2022 FEB P12 Q01

Cash and bank columns are balanced and brought forward to the next period.
Discount columns are only totalled as they are transferred to the discount allowed and received
accounts respectively.
2022 FEB P12 Q02

A is not the answer because repairs are the cost of running the business on a day-to-day
basis and are revenue expenditure.
B is not the answer because repainting is also a cost of running the business. (Maintenance
expense)
D is not the answer because this is also incurred in running the business on a daily basis.
Legal costs are incurred because of risk of bad debts.

C is the CORRECT answer because the legal cost incurred is only one off and will NOT be
incurred unless a new building is purchased, the frequency of which is very less and not part
of regular course of business.
2022 FEB P12 Q03

Cost = purchase price + capital expenditure -> 10000+900 = $10900

Depreciation = 10900 x 0.1 = $1090
Insurance expense = 800 x 3/12 = $200
Total expense = 1090+200 = $1290
so A
2022 FEB P12 Q04

Ownership = 2years
Depreciation = NBV x %

Year 1 -> $100000 x 0.20 = $20000

Year 2 -> (100000-20000) x 0.2 = $16000

Total = $36000

Disposal loss when NBV> sale proceeds

NBV = cost - total depreciation

100000-36000 = $64000

Loss = 64000-40000 = $24000

2022 FEB P12 Q05

Sales ledger control account only includes credit sales so point 1 wrong.
ONLY BAD DEBTS are recorded in sales ledger control account so point 2 is wrong.

Return inwards is recorded so D is correct.

The format of control account is available in the chapter guide.

2022 FEB P12 Q06

Bank error -> debit understated by 28142+28412 so it gets debit balance

Addition error = suspense account gets debit balance

correction of these errors =

28142+28412+450 = $57004

we will credit suspense account with this balance.

2022 FEB P12 Q07

BAD DEBTS IS AN EXPENSE.

2022 FEB P12 Q08

We will prepare an expense account (PAAP format)

A
2022 FEB P12 Q09

point 1 has no effect because we follow accrual accounting not cash based accounting.

point 3 has no effect because it has been RECORDED.

point 2 needs adjustment because inventory is overstated now.

2022 FEB P12 Q10

Depreciation (an expense) understated causes profit to be overstated so the difference must
be deducted.

Closing inventory is directly proportional to profit. Since understated, profit will also be
understated so it must be added to reflect the true inventory.

$250000
2022 FEB P12 Q11

NOTE YOU CAN ONLY HAVE EITHER PROFIT OR LOSS NOT BOTH IN THE CAPITAL ACCOUNT
2022 FEB P12 Q12

We need to work the inventory backwards. Whatever increases the inventory should be
deducted and vice versa.

1.) We should deduct this as these goods were not part of inventory at 31 December.
2.) These goods returned were NOT a part of inventory at 31 December and should be
deducted at cost
3.) We should record these damaged goods at the lower of cost or NRV.
Markup = GP on cost where GP = 25 , cost = 100 , Sales = 125
Profit = Margin x Sale value -> 25/125 of 900 = $180
Cost = Sale - Profit -> 900 - 180 = $720

NRV = selling price less selling expenses and completion costs

$500 vs $200
Loss of $300 so we deduct this difference to correct the overstatement done by recording at cost.

30000 -1500 - 720 - 300 = $27480

2022 FEB P12 Q13

Opening Capital + Additional Investment + Profit - Drawings = Closing Capital

where

Opening Capital = Assets - Liabilities.

Since we have been given the change in assets and liabilities this means we have been
given the difference between closing and opening capital

Therefore
Closing - Opening capital = (25000+10000-12500) = $22500

Profit = Closing capital - opening capital + drawings - additional investment

Profit = 22500 + 13000 - 20000 = $15500
2022 FEB P12 Q14

Start with what you know first. Points B , C and D are correct , therefore A must be wrong
2022 FEB P12 Q15

When a new partner is admitted, the old partners' capital account benefits from the
goodwill raised and gain on revaluation while it looses from goodwill eliminated in the
new profit-sharing ratio.

Therefore, for Q

Gain on revaluation = (480000-410000) x 0.5 = $35000

Goodwill raised in old profit sharing ratio for Q = $50000 x 0.5 = $25000

Goodwill eliminted in new profit sharing ratio for Q = $50000 x 0.4 = $20000

Net change = $35000+$25000-$20000 = $40000 increase

2022 FEB P12 Q16

Profit for the year less partner salary less interest on capital plus interest on drawings = profit for
distribution amongst partners.

52000 - 10000 + 0.2 x (20000) = 42000+400 = $42400

Partner residual profit share = 42400/2 = $21200

2022 FEB P12 Q17

2 is incorrect because rights issues are not a bookkeeping entry.

They result in money being received not paid. Reserves are not
utilized but increased in the issue of rights issue, unlike bonus shares.
2022 FEB P12 Q18

The revaluation reserve should be eliminated with $20000. Since the loss on revaluation is
$35000 , which is $15000 more than the reserve, this is debited to the retained earnings.
Dividends are paid from retained earnings.
Proposed dividend for this year is unpaid and doesn't affect retained earnings.
Profit increases retained earnings
So

142000 - 15000 - 40000 + 105000 = $192000

2022 FEB P12 Q19

Cash from issue of share = Issue price x shares

(0.5+0.25) x 500000
0.75 x 500000 = $375000

Remember bonus doesnt issue cash

and debenture is repaid via cheque if nothing mentioned

375000-100000+390000
275000+390000
= $665000
so B
2022 FEB P12 Q20

NCA turnover = SALES/NCA

Since purchasing NCA increases the denominator, the ratio will decrease so C
2022 FEB P12 Q21

ROCE = Operating profit / Capital Employed

Closing RE = Opening RE + Operating Profit - Dividends Paid + Finance costs

110000 = 82000+x-45000= profit = 73000

Operating profit = 73000 + debenture interest = 73000+8000 =$81000

ROCE = 81000/(300000+110000+100000) x100% = 15.88%

2022 FEB P12 Q22

Only fixed costs are stepped costs. These fixed costs remain same for a certain level of output.
and then increase. So 1 and 3 are correct.
2022 FEB P12 Q23

Basic pay = 15 x 8 = $120

Overtime (15 x 1.2) x 4 = $72
Bonus = 21 x 2 = $42

Total = $234
so D
2022 FEB P12 Q24

200 units sold and their cost =

50 x 500 = 25000
50 x 500 = 25000
100 x 525 = 52500
total = 102500

Profit = Sales Revenue - Cost =

900 x100 - 102500 = $77500 = C
2022 FEB P12 Q25

OAR = Budgeted Overhead/Budgeted Activity = 180000/6000 = $30 per machine hour

so C
2022 FEB P12 Q26

Over and under absorbed is the difference between the absorbed overhead and the actual
overhead. Therefore, over absorbed would be when the absorbed overhead > actual
overhead.

Therefore D
2022 FEB P12 Q27

Contribution to sales = (Sales Revenue - Variable Cost)/Sales Revenue

-> (85000-(30000+14000+12700))/85000 = 28300/85000 x100% = 33.29%
so B
2022 FEB P12 Q28

Direct labor required = 3x100 +6x100 = 900 hours

100 hours short so limiting

Direct material required = 2x100+4x100 = 600kg of X and 3x100 +

1x100 = 400kg of Y hence no shortage.

Only labour is the limiting factor as short so A

2022 FEB P12 Q29

Current break even point = (Fixed cost)/Contribution -> where

contribution = selling price less variable cost

= 21600/(100-40) = 360 units

New break even point = (21600x1.05)/60x1.1 = 343.6 = 344

units approximately.

Decrease by 360-344 = 16 units

2022 FEB P12 Q30

All of these are the disadvantages of budgetary control system.

More disadvantages are mentioned in the chapter guide.
2022 JUN P11 Q01

4 is wrong because trade discount is only shown on invoice - not part of the double entry book
keeping system.

2 is wrong because sales ledger only includes credit sales.

2022 JUN P11 Q02

4 because no sale takes place

matching -> to match cost of using asset against revenue earned

materiality -> since the item is of monetary value it is recorded.
prudence -> so that the non current asset is not overstated and profits are
not overstated.
2022 JUN P11 Q03

Cost to be depreciated = purchase price + delivery and installation costs

290000+10000 = $300000

depreciation in year 2019 = 0.2 x 300000 = $60000

Depreciation in year 2020 = 0.2 x 240000 = $48000
Disposal gain -> Proceeds - Net book value - disposal cost
205000 - (300000-108000) -5000 = $8000
2022 JUN P11 Q04

SLM Depreciation = cost-scrap/useful life -> 30000-5000/5 = 25000/5 = $5000 per annum
NBV at 4th year end -> 4x5000 =20000 depreciation, NBV = cost - accumulated depreciation so
30000-20000 = $10000
Proceeds > NBV = profit
So X>10000 = 200 profit
which means Proceeds - 10000 = 200
Proceeds =$10200
2022 JUN P11 Q05

All books of prime entries need to be checked.

