Accounting 9706 · AS & A Level
May/June 2025
117 questions from this paper, with worked solutions and instant marking.
What are the disadvantages of trading as a partnership rather than trading as a sole trader?
Types of business entity
Which item ought to be entered on the debit side of a sales ledger control account?
The accounting system
While preparing a purchases ledger control account, some mistakes were made. The balance shown was incorrect at $15\,830$. The errors below were then identified.
Reconciliation and verification
A business recorded a draft profit for the year of $84000$. The following mistakes were later found. 1 Discounts received of $2500$ had been entered on the debit side of the discounts allowed account. 2 Wages of $9000$ had been left out entirely. 3 Sales returns of $8000$ had been posted to the debit side of the purchases returns account. What is the adjusted profit for the year?
Reconciliation and verification
Which items would cause profit for the year to rise?
Analysis and communication of accounting information
Sam could not carry out a physical count of inventory on 31 December 2024. On 3 January 2025, inventory was sold to Abdul for $11950$. The cost price of this inventory was $9560$. On 4 January 2025, inventory had been returned by Sita. It had been sold on 21 December 2024 for $2390$. The cost price of this inventory was $1912$. Sam assessed his inventory on 5 January 2025 at a cost of $59750$. What was the inventory value on 31 December 2024?
Reconciliation and verification
For what reason does a sole trader account for accrued income?
The accounting system
At the close of the financial year, the following figures are given for a sole trader’s business. cost of sales $540000$ expenses $325000$ profit for the year $63000$ sales returns $30000$ What was the total sales amount for the year?
Preparation of financial statements
In a partnership, each partner has a capital account and a current account. Which accounting entry should be used to show interest on capital for partner X?
The accounting system
Arnold is in partnership with Bradley. Their financial period finishes on 31 December. Under one clause of their partnership agreement, drawings are subject to interest, worked out each month at $5$% per annum. During the year, Arnold withdrew the following amounts on the stated dates. 31 March $6000$ 30 June $10000$ 30 September $12000$ 31 December $8000$ What is the correct accounting treatment for interest on drawings in the partnership appropriation account?
Types of business entity
Which of the following statements is correct concerning the financial statements of limited companies?
Preparation of financial statements
At the close of a financial period, a business has the following balances. Non-current assets: $102\,000$ Trade receivables: $39\,000$ Trade payables: $27\,000$ Profit for the period: $65\,000$ Drawings: $32\,000$ Long-term loan: $50\,000$ What closing balance will appear on the owner’s capital account at the end of the financial period?
Preparation of financial statements
A company supplies the following details about its equity. $150000$ shares $1$ each: $150000$ share premium $75000$ general reserve $125000$ retained earnings $25000$ The directors plan to issue bonus shares on the basis of one $1$ share for every three already held. After that, the directors plan to carry out a rights issue on the basis of one new $1$ share for every four shares held, with a premium of $0.20$ per share. What will be the company’s total equity after the share issues?
Preparation of financial statements
Which of the following statements about ratios are correct?
Analysis and communication of accounting information
A limited company recorded a return on capital employed of $5$% in the previous financial year. Further information is given below. equity $1000000$ $10$% debentures $200000$ finance costs $20000$ taxation $10000$ What was the company’s profit for the year?
Analysis and communication of accounting information
A firm leases machinery to operate in its factory. One machine costs $12800 to hire. Each machine can make 60 00 units. The firm gave the information below. units produced: 90 00, total costs excluding machinery rental cost: $510 0 units produced: 120 0, total costs excluding machinery rental cost: $660 0 What is the total fixed cost for producing 100 0 units?
Costs and cost behaviour
A company charges $12 for each batch of a product. Each batch has a variable cost of $4. Fixed costs are absorbed using a normal activity level of 100 batches at $3 per batch. Under marginal costing, what profit is earned if the company produces and sells 125 batches?
Costs and cost behaviour
Which statements accurately compare the advantages of absorption costing and marginal costing?
Traditional costing methods
The table below gives production information for one week. budgeted production overheads: $100000 actual production overheads: $80000 expected production: 5000 units over-absorption of overheads: $1000 How many units were produced during the week?
Traditional costing methods
A business has prepared the budget shown below. revenue: $700000 contribution: $560000 fixed production costs: $350000 fixed non-production costs: $20000 What budgeted sales revenue gives break-even?
Costs and cost behaviour
How do you calculate a margin of safety?
