Accounting 9706/34 May/June 2021: question paper and mark scheme
Cambridge AS & A Level Accounting (9706), Paper 3 A Level Structured Questions 34, May/June 2021. Read both free below, or download them. Done the paper? Get it marked by AI against this mark scheme.
Read Source A1 in the insert.
(a) Prepare the complete subscriptions account for the year ended 31 December 2020.
…… [7]
Additional information
For the year ended 31 December 2020
$
Profit on sale of refreshments 6 200
Purchase of equipment 10 120
Depreciation on equipment 4 050
Proceeds from sale of equipment 8 440
Profit on disposal of equipment 510
Staff costs 18 310
Other costs 3 100
(b) Prepare the income and expenditure account for the year ended 31 December 2020.
…… [7]
(c) Advise the managing committee whether or not the new policy on unpaid subscriptions should be continued. Justify your answer.
…… [5]
Additional information
Inventory of refreshments was $600 at 1 January 2020 and $750 at 31 December 2020.
Amounts paid during the year to suppliers of refreshments totalled $16 000.
Amounts owing to suppliers of refreshments were $1100 at 1 January 2020 and $920 at
31 December 2020.
(d) Prepare the refreshments trading account for the year ended 31 December 2020, showing sales as the balancing figure.
…… [4]
(e) State two reasons why a club or society might engage in a trading activity.
1 ……
2 ……
…… [2]
[Total: 25]
Mark scheme
1(a) subscriptions account 7
$ $
Balance b/d 2 100 Balance b/d 300
Income and 20 000 (1) Bank 19 700
expenditure a/c
Balance c/d 500 (1) Bad/irrecoverable 1 500 W1
debts
Balance c/d 1 100 (1)
22 600 22 600
Balance b/d 1 100 (1of) Balance b/d 500 (1of)
W1 (6 × 100) (1) + (3 × 300) (1) = $1500
1(b) ZV Sports Club 7
Income and expenditure account for the year ended 31 December 2020
$ $
Subscriptions 20 000 (1of)
Profit on disposal of equipment 510 (1)
Profit on sale of refreshments 6 200 (1)
26 710
Bad/irrecoverable debts 1 500 (1of)
Depreciation 4 050 (1)
Staff costs 18 310 }
Other running costs 3 100 }(1) 26 960
Deficit for the year 250 (1of)
1(c) It applies the accounting concept of prudence (1) and avoids assets/debtors 5
being overstated (1).
However, the policy has caused an additional cost in the current year which
has actually arisen in earlier years (1) which has caused a surplus to turn
into a deficit (1).
Some members may pay later (1) if reminded (1)
Members with unpaid subscriptions should not be allowed to make use of
the facilities (1) perhaps by annual membership cards being available only
for members who have paid their current subscription (1).
Accept other valid points
(1) mark for decision plus (max 4) for comments
1(d) ZV Sports Club 4
Refreshments trading account for the year ended 31 December 2020
$ $
Sales 21 870 (1of)
Opening inventory 600 *
Purchases 15 820 W1
16 420
Closing inventory 750 *(1 both)
Cost of sales 15 670
Profit 6 200
W1 16 000 (1) + (920 – 1 100) (1) = $15 820
1(e) In order to raise funds/make a profit (1) to finance new assets/activities of 2
the club/provide a service to members (1)
To keep subscription low (1)
To attract new members (1)
Max 2
Accept other valid points
Read Source A2 in the insert.
(a) Prepare the equity and liabilities section of the statement of financial position at
31 December 2020.
…… [10]
(b) Calculate for the year ended 31 December 2020:
(i) the profit for the year
…… [4]
(ii) profit from operations.
…… [3]
(c) Explain two accounting ratios for which the knowledge of the value of profit from operations is needed.
1 ……
2 ……
…… [4]
Additional information
The directors have proposed a final dividend for 2020 to be paid on 1 March 2021.
(d) State how the proposed dividend will affect:
(i) the books of account
…… [2]
(ii) the financial statements.
…… [2]
[Total: 25]
Mark scheme
2(a) NT plc 10
Statement of financial position (extract) at 31 December 2020
Equity $
Ordinary share capital 450 000 (1)
Share premium 145 000 (1)
General reserve 50 000 (1)
Retained earnings 505 000 (1)
Revaluation reserve 270 000 (1)
1 420 000
Non-current liabilities
8% debenture (2031) 200 000 (1)
Current liabilities
Trade and other payables 125 000 W1
Total equity and liabilities (1) 1 745 000 (1of)
W1 117 000 (1) + 8 000 (1) = 125 000
2(b)(i) $ 4
increase in retained earnings 505 000 – 421 000 84 000 (1)
final dividend paid 40 000 } (1)
interim dividend paid 20 000 }
transfer to general reserve 30 000 (1)
profit for the year 174 000 (1of)
2(b)(ii) $ 3
profit for the year 174 000
bank interest 7 000 (1)
debenture interest 8 000 (1)
profit from operations 189 000 (1of)
2(c) Return on capital employed/ROCE (1) to show the return on the investment 4
in the business (1).
