Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

Refer to Source C in the insert.
(a)[2]

Explain one reason why the factory profit rate changed between 2022 and 2023.

(b)[2]

Prepare a corrected provision for unrealised profit account for the year ended 31 December 2023.

(c(i))[8]

Draw up a corrected statement of profit or loss for the year ended 31 December 2023.

(c(ii))[8]

Draw up a corrected statement of financial position at 31 December 2023.

(d)[5]

Advise the directors whether the retained earnings account balance is too low because excessive dividends were paid. Justify your answer.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: The rate was fixed so that the transfer price matched the buying price, making comparisons possible.

  • Full mark scheme, point by point
  • Step-by-step worked solution
  • Write your answer & get it marked instantly by AI