfortunately, all inventory was stolen on the last
day of the financial year.
Goods are marked up by 50% to calculate selling price.
What is the cost of the stolen inventory?
A $7500 B $11 000 C $19 000 D $22 500
9 What will be used to calculate the general provision for doubtful debts?
A total trade receivables only

B total trade receivables less irrecoverable debts only
C total trade receivables less provision for specific doubtful debts only
D total trade receivables less irrecoverable debts and provision for specific doubtful debts
10 At 31 December 2021, a business had calculated the draft profit for the year of $57 500.
It was then discovered that the following adjustments were necessary.
1 Inventory valued at $2400 was damaged and now had a resale value of $1660.
2 Rent receivable included $400 prepaid for 2022.
3 The provision for doubtful debts needed to be increased by $890.
What is the correct profit for the year?
A $55 470 B $56 270 C $58 050 D $58 730
11 Closing inventory has been undervalued.
What is the effect on the financial statements?
total current assets profit for the year
A no effect understated
B overstated overstated
C understated no effect
D understated understated
© UCLES 2022 9706/11/M/J/22

5
12 A sole trader has provided the following information.
net assets at 1 January 2021 10 000

net assets at 31 December 2021 24 000
during the year ended 31 December 2021
drawings for the year 3 200
cash introduced by owner 6 000
motor vehicle introduced by owner 2 500
What was the trader’s profit for the year ended 31 December 2021?
A $8000 B $8700 C $14 700 D $19 300
13 What will apply to a partnership where there is no partnership agreement?
A Partners are entitled to interest on the capital they have contributed to the partnership.
B Partners are not charged interest on their drawings.
C Partners are entitled to salaries.
D Partners are not entitled to interest on loans they make to the partnership.
14 X and Y were in partnership sharing profits and losses equally.
On 1 January, P was admitted into the partnership. He contributed $20 000 cash and $10 000
other assets.
The non-current assets were revalued upwards by $12 000 on this date.
There was no adjustment for goodwill.
Profits and losses continued to be shared equally.
What was the balance on P’s capital account after all relevant entries had been made?
A $20 000 B $26 000 C $30 000 D $34 000
15 Daisy, Freddie and Harry, who shared profits equally, had been in partnership for some years.
Harry decided to retire.
Harry’s capital and current accounts had credit balances of $40 000 and $8000 respectively.
The total assets of the partnership had a book value of $98 000 but a realisable value of
$116 000. There was no adjustment for goodwill.
Which amount did Harry receive from the partnership on his retirement?
A $38 000 B $42 000 C $48 000 D $54 000

6
16 A company made a bonus issue of one ordinary share for every five ordinary shares held.
What is the effect on share capital and reserves and net assets?
share capital and

net assets
reserves
A increase increase
B increase no change
C no change increase
D no change no change
17 At the end of its first year of trading, a company provided the following information.
paid during
at the year end
the year
$
$
dividends 3 000 5 800 proposed

debenture interest 4 000 1 600 accrued
directors’ salaries 10 800 nil
By how much do these items reduce the profit for the year?
A $13 200 B $14 400 C $16 400 D $19 400
18 M Limited has the following balances at 1 January 2021.
ordinary share capital 500 000 shares of $0.50 each 250 000
share premium 10 000
general reserve 40 000
During the year ended 31 December 2021:
1 an interim dividend of $0.02 per share was paid

2 there was a transfer of $20 000 to the general reserve.
For the year ended 31 December 2021, the company made a profit for the year of $80 000.
What is the maximum additional dividend payable per ordinary share for the year ended
31 December 2021?
A $0.20 B $0.22 C $0.32 D $0.34
© UCLES 2022 9706/11/M/J/22

7
19 Which ratios are efficiency ratios?
1 expenses to revenue ratio

2 inventory turnover
3 non-current asset turnover
4 return on capital employed
20 The following information is available for a limited company.
closing inventory $30 000

increase in inventory from the start of the year 50%
rate of inventory turnover 8 times
gross profit for the year $200 000
What was the company’s sales revenue for the year?
A $360 000 B $400 000 C $440 000 D $600 000
21 Which item is a direct cost?
A carriage inwards on production materials

B cleaning materials for the factory
C factory rent
D wages of the factory manager
22 A business pays its employees $2 for each unit of X they assemble and $3.20 for each unit of Y.
Monthly output is 1800 units of X and 1000 units of Y. The factory supervisor is paid $1000 per
month.
What is the direct labour cost per month?
A $6800 B $7760 C $7800 D $8760
23 An employee works a 35-hour week and is paid an hourly rate of $24.
In addition to basic pay she receives a bonus of 25% of her hourly rate. This is calculated using
time saved against the target units produced. Each unit should take 15 minutes to produce.
For a 35-hour week she produced 170 units. Of these, 2 units were rejected and her total pay
was reduced by $2.50 per unit.
What were her wages for the week?
A $840 B $880 C $885 D $890

8
24 A manufacturing business uses direct labour hours to calculate its overhead absorption rate.
What are the causes for over-absorption of overhead?
1 More labour hours have been used than budgeted.
2 More products have been produced than budgeted.
3 More products have been sold than budgeted.
A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only
25 The following information is provided by a company for a month.
actual direct labour hours worked 4500

budgeted direct labour hours 5000
budgeted overhead expenditure $80 000
overheads under-absorbed $12 000
What is the amount of the actual overhead expenditure?
A $60 000 B $68 000 C $72 000 D $84 000
26 What is the contribution to sales ratio used to calculate?
A break-even point
B overhead absorption rate
C profit for the period
D value of inventory
27 The following information relates to the first year of operation of a business.
production (units) 5000

sales (units) 4000
unit selling price $10
variable production costs per unit $4
selling expense per unit $1
total fixed manufacturing overhead $13 000
What is the value of gross profit if the business uses absorption costing to value its inventory?
A $7000 B $11 000 C $13 600 D $20 000
© UCLES 2022 9706/11/M/J/22

9
28 A company makes and sells a single product type which has a selling price of $20 per unit.
Variable costs are $8 per unit.
Total fixed costs are $7000.
The company wishes to achieve a target profit of $20 000.
How many units should be produced and sold to achieve the target profit?
A 1000 B 1350 C 1667 D 2250
29 Last year a company sold 2000 units and made a contribution of $50 per unit. After deducting
total fixed costs, profit was $60 000.
This year:
sales volume increased by 10%

contribution per unit decreased by 5%
total fixed costs increased by 25%.
What was the company’s profit this year?
A $45 000 B $54 500 C $60 000 D $64 500
30 Which statement does not apply to budgeting?
A Budgets are plans that guide management to achieve strategic objectives.

B Budgeted outcomes should be compared with actual results so that effective management
action can be taken.
C Budgets should be easily achieved so that managers appear to be efficient.
D Management should communicate and coordinate budgets across all levels of management.
© UCLES 2022 9706/11/M/J/22

* 2 1 0 9 5 8 9 6 8 1 *
ACCOUNTING 9706/23
Paper 2 Structured Questions May/June 2022
1 hour 30 minutes
You must answer on the question paper.
No additional materials are needed.
INSTRUCTIONS
● Answer all questions.
● Use a black or dark blue pen.
● Write your name, centre number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use an HB pencil for any rough working.
● You may use a calculator.
● You should present all accounting statements in good style.
● International accounting terms and formats should be used as appropriate.
● You should show your workings.
INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].
DC (RW) 303854/3
2
1 K Limited’s financial year ended on 31 December 2021. The company’s income statement for the
year ended on that date has already been prepared. The following information was available at
the year‑end.
$
8% Debentures (2022) 120 000
Bank overdraft 4 700
Dividends paid 96 000
Inventory 49 400
Non‑current assets at cost 960 000
Non‑current assets provision for depreciation 170 000
Ordinary share capital: shares of $0.25 each at 31 December 2021 480 000
Other payables 2 700
Other receivables 1 400
Profit for the year 99 400
Retained earnings at 1 January 2021 133 000
Share premium at 31 December 2021 90 000
Trade payables 25 900
Trade receivables 18 900
On 1 July 2021, the directors had made a rights issue of one ordinary share for every two ordinary
shares in issue. The rights issue was made at $0.35 per share and was fully subscribed.
REQUIRED
(a) Calculate the profit from operations for the year ended 31 December 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
(b) Calculate the amount raised by the rights issue on 1 July 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
© UCLES 2022 9706/23/M/J/22

3
(c) Prepare a statement of changes in equity for the year ended 31 December 2021.
K Limited
Statement of changes in equity for the year ended 31 December 2021
Share capital Share Retained Total

premium earnings
$ $ $ $
Balances at 1 January 2021
[7]

4
(d) Prepare the statement of financial position at 31 December 2021.
K Limited
Statement of financial position at 31 December 2021
$
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
.......................................................................................................................... .....................
[7]
© UCLES 2022 9706/23/M/J/22
5
(e) Explain the meaning of each of the following terms.
(i) Revenue reserve
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]
(ii) Capital reserve
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]

6
Additional information
The directors of K Limited will require additional finance in 2022 to cover the cost of opening a
new branch of the business.
They are considering two options.
Option 1: Make a further rights issue of shares.

Option 2: Make an issue of 8% debentures.
REQUIRED
(f) Advise the directors which option they should choose. Justify your answer by discussing both
options.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [7]
[Total: 30]
© UCLES 2022 9706/23/M/J/22

7
2 Rakesh prepared his business’s end of year financial statements on 30 September 2021.
REQUIRED
(a) Define the following accounting concepts. Give one example of each.
(i) Matching
Definition ...........................................................................................................................
...........................................................................................................................................
Example ............................................................................................................................
...........................................................................................................................................
[2]
(ii) Going concern
Definition ...........................................................................................................................
...........................................................................................................................................
Example ............................................................................................................................
...........................................................................................................................................
[2]
(iii) Materiality
Definition ...........................................................................................................................
...........................................................................................................................................
Example ............................................................................................................................
...........................................................................................................................................
[2]

8
On 30 September 2021, Rakesh decided to write off an irrecoverable debt of $730 from the
account of JD Supplies.
REQUIRED
(b) Prepare the journal entry in Rakesh’s books of account to record the write off of the
irrecoverable debt. A narrative is not required.
Journal
Dr Cr
$ $
[2]
Rakesh receives rent from a tenant. The following details are available for the year ended
30 September 2021.
1 At 1 October 2020, the tenant owed rent $1200.
2 During the year ended 30 September 2021, the tenant paid rent of $9000 by bank transfer.
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]
© UCLES 2022 9706/23/M/J/22
9
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]

10
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]
© UCLES 2022 9706/23/M/J/22
11
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.
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]

12
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]
© UCLES 2022 9706/23/M/J/22

13
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]

14
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]
© UCLES 2022 9706/23/M/J/22

15
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.
5 Introduce a sales commission of $0.50 per unit.
6 Reduce the selling price by 1.5% per unit.
REQUIRED
(d) Calculate the decrease in the monthly break‑even point in units if these changes are made.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [8]

16
At the other factory monthly production and sales are normally 14 000 units of a different product.
This product has a variable cost of $65 per unit and a contribution of $17 per unit. The budgeted
factory fixed costs are $128 000 per month.
A major customer normally purchases 5500 units per month. However, the company has been
informed that no units will be required by this customer in August 2022.
The directors are considering two options.
Option A
1 Reduce production in August 2022 by 4000 units.
2 Run an advertising campaign at a cost of $2 200 to increase demand so that all production is
sold.
Option B
1 Continue with normal production in August.
2 Store 5500 units in a warehouse at a cost of $6000.
3 At the end of August an overseas customer will purchase all the units in the warehouse at a
special price of $70 per unit. Transport costs of $1.80 per unit will be incurred on these units.
REQUIRED
(e) Calculate the profit for August 2022 for:
(i) Option A
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [3]
(ii) Option B
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [4]
© UCLES 2022 9706/23/M/J/22

17
(f) Advise the directors which option they should choose. Justify your answer by discussing both
financial and non‑financial factors.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
[Total: 30]
© UCLES 2022 9706/23/M/J/22

* 5 5 5 5 6 5 4 0 4 9 *
ACCOUNTING 9706/22
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (CE) 303891/4
2
1 Karen and Lee are in partnership sharing profits and losses in the ratio 2 : 3 respectively.
The following balances were available at 28 February 2022.
Trial balance at 28 February 2022
Debit Credit
$ $
Administrative expenses 6 020
Bank interest charges 180
Capital accounts
Karen 40 000
Lee 50 000
Carriage inwards 3 880
Current accounts, 1 March 2021
Karen 1 220
Lee 1 880
Drawings
Karen 17 500
Lee 19 900
Insurance 7 740
Inventory, 1 March 2021 8 250
Loan from Lee 10 000
Non-current assets
At cost 160 000
Provision for depreciation, 1 March 2021 56 000
Provision for doubtful debts, 1 March 2021 260
Purchases 151 440
Returns 2 200 3 930
Revenue 229 250
Suspense account 820
411 020 411 020
The following information is also available.
1 On 28 February 2022, inventory had been valued at cost, $21 220. This figure included some
damaged items which had cost $1320 and had a sales value of $2480. The damaged items
could be repaired at a cost of $1300.
2 In January 2022, an error had been made recording returns inwards, $410. This amount had
been credited to the returns outwards account.
3 Insurance includes $1410 paid for the three months ended 30 April 2022.
4 The loan from Lee had been arranged on 1 November 2021. It was agreed that Lee should
be entitled to interest at 6% per annum on the loan. No entries have been made for interest
on the loan.
5 The provision for doubtful debts should be increased to $310.
6 Non-current assets are to be depreciated by 20% per annum using the reducing balance
method.
© UCLES 2022 9706/22/M/J/22

3
REQUIRED
(a) Prepare the income statement for the year ended 28 February 2022. Use the space provided
on the next page for your workings.
Karen and Lee

Income statement for the year ended 28 February 2022
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................