Income gearing (1) to show the ability of a business to pay the interest out of
profit (1).
2(d)(i) A proposed dividend is not recorded in the books of account (1). It is 2
recorded in the cash book when it is actually paid (1).
2(d)(ii) A proposed dividend is not recorded in the financial statements for 2020 / is 2
recorded in 2021 (1) but in a note to the 2020 accounts (1).
Read Source A3 in the insert.
(a) Explain what is meant by the following terms:
(i) an adjusting event
…… [2]
(ii) a non-adjusting event.
…… [2]
Additional information
DW plc has a financial year end of 31 December. On 31 December 2020 the draft profit for the year was calculated as $8100 and the draft statement of financial position at that date included the following values.
$
Machinery (at cost) 186 000
Accumulated depreciation of machinery 91 500
On 1 January 2021 the directors reviewed the values of all the non-current assets. This indicated that the machinery could be sold for $87 000. The cost of dismantling the machinery and transporting it to a new owner would amount to $3000.
The present value of total future estimated net cash flows arising from the use of the machinery was $90 000.
(b) State the amounts of the following with regard to the machinery:
(i) its fair value
…… [1]
(ii) its value in use.
…… [1]
(c) Calculate with regard to the machinery:
(i) the carrying amount
…… [1]
(ii) the recoverable amount
…… [1]
(iii) the impairment loss.
…… [2]
(d) Explain how the impairment loss should be recorded in the financial statements.
…… [4]
Additional information
On 3 January 2021 there was a fire in the company’s warehouse, and inventory costing $18 000 was destroyed. It was expected that the company’s insurance would cover only part of the cost.
(e) Explain how the financial effects of the fire should be recorded in the financial statements for
31 December 2020.
…… [3]
(f) Explain what is meant by an audit of a limited company.
…… [3]
(g) Discuss how the shareholders of DW plc are likely to react to an unqualified audit report.
…… [3]
(h) Explain what is meant by the term ‘stewardship’ in relation to the directors of DW plc.
…… [2]
[Total: 25]
Mark scheme
3(a)(i) An event for which the condition existed at the year end (1) and which, if 2
material, requires adjustment(s) to be made to the financial statements (1).
3(a)(ii) An event for which the condition arose after the year end (1) but which, if 2
material, is disclosed by a note to the accounts (1).
3(b)(i) $84 000 (1) 1
3(b)(ii) $90 000 (1) 1
3(c)(i) $94 500 (1) 1
3(c)(ii) $90 000 (1) 1
3(c)(iii) $94 500 (1) – $90 000 (1) = $4 500 2
3(d) In accordance with IAS36 (1) it should be recorded as an expense (1) in the 4
income statement (1) and a reduction in the value of the asset (1) in the
statement of financial position (1).
Max 4
3(e) In accordance with IAS10 (1) this is a non-adjusting event (1) as the fire 3
happened after the year end (1). It should be disclosed as a note to the
accounts (1).
Max 3
3(f) It is a check on the financial statements (1) by a qualified, independent 3
person (1). It checks that they have been prepared in accordance with
legislation and accounting standards (1), that they contain no material errors
and/or omissions (1) so that the auditor can report (1) on whether they give
a true and fair view of the company’s performance (1).
Accept other valid points.
Max 3
3(g) They will know that the auditor has reported that the financial statements 3
show a true and fair view. (1)
They will have more confidence in using the financial statements as a basis
for further investment decisions. (1)
They will be able to make comparisons with more confidence. (1)
They will be assured that the directors have done their jobs properly. (1)
Accept other valid points.
Max 3
3(h) The directors are appointed by/responsible to the shareholders (1) for 2
managing the company (1)
Read Source A4 in the insert.
(a) Calculate the sales revenue of the joint venture.
…… [3]
Additional information
1 Rent of the market stall, $420, was paid from the joint venture bank account.
2 Amit paid for fittings for the stall, $180, from his own funds. These were later sold for $50 and the proceeds paid into the joint venture bank account.
3 Barry paid $1400 of the takings from sales into the joint venture bank account. The remainder he took for his own use.
4 At the end of the festival period the profit was calculated and the bank account closed.
(b) Prepare in the books of the joint venture:
(i) the joint venture account
…… [5]
(ii) Amit account
…… [4]
(iii) Barry account
…… [4]
(iv) the joint venture bank account.
