Mark Scheme (Results)

June 2011

GCE Accounting
(6001) Paper 01
Edexcel is one of the leading examining and awarding bodies in the UK and
throughout the world. We provide a wide range of qualifications including
academic, vocational, occupational and specific programmes for employers.
Through a network of UK and overseas offices, Edexcel’s centres receive the
support they need to help them deliver their education and training
programmes to learners.
For further information, please call our GCE line on 0844 576 0025, our
GCSE team on 0844 576 0027, or visit our website at www.edexcel.com.

If you have any subject specific questions about the content of this Mark
Scheme that require the help of a subject specialist, you may find
our Ask The Expert email service helpful.

Ask The Expert can be accessed online at the following link:

http://www.edexcel.com/Aboutus/contact-us/

Alternatively, you can contact our Business/Economics Advisor directly by

sending an email to Business specialist on
BusinessSubjectAdvisor@EdexcelExperts.co.uk.
You can also telephone 0844 372 2187 to speak to a member of our subject
advisor team.

June 2011
Publications Code UA027256
All the material in this publication is copyright
© Edexcel Ltd 2011
Question Answer Mark
Number
1(a)(i) Statement of comprehensive income (Trading and profit and loss
account) for the year ended 30 April 2011

£ £
Revenue (sales) 85 524 √
Less
Opening inventory (Stock) 3 810
Ordinary goods purchased (Purchases) 33 290 √
(32 890 + 400) 37 100
Less Closing inventory (Stock) 4 630
Cost of sales (Cost of goods sold) 32 470 √
Gross profit 53 054
Less
Motor vehicle running 4 250 √
General expenses 6 910 √
Repairs to fixtures and fittings 2 000 √
Telephone and broadband 1 450 √
Wages (23 860 - 1 600) 22 260 √
Loan interest (1 750 + 650) 2 400 √
Depreciation - Property 800 √
- Motor vehicle 1 400 √
- Fixtures and fittings 1 800 √
Bad debt 600 √
Increase in PDD 90 √
43 960
Profit for the year (Net profit) 9 094 √ OF (15)
53 054
Question Answer Mark
Number
1(a)(ii) Statement of financial position (Balance sheet) at 30 April 2011

Cost Accumulated NBV

Depreciation
£ £ £
Non-current assets
Property 40 000 7 200 32 800 √OF
Motor vehicle 15 000 9 400 5 600 √OF
Fixtures and fittings 12 000 √ 5 400 6 600 √OF
Other intangible assets (Goodwill) 25 000 √
67 000 22 000 70 000

Current assets
Inventory (stock) 4 630 √
Trade receivables (Debtors) ( 7 850 – 600) 7 250 √
Less PDD 290 √ 6 960
Other receivables (Prepaid) 1 600 √
Cash 5 750 √
18 940
Total assets 88 940

Less
Creditors: amounts due within one year
Trade payables (Creditors) (6 900 √ + 400 √ ) 7 300
Other payables (Accruals) 650 √
7 950
Less
Creditors: amounts falling due after more than one year
8% Bank loan 30 000 √
Total liabilities 37 950

Capital
Balance 1 May 2010 50 600
Profit for the year (Net profit) 9 094
59 694
Less Drawings 8 704
50 990 √OF (15)
Question Answer Mark
Number
1(b)(i) Error of principle √ (1)

Question Answer Mark

Number
1(b)(ii) Valid answers may include:
• Repairs are classed as day to day expenses OR
• Repairs are revenue expenses √√

• Fixtures and fittings contain capital expenditure only OR

(4)
• Fixtures and fittings will last for many years √√

Question Answer Mark

Number
1(b)(iii) Dr Cr
£ £
General expenses and repairs 2 000 √
Fixtures and fittings 2 000 √
Correction of error/Repairs charged to fixtures and fittings account √ (3)

Question Answer Mark

Number
1(c) Straight line Diminishing balance
Calculation Based upon cost less Based upon % of
residual value √√ outstanding book value √√

Depreciation Allows an even amount Allows more depreciation

of depreciation in each in the early years √
year √ (6)

Question Answer Mark

Number
1(d) Valid answers may include:
In favour
• Motor vehicles lose more in value in the early years of ownership
• Statement of financial position (balance sheet) valuation will be more
accurate
• When depreciation costs are added to repair costs the total cost of
owning the asset are fairly even
Against
• Benefit to the business will be the same over the early and later years
• After initial loss, motor vehicle loss in value is constant although
depreciation charge will be variable