4
Workings:
[9]
(b) Prepare Lee’s current account for the year ended 28 February 2022.
Lee
Current Account
$ $
[4]
© UCLES 2022 9706/22/M/J/22

5
The partners have been considering making a more detailed partnership agreement to include the
following terms.
1 Interest to be charged on all drawings at 10%.
2 Karen to receive a salary of $8400 per annum.
3 Profits and losses would continue to be shared in the ratio Karen : Lee, 2 : 3 respectively.
REQUIRED
(c) Calculate the increase or decrease in Lee’s current account balance at 28 February 2022
assuming the new agreement had been in use from 1 March 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [6]

6
Karen and Lee had also considered operating as a limited company.
REQUIRED
(d) Explain one advantage of operating as a partnership rather than a limited company.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
(e) Explain two advantages of operating as a limited company rather than a partnership.
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
© UCLES 2022 9706/22/M/J/22

7
The partners are concerned about the business’s liquidity position.
Karen believes the problem arises because the business holds too much inventory. She suggests
that credit purchases should be reduced for the next three months to ensure inventory levels are
lowered.
REQUIRED
(f) Advise Lee whether or not he should accept Karen’s suggestion. Justify your advice.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
[Total: 30]

8
2 V Limited owns various non-current assets. Non-current assets depreciate due to a number of
factors including wear and tear.
REQUIRED
(a) State two reasons, other than wear and tear, why non-current assets depreciate.
1 ................................................................................................................................................
2 ................................................................................................................................................
[2]
Businesses must apply the consistency concept when accounting for depreciation.
REQUIRED
(b) Describe the consistency concept.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
The company’s financial year ends on 31 December.
1 Property was purchased on 1 January 2019 at a cost of $850 000. Property is depreciated at
5% per annum on cost.
2 On 1 January 2021 the directors decided to revalue the property at $1 200 000.
REQUIRED
(c) Prepare the journal entry to record the revaluation of the property. A narrative is not required.
Journal
Dr Cr
$ $
[3]
© UCLES 2022 9706/22/M/J/22

9
1 Furniture and equipment was purchased on 1 January 2019 at a cost of $140 000.
2 Furniture and equipment is depreciated at 10% per annum using the reducing balance
method.
3 On 1 September 2021, the directors sold furniture and equipment which had cost $21 000 on
1 January 2019.
4 A full year’s depreciation is charged in the year of purchase but none in the year of disposal.
REQUIRED
(d) Calculate the charge for depreciation of furniture and equipment for the year ended
31 December 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [4]

10
1 Motor vehicles were purchased on 1 January 2020 at a cost of $84 000.
2 Motor vehicles are depreciated at 20% per annum using the reducing balance method.
3 On 1 November 2021, a new motor vehicle was purchased at a cost of $44 000. A cheque
for $17 000 was paid for the vehicle and the balance was covered by the part-exchange of a
vehicle which had cost $40 000 on 1 January 2020.
4 A full year’s depreciation is charged in the year of purchase but none in the year of disposal.
REQUIRED
(e) Prepare the motor vehicle disposal account for the year ended 31 December 2021.
Motor vehicle disposal account
$ $
[4]
[Total: 15]
© UCLES 2022 9706/22/M/J/22

12
3 N Limited is a trading company. The statement of financial position at 31 December 2021 is as

follows.
$000
Assets
Non-current assets at net book value 1520
Current assets
Inventory 35
Trade receivables 30
Total assets 1585
Equity and liabilities

Equity
Share capital 900
Share premium 180
Retained earnings 202
Total equity 1282
Liabilities
8% Debentures (2026) 250
Current liabilities
Trade payables 42
Bank overdraft 11
53
Total liabilities 303
Total equity and liabilities 1585
1 Purchases for the year were $600 000 of which 80% were on credit.
2 Credit sales were 30% of all sales.
3 The company had a gross profit margin of 40%. The company’s gross profit for the year
ended 31 December 2021 was $420 000.
4 The company’s profit for the year was $182 000.
5 No interest was charged on the bank overdraft.
© UCLES 2022 9706/22/M/J/22

13
REQUIRED
(a) Calculate the following ratios for the year ended 31 December 2021 stating the formula used.
(i) Trade payables turnover (days)
Formula Calculation
[3]
(ii) Trade receivables turnover (days)
Formula Calculation
[3]
(iii) Return on capital employed (to two decimal places)
Formula Calculation
[3]

14
(iv) Non-current asset turnover (to two decimal places)
Formula Calculation
[2]
(b) Explain the importance of this non-current asset turnover to the directors of N Limited.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
(c) Explain one reason why shareholders will be interested in the financial statements of a
company.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
[Total: 15]
© UCLES 2022 9706/22/M/J/22

15
4 F Limited is a manufacturing company which uses absorption costing at one of its factories. This
factory has two production departments and two service departments.
Budgeted costs have already been allocated and apportioned.
REQUIRED
(a) Explain the meaning of each of the following terms:
(i) Allocation
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]
(ii) Apportionment
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]
(b) State one benefit of using absorption costing.
...................................................................................................................................................
............................................................................................................................................. [1]
(c) State one limitation of using absorption costing.
...................................................................................................................................................
............................................................................................................................................. [1]

16
The budgeted costs for April 2022 before reapportionment of the service departments’ overheads
are as follows.
Production departments Service departments

Assembly Finishing Stores Maintenance
department department department department
$ $ $ $
Total overhead
275 000 103 200 19 200 26 700
costs
The service department overheads are apportioned to the production departments on the following
basis.

Maintenance 60% 30% 10% –
Stores 75% 25% – –
REQUIRED
(d) Calculate the total overheads for each production department by reapportioning the service
department overheads.

$ $ $ $
Total overhead
275 000 103 200 19 200 26 700
costs
Subtotal
Total
[3]
© UCLES 2022 9706/22/M/J/22

17
The following additional monthly budgeted information is available about the production
departments.
Labour hours Machine hours

Assembly department 950 1 430
Finishing department 840 380
REQUIRED
(e) Calculate the overhead absorption rate for each department to two decimal places.
(i) Assembly department
...........................................................................................................................................
..................................................................................................................................... [2]
(ii) Finishing department
...........................................................................................................................................
..................................................................................................................................... [2]
In April 2022, production was less than the forecast figure. The Assembly department’s actual
overheads were $285 400, actual labour hours were 820 and actual machine hours were 1310.
REQUIRED
(f) Calculate the under-absorption or over-absorption of overheads for April 2022 for the
Assembly department.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]

18
At another factory the company manufactures two products. This factory uses marginal costing. The
following details are available.
Product X Product Z
$ $
Direct materials per unit 6 9
Direct labour per unit 9 9
Fixed costs per unit 5 6
Selling price per unit 24 30
Normal production per month (units) 8000 4000
The company has a major customer who usually orders 5000 units of Product X each month. This
order is included in the normal production of 8000 units per month.
In May 2022 the customer has asked for 9000 units of Product X.
If it is not possible to supply this quantity, the customer has informed the directors that they will place
their entire order and all future orders with another company.
The directors are considering two options.
Option A
1 Stop manufacture of Product Z and devote all labour hours to the production of Product X.
2 The company will be able to complete all the normal orders for Product X and the increased order
from the customer.
3 The workforce for Product Z will require some retraining, costing $3000.
Option B
1 Maintain normal production levels.
2 Refuse the customer’s order.
3 Reduce the selling price of Product X by 5% in order to enable all normal production of this unit to
be sold.
© UCLES 2022 9706/22/M/J/22

19
REQUIRED
(g) Calculate the profit to be made in May 2022 for each of the options.
(i) Option A
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [4]
(ii) Option B
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [3]

20
(h) Advise the directors which option they should choose. Justify your answer by discussing both
financial and non-financial factors.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [7]
[Total: 30]
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.
© UCLES 2022 9706/22/M/J/22

* 4 6 0 3 4 3 2 7 3 3 *
ACCOUNTING 9706/21
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (CJ) 303853/3
2
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
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.
© UCLES 2022 9706/21/M/J/22

3
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
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4
Workings:
[15]
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]
© UCLES 2022 9706/21/M/J/22

5
(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]
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]

6
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.
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............................................................................................................................................. [7]
[Total: 30]
© UCLES 2022 9706/21/M/J/22

7
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]
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.

8
REQUIRED
(b) Prepare the suspense account clearly identifying the original difference in the trial balance
totals.
Suspense account
$ $
[5]
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]
© UCLES 2022 9706/21/M/J/22

10
3 Maria and Rio have been in partnership for a number of years. They are considering admitting a
new partner.
REQUIRED
(a) State three disadvantages to the existing partners when a new partner is admitted.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
3 ................................................................................................................................................
...................................................................................................................................................
[3]
The partnership year end is 31 December. For the period 1 January to 30 September 2021, Maria
and Rio did not have a partnership agreement.
The following information is available for the year ended 31 December 2021.
The balances on the partners’ accounts on 1 January 2021 were:
$
Capital accounts
Maria 52 000
Rio 38 000
Loan account: Rio 6 000
On 1 October 2021 they admitted Sarah as a partner. Sarah introduced capital of $45 000 from
her personal savings. The partners agreed to make no adjustments for goodwill or the revaluation
of the partnership assets.
From 1 October 2021 a formal partnership agreement was prepared as follows:
1 Rio to be given interest on his loan at 8% per annum.
2 Interest to be given at 6% per annum on fixed capitals.
3 Rio to be given a partnership salary of $15 000 per annum.
4 Profits to be shared in the ratio Maria : Rio : Sarah, 2 : 1 : 2 respectively.
© UCLES 2022 9706/21/M/J/22

11
During the year ended 31 December 2021, the partnership made a profit of $82 500 before taking
into account interest on Rio’s loan. It was assumed that the profit before interest on Rio’s loan had
accrued evenly throughout the year.
REQUIRED
(b) Prepare the appropriation account for the year ended 31 December 2021.
Maria, Rio and Sarah

Appropriation account for the year ended 31 December 2021
Maria and Rio Maria, Rio and Sarah

1 Jan–30 Sept 1 Oct–31 Dec
$ $
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............................................................................................................................................. [7]

12
Before Sarah had been admitted as a partner, she had been earning a salary of $18 000 per
annum. She had also received interest of 8% per annum on her personal savings.
REQUIRED
(c) Compare Sarah’s income as a partner with the total income she would have otherwise received
in the three months ended 31 December 2021. Support your answer with calculations.
...................................................................................................................................................
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............................................................................................................................................. [5]
[Total: 15]
© UCLES 2022 9706/21/M/J/22

14
4 N Limited manufactures a single product at one of its factories. The company uses marginal
costing.
REQUIRED
(a) State two benefits of using break-even analysis.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
(b) Define the term ‘fixed costs’.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
The following details are available for one month’s production:
Fixed costs $70 000

Break-even point 8 000 units
Selling price per unit $20
Margin of safety $80 000
REQUIRED
(c) Calculate the variable cost per unit.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
© UCLES 2022 9706/21/M/J/22

15
The directors have decided to increase output by 20%. All the output can be sold.
New machinery will be purchased at a cost of $72 000. The new machinery will have a useful life
of 5 years. The directors also plan the following:
1 Variable costs will remain unchanged.
2 Selling prices will be reduced by 5% to ensure that all production can be sold.
3 The cost of the new machinery will be financed by the issue of 10% debentures.
REQUIRED
(d) (i) Calculate the monthly revenue based on this plan.
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]
(ii) Prepare a budgeted marginal costing statement for one month based on this plan for
total production.
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..................................................................................................................................... [6]

16
At another factory the company manufactures two products: X and Y. Both products use the same
material.
The following information is available for one month’s output.
X Y
$ $
Selling price per unit 32 44
Direct material per unit 10 14
Direct labour per unit 12 19
Output 5000 units 4000 units
This factory’s fixed costs are $58 000 per month.
In April 2022 the supplier of direct materials informed the company that it would only be able to
supply 75% of the normal monthly requirement in June 2022.
REQUIRED
(e) Prepare a budgeted production plan for June 2022 to show the maximum profit available.
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............................................................................................................................................. [7]
© UCLES 2022 9706/21/M/J/22

