Cambridge International Examinations

Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2016
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*7598610220*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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.

IB16 03_9706_12/RP
© UCLES 2016 [Turn over
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1 A business has a good reputation. The owner wishes to include goodwill in the financial
statements. An accountant advises against it.

Which accounting concept is the accountant applying?

A business entity
B going concern
C matching
D prudence

2 Why is depreciation provided on non-current assets?

A so that the cost is allocated to periods that benefit from them

B so that the entity concept is applied
C so that there is enough cash in the business to replace them
D so that they are shown at market value

3 The following information relates to the disposal of a non-current asset.

profit on disposal 5 200

cost of non-current asset sold 14 400
sales proceeds 6 800

What was the accumulated depreciation on the non-current asset sold?

A $1600 B $2400 C $7600 D $12 800

4 Omar wishes to become a trader. He decides to buy an existing business in a good location. He
pays more for the business than its net asset value.

How is the extra amount paid shown in the books of the new business?

account to account to
be debited be credited

A capital goodwill
B goodwill bank
C goodwill capital
D premises goodwill

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5 A sales ledger control account was prepared. An irrecoverable debt of $40 was omitted and a
discount allowed of $68 was entered as $86.

What was the total effect of these errors on the closing balance of the sales ledger control
account?

A $22 overstated
B $22 understated
C $58 overstated
D $58 understated

6 The trial balance totals are as follows:

debit $500 150 credit $500 000

Which error could have caused the difference?

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.
C A credit sale has not been recorded.
D A credit sale has only been recorded in a customer’s account.

7 A business maintains a provision for doubtful debts of 5% per annum. It has trade receivables
balances of $560 000 at the start and $468 000 at the end of the financial year.

Which statements are correct?

1 Customers’ accounts have been credited with $4600.

2 $4600 is treated as income in the income statement.
3 $4600 is deducted from current assets in the statement of financial position.

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

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8 The statement of the financial position of a company shows the following:

tangible non-current assets 20 600

intangible non-current assets 5 700
trade receivables 8 600
trade payables 3 200
loan repayable in three years 4 000
bank balance 5 200 credit
inventory 6 900

What is total working capital?

A $3100 B $7100 C $17 500 D $29 400

9 An inexperienced bookkeeper calculated a draft profit for the year ended 31 December 2015 of
$578 500. He had not accounted for the following:

1 January 2015 31 December 2015

$ $

provision for doubtful debts 12 800 11 300

provision for depreciation 95 000 126 200

What was the revised profit for the year?

A $441 000 B $463 600 C $545 800 D $548 800

10 A computer used for demonstration to customers was treated as capital expenditure.

At the end of the year a customer purchased the computer in the ordinary course of business.

Which entries are needed to adjust the cost of sales?

account to be debited account to be credited

A inventory demonstration equipment

B purchases demonstration equipment
C sales inventory
D selling expenses sales

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11 A business makes up its financial statements to 30 April each year.

Included in the ledger account balances on 1 May 2014 was insurance (debit) $800.

On 31 October 2014 an insurance premium of $2100 was paid for the year ended 31 October 2015.

Which amount was charged for insurance in the income statement for the year ended
30 April 2015?

A $1050 B $1850 C $2100 D $2900

12 The statements of financial position of Goh’s business showed the following:

30 June 2014 30 June 2015

net assets $152 000 $184 000

During the year ended 30 June 2015, Goh brought his own motor car into the business at the
value of $14 000. The net book value of this motor car at 30 June 2015 was $13 200.

He also withdrew $7900 cash from the business bank account.

What was the profit for the year ended 30 June 2015?

A $25 900 B $26 700 C $37 300 D $38 100

13 P joined the partnership of G and H. He brought into the business the following assets.

non-current assets cost $25 000, valued at $38 000

inventory cost $6000, valued at $4500
cash $20 000

There was no goodwill arising when P joined the partnership.

What was the balance on P’s capital account?

A $20 000 B $49 500 C $51 000 D $62 500

14 X and Y have capital accounts of $50 000 each and share profits equally. They plan to admit Z
into partnership.

The new profit sharing ratio will be 2 : 2 : 1. The balances on the capital accounts will also be in
this ratio.

Goodwill is valued at $20 000 and will not be retained in the books of account.

How much cash will Z need to pay to join the partnership?

A $25 000 B $26 000 C $29 000 D $30 000

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15 David and Jane have been business partners for several years, sharing profits in the ratio of 2 : 1.
Jane now wishes to retire. Her capital account amounts to $15 800 and her current account
shows a debit balance of $3500.

Goodwill is valued at $6600. The book values of certain tangible assets are to be valued upwards
by $3000.

What is the amount due to Jane on her retirement from the business?

A $15 500 B $18 700 C $22 500 D $25 700

16 Which is not an appropriation of partnership profit?

A interest on capital
B interest on drawings
C interest on loan
D share of profit

17 A limited company intends to issue shares at a price above the nominal value.

Which items, apart from bank balance, will be affected by the share issue?

A share capital, capital reserves and revenue reserves

B share capital and capital reserves only
C share capital and revenue reserves only
D share capital only

18 A company issues one million ordinary shares of $1 each at $1.30 per share. It also issues a
debenture for $500 000.

What is the increase in the equity of the company?

A $1 000 000 B $1 300 000 C $1 500 000 D $1 800 000

19 What is measured by the return on capital employed ratio?

A percentage of profit paid out as dividends only

B percentage of profit paid out as dividends and interest
C return earned on funds invested by business owners only
D return earned on funds invested by business owners and long-term lenders

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20 The following ratios have been calculated for two businesses, both with the same revenue of
$100 000.

X Y

gross margin 20% 25%

profit margin 10% 10%

How do the cost of sales and expenses of X compare with those of Y?

cost of sales expenses

A higher higher
B higher lower
C lower higher
D lower lower

21 A business provides the following information.

gross margin 20%

$

sales 275 325

opening inventory 25 450
closing inventory 55 975

What are the purchases?

A $189 735 B $220 260 C $250 785 D $259 963

22 A company provided the following information.

material cost per unit

units $

opening inventory 100 2.00

receipt of new inventory 400 2.10
issued to production 200

The company uses the first in first out (FIFO) method of valuing inventory.

What is the cost of material issued to production?

A $400 B $410 C $416 D $420

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23 A production centre uses 20 000 machine hours and 17 000 labour hours each month.

Which formula is used to calculate the overhead absorption rate?

A total machine hours

total overhead cost

B total overhead cost

total labour hours
total overhead cost
C
total (labour hours + machine hours) ÷ 2

total overhead cost

D
total machine hours

24 The following information is available.

budget actual

overheads $60 000 $66 000

direct labour 30 000 hours 35 000 hours

The overhead absorption rate is based on direct labour hours.

What is the amount of overhead over-absorbed or under-absorbed?

A $4000 over
B $4000 under
C $6000 over
D $6000 under

25 A particular cost is classified as ‘semi-variable’.

What effect will a 20% reduction in activity have on the unit cost?

A decrease by 20%
B decrease by less than 20%
C increase by 20%
D increase by less than 20%

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26 A business produces and sells watches. In 2015, 4000 watches were produced and 3600
watches were sold. Other information for the year included the following:

$ per unit

direct materials 60
direct labour 80
variable selling expenses 15
fixed manufacturing overheads 45
fixed administrative costs 50

What is the cost of goods sold for 2015 if the business uses absorption costing?

A $558 000 B $666 000 C $720 000 D $740 000

27 Which items are included in the marginal cost of a unit of production?

A direct labour, direct materials, fixed production costs and variable production overheads
B direct labour, direct materials, fixed costs and variable production overheads
C direct labour, direct materials and variable production overheads only
D direct labour and direct materials only

28 Which statements about cost-volume-profit analysis are correct?

1 Profits are calculated on an absorption costing basis.

2 Profits are calculated on a marginal costing basis.
3 It only applies where there is a constant sales mix.
4 It only applies where there is a changing sales mix.

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

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29 A business has the following budgeted and actual results for a period.

budgeted fixed overheads 354 000

actual fixed overheads 360 000
under-absorption of overheads 3 000

The fixed overheads are absorbed per unit.

The budgeted number of units were 118 000.

What is the actual level of activity in units?

A 118 000 B 119 000 C 120 000 D 121 000

30 What are the main purposes of budgeting?

1 to control expenditure
2 to forecast future expenditure
3 to determine company strategy

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

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© UCLES 2016 9706/12/F/M/16

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2017
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*7264628521*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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.

IB17 03_9706_12/4RP
© UCLES 2017 [Turn over
 2

1 Which accounting treatments illustrate the use of the matching concept?

1 comparing the receipts and payments in the cash book to obtain the balance of
inventory at net realisable value rather than cost
2 using the FIFO method of inventory valuation each year
3 charging depreciation on non-current assets

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

2 Which item should be treated as capital expenditure?

A cost of carriage on the purchase of a non-current asset

B cost of replacement of part of a non-current asset
C depreciation of a non-current asset
D repairs to a non-current asset

3 During the year ended 31 December 2012 a business purchased a vehicle for $23 500. On
30 September 2015 it was sold for $3500. Depreciation was charged at 20% per annum using the
straight line method. A full year’s depreciation was charged in the year of purchase and the year
of disposal.

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

A $1200 loss
B $1200 profit
C $5900 loss
D $5900 profit

4 Why is a sales ledger control account used?

1 to control discounts received

2 to ensure credit customers pay promptly
3 to provide a trial balance figure for trade receivables

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

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5 A purchases ledger control account was prepared but contained a number of errors.

purchases ledger control account

$ $

balance b/d 45 750 cash paid to credit suppliers 19 730

credit purchases 20 380 cash discounts received 1 500
cash purchases 19 440 refunds from credit suppliers 3 500
balance c/d 60 840
85 570 85 570

What was the correct balance carried down?

A $47 100 B $48 400 C $60 840 D $67 840

6 A suspense account shows a debit balance of $350.

What could have caused this?

A A purchase of $350 was debited to the rent account.

B A purchase of $350 was omitted from the purchases journal.
C A sale of $350 was debited to the sales account and credited to the sales ledger control
account.
D The sales journal was overcast by $350.

7 The following balances related to Ladha’s business.

at 31 March 2016 at 31 March 2015

$ $

total assets 388 000 345 000

total liabilities 84 000 75 000
net assets 304 000 270 000
drawings during the year 22 000 20 000

What was Ladha’s profit for the year ended 31 March 2016?

A $12 000 B $32 000 C $36 000 D $56 000

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8 A trial balance showed a provision for doubtful debts as $1350. Trade receivables were $50 320
which included a debt of $500 which was irrecoverable.

Which entry was required in the provision for doubtful debts account if the closing balance was to
be 5% of trade receivables?

A $1141 credit
B $1141 debit
C $1166 credit
D $1166 debit

9 A business provides the following information.

revenue 140 000

opening inventory 22 000
closing inventory 24 500
purchases 120 000

Goods are sold at cost plus 25%.

The owner has taken goods for own use but has not recorded these as drawings.

What is the value of the goods taken for own use?

A $5500 B $10 500 C $12 500 D $17 500

10 The draft financial statements of a business show a profit for the year of $64 000 before taking
account of the following:

1 the reduction of the provision for doubtful debts by $300

2 the purchase of office stationery costing $2400 which has not been entered in the
books; only one-sixth of this stationery was used by the year end.

What is the corrected profit for the year?

A $61 900 B $63 900 C $64 100 D $64 300

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11 The table shows transactions relating to a product during July. There was no opening inventory.

units $ (per unit)

purchased 50 4
sold 30 10

Of the remaining units, 8 are damaged and therefore have no value.

What is the profit for July?

A $68 B $100 C $148 D $180

12 A trader provides the following financial information for the year ended 31 December.

gross margin 20%

cost of goods sold $220 000
drawings $7 000
profit for the year $28 000

How much are expenses?

A $9000 B $16 000 C $20 000 D $27 000

13 Why is goodwill adjusted in the books of account when a new partner is admitted?

A A more accurate value of non-current assets is shown in the statement of financial position.
B Original partners can be credited for their efforts in building up the partnership business.
C Partners can take higher drawings as a result of their share of the goodwill.
D The new partner knows how much they have to introduce as capital.

14 A partnership revalues its non-current assets upwards.

What are the ledger entries to record this?

account to debit account to credit

A non-current assets bank
B non-current assets partners’ capital accounts
C non-current assets partners’ current accounts
D non-current assets revaluation reserve

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15 X and Y are in partnership. They admit Z as a new partner. The profit sharing ratio will be 2 : 1 : 1
respectively. Goodwill is valued at $100 000. Goodwill is not to be retained in the books of
account.

Other assets are revalued at $40 000 in excess of their net book value.

Z introduces $250 000 cash and office equipment valued at $30 000.

What is Z’s capital account balance after his admission?

A $255 000 B $265 000 C $305 000 D $315 000

16 Which facts about preference shares are correct?

rate of dividends voting rights

A fixed no
B fixed yes
C variable no
D variable yes

17 The table shows year end information for a company.

income statement $ statement of financial position $

profit from operations 14 000 5% debenture 2020 30 000

finance costs (1 500) ordinary share capital 70 000
loss on disposal of
non-current asset (2 500) share premium account 15 000

profit for the year 10 000 retained earnings 35 000

What is the return on capital employed (ROCE)?

A 6.7% B 8.3% C 9.3% D 11.7%

18 A company provided the following information.

revenue for the year 390 000

year-end non-current assets at cost 260 000
year-end accumulated depreciation 65 000

What was the non-current asset turnover?

A 0.5 times B 0.67 times C 1.5 times D 2 times

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19 The following information is given in the financial statements of a limited company.

ordinary shares 1 200 000

general reserve 120 000
retained earnings 710 000
8% debentures 400 000

What is the value of total equity?

A $1 910 000 B $2 030 000 C $2 310 000 D $2 430 000

20 Which item is a direct cost?

A cost of production materials

B factory supervisor’s salary
C machine cleaning materials
D stores staff wages

21 Samuel manufactures a single product. Total cost per unit is $70 when production is 100 units
per week, and $62.50 when production is 160 units per week.

What are the total fixed costs per week?

A $450 B $750 C $1200 D $2000

22 How is the issue of inventory from stores valued when using FIFO?

A It is calculated using the average purchase price of goods.

B It is calculated using the price paid for the earliest delivery of goods.
C It is the same as the current replacement cost.
D It is the same as the most recent price paid for the goods.

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23 A business absorbs overheads based on machine hours.

During the last quarter it had the following budgeted and actual results.

actual overheads $118 505

actual machine hours 6 230
budgeted overheads $126 725
budgeted machine hours 6 850

By how much were overheads over or under absorbed?

A over absorbed by $3250

B over absorbed by $8220
C under absorbed by $3250
D under absorbed by $8220

24 Actual output exceeds budgeted output.

Which cost is higher than budgeted?

A fixed costs per unit

B total fixed costs
C total variable costs
D variable costs per unit

25 A company manufactures three products. The following information is obtained in respect of next
month’s budgeted production.

product X product Y product Z

contribution per unit $7 $6 $8

contribution per kilo $3 $4 $6
kilos of material required 400 600 1000
for production

The company has been advised that only 1800 kilos of material will be available for production
next month.

What is the maximum contribution the company can earn?

A $9000 B $9600 C $13 000 D $13 200

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26 The following information is available.

direct materials 20 000

direct labour 45 000
direct expenses 6 000
variable overheads 11 000
fixed overheads 38 000
sales 240 000

What is the contribution to sales ratio?

A 50% B 54.58% C 65.83% D 70.42%

27 A company provides the following information.

budgeted overheads $136 000

budgeted labour hours 10 568
actual overheads $146 000
actual labour hours 10 110

What is the overhead absorption rate per labour hour?

A $12.87 B $13.45 C $13.82 D $14.44

28 The following information is for a business.

budgeted fixed costs per month 2000

target profit per month 3000
budget variable cost per unit 15
selling price per unit 40

Fixed costs are expected to increase by $500 per month and variable costs increase by $5 per
unit.

Which value of revenue will be required to achieve the target profit?

A $8000 B $8800 C $10 000 D $11 000

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29 The costs of a company that annually sells 10 000 units are as follows.

direct material 50 000

assembly labour 100 000
factory overheads 70 000

The normal selling price of each unit is $50.

How many more units need to be sold to break even if the selling price is reduced to $35?

A 1500 units B 2000 units C 3500 units D 5000 units

30 Which statements identify a disadvantage of break-even analysis?

1 It does not show the effect of changes in output on the break-even point.
2 It is assumed that all costs can be split between fixed and variable.
3 It makes it difficult to decide the profitability of a product at different levels of activity.

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

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© UCLES 2017 9706/12/F/M/17

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2018
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*2327162738*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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.

IB18 03_9706_12/2RP
© UCLES 2018 [Turn over
 2

1 What would not be a purpose of ledger accounts?

A to assist in the preparation of the financial statements

B to assist in the preparation of the trial balance
C to record the double entry from the subsidiary books
D to verify the accuracy of the book-keeping system

2 Which accounting concepts apply to depreciation?

1 consistency
2 matching
3 money measurement
4 prudence

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

3 A motor vehicle was purchased for $12 000 on 1 January 2015. Its estimated residual value was
$7000 and expected life 5 years. Depreciation was calculated on a month-by-month basis using
the straight-line method.

It was sold on 30 June 2017 and there was a loss on disposal of $2560.

What were the sale proceeds?

A $3440 B $4352 C $6440 D $6940

4 The following information relates to a motor vehicle part-exchanged for a new vehicle in the year.

cost of old vehicle 20 000

accumulated depreciation at the date of sale 8 000
profit on disposal 3 000
cost of new vehicle 25 000

The balance payable for the new vehicle was paid from the business bank account.

How much was the payment from the bank account?

A $9000 B $10 000 C $15 000 D $20 000

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5 The table shows information in a purchases ledger control account at the year-end.

cash paid to suppliers 36 000

credit purchases 55 000
discount received 7 800
balance carried down (balancing figure) 35 000

What was the credit balance brought down at the beginning of the year?

A $8200 B $23 800 C $46 200 D $61 800

6 A sole trader withdraws goods for his own use.

How does this affect his financial statements?

income statement statement of financial position

A decrease closing inventories decrease drawings

B decrease cost of goods sold increase drawings
C increase cost of goods sold decrease drawings
D increase sales revenue increase drawings

7 Which error would affect the balancing of a trial balance?

A A payment for rent of $250 has been debited in the bank account. It has been entered
correctly in the rent account.
B A purchase invoice for $259 was entered in the purchases journal.
C A sales invoice for $180 was lost, before it could be entered in the sales journal.
D A sales return of $500 was debited in the customer’s account and credited to the purchases
returns account.

8 Which group would appear only on the credit side of a sales ledger control account?

A cash refunds, contras with the purchases ledger control accounts, sales
B cash refunds, contras with the purchases ledger control accounts, sales returns
C irrecoverable debts written off, cash received, discounts allowed
D irrecoverable debts written off, cash refunds, sales

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9 A company has a year-end of 31 December.

Its inventory records on that date showed an inventory of 600 units with a cost of $10 each.

A fire on 31 December had totally destroyed 100 units and caused a further 50 units to be
damaged. These would cost $7 each to be repaired.

The inventory records had not been adjusted for the fire. The selling price is $15 per unit.

What is the value of the inventory to be used in the financial statements at 31 December?

A $4500 B $4850 C $4900 D $5400

10 A business has a draft profit for the year of $182 750.

The following adjustments have not yet been made.

1 a decrease of $2800 in the provision for doubtful debts

2 a prepayment of rent by the tenant of $3900 at the year-end

What is the actual profit for the year?

A $176 050 B $181 650 C $183 850 D $189 450

11 Which rule does not apply in the absence of a partnership agreement?

A interest on loans is charged at 6% per annum

B no interest on capital is charged
C no salaries are paid to partners
D profits and losses are shared equally between the partners

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12 The partnership of Ravi and Tania, who shared profits equally, was dissolved.

The capital accounts prior to dissolution were Ravi $50 000 and Tania $60 000.

The current accounts balances prior to dissolution were Ravi $35 000 credit and Tania $35 000
credit.

The loss on disposal of partnership net assets was $10 000.

How much money did each partner receive when the partnership was dissolved?

Ravi Tania
$ $

A 45 000 55 000
B 80 000 90 000
C 85 000 95 000
D 90 000 100 000

13 A company issues 50 000 ordinary shares of $5 each at a premium of $15. It also issues a
4% debenture, $300 000.

By which amount do the net assets of the company increase?

A $250 000 B $550 000 C $1 000 000 D $1 300 000

14 Which statements describe a capital reserve?

1 It is a reserve arising from a gain which is not yet realised.

2 It is a reserve created by transferring an amount from profit for the year.
3 It is a reserve which can be credited back to retained earnings if not used.

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

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15 The following is an extract from a statement of changes in equity.

ordinary share general retained

share capital premium reserve earnings
$ $ $ $

balance at the
75 000 15 000 3000 45 000
start of the year

During the year the following occurred.

1 An interim dividend of $4875 was paid.

2 A final dividend of $6000 was proposed.

3 $2500 was transferred to the general reserve.

What was the balance of retained earnings at the end of the year?

A $31 625 B $36 625 C $37 625 D $42 625

16 The following has been extracted from the financial statements of a business.

revenue 135 000

total capital employed 575 000
non-current assets 180 000

What is the non-current asset turnover?

A 0.31 times
B 0.75 times
C 1.33 times
D 3.19 times

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17 The statement of financial position of X Limited at 31 December 2017 shows the following.

$000

non-current assets 1350

current assets 140
ordinary share capital 900
general reserve 150
10% debentures 200
current liabilities 90
retained earnings 150

The profit from operations for the year was $65 000 and the finance costs were $20 000.

What is the return on capital employed for 2017?

