CAMBRIDGE INTERNATIONAL EXAMINATIONS

Cambridge International Advanced Subsidiary and Advanced Level

MARK SCHEME for the October/November 2015 series

9706 ACCOUNTING
9706/21 Paper 2 (Structured Questions – Core),
maximum raw mark 90

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.

Cambridge will not enter into discussions about these mark schemes.

Cambridge is publishing the mark schemes for the October/November 2015 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.

® IGCSE is the registered trademark of Cambridge International Examinations.

 Page 2 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2015 9706 21

1 (a) The City Cricket Club Refreshments Trading Account for the year ended 30 September 2015

$ $
Sales of refreshments 4430
Less cost of sales
Opening inventory 770
Purchases (2697 + 840 (1) – 960 (1)) 2577
3347

Less closing inventory 590 2757

Gross profit 1673 (1)OF [3]

(b)
The City Cricket Club

Income and Expenditure Account for the year ended 30 September 2015
$ $
Profit from sales of refreshments 1 673
Subscriptions (670 (1) + 320 (1) + 6650
–240 (1) – 540 (1) – 400 (1) 6 460
Life membership transfer 320 (1)
Advertising revenue 2 600
Donations 770
11 823

Less expenses
Groundsman’s wages 3 500
Travelling expenses 942
Rent 4 500
Depreciation (W1) 2 000
Loss on disposal 250 (1)
Interest on loan 250 (1)
Bad debts 50 (1) 11 492
Surplus for the year 331 (1)OF
[12]

W1 1140 + 500 (1) + 360 (1)

OR

1070 + 570 (1) +360 (1)

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Page 3 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2015 9706 21

(c)
Statement of Financial Position at 30 September 2015

Non-current assets Cost Accumulated NBV

depreciation
$ $ $
Equipment (W1) 9 300 3 550 (2)OF 5 750
Current assets
Inventory 590
Subscriptions in arrears 270 (1)
Bank 6 315 (1) 7 175
Current liabilities
Subscriptions in advance 540
Interest due 250 (1)
Trade payable for refreshments 840 1 630 5 545
11 295

Accumulated fund (12 514 – 9430) 3 084 (1)

Add surplus 331 (1)OF
3 415

Life membership fund (W2) 2 880 (1)OF

Non-current liabilities – 5% loan (2017) 5 000 (1)

11 295
[9]

WORKINGS

W1 Statement of financial position

Accumulated Depreciation
= 4800 – sold 3250 = 1550 (1) + 2000(1)OF = 3550
Non-current assets and Depreciation 10 700 – 5000 = 5700 + 3600
= 9300 non-current assets
Sale of equipment 5000 – 3500 (5000 × 20% × 3.25yrs)
= 1750 (Process 1500, Loss 250)

W2 Life membership 2800 + 400 = 3200 – trf 10% = 320 =2880

(d) The fund contains large sums paid by members for a life subscription to the club (1). The full
amount cannot be charged in one year to the Income and Expenditure account (1) as this will
inflate the income (1) for that year and it cannot be compared satisfactorily to other year’s (1)
Accordance with the matching concept (1).

1 mark per point (Max 3) [3]

(e) The cashbook does not include non-cash items e.g. depreciation (1) The bank also includes
items which are not in the income and expenditure account such as the sale of assets
increase the amount of cash there (1) The Income and expenditure deals only with the
current year but the bank account includes cash brought forward from the previous period (1)

1 mark per point [3]

[Total: 30]

© Cambridge International Examinations 2015

 Page 4 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2015 9706 21

2 (a) Profit and loss appropriation account for the year ended 31 May 2015

$ $
Profit for the year 90 000

Add interest on drawings

Alex 200 (1)
Barry 480 (1)
680

90 680
Less interest on capital
Alex 4 500 (1)
Barry 3 000 (1)
7 500

83 180

Less Salary 6 000 (1)

Barry
77 180

Share of profit
Alex 57 885 (1)OF
Barry 19 295 (1)OF
77 180
[7]