17
A director has suggested an alternative plan that the factory should produce extra units in
May 2022 to make up for the shortfall of either Product X or Product Y in June 2022. Any additional
production will require overtime to be worked.
The following information is available:
1 All material requirements can be met in May 2022 but the material has to be converted into
finished product immediately as purchased.
2 Overtime is paid at 1.5 times the normal rate.
3 The extra units will be stored at a cost of $4000.
REQUIRED
(f) Calculate the profit or loss to be made on the extra units if this plan is implemented in
May 2022.
...................................................................................................................................................
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...................................................................................................................................................
............................................................................................................................................. [3]

18
(g) Advise the directors whether they should use the original budgeted production plan in (e)
or whether they should increase production in May 2022 as suggested by the director in his
alternative plan. Justify your advice.
...................................................................................................................................................
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............................................................................................................................................. [5]
[Total: 30]
© UCLES 2022 9706/21/M/J/22

* 9 5 8 7 0 7 0 3 5 8 *
ACCOUNTING 9706/22
Paper 2 Structured Questions February/March 2022
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (RW) 303870/3
2
1 Rafiq owns a retail business. When the business was opened a few years ago, Rafiq maintained
only minimal accounting records.
REQUIRED
(a) State two reasons why the owner of a business might maintain minimal accounting records.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
(b) Identify four benefits of maintaining full accounting records.
1 ................................................................................................................................................
2 ................................................................................................................................................
3 ................................................................................................................................................
4 ................................................................................................................................................
[4]
More recently Rafiq has been able to provide more detailed financial information.
1 On 1 January 2021, the business’s assets and liabilities were as follows:
$
Cash in hand 840
Furniture and fittings at valuation 22 710
Inventory 14 430
Rent prepaid 1 250
© UCLES 2022 9706/22/F/M/22

3
2 The following summary of receipts and payments for the year ended 31 December 2021 has
been prepared from the business’s bank statements.
Receipts $ $
Cash sales banked 132 200
Disposal of furniture and fittings 3 480
Total receipts 135 680
Payments
Drawings 18 390
Rent 14 750
Additional furniture and fittings 8 000
Installation costs for new fittings 380
Total payments 140 560
3 Rafiq purchases all goods for resale on a credit basis.
4 All sales are on a cash basis.
5 A cash discount of 5% was received when Rafiq settled debts with trade payables during the
year ended 31 December 2021.
6 At 31 December 2021 trade payables totalled $9230.
REQUIRED
(c) Calculate the total purchases for the year ended 31 December 2021.
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...................................................................................................................................................
[3]
© UCLES 2022 9706/22/F/M/22 [Turn over

4
1 Some cash takings were not banked but were used to pay wages, $21 540, and drawings,
$2580.
2 Rafiq took goods costing $480 for private use.
3 Furniture and fittings with a value of $2950 were sold.
At 31 December 2021:
1 Cash takings of $1200 had not yet been banked.
2 The balance of cash in hand was $920.
3 Inventory was valued at $11 920.
4 Furniture and fittings were valued at $23 400.
5 Rent of $1440 was prepaid.
REQUIRED
(d) Prepare the income statement for the year ended 31 December 2021.
Workings:
© UCLES 2022 9706/22/F/M/22

5
Rafiq
Income statement for the year ended 31 December 2021
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[14]

6
Rafiq would like to expand his business but requires additional finance to carry out this plan. He is
considering two options.
Option 1: Invite a friend, Khaled, to become a partner in the business. Khaled would introduce
capital of $10 000.
Option 2: Apply for a bank loan of $10 000.
REQUIRED
(e) Advise Rafiq which option he should choose. Justify your answer by discussing both financial
and non-financial issues of each option.
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[7]
[Total: 30]
© UCLES 2022 9706/22/F/M/22

7
2 T Limited’s statement of financial position at 28 February 2021 included the following:
$
Equity
Issued capital: ordinary shares of $0.50 each 450 000
Share premium 122 000
Retained earnings 342 000
914 000
On 31 August 2021 the directors paid an interim dividend of $0.05 per share.
REQUIRED
(a) Calculate the amount paid as an interim dividend.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[1]
(b) Identify two factors which directors should take into account when deciding the amount of a
dividend payment to shareholders.
1 ................................................................................................................................................
2 ................................................................................................................................................
[2]

8
On 1 December 2021, the directors made a bonus issue on the basis of two ordinary shares for
every three ordinary shares currently held. The directors wished to leave the reserves in their
most flexible form.
REQUIRED
(c) Prepare the journal entry to record the bonus issue of shares. A narrative is not required.
Journal
Dr Cr
$ $
[3]
On 28 February 2022, the directors paid a final dividend of $0.07 per share on all ordinary shares
issued at this date.
The company’s profit for the year ended 28 February 2022 was $114 000.
REQUIRED
(d) Calculate the closing balance of the company’s retained earnings account at 28 February 2022.
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
[6]
© UCLES 2022 9706/22/F/M/22

9
(e) State three reasons why a company sometimes makes a rights issue of shares rather than
a general issue of shares.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
3 ................................................................................................................................................
...................................................................................................................................................
[3]
[Total: 15]

10
3 Bipin, Feroz and Neeru have been in partnership for many years sharing profits and losses in the
ratio 3 : 1 : 2 respectively.
Feroz decided to retire from the partnership with effect from 1 January 2022. On this date the
statement of financial position was available.
Statement of financial position
$ $
Assets
Non-current assets at net book value 132 000
Current assets
Inventory 17 560
Cash at bank 18 490
46 590
Total assets 178 590
Capital and liabilities

Capital accounts
Bipin 72 000
Feroz 44 300
Neeru 57 000
173 300
Current accounts
Bipin 4 240
Feroz (1 980)
Neeru (2 750)
(490)
Total capital 172 810
Current liabilities
Total capital and liabilities 178 590
1 Non-current assets were revalued at $155 000 and inventory was revalued at $13 160.
2 Goodwill was valued at $39 000. It was agreed that a goodwill account was not to be
maintained in the books of the partnership.
3 Bipin and Neeru agreed to remain in partnership sharing profits and losses equally.
4 On his retirement, Feroz agreed to take a non-current asset at its valuation of $15 000. He
agreed to leave the remaining amount due to him as a loan to the partnership.
REQUIRED
(a) Prepare, on the next page, the partners’ capital accounts to record the retirement of Feroz.
© UCLES 2022 9706/22/F/M/22

Capital accounts
Bipin Feroz Neeru Bipin Feroz Neeru

$ $ $ $ $ $
© UCLES 2022
11
[7]
9706/22/F/M/22
[Turn over
12
Bipin and Neeru have agreed the following for the new partnership.
1 They will no longer use current accounts. Each partner’s current account balance is to be
transferred to the partner’s capital account.
2 The opening balances of their capital accounts are to reflect their new profit and loss sharing
ratio.
Neeru was to introduce or withdraw funds in order to achieve this.
REQUIRED
(b) Calculate the amount Neeru should introduce or withdraw.
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...................................................................................................................................................
[4]
(c) Explain one reason for valuing goodwill when a partner retires.
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
[2]
© UCLES 2022 9706/22/F/M/22

13
(d) State two reasons why it is usual not to maintain a goodwill account in the books of a
partnership.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
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[2]
[Total: 15]

14
4 R Limited uses absorption costing at one of its factories. This factory has two production
departments: Machining and Assembly, and two service departments: Support and Canteen.
Some budgeted overheads have already been apportioned for April 2022. The remaining budgeted
overheads for April 2022 are as follows:
$
Depreciation of machinery 25 000
Production departments’ supervisor’s wages 19 800
The following additional information is available.
1
Machining Assembly Support Canteen
Floor area (m2) 7000 2000 400 600
Power (Kwh) 4500 1800 300 900
Machinery cost ($) 850 000 110 000 15 000 25 000
Number of employees 75 35 8 7
2 The canteen provides meals for staff in the Machining, Assembly and Support departments.
3 The Support department’s overheads should be reapportioned on the basis of production

departments’ machinery cost.
REQUIRED
(a) Complete the following table showing the apportionment of overheads and the reapportionment
of service department overheads.

Machining Assembly Support Canteen
$ $ $ $
Overheads already
106 350 28 600 7 180 13 870
apportioned
Depreciation of
machinery
Production departments’
supervisor’s wages
Reapportioned Canteen
Reapportioned Support
Total
[5]
© UCLES 2022 9706/22/F/M/22
15
Machining Assembly
Direct labour hours per month 3200 2400
Machine hours per month 5600 1800
REQUIRED
(b) Calculate the overhead absorption rate for each production department to two decimal
places.
Machining
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Assembly
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
[4]
(c) State two reasons why overheads may be under-absorbed.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]

16
At another factory a single product is made. This factory uses marginal costing.
The following information is available.
$
Direct materials per unit 8.80
Direct labour per unit 10.10
Selling price per unit 27.00
Fixed costs per month $44 000

Production capacity per month 15 000 units
The factory has been operating at below its normal capacity. However, recently demand for the
company’s product has increased considerably. The directors believe there is an opportunity to
increase profits. They are considering two options to meet increased demand.
Option 1
1 Increase the selling price per unit by 5%.
2 Increase production to 16 000 units per month.
3 Overtime is paid at an additional $4.10 per unit.
4 Reduce monthly advertising by $2 000.
Option 2
1 Increase production capacity per month by 15% by purchasing additional machinery costing
$78 000. This machinery will be depreciated at 20% per annum.
2 Selling price will remain at $27 per unit.
3 The supplier of materials currently offers a trade discount of 20%. This will increase to 30%.
4 The additional machinery will be more efficient and production will not require any overtime
working.
© UCLES 2022 9706/22/F/M/22

17
REQUIRED
(d) Calculate the monthly profit to be made for each option.
(i) Option 1
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[5]
(ii) Option 2
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
[5]

18
The cost of the additional machinery required in Option 2 would be financed by an issue of ordinary
shares.
REQUIRED
(e) Advise the directors which option they should choose. Justify your answer by considering
both financial and non-financial factors.
...................................................................................................................................................
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[5]
© UCLES 2022 9706/22/F/M/22

19
(f) (i) State two benefits of budgetary control.
1 ........................................................................................................................................
...........................................................................................................................................
2 ........................................................................................................................................
...........................................................................................................................................
[2]
(ii) State two limitations of budgetary control.
1 ........................................................................................................................................
...........................................................................................................................................
2 ........................................................................................................................................
...........................................................................................................................................
[2]
[Total: 30]
© UCLES 2022 9706/22/F/M/22

* 2 7 9 2 3 3 0 8 6 3 *
ACCOUNTING 9706/23
Paper 2 Structured Questions October/November 2021
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (LK) 206629/3
2
1 The following information has been extracted from the accounting records of T Limited at
30 June 2021.
1 Inventory at 1 July 2020 was valued at $46 800.
2 Inventory at 30 June 2021 was valued at $54 200.
3 The rate of inventory turnover was 8.8 times.
4 The gross profit margin was 45%.
REQUIRED
(a) Calculate for the year ended 30 June 2021:
(i) cost of sales
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]
(ii) revenue.
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]
© UCLES 2021 9706/23/O/N/21

3
The following balances were extracted from the books of account at 30 June 2021.
$
8% debentures (2026–2027) 96 000
Directors’ remuneration 62 400
Distribution costs 59 200
Finance costs 6 350
Provision for doubtful debts at 1 July 2020 1 235
1 The 8% debentures (2026–2027) were taken out on 1 November 2020. Interest was paid
every three months in arrears, starting on 1 February 2021.
2 Wages and salaries of $3800 were owing at 30 June 2021.
3 At 30 June 2021, a bonus was due to be paid to the sales director of $12 000.
4 Expenses were to be allocated as follows:
Administrative Distribution
expenses costs
Wages and salaries 30% 70%
Directors’ remuneration 75% 25%
5 Depreciation is to be charged as follows:
Motor vehicles for office staff $26 400

Delivery vehicles $32 800
6 A credit customer owing $2360 from 12 April 2021 has been declared bankrupt and the debt
is to be written off to administrative expenses.
7 Aged analysis of net trade receivables at 30 June 2021:
0–60 61–90 Over 90

days days days
Percentage of total net trade receivables 75% 15% 10%
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.
© UCLES 2021 9706/23/O/N/21 [Turn over

4
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
Finance costs
Profit for the year
© UCLES 2021 9706/23/O/N/21