Costs and cost behaviour
A business recorded a contribution to sales ratio of 40%. The information below is given. sales revenue amounts to $100 00 fixed costs amount to $30 00 profit amounts to $10 0 It is forecast that sales revenue will rise by 20% next year. Total fixed costs will stay unchanged. By how much will profit increase?
Costs and cost behaviour
A sole trader keeps records of business transactions by using the double entry system. Which transaction does not comply with the double entry rules?
The accounting system
A business’s actual output is below forecast. Which costs are normally unchanged from the forecast? 1 fixed cost per unit 2 total fixed cost 3 total variable cost 4 variable cost per unit
Costs and cost behaviour
A business owns a property that is let to tenants. Which of the following costs ought to be classified as capital expenditure?
Accounting for non-current assets
Which statements identify factors that may lead to depreciation of a non-current asset?
Accounting for non-current assets
A business bought a non-current asset with an estimated life of $10$ years. Depreciation is calculated by the straight-line method. By the time it was sold, depreciation had been charged for $5$ years. The information below is given. Original purchase price: $100\,000$ Estimated residual value when purchased: $20\,000$ Selling costs: $8\,000$ Loss on sale: $10\,000$ Calculate the sale proceeds.
Accounting for non-current assets
A business keeps control accounts as part of its double-entry system. Which error would lead to an entry being made in the suspense account?
Reconciliation and verification
Which item is least likely to be entered in the cash book when the bank reconciliation statement is being prepared?
Reconciliation and verification
A draft statement of financial position records a bank balance of $1\,400$. The additional information is as follows. Cheques issued but still uncleared by the bank: $150$ Bank charges not yet entered in the cash book: $45$ Lodgements recorded in the cash book but absent from the bank statement: $220$ Which amount appears on the bank statement?
Reconciliation and verification
Ahmed and Betty run a partnership. They intend to change the business from a partnership into a limited company. Ahmed and Betty will become shareholders. What benefit will Ahmed and Betty gain as shareholders?
Types of business entity
What is the reason for a business to prepare a bank reconciliation statement?
Reconciliation and verification
At the end of the month, the cash book of a business showed a debit balance of $2600 for the bank. On the bank statement, bank charges of $1200 and interest received of $500 appeared, and neither item had been recorded in the cash book. The bank column in the cash book had been overcast by $200. There was a payment of $800 in the cash book that had not yet been shown on the bank statement. What credit balance did the bank statement show at the end of the month?
Reconciliation and verification
What is the purpose of a sales ledger control account?
Reconciliation and verification
A bookkeeper has been asked to reconcile the sales ledger control account with the balances in the sales ledger at the close of each month. Before the bookkeeper found the following, the sales ledger control account had a debit balance of $26 000: 1. Contra entries of $1800 in the sales ledger were not included in the control account. 2. Discounts allowed of $3600 had been entered on the debit side of the sales ledger control account. 3. The allowance for irrecoverable debts had been raised by $1200. What is the correct figure for trade receivables at the end of the month?
Reconciliation and verification
During its trading year, a business spent $5750 on advertising. Within this total, $500 related to the following financial year. How would the proper handling of the $500 affect the financial statements?
The accounting system
At the end of the financial year on 31 December, the accounting records of a business gave the following balances. trade receivables $18 820 allowance for irrecoverable debts $760 The following adjustments are required. 1. An irrecoverable debt of $470, written off in the previous year, has now been recovered. No accounting entries for this recovery have been made in the financial statements. 2. Irrecoverable debts of $680 are to be written off. 3. The allowance for irrecoverable debts must be set at 5% of trade receivables. In the statement of profit or loss for the year ended 31 December, how should the net total of these adjustments be shown?
Preparation of financial statements
Once the financial statements of a sole trader had been prepared, the items below were identified. 1. Drawings were goods removed for personal use, valued at their sales value of $12 000. The owner uses a mark-up of 50% on all goods sold. 2. Profit for the year included an insurance expense of $7500. One-third of this related to the owner’s health insurance. What is the effect on the profit for the year after these items are corrected?
Preparation of financial statements
L and M are partners in a partnership. Which item should be shown in the partnership appropriation account?
Types of business entity
Valerie and Paul are partners, and they divide profits and losses in the ratio 5 : 3. The profit of the partnership for the year amounted to $250 000. The partnership appropriation account for the year showed the following figures. total interest on partners’ drawings $12 000 total interest on partners’ capital contributions $18 000 What share of the residual profits was due to Paul?
