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Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2022
1 hour

You must answer on the multiple choice answer sheet.

*3192058211*

You will need: Multiple choice answer sheet

Soft clean eraser
Soft pencil (type B or HB is recommended)

INSTRUCTIONS
• 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 multiple choice answer sheet.
• Follow the instructions on the multiple choice answer sheet.
• Write in soft pencil.
• Write your name, centre number and candidate number on the multiple choice answer sheet in the
spaces provided unless this has been done for you.
• Do not use correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 30.
• Each correct answer will score one mark.
• Any rough working should be done on this question paper.

This document has 12 pages. Any blank pages are indicated.

IB22 11_9706_12/3RP
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1 Which items would be entered in the General Journal?

1 goods taken by owner for personal use -> Drawings

2 goods purchased for resale purchases ledger
3 purchase of a non-current asset on credit
4 purchase of office stationery

A 1 and 2
or
B 1 and 3 only C 1, 3 and 4 D 3 and 4 only

2 Why is it important for a trader to distinguish between capital expenditure and revenue
expenditure?

1 to apply the realisation concept

2 to know which method of depreciation to use
3 to obtain a more accurate profit figure

0
A 1 and 2 B 1 only C 2 and 3 ⑧
D 3 only

3 A company purchased a new vehicle for $30 000. It part-exchanged an existing vehicle at a value
* of $6500, with the balance being paid by cheque.

The part-exchanged vehicle originally cost $12 000 and had a net book value of $4800 on
disposal.

Which entries will be made in the accounts?

income statement bank account

A $1700 income motor vehicle at cost $23 500 credit

B $1700 expense motor vehicle at cost $30 000 debit
C $5500 expense motor vehicle at cost $23 500 debit
D $5500 income motor vehicle at cost $30 000 credit

4 At 31 December 2021 a business had a non-current asset with a net book value of $18 000. It
had been purchased during the year ended 31 December 2020.

Depreciation is charged at a rate of 25% per annum using the reducing balance method. A full
year’s depreciation is charged in the year of purchase. -

What was the original cost of the non-current asset?

A $22 500 B $24 000 C $27 000 D $32 000

25x180 1
25xx
=

18000
=
-

4500 108 /

x
-
4500 18000
=

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=25
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5 Which item is an error of principle?

ommitted
A No record was made of inventory withdrawn by the owner for private use.
B Sales returns were credited to the returns inwards account.
C The amount shown on a purchases invoice for goods for resale was incorrectly recorded in
the purchases journal.

0
D
~
The cost of machinery repairs was debited to the machinery at cost account.

6 The sales ledger control account of a business had a balance of $17 640. This did not agree with
X the total of the individual customer accounts in the sales ledger.

The following errors have been discovered.

1 An invoice in the sales journal for $460 has been entered wrongly in the sales ledger
as $640.
2 Credit balances on the sales ledger, $470, have been omitted from the sales ledger
control account.
3 Discounts allowed have been incorrectly totalled as $310 instead of $325.
4 Goods sold to Harry for $690 have been entered in the account of Barry in error.

What is the correct balance on the sales ledger control account?

A $16 975 B $17 155 C $17 185 D $18 125

7 The totals on a trial balance were:

debit $500 150 credit $500 000

Which error could have caused the difference?

-> don't
record cash
A A cash sale has only been recorded in the sales account.
B A credit purchase has only been recorded in a supplier’s account.

0
C A credit sale has not been recorded.

0
D A credit sale has only been recorded in a customer’s account.

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8 A draft statement of financial position for a business showed total net assets of $600 000.

The following items were then discovered. 600 000 -

20008 15000
+

1 A long-term loan for $10 000 had not been recorded. This was taken out on the last
day of the financial year.
Closing inventory had been overstated by $20 000. Clinv Assets I
4
2
3 Depreciation had been understated by $15 000.

What is the correct total net assets value?

A $555 000 ①
B $565 000 O
C $595 000 D $605 000

9 A company has produced draft financial statements for the year. It is then discovered that some
inventory is damaged and the value must be reduced.

What will be the effect? Cinv↓COS4 GPH PFY4

profit for the year current assets

0
A decrease decrease
B decrease increase

O
C increase decrease
D increase increase

10 A trader took out a 6% bank loan of $30 000 on 1 November 2021, to be repaid in full in 10 years’
time. Interest is to be paid annually. No interest had been paid by 30 April 2022.
-

How should this be recorded in the statement of financial position at 30 April 2022?

current non-current
liabilities
$
liabilities
$ may/fret
COL1 30 april
A 0 30 000 Start Loa
2022
0 B 900 30 000 V end

C
D
1 800
30 900
30 000
0 +30048X = 400

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11 In preparing the financial statements, an accrual for rent payable was treated as a prepayment.

What effect does this have on the profit and the current liabilities? PFY4
↳ ExPH

profit current liabilities

0
A overstated overstated
⑧
B overstated understated
C understated overstated
D understated understated

12 A sole trader is preparing his income statement for the year ended 31 December 2021, his first
year of trading. The following information is available.

takings banked 16 400

payments to trade payables 8 500
expenses for the year 2 900
balance of trade payables 1 200
balance of trade receivables 700

He took goods for his own use, $1000, during the year. There was no closing inventory.

What was his profit for the year?