5
Workings
Distribution costs
Finance costs
Other workings
[11]

6
The following transactions had also taken place during the year ended 30 June 2021.
Date Transaction
1 July 2020 Freehold property was revalued downwards by $10 000.
1 July 2020 Made a rights issue of one ordinary share of $2 each for every two
shares held. This was offered at a premium of $0.75. The issue was
fully subscribed.
1 March 2021 Made a bonus issue of one ordinary share of $2 each for every ten
shares held. Reserves were left in the most flexible form.
31 March 2021 Paid a dividend of $0.05 per share on all shares in issue at that date.
REQUIRED
(d) Prepare the statement of changes in equity for the year ended 30 June 2021.
T Limited
Statement of Changes in Equity for the year ended 30 June 2021
Ordinary Share Revaluation Retained

share capital premium reserve earnings Total
$ $ $ $ $
At 1 July 2020 440 000 – 7500 86 320 533 820
At 30 June 2021
[6]
© UCLES 2021 9706/23/O/N/21

7
The directors make use of accounting ratios to interpret the information contained within the
financial statements.
REQUIRED
(e) (i) State the formula for calculating the non-current asset turnover.
...........................................................................................................................................
..................................................................................................................................... [1]
(ii) State what information the directors would obtain from calculating the non-current asset
turnover.
...........................................................................................................................................
..................................................................................................................................... [1]
(f) State three limitations of ratio analysis when comparing the performance of businesses in the
same industry.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
3 ................................................................................................................................................
...................................................................................................................................................
[3]
[Total: 30]

8
2 Abbie, Ben and Cain have been in partnership for many years sharing profits and losses in the
ratio 3 : 2 : 1.
The partnership’s draft statement of financial position at 30 June 2021 is shown below.
Abbie, Ben and Cain

Statement of financial position at 30 June 2021
$
Non-current assets
Property 65 000
Motor vehicles 52 000
117 000
Current assets
Inventory 18 200
Bank 800
32 700

Capital accounts
Abbie 60 000
Ben 40 000
Cain 20 000
120 000
Current accounts
Abbie 18 520
Ben (3 250)
Cain 6 230
21 500
Current liabilities
Ben retired from the partnership on 30 June 2021 and the following was agreed.
1 Ben should retain one of the motor vehicles at the net book value $14 500.
2 The remaining motor vehicles should be revalued at $33 000.
3 Property should be revalued at $77 000.
4 Inventory should be revalued at $17 000.
5 The value of goodwill was $39 000 and it was not to be retained in the books of account.
Any amounts due to Ben were to be transferred to a short-term loan to be repaid from the
partnership bank account within one month.
Abbie and Cain decided to continue in partnership sharing profits and losses in the ratio 3 : 2.
Cain agreed to pay sufficient funds into the partnership bank account so that the partners’ capital
account balances reflected the new profit-sharing ratio.
© UCLES 2021 9706/23/O/N/21
9
REQUIRED
(a) State one reason why a partnership may revalue assets on the retirement of a partner.
...................................................................................................................................................
............................................................................................................................................. [1]
(b) Prepare the revaluation account at 30 June 2021.
Revaluation Account
$ $
[3]
(c) Prepare the partners’ capital accounts at 30 June 2021 on the next page.

Capital Accounts
Abbie Ben Cain Abbie Ben Cain
© UCLES 2021
$ $ $ $ $ $
10
9706/23/O/N/21
[6]
11
Ben has indicated that he may be willing to leave $10 000 as an interest-free loan, but he requires
any other amount due to be paid within one month.
In order to maintain sufficient working capital, Abbie and Cain are considering two options to
finance the settlement due to Ben.
Option 1: Request an overdraft facility from the bank.
Option 2: Ask Ben to consider leaving the whole amount due as a 5% loan repayable over ten
years in equal annual instalments.
REQUIRED
(d) Advise Abbie and Cain which option they should choose to finance the amount due to Ben.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
[Total: 15]

12
3 Petra owns a small manufacturing business. Her depreciation policy is as follows:
Non-current asset Depreciation policy

Plant and machinery 20% per annum reducing balance method
A full year’s depreciation is charged in the year of purchase but none in the year of sale.
The following information in respect of plant and machinery has been extracted from the books of
account for the year ended 31 July 2021.
Date Details
1 August 2020 Cost, $26 800; Provision for Depreciation, $12 200.
1 January 2021 Purchased new machinery, cost $4200. This was settled by a cheque
payment of $2450 and part exchange of machinery that had originally cost
$2500 in September 2018.
31 July 2021 Machinery with an original cost of $850 and a net book value of $60 was
scrapped with no proceeds.
REQUIRED
(a) Prepare the provision for depreciation account for plant and machinery for the year ended
31 July 2021.
Provision for Depreciation – Plant and Machinery
Date Details $ Date Details $

2020
Aug 1 Balance b/d 12 200
[5]
Workings:
© UCLES 2021 9706/23/O/N/21

13
(b) Prepare the disposal account for the year ended 31 July 2021.
Disposal Account
[7]
(c) Discuss the reasons why a business may choose to depreciate plant and machinery using
the reducing balance method.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
[Total: 15]

14
4 EMM is a manufacturing business producing one product, a wooden desk.
The business is contracted to supply 220 desks each week to H Co, a large retailer, at a
selling price of $44 per unit.
The costs incurred by EMM are as follows:
$
Direct material 36.00 per unit
Production labour
Salaries 410.00 per week
Bonus 0.50 per unit
Finishing labour
Salaries 180.00 per week
Bonus 0.30 per unit
Machine hire 120.00 per week
Administration costs 400.00 per week
Rent and rates 240.00 per week
REQUIRED
(a) Calculate the weekly break-even point in units.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
(b) (i) Define the term ‘margin of safety’.
...........................................................................................................................................
..................................................................................................................................... [1]
(ii) Explain the usefulness of the margin of safety to a business.
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [2]
© UCLES 2021 9706/23/O/N/21

15
(c) Prepare a weekly profit statement using marginal cost principles.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
EMM is concerned about future prospects. It has spare direct labour capacity and the machinery
is not being fully utilised.
EMM has been approached by K Limited, a large furniture company, requesting a quotation to
supply 80 desks each week. K Limited would require a small design change to the desks, and this
would add $5.40 to the direct material cost. Workers on these desks would receive an additional
finishing labour bonus of $0.20 per unit.
REQUIRED
(d) Calculate the selling price per unit that EMM should quote to K Limited in order to achieve a
20% contribution to sales ratio.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]

16
It has been decided to quote a price of $48 per unit to K Limited.
This work would involve employing extra finishing labour at a weekly salary of $120 and hiring an
additional machine at $30 per week.
The contract with H Co to produce 220 desks each week would still be continued at a price of
$44 per unit.
EMM has decided to set an annual target profit of $17 000.
REQUIRED
(e) Prepare a profit statement for EMM to show the total weekly contribution and total weekly
profit if K Limited accepts the quotation.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
K Limited have advised EMM that they will only proceed with the order if they are given
5% settlement discount for paying the account within seven days.
REQUIRED
(f) Calculate the total weekly profit of EMM if EMM agrees to giving the settlement discount.
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [1]
© UCLES 2021 9706/23/O/N/21

17
(g) Advise EMM whether or not the terms proposed by K Limited should be accepted. Justify
your answer using both financial and non-financial factors.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [7]
(h) State two advantages of cost–volume–profit analysis to management.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
(i) State three limitations of cost–volume–profit analysis.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
3 ................................................................................................................................................
...................................................................................................................................................
[3]
[Total: 30]
© UCLES 2021 9706/23/O/N/21

* 2 4 3 5 4 1 3 4 4 7 *
ACCOUNTING 9706/22
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (LK) 206628/3
2
1 The following balances have been extracted from the books of P Limited at 31 August 2021.
$
5% Debentures (2022–2023) 36 000
Bank 4 770 Credit
Carriage inwards 390
Delivery vehicles
Cost 89 420
Provision for depreciation at 1 September 2020 42 200
Distribution costs 44 320
Dividend paid 3 000
Freehold property at valuation at 31 August 2020 66 000
Interest paid 1 590
Inventory at 1 September 2020 22 880
Purchases 88 900
Revenue 216 600
Returns outwards 260
Revaluation reserve 6 000
Share capital (ordinary shares of $0.50 each) 60 000
Share premium 8 500
The freehold property was revalued on 1 September 2020 at $58 000. The revaluation has not yet
been recorded in the books of account.
REQUIRED
(a) Prepare the journal entry to record the revaluation of the freehold property on
1 September 2020. A narrative is not required.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
© UCLES 2021 9706/22/O/N/21

3
1 Revenue includes goods sent to a credit customer on 23 August 2021 on a sale or return
basis. The directors were uncertain whether any of these goods would be returned. The
selling price of the goods was $6400, and they had been sold at a gross margin of 25%.
2 Inventory in P Limited’s warehouse at 31 August 2021 was valued at cost, $18 600.
3 Debenture interest had been paid to 30 June 2021.
4 Delivery vehicle licences of $540 had been paid for the year ending 31 December 2021.
5 Wages and salaries of $620 were outstanding at 31 August 2021.
6 Wages and salaries are to be charged as follows:
Administrative expenses 25%

Distribution costs 75%
7 On 31 August 2021, a delivery vehicle was sold for $7000. The vehicle had been purchased
on 1 September 2018 for $13 000. No entries for the sale had been made in the books of
account and the sale proceeds had not yet been received.
8 The freehold property is used only as a distribution warehouse. Its remaining useful life at
1 September 2020 was estimated to be 40 years.
9 Depreciation is to be charged as follows:
Non-current asset Depreciation method

Freehold property Written off over the remaining useful life
Delivery vehicles 20% per annum reducing balance
A full year’s depreciation is charged in the year of purchase, but none in the year of disposal.

4
REQUIRED
(b) Prepare the income statement for the year ended 31 August 2021. Use the space on the
next page for your workings.
P Limited
Income statement for the year ended 31 August 2021
Revenue
Cost of sales
Gross profit
Distribution costs
Finance costs
Profit for the year
© UCLES 2021 9706/22/O/N/21

5
Workings
Revenue
Cost of sales
Depreciation
Distribution costs
Finance costs
[15]

6
(c) Prepare a statement to show the balance of retained earnings at 31 August 2021 after the
preparation of the income statement.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
The directors wish to reduce the level of trade receivables.
REQUIRED
(d) State two ways in which the level of trade receivables of a business could be reduced.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
© UCLES 2021 9706/22/O/N/21

7
The directors have plans to expand the business and they are considering two options.
Option 1: Make a rights issue of 80 000 ordinary shares of $0.50 each at a premium of 25%.
Option 2: Issue 8% debentures (2027–2028) to raise $50 000.
REQUIRED
(e) Advise the directors which option they should choose. Justify your decision.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [7]
[Total: 30]

8
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]
© UCLES 2021 9706/22/O/N/21

9
(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
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]

10
3 The following information has been extracted from the financial statements of D Limited at
30 June 2020.
$
Share capital (ordinary shares of $0.50 each) 150 000
Transactions during the year ended 30 June 2021.
1 August 2020 Made a rights issue of one ordinary share for every five shares held at
$0.70 per share. The issue was fully subscribed.
1 December 2020 Paid a dividend of $0.02 per share on all shares in issue at that date.
1 March 2021 Made a bonus issue of two ordinary shares for every nine shares held.
Reserves were left in the most flexible form.
30 June 2021 Proposed a final dividend of 2%.
The profit for the year ended 30 June 2021 was $76 520.
REQUIRED
(a) Prepare the following ledger accounts.
Ordinary share capital
© UCLES 2021 9706/22/O/N/21

11
Share premium
Retained earnings
[11]
(b) State two differences between capital reserves and revenue reserves.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
(c) Explain one reason why a company might make a bonus issue of shares.
...................................................................................................................................................
............................................................................................................................................. [2]
[Total: 15]

12
4 Hayden manufactures two products, Aye and Bee. The business operates two production
departments, Machining and Finishing, and two service departments, Stores and Maintenance.
REQUIRED
(a) Identify one possible basis of apportionment that a business could use in respect of:
(i) rent and rates
...........................................................................................................................................
(ii) machinery depreciation
...........................................................................................................................................
(iii) electricity for machinery.
...........................................................................................................................................
[3]
Machining Finishing
Number of orders from Stores 3 200 1 800
Maintenance call-outs 160 32
Budgeted direct labour hours 6 200 19 800
Budgeted machine hours 38 600 9 400
REQUIRED
(b) Complete the following table to show the apportionment of budgeted overhead costs for the
year ended 30 September 2021.
Production Service departments

departments
Total Machining Finishing Stores Maintenance
$ $ $ $ $
Total apportioned overheads 449 800 188 850 172 850 53 325 34 775
Re-apportion Stores
Subtotal
Re-apportion Maintenance
Total overheads cost
[4]
© UCLES 2021 9706/22/O/N/21