√√ per point x 2 in favour plus √√ per point x 2 against. (8)

Question Answer Mark
Number
2(a) Sales Ledger Control Account
£ £
Balance b/d 19 900 √ Bank 425 000 √
Refunds to customers 8 350 √
Dishonoured cheques 1 600 √
Revenue (sales) 420 000 √√ Balance c/d 24 850
449 850 449 850
Balance b/d 24 850 √ (7)

2 (b) Commission Receivable Account

£ £
Balance b/d 4 800 √ Bank 43 500 √
Income statement (P/L) √ 42 000 √√OF Balance c/d 3 300
46 800 46 800
Balance b/d 3 300 √OF

Rent Account
£ £
Balance b/d 1 250 √ Income statement (P/L)√ 5 000 √√
Bank 3 750 √
5 000 5 000

Wages Account
£ £
Balance b/d 400 √ Income statement (P/L)√18 550 √√
Bank 17 800 √
Balance c/d 350 √ .
18 550 18 550
Balance b/d 350
Marketing Expenses Account
£ £
Bank 11 250 √ Balance b/d 750 √
Income statement (P/L)√ 8 350 √√
Balance c/d 2 150 √
11 250 11 250
Balance b/d 2 150 (23)

2 (c) Statement of comprehensive income (profit and loss account )

for the year ended 31 March 2011
£ £
Revenue (sales) 420 000 x 10% 42 000 √√OF
Less
Rent 5 000 √OF
Wages 18 550 √OF
Marketing 8 350 √OF
Sundry expenses 3 600 √
Depreciation 4 600 √ 40 100
Profit for the year (net profit) 1 900 √OF
42 000 (8)
Question Answer Mark
Number
2(d) Accounting concepts - In the search for objectivity, the rules which lay down
the way in which the financial information of the
business is recorded. √√

Accruals concept - Calculates profit for the year on the basis of the
difference between revenues and expenses for the year
rather than the difference between cash receipts and
expenditures. √√

Going concern concept- Unless the opposite is known accounting always

assumes that the business will continue to operate for
an indefinite period. Therefore, it is not necessary to
show what assets would fetch. √√ (6)

Question Answer Mark

Number
2(e) Valid answers may include:
In favour
• Profit figures can be relied upon/asset values are accurate
• Comparison between accounts is possible
• Users can trust the accounts prepared/make decisions based on the
accounts
Against
• Use of concepts often open to a wide interpretation
• Different interpretation in different businesses e.g. materiality
• Concepts can contradict each other
(8)
√√ per point x 2 in favour plus √√ per point x 2 against
Question Answer Mark
Number
3(a) Profit is the difference between revenue and expenses for a period √√

Profitability compares the profit for the period with resources used to
generate that profit e.g. capital employed to obtain a percentage return on
capital employed/e.g. percentage mark-up on sales √√ (4)

Question Answer Mark

Number
3(b) Hilltec Microtech
(i – v) £000 £000

(i) Gross profit to 320 x100 = 40% √√√ 400 x 100 = 50% √√√
revenue (sales) percentage 800 800
(6)

(ii) Profit for the year (Net profit) 50 x 100 = 6.25% √√√ 20 x 100 = 2.5% √√√
to revenue (sales) percentage 800 800
(6)

(iii) Return on capital employed 50 x 100 = 20% √√√ 20 x 100 =10% √√√
250 150 + 50
(6)

(iv) Current ratio 150 + 200 + 60 = 1.17:1 100 + 40 = 2:1

(30)
350 √√√ 70
√√√
(6)

(v) Collection period for trade 200 x 365 = 91.25 days 40 x 365 = 18.25
days
receivables (debtors) 800 √√√ 800 √√√
(6)
Question Answer Mark
Number
3(c) Valid non-financial factors may include:

• Future market potential

• Location of business
• Quality of products sold
• Reputation
• Skill of workforce / Quality of service
• History of industrial relations
• Good relationship with suppliers
• Brand image

√ x 4 factors (4)

Question Answer Mark

Number
3(d) In favour of Hilltec:

• Net profit to revenue is better due to lower wage costs

• Return on capital employed is at a good level
• The business has no loans
• The business has a higher level of non-current assets

In favour of Microtech:

• Gross profit to sales is higher possibly due to more efficient buying

• Net profit to revenue/ Return on capital employed could be much
improved if wage costs could be reduced.
• Current ratio at benchmark level at 2:1
• Efficient collection of debts at 18.25 days