2022 JUN P11 Q06

bank debit 800

suspense credit 800

error 1 -> debit understated by $800. It can be confusing but we are referring to money received.
from customer.
error 2-> doesn't appear in suspense account as both entries missing.
error 3 -> credit side understated by 2x9600 = $19200
error 4 -> debit side understated by 18200

Total opening balance = overall effect of these errors

Double entries in suspense to correct

Error 1 -> Bank Dr 800 , suspense credit 800

Error 3 -> Suspense Dr 9600 , Discount allowed credit 9600

Suspense Dr 9600 , Discount received credit 9600

Error 4 -> Sales Dr 18200 , Suspense credit 18200

The double entries consititute to a total value of -> 19200 (dr) -18200 (cr) - 800 (cr)

remaining is $200 credit so that is the opening balance.

2022 JUN P11 Q07

Both 2 and 3 are "extreme" statements and such statements are usually incorrect. Moreover,
a good approach to solve confusing MCQS is to look for correct options first.

We know 1 and 4 are correct so we can safely say answer is B

2022 JUN P11 Q08

Markup = gross profit over cost

so
GP = 50 , COST = 100 AND SALES = 150

so margin = 50/150

Gross profit = 50/150 x 21000 = $7000

Sales - (opening inventory + purchases - closing inventory) = gross profit

21000 - (15000+18000-x) = 7000

x = $19000
2022 JUN P11 Q09

You can revise this concept from the chapter guide for basic accounting
2022 JUN P11 Q10

Inventory should be valued at the lowest of cost or NRV so

overstated by 2400-1660 and this reduces the profit by $740

Rent receivable includes prepaid income which doesn't belong to this period so profit
overstated. 2 reduces profit by $400.

Increase in provision for doubtful debts is an expense and so will reduce profit by $890

Corrected profit = 57500 - 890 - 740 - 400 = $55470

2022 JUN P11 Q11

Closing inventory is directly proportional to profits. This means that understated closing
inventory means understated profits.
2022 JUN P11 Q12

We have to prepare a capital account.

Remember that opening net assets refers to opening capital and the same logic
applies for closing net assets.

Opening capital + additional investment + proft - loss - drawing = closing capital

10000+6000+2500-3200+profit = 24000
24000-15300 = x
x= $8700
2022 JUN P11 Q13

You should be sure to memorize this. Further implications of no partnership agreement are
mentioned in the chapter guides.
2022 JUN P11 Q14

P will not benefit from revaluation so his capital account balance will reflect only his total
investment of $30000
2022 JUN P11 Q15

gain on revaluation and credit balance of current account will be transferred to credit of capital
account.

gain on revaluation for Hary = 18000x1/3 = $6000

Capital account -> 40000+6000+8000 = $54000 to be paid

you can also prepare a capital account to show these transactions.

2022 JUN P11 Q16

bonus issue don't result in any equity being raised (no cash raised). Therefore, it has no
effect on total equity (capital and reserves) and the net assets.
2022 JUN P11 Q17

dividends dont reduce profits

debenture interest paid + accrued is the expense for the year.

so total expense that will reduce the profit is
10800+4000+1600 = $16400
2022 JUN P11 Q18

Retained earnings at 31 December =

Opening - dividend paid - transfer to general reserve + profit
50-(0.02x500) - 20 +80
= 110000

We can pay dividend from retained earnings and general reserve so

Maximum per share dividend payable = (110000+50000)/500000 = $0.32 per share
2022 JUN P11 Q19

2 and 4 are profitability ratios

2022 JUN P11 Q20

opening inventory = 1.5 of X = 30000 -> x = $20000.

Average inventory = 20000+30000/2 = 25000
Rate of inventory turnover = COGS/Avg inventory -> 8 = x/25000
x = $200000
Sales = COGS + Gross Profit
200000+200000 = $400000
2022 JUN P11 Q21

The others can not be directly attributed to the finished good being produced.
2022 JUN P11 Q22

factory supervisor is indirect cost! so ignored

2 x 1800 + 3.2 x 1000 = 6800

2022 JUN P11 Q23

units produced time = 170 x 15/60 = 42.5 hours of work done

Time actually worked = 35 hours
Time saved = 7.5 hours

Pay =
Normal -> 24 x 35 = 840
Bonus -> 7.5 x 0.25 x 24 = 45
Penalty = $5
Total = $880
2022 JUN P11 Q24

Over under absorption is with respect to production not sales so 3 is wrong.

2022 JUN P11 Q25

Absorbed overhead >Actual Overhead = overabsorbed and vice versa

OAR = budgeted cost/ budgeted activity
80000/5000 = $16

Absorbed = OAR x Actual Activity -> 16 x 4500 = $72000

72000-x = (12000)
x = 84000
2022 JUN P11 Q26

It is recommended to memorize all the formulas mentioned in the syllabus guide.

2022 JUN P11 Q27

Inventory cost as per absorption costing = Prime cost +Variable Production OH +

Fixed OH
4+13000/5000 = $6.6

Profit = Selling price less (produced units at cost - closing units at cost)
40000 - (4000x6.6) = $13600

OR

selling price per unit - cost per unit multiplied by units sold
4000 x 3.4 = $13600
2022 JUN P11 Q28

Target units = (Target Profit + Fixed Cost)/contribution

27000/12 = 2250 units
2022 JUN P11 Q29

Sale units = 2000x1.1 = 2200

Contribution = 0.95x50 = $47.5
Fixed costs old = contribution x units - profit -> 50x2000-60000=$40000
Fixed cost new = 40000x1.25 = $50000
Profit = 47.5 x 2200 - 50000 = $54500
2022 JUN P11 Q30

The whole purpose of budgeting is to increase efficiency, not to misrepresent efficiency. Therefore
2022 JUN P12 Q01

It is recommended that you memorize all the accounting concepts

mentioned in the basic accounting chapter guide.
2022 JUN P12 Q02

Reducing balance method charges lower depreciation than

SLM. Therefore the NBV and profit will be lower SLM.
2022 JUN P12 Q03

Depreciation = 10000 x 0.1 = $1000

Gain/Loss on disposal after depreciation = Proceeds - NBV

8500 - (10000-1000) = $500 loss

Currently because of error he has recorded a loss of 1500

This means his current profit is $1000 lower.

2022 JUN P12 Q04

Months of ownership = April 20 , May 20 , June 20 , July 20 , Aug 20 ,Sep 20 Oct 20 Nov
20 Dec 20 Jan 21 Feb 21 Mar 21 April 21 May 21 June 21 July 21 Aug 21 Sep 21 Oct 21
Nov 21 -> 20 months
20/12 x 0.1 x 6600 = $1100

NBV = 6600 -1100= $5500

Proceed - NBV =gain

x - 5500 = 350
x = $5850
2022 JUN P12 Q05

3 and 4 are incorrect as they are extreme statements and

do not make sense.

On the contrary 1 and 2 are the benefits of control

accounts.
2022 JUN P12 Q06

the first 2 items are only used to update cash book.

2022 JUN P12 Q07

The SOFP will reflect the balance of the corrected sales ledger control account.
In this case it will be 19100 + 1600 = $20700

(The $200 refers to an error in the sales ledger not the control account so ignored)
2022 JUN P12 Q08

NRV of damaged inventory

10x6 -20 = $40

Current cost = 6x 12 = $72

Loss = $32

So new cost of inventory

12 x 100 = $1200 - 32 = $1168

The unpaid inventory do not affect our valuation as they are our
ownership and bought on credit.
2022 JUN P12 Q09

prepaid telephone charges is not an expense as its benefit is yet to be received.

2022 JUN P12 Q10

1 reduces profit as it is an expense understated.

2 reduces profit because profit directly proportional to closing inventory and
closing inventory overstated meaning profit overstated.
3 reduces profit as it is an expense not recorded.

1000 - 5 - 20 -10 = $965000

NOTE WE ASSUME THAT TOTAL ASSETS ARE REFLECTING OUR PROFIT IN THE
AS THE EQUITY INCLUDES A PORTION OF PROFIT AND IT EQUALS THE TOTAL
ASSETS.
2022 JUN P12 Q11

We follow accruals based accounting not cash based. (Income less expenses)
2022 JUN P12 Q12

Markup on cost = gross profit / cost

so
GP = 25 , COST = 100 , SALES = 125

Margin = gp/sales -> 25/125

25/125 x 140000 = $28000 gross profit

cost of sales = 140000-28000 = $112000

COS = Opening inventory + purchases - drawings - closing inventory

112000 = 22000+120000-24500 - x
x= $5500
2022 JUN P12 Q13

Purchases => opening T/P + purchases + return outwards - payments = closing T/P
x = 27400-1000-22500+110600 = $115500
2022 JUN P12 Q14

It is recommended that you memorize the provisions of the Partnership Act.