Types of business entity
Which items will appear in a company’s statement of changes in equity?
Preparation of financial statements
What is the correct double entry for goods withdrawn by the owner of a business for personal use?
The accounting system
The table sets out a company’s equity. ordinary shares of $1.00 each $200 000 share premium account $80 000 revenue reserves $160 000 The following changes are then to be made to the equity, in the order shown: • a one-for-one bonus issue of ordinary shares • a rights issue of 100 000 ordinary shares of $1.00 each at $1.40 per share. The company wants to keep reserves in the most flexible form. What will the equity of the company be?
Preparation of financial statements
At 31 December, a company showed these balances. inventory $31\,000$ trade receivables $88\,000$ allowance for irrecoverable debts $2\,000$ bank overdraft $9\,000$ cash in hand $5\,000$ The current ratio is $2.5 : 1$. What was the amount of trade payables at 31 December?
Analysis and communication of accounting information
The table gives figures at year end for a company. Statement of profit or loss: profit for the year $55\,200$ finance costs $12\,000$ Statement of financial position: total assets $350\,000$ total current liabilities $70\,000$ Calculate the return on capital employed (ROCE).
Analysis and communication of accounting information
A restaurant owner incurred the following expenses: 1 the cost of food ingredients 2 upkeep of cooking appliances 3 salaries paid to the chefs 4 salary paid to the restaurant manager. Which of these are indirect costs?
Costs and cost behaviour
Records were kept of the total costs for two months. The variable cost per unit stayed unchanged. In July, the total fixed costs were $\$1000$ higher. June: $8000$ units were produced, and total costs were $\$76\,000$ July: $10\,000$ units were produced, and total costs were $\$86\,000$ What was the amount of the fixed costs in July?
Costs and cost behaviour
P Limited applies an overhead absorption rate of $\$15$ for each machine hour, calculated from budgeted machine hours of $8000$ per month. During July, production used $8500$ machine hours, and overheads were under-absorbed by $\$16\,500$. Calculate the actual overheads for July.
Traditional costing methods
Which statement explains why overheads are allocated?
Traditional costing methods
A manufacturing enterprise has the budgeted annual figures below. direct wages ($\$12$ per labour hour) $600\,000$ fixed overheads $160\,000$ Fixed overheads are allocated using direct labour hours as the basis. A job uses direct materials with a cost of $\$480$ and requires $30$ labour hours. The business wants to earn a profit margin of $25\%$ on this job. What price should be quoted for this job?
Traditional costing methods
Which factor would make the variable cost line on a break-even chart curved rather than straight?
Costs and cost behaviour
The information below is given for a business. budgeted monthly fixed costs $2000$ target monthly profit $3000$ budgeted variable cost per unit $15$ unit selling price $40$ Fixed costs are forecast to rise by $\$500$ each month, and variable costs are forecast to rise by $\$5$ for each unit. Which revenue figure will be needed to reach the target profit?
Costs and cost behaviour
Which accounting concepts are used in depreciating non-current assets? 1 the consistency concept 2 the matching/accruals concept 3 the objectivity concept 4 the prudence concept
Accounting for non-current assets
What assumptions does cost-volume-profit analysis make?
Costs and cost behaviour
Which account balance would appear in the credit column of a trial balance?
The accounting system
The financial statements were drawn up from the details below. Purchase cost of machinery (this included $450$ for repairs to the machinery): $16950$ Lighting and heating (this included $250$ for wiring in the factory extension): $1780$ Carriage inwards (this included $45$ for delivery of new machinery): $230$ What amount will the decrease in non-current assets be when capital and revenue items are correctly dealt with (ignore depreciation)?
Accounting for non-current assets
What does depreciating a non-current asset achieve?
Accounting for non-current assets
The table gives the non-current assets of a business. End of the year: cost $360000$, accumulated depreciation $120000$, carrying value $240000$. Start of the year: cost $300000$, accumulated depreciation $75000$, carrying value $225000$. Throughout the year, non-current assets with a cost of $110000$ were purchased, and non-current assets with a carrying value of $20000$ were sold. What was the depreciation charge for the year?
Accounting for non-current assets
Once the profit for the year had been worked out, the errors below were found. 1 Discount allowed of $550$ had been entered as discount received. 2 Rental income of $3500$ had been entered as an expense. 3 Wages of $4500$ had been entered as $5400$. How will correcting these errors affect the profit for the year?