A 3.21% B 4.64% C 5.7% D 5.91%

18 Which business would use a job costing system of accounting?

A a beauty parlour
B a chocolate factory
C a dairy milk farmer
D an oil refinery

19 What is a direct cost?

A one that can be traced to a cost item

B one that is always fixed
C one that is always semi-variable
D one that is always variable

20 A company pays its employees $6.80 per hour for a basic 40-hour week. An overtime premium of
50% is payable together with a production bonus of $0.25 per unit for all units produced over 350.
Employees are guaranteed a weekly wage of $330.

One employee worked 45 hours last week and produced 410 units.

What was the employee’s gross pay that week?

A $330 B $338 C $372 D $474

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21 Adam records his inventory using the AVCO (perpetual inventory) to calculate its value.

Which statement is correct?

A He only values it at the end of the month.

B He only values it at the year-end.
C He values it at the same price throughout the year.
D His inventory is valued after every purchase and issue.

22 Which statements about absorption costing are correct?

1 It can be used as a basis for calculating the selling price of a product.

2 It ensures that all the costs of the business are charged to the production.
3 It ensures that only variable costs are charged to production.
4 It is used to calculate the factory cost for a unit of production.

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

23 How is the margin of safety calculated?

A actual contribution less budgeted contribution

B actual profit less budgeted profit
C budgeted contribution less break-even point
D budgeted sales less break-even point

24 A business provides the following information about a product.

variable cost per unit 16

selling price per unit 30
total fixed costs 35 000
budgeted profit 95 000

How many units should it produce to achieve the budgeted profit?

A 4286 B 4334 C 6786 D 9286

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25 A business provides the following financial information.

$ per unit

selling price 41
direct materials 5
direct labour 8
variable overhead 3
fixed overhead 4
profit 21

What is the marginal cost per unit?

A $13 B $16 C $20 D $25

26 Which factor will determine the optimum production plan in a limited resource situation?

A maximum contribution per unit of limited resource

B maximum contribution per unit of production
C maximum profit per unit of limited resource
D maximum profit per unit of production

27 A company manufactures two products.

product X product Y
per unit
$ $

selling price 20 30
direct labour 10 20
direct materials 4 2

Total fixed costs are $54 000.

Only 3000 units of Y can be made and sold.

How many units of product X must be made and sold to break even?

A 4000 B 4500 C 5000 D 9000

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28 A company uses absorption costing and makes and sells one product. In the last month budgeted
overheads totalled $60 000. Budgeted production was 15 000 units and budgeted sales were
14 000 units.

The company now decides to apply marginal costing principles for last month.

What effect will this have on profits?

A $3500 decrease
B $3500 increase
C $4000 decrease
D $4000 increase

29 A business has recorded the following total costs for the last two months.

units produced total costs ($)

month 1 8 000 31 800

month 2 10 000 36 700

What was the total fixed cost per month?

A $2440 B $4900 C $7340 D $12 200

30 A company has recently introduced a system of budgetary control.

Workers have given the following reasons for materials costs being more than budgeted.

1 Budgeted material costs are incorrect.

2 Production machinery is outdated and wastes materials.
3 The company should purchase better quality materials to reduce wastage.

Which reasons will cause actual material costs to be different from the budgeted costs?

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

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 9706/12/F/M/18

 Cambridge Assessment International Education
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2019
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*9372618279*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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.

IB19 03_9706_12/3RP
© UCLES 2019 [Turn over
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1 An item is included in the financial statements because it affects their interpretation.

Which accounting concept is being applied?

A consistency
B materiality
C money measurement
D substance over form

2 Why is depreciation provided on non-current assets?

A so that the cost is allocated to periods that benefit from them

B so that the business entity concept is applied
C so that there is enough cash in the business to replace them
D so that they are shown at market value

3 A company purchased an asset costing $100 000. It had a life of five years and an estimated
residual value of $20 000. The company uses straight-line depreciation.

The asset was sold for $5000 at the end of the five-year period.

What is the total effect on year five profits from both depreciating and selling the asset?

amount of
expense
$

A 1000
B 15 000
C 16 000
D 31 000

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4 A business provides the following information.

cheque paid in 2018 for equipment bought in 2017 15 000

equipment purchased on credit in 2018 42 000
net book value of equipment at 1 January 2018 83 000
net book value of equipment at 31 December 2018 67 000

What was the depreciation charge in the income statement for the year ended
31 December 2018?

A $16 000 B $31 000 C $43 000 D $58 000

5 Daphne buys a non-current asset for $10 000. It has an estimated life of two years and a scrap
value of $2000. She is considering whether to depreciate it using the straight-line method or to
use the reducing balance method at a rate of 60% per annum.

Which statements are correct?

1 The profit for the year in Year 1 is higher if the reducing balance method is chosen.
2 The profit for the year in Year 1 is higher if the straight-line method is chosen.
3 The profit on disposal at the end of Year 2 is higher if the reducing balance method
is chosen.
4 The profit on disposal at the end of Year 2 is higher if the straight-line method is
chosen.

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

6 What is not a purpose of control accounts?

A to assist in the preparation of financial statements

B to identify all errors where the trial balance agrees
C to provide a total for trade receivables and trade payables
D to verify the accuracy of the individual ledger accounts

7 The balance on a sales ledger control account was $21 500. This did not agree with the total of
the sales ledger account balances.

It was discovered that a credit note for $200 sent to a credit customer had been posted to the
debit of the customer’s account.

What was the total of balances in the business’s sales ledger before the error was corrected?

A $21 100 B $21 300 C $21 700 D $21 900

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8 During the month of June, a business recorded the following information.

payments to credit suppliers during June 16 380

credit purchases for June 21 650
discount received 850
purchases ledger balances at the start of June 5 730
purchases returns during June 1 200

What was the purchases ledger control account balance at the end of June?

A $8950 B $10 650 C $15 570 D $27 380

9 A business paid an annual rent of $24 000. At 1 January 2018 there was accrued rent of $4000.

Rental payments were as follows.

1 January 2018 12 000

1 July 2018 10 000
1 September 2018 13 000

How was rent recorded in the financial statements at 31 December 2018?

income statement other receivables other 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

10 At the year-end, a business has some damaged goods in inventory. The following information is
available.

1 The goods were purchased for $8500.

2 If the goods are repaired, they can be sold for $10 400. The business will have to
pay $2000 repairing cost and pay $300 to a salesman.
3 The same quantity of damaged goods can be purchased from the supplier for
$8200.

What is the value of the damaged goods at the year-end?

A $8100 B $8200 C $8400 D $8500

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11 A company undervalued the closing inventory for its current accounting period.

How did this affect gross profit?

current period following period

A no effect no effect
B understated overstated
C understated no effect
D understated understated

12 For the year ended 31 December 2018, Sim’s net assets increased by $1210.

The following transactions took place during 2018.

1 Payments out of Sim’s personal bank account: rent for business office $3600, rent
for personal residence $2000.
2 Drawing of goods: with a cost $6200 and sales value $7700.
3 Drawing of cash: $9750.

What was the profit for the year ended 31 December 2018?

A $11 560 B $13 560 C $15 060 D $15 160

13 Meena was a sole trader. On 1 July 2018, Hanna entered into a partnership with her sharing
profits equally.

Profit for the year ended 31 December 2018 was $168 000 accruing evenly over the year. An
irrecoverable debt of $8000 was incurred during March 2018 and it was agreed that this would be
paid for by Meena.

What is Hanna’s share of profit?

A $40 000 B $42 000 C $44 000 D $46 000

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14 Z is admitted as a new partner in the partnership of X and Y. He brings the following into the
business.

cash 20 000
inventory 6 000
vehicle 11 000

Interest on capital is calculated at 10% per annum. There is no goodwill on Z’s admission.

What is Z’s interest on capital per annum?

A $1700 B $2000 C $3100 D $3700

15 L and M are in partnership sharing the profits equally. No goodwill account is maintained in the
accounts. N joins the partnership and pays $30 000 cash for his share of the goodwill.

Profits are to be shared equally between L, M and N.

What are the increases in the capital accounts on the admission of N into the partnership?

capital accounts
L M N
$ $ $

A 10 000 10 000 10 000

B – – 30 000
C 15 000 15 000 –
D – – –

16 During the year a business issued $1 ordinary shares at $1.20 each. The directors proposed a
final dividend at the end of the year.

Which balances in the statement of changes in equity were affected by these transactions?

ordinary share general retained

share capital premium reserve earnings

A  
B   
C  
D  

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17 A company has ordinary share capital of $250 000. The ordinary shares have a nominal value of
$0.25 each.

A rights issue is made on the basis of 2 shares for every 5 shares held at a premium of $0.15.

What is the total amount of capital raised from the rights issue of shares?

A $15 000 B $40 000 C $60 000 D $160 000

18 A shareholder sells some shares for less than he paid for them.

What happens to the share capital of the company?

A decreases by the nominal value of the shares sold

B decreases by the sales proceeds of the shares sold
C increases by the amount received from the sale of the shares
D remains the same as before

19 Which item would result in a decrease in the expenses to revenue ratio?

A accrual for telephone

B increase in provision for doubtful debts
C prepayment for rent and rates
D the return of goods sold

20 A company provided the following information.

profit from operations 109 000

interest paid 12 000
share capital 250 000
total reserves 129 000
5% debentures 60 000

What was the return on capital employed (ROCE) to two decimal places?

A 22.10% B 24.83% C 25.59% D 28.76%

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21 A business provided the following information.

budgeted overheads $127 000

budgeted machine hours 10 450
actual overheads $149 000
actual machine hours 9 300

What was the absorption rate per machine hour?

A $12.15 B $13.66 C $14.26 D $16.02

22 Which costs are stepped costs?

1 Increase in indirect materials cost.

2 Increase in variable overheads.
3 Renting further factory space.

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

23 An employee worked a normal 35-hour week and was paid $15 per hour. He also worked 5 hours
of overtime which was paid at $20 per hour and received a bonus of $50.

What was his total pay for the week?

A $525 B $600 C $625 D $675

24 A company uses machine hours to absorb its overheads.

The following information is provided for a month.

actual budgeted

overheads $237 010 $253 450

machine hours 12 460 13 700

Which statement regarding overheads is correct?

A $6500 over-absorbed
B $6500 under-absorbed
C $16 440 over-absorbed
D $16 440 under-absorbed

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25 Which line represents total variable cost?

$
B

C
D

O output

26 The following information is available in respect of a product.

per unit $

selling price 25
variable costs 15
contribution 10

Production is 50 000 units.

The fixed costs are $300 000. The margin of safety is 20 000 units.

The directors propose to increase the unit selling price by 10%.

What will be the percentage increase in the margin of safety?

A 13.6% B 20% C 30% D 36.4%

27 A company makes a single 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

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28 The following information relates to one unit of a product.

per unit $

selling price 20
marginal cost 8
fixed costs 5

What is its contribution to sales ratio?

A 35% B 40% C 60% D 65%

29 The budgeted information for one month is shown.

units sales 20 000

selling price per unit $12
variable cost per unit $3
fixed costs $50 000

It is expected that the number of units sold will increase by 10%.

Fixed costs will increase by 5%.

What is the increase in profit as a result of these changes?

A $15 500 B $18 000 C $20 500 D $21 500

30 What are the disadvantages of budgetary control systems?

1 Budget holders can be blamed for uncontrollable adverse outcomes.

2 Only financial outcomes are measured and considered.
3 Rigid decision-making often occurs.

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

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group.Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 9706/12/F/M/19

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2020
1 hour

You must answer on the multiple choice answer sheet.

*4672324391*

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. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 03_9706_12/5RP R
© UCLES 2020 [Turn over
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1 A trader sells goods for $6600 to a customer on 31 March 2019, the last day of his financial year.
He does not produce an invoice until three days later. He is advised that the sales of $6600
should be entered in the financial statements for the year ended 31 March 2019.

Which accounting concepts are being applied?

1 consistency
2 prudence
3 realisation

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

2 The following costs for a business relate to a newly purchased machine.

1 alterations to the factory building to install the machine

2 payment of insurance for the new machine
3 the final purchase price of the machine agreed with the supplier
4 the price of the machine before the discount from the supplier

Which costs would be treated as capital expenditure?

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

3 The following information is available.

freehold premises at cost 125 000

provision for depreciation of freehold premises 50 000

The premises were revalued at $180 000.

Which entries are required to record the revaluation?

income freehold premises provision for revaluation

statement at cost account depreciation reserve

A credit $105 000 debit $55 000 none debit $50 000
B debit $55 000 debit $75 000 debit $50 000 credit $180 000
C debit $75 000 debit $55 000 debit $50 000 credit $180 000
D none debit $55 000 debit $50 000 credit $105 000

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4 A business has a year end of 31 December.

It purchased a motor vehicle on 1 January 2017 for $15 000. The motor vehicle was sold on
31 March 2019 for $8000.

Depreciation is calculated at 20% per annum using the reducing balance method on a month by
month basis.

What is the accumulated depreciation and profit/loss on disposal of the motor vehicle?

accumulated depreciation profit/loss on disposal

$ $

A 5400 1600 loss

B 5400 1600 profit
C 5880 1120 loss
D 5880 1120 profit

5 A trial balance does not balance and a suspense account is opened.

Later the following errors are found and the suspense account is cleared.

1 A sales invoice for $1240 had been completely omitted from the books.
2 Purchases had been entered as $85 600. The correct amount should have been
$87 580.
3 Rent paid of $2600 was entered correctly in the cash book but as $6200 in the rent
account.

What was the original balance on the suspense account?

A $1620 credit
B $1620 debit
C $5580 credit
D $5580 debit

6 A sales ledger control account included the following entries.

1 contra with the purchases ledger control account $500, debit

2 discount allowed $600, debit
3 irrecoverable debts written off $1200, debit

Which entries must be corrected?

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

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7 A company’s bank statement showed a credit balance of $2000.

The following errors were found.

1 A receipt of $2700 and a payment for $3000 were recorded on the bank statement.
Both had been omitted from the cash book.
2 Bank charges of $500 were correctly shown on the bank statement but had been
recorded as $600 in the cash book.
What was the cash book balance before the errors were corrected?

A $1600 B $1800 C $2200 D $2400

8 A business makes a provision for doubtful debts equal to 10% of trade receivables.

The provision at 31 March 2018 was $8300.

The trade receivables after the provision on 31 March 2019 were $55 800.

What is the change in the provision over the year?

A $2100 decrease
B $2100 increase
C $2720 decrease
D $2720 increase

9 A trader sent goods to a customer on a sale or return basis. At the trader’s year end he had not
heard if the customer had accepted the goods.

Where should the value of goods be included in the trader’s books of account at the year end?

A inventory and sales revenue

B inventory only
C sales revenue and trade receivables
D sales revenue only

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10 On 1 May 2018 Trevor had a debit balance of $3000 on his rent receivable account.

Rent received during the year was as follows.

28 May 2018 18 000

30 November 2018 16 000

On 30 April 2019, $4000 was owing to Trevor for rent for the period ended 30 April 2019.

Which entry should be made in the income statement for rent receivable for the year ended
30 April 2019?

A $33 000 B $35 000 C $38 000 D $41 000

11 A sole trader makes a profit for the year of $31 000, after taking the following items into account.

carriage inwards 2 600

decrease in provision for doubtful debts 1 500
discount received 2 000
other expenses 28 000
profit on disposal of non-current asset 300

What was the gross profit for the year?

A $55 200 B $55 500 C $56 700 D $57 800

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12 X and Y are in partnership sharing profit and losses equally.

Y’s opening current account balance was $1350 debit.

The residual profit for the year was $23 500.

Y was entitled to the following.

interest on capital 1 200

salary 14 500

Y’s drawings during the year were $25 000.

What is the closing balance of Y’s current account at the year end?

A $1100 credit
B $1100 debit
C $3800 credit
D $3800 debit

13 F and P are in business sharing profits and losses in the ratio 3 : 1.

Their capital account balances are:

F 90 000
P 60 000

B is introduced as a new partner and invests $50 000 as capital.

Goodwill is valued at $20 000 and is not to be retained in the books of account.

The new profit sharing ratio will be 2 : 2 : 1 for F, P and B respectively.

What is the new capital account balance of F following B’s admission?

A $57 000 B $83 000 C $97 000 D $105 000

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14 L and M are in partnership, sharing profits and losses in proportion to their capital invested. The
following information is available:

capital: L 68 000
M 102 000
profit for the year before appropriation 28 900
drawings: L 8 000
M 12 000

No interest is charged on drawings up to $10 000 for each partner.

Interest at a rate of 5% is charged on any drawings in excess of $10 000.

What was L’s share of residual profit?

A $11 520 B $11 600 C $11 800 D $11 960

15 Which item is shown in the statement of changes in equity?

A dividend proposed
B interest on long-term loan
C issue of debenture
D revaluation gain on non-current assets

16 Which statement about bonus shares is correct?

A They may be issued as repayment of debentures.

B They may be issued at a premium.
C They may be issued to the holders of preference shares.
D They may be issued using the share premium account.

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17 The equity of P Limited at 1 January 2019 was $668 000.

Profit for the year ended 31 December 2019 was $120 000.

During the year ended 31 December 2019, the following also took place:

1 April Paid an interim dividend of $40 000

1 July Transferred $50 000 from retained earnings to general reserve
1 October Issued 5% debentures for $200 000
31 December Proposed a final dividend of $30 000

What was the total equity of P Limited at 31 December 2019?

A $698 000 B $718 000 C $748 000 D $948 000

18 A business applied a mark-up of 25%.

Which statement is correct?

A Gross margin is 20%.

B Gross margin is 25%.
C Profit margin is 20%.
D Profit margin is 25%.

19 A company’s results for a year showed credit sales of $500 000.

The trade receivables collection period was 73 days.

In the next year, credit sales were expected to be $550 000 and the collection period was not
expected to change.

What is the expected percentage change in trade receivables?

A decrease of 10%
B increase of 10%
C decrease of 20%
D increase of 20%

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20 A business has the following current assets and current liabilities.

trade receivables 6000

bank overdraft 1500
cash in hand 50
trade payables 5050

The only other item in the working capital is inventory.

The current ratio is 2 : 1.

What is the value of the inventory?

A $2550 B $4050 C $5550 D $7050

21 A mechanic carries out regular factory machine maintenance. He is paid an annual salary of
$20 000.

Which type of cost is this?

A direct labour cost

B fixed factory cost
C variable factory cost
D variable administrative cost

22 A manufacturer uses the weighted average cost (AVCO) method of inventory valuation. Opening
inventory was 10 units at $50 each.

During the month:

30 units were purchased costing $70 each.

20 units were sold at $80 each.

What was the value of the inventory at the end of the month?

A $1200 B $1300 C $1400 D $1600

23 Which statement is correct when production increases?

A Total fixed costs fall.

B Total variable costs fall.
C The fixed cost per unit falls.
D The variable cost per unit falls.

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24 Why might absorption costing be used?

1 to calculate contribution
2 to decide whether or not to accept a special order
3 to make long-term decisions
4 to set the selling price of a product

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

25 The following information is available for a business.

fixed overheads
hours
$

budget 180 000 10 000

actual 190 000 11 000

What was the over-absorption or under-absorption of fixed overheads?

A $8000 over
B $8000 under
C $10 000 over
D $10 000 under

26 A business plans to sell all the 10 000 units produced next year at the same price as this year.

Direct costs are forecast to decrease by $2 per unit and total fixed costs will increase by $40 000.

What will be the effect of this?

total cost break-even point

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

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27 The following information is available for a business.

sales revenue 600 000

variable cost 180 000
break even sales revenue 400 000

What is the profit for the period?

A $120 000 B $140 000 C $280 000 D $300 000

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

1 It assumes costs and revenues behave in a linear fashion.

2 It assumes that only activity levels are uncertain.
3 It considers activity levels, marginal costs and revenues.

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

29 A company is forecasting its profits at two levels of activity.

sales units 5000 8000

$ $
total fixed and variable costs 20 000 26 000
profit 15 000 30 000
sales revenue 35 000 56 000

Fixed costs and selling prices are unchanged within the above activity range.

What is the forecast profit if sales were 7000 units?

A $21 000 B $25 000 C $26 000 D $26 250

30 Why would a business prepare budgets?

1 to communicate its plans

2 to enable it to control costs
3 to improve its products’ quality
4 to plan its operations

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

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9706/12/F/M/20

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2021
1 hour

You must answer on the multiple choice answer sheet.

*4583803857*

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.

IB21 03_9706_12/4RP
© UCLES 2021 [Turn over
 2

1 A business values its inventory at the lower of cost and net realisable value.

Which accounting concept is being applied?

A business entity
B duality
C matching
D prudence

2 On 1 May, Tom sold an old motor vehicle with a net book value of $10 000 to Arnold for $12 000.
Arnold paid $7500 by cheque and agreed to pay the balance by instalments.

What was the net effect of these transactions on Arnold’s accounting equation on 1 May?

owner’s equity
assets liabilities
/ capital
$ $
$

A increase 2500 increase 2500 no effect

B increase 2500 increase 4500 decrease 2000
C increase 4500 increase 2500 increase 2000
D increase 4500 increase 4500 no effect

3 Which item is not included as part of the capital cost of a new machine?

A cost of delivering the machine to the factory

B cost of installing the new machine
C interest on a loan used to buy the machine
D invoice price of the machine

4 Why does a business charge depreciation on its non-current assets?

A to retain profits for the replacement of worn out assets

B to show the correct value of the asset in the statement of financial position
C to show when an asset needs replacing
D to spread the cost of the assets over their useful lives

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5 The net book value of motor vehicles of a company is shown.

beginning of
end of the year
the year

$312 000 $305 000

During the year, an old vehicle was traded in as part exchange for a new vehicle. The part
exchange value of the old vehicle was $8000. The remaining purchase price of the new vehicle,
$30 000, was paid by cheque.

What was the depreciation charge for the year?

