Accounting 9706/13 October/November 2023: question paper and mark scheme

Question

Inventories are valued at the lower of cost and net realisable value in the statement of financial position. Which accounting concept is being applied? A duality B historic cost C matching D prudence

Question

Which statements describe ways in which the security of data can be ensured within a computerised accounting system? 1 avoiding the use of updates from the accounting software provider 2 frequent backing-up of all work entered into the accounting system 3 making sure that anti-virus protection is put in place 4 using a single password to allow access to the entire accounting system A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

Question

On 1 January, Ann owed Sam $400. She paid the amount due on 6 January after deducting a 2% cash discount. How did Ann record this? account debited $ account credited $ A bank 392 Sam 400 discount allowed 8 B bank 392 Sam 400 discount received 8 C Sam 400 bank 392 discount allowed 8 D Sam 400 bank 392 discount received 8

Question

An improvement to business premises has been incorrectly treated as an expense in the financial statements. What is the effect on the financial statements after this error has been corrected? assets profit for the year A decreased decreased B decreased increased C increased decreased D increased increased

Question

A business incurs the following business expenditure during the year. $ purchase of a machine 9 700 3-year maintenance for the machine 10 000 replacing the wheels of a motor car 8 500 upgrading the hardware of a computer 5 600 What are the total costs to be included in the non-current assets account during the year? A $15 300 B $15 600 C $23 800 D $25 300

Question

What is a reason for providing for depreciation of non-current assets? A to ensure non-current assets are replaced when they are worn out B to match the cost to the revenue earned each year by the non-current assets C to provide funds for purchasing replacement non-current assets D to show the amount they would realise if non-current assets were sold

Question

A business uses the straight-line method of depreciation. A machine which it has owned for three years has a carrying value of $13 000 at the end of the third year. When purchased, it was estimated that it had a life of five years and a residual value of $5000. What was the original cost of the machine? A $18 000 B $20 000 C $25 000 D $32 500

Question

Sammy paid a credit supplier $190 in full settlement of a debt of $200. He omitted to record the discount. How did the correction of this error affect Sammy’s statement of financial position? bank capital trade payables A decreased decreased no effect B increased no effect decreased C no effect decreased increased D no effect increased decreased

Question

The trial balance of a business did not agree and a suspense account was opened. The following errors were then discovered. 1 The sales journal total of $9150 had been credited to both the sales account and the sales ledger control account. 2 The purchases journal total of $3450 had been entered correctly in the purchases account but as $3350 in the purchases ledger control account. 3 Motor expenses of $6450 paid by cheque had only been entered in the bank account. What was the opening balance in the suspense account? A $15 700 credit B $15 700 debit C $24 650 credit D $24 650 debit

Question

Which items are used to update the cash book when preparing a bank reconciliation statement? 1 an amount directly collected by a supplier from the business’s bank account 2 an amount directly transferred by a customer to the business’s bank account 3 an amount not yet credited to the business’s bank account 4 an amount not yet debited to the business’s bank account A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

Question

The year-end balance in the cash book was $23 780. This was different from the balance on the bank statement. The difference was due to the following items. $ a bank error meant a cheque was incorrectly 560 debited to the bank account a customer’s cheque which was dishonoured 1 375 bank charges 216 Which figure should be included as cash at bank in the statement of financial position? A $21 629 B $22 189 C $25 371 D $25 931

Question

Which item is not recorded in the sales ledger control account? A allowance for irrecoverable debts B dishonoured cheque C returns inwards D settlement discount

Question

The closing balance of a purchases ledger control account was $7480. It did not agree with the total of the suppliers’ balances in the purchases ledger. The following two errors were found. 1 An error of original entry occurred when a credit note from a supplier for $120 had been recorded as $210. 2 Interest charged on an overdue supplier’s account of $40 had been debited to the purchases ledger control account. What is the corrected balance of the purchases ledger control account? A $7470 B $7490 C $7520 D $7650

Question

Which statements are correct? 1 An increase in the allowance for irrecoverable debts increases profit for the year. 2 Irrecoverable debts decrease profit for the year. 3 Rental income received in advance at the end of the period will increase profit for the year. 4 Revenue which has been earned but not yet received will increase profit for the year. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

Question

A business paid an annual rent of $24 000. At the beginning of the year, on 1 January, there was accrued rent of $4000. Rental payments during the year were as follows: $ 1 January 12 000 1 July 10 000 1 September 13 000 How was rent recorded in the financial statements at 31 December? statement of other other profit or loss receivables payables $ $ $ A 24 000 7 000 nil B 24 000 nil 7 000 C 35 000 11 000 nil D 35 000 nil 11 000

