Accounting 9706/22 February/March 2026: question paper and mark scheme

Mark scheme

1(a) Calculate the total purchases of goods for resale for the year ended 5 31 December 2025. $ Opening balance of trade payables (4 914) (1) fb Closing balance of trade payables 5 520 Payments to trade payables 35 724 (1) fb Discounts received 390 Unpresented cheques 680 (1) Cash purchases 3 172 (1) Total purchases 40 572 (1) OF Alternative approach: Purchase ledger control account $ $ Bank 35 724 } Bal b/d 4 914 *(1) Discounts 390 }(1) Purchases 36 720 received Bal c/d 5 520 *both 41 634 41 634 Bal b/d 5 520 Credit purchases 36 720 OF Unpresented cheques 680 (1) Cash purchases 3 172 (1) Total purchases 40 572 (1)OF Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 1(b) Prepare the statement of profit or loss for the year ended 31 December 2025. 14 Houssam Statement of profit or loss for the year ended 31 December 2025 $ $ Revenue W1 99 202 (1) Cost of sales W2 (3 878) (1) Gross profit 61 124 (1) OF Discounts received 390 (1) Profit on disposal of equipment 145 (1) 61 659 Less expenses Depreciation of equipment W3 3 700 (2) OF Bank loan interest 840 (1) General expenses W4 3 457 (2) OF Rent W5 9 210 (2) OF Wages 13 860 (1) (31 067) Profit for the year 30 592 (1) OF W1 Cash takings banked $79 320 + unbanked takings $19 882 = $99 202 (1) W2 Purchases $40 572 + carriage inwards $148 + [Opening inventory $8 792 – closing inventory $11 434] (1) = $38 078 (1) W3 $20 800 less disposal $800 (1) + purchase $3 200 = $23 200 – valuation $19 500 = $3 700 (1) OF W4 Paid $4 410 – opening due $183 (1) – closing prepaid $770 = $3 457 (1) OF W5 Paid $8 380 + $320 opening prepaid (1) + $510 closing due = $9 210 (1) OF Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 1(c) Explain, with reference to the relevant accounting concept, how drawings are 2 treated in the financial statements of a business. Business entity concept (1) drawings are removed from cost of sales/subtracted from purchases (in the statement of profit or loss) (1) drawings must be shown as a deduction from capital in the statement of financial position (1) Max 2 1(d) State two reasons why Houssam may have chosen not to maintain full 2 accounting records. The cost involved in employing/training someone OR purchasing software/computer (1) Does not have the skills (to maintain full accounting records) (1) Does not have the time (to maintain full accounting records) (1) Does not require the additional information a full accounting system would provide (1) Max 2 Accept other valid responses 1(e) Advise Houssam whether or not he should use a computerised accounting 7 system. Justify your answer by considering the advantages and disadvantages of computerised accounting systems. Advantages (max 3) Speed of processing information (1) Automatic provision of financial statements (1) Potential for additional useful features: payroll/inventory control (1) Accuracy/less errors of records (1) Space can be saved/less paper used/large amount of data stored (1) Production of business documents e.g. invoices (1) Auditing and fraud prevention (1) Records/data are more secure (using passwords/back-ups) (1) Disadvantages (max 3) Cost of capital equipment (1) Cost of software package/updating/maintenance (1) Training required to use software package/additional wages cost (1) Data security risks/hacking/cyber-attacks/virus (1) Systems crashing/loss of data (1) Employee resistance (1) Decision supported with a comment (1) Accept other valid responses. Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/

Mark scheme

2(a) Calculate the total carrying value of vehicles at 1 January 2025. 4 Vehicle A: 20% × 2 × $30 000 = $12 000 OR $18 000 (1) Vehicle B: 20% × ½ × $24 000 = $2 400 OR $21 600 (1) Vehicle C: 20% × 5/12 × $33 000 = $2 750 OR $30 250 (1) Carrying value: $87 000 – $17 150 = $69 850 (1) 2(b) Prepare the vehicles at cost ledger account for the year ended 31 December 4 2025. Vehicles at cost 2025 $ 2025 $ Jan 1 Balance 87 000 Sept 1 Disposal 30 000 (1) b/d Sept 1 Bank 18 200 (1) Dec 31 Balance 92 000 c/d Sept 1 Disposal 16 800 (1) 2026 122 000 122 000 Jan 1 Balance 92 000 (1) OF b/d 2(c) Calculate the profit or loss on disposal of Vehicle A. 3 (30 000 – 12 000)= 18 000 (1) 18 000 – 16 800 (1) = 1 200 loss (1) 2(d) Explain two accounting concepts which are applied when non-current assets 4 are depreciated. Matching/accruals (1): the cost of the non-current asset is matched to the period when the business benefits from the asset’s use (1). Prudence (1): assets and profits should not be overstated (1). Consistency (1): accounting policies should not be changed without a valid reason/to allow comparison between years (1) Max 2 concepts × 2 marks Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/