13
(c) Calculate, to two decimal places, an overhead absorption rate for each production
department, using a suitable basis.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [4]
The actual results for the year ended 30 September 2021 were as follows:
Machining Finishing
Factory overheads $265 800 $187 420
Direct labour hours 6 350 19 260
Machine hours 36 940 9 810
REQUIRED
(d) Calculate the over-absorption or under-absorption of overheads for each department for the
year ended 30 September 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [4]

14
The following information is available for one unit of product Aye.
Direct material $36.20

Direct labour hours
Machining ($8 per hour) 45 minutes
Finishing ($10 per hour) 60 minutes
Machine hours
Machining 20 minutes
Finishing 30 minutes
During September 2021, a customer requested a quotation for supplying 200 units of Aye. Hayden
required a 30% gross profit margin on the order.
REQUIRED
(e) Prepare a statement to show the total selling price that Hayden quoted to the customer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [6]
© UCLES 2021 9706/22/O/N/21

15
Hayden is considering using one factory-wide overhead absorption rate rather than separate
departmental overhead absorption rates.
REQUIRED
(f) Advise Hayden whether or not he should use one factory-wide absorption rate. Justify your
answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
(g) Explain two effects that the over-absorption of overheads may have on a business.
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
[Total: 30]
© UCLES 2021 9706/22/O/N/21

* 2 4 7 9 4 6 3 4 0 0 *
ACCOUNTING 9706/21
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (LK) 206627/3
2
1 Eleni owns a business selling computers. She does not maintain full accounting records.
At 30 June At 1 July
2021 2020
$ $
Equipment at valuation 3250 3460
Inventory 1940 2210
Provision for doubtful debts ? 360
Other receivables: rent prepaid 1080 500
Other payables: wages 110 190
Bank 1420 Credit 860 Credit
Cash in hand – 150
Bank loan – 1350
A summary of receipts and payments made through the bank for the year ended 30 June 2021
was as follows:
Receipts $
Receipts from credit customers 58 960
Sale of equipment 180
Payments $
Payments to credit suppliers 39 750
Purchase of equipment 610
General expenses 940
Rent 6 860
Bank loan repayments 1 390
Bank charges 50
Cash withdrawn 14 080
All cash sales are banked.
© UCLES 2021 9706/21/O/N/21

3
REQUIRED
(a) Calculate total revenue for the year ended 30 June 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
Of the cash withdrawn from the bank, Eleni took $450 each month for drawings and paid total
wages of $7620 for the year. The remaining cash from the cash till was used to pay for general
expenses.
REQUIRED
(b) Prepare the cash account to calculate the amount paid in cash for general expenses.
Cash account
$ $
[3]

4
1 Eleni wishes to write off an irrecoverable debt of $50 at 30 June 2021. She wishes to maintain
the provision for doubtful debts at the same percentage as the previous year.
2 Equipment sold during the year had a valuation of $140.
REQUIRED
(c) Prepare the income statement for the year ended 30 June 2021.
Eleni
Income statement for the year ended 30 June 2021
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
© UCLES 2021 9706/21/O/N/21

5
Workings:
[12]
(d) Prepare an extract from the statement of financial position at 30 June 2021 to show the capital
and liabilities section only.
Eleni
Statement of financial position at 30 June 2021
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]

6
Eleni is concerned that she is not earning enough profit. She is considering increasing her
prices by 5%.
REQUIRED
(e) Advise Eleni whether or not she should increase her prices by 5%. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
(f) State three factors that a business should consider when making a provision for doubtful
debts.
1 ................................................................................................................................................
2 ................................................................................................................................................
3 ................................................................................................................................................
[3]
[Total: 30]
© UCLES 2021 9706/21/O/N/21

8
2 The following balances have been extracted from the books of account of G Limited at
1 October 2020.
Account $
6% debentures (2022–23) 50 000
Revaluation reserve 28 000
During the year ended 30 September 2021 the following took place.
Date Transaction
1 November 2020 Made a rights issue of one ordinary share of $1 each for every
ten shares held at a premium of 20%. The issue was fully
subscribed.
1 March 2021 Paid a dividend of $0.05 per share on all shares in issue at
that date.
1 May 2021 Made a bonus issue of one ordinary share of $1 each for every
four shares held. The directors decided to leave the reserves
in the most flexible form.
30 September 2021 Revalued property downwards by $35 000.
The profit for the year ended 30 September 2021 was $96 000.
REQUIRED
(a) Prepare the statement of changes in equity for the year ended 30 September 2021.
G Limited
Statement of changes in equity for the year ended 30 September 2021
Share Share Revaluation Retained

capital premium reserve earnings Total
$ $ $ $ $
At 1 October 2020 28 000 34 500
At 30 September 2021 440 000 4 600
© UCLES 2021 9706/21/O/N/21

9
Workings:
[8]
The directors of G Limited wish to raise $500 000 additional capital for expansion. They have
identified two options to raise the full amount.
Option 1: Issue ordinary shares of $1 each.
Option 2: Issue 8% preference shares.
REQUIRED
(b) Advise the directors which option they should choose. Justify your answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]

10
The finance director has suggested that the company could issue further debentures.
REQUIRED
(c) State two characteristics of a debenture.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
[Total: 15]
© UCLES 2021 9706/21/O/N/21

12
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.
© UCLES 2021 9706/21/O/N/21

13
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]

14
(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]
© UCLES 2021 9706/21/O/N/21

15
4 B Limited is a manufacturing business. The business uses marginal costing techniques and
manufactures three products, Ess, Tee and Ewe.
The following budgeted monthly information is available.
Per unit Ess Tee Ewe

$ $ $
Selling price 30 43 69
Direct material 18 22 36
Direct labour at $8 per hour 4 6 14
Variable overhead 2 3 5
Maximum monthly demand 300 units 400 units 360 units
Fixed overheads are budgeted to be $96 000 per annum.
REQUIRED
(a) Calculate the contribution per unit for each product.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]

16
(b) Prepare a statement to show the maximum monthly contribution and maximum monthly profit
that B Limited can earn.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]
(c) Calculate the monthly direct labour hours that B Limited requires to meet the budgeted
maximum monthly demand.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................ [1]
© UCLES 2021 9706/21/O/N/21

17
Due to a shortage of skilled labour, the directors are aware that only 900 direct labour hours per
month will be available from 1 December 2021.
REQUIRED
(d) Calculate the maximum contribution and maximum profit for December 2021, taking into
account the limited direct labour hours available.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
........................................................................................................................................... [11]

18
In order to overcome the shortage of skilled labour and also be able to meet maximum demand,
the directors are considering paying an overtime premium of 25% and paying a total monthly
bonus of $200 to be shared between all workers.
REQUIRED
(e) Calculate the total contribution and total profit for the month of December 2021 if the directors
decide to carry out this proposal.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [4]
(f) Explain two disadvantages to a business of offering a bonus payment to its employees.
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
© UCLES 2021 9706/21/O/N/21

19
(g) Explain two disadvantages to a business of operating a system of budgetary control.
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
[Total: 30]
© UCLES 2021 9706/21/O/N/21

* 3 6 3 1 2 6 5 2 3 8 *
ACCOUNTING 9706/22
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
This document has 20 pages.
DC (DH) 201942/3
2
1 N Limited is a trading business. Sales are made on the credit basis only.
The following information was available at 31 December 2020.
Debit Credit
$000 $000
8% Debentures (2025) 250
Administrative expenses 171
Cash and cash equivalents 14
Cost of sales 466
Debenture interest 8
Distribution costs 63
Dividends paid 80
Inventory at 31 December 2020 33
Issued capital:
Ordinary shares of $0.25 each at 31 December 2020 500
Non-current assets
Cost 1140
Provision for depreciation at 1 January 2020 140
Retained earnings at 1 January 2020 129
Revenue 923
Share premium at 31 December 2020 70
Trade payables 42
Trade receivables 79
2054 2054
The following information is also available at 31 December 2020.
1 Administrative expenses included insurance of $16 000 for four months ended
31 January 2021.
2 Depreciation should be provided on non-current assets at 25% per annum using the reducing
balance method. Depreciation charges should be allocated 20% to distribution costs and 80%
to administrative expenses.
3 The account of a credit customer, $3000, should be written off to administrative expenses as
an irrecoverable debt.
4 Debenture interest was outstanding for the second half of the year. The directors had issued
additional debentures of $50 000 on 1 October 2020.
© UCLES 2021 9706/22/M/J/21

3
REQUIRED
(a) Prepare the company’s income statement for the year ended 31 December 2020.
N Limited
Income statement for the year ended 31 December 2020
$000
Workings:
Distribution costs
Finance costs
[10]

4
On 1 July 2020 the directors had decided to make a rights issue of two ordinary shares for every
three shares held at a price of $0.30 per share. The rights issue was fully subscribed.
REQUIRED
(b) Explain two reasons why a company may make a rights issue of shares rather than an issue
of debentures.
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
(c) Calculate the amount raised by the rights issue.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [4]
© UCLES 2021 9706/22/M/J/21

5
(d) Prepare a statement of changes in equity for the year ended 31 December 2020.
N Limited
Statement of changes in equity
for the year ended 31 December 2020
Ordinary share Share Retained Total

capital premium earnings
$000 $000 $000 $000
Balance at
1 January 2020
[5]
The directors are concerned about the company’s credit control and wish to improve the company’s
liquidity position. They are considering a proposal to offer a 5% cash discount to customers for
settlement within 30 days on all invoices of more than $2000.
REQUIRED
(e) Identify two ratios which can be used to assess the liquidity of a business.
1 ................................................................................................................................................
2 ................................................................................................................................................
[2]

6
(f) Advise the directors whether or not they should go ahead with this proposal. Justify your
answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
[Total: 30]
© UCLES 2021 9706/22/M/J/21

7
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]
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]

8
(c) State two ways in which the risk of irrecoverable debts may be reduced.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
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]
© UCLES 2021 9706/22/M/J/21

10
3 Jason prepared the following statement of financial position which contained errors.
$ $
Non-current assets
Cost 65 000
Provision for depreciation 31 000
34 000
Current assets
Inventory 17 390
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
Bank loan (repayable March 2021) 4 900
Current liabilities
Provision for doubtful debts 480
Other receivables 490
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.
© UCLES 2021 9706/22/M/J/21

11
REQUIRED
(a) Calculate the revised profit for the year ended 31 December 2020.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]

12
(b) Prepare the corrected statement of financial position at 31 December 2020.
Corrected statement of financial position at 31 December 2020

$ $
........................................................................................... ..................... .....................
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........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
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........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................

[7]
© UCLES 2021 9706/22/M/J/21

13
(c) Identify three types of error which do not affect the balancing of the trial balance.
1 ................................................................................................................................................
2 ................................................................................................................................................
3 ................................................................................................................................................
[3]
[Total: 15]

14
4 T Limited manufactures goods at two factories: Factory A and Factory B.
Factory A
Factory A has two production departments, Assembly and Finishing; and two service departments,
Administration and Canteen.
Absorption costing is used at this factory.
Budgeted overheads for February 2021 have already been apportioned.
The basis for reapportioning the service department overheads is as follows:

Assembly Finishing Administration Canteen
Canteen 50% 40% 10% -
Administration 75% 25% - -
REQUIRED
(a) Prepare a statement showing the reapportionment of service department overheads for
February 2021.