A $29 000 B $37 000 C $45 000 D $53 000

6 The bank statement of a business showed a credit balance of $4520. This did not agree with the
cash book. The following were discovered.

1 Bank charges of $89 had not been entered in the cash book.
2 There were unpresented cheques paid to suppliers of $680.
3 A dishonoured cheque for $210 appeared on the bank statement, but was not
shown in the cash book.
4 Sales receipts of $750 had been entered in the cash book, but did not appear on the
bank statement.

What is the bank balance to be shown in the statement of financial position?

A current asset $4501

B current asset $4590
C current liability $4450
D current liability $4539

7 What may help a book-keeper detect errors in the accounting records of a business?

1 books of original entry

2 sales ledger control account
3 statement of financial position
4 trial balance

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

8 The closing balance on a purchases ledger control account is $163 762. The purchases journal
has been undercast by $1000.

What is the correct closing balance on the purchases ledger control account?

A $162 762 B $163 762 C $164 762 D $165 762

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 4

9 A business has calculated its draft profit for the year as $15 000. The following were then
discovered.

1 General expenses were understated by $600.

2 The sales journal total of $55 690 had been posted to the sales account as $56 590.
3 Repairs to vehicles of $1100 had been entered in the vehicles (at cost) account.
4 The salaries account included travelling expenses of $2400 paid to the salesmen.

What was the correct profit for the year?

A $12 400 B $13 600 C $14 200 D $14 800

10 A sole trader maintains a provision for doubtful debts at 5% of trade receivables. Provision for
doubtful debts at the start of the year was $2750. The following information is available at the end
of the year.

trade receivables 37 500

irrecoverable debts written off during the year 500

What is the effect on the profit for the year due to the change in the provision for doubtful debts?

A decrease by $875
B decrease by $900
C increase by $875
D increase by $900

11 Esarba has a financial year end of 31 December.

On 31 March 2020, she transferred her private vehicle to the business at a value of $12 000.

Her profit for the year ended 31 December 2020 was $7800 and her cash drawings amounted to
$8000. Depreciation of $900 had been provided on the vehicle.

She also took goods for her own use with a cost price of $1000 and a selling price of $2000.

What was the increase in Esarba’s capital account balance in the year ended 31 December 2020?

A $8900 B $9800 C $9900 D $10 800

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12 At the end of his first year of trading, the trader lost all of his inventory in a fire. He knows the
values of sales and purchases and wishes to calculate the value of the inventory lost.

Which ratio should he use?

A gross margin
B profit margin
C trade payables turnover
D trade receivables turnover

13 X and Y were in partnership sharing profits and losses equally.

Z was admitted as a partner and the profit and loss sharing ratio for X, Y and Z will be 2 : 2 : 1
respectively.

On the date of admission, the value of non-current assets was increased by $48 000.

Goodwill was valued at $30 000 but would not be retained in the books of account.

What was the effect on X’s capital account?

A increased by $19 200

B increased by $24 000
C increased by $27 000
D increased by $31 200

14 Which items would appear in a partnership’s appropriation account, in the absence of a

partnership agreement?

1 profit for the year

2 partners’ interest on drawings
3 partners’ salaries
4 partners’ share of profits

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

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15 Annie and Bernie have been in partnership for some years, sharing profits and losses in the ratio
2 : 1.

On 1 January 2020, they decided to introduce interest on drawings. The annual interest on
drawings for the year ended 31 December 2020 was $1300 for Annie and $800 for Bernie.

Which effect did this change have on the balance on Annie’s current account at 31 December 2020?

A decrease of $100
B decrease of $500
C increase of $100
D increase of $500

16 The total of shareholders’ equity at 31 December 2019 was $45 500.

During the year ended 31 December 2020, the following took place.

1 An issue of 10 000 ordinary shares of $1 each at a premium of $0.25 was made.

2 A bonus issue of 5000 shares of $1 each was made.
3 Buildings were revalued from $250 000 to $265 000.
4 The profit for the year was $20 400.
5 There was a transfer to the general reserve of $6000.
6 The directors proposed a final dividend of $8000.

What was the balance of the shareholders’ equity at 31 December 2020?

A $85 400 B $87 400 C $93 400 D $98 400

17 The following relates to a limited company during a year.

repayment of a debenture 200 000

receipt from issue of ordinary shares 500 000
non-current assets purchased by cheque 300 000
net book value of disposals 50 000
disposal proceeds 60 000
revaluation surplus 20 000

What was the total net cash inflow arising from these?

A $60 000 B $70 000 C $80 000 D $110 000

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18 What is included in the reserves of a limited company?

A debentures
B ordinary shares
C preference shares
D share premium

19 Which ratio will help a business assess its ability to meet its immediate cash requirements?

A expenses to revenue
B liquid (acid test)
C non-current asset turnover
D return on capital employed

20 The following information for a business was available at the end of its financial year.

inventory 20 000
bank 8 400 credit
trade receivables 35 000
trade payables 15 000
rent receivable in arrears 3 000

There is also a 5-year bank loan of $20 000 repayable in equal annual instalments.

What was the current ratio?

A 2.12 : 1 B 2.88 : 1 C 3.52 : 1 D 4.43 : 1

21 A manufacturing company pays its production employees basic wages at the same hourly rate
every week. It also pays them a bonus based on achieving production targets.

What sort of cost is this an example of?

A fixed cost
B semi-variable cost
C stepped cost
D variable cost

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22 A company receives the following units of raw material into inventory.

per unit total

units
$ $

120 38 4560
100 40 4000
60 44 2640

It then issued 240 units.

Inventory is valued using the weighted average (AVCO) method.

What was the closing value of inventory?

A $1440 B $1520 C $1600 D $1760

23 The budgeted data of N Limited is as follows.

production level total costs

15 000 units $406 000

25 000 units $546 000

What is the budgeted fixed cost?

A $196 000 B $238 000 C $336 000 D $357 000

24 In March, a company’s overhead absorption rate was $2 per machine hour. In April this rate
increased.

What had increased in April causing the change in the overhead absorption rate?

A cost of insurance for the factory

B hourly pay rate of production workers
C number of actual machine hours worked
D number of budgeted machine hours

© UCLES 2021 9706/12/F/M/21

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25 A business absorbs its overheads on the basis of machine hours.

The following information is provided.

actual budgeted

overheads $564 000 $560 000

machine hours 6700 7000

By how much are overheads under or over-absorbed?

A over-absorbed by $4000
B under-absorbed by $4000
C over-absorbed by $28 000
D under-absorbed by $28 000

26 Which situation is not usually suitable for the use of marginal costing?

A negotiating a regular selling price with a customer

B quoting a selling price for a special order
C when there is a shortage of direct material for the next month
D whether to make or buy-in a product

27 The following budgeted information is available for 10 000 units.

per unit
$

selling price 53
direct materials and wages 22
variable manufacturing overhead 2
fixed manufacturing overhead 21
variable selling expenses 1
fixed selling expenses 5

What is the budgeted break-even point in units?

A 7242 B 7500 C 8966 D 9286

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28 The budgeted income statement of J Limited shows the following.

sales 400 000

variable costs 240 000
fixed costs 132 000
profit for the year 28 000

What is the margin of safety in dollars?

A $70 000 B $160 000 C $268 000 D $330 000

29 A business provided the following budgeted information.

break-even sales revenue 300 000

fixed costs 180 000
target profit 144 000

What is the sales revenue required to achieve the target profit?

A $486 000 B $540 000 C $624 000 D $810 000

30 Which factors should be considered when setting a budget?

1 availability of skilled labour

2 production capacity
3 quality of goods to be produced

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

© UCLES 2021 9706/12/F/M/21

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/12/F/M/21

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice February/March 2022
1 hour

You must answer on the multiple choice answer sheet.

*6011464210*

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 03_9706_12/3RP
© UCLES 2022 [Turn over
 2

1 Which actions are taken in respect of the totals of a three-column cash book at the end of an
accounting period?

cash and bank discount

columns columns

A balanced balanced
B balanced totalled
C totalled balanced
D totalled totalled

2 Which item is an example of capital expenditure?

A cost of repairs to an office building

B cost of repainting business name on delivery van
C legal cost paid to purchase an office building
D legal cost to collect outstanding receivables

3 On 1 July 2021, Tim bought a delivery van for $10 000. He paid an additional $900 to have racks
fitted inside, and $800 for a year’s insurance.

Tim provides for depreciation at the rate of 10% per annum. A full year’s depreciation is charged
in the year of acquisition.

What was the total for expenses recorded in Tim’s income statement in respect of the van for the
year ended 30 September 2021?

A $1290 B $1690 C $2100 D $2500

4 A business has a year end of 31 December. It purchased a non-current asset on 1 January 2020
for $100 000. The asset was depreciated using the reducing balance method at 20% per annum.
It was sold for $40 000 on 1 January 2022.

What was the loss on disposal?

A $20 000 B $24 000 C $40 000 D $60 000

5 What is entered in the sales ledger control account?

1 cash sales
2 increase in provision for doubtful debts
3 returns inwards

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

© UCLES 2022 9706/12/F/M/22

 3

6 A trial balance included a suspense account. The bank balance of $28 412 had mistakenly been
entered as an overdraft and placed on the credit side as $28 142.

There had also been an addition error and the debit side of the trial balance had been undercast
by $450.

Which entry in the suspense account will correct these errors?

A credit $56 104

B debit $56 104
C credit $57 004
D debit $57 004

7 Which statement is correct?

A The balance on the irrecoverable debts account is carried down to the next accounting
period.
B The balance on the irrecoverable debts account is treated as an expense in the income
statement.
C The balance on the provision for doubtful debts account is calculated before the deduction of
irrecoverable debts.
D The balance on the provision for doubtful debts account is not included in a trial balance.

8 The following information is available for a business at 31 December 2021.

general expenses in arrears 1 January 420

general expenses in advance 1 January 240
general expenses in arrears 31 December 720
general expenses in advance 31 December 120

Total amount paid during the year ended 31 December 2021 is $11 500.

What is the amount to be included in the income statement for general expenses for the year
ended 31 December 2021?

A $10 240 B $10 720 C $11 080 D $11 920

9 When would the year end value of inventory need to be adjusted?

1 when inventory has not yet been paid for

2 when selling price has fallen below cost
3 when the owner has recorded taking goods for his own use during the year

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

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 4

10 A business had a draft profit for the year of $250 000.

The following errors were then discovered.

1 Depreciation charged was $25 000. The figure should have been $40 000.
2 Closing inventory for the period was undervalued by $10 000.

What was the correct profit for the year?

A $225 000 B $245 000 C $255 000 D $275 000

11 A capital account for a sole trader contained three entries, in addition to the opening and closing
balances.

What did these entries represent?

debit side credit side

A capital introduced drawings, loss for the year

B capital introduced, drawings profit for the year
C drawings, loss for the year capital introduced
D profit for the year capital introduced, drawings

12 The year end of a business is 31 December 2021.

On 5 January 2022, inventory was counted and valued at cost, $30 000.

The following was then discovered.

1 Goods purchased and received after the year end, costing $1500, had been
included in the valuation.
2 It included goods returned by a customer after the year end. They had a selling price
of $900 which included a mark-up of 25% during the year.
3 Some goods included in the inventory, costing $500, were damaged. They can be
sold for $300 after repairs costing $100.

Which value of inventory should be included in the financial statements at 31 December 2021?

A $27 480 B $27 525 C $28 275 D $29 270

© UCLES 2022 9706/12/F/M/22

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13 A sole trader provided the following information for the year ended 31 December.

non-current assets increased by 25 000

current assets increased by 10 000
current liabilities increased by 12 500
additional capital introduced during the year 20 000
drawings for the year 13 000

What was the profit for the year ended 31 December?

A $10 500 B $14 500 C $15 500 D $29 500

14 Which rule does not apply in the absence of a partnership agreement?

A Interest on partners’ loans is charged at 6% per annum.

B No interest on capital is charged.
C No salaries are paid to partners.
D Profits and losses are shared equally between the partners.

15 P and Q are in partnership sharing profits and losses equally. On 1 January 2021, the
partnership had net assets of $410 000. At that date, R was admitted into the business on the
following terms.

1 Net assets to be revalued to $480 000.

2 Goodwill was valued at $50 000 but will not be retained in the books of account.
3 Profits and losses will now be shared P 40%, Q 40% and R 20%.

What was the change in Q’s capital immediately after R’s admission?

A decrease by $33 000

B decrease by $40 000
C increase by $33 000
D increase by $40 000

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16 X and Y are in partnership, sharing residual profits and losses equally. Partners are charged 2%
interest on their drawings. Y is entitled to a salary of $10 000.

The partners’ drawings for the year were as shown.

X 12 000
Y 8 000

The profit for the year was $52 000.

How much did each partner receive as a share of residual profits?

A $10 800 B $11 200 C $20 800 D $21 200

17 Which statements are correct?

1 Dividends can be paid out of the general reserve.

2 Rights issues can be made from the share premium account.
3 The general reserve can be created from retained earnings.

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

18 A limited company had the following balances on 1 January 2021.

revaluation reserve 20 000

retained earnings 142 000

Profit for the year ended 31 December 2021 was $105 000.

The revaluation reserve, $20 000, was created two years ago from a revaluation of a property.
The same property was revalued on 31 December 2021 with a revaluation loss of $35 000.

On 1 August 2021 an interim dividend, $40 000, was paid.

On 31 December 2021 a final dividend, $55 000, was proposed.

What was the value of retained earnings at 31 December 2021?

A $117 000 B $137 000 C $172 000 D $192 000

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19 The bank balance of a limited company was $390 000 before the following transactions took
place.

1 An issue of 500 000 new shares of $0.50 each was made at a premium of $0.25
per share.
2 A debenture for $100 000 was repaid.
3 A bonus issue of 100 000 shares of $0.50 each was made.

What was the bank balance after these transactions?

A $540 000 B $665 000 C $715 000 D $865 000

20 What might cause a decrease in a company’s non-current asset turnover?

A increase in expenses
B increase in sales revenue
C purchase of new non-current assets
D selling non-current assets

21 The following information for a limited company at 31 December 2021 is available.

ordinary share capital 300 000

retained earnings 110 000
8% debenture 100 000

Retained earnings at 1 January 2021 were $82 000. An interim dividend of $45 000 was paid on
1 May 2021.

What was the return on capital employed for the year ended 31 December 2021?

A 6.83% B 7.06% C 14.31% D 15.88%

22 Which statements about stepped costs are correct?

1 fixed within a range of activity levels

2 fixed whatever the level of activity
3 include fixed costs only
4 include both fixed and variable costs

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

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23 A production worker is paid $15 per hour for working 8 hours a day.

Overtime is paid at the rate of time and a fifth (basic pay plus 20%).

A productivity bonus is also paid at the rate of $21 per unit for each unit produced in excess of
12 units per day.

Last Friday, the production worker worked 12 hours and assembled 14 units.

How much did he earn on Friday?

A $144 B $162 C $192 D $234

24 A retailer made the following purchases of inventory in October.

quantity unit price total cost

purchase
(units) $ $

5 Oct 50 500 25 000

12 Oct 50 500 25 000
23 Oct 150 525 78 750
128 750

There was no opening inventory for October.

The business uses the first-in first-out (FIFO) method to value its inventory.

In October, 200 units were sold for $900 each.

What was the gross profit for October?

A $76 667 B $77 000 C $77 500 D $96 250

25 A company has two departments in its factory. The details are shown.

budgeted fixed
budgeted
department overheads
hours
$

machining 180 000 6 000

assembly 90 000 10 000
total 270 000 16 000

What is the fixed overhead absorption rate per hour in the machining department?

A $11.25 B $16.875 C $30 D $45

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 9

26 What would cause overheads to be over-absorbed?

A Overhead absorbed is greater than overhead budgeted.

B Overhead absorbed is less than overhead budgeted.
C Overhead incurred is greater than overhead absorbed.
D Overhead incurred is less than overhead absorbed.

27 A company has the following information for producing 2000 units of a product.

sales revenue 85 000

direct materials 30 000
direct labour 14 000
direct expenses 2 500
other variable overheads 10 200
fixed overheads 8 000

What is the contribution to sales ratio?

A 23.88% B 33.29% C 45.29% D 54.71%

28 The following information is available about two products.

product 1 product 2
per unit per unit

material X 2 kilos 4 kilos

material Y 3 kilos 1 kilo
direct labour 3 hours 6 hours

Production is planned to be 100 units of each product.

700 kilos of material X and 400 kilos of material Y are available. A total of 800 direct labour hours
can be worked.

What are the limiting factors?

A direct labour only

B material X only
C material Y only
D all three inputs

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29 A company provides the following information about its product.

selling price $100

variable cost per unit $40
fixed costs $21 600
break-even point 360 units

If the business changes its production method, contribution will increase by 10% and fixed costs
will increase by 5%.

What would be the effect on the break-even point?

A decrease by 16 units
B decrease by 18 units
C increase by 16 units
D increase by 18 units

30 What are possible limitations of a budgetary control system?

1 Budgets are based on estimates.

2 Budgets may lead to staff demotivation.
3 Budgets may prevent managers from being creative.

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

© UCLES 2022 9706/12/F/M/22

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/12/F/M/22

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2016
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*1585682719*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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 9 printed pages and 3 blank pages.

IB16 06_9706_12/4RP
© UCLES 2016 [Turn over
 2

1 What might stop financial statements showing a true and fair view?

A changes in depreciation methods from year to year

B changes in dividend policy
C creation of a general reserve
D inclusion of purchased goodwill in a statement of financial position

2 A company’s financial year ends on 31 December.

On 1 April 2015, the following payments relating to a new machine were made.

purchase cost 50 000

installation 10 000

Machinery is depreciated at 20% on cost per annum, calculated from the date of purchase.

What was the depreciation of the new machine for the year ended 31 December 2015?

A $7500 B $9000 C $10 000 D $12 000

3 A business purchased a motor vehicle on 1 January 2012 for $24 000. The estimated useful life of
the motor vehicle was four years and the estimated residual value at the end of four years was
$8000.

The business depreciates motor vehicles at 25% per annum using the reducing balance method.
No depreciation is charged in the year of disposal.

The motor vehicle was sold on 31 July 2015 for $12 000.

What was the profit on the sale of the motor vehicle?

A $1875 B $4000 C $5250 D $8000

4 A building was purchased for $500 000. The following costs were also incurred.

adapting the new building 50 000

legal fees for the building purchase 5 000
cleaning the building 4 000
salary of building manager 20 000

What was the capital cost of the building?

A $550 000 B $555 000 C $559 000 D $579 000

© UCLES 2016 9706/12/M/J/16

 3

5 Which statement about the sales ledger control account is correct?

A It is to verify the total of the customers' account balances in the sales ledger.
B It is used to calculate the gross profit on sales.
C It is used to calculate the total sales for the year.
D It is used to reconcile the cash received from customers with the bank statement.

6 In which book of prime entry is the contra between the sales ledger control account and the
purchase ledger control account recorded?

A cash book
B general journal
C purchases journal
D sales journal

7 A business omitted discounts allowed of $700 from its trial balance. During the year a machine
had been sold for cash of $500 but the only accounting entry made was a debit in the bank
account.

What is the balance on the suspense account before these errors are corrected?

A $200 debit B $1200 debit C $200 credit D $1200 credit

8 In an income statement carriage outwards of $5000 has been treated as carriage inwards.

Carriage inwards of $3000 has been treated as carriage outwards.

What are the effect(s) of these errors on the profit?

gross profit profit for the year

A overstated by $2000 understated by $2000

B overstated by $8000 no effect
C understated by $2000 no effect
D understated by $8000 overstated by $8000

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 4

9 A company received interest of $8800 during the financial year. Interest of $700 was due at the
beginning of the year and $850 at the end of the year.

Which entry appeared in the interest received account to make the transfer to the income
statement?

A $8650 credit
B $8650 debit
C $8950 credit
D $8950 debit

10 Katrina commenced business on 1 January 2015. For the year ended 31 December 2015, the
following information is available.

drawings 53 500
profit for the year 62 700
revenue 1 500 000
expenses 875 000

What was the cost of sales for the year?

A $562 300 B $571 500 C $678 000 D $687 700

11 The following information is available for rent and rates.

prepaid rent at the start of the year 1250

accrued rates at the start of the year 1380
rent and rates income statement amount 8750
prepaid rent at the end of the year 1104
accrued rates at the end of the year 1000

What is the amount paid for rent and rates during the year?

A $8516 B $8854 C $8880 D $8984

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 5

12 The directors of a company are completing the financial statements for the year ended
30 April 2016. They discover that the inventory at 1 May 2015 was over-valued by $50 000.

What are the effects of correcting this error?

retained earnings
profit for the year
brought forward
ended 30 April 2016
at 1 May 2015

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

13 X and Y were in partnership sharing profit and losses equally. They then admitted Z into the
partnership and profits and losses were still shared equally.

The following transactions took place.

1 Z introduced capital of $50 000.

2 Goodwill was valued at $30 000. No goodwill account is kept in the books of
account.
3 X took a computer from the business at a value of $3000.

After these transactions had taken place, the balance on X’s capital account was $60 000.

What was the opening balance on X’s capital account?

A $55 000 B $58 000 C $65 000 D $75 000

14 A and B were in partnership sharing profits and losses equally when they decided to retire.
Details of the realisation are shown in the table.

book value realised value

$000 $000

non-current assets 50 65
current assets excluding cash and bank 25 23
cash and bank balances 4 –
current liabilities 18 14
costs of realisation 1 –

How much profit was each partner entitled to on realisation?

A $8000 B $10 000 C $12 000 D $16 000

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15 A company’s profit from operations has increased by 10% in a year, whilst its gross profit has
only increased by 5%.

Which factors could explain this?

1 a decrease in finance costs

2 a decrease in distribution costs
3 an increase in rent received
4 an increase in selling prices

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

16 A company has 1 000 000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of
$300 000.

Profit from operations for the year was $465 000.

