Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2024
1 hour

You must answer on the multiple choice answer

*4703812695*

sheet. 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.

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1 Which statement about sole traders is correct?

A They always trade by buying and selling goods.

B They do not employ any staff.
C They keep all their profit themselves.
D They maintain a retained earnings account.

2 Which source of finance would be available to a public limited company but not to a
partnership?

A bank
overdraft B
debentures
C leasing
D trade credit

3 Which items will be debited to accounts in the purchases ledger?

1 discount allowed
2 payments to suppliers
3 purchases
4 purchases returns

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

2 4 3

4 Tom bought goods costing $100 on credit from Sam. He returned goods costing $20
as faulty.

He deducted a cash discount and paid $76 by cheque in full

settlement. Which amounts were recorded in Tom’s books of

prime entry?

purchase purchases three-column

s journal returns cash book (bank
$ journal column)
$ $
A 80 0 76
B 80 0 80

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C 100 20 76

D 100 20 80

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5 What are the characteristics of non-current assets?

1 They are not intended for resale.

2 They provide future economic benefits.
3 They prevent the company from going out of business.

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

only only only

6 At the beginning of the financial year on 1 January, a business acquired a new motor
vehicle for
$34 000. In error, this was recorded in the account for motor expenses. Motor
vehicles are depreciated using the reducing balance method at the rate of 30% per
annum. It is estimated that the motor vehicle will have a residual value of $4000 at
the end of its life.

If the error is not corrected, what will be the effect on the profit for the year ended 31
December?

A $10 200
overstated B $23
800 understated C
$25 000
understated D $34
000 understated

7 A company purchased a machine on 1 April 2021 for $25 000. It was depreciated at
20% per annum using the straight-line method. A full year’s depreciation is charged
in the year of purchase but none in the year of sale. On 30 June 2023 the machine
was sold for $12 500.

The company’s year end is 31 December.

What was the profit or loss on the disposal of the machine?

A $1250
loss B $1250
profit C $2500
loss D $2500
profit

8 Which error will cause a trial balance not to balance?

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A an invoice entered as a credit note on original input

B a journal entry that does not balance
C a transaction entered as the wrong amount on original input
D a transaction not entered in the books of account

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9 A business prepared a trial balance that included a suspense account. Draft

financial statements were prepared which showed a profit for the year of $85 000.

The following errors were then discovered.

1 Discounts allowed of $1000 had been debited to the discounts received

account.
2 Motoring expenses of $4000 had been debited to the purchases account.
3 A payment for purchases of $5000 had been correctly entered in the
cash book but credited to the drawings account.

After correcting these errors the balance on the suspense account was

eliminated. What was the revised profit for the year?

A $76 000 B $78 000 C $80 000 D $82 000

10 Amit compared his bank statement with his cash book.

How did Amit deal with the items revealed by this comparison?

including in
updating his
bank
cash
reconciliation
book
statement
A bank charges timing
differences
and bank
B errors
bank charges timing
C and bank differences
errors
D timing bank charges
differences
and bank
errors
timing bank charges
differences and bank
errors

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11 The bank statement of a business shows a credit balance of $1570 at 31 December.

The following differences were discovered on comparing the cash book with the bank
statement.

$
unpresented cheques 125
0
uncredited bankings 180
0

A direct debit of $230 was shown as $320 in the cash

book. What is the updated cash book balance at 31

December?

A B C D $2120

$930 $1020 $2030

12 What are the benefits of preparing a sales ledger control account?

1 detecting errors of original entry

2 helping reduce the possibility of fraud
3 providing totals of trade receivables for inclusion in financial statements

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

3 only only

13 A company prepared its purchases ledger control account, which showed a balance
of $15 960. The following items were then discovered.

1 Discounts received of $450 had been entered into the purchases

ledger control account as $540.
2 A payment of $720 to a supplier had not been entered in his account.
3 The purchases ledger debit balances carried down totalling $110 had
been omitted from the control account.
4 A contra of $170 had been entered in the purchases ledger but not in
the purchases ledger control account.

What was the correct total of the trade payables?

A $15 050 B $15 C $15 D $16 150

240 990
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14 Deepak provided the following information.

end of year 1 end of year 2

allowance for irrecoverable $60 $80
debts 0 0
rate of allowance 3% 5%

By how much did the total of trade receivables change from the end of year 1 to the end
of year 2?

A $4000
decrease B
$4000
increase C $10
000 decrease D
$10 000
increase

15 A sole trader began a business on 1 January with $50 000 capital.

During the year she introduced to the business her own private vehicle which had
cost $22 000 but which was valued at $16 000 when she added it to the business.
Drawings for the year were
$20 000. At the end of the financial year on 31 December the closing balance on the
capital account was $105 000.

