Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/11
Paper 1 Multiple Choice October/November 2015
1 hour
Additional Materials: Multiple Choice Answer Sheet
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*1813814735*

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Write in soft pencil.

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Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided
unless this has been done for you.
DO NOT WRITE IN ANY BARCODES.

There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.

Read the instructions on the Answer Sheet very carefully.

Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.

This document consists of 10 printed pages and 2 blank pages.

IB15 11_9706_11/3RP
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1 A business receives a $50 000 deposit from a customer for a product which is to be delivered
after the end of the financial year.

How should this be shown in the statement of financial position at the year end?

A current assets
B current liabilities
C non-current assets
D non-current liabilities

2 Derek places advertisements in monthly magazines.

In September 2014 Derek paid $900 for advertisements to appear in the October 2014 to
March 2015 editions of one magazine.

In December 2014 he paid a further $880 for advertisements to appear in the January 2015 to
April 2015 editions of another magazine.

Which amount was shown for advertisements under other receivables in Derek’s statement of
financial position at 31 January 2015?

A $520 B $820 C $960 D $1260

3 A business prepared its draft financial statements. It was later discovered that an adjustment for
prepaid rent was required.

What is the effect of this adjustment?

expenses current assets

A decrease decrease
B decrease increase
C increase decrease
D increase increase

4 A trader purchased fixtures and fittings on credit from a supplier. These were faulty and were
returned to the supplier.

Which entry in the trader’s books of account recorded the return?

account to debit account to credit

A fixtures and fittings supplier

B purchases returns fixtures and fittings
C supplier fixtures and fittings
D supplier purchases returns

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5 A business had a draft loss for the year of $4650. Further adjustments were required.

1 a write off of $165 for bad debts

2 a reduction of $300 in the provision for doubtful debts

What was the loss for the year after these adjustments?

A $4185 B $4515 C $4785 D $5115

6 Which entries are made to transfer cash discount obtained from suppliers to the financial
statements at the end of the year?

debit entry credit entry

A trade payables account income statement

B discount received account income statement
C income statement trade payables account
D income statement discount received account

7 A motor vehicle retailer has the following transactions.

1 issue of shares
2 sale of motor vehicles
3 sale of surplus premises

Which transaction(s) are capital income?

A 1 only B 1 and 3 C 2 only D 2 and 3

8 Which item appears as a reserve in a statement of financial position?

A bank overdraft
B provision for depreciation
C provision for doubtful debts
D share premium

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9 A trader adjusts his financial statements for a prepayment of $15 000 for three months’ property
rental.

Which accounting concept has he applied?

A consistency
B matching
C materiality
D prudence

10 What is meant by the historical cost principle?

A Each transaction must have a debit and credit of equal value.

B Reported profits are realistic and not overstated.
C Similar transactions should be recorded in the same way.
D Transactions are recorded at actual cost.

11 A business provides the following information.

cash received from customers 200 000

opening trade receivables 40 000
closing trade receivables 30 000
discounts allowed 5 000
provision for doubtful debts 4 000

How much are the credit sales?

A $190 000 B $195 000 C $199 000 D $215 000

12 The trial balance of a business does not agree. The difference has been entered in a suspense
account.

The error was caused by a cheque for $400 from Omar being debited to Omar’s account.

Which entries correct this?

account debited $ account credited $

A bank 400 suspense 400

B suspense 400 Omar 400
C suspense 800 Omar 800
D suspense 800 bank 800

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13 A business has the following balances at the end of its financial period.

trade receivables 10 620

bad debt not yet written off 260
provision for doubtful debts brought forward 460

What should the business do if it wishes to maintain the bad debt provision at 5% of trade
receivables?

A Decrease the existing provision by $58.

B Increase the existing provision by $58.
C Decrease the existing provision by $71.
D Increase the existing provision by $71.

14 Motor vehicles purchased for $530 000 at the start of the year have been incorrectly depreciated
for the whole year at 10% instead of 25%.

Ledger balances after the entries have been posted:

motor vehicles at cost 530 000

provision for depreciation 53 000

Which entries will correct the error?

account to be debited $ account to be credited $

A income statement 79 500 provision for depreciation 79 500

of motor vehicles
B income statement 132 500 provision for depreciation 132 500
of motor vehicles
C provision for depreciation 79 500 income statement 79 500
of motor vehicles
D provision for depreciation 132 500 income statement 132 500
of motor vehicles

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15 At the year end a company discovers that some inventory is damaged.