Candidates may recommend either business. Allow OF arguments. (6)

√√ per valid reason x 3 reasons
Question Answer Mark
Number
3(e) Valid points may include:

Points in favour

• Provide a ‘yardstick’ of comparison

• Can be compared with other similar businesses or previous periods
• Provide investors/purchasers etc with an independent assurance

Points against

• Do not consider non financial factors such as potential/ work force

• Look at individual/specific measurements only e.g. liquidity
• Difficult to interpret/may be subjective
• May not be accurate/representative
(8)
√√ per point x 2 in favour plus √√ per point x 2 against.
Question Answer Mark
Number
4(a)(i) Dissolution Account

£ £
Property (premises) 75 000 Trade payables (creditors) 23 000 √
Motor vehicles 18 000 Trade receivables(debtors) 11 000 √
Inventory (stock) 8 500 Marios – Motor vehicle 7 500 √
Trade receivables (debtors) 11 500 √ Woodman & Co 140 000 √
Trade payables (creditors) 21 800 √
Dissolution costs 1 250 √

Profit on dissolution:
Marios 27 270 √OF
Tamsin 18 180 √OF
45 450
181 500 181 500 (9)

Question Answer Mark

Number
4(a)(ii) Capital Accounts

Marios Tamsin Marios Tamsin

£ £ £ £
Motor vehicle 7 500 √ Balance b/d 32 000 25 000
Current a/c 3 000 1 000 √
Bank 54 770 √OF 44 180 √OF Diss’n a/c 27 270 18 180 √OF
62 270 44 180 62 270 44 180 (5)

Question Answer Mark

Number
4(a)(iii) Cash (Bank) Account

£ £
Balance b/d 1 000 Trade payables (creditors) 21 800 √
Trade receivables(debtors) 11 000 √ Dissolution costs 1 250 √
Woodman & Co 140 000 √ Loan – Marios 30 000 √
Capital – Marios 54 770√
Tamsin 44 180
152 000 152 000 (6)
Question Answer Mark
Number
4(b) Possible reasons:

• Retirement
• Death
• Disagreement
• Admission of a new partner
• Sale of business
• If a partner wants to leave

√ per reason x 2 reasons (2)

Question Answer Mark

Number
4(c)(i) Goodwill is the value/price paid for a business over and above the net value
of the assets √√ (2)

Question Answer Mark

Number
Possible reasons:
4(c)(ii)
• Location
• Reputation
• Specialist product or service

√√ per reason x 2 reasons (4)

Question Answer Mark
Number
4(d) Valid points may include:

Points in favour:

• More capital available

• Greater skill base
• Decisions made jointly and possibly more considered
• Holiday/sickness cover

Points against:

• Profits shared
• Cannot make decisions alone
• Conflicts may arise

√√ per valid point x 2. MAXIMUM one point in favour and one against (4)
Question Answer Mark
Number
5(a) Stock valuation relates to the price attached to the issue of stock to the
production department or for resale/for the valuation of closing stock. A
method such as FIFO will be used resulting in the issue price probably being
different from the price paid. √√

Stock rotation relates to physical rotation of stock, the oldest stock will be
issued first to avoid deterioration. √√ (4)

Question Answer Mark

Number
5(b) Stock valuation - FIFO
£
1 April Purchased 1 000 @ £20 =20 000
20 April Purchased 1 500 @ £22 =33 000
53 000
Less
Issued 1 000 @ £20
Issued 1 000 @ £22 42 000
Stock valuation 11 000 √√√√
Less
Repair costs of 200 phones 1 200 √√
Net valuation of stock 9 800 √√OF (8)

Question Answer Mark

Number
5(c) (i) Income statement (trading and profit & loss account) for the month of
and (ii) April 2011
£ £
Revenue (sales) 800 Low tariff 12 800 √√
1 200 High tariff 39 600 √√ (4)
52 400
Less
Purchases 53 000
Closing inventory (stock) (9 800)
Cost of sales 43 200 √√OF
Gross profit 9 200

Less
Wages and salaries (4 320 + 730) 5 050 √
Mobile phone network charges 5 000 √
Depreciation 1 400 √
11 450
Loss for the month (net loss) (2 250) √OF (6)
Question Answer Mark
Number
5(d)(i) Low tariff High tariff

Monthly charge £8 √ £20 √

Call charges £30 √ £7.50 √
£38 £27.50

(ii) For the usage that Hinal will make of the mobile phone he is advised to enter
into a High tariff contract. √√ Accept OF recommendation. (6)

Question Answer Mark

Number
5(e) Valid points may include:

Points in favour
• Accepted by the tax authorities/accounting standards
• Is logical in that the oldest stock values are sold/issued first
• Gives a higher closing stock value and higher profits when prices are
rising.

