Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February 2024
1 hour

Additional Materials: Multiple Choice Answer Sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this
has been done for you.
DO NOT WRITE IN ANY BARCODES.

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 separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet. Calculators may be used.
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1 Why did Amitav prefer to form a partnership with Lennie rather than set up as a sole trader?

A Amitav was certain they could work without disagreements.

B Lennie had a different area of expertise to Amitav.
C The financial statements of a partnership are not shared publicly.
D The legal requirements in setting up the business would be reduced.

2 A credit customer cleared her debt of $600 after deducting a cash discount of $12.

How would the customer account appear in the books of the supplier after the payment has been
recorded?

debit $ credit $
A balance b / d 600 bank 588
discount allowed 12
B balance b / d 600 bank 588
discount received 12
C bank 588 balance b / d 600
discount allowed 12
D bank 588 balance b / d 600
discount received 12

3 What is the advantage of keeping a full set of double entry books of account?

A Account balances are available through the year.

B Business assets and owner’s assets can be kept separate.
C It enables the book-keeper to check the bank statement for errors and omissions.
D It stops the value of assets being overstated.

4 At the start of a financial period, the owner’s capital account of a business showed a balance of
$85 000.

During the period, the owner introduced to the business a private vehicle worth $30 000. In
addition, the owner made cash drawings of $15 000. The business made a net loss for the period
of $22 000.

What is the balance on the capital account at the end of the period?

A $18 000 B $48 000 C $78 000 D $100 000

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5 A business has incorrectly recorded a vehicle purchase as a vehicle repair. The business does
not charge depreciation on assets in the year of purchase.

What is the effect of this error on the financial statements?

statement of statement of
profit or loss financial position
A profit overstated assets overstated

B profit overstated assets understated

C profit understated assets overstated
D profit understated assets understated

6 Non-current assets at the end of Year 1 were recorded as cost, $500 000, and carrying value,
$360 000.

During Year 2, certain assets were sold. They had originally cost $100 000 and had been
depreciated by $40 000.

The depreciation charge for the remaining non-current assets in Year 2 was $30 000.

What was the carrying value of non-current assets at the end of Year 2?

A $270 000 B $300 000 C $330 000 D $370 000

7 The cost of repainting a property was debited to the property account.

Which type of error was made?

A commission
B compensating
C original entry
D principle

8 A trial balance does not balance. The difference has been entered in a suspense account.

The following errors are found.

1 A cash payment of $630 for rent has been credited in the cash book and debited to
the irrecoverable debts account.
2 The provision for depreciation account has been overcast by $960.
3 The purchases ledger control account balance of $48 300 has been included as a
debit balance.

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What is the correcting debit entry to the suspense account?

A $47 340 B $95 010 C $95 640 D $97 560

9 What are the benefits of preparing a bank reconciliation statement?

1 acts as a deterrent to fraud

2 identifies out-of-date cheques
3 prevents the business going into overdraft
4 provides the correct bank balance for financial statements

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

10 At the month end, a business bank statement showed a credit balance of $12 697. This did not
agree with the cash book balance.

The following differences were found.

1 A cheque received, $7170, was entered as $7710 in the cash book.

2 A cheque paid in, $2400, had not been cleared by the bank.
3 A standing order, $450, was recorded in the cash book but had not been paid by the
bank.
4 Bank interest payable of $642 had not been entered in the cash book.

What was the cash book balance before the necessary corrections were made?

A $9565 B $13 429 C $14 995 D $15 829

11. X and Y are in partnership sharing profits and losses in the ratio 2 : 1.

Z will be admitted with the following new arrangements.

Profit and loss sharing ratio will be 2 : 1 : 2 respectively.

Goodwill is valued at $90 000. Z will pay the partners for his share of the goodwill.

How much will Z pay X?

A $18 000 B $24 000 C $45 000 D $60 000

12. D, E and F are in partnership, sharing profits in the ratio 2 : 2 : 1.

D is allowed an annual salary of $10 000.

E has made a loan to the partnership on which the partnership pays interest of $5000 each year.

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Profit for the year before appropriation was $150 000.

What was F’s total share of profit for the year?

a. $27 000 B $28 000 C $29 000 D $30 000

13. L and M had been in partnership sharing profits and losses equally. P was admitted to the
partnership and the partners continued to share profits and losses equally. Goodwill was valued
at $48 000 but the partners agreed that no goodwill account would be retained in the books of
account.