The directors paid an 8% ordinary share dividend during the year.

By which amount did the retained earnings increase during the year?

A $250 000 B $370 000 C $385 000 D $400 000

17 A company issues 100 000 new $1 ordinary shares at a premium of $0.20 each.

Which effect does this have on the statement of financial position?

A Equity increases by the nominal value of the shares but decreases by the value of the
premium.
B Equity increases by the nominal value of the shares only.
C Net assets increase by the nominal value of the shares plus the value of the premium.
D Net assets increase by the nominal value of the shares but decrease by the value of the
premium.

18 The trial balance on 31 December 2015 showed the following information.

$
ordinary share capital ($1 shares) 500 000

retained earnings 300 000

On 1 January 2016 the directors created the general reserve of $70 000. At the same time
200 000 ordinary shares were issued for $300 000.

By which amount did the total reserves increase on 1 January 2016?

A $100 000 B $170 000 C $300 000 D $370 000

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19 A company wants to increase its return on capital employed in the short term.

Which course of action will achieve this?

A invest in new plant and machinery

B make a bonus issue of shares
C reduce overhead expenses
D reduce the dividends paid to investors

20 Which item is included in the current ratio but not the liquid (acid test) ratio?

A cash at bank
B inventory
C trade payables
D trade receivables

21 A business has prepared the following information for the year ended 30 April 2015.

$ $

revenue 220 000

opening inventory 25 000
purchases 120 000
closing inventory (31 000)
cost of goods sold 114 000
gross profit 106 000

What was the inventory turnover?

A 86 days
B 90 days
C 95 days
D 100 days

22 An employee works a standard 40-hour week. In that time he is expected to make 200 complete
units.

He is paid a bonus of $10 for every hour saved in production.

For week 25 he worked 44 hours and produced 250 units.

How much was his bonus payment for week 25?

A $30 B $40 C $50 D $60

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23 A business was started on 1 January. The purchases and sales of inventory for January were as
follows.

date purchases sales

4 January 3 at $200 each –

13 January – 2 at $400 each
26 January 3 at $250 each –
28 January – 2 at $400 each

The business used the first in first out (FIFO) method of inventory valuation.

What was the gross profit for January?

A $250 B $650 C $700 D $750

24 A manager is preparing a quotation for Job 88. A specialised technician is hired to work for this
job only. He will use machinery that the company already owns.

Which statement is correct about expenses for Job 88?

A Both machinery depreciation and technician wage are direct.

B Both machinery depreciation and technician wage are indirect.
C Machinery depreciation is direct and technician wage is indirect.
D Machinery depreciation is indirect and technician wage is direct.

25 Budgeted overhead expenditure was $180 000 and budgeted labour hours were 12 000. Actual
overheads amounted to $196 000 and actual labour hours were 12 200.

What was the under or over absorption of overheads?

A $3000 over
B $3000 under
C $13 000 over
D $13 000 under

26 Why might a business use marginal costing?

1 to calculate break-even units

2 to decide on the most profitable use of limited resources
3 to decide whether to make a product or buy it

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

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27 A business provided the following information for the past two months.

number of total overheads

month
labour hours $

February 64 000 918 000

March 76 000 1 062 000

What was the monthly fixed overhead cost?

A $144 000 B $150 000 C $768 000 D $912 000

28 A company uses marginal costing.

Which costs are included in its inventory valuation?

A variable manufacturing cost, fixed manufacturing overhead and variable selling expenses
B variable manufacturing cost and fixed manufacturing overhead only
C variable manufacturing cost and variable selling expenses only
D variable manufacturing cost only

29 The break-even sales of a company are 1000 units when the variable costs are $30 000 and fixed
costs are $20 000.

What is the profit if 70 units above the break-even point are sold?

A $700 B $1400 C $2100 D $3500

30 Who should be on the budget committee?

A accounting and finance staff only

B sales manager and production manager only
C sales staff only
D senior management representing every department in the organisation

© UCLES 2016 9706/12/M/J/16

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 9706/12/M/J/16

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2017
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*7586550867*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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 11 printed pages and 1 blank page.

IB17 06_9706_12/4RP
© UCLES 2017 [Turn over
 2

1 When a businessman introduces capital into his business, the transaction is debited in the cash
book and credited to his capital account.

Of which accounting concept is this an example?

A business entity
B going concern
C matching
D prudence

2 Which are examples of the accounting equation?

1 capital + assets = liabilities

2 capital = assets + liabilities
3 capital = assets – liabilities

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

3 Amitav purchased a van costing $20 000. He provided an old van with a net book value of $8000
in part exchange. There was a profit on disposal of $1500.

What was the cash outflow arising from the purchase?

A $9500 B $10 500 C $12 000 D $13 500

4 The net book value of a company’s non-current assets was as follows.

at 1 January 2016 100 000

at 31 December 2016 80 000

During 2016 assets were sold for $20 000, realising a profit on disposal of $5000.

Depreciation charged for 2016 was $8000.

What was the expenditure on new assets in 2016?

A $3000 B $5000 C $8000 D $15 000

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5 The following errors were found after a suspense account was opened.

1 Motor repairs of $400 were credited to the motor vehicle at cost account.
2 A payment for electricity was debited in the electricity account as $2500 instead
of $5200.
3 A $450 cash purchase of goods for resale had been completely omitted from
the books.
4 Discount allowed of $50 had been debited to the discounts received account.

Which items would be entered in the suspense account?

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

6 Which items appear in a sales ledger control account?

1 cash discount allowed

2 credit sales
3 payments to trade payables
4 returns inwards

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

7 The following information is extracted from the statement of financial position of a business at
31 December 2016.

bank loan (repayable 2025) 16 200

other payables 1 880
bank overdraft 11 600
capital 20 710
drawings 19 100
inventory 14 610
other receivables 1 420
trade payables 14 110
trade receivables 9 050

What is the value of the net current liabilities?

A $1590 B $2510 C $18 710 D $20 320

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8 The following items are recorded in the cash book of a business but not yet recorded in its bank
statement.

$
cheques drawn 3000
amounts banked 250

The cash book shows a bank balance of $2600 credit.

What is the balance on the bank statement?

A $150 credit
B $150 debit
C $400 credit
D $400 debit

9 Finn provides the following information.

capital at the start of the year 19 800

profit for the year 24 000
drawings (cash) 19 500
drawings (goods for own use) 1 100
private vehicle transferred to business use 6 000

What was Finn’s capital at the end of the year?

A $23 200 B $24 300 C $29 200 D $31 400

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10 A business provides the following information.

year 1 year 2
$ $

profit for the year 30 000 40 000

cost of goods sold 240 000 320 000

The owner then discovers that at the end of year 1 the value of inventory was overstated by
$2000.

What are the correct profits for the year and cost of goods sold figures?

year 1 year 2
profit for cost of profit for cost of
the year goods sold the year goods sold
$ $ $ $

A 28 000 238 000 42 000 322 000

B 28 000 242 000 40 000 320 000
C 28 000 242 000 42 000 318 000
D 32 000 238 000 38 000 318 000

11 Sam was unable to conduct a physical count of inventory at 31 December 2016.

On 3 January 2017 inventory had been sold to Abdul for $11 950. The cost price of this inventory
had been $9560.

On 4 January 2017 inventory had been returned by Sita. It had been sold for $2390. The cost
price of this inventory was $1912.

Sam valued his inventory at 5 January 2017 at cost, $59 750.

What was the value of inventory at 31 December 2016?

A $50 190 B $52 012 C $67 398 D $69 310

12 Which item is not taken into account when a partner joins a partnership?

A balances on the partners’ current accounts

B capital introduced by the new partner
C changes in the profit sharing ratio
D goodwill

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13 Ali, Bharti and Chan were in partnership sharing profit and losses in the ratio 3 : 2 : 1. Bharti retired
from the partnership on 30 June 2016.

The following were the balances available at 30 June 2016.

Ali ($) Bharti ($) Chan ($)

capital accounts 60 000 Cr 40 000 Cr 20 000 Cr
current accounts 18 650 Cr 6 100 Dr 8 950 Cr

On her retirement, Bharti retained a partnership motor vehicle at an agreed valuation of $4000.

Goodwill was valued at $39 000.

How much was payable to Bharti on her retirement?

A $33 900 B $42 900 C $46 900 D $50 900

14 A partnership maintains both capital and current accounts for its partners.

What is the correct accounting entry for recording interest on capital for partner X?

account to account to
be debited be credited

A appropriation X’s capital

B appropriation X’s current
C X’s capital appropriation
D X’s current appropriation

15 Which statement describes the treatment of purchased goodwill for a limited company?

A a tangible non-current asset that can be amortised

B a tangible non-current asset that can be depreciated
C an intangible non-current asset that can be amortised
D an intangible non-current asset that can be depreciated

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16 A company’s equity is made up as shown.

100 000 ordinary shares of $0.25 each 25 000

share premium 3 000
retained earnings 8 000

The following took place.

1 A bonus issue of one ordinary share for every five held was made.
2 Six months later a rights issue of one ordinary share for every four held was made.
The shares were issued at $0.30 each.

By how much did the company’s equity increase as a result of these transactions?

A $5000 B $6000 C $7500 D $9000

17 Which statement about ordinary shares is correct?

A dividends on ordinary shares are an appropriation of profit

B dividends on ordinary shares are paid at the same rate each year
C ordinary shares are never issued at a premium
D the holders of ordinary shares are creditors of a company

18 Who are internal users of accounting information?

A customers
B directors
C lenders
D shareholders

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19 A company provides the following information.

profit from operations 16 000

finance costs 4 000
ordinary share capital ($1 shares) 50 000
non-current liabilities 4 000
retained earnings 20 000

What is the return on capital employed?

A 16.22% B 17.14% C 21.62% D 22.86%

20 The following financial information is available for a business. All purchases and sales are made
on credit.

purchases 121 980

revenue 209 980
trade payables 45 448
trade receivables 28 765

What is the average collection period?

A 50 days B 79 days C 86 days D 136 days

21 How are stepped costs best described?

A costs that are always variable

B costs that have both a fixed and variable element
C fixed costs that are always the same amount at any level of output
D fixed costs which increase in total once a certain level of output is reached

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22 Jamal uses the AVCO system to value his inventory. He provides the following information:

March 1 no opening inventory

6 60 units were purchased at $120 per unit
17 100 units were purchased at $116 per unit
23 110 units were sold for $150 per unit

What was the cost of sales for March?

A $5875 B $12 925 C $13 000 D $18 800

23 A business makes wedding dresses. Each machinist is paid $30 a day and each supervisor $40 a
day. Each supervisor can work with up to 10 machinists and each machinist can produce one
wedding dress a day.

If 95 wedding dresses a day are produced, what is the daily labour cost?

A $2850 B $3210 C $3230 D $3250

24 Which statement best describes variable costs?

A costs that are the same in total up to a certain level then increase with output
B costs that are the same in total over any output level
C costs that are constant per unit as output increases
D costs that increase per unit as output increases

25 A company manufactures and sells chairs. The following per unit information is available.

selling price 25
direct material and labour 12
other variable production costs 3
variable selling costs 2
fixed costs 4

The company has the option of buying in the chairs for resale instead of making them.

At which purchase price would the company’s profit be unchanged?

A $15 B $17 C $19 D $21

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26 The budgeted income statement of J Limited shows the following.

sales 400 000

variable costs 240 000
fixed costs 132 000
profit for the year 28 000

What is the margin of safety in dollars?

A $70 000 B $160 000 C $268 000 D $330 000

27 The following details are supplied by a company for the month of August.

budgeted machine hours 36 000

budgeted overheads $162 000
actual machine hours 36 500
actual overheads $155 000

What is the under or over absorption of the overheads?

A $2250 over absorbed

B $2250 under absorbed
C $9250 over absorbed
D $9250 under absorbed

28 A company has fixed costs of $40 000 per month. It provided the following information.

March units April units

production 30 000 15 000

Total production costs for March were $90 000.

What were the total production costs for April?

A $45 000 B $65 000 C $70 000 D $110 000

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29 A company’s profits using marginal costing and absorption costing principles were identical.

Which statement is true about the company’s production units?

A they were greater than break-even units

B they were greater than the sales units
C they were the same as the break-even units
D they were the same as the sales units

30 Which statement is not a reason why a business prepares budgets?

A to ensure coordination of the business activities

B to identify potential problems in the future
C to identify the responsibilities of managers
D to prepare the financial statements for the year

© UCLES 2017 9706/12/M/J/17

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 9706/12/M/J/17

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2018
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*4820752289*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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 11 printed pages and 1 blank page.

IB18 06_9706_12/2RP
© UCLES 2018 [Turn over
 2

1 The owner of a business has been told that work completed for a customer should be recorded in
the books of account although the invoice has not yet been sent to the customer.

Which accounting concepts are being applied?

1 matching
2 materiality
3 realisation

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

2 Adam’s financial year ends on 31 December 2017.

On 1 January 2017 the net book value of machinery was $20 000.

On 30 June 2017 he purchased a new machine for $6000. He paid 50% of the cost in cash and
the balance by part exchange of an old machine, which had a net book value of $2500 on that
date.

He depreciates his machinery by 20% per annum on the net book value calculated on a time
basis.

What is the net book value of the machinery shown in the statement of financial position on
31 December 2017?

A $18 400 B $18 800 C $19 150 D $20 800

3 A business has an accounting year-end of 31 March. It purchased a car on 1 April 2014 for
$15 000. The car was sold on 30 September 2017 for $5000.

Depreciation is charged at 20% per annum. A full year’s depreciation is charged in the year of
purchase. No depreciation is charged in the year of sale.

What was the profit or loss on disposal?

A loss of $500
B loss of $1000
C profit of $500
D profit of $1000

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 3

4 The accounting year-end for a company is 31 October.

The table shows the company’s telephone invoice received on 2 December for the three months
ended 30 November.

telephone calls to 30 November 1041

rental of equipment for the period from 1 September to 30 November 156

Which accrual should the company make in the financial statements for the year ended
31 October?

A $399 B $798 C $1093 D $1197

5 A business created a provision for doubtful debts at 31 December 2016. The provision was
calculated as a percentage of the trade receivables at each year end as follows.

trade provision for

year ended receivables doubtful debts
$ %

31 December 2016 32 500 10

31 December 2017 34 300 5

Which entry in the provision for doubtful debts account for the year ended 31 December 2017
was required?

A $1535 credit
B $1535 debit
C $1715 credit
D $1715 debit

6 Errors can exist in the preparation of both the sales ledger and the sales ledger control account.

Which error would require an adjustment in the sales ledger control account only to correct it?

A sales journal being overcast

B sales transaction amount originally entered incorrectly
C sales transaction omitted completely
D sales transaction recorded in wrong customer account

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7 The trial balance of a business did not balance. The following errors were found.

1 The total of the purchases journal of $33 030 had been posted to the purchases
account in the general ledger as $33 000.
2 Discount received of $50 had been entered on the debit side of the discount
received account.

What was the original balance on the suspense account?

A $20 credit
B $20 debit
C $70 credit
D $70 debit

8 The bank column of a cash book showed a credit balance of $5000. There were unpresented
cheques amounting to $1500. The bank statement showed bank charges, $700, which were not
recorded in the cash book.

What is the balance on the bank statement?

A $4200 credit
B $4200 debit
C $5800 credit
D $5800 debit

9 During the financial year a business paid $295 000 to its trade payables, after taking a cash
discount of $15 000.

At the start of the year the trade payables balance was $25 000. At the end of the year $32 000
was owed to trade payables.

What was the amount of credit purchases made during the year?

A $288 000 B $302 000 C $303 000 D $317 000

10 What would not result in goodwill?

A good reputation of a business

B selling high quality products
C selling products above market value
D skill of the workforce

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11 At the beginning of the financial year inventory was valued at $15 000. During the year, sales of
$21 000 and purchases of $18 000 were made. Unfortunately, all inventory was stolen on the last
day of the financial year.

Goods are marked up by 50% to calculate selling price.

What is the cost of the stolen inventory?

A $7500 B $11 000 C $19 000 D $22 500

12 A business does not keep complete accounting records. All transactions are in cash.

Which item will not be required in order to calculate the owner’s cash drawings?

A non-current assets purchased

B opening capital account
C purchases
D sales

13 The following summarised information has been taken from the statement of financial position of
a partnership.

non-current assets 42 000

capital accounts 36 000
current accounts (debit) 6 000
current liabilities 8 000
non-current liabilities 15 000

What is the value of current assets?

A $5000 B $6000 C $11 000 D $23 000

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14 X and Y had been in partnership for some years when Z was admitted as a partner.

On that date the premises account was debited with $120 000 following a revaluation.

Profits were shared equally both before and after Z’s admission.

What were the credit entries recording the revaluation?

A capital accounts X $40 000, Y $40 000, Z $40 000

B capital accounts X $60 000, Y $60 000
C current accounts X $40 000, Y $40 000, Z $40 000
D current accounts X $60 000, Y $60 000

15 Which company reserves may not be used to pay dividends?

1 general reserve
2 retained earnings
3 revaluation reserves
4 share premium

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

16 A company issued 50 000 ordinary shares of $0.50 each at a price of $0.60 each.

What were the accounting entries for the issue?

debit $ credit $

A bank 30 000 share capital 25 000

share premium 5 000
B bank 25 000 share capital 30 000
share premium 5 000
C share capital 30 000 bank 30 000
D share capital 25 000 bank 30 000
share premium 5 000

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 7

17 What could be used to fund a bonus issue of shares?

1 general reserve
2 retained earnings
3 share premium

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

18 The following is an extract from an income statement.

revenue 180 000

costs of goods sold (75 000)
distribution costs (8 000)
administrative expenses (22 000)
profit from operations 75 000
debenture interest (2 500)
profit for the year 72 500

What was the operating expenses to revenue ratio?

A 16.7% B 18.1% C 58.3% D 59.7%

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19 The following information is available for the year ended 31 December 2017.

$000

revenue 640
cost of sales 350
machinery at net book value 120
land and buildings at net book value 90
motor vehicles at net book value 20
current assets 50
equity 210

What was the non-current assets turnover?

A 1.26 times
B 2.29 times
C 2.78 times
D 3.05 times

20 A baker receives one order for 350 loaves of bread.

Which costing method will the baker use?

A absorption costing
B batch costing
C job costing
D unit costing

21 A business pays a salesman a basic salary, plus commission based on how much he sells.

Which type of cost is the salesman’s total earnings?

A fixed
B semi-variable
C stepped
D variable

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22 Which cost is treated as variable cost of a motor transport company?

A advertising
B driver insurance
C fuel
D vehicle licence

23 Adam is paid $4 per hour and his expected output is 500 units per week. He is also paid a bonus
$1 for every 20 perfect units made above the total of 500.

In one week he worked for 40 hours and made 880 units, but 40 were faulty and were scrapped.

How much was Adam paid for the week?

A $177 B $179 C $202 D $204

24 A business values their inventory using the AVCO method. The inventory on 1 June 2017 was
100 units valued at $2.40 each.

The following took place.

June 5 purchased 40 units at $2.50 per unit

7 sold 60 units at $3.50 per unit

What was the value of the inventory on 8 June 2017 to the nearest dollar?

A $194 B $196 C $200 D $224

25 The following budgeted information is available for a hotel for the next financial year.

fixed overheads $192 000

direct costs $240 000
number of guests 2400
average guest stay 4 nights

What is the overhead absorption rate per guest night?

A $20 B $45 C $80 D $180

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26 The costs of producing 1000 units of a product are as follows.

direct materials 20 000

direct labour 10 500
direct expenses 1 600
variable overheads 11 300
fixed overheads 7 500

The selling price is $60 per unit and 1000 units are sold.

What is the contribution to sales ratio?

A 15.17% B 27.67% C 30.33% D 46.50%

27 A business produces a single product. The following information is available for a month.

budgeted sales quantity 200 units

selling price per unit $40
variable cost per unit $24
budgeted monthly fixed costs $800

The business plans to rent a machine which will increase monthly fixed costs by $1200 to $2000
and reduce variable costs to $20 per unit.

What would be the effect of this on the margin of safety?

A decrease by 50 units
B decrease by 90 units
C increase by 50 units
D increase by 90 units

28 A business hires machinery at a cost of $700 per machine per month. Each machine can produce
1000 units a month. A maximum of 10 machines can fit into the factory. The factory rent is $4900
per month. Other costs amount to $2 per unit.

What is the unit cost if 8500 units are produced in a month?

A $3.19 B $3.23 C $3.28 D $3.32

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29 The direct material cost of 20 000 units is $8000. 400 direct labour hours are required at a cost of
$6000. Overheads are absorbed at 150% of the cost of direct labour.

What is the cost per unit?

A $0.40 B $0.70 C $0.85 D $1.15

30 Why might a business prepare a budget?

A to determine the amount of bank loan it needs

B to determine the skills of labour force
C to identify its market share
D to identify the quality of its products

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 9706/12/M/J/18

 Cambridge Assessment International Education
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2019
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*3024079424*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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.

IB19 06_9706_12/5RP
© UCLES 2019 [Turn over
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1 Which concept is identified by the accounting equation assets = capital + liabilities?

A business entity
B duality
C going concern
D realisation

2 What are causes of depreciation on non-current assets?

1 change in its cost of repair

2 change in its market value
3 changes in technology

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

3 June purchased a new machine. She depreciated it at a rate of 40% per annum using the
reducing balance method. After two years its net book value was $3600.

What was the purchase price of the machine?

A $7056 B $9216 C $10 000 D $22 500

4 The following information relates to the motor vehicles of a business.

1 January 2018 31 December 2018

$ $

net book value 398 000 480 000

During 2018 the following occurred.

1 Additional motor vehicles costing $195 000 were purchased.

2 A motor vehicle (original cost $80 000) was sold for $24 000 at a profit of $2000.

What was the depreciation charge for 2018?