What was the profit for the year?

A $39 B $53 C $59 D $75 000

000 000 000

16 Which provision of the Partnership Act 1890 applies when there is no partnership
agreement?

A Partners receive 5% interest per annum on their capital contributions.

B Partners are charged 5% interest per annum on their drawings.
C Partners receive interest of 5% per annum on loans to the partnership.
D Partners are entitled to equal amounts of salary.

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17 A partnership provided the following information for the year.

$
gross profit 76 000
operating costs 30 000
bank interest 1 300
interest on partner’s loan 600

interest on capital 5 600

interest on drawings 2 000

What were the profit for the year and the residual profit shared by the partners?

profit for the residual profit

year $
$
A 44 100 40 500
B 44 100 47 700

C 44 700 40 500

D 44 700 47 700

18 Why is a statement of changes in equity prepared?

A to calculate profit when incomplete records have been kept

B to match the dividends paid to profit for the year
C to show the change in capital employed
D to show the movements in the shareholders’ stake in the business

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19 The trial balance of a company at 31 December at the end of year 1 included the
following amounts.

$
Ordinary share 800 000
capital
($0.50 shares)
Share premium 200 000
Retained earnings 1 000 000

On 1 January in year 2 the company made a rights issue of 400 000 shares at a
premium of $0.70 per share. This was fully taken up.

On 1 July in year 2 the company issued bonus shares at the rate of one new share for
every four held.

The policy is to maintain reserves in their most flexible form.

What is the balance on the share premium account after these transactions?

A $230 B $330 C $355 D $480 000

000 000 000

20 Jim is a manager in a limited company. He also owns a few of its shares.

Why has he been looking at its most recent financial statements?

A to discover the profit made by his department as he might receive a bonus

B to find out if the company made a profit, making his job more secure
C to know if dividends will increase over the next five years, improving his income
D to see if the company has a good reputation, increasing the value of his shares

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21 H Limited’s cost of sales for the recent two years (Year 2 and Year 1) is as follows:

Year Year 1
2 $
$
average inventory 100 65 000
000
credit purchases 910 760 000
000
cost of sales 850 750 000
000

Which statement regarding the efficiency of inventory turnover is correct?

A Year 2 is better because the average inventory is higher.

B Year 2 is better because the inventory turnover (in days) is higher.

C Year 2 is worse because the cost of sales is higher.
D Year 2 is worse because the inventory turnover (in days) is higher.

22 Which expense for a business may be classified as a stepped cost?

A direct
labour B
direct
materials C
factory rent
D telephone

23 Which statements describe just in time (JIT) management of inventory?

1 It increases administration costs as more suppliers are required.

2 It is a management strategy that minimises inventory to increase
efficiency.
3 Producers hold only sufficient inventory to meet maximum market
demand.
4 The system benefits cash flow and reduces the amount of capital
required to run the business.

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

2 4 4

24 The direct materials cost of a batch of soft drinks is $10 000 for 50 000 cans. 60
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direct labour hours are required at a cost of $40 per labour hour. Overheads are
absorbed at 250% of the cost of direct labour.

What is the cost per soft drink can to the nearest dollar?

A B C D $1.04
$0.20 $0.37 $0.44

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25 What is an advantage of absorption costing?

A
It helps to determine a product‘s selling price.
B
It is used to improve operational efficiency.
C
It makes it easy to analyse costs at different production levels.
D
It takes into account only variable costs.

26 The following information is forecast for the next month.

opening inventory 20 300 units

closing inventory 22 500 units
marginal cost $90 600
profit absorption $100 400
cost profit

What is the overhead absorption rate per unit?

A B C D $4.95
$4.03 $4.45 $4.46

27 X Limited has budgeted monthly overheads of $125 000. Its overhead absorption
rate is $5 per machine hour. In July there was an under-absorption of overheads of
$1000.

Which changes from budgeted data caused this to happen?

overheads machine hours

A $500 higher 100 hours less

B $500 lower 100 hours more

C $750 higher 50 hours more

D $750 lower 50 hours less

28 Which changes result in a decrease in the margin of safety?

unit variable total fixed costs

cost
A decrease decrease
B decrease increase

C increase decrease

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D increase increase

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29 A company has the following budgeted information per unit.

$
selling price 25
variable 10
costs

Fixed costs are $72 000.

What is the increase in break-even sales if fixed costs increase by 33 %?

A $38 400 B $40 000 C $53 333 D $60 000

30 Which statements about cost–volume–profit analysis are correct?

1 Fixed costs remain constant for a range of activity.

2 Profits are calculated on an absorption costing basis.
3 Sales revenue increases in direct proportion to output.
4 There is only one product or there is a constant sale mix.

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

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