What were the accounting entries to record the goodwill?

a. debit L capital account $16 000, debit M capital account $16 000, credit P capital account
$32 000
b. debit P capital account $32 000, credit L capital account $16 000, credit M capital account
$16 000
c. debit L capital account $8000, debit M capital account $8000, credit P capital account
$16 000
d. debit P capital account $16 000, credit L capital account $8000, credit M capital account
$8000

14. Which items do not appear in a statement of changes in equity?

1 dividend paid
2 dividend proposed
3 loan interest

a. 1 and 2 only B 1, 2 and 3 C 1 only D 2 and 3 only

15. On 1 January a company’s equity included 100 000 $1 ordinary shares.

The directors of the company then did the following:

1 March Made a rights issue of 20 000 ordinary shares at $1.25 each. The rights issue was
fully subscribed.
1 June Made a bonus issue of 5000 ordinary shares.
1 July Paid an interim dividend of $0.10 on all of the shares in issue at that date.

By how much did the bank account increase as a result of these transactions?

a. $12 500 B $17 500 C $30 000 D $37 000

16. The following balances are extracted from the books of J Limited.

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30 April 2019 30 April 2018

$ $
ordinary shares of $0.50 each 700 000 500 000

share premium 90 000 50 000

How many ordinary shares have been issued during the year ended 30 April 2019?

a. 200 000 B 240 000 C 400 000 D 480 000

17. Which action will increase a company’s current ratio?

a. making an issue of bonus shares

b. making a rights issue of shares

c. increasing the provision for doubtful debts

d. reducing the rate of depreciation on non-current assets

18. A trader wishes to set a selling price.

How does he use a mark-up?

a. by adding a percentage to the cost

b. by adding a percentage to the selling price

c. by deducting a percentage from the cost

d. by deducting a percentage from the selling price

e.

19 Which costs would be included in the manufacturing overheads for a computer assembly plant?

1 assembly line employees’ wages

2 cost of components used to make computers
3 depreciation of factory machinery
4 production supervision costs

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

20 The inventory records of a business show the following information for product X.

cost per unit

units $

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1 January opening balance 100 3

3 January receipts into inventory 50 4

8 January inventory issued 120 –

What is the value of the inventory issued on 8 January using the FIFO method?

A $360 B $380 C $410 D $420

21. An employee is paid $20 an hour basic pay for working 8 hours a day. Overtime is paid at the
rate of a time and a half. A bonus is also paid of $40 for each unit produced in excess of 10
units a day.

Yesterday the employee worked 10 hours and produced 11 units.

What was the employee’s pay for the day?

a. $220 B $260 C $620 D $660

22. 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

23. A business uses the weighted average cost (AVCO) method of inventory valuation.

date units $ per unit

1 September purchased 50 4.00

10 September purchased 30 4.80

21 September sold 15

What was the cost of each unit sold?

a. $4.00 B $4.30 C $4.40 D $4.80

24. What may cause the under absorption of overheads?

1 Overheads have been lower than budgeted.

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2 Overheads have been higher than budgeted.

3 Production volumes have been lower than budgeted.
4 Production volumes have been higher than budgeted.

a. 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

25. Which changes would result in a fall in profit?

1 Marginal cost per unit increases.

2 Total fixed cost decreases.
3 Sales volume increases.
4 Selling price per unit decreases.

a. 1 and 2 B 1 and 4 C 2 and 4 D 3 and 4

26. Last month a business sold 10 000 units and made a total contribution of $60 000. Fixed costs
were $10 000.

This month the sales volume fell by 20% and its contribution per unit fell by 10%. Fixed costs
were unchanged.

By how much will its profit fall this month compared to last month?

a. $6000 B $16 800 C $26 800 D $43 200

27. A business has provided the following information.

$
total fixed costs 12 500

unit selling price 10

unit variable cost 6

Fixed costs and unit selling prices are expected to remain unchanged.

Which percentage increase in variable costs would result in a break-even quantity of 5000 units?

a. 20% B 25% C 33% D 42%

28. The following information is available for a product.

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selling price per unit $25

total fixed costs $30 000

break-even point 5000 units

What is the contribution to sales (C/S) ratio?

A 19.4% B 24% C 31.6% D 76%

29 Which cost will increase as production decreases?

1 fixed costs per unit

2 total fixed costs

3 total variable costs

4 variable cost per unit

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

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30 Which statements concerning a budget are correct?

1 It is always based upon historic data.

2 It is always prepared for a year ahead.
3 It needs the full commitment of all managers in order to work well.
4 It is used for planning and control of a business.

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

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