Mark scheme

3(a) Prepare the statement of changes in equity for the year ended 31 December 9 2025. N plc Statement of changes in equity for the year ended 31 December 2025 Share Share Revaluation Retained Total capital premium reserve earnings $ $ $ $ $ At 1 660 000 175 000 110 000 367 000 1 312 000 January 2025 Revaluation (110 000)} (30 000)} (140 000) (of (1) property) Bonus 396 000 (175 000) (221 000) – issue W1 (1) (1) (1) Dividend (84 480) (84 480) (paid) W2 (1) Rights 352 000 140 800 492 800 issue W3 (1) (1) Profit (for 92 500 92 500 the year) (1) At 31 1 408 000 140 800 – 124 020 1 672 820 December 2025 (1)OF column W1 Bonus issue: 3/5 × 660 000 = $396 000 W2 Number of shares 1 056 000 × 4 = 4 224 000 × $0.2 = $84 480 W3 Rights issue 4 224 000/3 = 1 408 000 shares Increase in share capital $352 000 Increase in share premium: 1 408 000 × $0.10 = $140 800 Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 3(b) Explain two advantages to a company of making a rights issue of shares rather 4 than a new issue of shares. • A rights issue is less time consuming than making a general issue of shares (1) because there are less rules and regulations/already know the shareholders (1) • A rights issue is less costly (1) no need for a prospectus/promotion costs (1) • The control of the company is unaffected by a rights issue (1) as shares are purchased by existing shareholders/not new shareholders (in proportion to their existing shareholding) (1) • More likely to be successful than a general issue (1) as shares are offered at a favourable price (1) Max 4 Accept other valid responses. 3(c) Explain one reason for creating a general reserve. 2 • To ensure finance is retained in the business for some future needs/in case of emergency (1) ensures they have necessary funds to respond/liquid enough (1) • Divided policy flexibility (1) allows dividend payout in less profitable years (1) Max 2 Accept other valid responses.

Mark scheme

4(a)(i) Define each of the following terms: 1 Marginal cost: the extra cost arising from the production of one more unit (1) 4(a)(ii) Define each of the following terms: 1 Stepped cost: fixed costs which change as different stages of production are reached (1) 4(b) Calculate the current profit per month. 3 Contribution per unit: $84 – $24 – $48 = $12 (1) Total contribution: 12 × 3 600 = $43 200 (1) Profit per month: $43 200 – $28 260 = $14 940 (1) Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 4(c) Calculate the increase in the selling price per unit in order to achieve the target 5 profit. Increase in direct labour cost: $2.40 $46 260 New contribution: $28 260 + 18 000 = (1) = $12.85 (1) 3 600 Either: New selling price: Variable costs $74.40 (1) + new contribution $12.85 = $87.25 (1) Increase in selling price = $3.25 (1) Or: Increase in selling price: $2.40 + $0.85 (1) = $3.25 (1) 4(d)(i) Prepare marginal costing statements to show the monthly profit to be made for 7 each option. option A Marginal costing statement for one month $ Revenue: 8800 × 28 246 400 (1) Direct materials W1 (95 040) (1) Direct labour (normal working): 8000 × 12 (96 000) (1) Direct labour (overtime working) 800 × 16.80 (13 440) (1) Contribution 41 920 (1) OF Fixed costs: $28 700 + $4000 advertising (32 700) (1) Profit for one month 9 220 (1) OF W1: Direct materials per unit: $9 + 50% = $13.50 × 80% = $10.80 Total direct materials: 8 800 × $10.80 = $95 040 Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 4(d)(ii) Prepare marginal costing statements to show the monthly profit to be made for 6 each option. option B Marginal costing statement for one month $ Revenue: 8000 × 28 224 000 (1) Direct materials: W1 (75 600) (1) Direct labour (8000 × $12) (96 000) (1) Contribution 52 400 (1) OF Fixed costs (28 700) (1) Profit for one month 23 700 (1) OF W1: New price per unit $13.50 × 70% = $9.45 Total direct materials 8 000 × $9.45= $75 600 Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/ 4(e) Advise the directors which option they should choose. Justify your choice by 7 discussing both financial and non-financial factors. Option A (max 4) For Can use inventory control system (JIT) which will help avoid wastage (1) and avoid any increase in storage costs (1) Avoid storage costs (1) Increased advertising should increase customers/revenue/brand recognition (1) Overtime may motivate employees (1) Could sell more products which will increase customers/revenue (1) Against Will advertising campaign be successful? (1) Profits are lower per month than for option B (1) Altering the design may reduce customer demand/sales/revenue (1) JIT could mean halts in production if delivery is late (1) JIT often means additional delivery/admin costs (1) Option B (max 4) For Avoids overtime requirement which may be resisted by employees (1) Makes higher profit per month than option A (1) OF Against Reliability of new supplier (1) Will quality be maintained? (1) Additional storage costs? (1) Accept other valid responses. Decision supported with a comment (1) Trace ID: PC-FE90DFB25C Re-uploading, mirroring or re-hosting this file on any other website or domain is unauthorised and traceable. Licensed for hosting on papacambridge.com only. PapaCambridge Downloaded from PapaCambridge - https://papacambridge.com/