A $87 000 B $89 000 C $91 000 D $113 000

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5 A book-keeper compared the business bank statement with the cash book. He then updated the
cash book and finally prepared a bank reconciliation statement.

Why was the bank reconciliation statement prepared?

A to ensure no transactions had been omitted from the cash book

B to establish the value of unpresented cheques
C to explain the difference between the cash book balance and the bank statement balance
D to find out if any cheques had been dishonoured

6 On 31 December 2018, a business had the following balances.

sales ledger 12 800

sales ledger control account 15 200

Which error explains the difference between the two figures?

A A credit balance of $1200 was brought forward as a debit balance in the sales ledger control
account.
B An irrecoverable debt of $2400 was omitted in a customer’s personal account in the sales
ledger.
C Purchases returns, $1200, were wrongly entered on the debit side of the sales ledger control
account.
D Sales returns, $1200, were entered twice in a customer’s personal account in the sales
ledger.

7 The provision for doubtful debts at 1 January 2018 was $1580.

Trade receivables at 31 December 2018 were $44 750. This included a debt of $12 500,
considered irrecoverable.

The provision for doubtful debts was to be maintained at a rate of 5%.

Which entry for doubtful debts was included in the income statement for the year ended
31 December 2018?

A $32.50 expense
B $32.50 income
C $657.50 expense
D $657.50 income

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8 Which statements about valuing inventory are correct?

1 Any charges for carriage inwards should be included in its cost.

2 Cost should always be compared with the net realisable value.
3 Cost should always be compared with replacement price.

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

9 A sole trader calculated a draft profit for the year of $56 750.

He then discovered that discounts received of $580 and discounts allowed of $665 had been
recorded on the wrong sides of their respective accounts.

What is the correct profit for the year?

A $56 580 B $56 665 C $56 835 D $56 920

10 Which item will not appear in the income statement of a sole trader?

A accounting charges
B bank loan interest
C director’s fee
D rental charge for machinery

11 X and Y are in partnership sharing profits and losses in the ratio 2 : 1.

Z will be admitted with the following new arrangements.

Profit and loss sharing ratio will be 2 : 1 : 2 respectively.

Goodwill is valued at $90 000. Z will pay the partners for his share of the goodwill.

How much will Z pay X?

A $18 000 B $24 000 C $45 000 D $60 000

12 D, E and F are in partnership, sharing profits in the ratio 2 : 2 : 1.

D is allowed an annual salary of $10 000.

E has made a loan to the partnership on which the partnership pays interest of $5000 each year.

Profit for the year before appropriation was $150 000.

What was F’s total share of profit for the year?

A $27 000 B $28 000 C $29 000 D $30 000

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13 L and M had been in partnership sharing profits and losses equally. P was admitted to the
partnership and the partners continued to share profits and losses equally. Goodwill was valued
at $48 000 but the partners agreed that no goodwill account would be retained in the books of
account.

What were the accounting entries to record the goodwill?

A debit L capital account $16 000, debit M capital account $16 000, credit P capital account
$32 000
B debit P capital account $32 000, credit L capital account $16 000, credit M capital account
$16 000
C debit L capital account $8000, debit M capital account $8000, credit P capital account
$16 000
D debit P capital account $16 000, credit L capital account $8000, credit M capital account
$8000

14 Which items do not appear in a statement of changes in equity?

1 dividend paid
2 dividend proposed
3 loan interest

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

15 On 1 January a company’s equity included 100 000 $1 ordinary shares.

The directors of the company then did the following:

1 March Made a rights issue of 20 000 ordinary shares at $1.25 each. The rights
issue was fully subscribed.
1 June Made a bonus issue of 5000 ordinary shares.
1 July Paid an interim dividend of $0.10 on all of the shares in issue at that
date.

By how much did the bank account increase as a result of these transactions?

A $12 500 B $17 500 C $30 000 D $37 000

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16 The following balances are extracted from the books of J Limited.

30 April 2019 30 April 2018

$ $

ordinary shares of $0.50 each 700 000 500 000

share premium 90 000 50 000

How many ordinary shares have been issued during the year ended 30 April 2019?

A 200 000 B 240 000 C 400 000 D 480 000

17 Which action will increase a company’s current ratio?

A making an issue of bonus shares

B making a rights issue of shares
C increasing the provision for doubtful debts
D reducing the rate of depreciation on non-current assets

18 A trader wishes to set a selling price.

How does he use a mark-up?

A by adding a percentage to the cost

B by adding a percentage to the selling price
C by deducting a percentage from the cost
D by deducting a percentage from the selling price

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19 The following information is available for the year ended 31 December 2018.

revenue 800 000

cost of sales (175 000)
gross profit 625 000
distribution costs (95 000)
administrative expenses (35 000)
profit from operations 495 000
finance costs (5 000)
profit for the year 490 000

What was the operating expenses to revenue ratio?

A 16.25% B 16.88% C 21.88% D 38.13%

20 On 1 January 2018 a business expected to have sales for the year ended 31 December 2018 of
$450 000.

Its non-current assets at that date were $306 000.

On 1 July 2018 it purchased new machinery at a cost of $180 000, in order to increase its sales
by an extra $20 000 each month.

What was the rate of non-current asset turnover in 2018? (Ignore depreciation.)

A 1.17 times
B 1.42 times
C 1.44 times
D 1.74 times

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21 A business uses the First In First Out (FIFO) method to value its inventory.

The following inventory transactions took place during a month. There was no opening balance.

receipts issues
date
units $ per unit units

1 July 100 15.50

6 July 100 15.60
10 July 80
20 July 50 15.80
25 July 100

What was the value of inventory at the end of the month?

A $1085 B $1092 C $1102 D $1106

22 A business has two production departments: assembly and machinery. The following budgeted
information is available.

assembly machinery

labour hours 5600 1350

machine hours 1200 6900
overheads $75 000 $80 000

What is the overhead absorption rate for the assembly department?

A $13.39 per labour hour

B $19.14 per machine hour
C $22.30 per labour hour
D $62.50 per machine hour

23 A shortage caused a business to pay more for its purchases of raw materials.

What is the effect of this?

break-even point marginal cost contribution

A decrease decrease increase

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

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24 Which statement best describes a stepped fixed cost?

A It changes in direct proportion to changes in output.

B It changes in proportion to changes in prime cost.
C It remains at a constant amount until output changes significantly.
D It represents a constant amount of total cost.

25 A company produces less than it sells in a particular period.

Which statement is correct?

A Reported profit is the same whether absorption or marginal costing is used.

B Reported profit is the difference between absorption and marginal costing closing
inventories.
C Reported profit is lower using absorption costing.
D Reported profit is lower using marginal costing.

26 Which statements are true about the preparation of a break-even chart?

1 Costs are easily classified into fixed and variable.

2 Fixed costs always change as output changes.
3 The break-even point is clearly seen.

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

27 When a company had sales revenue of $600 000, its variable costs were $300 000.

At the break-even point, its sales were $400 000.

How much profit did it make when sales were $600 000?

A $100 000 B $200 000 C $300 000 D $400 000

28 A company provided the following information.

total sales $400 000

production and sales (units) 10 000
total costs $250 000
total fixed costs $60 000

What was the contribution to sales ratio?

A 37.5% B 47.5% C 52.5% D 62.5%

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29 Last year a company sold 2000 units and made a contribution of $50 per unit. Profit, after
deducting total fixed costs, was $60 000.

This year:

sales volume increased by 10%

contribution per unit decreased by 5%
total fixed costs increased by 25%.

What was the company’s profit this year?

A $45 000 B $54 500 C $60 000 D $64 500

30 Why do businesses prepare budgets?

1 to communicate plans
2 to control activities
3 to improve co-ordination
4 to prepare their annual financial statements

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

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 9706/12/M/J/19

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2020
1 hour

You must answer on the multiple choice answer sheet.

*1530464057*

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. A mark will not be deducted for a wrong answer.
• Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 06_9706_12/4RP
© UCLES 2020 [Turn over
 2

1 A business depreciates its non-current assets. It then includes them in the statement of financial
position at the net book value.

Which concept is the business following?

A duality
B prudence
C realisation
D substance over form

2 Which item is capital income?

A bank interest received

B proceeds from sale of business premises
C rental income from property
D sale of inventory to a customer

3 A company purchased a machine on 1 April 2017 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 2019 the machine was sold for $12 500. The
company 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

4 Why do businesses charge depreciation on their non-current assets?

A to ensure that sufficient cash is available to replace the assets

B to show the realisable value of the assets in the statement of financial position
C to spread the cost of the assets over their estimated useful life
D to show when the assets must be replaced

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5 A trader’s trial balance did not agree at the end of the financial period and a suspense account
was opened.

The following errors were discovered.

1 No entry had been made in the books of account for a purchase of inventory, $650.
2 Purchase of a vehicle by cheque had been credited to bank but debited to motor
expenses.
3 The discount received of $300 had been correctly recorded in the purchases ledger
control account and was debited to discount allowed account.
4 The purchases account for the year had been incorrectly totalled.

Which errors would affect the suspense account?

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

6 The following financial information is available for a business.

draft profit for the year 12 650

closing capital 52 780

The following error has been discovered.

Private fuel costs, $1930, had been charged in the business motor expenses account.

What are the correct figures for the year?

profit for the year closing capital

$ $

A 10 720 50 850
B 10 720 54 710
C 14 580 52 780
D 14 580 54 710

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7 A sales ledger control account has a closing balance of $21 000.

It was discovered that a contra entry with the purchases ledger control account for $700 had
been incorrectly entered on the wrong side of the sales ledger control account.

What was the correct sales ledger control account balance?

A $19 600 B $20 300 C $21 700 D $22 400

8 A sole trader does not keep a complete set of books of account. He believes a staff member has
stolen some cash.

Which items will not be needed to calculate the amount missing?

1 cash in hand at the beginning and end of the year

2 owner’s drawings taken from the bank
3 cheques received from customers
4 totals of cash sales and cash purchases

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

9 A business provides the following information.

trade provision for

receivables doubtful debts
$ $

31 December 2018 46 200 1386

31 December 2019 48 100 1924

Which statement must be correct?

A The rate of provision for doubtful debts has decreased.

B The rate of provision for doubtful debts has increased.
C The value of irrecoverable debts incurred has decreased.
D The value of irrecoverable debts incurred has increased.

10 On 1 March a company has prepaid $3600 for 12 months’ travel costs. It also has an outstanding
hotel bill of $180.

During March it pays the outstanding hotel bill and a further $700 for airline tickets for the month.

At 31 March it has an outstanding hotel bill of $220.

What is the correct cost of travel in the income statement for March?

A $920 B $1220 C $1400 D $4520

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11 A business owner provided the following information at the end of his first year of trading.

closing inventory 15 000

total payments to suppliers 60 000
amount owing to suppliers 5 000
total receipts from customers 85 000
amount owed by customers 10 000

What was the gross profit for the year?

A $10 000 B $15 000 C $25 000 D $45 000

12 How should interest charged on a partner’s drawings account be treated?

A credited to the appropriation account

B credited to the income statement
C debited to the appropriation account
D debited to the income statement

13 X, Y and Z were in partnership, sharing profits equally. When Z retired from the business the
assets were revalued. Goodwill was also valued but was not retained in the books of accounts.

Which statement about Z’s retirement is correct?

A Only X and Y’s capital accounts will be adjusted for the revaluation.
B Only X and Y’s capital accounts will be adjusted for goodwill.
C The balance on Z’s current account will form part of her retirement settlement.
D Z may only be paid in cash for her share on retirement.

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14 L and M are in partnership, sharing profits and losses in the ratio of 3 : 2. They have the following
current account balances.

L M
$ $

31 March 2019 3 000 credit 4500 debit

31 March 2020 14 200 credit 6200 debit

The balances at 31 March 2020 are after taking into account the following.

L M
$ $

interest on drawings 1 000 1 500

interest on capital 3 000 2 000
drawings 10 000 15 000

What was the residual profit to be shared between L and M for the year ended 31 March 2020?

A $24 000 B $27 000 C $29 000 D $32 000

15 How is unpaid debenture interest recorded in the financial statements of a company at the year
end?

1 a current liability in the statement of financial position

2 a non-current liability in the statement of financial position
3 an expense in the income statement
4 an item in the statement of changes in equity

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

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16 On 1 December 2019 a company’s statement of financial position included the following.

ordinary shares of $5 each 2 500 000

share premium 850 000
retained earnings 710 000

2019

15 December paid an ordinary share interim dividend of $0.15 per share

23 December made a bonus issue of 25 000 ordinary shares

Reserves were kept in their most flexible form.

What were the balances on the revenue reserves and capital reserves accounts after these
transactions?

revenue reserves capital reserves

$ $

A 335 000 725 000

B 335 000 825 000
C 635 000 725 000
D 635 000 825 000

17 A business sells goods at a uniform mark-up of 25%.

The following information is available.

sales revenue 120 000

opening inventory 18 000
purchases 95 000
returns outwards 2 000

What is the value of closing inventory?

A $15 000 B $19 000 C $21 000 D $25 000

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18 The rate of inventory turnover of a company has been calculated for two successive periods.

current period 5.6 times

previous period 4.8 times

The following statements have been made about the change.

1 Inventory is moving more slowly in the current period.

2 Inventory is moving more quickly in the current period.
3 Management of inventory has been more efficient in the current period.

Which statements may explain the change?

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

19 The following items appear on a statement of financial position.

inventory 20 000
cash and cash equivalents 3 500
trade payables 11 000
provision for doubtful debts 500

The current ratio is 3 : 1.

How much do the trade receivables owe?

A $9500 B $10 000 C $12 000 D $12 500

20 Which costs are indirect?

1 bought-in components used in a finished product

2 materials used for factory maintenance
3 raw materials used in a finished product
4 spare parts bought for factory machinery

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

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21 A business provided the following information.

budgeted overheads $20 000

budgeted direct labour hours 2000
direct labour rate $20 per hour

A job used materials costing $45 and 6 hours of direct labour.

Overheads are charged on the basis of direct labour hours used.

What was the cost of the job before adding any profit?

A $105 B $165 C $180 D $225

22 A business has produced the following estimates of labour costs for next month.

units produced 600 800 1100

total labour cost $5690 $6170 $6890

What was the monthly fixed labour cost?

A $480 B $1200 C $2640 D $4250

23 Why are service centre costs apportioned to production departments?

A to act as a check on service centre managers

B to ascertain whether service centres are cost effective
C to ensure the service centre costs are included in selling prices
D to minimise the total costs of service centres

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24 The following data were available for a department for July.

budget actual

direct labour hours 40 000 41 950

machine hours 60 000 60 900
overheads $480 000 $499 200

What was the over or under absorption of overheads for July?

A $4200 over absorbed

B $4200 under absorbed
C $12 000 over absorbed
D $12 000 under absorbed

25 Which statements about marginal costing are correct?

1 It cannot be used as a basis to calculate contribution.

2 It is useful for decision-making.
3 It recognises the importance of fixed costs.

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

26 A company with fixed costs of $50 000 and a contribution to sales ratio of 40% makes a profit of
$30 000.

What are the total costs?

A $130 000 B $170 000 C $175 000 D $200 000

27 What is not an assumption made in cost–volume–profit analysis?

A Unit fixed cost is constant.

B Unit selling price is constant.
C Unit variable cost is constant.
D Units produced are all sold.

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28 The actual output for a business is lower than that forecast.

Which costs would normally still be the same as forecast?

1 fixed cost per unit

2 total fixed cost
3 total variable cost
4 variable cost per unit

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

29 A manufacturer produces a single product. The following information is available.

selling price per unit 14

variable costs per unit 8
fixed costs per annum 96 000

There are plans to reduce the selling price by $3 per unit and to reduce variable costs by $1 per
unit. Fixed costs will remain unchanged.

What will be the new break-even point?

A 9600 units
B 12 000 units
C 24 000 units
D 48 000 units

30 A company has recently introduced a system of budgetary control.

Workers have given the following reasons for failing to achieve the budget targets.

1 ‘We need more training.’

2 ‘The budget is unrealistic.’
3 ‘The budget needs to be changed to reflect actual conditions.

Which reasons should be considered when evaluating a worker’s performance?

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

© UCLES 2020 9706/12/M/J/20

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9706/12/M/J/20

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2021
1 hour

You must answer on the multiple choice answer sheet.

*3094855142*

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.

IB21 06_9706_12/3RP
© UCLES 2021 [Turn over
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1 Which of these items require entries to be made in the general journal?

1 purchase of a non-current asset on credit

2 sale of inventory to a customer on credit
3 the owner taking drawings from their business in cash
4 writing off an irrecoverable debt

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

2 Which statement relating to depreciation is not correct?

A A business can never change its accounting policy on depreciation.

B Depreciation is the allocation of the cost of a non-current asset over its useful life.
C Freehold land is usually not depreciated.
D Non-current assets of similar class are depreciated using the same method of depreciation.

3 Arnaud owned a vehicle which originally cost $20 000. During the year ended 31 May 2021, he
paid for repairs of $3700 and provided depreciation of $4000.

On 31 May 2021, the vehicle had a net book value of $12 000. Arnaud sold the vehicle on that
date and the loss on disposal amounted to $2500.

What were the cash inflows and outflows relating to the vehicle during the year?

cash inflows cash outflows

$ $

A 9 500 3 700
B 9 500 7 700
C 13 500 6 200
D 13 500 8 000

4 Two years ago a business purchased two machines costing $25 000 each.

During the third year one of them with a net book value of $16 000 was sold. A new machine
costing $30 000 was purchased.

Depreciation is charged at 20% per annum using the reducing balance method on all the assets
owned at the end of the accounting period.

What was the depreciation charge for the third year?

A $6000 B $9200 C $11 000 D $12 800

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5 Which statements about an unpresented cheque are correct?

1 It arises as the result of an error of omission.

2 It arises from a timing difference.
3 It is used when preparing a bank reconciliation statement.

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

6 The balance on the purchases ledger control account did not agree with the total of balances
from the purchases ledger accounts. The following errors were then discovered.

1 Contra entries had not been entered in the general journal.

2 Debit balances on the purchases ledger had not been included in the control
account.
3 Discount allowed total had been included in the control account.
4 Goods returned to a supplier had not been recorded in the purchases returns
journal.

Which errors will require entries being made in the purchases ledger?

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

7 The correction of which error requires an entry in the suspense account?

A A cheque, $1000, paid to Kong had been debited to Kang’s account.

B A purchase of stamps, $50, had been debited to the purchases account.
C Commission income, $170, had been debited to the loan interest account.
D The insurance account had been undercast by $200 and the wages account overcast
by $200.

8 A business had a draft profit for the year of $200 000.

The following items were then discovered.

1 Depreciation charges had been overstated by $20 000.

2 The value of closing inventory was overstated by $15 000.
3 A year-end accrual for wages was needed, $8000.
4 A year-end adjustment for prepaid insurance, $2500, was required.

What was the corrected profit for the year?

A $159 500 B $199 500 C $240 500 D $245 500

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9 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 purchases returns

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

10 A sole trader provided the following information.

sales 200 000

opening inventory 50 000
closing inventory 75 000
gross margin 25%

What were the purchases for the year?

A $125 000 B $150 000 C $175 000 D $185 000

11 Which item would not appear in the financial statements of a sole trader?

A bank overdraft
B dividends paid
C interest received
D loss on disposal of machinery

12 L and M are partners sharing profits and losses equally. This year M’s share of the profit is
$18 000.

Next year they plan to change the partnership agreement so that L has an annual salary of
$10 000 and a one-third share of any profits or losses.

What does the total partnership profit for next year need to be for M to receive the same amount
of profit as this year?

A $22 000 B $34 000 C $37 000 D $42 000

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13 V and E are in partnership, sharing profits and losses equally.

Their capital accounts showed the following credit balances at 31 March 2021.

V 80 000
E 40 000

Z was admitted as a partner on 1 April 2021. At that date the following items were taken into
account.

1 Non-current assets were revalued downwards by $20 000.

2 Goodwill was valued at $80 000, but will not remain in the books of account after Z is
admitted.

The new profit-sharing ratio will be V 40%, E 30% and Z 30%.

What was the balance on E’s capital account after the admission of Z?

A $30 000 B $46 000 C $56 000 D $70 000

14 Which account is used to calculate the profit or loss on the dissolution of a partnership?

A appropriation account
B capital account
C realisation account
D revaluation account

15 Which statements apply when a bonus issue of ordinary shares is made by a company?

1 It will be made to existing shareholders.

2 The issue can be at a premium.
3 They can be issued at lower than market price.

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

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16 At the start of the year a limited company’s equity was as follows.

ordinary shares of $1 each 200 000

retained earnings 120 000

During the year the following took place.

1 Non-current assets were revalued upwards by $70 000.

2 An interim dividend of $30 000 was paid.
3 A 10% debenture (2030) of $10 000 was issued.

The profit for the year was $80 000.

What was the total equity at the end of the year?

A $380 000 B $390 000 C $440 000 D $480 000

17 The financial year of a limited company ends on 30 June. The following information is available
regarding ordinary dividends.

for the year dividend proposed

ended $

30 June 2019 12 000

30 June 2020 19 000

During the year ended 30 June 2020, the company paid last year’s proposed dividend in full
together with an interim dividend of $4300.

What is the amount of dividends shown in the financial statements for the year ended
30 June 2020?

statement of statement of
income statement
changes in equity financial position
$
$ $

A nil 16 300 nil

B nil 23 300 23 300
C 19 000 16 300 nil
D 23 300 19 000 19 000

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18 The trade receivables turnover ratio figures for two companies are shown.

company turnover in days

X 45
Y 55

What does this indicate about company Y?

A It has higher levels of trade receivables than X.

B It has higher liquidity than X.
C It is less efficient in managing its receivables than X.
D It offers less credit to its customers than X.