…… [4]
(c) Suggest two ways in which the profit could be increased if the joint venture was repeated at the next festival.
1 ……
2 ……
…… [2]
Additional information
Barry wishes to repeat the joint venture but feels that more help is needed in staffing the stall. He wants to bring in Clara as a third party to the joint venture.
(d) Advise Amit whether or not he should agree to repeat the joint venture if it included Clara as a third party. Justify your answer.
…… [3]
[Total: 25]
Section B: Cost and Management Accounting
Answer all questions.
Mark scheme
4(a) $ 3
900 × 1.8 1 620 (1)
100 × 0.5 50 (1)
1 670 (1of)
4(b)(i) Joint venture account 5
$ $
JV bank (purchases) 1 000 (1) Cash 1 670 (1of)
JV bank (rent) 420 } JV bank (fittings) 50 (1)
Amit (fittings) 180 }(1)
Profit – Amit 80 }
– Barry 40 }(1of)
1 720 1 720
4(b)(ii) Amit account 4
$ $
JV bank 1 060 (1of) JV bank 800 (1)
JV account (fittings) 180 (1)
JV account (profit) 80 (1of)
1 060 1 060
4(b)(iii) Barry account 4
$ $
Cash 270 (1of) JV bank 400 (1)
JV bank 170 (1of) JV account (profit) 40 (1of)
440 440
4(b)(iv) Joint venture bank account 4
$ $
Amit 800 }(1) JV account 1 000 }(1)
(purchases)
Barry 400 } JV account (rent) 420 }
JV account (fittings) 50 } Amit 1 060 }
Cash 1 400 }(1) Barry 170 }(1of)
2 650 2 650
4(c) Negotiate lower rent for the stall. (1) 2
Rent the fittings instead of buying them/negotiate a better deal on buying the
fittings (1)
Seek cheaper supplier for pastries (1)
Make sure they only buy what they can sell (1)
Consider reducing the selling price so that all pastries can be sold and total
takings would increase (1)
Accept other valid points
Max 2
4(d) The already small profit would be split further if there was another party. (1) 3
The profit would not necessarily be higher just because there was another
party as they already can’t sell all their goods. (1)
If Clara made a cash contribution it would lower the amount Amit had to pay.
(1)
Risk would be shared. (1)
Consider whether Clara has any special knowledge. (1)
There may be disputes when three coventurers are involved. (1)
Accept other valid points
(1) mark for decision plus (max 2) for comments
Read Source B1 in the insert.
(a) Calculate the total purchases and the purchases returns expected in January 2021.
…… [2]
(b) Prepare the trade payables budget for January 2021. Show separately the payments made in the month of purchase and the payment made a month in arrears.
…… [6]
Additional information
In February 2021 the actual results for January 2021 were available. These showed:
1 Trade payables had been $96 000 at the start of the month.
2 Net purchases had been 10% higher than budgeted.
3 The value of purchases returns had been the same as had been expected.
4 The company had maintained its policy of paying for one-third of net purchases in the month of purchase and the remainder in the month following. The rate of cash discount received had been the same as had been expected.
5 A contra with the sales ledger control account, $5000, had been made on 1 January. This related to debts incurred in 2020.
(c) Prepare a statement reconciling the opening and closing actual figures for trade payables for
January 2021.
…… [10]
Additional information
One of the directors has suggested that the business discontinues the use of budgets.
(d) Advise the directors whether or not the business should discontinue the use of budgets.
Justify your answer.
…… [5]
(e) Explain what is meant by the term ‘flexed budget’.
…… [2]
[Total: 25]
Mark scheme
5(a) $000 2
Total purchases 200 (1)
Purchases returns 20 (1)
Net purchases 180
5(b) Trade payables budget for January 2021 6
$000
Opening balance 105
Purchases, net of returns 180 (1)
285
Payment in month of purchase 57 W1
Discount received 3 (1)
Payment for December 2018 105 (1)
Closing balance (180 x 2/3) 120 (1)
1
W1 180 × (1) – 3 (1) = 57
3
5(c) Statement reconciling opening and closing trade payables for January 2021 10
$
Opening trade payables 96 000
Purchases 218 000 W1
Purchases returns (20 000) (1of)
Discount received (3 300) W2
Bank (153 700) W3
Sales ledger control account (5 000) (1)
Closing trade payables 132 000 W4
W1 (180 000 + 18 000) (1) + 20 000 (1of) = 218 000
1
W2 [180 000 + 18 000 ] × (1of) × 5% (1) = 3 300
3
W3 (66 000 – 3 300) (1of) + (96 000 – 5 000) (1) = 153 700
2
W4 (180 000 + 18 000) (1of) × (1) = 132 000
3
5(d) budgets may be time consuming/expensive to prepare (1) 5
the data used in budgets are only estimates and may be inaccurate (1)
a desire to achieve the budget’s targets may lead to a sub optimal use of
resources (1)
budgets may demotivate staff (1)
budgets enable co-ordination (1)
budgets enable planning/control to take place (1)
budgets define areas of responsibility/set targets (1)
budgets should lead to a better use of resources (1)
budgets can motivate staff (1)
Accept other valid points
(1) mark for decision plus (max 2) for disadvantages plus (max 2) for
advantages
5(e) a budget based on actual levels of activity (1) which enables meaningful 2
comparisons to be made (1)
Read Source B2 in the insert.