Points against
• Stock is sold/issued at values that may be below current market prices
• Higher profits will mean higher taxes.

√√ per valid point x 2. MAXIMUM one point in favour and one against.
(4)

Question Answer Mark

Number
6(a)(i) Appropriation is the way that overheads are shared/divided between various
departments or cost centres. √√ This could involve allocation and/or
apportionment. √√

The costs may be shared on the most reasonable basis available √√ e.g. floor
area for rent. √√

Any two points x √√ (4)

Business advertising is undertaken to increase sales and therefore it would be

(ii)
best to apportion this cost on the basis of the revenue (sales). √√ (2)
Question Answer Mark
Number
6(b) Departmental income statement (trading and profit & loss account) for
the year ended 31 March 2011
Shop sales Workshop repairs
£ £
Revenue (sales) 120 000 60 000
Less
Opening inventory (stock) 38 000 √ 2 100 √
Purchases 84 000 √ 7 100 √
Internal transfers (5 600) √ 5 600 √
116 400 14 800
Closing inventory (stock) 47 500 √ 0√
Cost of sales 68 900 14 800
Gross profit 51 100 45 200
Less
Motor running expenses 6 400 √ 9 600 √
Wages 16 800 √ 25 200 √
Rent and rates 3 000 √ 6 000 √
General expenses 7 000 √ 5 500 √
Business advertising 7 200 √ 3 600 √
Provision for doubtful debts 440 √ 750 √
40 840 50 650
Profit /loss for the year (net profit) 10 260 √OF (5 450) √OF
51 100 45 200 (22)

Question Answer Mark

Number
6(c) Valid points may include (accept OF comments):

Points in favour:
• Shop sales are more profitable than workshop repairs
• Costs such as wages may be able to be reduced
• The repair shop makes losses.

Pointsagainst:
• Workshop overheads are greater than shop overheads
• Workshop overheads will have to be borne by the shop sales
• Sales may be affected because the business will not offer repair
facilities
• Loss of image/business reputation affected as a result of redundancies
• Cost of redundancies.

√√ per valid point x 2. MAXIMUM one point in favour and one against (4)
Question Answer Mark
Number
7(a) (iii) √

A suspense account is opened as a temporary measure when the trial balance

fails to agree √√. It has a balance equal to the net balance of all errors in the
ledger √√. (5)

Question Answer Mark

Number
7(b) Statement of corrected gross profit at 30 March 2011
£
Gross profit 37 780
(i) Sale or return (860) √√
(ii) Goods at list price (250) √√
(i) PDB – February (5 000) √√
Corrected gross profit 31 670 √ (7)

Question Answer Mark

Number
7(c) Journal of Zahin
Dr Cr
£ £
Suspense 850 √
Discount received 850 √

A Milner 950 √
M. Mills 950 √

Sundry expenses 360 √

Suspense 360 √

Income statement (profit & loss) 900 √

Provision for depreciation (disposal) 900 √ (8)

Question Answer Mark

Number
7(d) Statement of corrected profit for the year (net profit) at 30 March 2011
Increase Decrease
£ £
(iv) Discount received 850 √√
(v) Error of commission No Effect √√
(vi) Sundry expenses (360) √√
(vii) Depreciation (900) √√
(8)
Question Answer Mark
Number
7(e) Valid points may include:

Points in favour:

• The trial balance is a checking device

• Is ‘prima facie’ evidence that the books are correct when the trial
balance balances

Points against:

• Certain errors, e.g. commission, are not revealed

• Shows only arithmetical errors
• Does not show location of errors
(4)
√√ per valid point x 2. MAXIMUM one point in favour and one against
Further copies of this publication are available from
Edexcel Publications, Adamsway, Mansfield, Notts, NG18 4FN

Telephone 01623 467467

Fax 01623 450481
Email publication.orders@edexcel.com
Order Code UA027256 June 2011

For more information on Edexcel qualifications, please visit

www.edexcel.com/quals

Pearson Education Limited. Registered company number 872828

with its registered office at Edinburgh Gate, Harlow, Essex CM20 2JE