$20 200
19 In 2019 a company’s non-current asset turnover ratio was = 3.96 times.
$5100

During 2020 the following took place.

1 Net revenue was unchanged.

2 Discount allowed increased by $400.
3 Depreciation was $1000.
4 Purchases of non-current assets amounted to $1300.

What was the non-current asset turnover ratio in 2020?

A 3.09 times
B 3.16 times
C 3.67 times
D 3.74 times

20 Which statements are correct?

1 Fixed cost per unit changes with a change in the level of production.
2 Variable cost per unit changes with a change in the level of production.
3 Total fixed costs are unchanged within a given range of production.
4 Total variable costs are unchanged within a given range of production.

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

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21 An employee is paid $20 an hour basic pay for working seven hours a day. Overtime is paid at
the rate of time and a quarter (basic pay plus 25%). A bonus is also paid at the rate of time and a
half (basic pay plus 50%) for each unit produced in excess of eight units per day.

On Monday the employee worked 10 hours and produced 10 units.

How much did the employee earn on Monday?

A $175 B $200 C $215 D $275

22 A business uses absorption costing.

What will be included in cost of sales?

A variable manufacturing costs, variable selling costs and fixed manufacturing costs
B variable manufacturing costs and fixed manufacturing costs only
C variable manufacturing costs and variable selling costs only
D variable manufacturing costs only

23 A business absorbs its overheads on the basis of machine hours.

The following information is provided.

actual budgeted

overheads $960 000 $900 000

machine hours 6200 6000

By how much were overheads under-absorbed or over-absorbed?

A over-absorbed by $30 000

B under-absorbed by $30 000
C over-absorbed by $60 000
D under-absorbed by $60 000

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24 The following information is provided about one unit of a product.

selling price 100

contribution 40
profit 10

The selling price is expected to increase by $10. Costs are expected to remain unchanged.

What will be the change in the contribution to sales ratio?

A 3.64% decrease
B 3.64% increase
C 5.45% decrease
D 5.45% increase

25 The following information is available.

unit selling price 36

direct cost per unit 18
selling commission per unit 2
total fixed costs 180 000
total units manufactured and sold 18 000

What was the margin of safety?

A 37.50% B 44.44% C 55.56% D 62.50%

26 How is break-even revenue calculated?

A (total fixed costs + total variable costs) divided by contribution per unit
B (total fixed costs + total variable costs) divided by contribution to sales ratio
C total fixed costs divided by contribution per unit
D total fixed costs divided by contribution to sales ratio

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27 A business manufactures three products.

The following information was provided.

X Y Z
per unit
$ $ $

selling price 450 350 400

direct material 160 100 150
direct labour 115 95 190
contribution 175 155 60
fixed overheads 135 110 10
profit 40 45 50

Direct labour is in short supply. All direct labour is paid at the same hourly rate.

Which order of production should be used to maximise the profit?

A X  Z  Y

B X  Y  Z

C Y  X  Z

D Z  Y  X

28 The following information is available for a month.

per unit $

selling price 100

contribution 30

Total fixed costs were $100 000 and budgeted sales were 5000 units.

The directors think that if they reduce the unit selling price to $95, sales will increase to 6500
units a month.

What would be the increase in profit as a result of this?

A $12 500 B $32 500 C $45 000 D $77 500

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29 A business makes and sells a single product.

It has a selling price of $100 and a contribution per unit of $40.

When output is 500 units, the business makes a profit of $2000.

The direct material price is expected to rise by $4 per unit.

How many units will need to be made and sold for the profit to be unchanged?

A 450 B 455 C 550 D 556

30 What is not an advantage to a business of preparing budgets?

A They can motivate managers and employees.

B They ensure that the business will not make loss.
C They facilitate coordination and communication.
D They provide a measure for evaluating performance.

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/12/M/J/21

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice May/June 2022
1 hour

You must answer on the multiple choice answer sheet.

*8276462329*

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 06_9706_12/4RP
© UCLES 2022 [Turn over
 2

1 Which accounting concept states that revenue can only be recognised after it has been earned?

A consistency
B going concern
C money measurement
D realisation

2 A sole trader has changed the method of depreciating his machinery from the reducing balance
method in the year 1 to the straight-line method in the year 2 of trading. The same percentage
rate of depreciation is used in both cases.

What is the effect on the net book value of machinery and profit for the year 2?

net book value profit for the year 2

A higher higher
B higher lower
C lower higher
D lower lower

3 Paul has a year end of 31 December.

On 1 January 2020, he bought a non-current asset for $10 000. He sold it on 1 January 2021 for
$8500.

Paul usually provides depreciation at the rate of 10% per annum. A full year’s depreciation is
charged in the year of acquisition and none in the year of disposal. He forgot to provide for any
depreciation on this non-current asset.

What was the effect of this error on Paul’s profit for the year ended 31 December 2021?

A $1000 higher
B $1000 lower
C $1500 higher
D $1500 lower

4 A business depreciates its machinery at 10% per annum using the straight-line method on a
month-by-month basis. The business’s financial year end is 30 June.

Machinery which had cost $6600 on 1 April 2020 was sold on 30 November 2021. The profit on
sale was $350.

What were the sale proceeds?

A $5150 B $5425 C $5850 D $6125

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5 Why does a business maintain sales and purchases ledger control accounts as part of the double
entry accounting system?

1 It allows a trial balance to be prepared easily from the nominal ledger.

2 It can involve separate employees which makes fraud more difficult.
3 There is no need to keep sales and purchases journals.
4 There is no need to reconcile with personal accounts for customers and suppliers.

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

6 Doug received his business bank statement. He updated the cash book and prepared the bank
reconciliation statement.

Which items appeared on the bank reconciliation statement?

customer
bank uncredited
payments by
charges deposits
direct debit

A no no yes
B no yes yes
C yes no no
D yes yes no

7 At 31 December 2021, the sales ledger control account had a balance of $19 100 while the total
balances in the sales ledger were $20 900.

The following reconciliation statement had been prepared after the errors were located.

balance of sales ledger control account 19 100

credit sales omitted from the sales journal 1 600
discount allowed understated in sales ledger 200
total of balances in the sales ledger 20 900

What is the correct amount of total trade receivables as shown in the statement of financial
position?

A $17 500 B $18 900 C $19 300 D $20 700

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8 At the year-end, Victor had 100 units of inventory which had cost $12 per unit.

Of these, eight units had been received on the last day of the year and had not yet been paid for.

An additional six units were damaged and would be sold for $10 each once repairs to them
totalling $20 were made.

What was the value of inventory in Victor’s financial statements at the year-end?

A $1072 B $1092 C $1168 D $1188

9 Which items are treated as expenses in the income statement?

accrued wages prepaid telephone increase in

at the end of charges at the provision for
the year end of the year doubtful debts

A   
B   
C   
D   

10 At 31 December 2021, the draft statement of financial position for a business showed total assets
of $1 000 000.

The following was then discovered.

1 An increase in the provision for doubtful debts, $5000, had not been recorded.
2 Closing inventory had been overvalued by $20 000.
3 Depreciation, $10 000, had not been recorded.

What was the corrected total assets value?

A $965 000 B $985 000 C $1 005 000 D $1 015 000

11 On what basis does a trading business produce an income statement?

1 cash received and paid out by the business in the year

2 income earned less costs incurred by the business during the year
3 revenue received less any cash paid out by the business during the year

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

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12 A business provides the following information.

revenue 140 000

opening inventory 22 000
closing inventory 24 500
purchases 120 000

Goods are sold at cost plus 25%.

The owner has taken goods for own use but has not recorded these as drawings.

What is the value of the goods taken for own use?

A $5500 B $10 500 C $12 500 D $17 500

13 A business owner does not maintain a full set of accounting records. At the end of the financial
year the following information is available.

trade payables
opening balance 22 500
closing balance 27 400
returns outwards 1 000
payments to trade payables 110 600

There were no cash purchases.

The opening and closing inventory has remained at the same amount.

What was the amount of the cost of sales?

A $105 700 B $106 700 C $115 500 D $116 500

14 The provisions of the Partnership Act apply if partners do not draw up a partnership agreement.

Which statement is true as a provision of the Partnership Act?

A Interest on drawings is charged at 5% a year.

B Interest on loans from partners is to be at 8% a year.
C Partners are not entitled to salaries.
D Profits are to be shared in the ratio of fixed capitals.

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15 Dua and Noor are in partnership sharing profits and losses equally.

They admitted Zee and now share profits and losses in the ratio Dua : Noor : Zee, 2 : 2 : 1.

On admission of Zee, tangible assets were reduced in value by $20 000 and goodwill was valued
at $60 000, but was not retained in the books of account.

What was the net decrease on Noor’s capital account?

A $4000 B $8000 C $10 000 D $14 000

16 The following information is available for a partnership.

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

17 Which item should not be recorded in a statement of changes in equity?

A bonus issue of ordinary shares

B dividends paid on ordinary shares

C profit from operations for the year
D transfer to general reserve

18 The following information has been extracted from the statement of financial position of a limited
company.

6% debenture (2026–2028) 20 000

400 000 ordinary shares of $1 each 400 000
5-year bank loan 200 000
share premium account 50 000
retained earnings 75 000

What is the value of the total equity?

A $525 000 B $545 000 C $695 000 D $725 000

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19 On 1 January, X Limited had share capital of 100 000 ordinary shares which had been issued at
their par value of $1 each. There was no share premium account.

On 1 March, a bonus issue of one new ordinary share for every five ordinary shares held was
made from retained earnings.

On 1 June, the company made a rights issue of one new ordinary share for every four ordinary
shares held at a price of $1.50 each. All the rights were taken up.

How much was recorded in the share premium account?

A $12 500 B $15 000 C $30 000 D $45 000

20 The following information is available for a business.

sales revenue $500 000

purchases $365 000
gross margin 25%
mark-up 33 31 %
inventory at start of the period $20 000

What was the value of closing inventory?

A $10 000 B $20 000 C $30 000 D $50 000

21 The following shows extracts from the statement of financial position of a company.

at 30 September
$

non-current assets 120 000

inventory 35 000
trade receivables 23 000
cash at bank (debit balance) 12 000
trade payables 15 000
bank loan repayable within 12 months 40 000

What is the liquid (acid test) ratio?

A 0.64 : 1 B 1.27 : 1 C 2.33 : 1 D 4.67 : 1

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22 The cost of direct materials is increasing.

What is the effect if a business uses first-in-first-out (FIFO) instead of average cost (AVCO) for
inventory valuation in this situation?

closing inventory
cost of sales profit for the year
value

A increases decreases increases

B increases decreases decreases
C decreases increases decreases
D decreases increases increases

23 Q Limited employs machine operators and supervisors.

Each machine operator produces 100 units per week.

One supervisor can supervise up to 10 machine operators and is paid $550 per week.

Production is 7700 units per week.

Which type of cost is the supervisors’ pay and how much is their total pay per week?

total pay per

type of cost week
$

A stepped 4235
B stepped 4400
C variable 4235
D variable 4400

24 What is a limitation of absorption costing?

A It does not comply with accounting principles.

B It does not take into account all costs of production.
C It is not accepted for preparing published financial statements.
D It is not useful for improving the organisation’s performance.

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25 The following information relates to one accounting period.

opening inventory 40 000 units

closing inventory 44 000 units
absorption cost profit $284 000
marginal cost profit $250 000

What was the overhead absorption rate per unit during the accounting period?

A $6.25 B $6.45 C $7.10 D $8.50

26 The selling price of a product remains constant.

In which circumstances will the break-even point in units decrease?

1 increase in labour costs per unit

2 decrease in material costs per unit
3 decrease in variable costs per unit
4 increase in total fixed costs

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

27 A company makes and sells a single product type.

The product is sold for $50 per unit and variable costs are $30 per unit.

Total fixed costs are $500 000.

How many units of the product does the company need to sell to make a profit of $300 000?

A 6400 B 15 000 C 25 000 D 40 000

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28 A business makes and sells three different product types, M, N and O. The following information
is available.

product
M N O
per unit
$ $ $

selling price 240 280 250

direct material 110 120 90
direct labour 65 90 100
variable overheads 20 30 25
fixed overheads 50 30 18
profit / (loss) (5) 10 17

Each product uses the same direct material, which is in short supply.

In which order of priority should the products be produced to maximise the profit?

A MNO

B MON

C NOM

D ONM

29 A business has the following information.

break-even point 5000 units

variable costs per unit $27
contribution to sales ratio 40%

What is the total fixed cost?

A $54 000 B $81 000 C $90 000 D $135 000

30 Why does a business prepare budgets?

A to assess their non-financial performance

B to control their expenditure
C to strategically plan several years ahead
D to value the assets and liabilities of the organisation

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 9706/12/M/J/22

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2016
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*7599461917*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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.

IB16 11_9706_12/FP
© UCLES 2016 [Turn over
 2

1 Which transaction applies the matching concept?

A A machine acquired on long-term rental is included in non-current assets.

B Computer equipment is depreciated over two years.
C A building is revalued following a fall in property prices.
D A waste-paper basket is treated as revenue expenditure.

2 A disposal account is used to record the sale of a non-current asset.

Which transactions are recorded on the credit side of the disposal account?

A cost, loss on disposal and sale proceeds

B cost, profit on disposal and sale proceeds
C depreciation, loss on disposal and sale proceeds
D depreciation, profit on disposal and sale proceeds

3 The following information was available for the disposal of a machine.

accumulated depreciation 45 000

profit on disposal 8 100
sale proceeds 75 600

What was the original cost of the machine?

A $22 500 B $38 700 C $112 500 D $128 700

4 A printing company installed a large printing press.

Which costs are capital expenditure in the first year of its operation?

1 installation of the press

2 depreciation of the press
3 repairs to the press
4 upgrades to the press

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

© UCLES 2016 9706/12/O/N/16

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5 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.

bank charges 216

a customer’s cheque which was dishonoured 1375
a bank error meant a cheque was incorrectly 560
debited to the bank account

What should be the value of bank in the statement of financial position?

A $21 629 B $22 189 C $25 371 D $25 931

6 At the end of the year, the balance on a firm’s sales ledger control account was $12 900. The total
of the customers’ accounts in sales ledger was $11 900.

The following errors were then discovered.

1 A customer’s account had been undercast by $700.

2 A contra with a supplier in the purchases ledger of $200 had only been entered in
the sales ledger control account.
3 The discount allowed column in the cash book totalled $500. This had not been
posted to the nominal ledger.
What was the correct balance on the sales ledger control account?

A $11 200 B $11 400 C $12 000 D $12 400

7 A suspense account has a balance of $450 debit.

What has caused this balance in the suspense account?

A motor expenses of $225, correctly entered in the cash book, and posted to motor expenses
as a credit
B motor expenses of $225, entered in the cash book as a receipt and posted to motor
expenses as a credit
C motor expenses of $450, correctly entered in the cash book, and posted to motor vehicles as
a debit
D motor expenses of $675, entered in the cash book as a credit of $225 and posted to motor
expenses as $225 debit

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 4

8 An item of capital expenditure has been incorrectly treated as revenue expenditure in the
financial statements of a business.

What is the effect of this error on the financial statements of the business?

assets profit

A overstated overstated
B overstated understated
C understated overstated
D understated understated

9 A company pays or receives the following amounts on the last day of its financial year.

deposit paid to a supplier 6500

rental income received in advance 8000
loan repayment 3000
payment for last month’s sales commission 900

Which of these amounts will be included as other receivables in the statement of financial
position?

A $6500 B $14 500 C $17 500 D $18 400

10 A sole trader provides the following information.

start of year end of year

$ $

total assets 100 000 135 000

total liabilities excluding owner’s capital (35 000) (40 000)

During the year the owner took drawings of $18 000.

What was the profit for the year?

A $12 000 B $30 000 C $35 000 D $48 000

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11 A trader did not keep full accounting records. The following information was available for 2015.

trade payables on 1 January 32 785

trade payables on 31 December 43 630
payments to suppliers during the year 72 830
discounts received during the year 3 450

What was the value of purchases?

A $58 535 B $65 435 C $80 225 D $87 125

12 A partnership admits a new partner.

Which statement is correct?

A Profits will always be shared equally following the new partner’s admission.
B The new partner will always benefit if assets are later revalued upwards.
C The new partner must always contribute capital to the partnership.
D The new partner will always pay for a share of partnership goodwill.

13 X, Y and Z are in partnership sharing the profits and losses in the ratio of 2 : 2 : 1.

At 31 December the following information is available.

X Y Z
$ $ $

capital account balances 100 000 100 000 50 000

current account balances 20 000 15 000 (5 000)

On 31 December Z retires from the partnership. Total assets are revalued upwards by $45 000.
There is no goodwill.

How much will Z be paid on his retirement?

A $54 000 B $59 000 C $60 000 D $65 000

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14 The following information relates to a partnership.

profit from operation 90 000

loan interest 3 200
interest on drawings 6 000
drawings 40 000
interest on capital 11 000

What is the residual profit to be appropriated amongst the partners?

A $41 800 B $69 800 C $81 800 D $91 800

15 A partnership earned an average profit during the year of $15 000 per month.

Halfway through the year D and E were joined by a new partner F and profits were shared
equally before and after the change. In the first half of the year D transferred his private vehicle to
the partnership at a valuation of $12 000. D’s drawings amounted to $60 000 during the year.

What was the increase in D’s current account balance during the year?

A $15 000 B $30 000 C $75 000 D $87 000

16 How would a transfer to general reserve and the issue of shares at a premium affect the revenue
reserves of a limited company?

transfer to issue of shares

general reserve at a premium

A decrease decrease
B decrease increase
C no effect increase
D no effect no effect

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17 A company is formed with the issue of 100 000 6% non-cumulative preference shares of $1 each
and 300 000 ordinary shares of $1 each issued at a premium of $0.20.

It earned profits of $3000, $16 000 and $31 000 in the first three years of trading. The directors
wish to pay an ordinary dividend of 5% each year when possible.

What value of ordinary dividends does the company actually pay in years 2 and 3?

year 2 year 3
$ $

A 7 000 15 000
B 7 000 18 000
C 10 000 15 000
D 10 000 18 000

18 A company had an issued share capital of 400 000 ordinary shares of $1 each. It then made a
bonus issue of one share for every five held. This was later followed by a rights issue of one
share for every three held.

What was the balance on the share capital account after these transactions?

A $480 000 B $533 333 C $613 333 D $640 000

19 Which action will increase the equity of a limited company?

A creating a general reserve

B issuing bonus shares
C issuing debentures
D issuing non-redeemable preference shares

20 Which action leaves the value of working capital unchanged?

A disposal of a non-current asset

B issuing shares for cash
C purchasing goods for resale on credit
D writing off an irrecoverable debt

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21 Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the
inventory increases.

Which effects does this have on the inventory holding period and on inventory turnover?

inventory holding inventory turnover

(in days) (times)

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

22 A business uses the AVCO method of inventory valuation.

The following transactions took place.

1 March purchased 1000 units at $65 per unit

2 March purchased 1200 units at $66 per unit
4 March sold 1850 units at $68 per unit

What was the value of closing inventory?

A $22 750 B $22 941 C $23 100 D $23 800

23 A manufacturing company employs 20 workers who are paid a basic rate of $30 per hour for a
40-hour week. To meet a special order, the workers each worked 50 hours and were paid a
premium of 40% over basic rate for the overtime.

What was the value of wages paid to meet the special order?

A $30 000 B $32 400 C $33 600 D $42 000

24 A manufacturing business is currently operating at full capacity.

As part of an expansion programme to increase production capacity, the business intends to

employ an additional factory supervisor.

How are total supervisory salaries classified?

A fixed cost
B semi-variable cost
C stepped cost
D variable cost

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25 In a manufacturing business the following could occur.

1 Actual overheads paid are less than budgeted overheads.

2 Actual overheads paid are more than budgeted overheads.
3 Actual units produced are less than budgeted units.
4 Actual units produced are more than budgeted units.

Which situations would result in an under absorption of overhead expenditure?

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

26 A company makes and sells a single product 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

27 The following information was provided about a product.

selling price per unit $50

variable cost per unit $26
total fixed costs $10 000
demand 1800 units

If the selling price increases only demand changes.

When the selling price increased by $4 profit fell by $1200.

What was the decrease in demand?

A 214 units
B 300 units
C 571 units
D 657 units

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28 A business that uses flexible budgets shows the following:

units of output 100 000 110 000

total fixed and variable costs $400 000 $425 000

What are fixed costs?

A $125 000 B $150 000 C $250 000 D $275 000

29 A company makes a product for which the following information is given.

per unit
$

selling price 100

direct materials 40
direct labour 30

Total fixed costs are $40 000.

Planned production is 1000 units.

Which action should the company take to break-even?

A decrease direct labour cost by 30%
B decrease direct material cost by 25%
C increase direct labour cost by 30%
D increase direct materials cost by 25%

30 What is the objective of a system of budgetary planning and control?

A to determine next year’s production

B to determine next year’s profits
C to motivate the manufacturing staff
D to provide a system for communication, coordination and control

© UCLES 2016 9706/12/O/N/16

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2016 9706/12/O/N/16

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2017
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*5624311206*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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.

IB17 11_9706_12/3RP
© UCLES 2017 [Turn over
 2

1 Which item is classed as revenue expenditure?

A installation costs of machinery

B legal fees on the purchase of premises
C number plates on a new motor vehicle
D redecorating office premises

2 What is the purpose of depreciation?

A to allocate the cost of the assets over their lives

B to improve liquidity ratios of the business
C to provide sufficient funds to replace the assets
D to show the assets at their market values

3 A company’s year end is 30 April. It purchases a factory in May 2014 at a cost of $200 000. The
factory will be depreciated over 20 years. A full year’s depreciation is charged in the year of
purchase.

In May 2017 the factory is revalued at $300 000.

How much should be included in the revaluation reserve account?