Assembly Finishing Administration Canteen
$ $ $ $
Overheads 83 500 70 100 28 300 15 400
Reapportionment of
canteen
Subtotal
Reapportionment of
administration
Total overheads
[4]
© UCLES 2021 9706/22/M/J/21

15
Assembly Finishing
Direct labour hours per month 1700 1400
Machine hours per month 2800 900
Direct labour rate per hour $8.40 $8.20
REQUIRED
(b) Calculate the overhead absorption rate for each production department to two decimal
places.
Assembly department
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Finishing department
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]

16
The company received an order from a customer. The following details are available:
Direct materials $1880

Direct labour:
Assembly department 11.5 hours
Finishing department 6.1 hours
Machine hours:
Assembly department 5.7 hours
Finishing department 2.4 hours
The company’s policy is to achieve a profit of 40% on selling price.
REQUIRED
(c) Prepare a statement to show the total selling price that T Limited will quote to the customer.
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
............................................................................................................................................. [7]
© UCLES 2021 9706/22/M/J/21

17
(d) State two possible causes of under absorption of overheads.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
(e) State what is meant by
(i) allocation of overheads
...........................................................................................................................................
..................................................................................................................................... [1]
(ii) apportionment of overheads
...........................................................................................................................................
..................................................................................................................................... [1]

18
Factory B
T Limited manufactures a single product in Factory B.
Marginal costing is used at this factory.
The following information is available for December 2020 when production was 9000 units which
included 1000 units produced using overtime.
$
Direct materials 72 000
Direct labour 74 000
Other variable costs 22 500
Fixed costs 65 000
Total costs 233 500
Direct labour overtime is paid at 1.25 times the normal rate.
All production was sold at $30 per unit.
The directors have been considering changing the supplier of materials. The following information
is available.
1 An overseas supplier is prepared to become the company’s sole supplier of materials at $5.50
per unit including delivery costs.
2 The supplier can only provide sufficient materials for the company to make 7600 units per
month.
3 The directors do not expect any other costs or the unit selling price to change. All production
will be sold.
© UCLES 2021 9706/22/M/J/21

19
REQUIRED
(f) Calculate the maximum profit per month that can be made if materials were obtained from the
overseas supplier and production limited to 7600 units.
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
............................................................................................................................................. [4]

20
(g) Advise the directors whether or not they should change the supplier. Justify your advice by
considering both financial and non-financial factors.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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............................................................................................................................................. [7]
[Total: 30]
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
© UCLES 2021 9706/22/M/J/21

* 9 1 1 8 5 1 5 0 1 9 *
ACCOUNTING 9706/21
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (DH) 201941/3
2
1 Suyin owns a small retail business. She has not maintained full accounting records.
REQUIRED
(a) State two reasons why the owner of a small business may decide not to maintain full
accounting records.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
Suyin has been informed that the accounting concepts of matching and prudence must be followed
when preparing financial statements.
REQUIRED
(b) Explain how these accounting concepts are applied when a business prepares financial
statements.
Matching
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Prudence
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
© UCLES 2021 9706/21/M/J/21

3
Suyin has provided the following information.
1 On 1 August 2019 the business’s assets and liabilities included:
$
Fittings and equipment at valuation 18 500
Inventory 11 440
Other payables: shop rent 510
Other receivables: insurance 290
2 Summary of bank statements for the year ended 31 July 2020.
$
Receipts
Proceeds from the sale of equipment (net book value $490) 550
Payments
Drawings 24 070
Shop rent 3 580
Carriage inwards 610
Insurance 2 950
Trade payables (after deducting 2.5% cash discounts) 46 800
3 Cash account for the year ended 31 July 2020.
$ $
Balance b/d 420 Bank 79 480
Cash sales 96 000 Wages 15 430
Purchases 1 320
Balance c/d 190
96 420 96 420
Balance b/d 190
4 During the year ended 31 July 2020
Goods had been returned to suppliers, $1280.

All sales were made on a cash basis.
5 At 31 July 2020
Suppliers were owed $4560.

Inventory was valued at $18720.
Fittings and equipment was valued at $15 860.

4
REQUIRED
(c) Calculate total purchases for the year ended 31 July 2020.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
(d) Prepare the income statement for the year ended 31 July 2020.
Workings:
© UCLES 2021 9706/21/M/J/21

5
Suyin
Income statement for the year ended 31 July 2020
$ $
........................................................................................... ..................... .....................
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[10]

6
Suyin has the opportunity to move her business to a busier location. The following information is
available.
1 The rent of the new shop premises will be three times the current annual charge.
2 Annual sales could be increased by 10% on the figure for the year ended 31 July 2020.
3 She intends to achieve a gross margin of 60%.
4 She will need to apply for a bank loan of $16 000 at 8% per annum interest to cover the costs
of changing location. The loan will be repayable over a two-year period.
5 Discounts received will no longer be available.
6 All other expenses will remain unchanged and there will be no sources of additional income.
REQUIRED
(e) Calculate how much profit per annum will be made if Suyin moves her business to the new
location.
$
Revised gross profit
Revised profit for the year

[4]
© UCLES 2021 9706/21/M/J/21

7
(f) Advise Suyin whether or not she should change her business’s location. Justify your answer
considering both financial and non-financial factors.
...................................................................................................................................................
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............................................................................................................................................. [5]
[Total: 30]

8
2 Karis and Lara are in partnership.
(a) State two reasons why partners may each have a separate capital account and current
account.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
Karis and Lara share profits and losses in the ratio 3:2 respectively.
They decided to admit Megan as a partner on 1 February 2021.
On that date the statement of financial position was as follows.
Assets $ $
Non-current assets at net book value
Motor vehicles 43 500
Furniture and equipment 16 200
59 700
Current assets
Total assets 78 110

Capital accounts
Karis 35 700
Lara 24 500
60 200
Current accounts
Karis 3 110
Lara (540)
2 570
Current liabilities
15 340
© UCLES 2021 9706/21/M/J/21

9
The partners agreed the following on Megan’s admission.
1 Current accounts would no longer be used.
2 Karis took over a motor vehicle for private use with a net book value of $18 400 at an agreed
value of $15 000.
3 Goodwill was valued at $48 000. No goodwill account was to be maintained in the partnership’s
books of account.
4 Profits and losses are to be shared in the ratio Karis : Lara : Megan 7 : 5 : 3 respectively.
5 Megan introduced a motor vehicle valued at $23 000 as part of her capital contribution.
After making the adjustments, it was agreed that Megan should pay sufficient cash into the
business bank account to make her total capital equal to that of Lara.
REQUIRED
(b) Prepare, on the next page, the capital accounts of the partners to record the admission of
Megan as a partner.

Capital accounts
Karis Lara Megan Karis Lara Megan
© UCLES 2021
$ $ $ $ $ $
10
9706/21/M/J/21
[8]
11
In the new partnership agreement Lara is to receive a salary of $12 000 per annum.
Megan is hoping to achieve a 25% return on her capital employed (ROCE).
REQUIRED
(c) Calculate the minimum profit the partnership must make in order for Megan to achieve this
ROCE.
...................................................................................................................................................
...................................................................................................................................................
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...................................................................................................................................................
............................................................................................................................................. [3]
(d) State two possible disadvantages to existing partners of admitting a new partner.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
[Total: 15]

12
3 C Limited’s statement of financial position at 31 December 2020 is shown with comparative figures
at 31 December 2019.
At 31 December
2020 2019
$000 $000
Assets
Non-current assets 2621 2217
Current assets
Inventory 61 47
Trade and other receivables 29 38
Cash and cash equivalents 2 31
92 116

Equity
Ordinary shares 1800 1200
Share premium - 220
Revaluation reserve 300 -
Total equity 2501 2044
8% Debentures (2025) 160 250
Current liabilities
Trade and other payables 52 39
Total equity and liabilities 2713 2333
1 The company’s issued capital consists of ordinary shares of $0.25 each.
2 On 1 January 2020 the directors revalued the property upwards by $300 000.
3 There were no purchases or disposals of non-current assets during the year.
4 On 1 July 2020 the directors made a bonus issue of ordinary shares.
5 There were no other changes in share capital during the year.
REQUIRED
(a) Explain two reasons for making a bonus issue of shares.
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
© UCLES 2021 9706/21/M/J/21
13
(b) Calculate the number of bonus shares issued on 1 July 2020.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
(c) Prepare the journal entry recording the bonus issue on 1 July 2020. A narrative is required.
Journal
Dr Cr
$000 $000
[4]
(d) Identify three factors that directors of a company should consider when deciding on the
amount of a proposed dividend.
1 ................................................................................................................................................
2 ................................................................................................................................................
3 ................................................................................................................................................
[3]
The directors of C Limited wish to propose a dividend of $0.01 per share on all shares in issue at
31 December 2020.
REQUIRED
(e) Calculate the amount of the proposed dividend.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
[Total: 15]
14
4 P Limited is a manufacturing business.
REQUIRED
(a) Define the following terms:
(i) Direct costs
...........................................................................................................................................
..................................................................................................................................... [1]
(ii) Stepped costs
...........................................................................................................................................
..................................................................................................................................... [2]
(b) State the formula for finding the margin of safety in units.
...................................................................................................................................................
............................................................................................................................................. [1]
(c) Explain the term ‘limiting factor’ when using marginal costing.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [2]
© UCLES 2021 9706/21/M/J/21

15
P Limited manufactures a single product. The factory has the capacity to make 40 000 units per
month. All production is sold.
The following budgeted information is available for December 2021.
Sales 30 000 units at $48 per unit

Direct materials per unit 4.5 m at $4 per metre
Direct labour per unit 3 hours at $8.50 per labour hour
Fixed costs $112 000
The company has a target profit of $40 000 per month.
REQUIRED
(d) Calculate the number of units to be sold for the company to achieve its target profit for
December 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [3]

16
(e) Prepare a budgeted marginal cost statement for December 2021.
Budgeted marginal cost statement for December 2021
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
The directors have been told that demand for their product is likely to fall in future months. They
are considering two proposals: Proposal A and Proposal B.
Proposal A
Produce a superior version of the product.
Sales 27 000 units per month at $57 per unit.

Direct materials The same quantity of material per unit as currently used,
but the price per metre would increase by 7.5%.
Direct labour The rate would increase to $9.25 per hour and each unit
would take 3.4 hours to make.
Additional fixed Extra machinery costing $75 000 will be required.
costs Machinery is depreciated at 20% per annum using the
straight-line method.
A loan would be required to finance the full cost of the

machinery. Interest rates are currently 8% per annum.
© UCLES 2021 9706/21/M/J/21

17
REQUIRED
(f) Calculate the monthly profit to be made from proposal A.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [9]
Proposal B
The directors are also considering a proposal to produce a simpler version of the product with a
selling price of $37 per unit. This proposal would require 76 000 labour hours per month. They
estimate that 38 000 units per month could be sold.
This will produce a monthly profit of $49 500.

18
REQUIRED
(g) Advise the directors which proposal they should choose. Justify your choice by considering
both financial and non-financial factors.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [7]
[Total: 30]
© UCLES 2021 9706/21/M/J/21

* 9 8 0 2 8 1 5 4 3 8 *
ACCOUNTING 9706/22
Paper 2 Structured Questions February/March 2021
1 hour 30 minutes
INSTRUCTIONS
INFORMATION
DC (CJ) 201861/3
2
1 Faraz, Javed and Leah were in partnership. Their agreement included the following terms:
1 Interest on drawings to be charged at 5% on total drawings for the year.
2 Interest at 12% per annum to be provided on fixed capitals.
3 Javed to receive a salary of $9000 per annum.
4 Remaining profits and losses to be shared in the ratio Faraz, Javed and Leah, 4 : 3 : 3
respectively.
The following information was available for the year ended 31 December 2020.
Faraz Javed Leah

$ $ $
Balances at 1 January 2020
Capital accounts 80 000 60 000 50 000
Current accounts 3 400 credit 2 900 debit 1 700 debit
For the year ended 31 December 2020
Drawings 22 400 17 200 20 200
The profit for the year ended 31 December 2020, before appropriation, was $31 500.
REQUIRED
(a) State two reasons why partnership agreements sometimes include a provision to charge
interest on drawings.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
© UCLES 2021 9706/22/F/M/21

3
(b) Prepare the appropriation account for the year ended 31 December 2020.
Faraz, Javed and Leah

Appropriation account for the year ended 31 December 2020
$ $
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................
........................................................................................... ..................... .....................

[5]

4
(c) Prepare Javed’s current account for the year ended 31 December 2020.
Javed
Current account
$ $
[6]
© UCLES 2021 9706/22/F/M/21

5
On 1 January 2021, Javed retired from the partnership. It was agreed that on this date:
1 Javed would keep some equipment for personal use. The equipment had a net book value of
$15 400 and was to be transferred to Javed at a value of $13 000.
2 Other non-current assets were to be revalued upwards by $24 000.
3 Goodwill was valued at $50 000. A goodwill account was not to be maintained in the
partnership’s books.
REQUIRED
(d) Explain the meaning of goodwill.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
(e) Explain why a valuation of goodwill could be made when a partner retires.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]

6
(f) Prepare a statement to show the amount due to Javed on his retirement from the partnership.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[6]
© UCLES 2021 9706/22/F/M/21

7
Faraz and Leah continued in partnership sharing profits and losses equally. They discussed
how best to finance the amount due to Javed on his retirement from the partnership. They are
considering two options.
Option 1: Take out a bank loan to cover the amount due.
Option 2: Admit a new partner whose capital contribution would cover the amount due.
REQUIRED
(g) Advise the partners which option they should choose. Justify your answer by discussing both
options.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[7]
[Total: 30]

8
2 Myra owns a delivery business. The following information is available about her business’s delivery
vehicles.
Vehicle Date of purchase Cost

$
A 1 August 2017 30 000
B 1 February 2018 36 000
C 1 June 2019 39 000
Vehicles are depreciated using the straight-line method at 20% per annum. Depreciation is
charged on a month-by-month basis. The business’s financial year end is 31 December.
REQUIRED
(a) Calculate the balance on the provision for depreciation of vehicles account at
31 December 2019.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
© UCLES 2021 9706/22/F/M/21

9
On 1 March 2020, Vehicle A was sold in part exchange for Vehicle D. Vehicle D cost $42 000 of
which $29 200 was paid by cheque.
REQUIRED
(b) Prepare the vehicle disposal account.
Vehicle disposal account
$ $
[5]

10
(c) Prepare the provision for depreciation of vehicles account for the year ended
31 December 2020.
Provision for depreciation of vehicles account
$ $
[3]
© UCLES 2021 9706/22/F/M/21