2022 JUN P12 Q15

Goodwill raised for Noor = 60000 x 0.5 = $30000 (credit)

Loss on revaluation for Noor = 20000 x 0.5 = $10000 (debit)
Goodwill eliminated for Noor = 60000 x2/5 = $24000 (debit)

Total net decrease for Noor = 34000-30000 = $4000 debit

2022 JUN P12 Q16

Profit for appropriation is the profit after the deduction of all business expenses.
In this case the partners loan interest is a business expense.
2022 JUN P12 Q17

We use the profit for the year after interest and tax instead.
2022 JUN P12 Q18

ordinary shares , share premium and retained earnings are equity

400000+75000+50000 =525000
2022 JUN P12 Q19

bonus issue shares = 1/5 x 100000 = 20000 shares

right issue shares = 1/4 x 120000 = 30000 shares
share premium = 30000 x 0.5 = $15000

REMEMBER THAT BONUS ISSUE DOESN'T AFFECT EQUITY OR RAISE CASH

2022 JUN P12 Q20

GROSS PROFIT = 500000 x 25% = $125000

Cost of sales = 500000 -125000 = $375000

Opening inventory + purchases - closing = cost of sales

20000+365000-x = 375000
x = $10000
2022 JUN P12 Q21

Current assets - inventory / current liabilities

35000+23000+12000-35000/(15000+40000)

= 0.64
2022 JUN P12 Q22

Value of closing inventory is higher in FIFO so cost of sales decreases.

AVCO is lower than FIFO
2022 JUN P12 Q23

Stepped because paid a fixed 550 per week upto 10 workers. Total cost will
rise for every 11th worker supervised.

workers = 7700/100 = 77
Supervisors needed = 7.7 = 8

Cost = 550 x 8 = $4400

We cant have a supervisor in fraction! it must be rounded up.

2022 JUN P12 Q24

You can find further limitations in the absorption costing chapter guide.
2022 JUN P12 Q25

Difference in profits = cost per unit of closing inventory.

Where absorption valued at variable + fixed and marginal is valued only at
variable

Change in inventory = 4000 units

Since closing inventory is more absorption profit is higher

284000 - 4000Y = 250000

34000 = 4000Y

Y = $8.50
2022 JUN P12 Q26

When variables costs decrease, the contribution will increase and breakeven
units will decrease.
2022 JUN P12 Q27

Target units = (Target profit + FC)/Contribution

300000+500000 = 800000

800000/ (50-30) = 40000 units

2022 JUN P12 Q28

We need to prepare an optimum production plan

We calculate the contribution per limiting factor to proceed.

Contributions
M = 240 - (110+65+20) = $45
N = 280 - (120+90+30) = $40
O = 250 - (90+100+25) = $35
we assume material costs same ($1)
C/LF
M = 45/110 = 0.41
N = 40/120 = 0.33
O = 35/90 = 0.39

Based on ranking -> M , O finally N

So B
2022 JUN P12 Q29

contribution to sales ratio = contribution/sales

x-27/x = 0.4
x-27 = 0.4x
27 = 0.6x
x = $45

Break even = Fixed cost / Contribution

X/18 = 5000

X = $90000
2022 JUN P12 Q30

Budgets are for planning and controlling expenses.

2022 JUN P13 Q01

sale should only be recorded as being earned if the legal title of goods and services passes.
2022 JUN P13 Q02

Rent is a cost of running business on daily basis.

Repainting is a maintainence cost which is an expense on a daily basis.

Repair costs are also the cost of running business on daily basis.

So only A is correct.
2022 JUN P13 Q03

Month ownership = 24 months + 9 months = 33 months

depreciation = Year 1 -> 0.2 x 30000 = $6000

Year 2 -> 0.2 x 24000 = $4800
Year 3 -> 0.2 x 19200 x 9/12 = $2880 (2021 dep)

Incorrect NBV on disposal date = 30000- 10800 = $19200

Correct NBV on disposal date = 30000 - (6000+4800+2880)

NBV = $16320

Gain or loss

Proceeds - NBV = gain or (loss)

Proceed = (we calculate this from the error)

x = NBV + gain -> 19200+3000 = $22200

22200 - 16320 = $5880

Understated profit or gain by 5880 - 3000 = $2880

2022 JUN P13 Q04

2 years depreciation charged @10% of cost (2019 and 2020)

0.1 x Y x 2 = 0.2Y DEPRECIATION

Y-0.2Y = NBV = 0.8Y

Proceeds - NBV = gain

4000 - 0.8Y = 200

Y = cost = $4750
2022 JUN P13 Q05

A appears in purchase ledger.

B appears on the debit side
C appears on the debit side
2022 JUN P13 Q06

we know it is overdraft so we need to be mindful of the negative sign.

we start from cash book balance and add items that were present in bank
statement but not cash book to reflect the balance of bank statement.

-2915-180 (as credit balance understated) - 25 (since charges missing

and would increase negative balance) - 450 (since money received not
recorded it would increase the negative balance) +150 (since money
received recorded it lowers the credit balance)

-2915-180-25-450+150 = (3420) overdraft

Since overdraft is represented in cash book with credit and bank

statement compaes opposite sides it will have a debit balance.
2022 JUN P13 Q07

D results in credit side being understated.

A is incorrect because both debit and credit missing so trial balance

would still balance.
B is incrroect because it is reversal error and again trial balance
would still balance.
C is incorrect because it is an error of principle and trial balance
would still balance

REMEMBER THAT ALL THE 6 ERRORS THAT DO NOT AFFECT

TRIAL BALANCE WILL NOT RESULT IN THE CREATION OF
SUSPENSE ACCOUNT.
2022 JUN P13 Q08

We need to prepare an expense account.

PAAP format

770+x+6500 = 4000+820 + 76230

x = 73780
2022 JUN P13 Q09

1 - They are recorded in SOFP

2 - Shown in I/S
3 - Prepayments only appear in SOFP
2022 JUN P13 Q10

We know that T/R are recorded in the SOFP after deducting for bad debts and provisions.
Let us calculate the balance of T/R as per the control account. The difference between the control
account balance and the recorded balance will be our provision for the year.

93730-76500-150-80 = $17000

17000-16660 = $340
2022 JUN P13 Q11

2 is for partners

3 is for companies
2022 JUN P13 Q12

total revenue = cash + credit sales

cash sales = x - 12x2000 = 82000

x = $106000

Credit sales = prepare sales ledger control account

-> 25000+9500 = $34500

106000+34500 = $140500
2022 JUN P13 Q13

CAPITAL = assets - liabilities

Opening capital + profit - drawings = closing capital

Profit = closing capital + drawings - opening capital

x = (119000-11500-10000)+12000-(108000-7500)

x = $9000
2022 JUN P13 Q14

These events refer to partnership changes

2022 JUN P13 Q15

we need to prepare a realization account.

Debit all asset transfers and credit all liability transfers.
Finally credit all cash received and debit all cash paid.
The balance is the profit

600+50+40+6+20-40-654-80-20 = $78000 (we are getting negative answer because credit >
debit side and this indicates its a profit. We have shown the absolute value here only for
calculation purposes).

Share of profit = 78000x2/3 = $52000

2022 JUN P13 Q16

we prepare the appropriation account to calculate share of profit and then add his
other shares of salary and interest.

140000-18000-0.06 x (72000) x 2/10 = 23536 + 18000 + 1320 = 42856

2022 JUN P13 Q17

issue of shares at premium affects share capital and shar premium

Proposed dividends have no effect on SOCE.
2022 JUN P13 Q18

30000+5000-9000+6000 = $32000

we add all inflows and deduct all outflows

2022 JUN P13 Q19

dividends and reserve transfers are from retained earnings.

122000-7500-10000+32000 = $136500
opening less dividend paid less transfer to reserve plus profit

Revenue reserves are general reserves+ retained earnings

136500+10000 =$146500
2022 JUN P13 Q20

Option A because current assets increase overall by

$1000.

B incorrect because cash decreases so current ratio

decreases.

C is incorrect because liabiltiies increase and current

ratio increases assuming short term.

D is incorrect because cash increases and inventory

decreases by same amount.
2022 JUN P13 Q21

COGS/AVG INVENTORY

3500+2800 /2 = 3150 UNITS

cogs = Opening inventory + purchases - closing inventory

3500+21000-2800 = 21700

21700/3150 = 6.89 times

2022 JUN P13 Q22

Semi variable costs have a fixed component and the part of the amount
changes for a given
level of output
2022 JUN P13 Q23

AVCO = cost of goods available / goods available

330x40+288x50/330+288 = 44.66 per unit

44.66 x (330+288-500)= 5270

2022 JUN P13 Q24

Quoted Sale Price of 50000 units -> markup x cost of production

We need to remember that sales staff salaries and delivery vehicles and administrative
expenses are not production costs. They are office cost. So we deduct them first

Cost of production = 940000-360000-50000-70000 = $460000

140% of 460000 = $644000

Price of 500 units = 644000/50000 x 500

= $6440
2022 JUN P13 Q25

Remains fixed for a certain level and then increases.

2022 JUN P13 Q26

This helps in finding a universal contribution %

2022 JUN P13 Q27

FIXED COST/ CONTRIBUTION

480000/20 = 24000 UNITS

2022 JUN P13 Q28

current profit = (80-28) x 3500 = $182000 -fixed costs (70000) = 112000

new profit = 112+26 = 138000

units needed = 138000+70000 = 208000/52 = 4000 units

increase needed by 500.

WE HAVE TO USE THE CONTRIBUTION BECAUSE WE ARE USING MARGINAL

COSTING
2022 JUN P13 Q29

New Revenue = 350x1.2 = $420000

New variable costs = 180/350 x 420 = $216000
total fixed OH remain same at 198000

profit / loss = 420-216-198 =$6000

decrease by $51000
2022 JUN P13 Q30

all of these are the advantages of budgets.