A $100 000 B $120 000 C $130 000 D $140 000

4 A business has a year end of 31 December. It purchased a non-current asset on 1 January 2014
for $100 000. It was depreciated using the reducing balance method at 20% per annum. It was
sold for $40 000 on 1 January 2016.

What was the loss on disposal?

A $20 000 B $24 000 C $40 000 D $60 000

5 Why does a business keep a sales ledger control account?

1 It helps deter fraud.

2 It helps with the preparation of financial statements.
3 It identifies doubtful debt easily.
4 It predicts the sales for the coming year.

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

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6 A sales ledger control account had a debit balance of $38 600. The total of individual sales ledger
debit balances was $36 500. The only errors found were as follows.

An irrecoverable debt had been recorded in the ledger of Smith but not the control account.

The sales journal was undercast by $1500.

A contra of $1750 had been correctly recorded in the control account but only $1250
recorded in the ledgers.

What was the value of the irrecoverable debt?

A $100 B $1100 C $3100 D $4100

7 The following information is available.

provision for doubtful debts at the beginning of the year 6 250

trade receivables at the end of the year 93 750

Provision for doubtful debts is to be maintained at 6% of trade receivables.

Which effect will the provision for doubtful debts have on profit for the year in the income
statement?

A decrease by $625
B decrease by $5625
C increase by $625
D increase by $5625

8 At 31 December the following information is available about a company’s banking transactions.

balance at bank per bank statement 22 650

uncleared deposits 3 110
unpresented cheques 6 290
bank credit recorded twice by bank in error 650

Which value for bank should be recorded in the statement of financial position at 31 December?

A $18 820 B $20 120 C $25 180 D $26 480

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9 Hedley has 100 items of inventory in his warehouse and five more with a customer on a sale or
return basis. He provides the following information.

$ per unit

historic cost paid 60

selling price 85
current replacement cost 65

Which value should appear in the statement of financial position for inventory?

A $6000 B $6300 C $6825 D $8500

10 A business does not keep complete accounting records. The following information is known for
the year.

capital at start 52 000

capital at end 55 000
drawings 13 000
capital introduced 25 000

What is the profit or loss for the year?

A loss $9000
B profit $9000
C loss $15 000
D profit $15 000

11 A business has 500 items of inventory at a cost price of $3 each. The selling price per unit is
based on a mark-up of 20%. Before sale, the items need to be repaired at a total cost of $400.

What is the net realisable value of the inventory?

A $1400 B $1475 C $2200 D $2275

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12 The following information is available for the year ended 31 December 2016.

revenue 75 000
purchases 32 000
carriage inwards 5 400
carriage outwards 4 500
inventory at 1 January 2016 6 300
inventory at 31 December 2016 7 600

What was the gross profit for the year ended 31 December 2016?

A $36 300 B $37 200 C $38 900 D $39 800

13 A partnership maintains capital accounts and current accounts.

Which statements are correct?

1 The capital accounts show the total amount owed to each partner.
2 The capital accounts represent the retained earnings of the business.
3 The capital and current accounts equal the net assets.

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

14 X, Y and Z had been in partnership, sharing profits and losses in the ratio of 2 : 2 : 1.

On 1 January 2017, Y retired. The balances of his capital and current accounts were as shown.

capital account current account

$50 000 $6400 debit

Y took over a motor van at an agreed value of $3800. The net book value of the motor van was
$4800.

Goodwill was valued at $30 000.

The value of all other assets at 1 January 2017 would remain unchanged.

How much cash was Y entitled to when he retired?

A $51 400 B $51 800 C $55 200 D $64 200

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15 S and T are in partnership, sharing profits and losses in the ratio 2 : 1. The balances on their
capital accounts at 31 March 2017 were:

capital account S 40 000

capital account T 20 000
60 000

On 1 April 2017 the partners decide to change the profit-sharing ratio to 3 : 2. Goodwill is to be
valued at $30 000 and is not to be retained in the books of account.

What is the new balance of T’s capital account?

A $18 000 B $20 000 C $22 000 D $30 000

16 A partnership provides the following financial information for the year ended 30 June 2017.

profit from operations 240 000

bank interest payable 21 000
interest on capital 15 000
drawings 50 000
partnership salaries 45 000

What is the residual balance of profits to be appropriated between the partners?

A $109 000 B $154 000 C $159 000 D $204 000

17 Which accounting entry could record the issue of bonus shares?

debit credit

A bank share capital

B general reserve share capital
C general reserve share premium
D share capital general reserve

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18 From which accounts can a company pay dividends?

1 general reserve
2 retained earnings
3 revaluation reserve
4 share capital

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

19 A company provides the following data on 1 January 2016.

10% debentures (2020) 200 000

bank loan (2017) 130 000
bank loan (2018) 10 000
bank overdraft 24 000

What is the total value of non-current liabilities at 31 December 2016?

A $154 000 B $210 000 C $340 000 D $364 000

20 Calculation of which ratio does not include revenue?

A gross margin
B mark-up
C non-current asset turnover
D profit margin

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21 Bradshaw does not keep proper books of account. The following information is available for the
year.

cost of sales $750 000

mark-up 20%
cash sales $300 000
trade receivables $46 000

What are total sales and trade receivables turnover?

trade
total sales
receivables
$
turnover (days)

A 900 000 19
B 900 000 28
C 937 500 18
D 937 500 27

22 The financial statements of a company showed the following.

current liabilities 15 000

non-current liabilities 40 000
ordinary shares 120 000
general reserve 10 000
retained earnings 46 000
interest paid 11 000

Profit for the year was $23 000.

What was the return on capital employed?

A 10.65% B 13.07% C 15.74% D 19.32%

23 Which item is an indirect cost?

A carriage inwards
B production materials
C wages of machine operators
D wages of stores staff

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24 The following information is forecast for next period.

units

opening inventory 54 275

closing inventory 60 120
$

profit using marginal costing 300 600

profit using absorption costing 390 780

What is the overhead absorption rate per unit?

A $5.00 B $6.50 C $7.20 D $15.43

25 A business has total fixed costs of $240 000. Products have a unit selling price of $25 and a unit
variable cost of $15.

How many units need to be sold to break even?

A 6000 B 9600 C 16 000 D 24 000

26 The table contains information provided by a company.

budgeted direct labour hours 8000

actual direct labour hours worked 7500
budgeted overhead expenditure $104 000
actual overhead expenditure $112 500

What is the over or under recovery of overheads?

A $8500 over recovered

B $8500 under recovered
C $15 000 over recovered
D $15 000 under recovered

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27 The diagram illustrates the cost behaviour of a typical telephone invoice.

total cost
$

0 level of activity

Which term best describes the behaviour of this cost?

A fixed
B semi-variable
C stepped
D variable

28 Which statements about the limitations of marginal costing are correct?

1 Finance costs are not included in the manufacturing overheads.

2 Variable cost per unit changes at different levels of activity.
3 Some costs may be semi-variable costs.

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

29 A product has a variable cost of $31.32 per unit. Total fixed costs are $93 600.

When production is 13 000 units the margin of safety is 5000 units.

What is the selling price per unit?

A $36.52 B $38.52 C $43.02 D $50.04

30 Why is planning important to a business?

1 to ensure that the business always makes a profit

2 to employ the correct number of workers
3 to reduce the risk of running out of inventory

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

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2017 9706/12/O/N/17

 Cambridge International Examinations
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2018
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*5929436929*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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 11 printed pages and 1 blank page.

IB18 11_9706_12/RP
© UCLES 2018 [Turn over
 2

1 A company does not include in the financial statements the value of skills gained by its
employees from training programmes.

Which accounting concept is being applied?

A consistency
B materiality
C money measurement
D substance over form

2 Which non-current asset is most likely to be depreciated using the revaluation method?

A loose tools
B motor vehicles
C office equipment
D plant and machinery

3 A trader purchased a motor vehicle costing $36 000 on 1 July 2016. The estimated useful life of
the motor vehicle was five years and the estimated residual value was $6000. Depreciation is
provided on a month-by-month basis using the straight-line method.

The motor vehicle was sold on 31 March 2018 for $22 500.

What was the profit or loss on disposal of the motor vehicle?

A $900 loss B $900 profit C $3000 loss D $3000 profit

4 The following is an extract from the statement of financial position for a company at
31 December 2016.

accumulated
cost net book value
depreciation
$ $
$

non-current assets 250 000 95 000 155 000

The assets have a residual scrap value of $12 500.

The company’s policy is to provide depreciation using the reducing balance method at a rate of
25% per annum.

What was the depreciation charge for the year ended 31 December 2017?

A $35 625 B $38 750 C $59 375 D $62 500

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5 A business sells a non-current asset for cash. The disposal account includes entries for the cost
of the asset and the sales proceeds.

Which books of prime entry are used?

cost sales proceeds

A cash book general journal

B cash book sales journal
C general journal cash book
D purchases journal cash book

6 A trader has extracted the following information from his books of account at 31 March 2018.

purchase ledger balances at 1 March 2018 32 100

credit purchases for March 26 400
cheques paid to credit suppliers in March 29 700
contra to sales ledger 600
discount received 400

What was the closing balance on the purchases ledger control account at 31 March 2018?

A $27 800 B $29 800 C $29 000 D $34 400

7 The table shows extracts from a business’s bank reconciliation.

balance per cash book at 31 December 2075 debit

balance per bank statement at 31 December 2250 credit
bank charges per bank statement not entered in cash book 150
outstanding cheques not presented at the year end 325

What is the bank balance to be shown in the financial statements?

A $1600 B $1925 C $2075 D $2225

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8 Bank interest income, $1800, had been correctly entered in the bank account but recorded as
interest expense.

Which entries in the ledger will correct the error?

account to account to
$ $
be debited be credited

A interest expense 1800 suspense 1800

B interest income 1800 suspense 1800
interest expense 1800

C suspense 1800 interest income 1800

D suspense 3600 interest income 1800
interest expense 1800

9 A company has the following balances.

trade receivables at 31 December 2017 125 400

provision for doubtful debts at 1 January 2017 1 800

During the year ended 31 December 2017 debts of $20 500 had been written off. The company
provides for doubtful debts at a rate of 5% of trade receivables at each year end.

Which expense for doubtful debts was included in the income statement for the year ended
31 December 2017?

A $3445 B $4470 C $5245 D $6270

10 How are purchases calculated when proper accounting records have not been kept?

A sales × (1 – margin) – closing inventory + opening inventory

B sales × (1 – margin) + closing inventory – opening inventory

C sales × (1 – mark-up) – closing inventory + opening inventory

D sales × (1 – mark-up) + closing inventory – opening inventory

11 The draft financial statements for a business included an inventory valued at $550 000.

This valuation included damaged items which originally cost $50 000. These could be sold for
$15 000 provided that $5000 is spent on repairs.

What is the correct inventory valuation?

A $490 000 B $500 000 C $510 000 D $515 000

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12 A trader took out a 6% bank loan of $30 000 on 1 November 2017, to be repaid in full in 10 years’
time. Interest is to be paid annually. No interest had been paid by 30 April 2018.

How should this be recorded in the statement of financial position at 30 April 2018?

current non-current
liabilities liabilities
$ $

A 0 30 000
B 900 30 000
C 1 800 30 000
D 30 900 0

13 Which items would not be in the appropriation account for a partnership?

1 interest on capital
2 interest on a partner’s loan
3 share of profit on revaluation of assets
4 share of residual profit

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

14 X and Y had been in partnership sharing profit and losses in the ratio of 1 : 2 respectively.

Z was later admitted to the partnership.

It was agreed that the goodwill is valued at $120 000. No goodwill account is to be retained in the
books of account.

Profit and losses were to be shared between X, Y and Z in the ratio of 2 : 1 : 1 respectively.

What was the effect of the goodwill adjustment in X’s capital account?

A decreased by $20 000

B decreased by $60 000
C increased by $20 000
D increased by $60 000

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15 J and K shared profits equally.

Their capital account balances were J $400 000 and K $160 000.

L was admitted as a partner. The three partners then shared profits equally.

On admission of L as a partner, assets were increased in value by $210 000. L paid in capital
equal to the average new capital balances of J and K.

What was the capital paid in by L?

A $175 000 B $280 000 C $350 000 D $385 000

16 The statement of financial position of a business on 31 December 2017 showed the following.

retained earnings 136 000

general reserves 28 000
share premium 55 000

During the year ended 31 December 2017 the business had made a profit for the year of $25 000
and had transferred $10 000 to the general reserve.

What was the total of revenue reserves on 1 January 2017?

A $101 000 B $139 000 C $149 000 D $194 000

17 A company provides the following information.

ordinary shares of $0.50 each 84 000

retained earnings 50 000
134 000

The following transactions then take place.

1 The company makes a rights issue of one new ordinary share for every two held, at
$1.30. The issue was fully subscribed.
2 A bonus issue of two new ordinary shares for every three held was then made.

What is the maximum possible balance of the retained earnings after these transactions?

A $8400 B $16 800 C $33 200 D $41 600

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18 The financial data relates to two businesses.

X Y

trade receivable turnover (days) 90 40

trade payable turnover (days) 50 70
liquid (acid test) ratio 3:1 1:1
current ratio 4.5 : 1 6.2 : 1

Which statement about the comparison of the two businesses’ performance is correct?

A X has better credit control system.

B X has higher profitability.
C Y has better credit control system.
D Y has higher profitability.

19 A company’s financial statements show the following.

profit before interest 125 378

profit for the year 120 426
200 000 ordinary shares $1 each 200 000
retained earnings 191 982
debentures 150 000

What is the return on capital employed (ROCE)?

A 22.22% B 23.13% C 30.72% D 31.99%

20 A company’s income statement shows the following.

revenue 460 000

cost of sales 120 000
administration expenses 54 000
distribution costs 47 000
finance charges 7 000

What is the operating expenses to revenue ratio?

A 21.96% B 23.48% C 48.04% D 49.57%

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21 To make a single unit of output a business requires material costing $1000.

When 20 items are produced, the total cost of the material is $20 000.

What best describes this cost?

A fixed cost
B semi variable cost
C stepped cost
D variable cost

22 A business has the following total overheads for two different output levels.

total overheads output

$ (units)

200 000 20 000

216 000 30 000

What is the total fixed overhead cost?

A $16 000 B $48 000 C $168 000 D $216 000

23 A retailer uses the FIFO method for inventory valuation. The following information is available.

June $

1 opening inventory 300 units at $12 per unit 3 600

10 purchased 1000 units at $12.50 per unit 12 500
21 sold 1200 units for $16 each 19 200
28 purchased 700 units at $13 per unit 9 100

What was the value of the inventory at 30 June?

A $6000 B $9850 C $10 080 D $10 350

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24 A business manufactures 175 units of a product each month.

The following information is available for the month.

Per unit $

revenue 580
variable costs 230
fixed overheads 90

What is the break-even point in units?

A 45 units B 61 units C 88 units D 160 units

25 When is marginal costing less useful than absorption costing?

A when choosing to make or buy a product

B when dealing with a limiting factor
C when producing a special order
D when valuing closing inventory

26 A company manufactures a single product with a selling price of $75 per unit. The table shows
the costs based on sales and production volume of 8000 units.

direct costs 158 000

variable manufacturing overheads 74 000
fixed manufacturing overheads 80 000
variable selling overheads 20 000
fixed administration overheads 100 000

If absorption costing is applied, what is the gross profit on each unit sold?

A $21.00 B $36.00 C $43.50 D $46.00

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27 A company has the following revenue information for a month.

actual revenue 510 000

break-even revenue 555 000
budgeted revenue 570 000

What was its margin of safety during the month?

A –$60 000
B –$45 000
C +$45 000
D +$60 000

28 A business provides the following information.

budgeted overhead costs $280 000

budgeted labour hours 25 000
budgeted machine hours 20 000
actual overhead cost $336 000
actual labour hours 35 000
actual machine hours 30 000

What is the over-absorption or under-absorption of overheads?

A $56 000 over absorbed

B $56 000 under absorbed
C $84 000 over absorbed
D $84 000 under absorbed

29 A business provides the following budgeted information.

contribution to sales ratio 60%

budgeted sales $240 000
budgeted production units 40 000

What is the contribution per unit?

A $3.60 B $3.75 C $9.60 D $10.00

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2018 9706/12/O/N/18

 Cambridge Assessment International Education
Cambridge International Advanced Subsidiary and Advanced Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2019
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*4998627567*

Soft pencil (type B or HB is recommended)

READ THESE INSTRUCTIONS FIRST

Write in soft pencil.

Do not use staples, paper clips, glue or correction fluid.
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 11 printed pages and 1 blank page.

IB19 11_9706_12/5RP
© UCLES 2019 [Turn over
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1 Which concept requires that profits should be based on recognising revenues and their related
expenses for an accounting period?

A consistency
B matching
C materiality
D prudence

2 A business buys a non-current asset and decides to apply the straight-line method of
depreciation. The accountant forgets to include an estimate of scrap value in the calculation.

Which statements are correct?

1 The annual depreciation charge is too high.

2 The annual depreciation charge is too low.
3 There is likely to be a loss on disposal in the future.
4 There is likely to be a profit on disposal in the future.

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

3 The table gives information relating to the non-current assets of a business.

net book value at the end of the year 25 000

net book value at the beginning of the year 16 000
depreciation charge for the year 5 000
additions at cost during the year 22 000

What is the net book value of disposals during the year?

A $8000 B $14 000 C $18 000 D $24 000

4 The accounting year of a company ends on 31 December. It purchased a warehouse for

$100 000 on 1 January 2013. The warehouse had an estimated useful economic life of 25 years.
The company’s accounting policy is to depreciate the warehouse using the straight-line method.
On 1 January 2018, the warehouse was revalued at $120 000.

What was the depreciation charge for the year ended 31 December 2018?

A $4000 B $4800 C $5000 D $6000

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5 A company prepared a sales ledger control account. The balance did not agree with the total of
the sales ledger balances, which were $42 650. The following was discovered.

1 An irrecoverable debt of $500 in the general journal has not been recorded in the
sales ledger.
2 The sales journal has been incorrectly added and must be reduced by $750.
3 The sales ledger control account includes the discount received of $400. It should
have been discount allowed, $600.
4 Sales to J Brown, $640, have not been entered in his account.

What was the correct total of the sales ledger balances?

A $41 700 B $41 840 C $42 510 D $42 790

6 The correction of which error would require an entry in the suspense account?

A $100 paid for vehicle repairs were debited to the vehicles account.
B A sales invoice for $45 was omitted from the sales journal.
C Drawings of $60 were debited in the cash book and were credited to the drawings account.
D Wages, $150, were correctly recorded in the wages account and debited in the cash book.

7 The table shows information for a business at 31 March 2019.

inventory 16 100
trade payables 5 200
other payables 2 000

The information excludes the purchase of $3700 of goods. These goods were delivered on
31 March 2019, but the invoice states that legal title to the goods does not pass until payment is
received.

Which values should appear in the statement of financial position on 31 March 2019?

inventory trade payables other payables

$ $ $

A 16 100 5200 2000

B 16 100 5200 5700
C 19 800 5200 5700
D 19 800 8900 2000

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8 A business has valued some of its closing inventories at cost. Their net realisable value is lower
than cost.

What is the effect of this error on financial statements?

profit for the year current assets

A no effect no effect
B overstated overstated
C understated understated
D no effect overstated

9 The following balances were extracted from a trial balance at 31 March 2019.

total trade receivables 84 600

provision for doubtful debts at 1 April 2018 2 835
irrecoverable debt 1 600

There was a decrease in the provision for doubtful debts, $280, for the year ended
31 March 2019.

What was the amount of net trade receivables at 31 March 2019?

A $79 885 B $80 445 C $81 485 D $82 045

10 A business had the following assets and liabilities at the start of the year.

a motor car valued at $2500

inventory which cost $4000 with a sales value of $5800
bank overdraft of $500
a loan to a friend from the business bank account of $1000

What was the capital account balance at the start of the year?

A $5000 B $7000 C $8000 D $8800

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11 A sole trader had the following transactions.

returns outwards 2750

carriage inwards 4820
goods for own use 1460

What was the total effect of these transactions on the cost of sales?

A $610 increase
B $3530 increase
C $6110 decrease
D $9030 decrease

12 A sole trader’s personal expenses had been paid out of the business bank account and included
in his income statement.

What was the effect of this on the profit and capital?

profit capital

A no effect no effect
B no effect overstated
C understated no effect
D understated understated

13 A warehouse was damaged by fire on 31 March and some of the inventory was destroyed. The
following information is available.

inventory at cost on 1 January 6 000

inventory at cost on 31 March after fire 3 200
sales during the period 14 700
purchases during the period 9 500

The business uses a mark-up of 33.33%.

What was the value of the inventory destroyed?

A $1275 B $1800 C $2000 D $2500

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14 P and Q are in partnership. R was admitted as a partner on 1 July 2018, and the profit and loss
sharing ratio among P, Q and R was 2 : 2 : 1 respectively.

For the purpose of R’s admission, the partners agreed:

goodwill would be valued at $20 000, but not retained in the books of account
R would introduce cash, $40 000, and motor vehicle, $10 000
R would be entitled to an annual salary, $5000.

What was R’s capital account balance immediately after his admission?

A $36 000 B $46 000 C $51 000 D $54 000

15 Hilary and Lee commenced in partnership on 1 January 2018. There was no partnership
agreement. They provided the following information.

Hilary Lee
$ $

capital contributions 5000 6000

loan to partnership – 1000

Profit for the year ended 31 December 2018 before the loan interest was $8850.

What was Lee’s share of the profit?

A $4400 B $4425 C $4800 D $4827

16 L, M and N are in partnership sharing profits and losses equally.

L retired when the credit balances on her capital and current accounts were $100 000 and
$40 000.

Partnership assets were revalued upwards by $60 000.

L took half of the amount due to her on retirement. The other half was left as a loan to the
business.

How much was L paid from the partnership bank account on her retirement?