11
Businesses may use the revaluation method of depreciation for some of their non-current assets.
REQUIRED
(d) Explain one reason why some businesses may use the revaluation method of depreciation.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
(e) State how an annual depreciation charge is calculated using the revaluation method.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[1]
[Total: 15]

12
3 The directors of B Limited have provided the following information.
Assets $
Non-current assets 656 000
Current assets
Inventory 34 000
65 000
Equity
Issued share capital 500 000
Total equity 635 000
8% Debenture (2025) 50 000
50 000
Current liabilities
Cash and cash equivalents 17 000
36 000
Total liabilities 86 000
Total equity and liabilities 721 000
1 The company’s revenue for the year ended 31 December 2020 was $540 000 of which 60%
was on credit.
2 The company’s profit for the year was $80 000.
REQUIRED
(a) Calculate the following ratios at 31 December 2020.
(i) Current ratio (to two decimal places)
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[1]
© UCLES 2021 9706/22/F/M/21

13
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[1]
(iii) Return on capital employed (to two decimal places)
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[2]
The following ratios are available for 2019 along with comparative ratios for 2018.
At 31 December At 31 December
2019 2018
Current ratio 2.20 : 1 2.10 : 1
Trade receivables turnover 37 days 38 days
Return on capital employed 15.57% 14.32%
REQUIRED
(b) Compare the company’s position at 31 December 2020 with that of the previous two years in
regard to the following ratios:
(i) Current ratio
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[2]

14
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[2]
(iii) Return on capital employed
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[2]
(c) State two ways in which a company could improve its current ratio.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
© UCLES 2021 9706/22/F/M/21

15
Companies compare their financial performance with that of different businesses.
REQUIRED
(d) State three limitations of comparing the financial performance of different businesses.
1 ................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
3 ................................................................................................................................................
...................................................................................................................................................
[3]
[Total: 15]

16
4 K Limited produces goods at two sites and uses marginal costing.
At one site the company makes a single product. The following details are available.
Maximum capacity 14 500 units per month
Fixed costs $216 000 per month
$
Unit selling price 90
Costs per unit:
Direct materials 25
Direct labour 36
Other variable costs 11
REQUIRED
(a) Calculate the break-even point per month in units.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
(b) Define the term ‘margin of safety’.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
The directors have decided to make the following changes:
1 Reduce selling price by 2%.
2 Introduce a sales commission of $2 per unit on every unit sold in excess of 5000 units per
month.
3 Purchase direct materials in bulk and obtain a trade discount of 20%.
Buying direct materials in bulk will increase storage costs by $4000 per month.
Demand will be 98% of factory capacity.
© UCLES 2021 9706/22/F/M/21

17
REQUIRED
(c) Prepare a marginal costing statement to show the monthly profit based on these changes.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[6]
(d) Explain two advantages of using a system of marginal costing.
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]

18
At its other site the company makes three products: Product X, Product Y and Product Z. The
following details are available.
Product X Product Y Product Z

Contribution per unit $15 $20 $27
Machine hours per unit 1.5 2.5 3
Maximum monthly output in units 600 300 200
Fixed costs per month are $14 100.
Each month the company plans to work to full capacity producing the maximum output of each
product.
In August 2021 only two-thirds of the month’s machine hours will be available.
REQUIRED
(e) Calculate the machine hours available in August 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
The company has a regular order to supply one major customer with 50% of the output of each
product per month.
Two options are being considered to deal with the shortage of machine hours.
Option 1: The finance director has recommended the company makes the maximum profit possible
in August 2021 and if necessary not complete all of the major customer’s order.
Option 2: The sales director has recommended that the company should ensure it fulfils the major
customer’s order.
© UCLES 2021 9706/22/F/M/21

19
REQUIRED
(f) Calculate the profit or loss for August 2021 based on:
(i) Option 1
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[4]
(ii) Option 2
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
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...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[5]
20
(g) Advise which option the company should choose. Justify your advice by discussing both
options. (Consider both financial and non-financial factors.)
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[5]
[Total: 30]
© UCLES 2021 9706/22/F/M/21

*0123456789*
ACCOUNTING9706/02
Paper 2 Fundamentals of Accounting For examination from 2023
SPECIMEN PAPER 1 hour 45 minutes
INSTRUCTIONS
INFORMATION

2
1 Hamid and Jamila have been in partnership for several years and do not have a partnership
agreement. They do not maintain full accounting records.
(a) (i) State two disadvantages to Hamid and Jamila of trading as a partnership rather than as
sole traders.
1 .........................................................................................................................................
............................................................................................................................................
2 .........................................................................................................................................
............................................................................................................................................
[2]
(ii) State three items other than the profit and loss sharing ratio which may be included in a
partnership agreement.
1 .........................................................................................................................................
2 .........................................................................................................................................
3 .........................................................................................................................................
[3]
© UCLES 2020 9706/02/SP/20

3
The partners have provided the following information for the year ended 31 December 2020.
At 31 December At 1 January
2020 2020
$ $
Administrative expenses owing – 472
Administrative expenses prepaid 291 –
Furniture and fittings at carrying value 26 580 24 720
Inventory 9 322 7 430
Insurance prepaid – 390
Trade receivables 12 930 14 380

$
Irrecoverable debt written off 336
Receipts from trade receivables 164 650
Returns inwards 1 084
All sales are made on credit.
(b)
Calculate the revenue for the year ended 31 December 2020.
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
.............................................................................................................................................. [3]
© UCLES 2020 9706/02/SP/20 [Turn over

4
The following information is also available for the year ended 31 December 2020.
$
Administrative expenses paid 8 228
Insurance paid 1 090
Purchase of additional furniture and fittings 4 500
Purchases of goods for resale 112 152
Receipts from the disposal of furniture and fittings 575
Rent of business premises 14 500
Staff wages 10 230
All goods are sold with a mark-up of 50%.
During the year Hamid took goods for his own use but no record was made of their value.
Furniture and fittings with a carrying value of $800 were disposed of during the year.
(c)
Prepare the partnership statement of profit or loss for the year ended 31 December 2020.
Workings:
© UCLES 2020 9706/02/SP/20

5
Hamid and Jamila

Statement of profit or loss for the year ended 31 December 2020
$ $
....................................................................................................... .................... ....................
....................................................................................................... .................... ....................
....................................................................................................... .................... ....................
....................................................................................................... .................... ....................
....................................................................................................... .................... ....................
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....................................................................................................... .................... ....................
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[14]

6
Hamid and Jamila have been advised that their business could be improved if they were to keep
full accounting records. They are considering two options.
Option 1: To employ a part-time book-keeper at a salary of $5000 per year.
Option 2: To purchase a new computerised accounting package to maintain all the financial
records. This will cost $12 000 and will be written off over 5 years. Hamid has said
he will loan $12 000 to the business, but will require interest of 5% per year on the
loan.
(d) (i) Calculate Jamila’s share of profit or loss for both Option 1 and Option 2.
Option 1 ..............................................................................................................................
............................................................................................................................................
............................................................................................................................................
Option 2 ..............................................................................................................................
............................................................................................................................................
............................................................................................................................................
[3]
(ii) Advise the partners which option they should choose. Justify your answer.
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
....................................................................................................................................... [5]
[Total: 30]
© UCLES 2020 9706/02/SP/20

8
2 Sergio is a sole trader. His book-keeper prepares regular bank reconciliation statements.
(a)
State two benefits of preparing regular bank reconciliation statements.
1 .................................................................................................................................................
....................................................................................................................................................
2 .................................................................................................................................................
....................................................................................................................................................
[2]
Sergio is preparing his financial statements to 31 May 2020.
His bank statement shows the following for the first week of June 2020:
Date Details Debit Credit Balance

2020 $ $ $
31 May Balance 12 350 Debit
1 June Cash and cheques banked 1 211 11 139 Debit
2 June Cheque 1681 527 11 666 Debit
Cheque 1682 361 12 027 Debit
Cash and cheques banked 2 170 9 857 Debit
3 June Cheque 1683 1 260 11 117 Debit
4 June Standing order adjustment 225 10 892 Debit
6 June BACS Sofia 536 11 428 Debit
7 June Balance 11 428 Debit
1 The deposits on 1 June and 2 June both relate to amounts received and recorded by Sergio
in his cash book for the month of May.
2 The last cheque that Sergio issued in May 2020 was number 1683.
3 The adjustment on 4 June 2020 related to a standing order debited by the bank in error on
27 May 2020.
4 On 5 June 2020 Sergio received a letter from the bank that had been delayed in the post. The
letter stated that on 29 May 2020:
bank charges of $90 and bank interest of $120 had been debited to his account
an amount of $360 had been received electronically from Alvaro, a credit customer.
© UCLES 2020 9706/02/SP/20

9
(b)
Prepare Sergio’s bank reconciliation statement at 31 May 2020 to show the balance in the
cash book before it is updated.
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
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....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
............................................................................................................................................... [7]
10
Sergio’s bank manager has asked Sergio to repay the overdraft within the next three months.
Sergio has identified two possible options.
Option 1: Miguel, a close friend, would provide Sergio with a loan of $10 000 repayable in five
annual instalments of $2500.
Option 2: Sergio could take a seven-year bank loan from another bank for $16 000. This bank
would require annual interest of $1000 and security for the loan.
(c)
Explain the benefits and drawbacks to Sergio of each option.
Option 1
benefits ......................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
drawbacks .................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
Option 2
benefits ......................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
drawbacks .................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
[6]
[Total: 15]
© UCLES 2020 9706/02/SP/20

11
3 The directors of AB plc have decided to make a rights issue and a bonus issue of ordinary shares.
(a)
Identify two advantages to the company of:
(i) a rights issue of ordinary shares
1 .........................................................................................................................................
............................................................................................................................................
2 .........................................................................................................................................
............................................................................................................................................
[2]
(ii) a bonus issue of ordinary shares.
1 .........................................................................................................................................
............................................................................................................................................
2 .........................................................................................................................................
............................................................................................................................................
[2]
The following information is available for AB plc at 1 January 2020.
Equity $
Ordinary share capital ($0.50 shares) 120 000
AB plc has adopted the revaluation model for measuring the value of its non-current assets.
During the year ended 31 December 2020 the following took place:
1 July The directors made a rights issue of one ordinary share for every 6 held at a
premium of $0.05 per share. The issue was fully subscribed.
1 August he directors made a bonus issue of 1 ordinary share for every 5 held on that
T
date. They wished to keep the reserves in their most flexible form.
30 September T
he directors paid an interim dividend of $0.08 per share on all shares in issue at
that date.
31 December L
and which had cost $120 000 is now only worth $100 000. This has not been
adjusted in the books of account.
The company made a profit for the year ended 31 December 2020 of $18 000.

12
(b)
Prepare the ledger accounts to record these transactions.
Ordinary share capital account
$ $
Share premium account
$ $
Retained earnings account
$ $
[11]
[Total: 15]
© UCLES 2020 9706/02/SP/20

13
4 Z Limited is a manufacturing company. It operates two production departments and two service
departments. The costs are allocated to each department as follows:

Machining Finishing Stores Canteen
$ $ $ $
Indirect labour 253 000 340 100 52 000 78 000
Other indirect overhead costs 205 000 225 000 80 000 92 000
Total indirect costs 458 000 565 100 132 000 170 000
The costs of the service departments are to be apportioned to the other departments as follows:
Canteen in proportion to the number of employees

Stores in proportion to the number of stores requisitions
The following information is available:

Number of employees 5 9 3 1
Direct labour hours 15 000 40 000
Machine hours 45 000 25 000
Number of stores requisitions 6 300 7 200
(a)
Apportion the service department costs by completing the table.

$ $ $ $
Total indirect costs 458 000 565 100 132 000 170 000
Reapportionment of canteen costs
Reapportionment of stores
Total apportioned costs
[6]
(b)
Calculate, to two decimal places, a suitable overhead absorption rate for each of the
production departments.
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
............................................................................................................................................... [4]

14
Z Limited has been approached by a customer to quote for one of their products. This will require
the following:
Direct materials 20 kilos at $5 per kilo

Direct labour 8 hours at $9 per hour
Direct labour hours and machine hours required in each department will be:
Machining Finishing
Direct labour 3 hours 5 hours
Machine time 2 hours 20 minutes
It is the company’s policy to achieve a gross margin of 40% on all its products.
(c)
Calculate the total price to quote to the customer.
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
............................................................................................................................................... [6]
© UCLES 2020 9706/02/SP/20

15
The customer has said they will buy the goods from Z Limited, but at a price which will earn Z
Limited a gross margin of 25%.
(d)
Advise the directors whether or not they should accept the offer. Justify your answer.
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
............................................................................................................................................... [5]
Z Limited operates a second factory. It uses both direct labour hours and machine hours to absorb
its factory overheads. The cost accountant has suggested that a single factory-wide overhead
absorption rate should be used instead.
(e)
Advise the directors whether or not they should make this change. Justify your answer.
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
............................................................................................................................................... [5]
© UCLES 2020 9706/02/SP/20

16
(f) Discuss the impact of over-absorption of overheads on the profits of a manufacturing

business.
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
....................................................................................................................................................
............................................................................................................................................... [4]
[Total: 30]
© UCLES 2020 9706/02/SP/20

ACCOUNTING9706/01
Paper 1 Multiple Choice For examination from 2023
SPECIMEN PAPER 1 hour

*0123456789*

Soft clean eraser
INSTRUCTIONS
● There are thirty questions on this paper. Answer all questions.
● For each question there are four possible answers A, B, C and D. Choose the one you consider correct
● Follow the instructions on the multiple choice answer sheet.
● Write in soft pencil.
● Write your name, centre number and candidate number on the multiple choice answer sheet in the
● Do not use correction fluid.
INFORMATION
● Each correct answer will score one mark.
● Any rough working should be done on this question paper.

