CAMBRIDGE INTERNATIONAL EXAMINATIONS

GCE Advanced Subsidiary Level and GCE Advanced Level

MARK SCHEME for the May/June 2014 series

9706 ACCOUNTING
9706/23 Paper 2 (Structured Questions – Core),
maximum raw mark 90

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.

Cambridge will not enter into discussions about these mark schemes.

Cambridge is publishing the mark schemes for the May/June 2014 series for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level components and some Ordinary Level components.
 Page 2 Mark Scheme Syllabus Paper
GCE AS/A LEVEL – May/June 2014 9706 23

1 (a) Ocean Fishing Club Shop

Trading Account for the year ended 31 March 2014

$ $
Sales 7 690
Less cost of sales
Inventory on 1/4/2013 975
Add purchases 3 198 (1)
4 173

Less inventory on 31/3/2014 859 3 314

Gross profit 4 376

Less
Wages 3 615 (1)
Depreciation 110 (1) 3 725
Profit for the year 651 (1of) [4]

(b) Ocean Fishing Club

Income and Expenditure Account for the year ended 31 March 2014

$ $
Shop profits 651
Subscriptions 7 000 (1)
Family day 2 300
Interest 300 (1) 10 251

Less expenses
Administration expenses 2 790
Repairs 2 450 (1)
Depreciation 1 869 (3) 7 109
Surplus 3 142

Depreciation 1029 (1) + 840 (1) = 1869 (1of) [6]

© Cambridge International Examinations 2014

Page 3 Mark Scheme Syllabus Paper
GCE AS/A LEVEL – May/June 2014 9706 23

(c) Ocean Fishing Club

Statement of Financial Position at 31 March 2014

Non-current assets Cost Dep’n NBV

$ $ $
Equipment 15 400 (1) 4 809 (1of) 10 591
Shop fittings 750 110 640
16 150 4 919 11 231 (1of)
Current assets
Inventory 859
Subscription in arrears 200 (1)
Bank – current account 876
Bank – deposit account 13 300 (1of)
15 235
Current liabilities
Trade payables 784
Other payables 370+195 565
Subscriptions in advance 720 (1) 2 069 13 166
24 397
Accumulated Fund (1) 19 805 (1)
Add surplus (1) 3 142 (1of) 22 947

Donations fund 1 450 (1)

24 397
[11]

(d) 1 Use funds from the deposit account

2 Bank loan

3 Ask members for donations

4 Fund raising events

1 mark per valid suggestion (3) [3]

(e) Answers will be based on methods selected. For those above:

1 Advantage: Immediate funds available.

Disadvantage: No cash reserves for the club. Loss of interest.

2 Advantage: Funds available from bank for full amount.

Disadvantage: Interest will have to be paid. May require security.

3 Advantage: No interest payable.

Disadvantage: May not raise enough money, so other / additional method will be needed.

4 Advantage: No interest payable.

Disadvantage: May not raise enough money, so other / additional method will be needed.

1 mark for advantage and 1 for disadvantage (max. 6) [6]

[Total: 30]

© Cambridge International Examinations 2014

 Page 4 Mark Scheme Syllabus Paper
GCE AS/A LEVEL – May/June 2014 9706 23

2 (a) Non-current assets generate profit for the business (1). Depreciation is a fall in value of a
non-current asset (1) due to wear and tear and other factors by making a charge against
income generated (1) reducing the profit and thereby applying the prudence concept (1).

1 mark per valid point (max. 3) [3]

(b) (i) Wear and tear (1)

(ii) Obsolescence (1)

(iii) Technological innovation (1) [3]

(c) Rates of depreciation

Buildings = $ 40 000 / $ 2 000 000 = 2% (1)
Machinery = $ 400 000 / $ 2 000 000 = 20% (1)
Motor vehicles = $ 100 / [$ (700 – 300 + 100)] = 20% (2)
(1) (1of) [4]

(d) Assets suffer wear and tear, etc. and lose their value at different rates (1). This might
depend on the degree of use of the asset. Vehicles tend to lose more value in the early
years of use (1); hence the reducing balance method is more appropriate. Buildings tend to
lose value (1) more consistently over their lifetime; therefore, the straight line method tends
to be more appropriate (1). [4]

© Cambridge International Examinations 2014

Page 5 Mark Scheme Syllabus Paper
GCE AS/A LEVEL – May/June 2014 9706 23

(e)

Buildings Machinery Motor vehicles Total

$ 000 $ 000 $ 000 $ 000

COST

Balance at 31 May 2013 2000 2000 700 4700

Additions 1000(1) 720(1) 200(1) 1920

Disposals – (160)(1) (100)(1) (260)

Balance at 31 May 2014 3000 2560 800 6360(1of)

DEPRECIATION

Balance at 31 May 2013 120 800 300 1220

Charge for the year 60(1) 512(1) 108(1) 680

Disposals – (64)(1) (40)(1) (104)

Balance at 31 May 2014 180 1248 368 1796(1of)

NBV at 31 May 2014 2820(1) 1312(1) 432(1) 4564(1)

NBV at 31 May 2013 1880 1200 400 3480

[16]

[Total: 30]

© Cambridge International Examinations 2014

 Page 6 Mark Scheme Syllabus Paper
GCE AS/A LEVEL – May/June 2014 9706 23

3 (a) Advantage: Easier to calculate (1) by avoiding the necessity to allocate and apportion costs
into departments. (1)

Disadvantage: Where different products spend differing amounts of time in departments (1)
there is a danger that product costs will be under or overstated. (1)
[4]

(b) $ 367 200 / 162 000 direct labour hours = $ 2.27 per direct labour hour (1) [1]

(c) Total Cutting Sewing Finishing Stores Maintenance

Indirect wages (1) 185 400 27 810 46 350 27 810 37 080 46 350
Rent and rates (1) 38 500 9 167 11 000 5 500 5 500 7 333
Power (1) 32 600 13 873 17 340 1 387
Light and heat (1) 18 800 4 476 5 371 2 686 2 686 3 581
Machine depreciation (1) 73 700 37 954 28 244 5 296 2 206
Buildings insurance (1) 18 200 4 333 5 200 2 600 2 600 3 467
367 200 97 613 113 505 45 279 47 866 62 937
Stores (1of) 35 900 8 377 1 196 (47 866)(1of) 2 393
133 513 121 882 46 475 – 65 330
Maintenance (1of) 27 800 34 750 2 780 (65 330) (1of)
161 313 156 632 49 255 –
[10]

(d) Cutting: $ 161 313 / 84 000 direct labour hours (1) = $ 1.92 per direct labour hour (1of)

Sewing: $ 156 632 / 50 000 machine hours (1) = $ 3.13 per machine hour (1of)

Finishing: $ 49 255 / 56 000 direct labour hours (1) = $ 0.88 per direct labour hour (1of) [6]

(e)
Cutting Sewing Finishing
Actual overheads 168 180 146 320 51 870
Absorbed
$ 1.92 x 85 200 163 584
$ 3.13 x 52 450 164 169
$ 0.88 x 58 140 51 163
$ 4 596 (1of) $ 17 849 (1of) $ 707 (1of)

Under absorbed Over absorbed Under absorbed

(1of) (1of) (1of) [6]

(f) Manufacturing costs (1)

Selling costs (1)
Distribution costs (1)
Administration costs (1)
Finance charges and other costs (1)

1 mark for each functional group (max. 3) [3]

[Total: 30]

© Cambridge International Examinations 2014