 2
2022 NOV P11 Q01
1 For which items does the cash book act as a book of prime entry?

1 payments to suppliers
2 purchase of a non-current asset on credit
3 receipts from customers
4 returns outwards

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

2 Which statements about the reducing balance method of depreciation are correct?

1 The annual percentage depreciation rate changes each year.

2 The annual depreciation charge remains the same each year.
3 The annual percentage depreciation rate remains the same each year.
4 The annual4 depreciation
incorrect ascharge
we have
fallspurchase
each year.returns journal for that

A 1 and 2 B 21incorrect
and 4 as we
C have general
2 and 3 journal
D 3for that.
and 4

3 On 1 April 2021 a business purchased a machine for $120 000 with an estimated residual value
of $12 000.

On 1 July 2022 the machine was sold for $100 000.

Machinery is depreciated at the rate of 20% per annum using the straight-line method.
Depreciation is calculated for each month of ownership.

Which entry should be made in the provision for depreciation of machinery account for the
disposal of the machine?

A $21 600 credit

B $21 600 debit
C $27 000 credit
D $27 000 debit

4 Sue purchased a new machine. She depreciated it at a rate of 40% per annum using the
reducing balance method. After two years its net book value was $3600.

What was the purchase price of the machine?

A $7056 B $9216 C $10 000 D $22 500

© UCLES 2022 9706/11/O/N/22

 4 returns outwards

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

2022 NOV P11 Q02

2 Which statements about the reducing balance method of depreciation are correct?

1 The annual percentage depreciation rate changes each year.

2 The annual depreciation charge remains the same each year.
3 The annual percentage depreciation rate remains the same each year.
4 The annual depreciation charge falls each year.

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

3 On 1 April 2021 a business purchased a machine for $120 000 with an estimated residual value
of $12 000.

On 1 July 2022 the machine was sold for $100 000.

Machinery is depreciated at the rate of 20% per annum using the straight-line method.
3 each
Depreciation is calculated for and 4month
are correct because RBM is applied on
of ownership.
Book value which falls each year so depreciation
Which entry should be made in the
charge alsoprovision
falls andfora fixed
depreciation of machinery
percentage account for the
is charged.
disposal of the machine?

A $21 600 credit

B $21 600 debit
C $27 000 credit
D $27 000 debit

4 Sue purchased a new machine. She depreciated it at a rate of 40% per annum using the
reducing balance method. After two years its net book value was $3600.

What was the purchase price of the machine?

A $7056 B $9216 C $10 000 D $22 500

© UCLES 2022 9706/11/O/N/22

 4 The annual depreciation charge falls each year.

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

2022 NOV P11 Q03

3 On 1 April 2021 a business purchased a machine for $120 000 with an estimated residual value
of $12 000.

On 1 July 2022 the machine was sold for $100 000.

Machinery is depreciated at the rate of 20% per annum using the straight-line method.
Depreciation is calculated for each month of ownership.

Which entry should be made in the provision for depreciation of machinery account for the
disposal of the machine?

A $21 600 credit

B $21 600 debit
C $27 000 credit
D $27 000 debit

4 Sue purchased a new machine. She depreciated it at a rate of 40% per annum using the
reducing balance method. After two years its net book value was $3600.

What was the purchase priceowned

Months of the machine?
= 15 months
A $7056 B $9216
depreciation C $10 000 life or
= cost-scrap/useful D (cost-scrap)
$22 500 x SLM%

(120000-12000) x 0.2 x 15/12 = $27000

Since the asset was disposed the double entry will be

Accumulated depreciation (Debit)

Disposal (Credit)
© UCLES 2022 9706/11/O/N/22
 C $27 000 credit
D $27 000 debit

2022 NOV P11 Q04

4 Sue purchased a new machine. She depreciated it at a rate of 40% per annum using the
reducing balance method. After two years its net book value was $3600.

What was the purchase price of the machine?

A $7056 B $9216 C $10 000 D $22 500

X = cost
Year 1 -> 0.4 x X = 0.4X depreciation
Year 2 -> 0.4 x (X - 0.4X) = 0.24X
© UCLES 2022 9706/11/O/N/22
NBV AT YEAR 2 = X - (0.24X+0.4X) = 0.36X

Since NBV AT YEAR 2 = $3600

Therefore 0.36X = 3600

= $10000
 3
2022 NOV P11 Q05
5 Which items will be included in the sales ledger control account?

1 amounts owed by credit customers at the end of the previous month

2 provision for doubtful debts
3 total of the invoices sent out to credit customers
4 total of the sales returns journal

A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

6 Which error would affect the balancing of a trial balance?

A A payment for rent of $250 had been debited in the bank account. It had been entered
correctly in the rent account.
B A purchase
2 isinvoice for because
incorrect $259 was only
entered
badindebts
the purchases
appear injournal
SLCAasnot
$295.
its provision.
C A sales invoice for $180 was lost before it could be entered in the sales journal.
D A sales return of $500 was debited in the customer’s account and credited to the purchases
returns account.

7 The balance on a purchases ledger control account at 1 March was $71 300.

During the month ended 31 March, the following transactions took place.

payments to trade payables by cheque 133 200

credit purchases 149 000
purchases returns 3 000
cash purchases 2 000
contra with sales ledger 1 600

What was the trade payables balance at 31 March?

A $80 500 B $82 500 C $83 700 D $85 700

8 Which statements about accruals and prepayments are correct?

1 Accrued revenue at the end of an accounting period is recorded as a current asset.

2 Accrued revenue at the end of an accounting period is recorded as a current liability.
3 Prepaid expenses at the end of an accounting period are recorded as a current
asset.
4 Prepaid expenses at the end of an accounting period are recorded as a current
liability.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

© UCLES 2022 9706/11/O/N/22 [Turn over

 4 total of the sales returns journal

A 1, 2 and 3 B 1, 2 and 4 C 1, 3 and 4 D 2, 3 and 4

2022 NOV P11 Q06

6 Which error would affect the balancing of a trial balance?

A A payment for rent of $250 had been debited in the bank account. It had been entered
correctly in the rent account.
B A purchase invoice for $259 was entered in the purchases journal as $295.
C A sales invoice for $180 was lost before it could be entered in the sales journal.
D A sales return of $500 was debited in the customer’s account and credited to the purchases
returns account.

7 The balance on a purchases ledger control account at 1 March was $71 300.

During the month ended 31 March, the following transactions took place.

payments
error to trade
1 because payables
it results inby cheque
the credit side133 200understated.
being
credit purchases 149 000
B is incorrect because it is an error of original entry
Cpurchases returns
is incorrect 3 000omission.
because it is an error of complete
Dcash
is incorrect because it is an error of complete
purchases 2 000reversal.
contra with sales ledger 1 600

What was the trade payables balance at 31 March?

A $80 500 B $82 500 C $83 700 D $85 700

8 Which statements about accruals and prepayments are correct?

1 Accrued revenue at the end of an accounting period is recorded as a current asset.

2 Accrued revenue at the end of an accounting period is recorded as a current liability.
3 Prepaid expenses at the end of an accounting period are recorded as a current
asset.
4 Prepaid expenses at the end of an accounting period are recorded as a current
liability.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

© UCLES 2022 9706/11/O/N/22 [Turn over

 D A sales return of $500 was debited in the customer’s account and credited to the purchases
returns account.

2022 NOV P11 Q07

7 The balance on a purchases ledger control account at 1 March was $71 300.

During the month ended 31 March, the following transactions took place.

payments to trade payables by cheque 133 200

credit purchases 149 000
purchases returns 3 000
cash purchases 2 000
contra with sales ledger 1 600

What was the trade payables balance at 31 March?

A $80 500 B $82 500 C $83 700 D $85 700

8 Which statements about accruals and prepayments are correct?

1 Accrued revenue at the end of an accounting period is recorded as a current asset.

2 prepare
we Accruedthe
revenue
PLCAat the end of an accounting period is recorded as a current liability.
3 Prepaid expenses at the end of an accounting period are recorded as a current
opening t/p + credit purchases - purchase returns - cash paid - contra with SLCA =
asset.
closing balance
4 Prepaid expenses at the end of an accounting period are recorded as a current
liability.
71300+149000-3000-1600-133200 = $82500

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

© UCLES 2022 9706/11/O/N/22 [Turn over

 What was the trade payables balance at 31 March?

A $80 500 B $82 500 C $83 700 D $85 700

2022 NOV P11 Q08

8 Which statements about accruals and prepayments are correct?

1 Accrued revenue at the end of an accounting period is recorded as a current asset.

2 Accrued revenue at the end of an accounting period is recorded as a current liability.
3 Prepaid expenses at the end of an accounting period are recorded as a current
asset.
4 Prepaid expenses at the end of an accounting period are recorded as a current
liability.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

© UCLES 2022 9706/11/O/N/22 [Turn over

accrued revenue is income not yet received so it is a current

asset.
prepaid expense is expense paid in advance not yet received so
it is a current asset
 4
2022 NOV P11 Q09
9 A business has a bank overdraft of $4800.