2
1 In financial statements, inventories are valued at the lower of cost and net realisable value in the
statement of financial position.
Which accounting concept is being applied?
A duality
B historic cost
C matching
D prudence
2 Which statements describe advantages of a computerised accounting system?
1 It allows for large amounts of data to be stored.
2 Mistakes in entering data are never made.
3 The system can be installed with minimum cost.
4 The trial balance always balances.
A 1 and 2
B 1 and 4
C 2 and 3
D 2 and 4
3 What would be treated as part of the capital expenditure of the purchase of a building?
1 cost of purchase
2 installation of air conditioning needed for the machinery in the building
3 insurance of the building
A 1, 2 and 3 B 1 and 2 only C 1 only D 2 and 3 only
© UCLES 2020 9706/01/SP/23

3
4 The table shows parts of the statements of financial position of a business.
2020 2019
$ $
non-current assets (at cost) 245 000 190 000
less accumulated depreciation 90 000 75 000
net book value 155 000 115 000
Other information for the financial year 2020 is as follows:
$
depreciation charged 40 000
new non-current assets purchased (at cost) 105 000
loss on sale of non-current assets 10 000
Which amount was received from the sale of the non-current assets?
A $15 000 B $25 000 C $35 000 D $50 000
5 A business has a financial year end of 31 December. It purchased a motor vehicle on 1 January
2017 for $24 000. The estimated useful life of the motor vehicle was four years. The estimated
residual value at the end of four years was $8000.
The business depreciates motor vehicles at 25% per year using the reducing balance method. No
depreciation is charged in the year of disposal.
The motor vehicle was sold on 31 July 2020 for $12 000.
What was the profit on the sale of the motor vehicle?
A $1875 B $4000 C $5250 D $8000

4
6 A business’s suspense account appears as follows.
$ $
salaries 150 opening balance 100
sales 50
150 150
Which statements are correct?
1 The salaries account had been overcast by $150.
2 The sales account had been overcast by $50.
3 Total debits had been $100 less than total credits in the trial balance.
A 1 and 2 B 1 only C 2 and 3 D 3 only
7 In statement of profit or loss carriage outwards of $5000 has been treated as carriage inwards.
Carriage inwards of $3000 has been treated as carriage outwards.
What effect do these errors have on the profit?
gross profit profit for the year

A overstated by $2000 understated by $2000
B overstated by $8000 no effect
C understated by $2000 no effect
D understated by $8000 overstated by $8000
8 A bank statement shows a credit balance of $1500.
A payment of $500 and a receipt of $1250 were included in the cash book but have not yet
appeared on the bank statement.
Bank interest payable of $1100 had been correctly recorded in the cash book but due to a bank
error had been recorded in the bank statement as $1000.
What is the cash book balance?
A $650 B $850 C $2150 D $3350
© UCLES 2020 9706/01/SP/23

5
9 In which book of prime entry is the contra between the sales ledger control account and the
purchases ledger control account recorded?
A cash book
B general journal
C purchases journal
D sales journal
10 A book-keeper reconciles the control accounts with the sales and purchases ledgers.
Which errors are identified in this way?
1 A figure was transposed when copied from a book of prime entry to a personal account.
2 An incorrect amount was entered in a book of prime entry.
3 A total in a book of prime entry was incorrect.
4 A transaction was omitted from a book of prime entry.
A 1, 2 and 3 B 1, 2 and 4 C 1 and 3 only D 2 and 4 only
11 The draft profit for the year for a sole trader was $108 000 before the following were taken into
account.
1 An accrual of $600 for repairs had been treated as a prepayment.
2 Depreciation of non-current assets had been undercharged by $2000.
3 The allowance brought forward for irrecoverable debts was $1850. The allowance to carry
forward should be $2250.
What was the correct profit for the year?
A $104 400 B $105 200 C $109 000 D $111 600
12 A company received interest of $8800 during the financial year. Interest of $700 was due to be
received at the beginning of the year and $850 at the end of the year.
Which entry appeared in the interest received account to make the transfer to the statement of
profit or loss?
A $8650 credit B $8650 debit C $8950 credit D $8950 debit

6
13 Katrina started a business on 1 January 2020. For the year ended 31 December 2020, the
following information is available.
$
drawings 53 500
profit for the year 62 700
revenue 1 500 000
expenses 875 000
What was the cost of sales for the year?
A $562 300 B $571 500 C $678 000 D $687 700
14 What are advantages to a sole trader of forming a partnership?
1 Losses can be shared by all partners.
2 More capital may be available to the business.
3 Profits will be greater than those of a sole trader.
4 There may be disagreements between partners.
A 1 and 2
B 1 and 3
C 2 and 3
D 3 and 4
15 Smith and Jones are in partnership sharing profits and losses in the ratio 3 : 2 respectively.
Profit for the year was $152 000.
Smith was charged interest on drawings of $1650. Jones had a partnership salary of $40 000.
What was Smith’s share of the residual profit?
A $66 210 B $68 190 C $114 210 D $116 190
16 There are three partners in a partnership.
The total of their current accounts at the start of the year was $18 000 and at the end of the year is
$32 000.
Total drawings for the year amount to $22 000 and total of partners’ salaries are $13 000.
What is the profit for the year?
A $5000 B $14 000 C $23 000 D $36 000
© UCLES 2020 9706/01/SP/23

7
17 Which statement about rights issues is correct?
A These shares can be offered to anyone.
B These shares can only be offered to existing shareholders.
C These shares cannot be sold at a premium.
D These shares cannot be sold at less than the market price.
18 A company’s profit from operations has increased by 10% in a year, whilst its gross profit has only
increased by 5%.
Which factors could explain this?
1 a decrease in distribution costs
2 a decrease in finance costs
3 an increase in rent received
4 an increase in selling prices
19 A trial balance on 31 December 2020 showed the following information:
$
ordinary share capital ($1 shares) 500 000
On 1 January 2021 the directors created a general reserve of $70 000. At the same time 200 000
ordinary shares were issued for $300 000.
By which amount did the total reserves increase on 1 January 2021?
A $100 000 B $170 000 C $300 000 D $370 000
20 The following information is given in the financial statements of a limited company:
$
ordinary shares 1 200 000
general reserve 120 000
8% debentures 400 000
What is the value of total equity?
A $1 910 000 B $2 030 000 C $2 310 000 D $2 430 000

8
21 The table shows year-end information for a company.
statement of profit or loss statement of financial position

$ $
profit from operations 14 000 5% debenture 2030 30 000
finance costs (1 500) ordinary share capital 70 000
loss on disposal of non-current asset (2 500) share premium account 15 000
profit for the year 10 000 retained earnings 35 000
What is the return on capital employed (ROCE)?
A 6.7% B 8.3% C 9.3% D 11.7%
22 A company provided the following information:
$
revenue for the year 390 000
year-end non-current assets at cost 260 000
year-end accumulated depreciation 65 000
What was the non-current asset turnover?
A 0.5 times B 0.67 times C 1.5 times D 2 times
23 A garage owner paid the following costs:
1 garage equipment repairs
2 mechanics’ wages
3 rent paid for garage premises
4 spare parts used to repair vehicles
Which of these are direct costs?
A 1, 2, 3 and 4
B 1, 2 and 3 only
C 1 and 3 only
D 2 and 4 only
© UCLES 2020 9706/01/SP/23

9
24 A business provided the following information:
month number of total overheads

labour hours $
February 64 000 918 000
March 76 000 1 062 000
What was the monthly fixed overhead cost?
A $144 000 B $150 000 C $768 000 D $912 000
25 What is the reason for calculating an overhead absorption rate in a manufacturing business?
A to control overhead expenditure
B to determine whether or not a supplier is overcharging
C to enable overheads to be apportioned to cost centres
D to establish costs per unit of product
26 Budgeted overhead expenditure was $180 000 and budgeted labour hours were 12 000. Actual
overheads amounted to $196 000 and actual labour hours were 12 200.
What was the under-absorption or over-absorption of overheads?
A $3000 over
B $3000 under
C $13 000 over
D $13 000 under
27 Why might a business use marginal costing?
1 to calculate break-even units
2 to decide on the most profitable use of limited resources
3 to decide whether to make a product or buy it
A 1, 2 and 3 B 1 and 2 only C 2 only D 3 only

10
28 How is margin of safety calculated?
A actual sales minus break-even sales
B actual sales minus expected sales
C actual sales minus cost of sales
D expected sales minus cost of sales
29 A business manufactures and sells a single product. The following information is available:
this year estimated

$ next year
$
selling price per unit 25 25
variable cost per unit 15 17
total fixed costs 80 000 84 000
The profit for this year is $20 000.
How many units must be sold to achieve the same profit next year?
A 10 000 B 10 500 C 12 500 D 13 000
30 A company wants to sell 50 000 units and achieve a profit of $600 000.
It has variable costs of $60 per unit and total fixed overheads of $400 000.
Which selling price per unit does the company need to charge?
A $64 B $68 C $72 D $80
© UCLES 2020 9706/01/SP/23

As Acc Booklet 23

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Syllabus

Cambridge International AS & A Level

‘We think the Cambridge curriculum is superb preparation for university.’

Copyright © UCLES September 2020

1 Why choose this syllabus? ................................................................................................................2

2 Syllabus overview .............................................................................................................................. 6

3 Subject content ................................................................................................................................. 10

4 Details of the assessment .............................................................................................................. 29

5 What else you need to know ......................................................................................................... 32

Important: Changes to this syllabus

1 Why choose this syllabus?

Following a Cambridge International AS & A Level programme

2 www.cambridgeinternational.org/alevel Back to contents page

Back to contents page www.cambridgeinternational.org/alevel 3

International recognition and acceptance

Learn more at www.cambridgeinternational.org/recognition

4 www.cambridgeinternational.org/alevel Back to contents page

Find out more at www.cambridgeinternational.org/support

Planning and preparation Teaching and assessment

• Cambridge Professional Development Qualifications

Supporting exams officers

Back to contents page www.cambridgeinternational.org/alevel 5

The aims are to enable students to:

Cambridge Assessment International Education is an education organisation and politically neutral.

6 www.cambridgeinternational.org/alevel Back to contents page

AS Level topics A Level topics

Financial 1.1 Types of business entity 3.1 Preparation of financial statements

Back to contents page www.cambridgeinternational.org/alevel 7

Multiple Choice 1 hour Financial Accounting 1 hour 30 minutes

Fundamentals of Accounting 1 hour 45 minutes Cost and Management Accounting 1 hour

Information on availability is in the Before you start section.

2 A Level (staged over two years)

Year 2 Complete the A Level  

8 www.cambridgeinternational.org/alevel Back to contents page

AO1 Knowledge and understanding

Weighting for assessment objectives

Assessment objectives as a percentage of each qualification

Assessment objective Weighting in AS Level % Weighting in A Level %

AO1 Knowledge and understanding 63 55

Total 100 100

Assessment objectives as a percentage of each component

Paper 1 Paper 2 Paper 3 Paper 4

AO1 Knowledge and understanding 70 60 54 44

Total 100 100 100 100

Back to contents page www.cambridgeinternational.org/alevel 9

Cambridge International AS Level candidates study topics 1.1–2.2.

Cambridge International A Level candidates study all topics 1.1–4.4.

1.1.1 Types of business entity

10 www.cambridgeinternational.org/alevel Back to contents page

1.2 The accounting system

1.2.1 The accounting system

Back to contents page www.cambridgeinternational.org/alevel 11

1.3 Accounting for non-current assets

1.3.1 Capital and revenue income and expenditure

1.3.2 Changing asset values

1.4 Reconciliation and verification

1.4.1 Reconciliation and verification

12 www.cambridgeinternational.org/alevel Back to contents page

1.4 Reconciliation and verification continued

1.4.2 Trial balance

1.4.3 Bank reconciliation statements

1.4.4 Control accounts

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1.5 Preparation of financial statements