Question

A business adds a mark-up of 25% to all goods sold. The following information is available for the year ended 30 June. $ receipts from credit customers 284 300 opening trade receivables 22 100 closing trade receivables 26 500 cash used for business expenses and drawings 52 400 discount allowed to credit customers 1 200 closing cash balance 500 Receipts from cash sales were used to pay business expenses and drawings. Any remaining cash was placed in the cash account. The opening cash balance was nil. What was the value of total sales for the year? A $340 400 B $341 600 C $342 800 D $428 500

Question

A partnership agreement only provides for interest on capital at a rate of 6% and interest on drawings at a rate of 8%. What will be the interest payable on a loan from a partner? A 0% B 5% C 6% D 8%

Question

L and M are in partnership. The following information relates to the financial year. L M $ $ drawings 20 000 30 000 interest on drawings 1 200 1 800 interest on partner’s loan 8 000 salary 20 000 residual profit share 36 000 18 000 What was the profit for the year? A $71 000 B $77 000 C $79 000 D $121 000

Question

Which items will not form part of the equity of a limited company? 1 long-term bank loan 2 share premium 3 retained earnings 4 revaluation reserve A 1, 3 and 4 B 1 only C 2, 3 and 4 D 2 only

Question

Which is an internal stakeholder? A bank B debenture holder C employee D potential investor

Question

In the last financial year, R Limited had sales revenue of $190 000 and operating expenses of $108 000. In the current financial year, the directors think that if they increase spending on advertising by $5000, then sales would increase to $205 000. Operating expenses (excluding advertising) would increase by $7000. What would the operating expenses to revenue ratio be if the additional advertising took place? A 56.10% B 58.54% C 158.33% D 170.83%

Question

The following information is available for a business. $ total purchases 820 000 credit purchases 740 000 opening inventory 60 000 closing inventory 80 000 total sales (all on credit) 910 000 carriage inwards 20 000 returns outwards 40 000 What was the inventory turnover? A 29 days B 32 days C 33 days D 35 days

Question

Which characteristic describes an indirect cost? A a cost that cannot be controlled by company managers B a cost that cannot be directly traced to individual cost units or cost centres C a cost that changes at different levels of activity D a cost that remains unchanged at all levels of activity

Question

The manufacture of product type X incurs a specific cost. Data relating to this is as follows: units produced 6000 9000 cost per unit $3 $2 Which type of cost is this? A fixed B semi-variable C stepped D variable

Question

A company makes a single type of product and sells it for $12 per batch. The variable cost is $4 per batch. Fixed costs have been absorbed based on a normal activity level of 1000 batches at $3 per batch. What is the profit under marginal costing if the company makes and sells 1500 batches? A $6000 B $7500 C $9000 D $12 000

Question

A business operates a system of absorption costing. Which statements are correct? 1 Overheads would be over absorbed if the actual activity level was below the budgeted level. 2 Overheads would be under absorbed if the actual activity level was below the budgeted level. 3 Overheads would be over absorbed if the actual overhead exceeded the budgeted overhead. 4 Overheads would be under absorbed if the actual overhead exceeded the budgeted overhead. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

Question

A business uses an overhead absorption rate of $20 per direct labour hour. In April budgeted direct labour hours were 6000 and actual direct labour hours were 6100. Overheads for the month were under absorbed by $3000. What were the actual overheads in April? A $117 000 B $119 000 C $123 000 D $125 000

Question

Which statement is an argument for using marginal costing? A International accounting standards require use of marginal costing. B Marginal costing data enables the use of decision-making techniques. C Setting selling prices is made easier under marginal costing because all costs are considered. D The distinction between fixed and variable overheads under marginal costing is no longer relevant.

Question

The following information is available for a business. total fixed costs $15 000 variable cost $12 per unit selling price $20 per unit break-even point 1875 units The business wants to reduce the break-even point to 1500 units. Which strategy will not achieve the target break-even level? A increasing the selling price to $22 per unit B reducing fixed costs to $12 750 and reducing variable cost to $11.50 per unit C reducing fixed costs to $12 800 D reducing variable costs to $10 per unit

Question

Which assumption does not apply for cost–volume–profit (CVP) analysis? A All units produced are sold. B Only a single type of product is produced and sold. C Total fixed costs change over a period. D Variable cost changes in direct proportion with sales volume.