It pays for materials invoiced, $3000, less a trade discount of 20% and a settlement discount
of 5%.

A cheque for $500 is received from a credit customer.

What is the bank balance after these transactions?

A $2020 overdraft
B $6580 overdraft
C $7150 overdraft
D $7580 overdraft

10 How are closing inventory and loss for the year treated in the financial statements of a sole
trader?

closing inventory loss for the year

A asset in statement
amount of financial
paid for materialsposition debit
= 3000x0.8x0.95 in capital account
= $2280

credit
Total in income
effect statement
on overdraft credit
= -4800-2280+500 in income
= -6580 statement
overdraft
B asset in statement of financial position debit in income statement

credit in income statement credit in capital account

C debit in income statement debit in capital account

liability in statement of financial position credit in income statement

D debit in income statement debit in income statement

liability in statement of financial position credit in capital account

© UCLES 2022 9706/11/O/N/22

 C $7150 overdraft
D $7580 overdraft

2022 NOV P11 Q10

10 How are closing inventory and loss for the year treated in the financial statements of a sole
trader?

closing inventory loss for the year

A asset in statement of financial position debit in capital account

credit in income statement credit in income statement

B asset in statement of financial position debit in income statement

credit in income statement credit in capital account

C debit in income statement debit in capital account

liability in statement of financial position credit in income statement

D debit in income statement debit in income statement

liability in statement of financial position credit in capital account

Closing inventory is a credit in income statement because the

balance is deducted. Secondly it is the C/D value in the
inventory account and the carried down appears on the credit
side. So the double entry to transfer it to the I/S is

Inventory (Dr)
I/S (Cr)

Loss for the year on the other hand has a reducing effect on the
capital account so its double entry is

Capital (Dr)
© UCLES 2022
Income Statement9706/11/O/N/22
(Cr)
 5
2022 NOV P11 Q11
11 A trader had the following closing trade receivables.

year $

1 64 000
2 80 000
3 90 000

He usually provides for doubtful debts at the rate of 5%. At the end of year 2 he forgot to adjust
the provision.

What was the effect on profit in year 3 of forgetting to adjust the provision in year 2?

A $800 decrease
B $800 increase
C $1300 decrease
D $1300 increase

12 The following information is available for the year ended 31 December 2021.

Year 1 -> 0.05 x 64000 = $3200 provision $

Year 2 ->0.05 x 80000 = $4000 provision.
Year 3 revenue
-> 0.05 x 90000 = $4500 provision. 1 400 000
inventory as at 1 January 2021 140 000
If it had been provided, then the profit in year 3 would have to be
decreasedinventory as at
by only 31 December
$500. Since this2021 148corrected
error wasn't 000 the profit
in year 3 would have to be reduced by $1300 (because the
provision
The trader uses hasofincreased
a mark-up 60% on allfrom 3200 to 4500 and increase in
purchases.
provision is an expense.)
What was the value of purchases for the year?
So the profit decreases by $800 because of this error.
A $848 000 B $867 000 C $875 000 D $883 000

© UCLES 2022 9706/11/O/N/22 [Turn over

 C $1300 decrease
D $1300 increase

2022 NOV P11 Q12

12 The following information is available for the year ended 31 December 2021.

revenue 1 400 000

inventory as at 1 January 2021 140 000
inventory as at 31 December 2021 148 000

The trader uses a mark-up of 60% on all purchases.

What was the value of purchases for the year?

A $848 000 B $867 000 C $875 000 D $883 000

markup = gp on cost of sales

Markup to margin ->

GP = 60 , COST = 100 , SALES = 160

MARGIN = 60/160

GP = 60/160 x 1400 = $525

© UCLES 2022 COST of sales = Sales - GP

9706/11/O/N/22 [Turn over
= 1400 -525 = $875

Purchases = Cost of sales + closing - opening

875 + 148 -140 = $883

hence 883000
 6
2022 NOV P11 Q13
13 The following information is available for a business for the year ended 31 March 2022.

non-current assets at cost at 1 April 2021 62 000

provision for depreciation on non-current assets at 1 April 2021 12 000
expenses paid by cash and cheques during the year 42 200
expenses prepaid at 31 March 2022 4 600
trade receivables at 31 March 2022 25 000

A provision for doubtful debts is to be created at 2% of trade receivables.

Depreciation on non-current assets is to be provided at 20% using the reducing balance method.

What was the total of expenses for the year?

A $47 600 B $48 100 C $50 500 D $57 300

14 X and Y are in partnership but do not have a partnership agreement. X had introduced twice as
much capital as Y and made a loan to the partnership.

X insists he is entitled to the following:

25000 x 0.02 = $500 provision for doubtful debts
1 interest on the extra capital he has invested
2 Depreciation
interest = (62000-12000)
on the loan he has made to the x0.2 = $10000
partnership
3 a profitTotal
shareexpense
of double= that of Y
10000+500 + (42200-4600) = $48100
4 not to pay interest on his drawings.

What is X entitled to?

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

15 L, M and N share profits equally. N is retiring and net assets at net book value of $27 000 are
revalued at $36 000.

Goodwill is valued at $18 000 but will not be recorded in the books of account.

After N retires, L and M will share profits in the ratio 3 : 2.

What will be the change to L’s capital account?

A $1800 decrease
B $1800 increase
C $7800 decrease
D $7800 increase

© UCLES 2022 9706/11/O/N/22

 What was the total of expenses for the year?

A $47 600 B $48 100 C $50 500 D $57 300

2022 NOV P11 Q14

14 X and Y are in partnership but do not have a partnership agreement. X had introduced twice as
much capital as Y and made a loan to the partnership.

X insists he is entitled to the following:

1 interest on the extra capital he has invested

2 interest on the loan he has made to the partnership
3 a profit share of double that of Y
4 not to pay interest on his drawings.

What is X entitled to?

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

15 L, M and N share profits equally. N is retiring and net assets at net book value of $27 000 are
revalued at $36 000.

Goodwill is valued at $18 000 but will not be recorded in the books of account.
This question tests your knowledge about whether you know the
After N retires, L and M will share profits in the ratio 3 : 2.
provisions when there is no partnership agreement. It is advised
What willtobe
memorize thetoprovisions
the change when there is no partnership
L’s capital account?
agreement.
A $1800 decrease
B $1800 increase
C $7800 decrease
D $7800 increase

© UCLES 2022 9706/11/O/N/22

 What is X entitled to?

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

2022 NOV P11 Q15
15 L, M and N share profits equally. N is retiring and net assets at net book value of $27 000 are
revalued at $36 000.

Goodwill is valued at $18 000 but will not be recorded in the books of account.

After N retires, L and M will share profits in the ratio 3 : 2.

What will be the change to L’s capital account?

A $1800 decrease
B $1800 increase
C $7800 decrease
D $7800 increase

© UCLES 2022 9706/11/O/N/22

L's account will change by his share of

revaluation gain and change by goodwill raised
less goodwill eliminated.

Goodwill raised = 1/3 x 18000 = $6000

Goodwill eliminated = 3/5 x 18000 = $10800

Revaluation gain share -> 1/3 x 9000 = $3000

Total change = 6000-10800+3000 = (1800)

so decrease by 1800
 7
2022 NOV P11 Q16
16 Dele and Iyabo are partners and share profits in the ratio of 3 : 1.

Their profit for the year is $80 000.

The following information is available.

Dele Iyabo
$ $

interest on capital 3000 2500

interest on drawings 500 1000

How will the residual profit be shared?

Dele Iyabo
$ $

A 57 000 19 000
B 57 500 18 500
C 62 500 21 500
D 63 000 21 000

17 W Limited made a loss for the year. The directors wish to increase the balance on the retained
earnings account.

How can they do this?

Profit less interest on capital + interest on drawings = residual profit
1 increase dividends paid
2 issue new ordinary shares
80000+1500-5500 at a premium
= $76000
3 make a transfer from general reserve
Residual profit = 76000 x 3/4 = $57000 for Dele and $19000 for Iyabo
A 1 and 2 B 1 only C 2 and 3 D 3 only

© UCLES 2022 9706/11/O/N/22 [Turn over

 C 62 500 21 500
D 63 000 21 000

2022 NOV P11 Q17

17 W Limited made a loss for the year. The directors wish to increase the balance on the retained
earnings account.

How can they do this?

1 increase dividends paid

2 issue new ordinary shares at a premium
3 make a transfer from general reserve

A 1 and 2 B 1 only C 2 and 3 D 3 only

dividends paid reduce retained earnings

issue of shares at premium increases share

premium not retained earnings.

Reserves can be transferred to retained

earnings as they are portions of profit kept for
special purpose / emergency.

© UCLES 2022 9706/11/O/N/22 [Turn over

 8
2022 NOV P11 Q18
18 The following items were taken from the financial statements of a limited company during a
period.

increase in trade receivables 6 000

increase in trade payables 4 000
loan repaid 10 000

What was the effect of these items on the net cash inflow or outflow for the period?

A $8000 outflow
B $12 000 inflow
C $12 000 outflow
D $20 000 outflow

19 The following information is available for a limited company.

At 1 April 2021 the balance of the retained earnings account was $858 000.