This inventory originally cost $2000 and to replace it would now cost $1900.

It would normally sell for $2400 but can now only be sold for $2200 if repairs costing $400 are
undertaken.

At what value should the damaged inventory be shown in the financial statements?

A $1800 B $1900 C $2000 D $2200

16 Which entries are made to record interest on capital in partnership accounts?

debit credit

A appropriation account capital account

B appropriation account current account
C capital account appropriation account
D current account appropriation account

17 Two partners, X and Y, have a capital account of $10 000 each and share profits and losses
equally. They agree to admit Z to the partnership and continue to share profits and losses
equally.

There is no goodwill account in the books. At that time goodwill is valued at $15 000 but is not to
be retained in the books of account.

What will be the balance on X’s capital account after the admission of Z?

A $10 000 B $12 500 C $15 000 D $17 500

18 A manufacturing business incurs the following costs.

1 carriage inwards
2 depreciation of plant
3 wages

Which item(s) can be shown as either a direct cost or an indirect cost in the manufacturing
account?

A 1 only B 1 and 2 C 2 and 3 D 3 only

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19 A fitness club operates a shop selling sports shoes.

Which statement is correct?

A The inventory of shoes appears in the receipts and payments account.

B The payments to suppliers are adjusted for trade payables in the income and expenditure
account.
C The profit made appears in the trading account and the income and expenditure account.
D The sales proceeds and payments to suppliers are netted off in the receipts and payments
account.

20 On 1 January a business had an inventory of 100 units at a cost of $10 each. The following
transactions then took place.

units purchased units sold

February 50
March 60 at $11 each
April 70 at $12 each 100
May 30

All sales are made at $13 per unit.

The business values its inventory on a FIFO basis.

What is the value of the inventory at the end of May?

A $390 B $550 C $600 D $650

21 Information from a partnership’s accounts is shown.

profit for the year before interest 15 000

interest on partner’s loan to the firm 1 000
interest on capital 2 000
drawings 10 000

Which profit figure is to be appropriated between the partners?

A $3000 B $13 000 C $14 000 D $15 000

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22 The following information relates to the subscriptions of a club.

in advance in arrears
$ $

at the start of the year 50 75

at the end of the year 150 120

Cash for subscriptions received during the year was $3750.

What was the subscription income for the year?

A $3695 B $3750 C $3755 D $3805

23 An asset with accumulated depreciation of $72 400 is sold for $46 500. There is a loss on
disposal of $23 000.

What was the cost of the asset?

A $48 900
B $95 900
C $118 900
D $141 900

24 Which item will not be shown as part of the equity in the statement of financial position of a
limited company?

A debentures
B ordinary share capital
C retained earnings
D share premium

25 A decrease in which ratio indicates a better performance for a business?

A inventory turnover in days

B non-current asset turnover
C return on capital employed
D trade payables turnover

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26 Which line represents total cost?

break-even
point
Y
$
M X
W

O
units

A OW B OZ C MX D MY

27 A company makes one product with a selling price of $384 per unit. Costs are as follows.

per unit

direct materials 4 kilos at $8 per kilo

direct labour 8 hours at $12 per hour
selling and distribution $40

The mark up is 50%.

What is the factory overhead absorption rate per labour hour?

A $3 B $5 C $11 D $22

28 A business provides the following information for August.

actual revenue 340 000

break-even revenue 370 000
forecast revenue 365 000

What was its margin of safety in August?

A +$25 000 B –$25 000 C +$30 000 D –$30 000

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29 A company’s profit for a period using marginal costing was $70 000.

Opening inventory was 2000 units and closing inventory 2500 units.

The fixed production overhead absorption rate is $10 per unit.

What was the profit under absorption costing?

A $50 000 B $65 000 C $75 000 D $90 000

30 A business sold 10 000 units at $20 each. It had fixed costs of $15 000. Costs per unit of
production were as follows.

direct materials 7
direct labour 5
variable production overhead 3
variable sales overhead 2

What was the contribution?

A $15 000 B $30 000 C $35 000 D $50 000

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