Reconciliation and verification
The suspense account for a business is set out below: Debit: discount allowed $150$. Credit: opening balance $100$, sales $50$. Which of the following statements are correct? 1 The total debits were $100$ below the total credits in the trial balance. 2 The sales account had been overstated by $50$. 3 The discount allowed account had been overstated by $150$.
Reconciliation and verification
What disadvantages does operating as a partnership have compared with operating as a sole trader?
Types of business entity
Which item ought to be entered on the debit side of a sales ledger control account?
The accounting system
A purchases ledger control account was prepared with some mistakes. The balance shown was $15\,830$ before correction. The following mistakes were then found. 1. Refunds of $270$ from credit suppliers had not been entered in the control account. 2. The total discounts received of $480$ had been entered on the wrong side of the control account. What is the corrected balance of the purchases ledger control account?
Reconciliation and verification
The draft profit for the year for a business was $\$84\,000$. The following errors were then found. 1 Discounts received of $\$2\,500$ had been entered on the debit side of the discounts allowed account. 2 Wages of $\$9\,000$ had been left out entirely. 3 Sales returns of $\$8\,000$ had been entered on the debit side of the purchases returns account. What is the adjusted profit for the year?
Reconciliation and verification
Which items would raise profit for the year?
Preparation of financial statements
Sam could not carry out a physical count of inventory on 31 December 2024. On 3 January 2025, a batch of inventory was sold to Abdul for $\$11\,950$. Its cost price was $\$9\,560$. On 4 January 2025, inventory was returned by Sita. It had first been sold on 21 December 2024 for $\$2\,390$. Its cost price was $\$1\,912$. On 5 January 2025, Sam valued his inventory at cost at $\$59\,750$. What was the inventory value at 31 December 2024?
Reconciliation and verification
Why does a sole trader need to record accrued income?
The accounting system
The information below relates to a sole trader’s business at the end of the financial year. cost of sales: $\$540\,000$ expenses: $\$325\,000$ profit for the year: $\$63\,000$ sales returns: $\$30\,000$ What was the total sales figure for the year?
Preparation of financial statements
In a partnership, each partner has a capital account as well as a current account. What is the correct accounting entry to record interest on capital for partner X?
The accounting system
Arnold runs a partnership with Bradley. The financial year closes on 31 December. Under one clause of their partnership agreement, drawings attract interest each month at $5\%$ per annum. During the year, Arnold withdrew the following amounts on these dates. 31 March: $\$6\,000$ 30 June: $\$10\,000$ 30 September: $\$12\,000$ 31 December: $\$8\,000$ How should the partnership's appropriation account deal with the interest on drawings?
Preparation of financial statements
Which statement is true with regard to the financial statements of limited companies?
Preparation of financial statements
At the end of the financial period, a business shows these balances: non-current assets: $102\,000$ trade receivables: $39\,000$ trade payables: $27\,000$ profit for the period: $65\,000$ drawings: $32\,000$ long-term loan: $50\,000$ What is the closing balance on the owner’s capital account at the end of the financial period?
Preparation of financial statements
A company gives the following details about its equity. 150,000 shares $\$1$ each: $\$150\,000$ share premium: $\$75\,000$ general reserve: $\$125\,000$ retained earnings: $\$25\,000$ The directors suggest a bonus issue of shares on the basis of one $\$1$ share for each three shares already owned. After that, the directors plan a rights issue on the basis of one new $\$1$ share for every four shares held, with a premium of $\$0.20$ per share. What will the company’s total equity be after the share issues?
Preparation of financial statements
Which of the following statements about ratios are correct?
Analysis and communication of accounting information
A limited company recorded a return on capital employed of $5\%$ in the previous financial year. The extra information below is available. equity: $\$1\,000\,000$ $10\%$ debentures: $\$200\,000$ finance costs: $\$20\,000$ taxation: $\$10\,000$ What was the company's profit for the year?
Analysis and communication of accounting information
A business hires machinery for use in its factory. The rental charge for one machine is $12000. Each machine can make 60000 units. The business gave the information below. number of units / total costs excluding rental cost of machinery ($): 90000 → 510000, 120000 → 660000. What is the total fixed cost of producing 100000 units?
Costs and cost behaviour
A firm charges $12 for each batch sold. The variable cost comes to $4 per batch. Fixed costs are absorbed using a normal activity level of 100 batches at $3 per batch. What profit is made under marginal costing if the firm produces and sells 125 batches?