A $4500
0
B $5500 C $7400 D $7900

13 The following information is available for the year ended 31 December 2021.

$ Dist 6000
Balb,18000
trade payables at 1 January 2021 18 000 jetaras 3000
credit
165000
trade payables at 31 December 2021 14 000 purchases
Contra 1000
discount received 6 000 Bank 158000

payments to credit suppliers 158 000 C1d 14000

returns outwards 3 000
183 UUD
contra to sales ledger control account 2 000

What were the credit purchases for the year?

Ald 14000

A $143 000 B $161 000

OC $165 000 D $173 000

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14 What is recorded in both the appropriation account and the current accounts of a partnership?

1 drawings
2 interest on drawings
3 interest on capital

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

15 R, S and T were in partnership, sharing profits equally.

*
T retired as a partner. At that time, the balance on his capital and current accounts totalled
$320 000.

Goodwill was valued at $60 000.

The partnership assets were revalued upwards by $30 000.

T agreed to leave $90 000 in the partnership as a loan on retirement.

The balance due to him was paid from the partnership bank account.

How much was paid to T on his retirement?

A $230 000 B $240 000 C $250 000 D $260 000

16 Owing to an issue with Question 16, it has been removed from the question paper.

17 Where is the dividend received by a company shown in its financial statements?

0
A income statement only
B income statement and statement of changes in equity
C statement of changes in equity only

~
D statement of financial position and income statement

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18 On 1 January a company had 300 000 ordinary shares of $1 each and a 10% bank loan of
$100 000. On 1 July the company issued a 6% debenture of $800 000.

The profit from operations for the year ended 31 December was $120 000. profit operaticus 120000
Bank
Loon (10000)
The company paid a dividend of $0.05 per ordinary share during the year.

What was the profit for the year ended 31 December? 6,x800000x, Debenture, 24000)
8 6000
A $71 000 ⑧ B $86 000 C $96 000 D $110 000
~
19 X Limited recorded the following information in its books of account.

* 1 issue of 10 000 ordinary shares of $1 each at a price of $1.80

2 payment of dividends, $6200
3 transfer to general reserve, $7500

What was the effect on total revenue reserves?

E
A $6200 decrease
B $6700 increase
C $8000 increase
D $13 700 decrease

20 H Limited uses ratio analysis to analyse its financial performance.

# On 31 January 2021 the company prepared draft financial statements before it revalued its
premises upwards.

How did this revaluation affect the company’s ratios?

non-current asset return on capital

turnover employed
O
A decrease decrease
B decrease increase
C increase decrease
D increase increase

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21 A company purchases its inventory on credit. The following information is available.

sales revenue 440 000

purchases 270 000

9008x365
trade payables 90 000
trade receivables 110 000

What is the trade payables turnover in days?

A 75 B 92 Or
C 122 D 149

22 A business has the following wages policy for its direct workers.

standard working hours per week 40

basic rate per hour $16
overtime basic rate + 25%
standard production per worker per week 100 units
bonus $4 per unit in excess of
standard production

Last week Ben produced 115 units and earned $860.

How many hours did Ben work last week?

A 48 B 50 C 51 D 53.75

23 Which statements are correct about the first in first out (FIFO) method for inventory valuation?

1 issues to production are valued at the most recent purchase prices

2 issues to production are valued at the oldest purchase prices
3 provides a higher profit during periods of inflation
4 provides a lower profit during periods of inflation

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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24 A manufacturing business has two production departments: assembly and painting.

The following information is available.

assembly painting

machinery at net book value ($) 150 000 100 000

machinery repair costs ($) 14 000 6 000
machine operating hours 60 000 15 000
number of machines 30 10

The total machinery insurance cost for the year was $5000.

How much insurance should be apportioned to the assembly department?

A $3000 B $3500 C $3750 D $4000

25 Which statement about absorption costing is correct?

A It allocates fixed costs to a product when it is sold.

B It allocates fixed costs to a product whether it is sold or not.
C It increases the costs charged to the income statement.
D It reduces the cost of the closing inventory.

26 What is equal to total revenue at the break-even point?

A total contribution
B total fixed costs
C total variable and fixed costs
D total variable costs

27 A business manufactures and sells a single product.

It is sold for $10 per batch.

The variable cost is $4 per batch.

Fixed costs are absorbed based on a normal activity level of 5000 batches at $1 per batch.

What is the profit, using marginal costing, if the company makes and sells 6000 batches?

A $24 000 B $30 000 C $31 000 D $36 000

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28 A company provides the following information for a year.

sales 400 000

total variable costs 240 000
total contribution 160 000
total fixed costs 100 000
profit for the year 60 000

To increase the sales volume by 20%, the company plans to reduce the selling price by 10%.
Total fixed costs and variable cost per unit will remain unchanged.

By how much will profit for the year change?

A 8% increase
B 10% decrease
C 21.33% increase
D 26.67% decrease

29 A business makes and sells a single product. The budget for sales of 5000 units is as follows:

per unit $

selling price 75.00

variable production cost 25.00
fixed production cost 18.90
variable selling expenses 5.00

The company plans to reduce the selling price to $60 per unit.

How many extra units will need to be sold to break even?

A 810 B 1050 C 2100 D 3150

30 Which statements about a budgetary control system are correct?

1 It is a long-term plan.
2 It is a short-term plan.
3 It is qualitative.
4 It is quantitative.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

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