-6000+4000-10000 = -12000
for the year ended 31 outflow
March 2022 $

profit from operations 978 000

Increase in T/R is an outflow while increase in T/P is an inflow.
debenture interest paid for the year 100 000
Repayment of loan is an outflow
ordinary share dividends paid 150 000

On 31 March 2022 the directors transferred $280 000 to a general reserve. They also issued
250 000 bonus shares of $1 each using the general reserve.

What was the balance of the retained earnings account at 31 March 2022?

A $1 056 000 B $1 306 000 C $1 406 000 D $1 586 000

20 What does return on capital employed measure for a business?

A efficiency to generate profit from its total assets

B efficiency to generate profit from its total liabilities
C efficiency to generate profit from its non-current assets
D efficiency to generate profit from its shareholders’ equity and non-current liabilities

© UCLES 2022 9706/11/O/N/22

 C $12 000 outflow
D $20 000 outflow

2022 NOV P11 Q19

19 The following information is available for a limited company.

At 1 April 2021 the balance of the retained earnings account was $858 000.

for the year ended 31 March 2022 $

profit from operations 978 000

debenture interest paid for the year 100 000
ordinary share dividends paid 150 000

On 31 March 2022 the directors transferred $280 000 to a general reserve. They also issued
250 000 bonus shares of $1 each using the general reserve.

What was the balance of the retained earnings account at 31 March 2022?

A $1 056 000 B $1 306 000 C $1 406 000 D $1 586 000

20 What does return on capital employed measure for a business?

A efficiency to generate profit from its total assets

B efficiency to generate profit from its total liabilities
Profit for the year = 978000-100000 = $878000 (operating profit less interest)
C efficiency to generate profit from its non-current assets
858000-280000-150000+878000 =$1306000
D efficiency to generate profit from its shareholders’ equity and non-current liabilities
(opening - transfer to reserve - dividends paid + profit for the year = closing)

© UCLES 2022 9706/11/O/N/22

 What was the balance of the retained earnings account at 31 March 2022?

A $1 056 000 B $1 306 000 C $1 406 000 D $1 586 000

2022 NOV P11 Q20

20 What does return on capital employed measure for a business?

A efficiency to generate profit from its total assets

B efficiency to generate profit from its total liabilities
C efficiency to generate profit from its non-current assets
D efficiency to generate profit from its shareholders’ equity and non-current liabilities

Return refers to operating profit

© UCLES 2022
capital employed refers to shareholders equity and
9706/11/O/N/22
non-current liabilities therefore D is correct.
 9
2022 NOV P11 Q21
21 The following information was available for a business at the end of a financial year.

sales 300 000

opening inventory 33 000
closing inventory 27 000

The business applies a mark-up of 20% on all goods purchased.

What was the inventory turnover in days?

A 40 B 44 C 45 D 46

22 A business employs machine operators. Each machine operator works 36 hours a week.

One unit of output takes four hours of labour.

It also employs supervisors who can =each

Inventory turnover AVG supervise ten/Cost
inventory machine operators.
of sales x 365

Production is currently 1140 units

avg inventory a week.
= 33000+27000/2 = $30000
How many more units can
COGS be produced
= Sales each
- (markup week
x cost before the
or margin company needs to employ an
x sales)
extra supervisor?
Markup = GP/COS
A 3 B 30 C 75 D 90
GP = 20 , COS = 100 , SALES = 120

MARGIN
23 What best describes = cost?
a fixed 20/120

A a part that stays

GP =the same xand
20/120 a part =that
300000 changes as output increases
$50000
B the same cost
COS per=unit for any level of
300000-50000 = output
$250000
C the same total cost for any level of output
turnover = 30000/250000 x 365 = 43.8 days = 44 days
D the same total cost for output within a relevant range

24 What would result in the under-absorption of overheads?

expenditure units produced

A actual is less than budgeted actual is less than budgeted

B actual is less than budgeted actual is more than budgeted
C actual is more than budgeted actual is less than budgeted
D actual is more than budgeted actual is more than budgeted

© UCLES 2022 9706/11/O/N/22 [Turn over

 What was the inventory turnover in days?

A 40 B 44 C 45 D 46
2022 NOV P11 Q22
22 A business employs machine operators. Each machine operator works 36 hours a week.

One unit of output takes four hours of labour.

It also employs supervisors who can each supervise ten machine operators.

Production is currently 1140 units a week.

How many more units can be produced each week before the company needs to employ an
extra supervisor?

A 3 B 30 C 75 D 90

23 What best describes a fixed cost?

A a part that stays the same and a part that changes as output increases
B the same costTotal
per unit for any
number oflevel
hoursof available
output = 36 x Number of people
C the same total cost for any level of output
Hours used = output x hours per unit -> 1140 x 4 = 4560 hours
D the same total cost for output within a relevant range
Number of people = 4560/36 = 127 operators.
24 What would resultSupervisors
in the under-absorption
right now =of127/10
overheads?
= 12.7 = 13

expenditure units produced

Units that can be produced -> Number of workers that
supervisors can supervise without needing additional hiring ->
A actual is13
less than= budgeted
x 10 130 workers actual is less than budgeted
B actual is less than budgeted actual is more than budgeted
130 x 36 = 4680 hours
C actual is Units
more than budgeted
= 4680/4 actual is less than budgeted
= 1170 units
D actual is more than budgeted actual is more than budgeted
extra units = 30

© UCLES 2022 9706/11/O/N/22 [Turn over

 extra supervisor?

A 3 B 30 C 75 D 90

2022 NOV P11 Q23

23 What best describes a fixed cost?

A a part that stays the same and a part that changes as output increases
B the same cost per unit for any level of output
C the same total cost for any level of output
D the same total cost for output within a relevant range

24 What would result in the under-absorption of overheads?

expenditure units produced

A actual is less than budgeted actual is less than budgeted

B actual is less than budgeted actual is more than budgeted
C actual is more than budgeted actual is less than budgeted
D actual is more than budgeted actual is more than budgeted
fixed costs remain unchanged until a certain level.
For example fixed costs might be 40000 for upto 50000
units. If factory wants to make more they will have to
expand raising fixed costs.

Do not confuse this with stepped costs where the fixed

costs change after certain units of production. In step costs
© UCLES 2022 the factory is not operating at max capacity.
9706/11/O/N/22 [Turn over
 C the same total cost for any level of output
D the same total cost for output within a relevant range

2022 NOV P11 Q24

24 What would result in the under-absorption of overheads?

expenditure units produced

A actual is less than budgeted actual is less than budgeted

B actual is less than budgeted actual is more than budgeted
C actual is more than budgeted actual is less than budgeted
D actual is more than budgeted actual is more than budgeted

© UCLES 2022 9706/11/O/N/22 [Turn over

Absorbed overheads - actual overheads = (under absorbed)

where absorbed overheads = OAR x Actual units

so if actual units less than budgeted under absorption as absorbed less

or

if actual overheads are very high.

 10
2022 NOV P11 Q25
25 A company has received an order to supply 3000 pairs of safety glasses.

The costs of production are shown.

raw materials 975

packaging for 50 pairs 4.20
direct labour at $8.00 per direct labour hour 800
order setting up costs 100
overhead absorption rate per direct labour hour 6.25

What is the cost of manufacturing this order?

A $2552 B $2652 C $2710 D $2752

26 How is break-even point in units calculated?

A fixed costs ÷ contribution per unit

B fixed costs ÷ selling price per unit

C fixed costs ÷ variable cost per unit

Packaging cost = 3000/50 x 4.2 = $252
D (sales – fixed costs) ÷ contribution per unit
Labour hours = 800/8 = 100 hours

27 A company manufactures
total -> 252 and sells
+ 975 a single
+ 800 + 100product.
+ 6.25The following
x 100 information is available about
= $2752
a unit of the product.

selling price 105

direct materials 45
direct labour 30

The supplier of direct materials has agreed to increase the trade discount from 10% to 20%.

What is the new contribution per unit?

A $25.00 B $25.50 C $34.50 D $35.00

© UCLES 2022 9706/11/O/N/22

 What is the cost of manufacturing this order?

A $2552 B $2652 C $2710 D $2752

2022 NOV P11 Q26

26 How is break-even point in units calculated?

A fixed costs ÷ contribution per unit

B fixed costs ÷ selling price per unit

C fixed costs ÷ variable cost per unit

D (sales – fixed costs) ÷ contribution per unit

27 A company manufactures and sells a single product. The following information is available about
a unit of the product.

selling price 105

direct materials
It is advised to memorize 45
all formulas properly.
direct labour 30

The supplier of direct materials has agreed to increase the trade discount from 10% to 20%.

What is the new contribution per unit?

A $25.00 B $25.50 C $34.50 D $35.00

© UCLES 2022 9706/11/O/N/22

 C fixed costs ÷ variable cost per unit

D (sales – fixed costs) ÷ contribution per unit

2022 NOV P11 Q27

27 A company manufactures and sells a single product. The following information is available about
a unit of the product.

selling price 105

direct materials 45
direct labour 30

The supplier of direct materials has agreed to increase the trade discount from 10% to 20%.

What is the new contribution per unit?