(a) State two ways in which the directors may have estimated the future cash inflows.
1 ……
2 ……
…… [2]
(b) Calculate for option 1:
(i) the net present value (NPV)
…… [6]
(ii) the payback period, in years.
…… [3]
(c) Calculate for option 2:
(i) the net present value (NPV)
…… [6]
(ii) the payback period, in years.
…… [3]
(d) Advise the directors which, if either, of the options they should choose. Justify your answer.
…… [5]
[Total: 25]
Mark scheme
6(a) based on market research (1) 2
based on demand for existing/competitors’ products (1)
based on budgets (1)
Accept other valid points
Any two for (1) mark each
6(b)(i) Year net cash discount discounted 6
flow factor cash flow
$ $
0 (460 000) 1 (460 000) (1)
1 150 000 0.909 136 350 (1)
2 150 000 0.826 123 900 (1of)
3 150 000 0.751 112 650 (1of)
3 160 000 0.751 120 160 (1)
Net present value 33 060 (1of)
6(b)(i) OR
Year net cash flow discount factor discounted
$ cash flow
$
0 (460 000) 1 (460 000) (1)
1–3 150 000 (1) 2.486 (1) 372 900 (1of)
3 160 000 0.751 120 160 (1)
Net present value 33 060 (1of)
6(b)(ii) $ 3
Initial cost (460 000)
Net cash flow Year 1 150 000
Net cash flow Year 2 150 000
Net cash flow Year 3 150 000
(10 000) (1)
Cash inflow End of year 3 160 000 (1)
Payback period 3 years (1)
6(c)(i) Year net cash discount discounted 6
flow factor cash flow
$ $
0 (100 000) 1 (100 000) (1)
1 40 000 0.909 36 360 (1)
2 40 000 0.826 33 040 (1of)
3 40 000 0.751 30 040 (1of)
3 10 000 0.751 7 510 (1)
Net present value 6 950 (1of)
6(c)(i) OR
Year net cash discount factor discounted
flow cash flow
$ $
0 (100 000) 1 (100 000) (1)
1–3 40 000 (1) 2.486 (1) 99 440 (1of)
3 10 000 0.751 7 510 (1)
Net present value 6 950 (1of)
6(c)(ii) $ 3
Initial cost (100 000)
Net cash flow Year 1 40 000
Net cash flow Year 2 40 000
(20 000) (1)
Net cash flow Year 3 40 000 (1)
Payback period 2.5 years (1)
(2 years + 20/40 years)
6(d) NPV is higher/better for option 1 (1) 5
Payback period is shorter/better for option 2 (1)
NPV is generally considered a better method of investment appraisal (1)
Both options have a positive NPV (1)
Option 2 involves a smaller capital outlay which reduces risk (1) so option 1
may have higher finance costs (1)
Accept other valid points
(1) mark for decision plus (max 4) for comments
Checked your answers against these? Let AI mark the whole paper, on your own working.
Examiners follow the generic marking principles at the front of the scheme, then each question's points: method (M), accuracy (A) and independent (B) marks, error carried forward where the scheme allows it, and positive marking, so you're credited for what you got right.
Check your answers against it
Done this paper? Upload your script and CIE Buddy's AI marker marks it question by question against this exact scheme, puts the ticks on your own working and says what each lost mark needed.
Where can I find the 9706/34 May/June 2021 mark scheme?+
On this page, free: the mark scheme for AS & A Level Accounting 9706/34, May/June 2021 (9706_s21_ms_34), and the question paper (9706_s21_qp_34), to read or download, with each question's marking points written out underneath.
How many marks is 9706/34 out of?+
Accounting 9706/34 for May/June 2021 is out of 150 marks, with 3 hours to answer it, across 6 questions.
Can I get my 9706/34 answers marked?+
Yes. Upload your answers to 9706/34/M/J/21 as a PDF or photos, and CIE Buddy marks every question against this paper's official mark scheme, using Cambridge's marking rules. You get your score, each lost mark explained on your own script, and the topics to revise. It's a guide, not an official Cambridge grade.