Costs and cost behaviour
Which of the statements accurately compare the advantages of absorption costing with those of marginal costing?
Traditional costing methods
The table below gives production information for one week: budgeted production overheads $100000; actual production overheads $80000; expected production 5000 units; over-absorption of overheads $10000. How many units were produced during the week?
Traditional costing methods
A business has drawn up the following budget: revenue $700000; contribution $560000; fixed production costs $350000; fixed non-production costs $20000. What would its budgeted break-even sales revenue be?
Costs and cost behaviour
How do you calculate a margin of safety?
Costs and cost behaviour
A business has a contribution to sales ratio of 40%. The information provided is as follows: sales revenue $100000; fixed costs $30000; profit $10000. It is forecast that sales revenue will rise by 20% next year. Total fixed costs will stay unchanged. What increase in profit will result?
Costs and cost behaviour
A sole trader applies the double entry system to record business transactions. Which transaction does not comply with the double entry rules?
The accounting system
If a business’s actual output is below the forecast level, which costs normally stay the same as forecast?
Costs and cost behaviour
A business owns a property that is let to tenants. Which of the following costs should be classified as capital expenditure?
Accounting for non-current assets
Which statements indicate factors that may lead a non-current asset to depreciate?
Accounting for non-current assets
A business acquired a non-current asset with an estimated useful life of $10$ years. Depreciation is calculated by the straight-line method. By the date of disposal, depreciation for $5$ years had been recorded. The information below is given: original purchase price: $100\,000$ estimated residual value when purchased: $20\,000$ selling costs: $8\,000$ loss on sale: $10\,000$ What were the sale proceeds?
Accounting for non-current assets
A business uses control accounts within its double entry system. Which type of error would lead to a posting in the suspense account?
Reconciliation and verification
Which item would be least likely to need updating in the cash book when the bank reconciliation statement is being prepared?
Reconciliation and verification
A draft statement of financial position indicates a bank balance of $1400$. The additional information is as follows: cheques issued but not yet cleared by the bank: $150$ bank charges not recorded in the cash book: $45$ lodgements entered in the cash book but not appearing on the bank statement: $220$ What amount appears on the bank statement?
Reconciliation and verification
Bilal gave the following information for his service business for the year ended 31 December 2024.
Preparation of financial statements
Ben and George turned their partnership into a limited company, M Limited.
Preparation of financial statements
Khaled, who owns a retail business, supplied the following information.
Analysis and communication of accounting information
Ameerah’s business operates using absorption costing.
Traditional costing methods
H Limited’s financial year came to an end on 31 December 2024, and the information below was available on that date.
Accounting for non-current assets
Virat drew up the trial balance at 28 February 2025, which was the close of his financial year. Even so, the totals failed to balance. The business does not keep control accounts. An examination of the entries in the books of account uncovered the following errors.
Reconciliation and verification
Zak has not kept complete accounting records for his retail business. He has given the information below for the year ended 31 December 2024.
The accounting system
M Limited makes one product under marginal costing, and the case gives extra details about two factories plus alternative operating choices.
Costs and cost behaviour
Bilal supplied the following details for his service business for the year ended 31 December 2024.
Preparation of financial statements
Ben and George changed their partnership into a limited company, M Limited.
Preparation of financial statements
Khaled, who owns a retail business, gave the information below.
Analysis and communication of accounting information
Ameerah’s business applies absorption costing.
Traditional costing methods
Consult Source A in the insert.
Preparation of financial statements
Consult Source B in the insert.
Analysis and communication of accounting information
Consult Source C in the insert.
Preparation of financial statements
Read Source A from the insert.
Preparation of financial statements
Refer to Source B in the insert.
Preparation of financial statements
Consult Source C in the insert.
Business acquisition and merger
Read Source A in the insert provided.
Preparation of financial statements
Refer to Source B in the insert.
Analysis and communication of accounting information
Refer to Source C in the insert.
Preparation of financial statements
Waheed is deciding on a project and needs to judge its financial worth by using net cash flows and net present value.
Investment appraisal
Refer to Source B in the insert. Terri is worried about the projected bank overdrafts shown in the cash budget.
Budgeting and budgetary control
Refer to Source A in the insert.
Investment appraisal
Refer to Source B in the insert.
Standard costing
Use Source A in the insert.
Investment appraisal
Consult Source B in the insert. Extra information concerns Terri’s cash budget and the options suggested to cut bank overdrafts.
Budgeting and budgetary control