A $25.00 B $25.50 C $34.50 D $35.00

0.9 of X = 45 -> original cost = X = $50

new discounted cost -> 0.8 x 50 = $40

DO NOT MAKE THE ERROR OF

© UCLES 2022 APPLYING 10% OF9706/11/O/N/22
45 AS
DISCOUNT IS APPLIED ON
ORIGINAL COST.

new contribution = SP -VC -> 105 -

(40+30) = $35
 11
2022 NOV P11 Q28
28 The fixed costs of a business increase. All other revenues and costs remain unchanged.

What happens if output is unchanged?

contribution break-even margin of

per unit point per unit safety per unit

A decreases decreases decreases

B increases no change increases
C no change increases decreases
D no change increases increases

29 A business manufactures three types of products which all use the same material. The following
information is available.

X Y Z
$ $ $
no change in contribution as it is dependent on selling price and
variable
sellingcost.
price 160 190 240
break event increases because fixed costs increase and
direct material
contribution no change 56 68 90
direct labour 35 32 50
margin of safety decreases because break even increases.
variable overhead 28 34 45
contribution 41 56 55

Direct material is in short supply.

In which order should the products be manufactured to maximise profits?

A X Y Z

B Y X Z

C Y Z X

D Z Y X

30 Which statements about a budgetary control system are correct?

1 It can encourage departmental rivalry.

2 It will always improve staff motivation.
3 It will always lead to improved business performance.
4 It will define areas of responsibility of personnel.

A 1, 2 and 3 B 1, 3 and 4 C 1 and 4 only D 2 and 3 only

© UCLES 2022 9706/11/O/N/22

 C no change increases decreases
D no change increases increases

2022 NOV P11 Q29

29 A business manufactures three types of products which all use the same material. The following
information is available.

X Y Z
$ $ $

selling price 160 190 240

direct material 56 68 90
direct labour 35 32 50
variable overhead 28 34 45
contribution 41 56 55

Direct material is in short supply.

In which order should the products be manufactured to maximise profits?

A X Y Z

B Y X Z

C Y Z X

D Z Y X

30 Which statements about a budgetary control system are correct?

We need to calculate contribution per limiting factor.
1 It can encourage departmental
WE ASSUME THATrivalry.
DIRECT MATERIAL COSTS THE
2 SAME
It will always @$1staff
improve andmotivation.
the difference is due to consumption per
unit.
3 It will always lead
X -> to improved
41/56 = $0.73 business performance.
Y -> 56/68 = $0.82
4 It will define areas of responsibility of personnel.
Z -> 55/90 = $0.61
A 1, 2 and 3 B 1, 3 and 4 C 1 and 4 only D 2 and 3 only

© UCLES 2022 9706/11/O/N/22

 C Y Z X

D Z Y X

2022 NOV P11 Q30

30 Which statements about a budgetary control system are correct?

1 It can encourage departmental rivalry.

2 It will always improve staff motivation.
3 It will always lead to improved business performance.
4 It will define areas of responsibility of personnel.

A 1, 2 and 3 B 1, 3 and 4 C 1 and 4 only D 2 and 3 only

© UCLES 2022 9706/11/O/N/22

It can cause demotivation if budgets are too hard to achieve and

unrealistic.
It can lead to poor business performance if budgets are restrictive.

1 is correct because managers will be focused on meeting their

budget objectives to ensure they ensure they get the most budget
and will lead to rivalry. For example managers can put down the
needs of other departments to minimize expenses.

4 is correct because personnel will know what is expected of them in

light of the budget.
2022 NOV P12 Q01

irregular transactions not part of normal course of

business are recorded in general journal.
Owners usually dont take goods for personal use so
irregular transaction.

2 will be recorded in Purchases Journal

3 is a irregular trasnsaction as you dont buy NCA

frequently.

4 is regular item and will be recorded in the petty cash

book.

so 1 and 3 correct
2022 NOV P12 Q02

it helps in charging depreciation accurately on a reliable cost figure.

2022 NOV P12 Q03

NBV = 4800
Proceeds = 6500
Gain = $1700

So income statement credit with gain and disposal debit with gain

Bank account will be credit with the amount paid for the new vehicle.

cost less exchange discount = amount paid

30000-6500 = $23500 -> credit as amount paid

2022 NOV P12 Q04

depreciation of 2020 = 0.25 x Y where Y is cost

depreciation of 2021 = 0.25 x (Y-0.25Y)

= 0.1875Y

total book value in 2021 = Y-(0.25+0.1875)Y = 05625Y

NBV = 18000 = 0.5625Y so Y = $32000

2022 NOV P12 Q05

transactions entered on the correct side but in the wrong class of account.
2022 NOV P12 Q06

SLCA IS ONLY AFFECTED BY ERRORS IN BOOKS OF PRIME ENTRY.

1 doesnt affect SLCA because error in ledger not BOPE

2 error in SLCA so has an effect.
3 error in totalling in BOPE (cashbook) so affects.
4 doesnt affect as error in ledger.

17640 - 470 - 15 = $17155

2022 NOV P12 Q07

D is correct because debit would be higher and credit would be under stated.

C incorrect because both debit and credit would be low by same amount.
B is incorrect because debit would be lower than credit.
A is incorrect because credit would be higher than debit.
2022 NOV P12 Q08

impact of 1 -> liabilities increase by 10000 and assets increase by 10000.

so net change
assume error assets = 900 and liabilities = 800 so $100
after correction -> 910 - 810 = $100

assets increase because bank will be debit with loan amount.

impact of 2 -> since closing inventory directly proportional to profit, profit will be overstated. Correcting
error reduces profit.

(910-20)- (810) = $80 ( no change in liabilities only profit decreases)

Depreciation understated = asset overstated and profiit understated , no change in liability

(890-15) - 810 = $65

total change in profit = $100 -65 = $35

so in our example
$600000 - 35000 = $565000
2022 NOV P12 Q09

Since closing inventory is directly proportional

to profits , loss in value results in loss in profit
so profit decreases. The current assets will
also decrease as Closing inventory is a current
asset.

We know it is closing inventory because we

only have this inventory at the year end.
Any change in inventory would be in the
closing inventory.
2022 NOV P12 Q10

Since loan belongs to 6 months for this

year our expense is 6 months interest.
Since it is unpaid it will be a current liability
and the loan repayable will be a
non-current liability as payable in more than
1 year.

6/12 x 30000 x 6% = $900

2022 NOV P12 Q11

since expense for the year was treated as not

an expense, the profit will be overstated as
accruals are an expense, while prepayments
are not.
On the other hand, current liabilities will be
understated because accruals are a current
liability and prepayments are current assets.
2022 NOV P12 Q12

sales = SLCA
purchases = PLCA

sales = 16400+700 (cash + closing receivables) = $17100

purchases = 8500+1200 = $9700 (cash paid + closing payables)

profit = sales - COS - expenses

17100 - (9700 -drawings of 1000) - 2900 = $5500

2022 NOV P12 Q13

we prepare PLCA

opening t/p + credit purchases - discount

received - payments - returns - contra = closing

18000 + x - 6000-158000-3000-2000 = 14000

x = $165000
2022 NOV P12 Q14

drawings is only recorded in the current

account. Be careful the question is asking
for what is recorded in "both"
2022 NOV P12 Q15

T account balance will rise from goodwill raised

and share of gain of revaluation. The capital
account will be reduced for the loan and the
balancing figure will be the amount paid.

320000+60000x1/3 + 30000 x 1/3 - 90000 =

$260000
2022 NOV P12 Q17

dividend received is an income

2022 NOV P12 Q18

operating profit less finance costs = profit for the year.

120000 - 0.1 x 100000 - 6/12 x 0.06 x 800000 = $86000

debenture interest will be paid only on six months as it was issued in July
2022 NOV P12 Q19

the total revenue reserves includes general reserves +

retained earnings.

1 doesn't affect reserves and results in a change in Share

capital and share premium (capital reserve) [OSC and
share premium increase because of 1]

2-> reduces retained earnings which is a revenue reserve

by the amount of dividend paid.

3-> since retained earnings is reduced by 7500 to make a

transfer to general reserve which increases by the same
amount and is a revenue reserve, the total effect is Nil

so

revenue reserves decrease by the amount of dividends

paid i.e $6200.
2022 NOV P12 Q20

ROCE decreases because the total capital employed

increases while profit remains unchanged. (Capital employed
increases because equity increase by the amount of
revaluation due to revaluation reserve)

NCA turnover decreases because the total non current assets

increase while sales remain the same.
2022 NOV P12 Q21

T/P turnover = T/P / credit purchases x 365

90000/270000 x 365 = 122 days

2022 NOV P12 Q22

basic pay = 16 x 40 = $640

overtime = (16+25% x 16) x Y = 20Y
bonus = 4x15 =$60

860= 700+20Y

Y= hours worked = 160/20 = 8 hours

total hours = 40+8 = 48 hours

2022 NOV P12 Q23

It is recommended to memorize these facts as

they are frequently tested in either paper.

FIFO refers to issuing units bought first so they

will be at old purchase prices. Since old prices will
be lower during inflation , profits will be higher.
2022 NOV P12 Q24

insurance is apportioned at machine book value

5000/(150000+100000) x 150000 = $3000

2022 NOV P12 Q25

cost of closing inventory is higher under absorption costing.