A $20 000 B $40 000 C $60 000 D $80 000

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17 The directors of a limited company recently made a rights issue of one ordinary share for every
three held at a premium of $0.50 per share. The rights issue was fully subscribed.

The statement of financial position showed the following information after the rights issue was
made.

$000

issued share capital: (shares of $1 each) 1200

share premium 300

Which amount was debited to the company’s bank account when the rights issue was made?

A $300 000 B $400 000 C $450 000 D $600 000

18 A company’s year end is 31 December. During the year ended 31 December 2018 it paid the
following dividends:

$
final dividend for the year ended 31 December 2017 15 000
interim dividend for the year ended 31 December 2018 8 000

On 1 February 2019 it declared a final dividend of $10 000 for the year ended 31 December 2018.

How much should be recorded for dividends in the statement of changes in equity for the year ended
31 December 2018?

A $8000 B $18 000 C $23 000 D $33 000

19 Which information would an investor gain by looking at the financial statements of a business?

1 identifying future trading prospects

2 identifying the amount of future dividends
3 identifying that the entity is a going concern

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

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20 The following information is available for a limited company.

profit from operations 40 475

profit for the year 26 380
10% debenture (2025) 75 000
100 000 shares ($1 each) 100 000
retained earnings at the end of the year 135 679

What was the return on capital employed?

A 8.49% B 11.19% C 13.03% D 17.17%

21 A manufacturing business has provided the following information about a product.

units total cost

produced $

8 000 37 000
14 000 53 500

What is the variable cost per unit?

A $2.75 B $3.82 C $4.11 D $4.63

22 The following information relates to the inventory of a business.

date purchases unit cost sales unit selling price

2 June 1000 units $12

12 June 1000 units $13
18 June 800 units $18
28 June 1000 units $14

Estimated unit selling price at 30 June is $20.

There was no opening inventory.

What was the value of closing inventory at 30 June using FIFO?

A $24 600 B $28 600 C $29 400 D $44 000

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23 Inventory cost prices are rising for a business. The company uses AVCO rather than FIFO to
value its inventory.

What is the effect on inventory valuation and profit of using AVCO rather than FIFO?

inventory
profit
valuation

A higher higher
B higher lower
C lower higher
D lower lower

24 A company calculates its profit using marginal costing as $90 000 for a month.

Opening inventory was 4000 units and closing inventory 6000 units.

The fixed production overhead absorption rate is $20 per unit.

What is the profit under absorption costing?

A $10 000 B $50 000 C $130 000 D $170 000

25 A manufacturing business has provided the following information.

budgeted labour hours 12 000

budgeted overhead absorption rate $7.50 per labour hour
actual overhead cost $101 250
actual labour hours 15 000

What is the over or under absorption of overheads?

A $11 250 under absorbed

B $11 250 over absorbed
C $20 250 under absorbed
D $20 250 over absorbed

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26 A business has the following information relating to its single product.

selling price per unit 30

variable cost per unit 14
total cost per unit 24

What is its contribution to sales ratio?

A 20% B 46.67% C 53.33% D 80%

27 A company makes three products for which the following details are given.

product X product Y product Z

$ $ $

selling price per unit 40 48 72

direct material per unit 18 24 30
direct labour per unit 10 6 18

The same material is used to make all three products and it costs $2.00 per kilo.

There is a shortage of material.

In which order should the products be made to achieve maximum profit?

first last

A X Y Z
B Y Z X
C Z X Y
D Z Y X

28 Last month a company made and sold 10 000 units and earned a contribution of $20 per unit.

Its final profit, after deducting total fixed costs, was $120 000.

This month its sales volume has increased by 20%, its contribution per unit has increased by 5%
and its total fixed costs have increased by 15%.

What is its profit this month?

A $118 000 B $148 000 C $160 000 D $172 000

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

1 Fixed costs remain constant over 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 constant sales mix.

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

30 Why do businesses prepare budgets?

1 to communicate plans
2 to improve coordination
3 to plan annual operations
4 to plan long-term strategies

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

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2019 9706/12/O/N/19

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2020
1 hour

You must answer on the multiple choice answer sheet.

*3801950463*

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. A mark will not be deducted for a wrong answer.
 Any rough working should be done on this question paper.

This document has 12 pages. Blank pages are indicated.

IB20 11_9706_12/3RP
© UCLES 2020 [Turn over
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1 The inclusion of unpaid loan interest in financial statements is in accordance with which
accounting concept?

A consistency
B going concern
C matching
D money measurement

2 What is depreciation?

A a means of allocating the cost of a non-current asset over its useful life
B a measure of the decrease in market value of a non-current asset
C an outflow of cash from the use of a non-current asset
D the expense spent on the non-current asset

3 A trader depreciates fixtures and fittings at the rate of 10% per annum on cost. On
1 January 2019 a purchase of new fixtures and fittings, $5000, was posted to the advertising
account in error.

What was the effect of this error on the trader’s capital account on 31 December 2019?

A overstated $4500
B overstated $5000
C understated $4500
D understated $5000

4 A company had a non-current asset which cost $370 000. The asset had a 10-year useful life and
an estimated residual value of $20 000. A full year’s charge for depreciation is made in every year
of use.

After four years the asset was sold. The loss on disposal was $30 000 and disposal costs were
$10 000.

What were the sale proceeds?

A $192 000 B $200 000 C $202 000 D $210 000

5 Which item is recorded on the debit side of a sales ledger control account?

A interest charged on overdue accounts of customers

B irrecoverable debts written off
C returns of goods supplied to credit customers
D total of cash sales

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6 A trader prepared a trial balance which did not balance. The difference was posted to a suspense
account.

The following errors have now been found.

1 The returns inwards account had been overcast by $90.

2 A payment of $200 for rent had been entered correctly in the cash book but had not
been posted to the rent account.

What was the opening balance on the suspense account?

A $110 credit
B $110 debit
C $290 credit
D $290 debit

7 How could a credit entry of $500 in X’s account have arisen in the books of account of Y?

A X bought goods from Y.

B X returned goods to Y.
C Y made a payment to X.
D Y returned goods to X.

8 An invoice for purchases was credited to the purchases account.

How will the balance on the purchases account be corrected?

A decrease by the value of the invoice

B decrease by twice the value of the invoice
C increase by the value of the invoice
D increase by twice the value of the invoice

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9 Rent is paid by a business monthly in advance on the first day of each month. The payments
during a financial year were as follows.

up to and including 1 June $500 per month

from 1 July $600 per month

Which amounts will appear in the financial statements for the year ended 31 October?

statement of financial
income statement
position

A $6300 $600 other receivables

B $6300 $600 other payables
C $6400 –
D $6500 –

10 What is the effect on profit for the year and net assets when accrued expenses are understated?

profit for the year net assets

A overstated overstated
B overstated understated
C understated overstated
D understated understated

11 Ali’s trade receivables at 31 December 2019 were $26 500. He knew that $400 of these were
irrecoverable.

He wished to maintain a provision for doubtful debts equal to 5% of the trade receivables.

At 1 January 2019 the balance of the provision for doubtful debts was $1200.

Which entry does Ali make in the provision for doubtful debts account at 31 December 2019?

A $105 credit
B $105 debit
C $125 credit
D $125 debit

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12 Adil and Bashir were in partnership sharing profits and losses in the ratio 2 : 1.

Chandra joins the partnership and profits and losses are now to be shared between Adil, Bashir
and Chandra in the ratio 3 : 2 : 1.

The balances of the partners’ capital accounts prior to Chandra joining the partnership are as
follows:

Adil 20 000
Bashir 10 000

Goodwill is to be valued at $36 000 and is not to be retained in the books of account.

What is the balance on Adil’s capital account after Chandra joined the partnership?

A $20 000 B $26 000 C $38 000 D $44 000

13 How is a loss on realisation recorded when a partnership is dissolved?

A Credit each partner’s capital account equally.

B Debit each partner’s capital account equally.
C Credit each partner’s capital account in the profit-sharing ratio.
D Debit each partner’s capital account in the profit-sharing ratio.

14 John and Brian are in partnership sharing profits and losses equally. John receives a salary of
$2000 per annum. Brian loaned the business $5000. He is entitled to interest of 5% per annum.

The profit for the year before appropriation was $24 000. During the year John took drawings of
$3000.

What will be the amount of residual profit Brian will receive for the year?

A $9375 B $10 875 C $11 000 D $11 250

15 A company issued 100 000 ordinary shares of $1 each at a premium of $2. The market value was
$4 per share.

Which statement is not correct?

A Capital reserves increased by $200 000.

B Cash and cash equivalents increased by $300 000.
C Ordinary share capital increased by $100 000.
D Revenue reserves increased by $400 000.

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16 Which item has no effect on the total equity of a limited company?

A bonus issue of shares

B dividends paid
C rights issue of shares
D upward revaluation of non-current assets

17 Information relating to W Limited for the year ended 31 December 2019 was as follows:

retained earnings at 1 January 2019 22 000

profit from operations 83 000
dividend paid 20 000
dividend proposed 15 000
bank loan interest 16 000

What was the amount of retained earnings at 31 December 2019?

A $32 000 B $47 000 C $54 000 D $69 000

18 Which financial information is not available for potential shareholders of a limited company?

A cash budget
B income statement
C notes to financial statements
D statement of changes in equity

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19 The following information is available.

$ $

revenue 600 000

opening inventory 46 000
purchases 244 000
290 000
closing inventory 50 000 240 000
gross profit 360 000
expenses 150 000
profit from operations 210 000

What was the rate of inventory turnover (in times)?

A 4.8 B 5 C 12 D 12.5

20 A company’s financial statements for the year ended 31 December showed the following:

issued share capital 150 000

non-current liabilities 280 000
reserves including retained earnings 250 000

The company’s profit from operations was $160 000 and the profit for the year was $120 000.

What was the company’s return on capital employed?

A 23.5% B 30.0% C 37.2% D 40.0%

21 Which cost can be classified as a fixed cost?

A bank overdraft interest

B piece rate labour cost
C sales commission
D telephone rental

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22 An employee works a 40-hour week at an hourly rate of $8.

She receives a bonus of 30% of the hourly rate for time saved producing each unit. The target
production time is 30 minutes per unit.

Last week she worked 40 hours and produced 90 units.

What were her gross earnings for the week?

A $320 B $332 C $360 D $416

23 A business uses the weighted average (AVCO) method to value its inventory.

It purchased the following units of inventory.

cost per unit total cost

units
$ $

100 36 3600
120 48 5760
80 54 4320

After these receipts it issued 250 units to production.

What was the value of the issue?

A $10 980 B $11 400 C $11 500 D $11 880

24 A business provides the following information.

number of overheads
month
machine hours $

April 34 000 493 000

May 67 000 625 000

The variable overhead rate per machine hour was $4.

What was the monthly fixed overhead cost?

A $132 000 B $136 000 C $268 000 D $357 000

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25 A business absorbs its fixed overheads using direct labour hours.

The following information is provided.

actual budgeted

overheads $600 000 $508 000

labour hours 14 300 12 700

Which statement is correct?

A Overheads were over absorbed by $28 000.

B Overheads were under absorbed by $28 000.
C Overheads were over absorbed by $92 000.
D Overheads were under absorbed by $92 000.

26 A company sells a single product for $24 per unit.

The variable cost is $8 per unit.

Fixed costs have been absorbed based on a normal activity level of 1000 units at $6 per unit.

What is the profit under marginal costing if the company makes and sells 1250 units?

A $10 000 B $12 500 C $14 000 D $20 000

27 A product has the following revenue and costs per unit.

selling price 40
marginal cost 22
fixed manufacturing overhead 6
non-manufacturing overhead 2

What is the contribution to sales ratio?

A 25% B 30% C 45% D 55%

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

1 It applies over any time period.

2 It is suitable for any range of output.
3 Profits are calculated using marginal costing.

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

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29 Total costs at two levels of production are as follows.

units $

10 000 230 000

16 000 320 000

Fixed costs will increase by $30 000 if more than 20 000 units are produced.

What are the total costs if 25 000 units are produced?

A $405 000 B $485 000 C $530 000 D $605 000

30 Which are benefits of a budgetary control system?

1 It can be used to control expenditure.

2 It can be used to record accounting transactions.
3 It can help when applying for a loan.
4 It can identify where improvements are required.

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

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9706/12/O/N/20

 Cambridge International AS & A Level

ACCOUNTING 9706/12
Paper 1 Multiple Choice October/November 2021
1 hour

You must answer on the multiple choice answer sheet.

*1346665176*

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.

IB21 11_9706_12/4RP
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1 A trader has prepared financial statements which include unpaid wages to her employees.

Which accounting concept is being applied?

A business entity
B duality
C matching
D substance over form

2 On which basis will non-current assets be valued if the business is not a going concern?

A net book value

B original cost
C the amount they could be sold for
D the value placed on them by the owner

3 A business has a financial year end of 31 December.

It depreciates its machinery on a month-by-month basis. It uses the straight-line method at

10% per annum.

It bought a machine, cost $12 000, on 1 January 2019 and sold it on 31 March 2020.

Which entries relating to this machine were made in the provision for depreciation of machinery
account for the year ended 31 December 2020?

debit side credit side

$ $

A 300 1500
B no entry 1200
C 1200 no entry
D 1500 300

4 A business purchased a non-current asset for $500 000 with an expected life of 20 years. After
that time it was expected to be sold for $100 000. It was depreciated using the straight-line
method.

The non-current asset was sold after 10 years for $120 000 with selling costs of $10 000.

What was the loss on disposal?

A $130 000 B $140 000 C $180 000 D $190 000

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5 Which items are capital expenditure?

1 payment of wages to staff to install new equipment

2 purchase of a new computer for office
3 purchase of spare parts for factory equipment
4 use of factory machinery to repair owner’s car

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

6 A sales ledger control account showed a debit balance of $15 000.

The following errors were discovered.

1 Returns outwards, $200, had been credited in the sales ledger control account.
2 A contra entry with the purchases ledger control account, $400, had been debited in
the sales ledger control account.
3 A customer balance, $300, had been written off in the sales ledger control account
but no entry had been made in the sales ledger.

Which figure for trade receivables should appear in the statement of financial position?

A $14 400 B $15 200 C $15 600 D $15 700

7 The bank account had a debit balance of $5760 in the cash book at 31 May.

The following items were identified when reconciling the bank account with the bank statement.

amount not yet credited by bank 900

bank charges 120
dishonoured cheque 340
unpresented cheque 740

What was the amount shown in the bank statement at 31 May?

A $3660 B $5140 C $5460 D $5820

8 A trader maintains a full set of accounting records. Each month she issues many sales invoices.

Where does she record an individual sales invoice?

A sales journal and sales ledger

B sales journal and sales ledger control account
C sales ledger and sales account
D sales ledger and sales ledger control account

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9 Brian had a service business which held no inventory. His current assets and current liabilities at
1 April were as follows.

trade receivables 10 000

trade payables 6 100
bank overdraft 1 900

On that date he set off a sales ledger balance, $600, against a purchases ledger balance and
then created a provision for doubtful debts of 5%.

What was the value of his working capital after these adjustments?

A $1470 B $1500 C $1530 D $1900

10 Frieda’s provision for the doubtful debts account for the year included a debit entry representing
the change in the amount provided. The rate of provision for doubtful debts has not changed.

What might have happened during the year to make this entry necessary?

1 Credit control procedures had been improved.

2 Credit control procedures had been reduced.
3 Total trade receivables had decreased.
4 Total trade receivables had increased.

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

11 A trader’s income statement recorded sales, $10 000, and cost of sales, $7070. The trader had
taken goods for his own use during the year, cost $280, selling price $410, but had omitted to
record this.

What effect did the omission have on the gross margin?

A 2.8% overstated
B 2.8% understated
C 4.1% overstated
D 4.1% understated

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12 William buys radios for $10 each and sells them for $15 each.

His draft statement of financial position included a value of $1500 for inventory.

His method of calculation of inventory was correct.

He then found that 12 radios could only be sold for $8 each and 4 radios had been stolen.

By how much should William reduce his inventory valuation?

A $64 B $84 C $124 D $144

13 A sole trader has not kept a full set of double-entry records.

The following information relates to the business for the year ended 31 March 2021.

sales 210 000

inventory at 1 April 2020 17 600
inventory at 31 March 2021 18 700
prepaid expense at 1 April 2020 630
expenses paid by cheque 11 900

All goods are marked up by 25%.

What were the purchases and profit for the year?

profit for the

purchases
year
$
$

A 158 600 40 150

B 168 000 29 470
C 168 000 30 730
D 169 100 29 470

14 Which statement is correct in the absence of a partnership agreement?

A Interest is charged on drawings at 5%.

B Only one partner can have a salary.
C Partners are not entitled to interest on capital.
D Profits and losses are shared in the ratio of partners’ capital contribution.

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15 X and Y are in partnership sharing profits and losses equally. They have combined capital
account balances of $200 000.

Z was admitted as a partner. Non-current assets were revalued upwards by $30 000. Goodwill
was valued at $20 000 but was not to be retained in the books of account.

Following Z’s admission the total of the partners’ capital accounts was $270 000.

How much capital did Z contribute?

A $20 000 B $40 000 C $50 000 D $70 000

16 A company’s statement of financial position at 1 January 2020 included the following amounts.

ordinary shares of $5 each 800 000

general reserve 80 000
retained earnings 120 000

The following transactions took place during the year ended 31 December 2020.

1 The company issued a further 50 000 ordinary shares at a premium of $1 per share.
2 The company’s land was revalued upwards by $130 000.
3 The company paid a final dividend of $60 000.

What were the total revenue reserves and capital reserves at 31 December 2020 after these
three transactions?

total revenue total capital

reserves reserves
$ $

A 140 000 180 000

B 190 000 130 000
C 200 000 180 000
D 250 000 130 000

17 A company revalued its premises upwards.

Which statement about the increase in value is correct?

A It is an unrealised profit.
B It is debited to the revaluation reserve.
C It is recorded in the income statement.
D It can be used to pay cash dividends.

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18 The table shows equity and liabilities of a company at 31 December 2020.

ordinary share capital 750 000

6% debentures (2030) 150 000
bank loan (repayable 2024) 75 000
bank overdraft 110 000
mortgage on buildings (repayable 2021) 120 000

What is the total of non-current liabilities in the statement of financial position at

31 December 2020?

A $195 000 B $225 000 C $270 000 D $345 000

19 The non-current asset turnover of a business improved between 2020 and 2021, even though the
net revenue was the same for both years.

What caused the improvement in the ratio?

A a reduction in the level of irrecoverable debts being incurred

B an upwards revaluation of the premises at the year end
C depreciation charged being higher than the cost of new non-current assets
D purchases of new non-current assets being greater than disposals

20 A business provides the following information.

trade payables 39 540

opening inventory 15 450
closing inventory 32 780
credit purchases 184 600
credit sales 230 600

What is the trade payables turnover?

A 63 days B 72 days C 79 days D 87 days

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21 When a company produces 5000 units of a product it requires one supervisor.

If production is increased beyond 5000 units then two supervisors are required.

Which type of cost is this an example of?

A fixed
B semi-variable
C stepped
D variable

22 A business employs 20 workers as production staff. Each worker is employed for 40 hours per
week at a rate of $7.80 per hour.

Bonus is calculated at 20% of basic rate pay per hour for each product manufactured above
120 units per employee.

In a week, each employee produced 145 units.

What were the total wages for the week?

A $7020 B $9984 C $10 764 D $10 920

23 A business uses absorption costing to set its selling prices.

Which overheads are accounted for by the use of the overhead absorption rate?

A total production, administrative and selling

B total production only
C variable production, administrative and selling
D variable production only

24 A business uses absorption costing and applies a mark-up of 50% when setting selling prices.

Each unit of product X has a direct cost of $60 and a selling price of $150 and requires two hours
of machine time.

What is the overhead absorption rate per machine hour?

A $7.50 B $15.00 C $20.00 D $40.00

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25 A business had no opening inventory. In one month it produced 4000 units and sold 3500 units.
The following information is available.

per unit
$

selling price 70
variable cost 30
fixed cost 15

How would inventory value and profit vary between using absorption costing and marginal
costing?

inventory value profit

A absorption costing higher by $7500 absorption costing higher by $7500

B absorption costing higher by $7500 absorption costing lower by $7500
C marginal costing higher by $7500 marginal costing higher by $7500
D marginal costing higher by $7500 marginal costing lower by $7500

26 Which costs are part of the marginal cost of a product?

1 direct material
2 fixed production
3 fixed selling and distribution
4 variable production

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

27 A company provided the following information.

variable costs 540 000

contribution 360 000
fixed production costs 100 000
fixed selling and distribution costs 320 000

What is its budgeted break-even sales revenue?

A $420 000 B $460 000 C $700 000 D $1 050 000

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28 Details for two products made by a company were as follows.

product X product Y
$ $

selling price per unit 13 8

variable cost per unit 11 4

The company could sell a maximum of 11 000 units of X and 9000 units of Y.

However, the company cannot produce more than 10 000 units of X and Y together due to
production constraints.

Which production mix will maximise profits?

units of X units of Y

A 10 000 0
B 1 000 9000
C 9 000 1000
D 5 000 5000

29 A manufacturer has a target profit of $80 000 per annum. Last year the business made a profit of
$60 000 when 10 000 units were produced and sold. Contribution was $10 per unit.

In order to achieve the target profit the plan is to increase advertising by $10 000 per annum.
Variable cost per unit and selling price per unit will remain unchanged.

What will be the total fixed cost if this plan is carried out?

A $20 000 B $30 000 C $40 000 D $50 000

30 Which are advantages of a budgetary control system?

1 Budgets help to prepare year-end financial statements.

2 Budgets may be set at easily achievable levels to make the business appear more
efficient.
3 Managers become responsible for implementing their department’s budget.
4 Where budget targets are not met, corrective action is taken.

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

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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2021 9706/12/O/N/21