Also remember that costs are allocated to all products whether sold or not.
2022 NOV P12 Q26

total costs are equal to total revenue.

Total costs are equal to variable costs + fixed costs.
2022 NOV P12 Q27

contribution = sp - vc = 10-4 = $6

profit = total contribution - fixed cost

6 x 6000 - 5000 = $31000

Remember that fixed cost doesn't change and will

be calculated at the normal activity level.
2022 NOV P12 Q28

we will assume selling price to be $1.

In that case volume right now is 400000 units.

increase in volume = 400000 x 1.2 = 480000 units

New selling price = 0.9 x 1 = $0.9

New revenue = 0.9 x 480000 = $432000

Variable costs = vc/old units x new units -> 240/400 x 480000 = $288000

new profit = 432 - 288 - 100 = $44000

Percentage change = new-old/old x 100% -> 44-60/60 x 100 = -26.67%

2022 NOV P12 Q29

Current break even = FC/CONTRIBUTION

(18.90 x 5000)/(75-25-5) = 2100 units

New breakeven = (18.90 x 5000)/(60-30) = 3150 units

extra units = 3150 - 2100 = 1050 units

2022 NOV P12 Q30

budgets are short term future financial plans hence they are
quantitative.
2022 NOV P13 Q01

This is because the legal title of goods and services has not changed hands.
2022 NOV P13 Q02

It worth revising the format of the disposal account at this point.

Disposal account has the following format

NCA -Dr
Profit -Dr
Disposal cost - Dr

Accumulated Depreciation -Cr

Loss - Cr
Disposal Proceeds - Cr
2022 NOV P13 Q03

depreciable amount = cost + any cost incurred in bringing to useable

condition
depreciable amount = 300000+4000 = $304000
depreciation in 2020 = 304000 x 0.4 = $121600
2021 depreciation at book value -> (304000-121600) x 0.4 = $72960
2022 NOV P13 Q04

accumulated depreciation of disposed asset = opening AD + depreciation - closing

AD

40000+9000-46000 = $3000

Proceeds - NBV = gain or (loss)

X - 7000 = (1200)

X = $5800
2022 NOV P13 Q05

2 and 3 do not affect the trial balance.

only 1 affects the trial balance and will result in the creation of suspense account.
2022 NOV P13 Q06

$7270 - 100 -50 = $7120 PLCA balance

we include both error 1 and 2 because they are errors in books of prime entry and
book of prime entry errors affect Control Accounts.

For the ledger we only include error 1 because this transaction was completely
omitted from the books.

Error 2 is not included because the transaction has been recorded correctly in the
ledger and the error is only in the discount received account.

6860 - 100 = $6760

2022 NOV P13 Q07

It is recommended to revise the format of the SLCA

2022 NOV P13 Q09

Closing inventory is directly proportional to profit. Since profit

overstated , correcting it will reduce profit.

Bad debts are an expense so writing them off will reduce

profit

Since depreciation is an expense, reducing it will increase

the profit.
2022 NOV P13 Q10

x-0.04x = 153600 (opening T/R)

x = $160000

Opening provision = $6400

Closing provision = 6400+960 = $7360

Closing value of T/R =

0.04 of X = 7360

x = $184000 = closing T.R before deduction

After deduction = 184000-7360

= $176640
2022 NOV P13 Q11

PREPAID EXPENSES ARE AN ASSET WHICH WILL BE

UNDERSTATED AND CAPITAL WILL BE UNDERSTATED
BECAUSE EXPENSE OVERSTATED SO PROFIT
UNDERSTATED.
2022 NOV P13 Q12

Sales will be found by preparing SLCA and purchases by PLCA

Sales = 70000+4000 (cash + closing T/R)

sales = $74000

Purchases = 65000+2000 = $67000 (cash paid + closing T/P)

COST OF SALES = 67000 - 20000 = $47000 (purchases - closing inventory)

Profit = sales - cost of sales - expenses

74000 - 47000 - 3000 = $24000

2022 NOV P13 Q13

Gross profit on sales = margin

markup to margin =
MARKUP = GP/COST
MARKUP = 33.333%
SO
GP = 33.33 , COST = 100 , SALES = 133.33

SO MARGIN = 33.33/133.33

GP = 33.33/133.33 * 24600 = $6150

COST OF SALES = 24600-6150 = $18450

CLOSING INVENTORY = OPENING + PURCHASES - COST OF SALES

4500+16700-18450 = $2750

INVENTORY SAVED VALUE LOWER OF COST OR NRV =

1485-800+650 = $1335

VALUE LOST = 2750-1335 = $1415

2022 NOV P13 Q14

3 APPEARS ON THE CREDIT SIDE BECAUSE DOUBLE ENTRY IS

CASH DEBIT
DISSOLUTION CREDIT
2022 NOV P13 Q15

REVALUATION LOSS WILL BE SHARED BY L REDUCING CAPITAL

BALANCE

GOODWILL SHARE WILL INCREASE AS THE PARTNER WILL BENEFIT

FROM GOODWILL
2022 NOV P13 Q16

we prepare appropriation account.

PROFIT - INTEREST - SALARY = RESIDUAL PROFIT

200000 - (0.1 x 100000) -40000 = residual profit = $150000

150000 x 7/10 = $105000 for J and $45000 for K

total share = salary + interest + residual profit

J -> 40000+0.1x40000+105000 = $149000

K -> 45000+0.1x60000 = $51000
2022 NOV P13 Q17

we need to prepare capital account.

we will record goodwill raised and eliminated for Z and then the MV he takes over and also
record the gain or loss on revaluation and his share of it. Finally we also transfer the current
account debit balance to his capital account. The balancing figure will be the amount payable
to him and we know that X would pay half of it.

85000-7000+8000(goodwill raised) -5000 (Reval loss share)-4000 = 77000

77000/2 = $38500
2022 NOV P13 Q18

any increase or decrease in profit will

also be corrected in the retained
earnings.

170 - 25 - 30 +15 = $130000

closing inventory is directly proportional

to profit. Since understated it reduces the
profit, so we correct by increasing it.

bad debts are an expense and reduce

profits.

dividends paid reduce retained earnings.

2022 NOV P13 Q19

Bonus issue = rights factor x number of shares -> 1/2

x100000 = 50000 shares
OSC = 150000 and retained earnings = 45000 as bonus
issue done from retained earnings in absence of
premium.

Rights issue effect on OSC and share premium

OSC = 200000 and share premium = 50000x0.25 =

12500

General reserve transfer reduces Retained earnings and

increases general reserve.

Dividend paid reduces retained earnings.

total equity = ordinary share capital + share premium +

General reserve + retained earnings + profit

200000+12500+25000+ (45000-11250-25000+68500) =
$314750
2022 NOV P13 Q20

current ratio no change because cash decreases and

inventory rises by the same amount.

quick ratio decreases because it excludes inventory so

only cash decreases while current liabilities remain the
same.
2022 NOV P13 Q21

NCA TURNOVER = SALES / NCA AT BOOK VALUE

980000/120000 = 8.17 Times

2022 NOV P13 Q22

we add all the indirect costs.

2022 NOV P13 Q23

basic pay = 10 x 1000 = $10000

overtime pay = 15 x 500 = $7500
bonus = 0.1 x 10000 (basic pay) = $1000

total = 18500
2022 NOV P13 Q24

this procedure is done under absorption costing and absorption costing does not help with the
calculation of break-even point.
2022 NOV P13 Q25

since closing inventory is higher than opening inventory , the absorption profit will be higher by
the difference in inventory multiplied by fixed OH per unit.

100000 + 1000 x 30 = $130000

2022 NOV P13 Q26

absorption costing profit reduces only when opening inventory > closing inventory.
This would mean fewer units produced than sold as the opening inventory will cover
the remaining.
2022 NOV P13 Q27

TARGET UNITS = (TARGET PROFIT + FC)/(SP-VC)

50000 = 1000000/(y-60)

y-60 = 1000000/50000 -> y-60 = 20

y = $80 = selling price

2022 NOV P13 Q28

C/S RATIO = CONTRIBUTION/SALES WHERE contribution = SP-VC

C/S RATIO RIGHT NOW WITH ERROR -> 160/160 = 100%

CORRECT C/S RATIO -> (160-26)/160 x100% = 83.75%

THE RATIO IS TOO HIGH BY 100-83.75 = 16.25%

2022 NOV P13 Q29

SP = REVENUE/UNITS = 50000/1000 = $50

FC = CONTRIBUTION - PROFIT -> 22000-8000 = $14000

FOR MAY ->

CONTRIBUTION = 10500+14000 = 24500

SALES REVENUE = 1200 x 50 = $60000

VC = REVENUE-CONTRIBUTION -> 60000-24500 = $35500

VC/UNIT = 35500/1200 = $29.583

OLD VC -> (50000-22000)/1000 = $28

CHANGE = INCREASE BY 1.58

2022 NOV P13 Q30

1 is incorrect because it is difficult to accurately allocate overheads as we learned in

absorption costing.

4 is incorrect because preparing budgets is very time consuming.