(b)
Current accounts

Alex Barry Alex Barry

$ $ $ $
Balance b/d 12 500 Balance b/d 14 000 (1)
Int on drawings 200 480 (1)OF Int on loan 1 500 1 600 (1)
Drawings 5 000 12 000 (1)
Balance c/d 72 685 4 915 (1)OF Int on capital 4 500 3 000 (1)OF
Salary 6 000 (1)
Share profit 57 885 19 295 (1)OF
77 885 29 895 77 885 29 895
Balance b/d 72 685 4 915
[8]

(c) Sharing losses. (1)

Introduction of capital. (1)
Bringing more expertise to the business. (1)
Reducing the workload of the partners. (1) [Max. 2] [2]

© Cambridge International Examinations 2015

 Page 5 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2015 9706 21

(d)
Capital accounts

Alex Barry Cesar Alex Barry Cesar

$ $ $ $ $ $
Goodwill 30 000 20 000 10 000 (3) Balance 90 000 60 000 (1)
Bank 100 000 (1)
Balance c/d 105 000 55 000 90 000 (1)OF Goodwill 45 000 15 000 (2)
135 000 75 000 100 000 135 000 75 000 100 000
Balance b/d 105 000 55 000 90 000
[8]

(e)
Statement of corrected net profit

$
Original Net Profit + – 90 000
$ $
1 Sales day book 20 000 (1) 110 000
2 Inventory 2 000 (1) 108 000
3 Repairs 7 000 (1) 101 000
4 Purchase invoice 3 600 (1) 97 400 (1)OF

[5]

[Total: 30]

© Cambridge International Examinations 2015

 Page 6 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2015 9706 21

3 (a) Overhead Analysis Sheet

Basis of
Overheads Machining Assembling Maintenance Totals
Apportionment

$ $ $ $

Rent floor area 5 600 4 000 3 200 12 800 (1)

Machinery value of
5 200 4 800 10 000 (1)
depreciation machinery

Power kilowatt hours 3 600 2 700 900 7 200 (1)

Supervision of number of
2 560 1 920 1 920 6 400 (1)
employees employees

Indirect
allocated 300 268 320 888 (1)
materials

Indirect labour allocated 2 720 1 480 860 5 060 (1)

19 980 15 168 7 200 42 348

re-
apportionment
3744 3456
of maintenance (7 200) (1)
(1) (1)
department
overheads

23 724 18 624 (1)OF 42 348

[10]

(b) (i) Machining – Overhead absorption rate

(1) (OF) (1) (with narrative)
Machine dept overhead $23 724
= = $1.69 per machine hour
Machine hours 14 000
(1)

(ii) Assembling – Overhead absorption rate

(1) (OF)(1) (with narrative)

Assembling dept overhead $18 624
= = $3.10 per direct labour hour
Direct labour hours 6 000
(1)
[6]

© Cambridge International Examinations 2015

Page 7 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2015 9706 21

(c) (i) Cost statement – Job 68

$
Direct materials 3 600
Direct labour 1 900
PRIME COST 5 500 (1)
Total overhead *355 (4) (OF)
TOTAL COST 5 855

$
Overhead calculation
Machining – 100 hours × $1.69 = 169
Assembling – 60 hours × $3.10 = 186 $355

*[Needs the correct hours for 1 mark and the absorption rate from part (b) for 1 mark]
× 2. [5]

(ii) (1) (OF) (1) (1) (OF)

100 100
SP = TOTAL COST × = $5855 × = ($7318.75) = $7319
80 80

[3]

(d) (i) Overhead over absorption

Machining department over absorbed. (1)

Over absorption of overheads means that the absorbed overheads were more than the
actual overhead expenditure incurred. (1)

In the machining department indirect wages of $2720 were absorbed into production.
This was $700 more than the actual overhead. Over-absorption of overhead occurred.
(1)

A credit for $700 should be made to the income statement. (1)

(Max 3)

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Page 8 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2015 9706 21

(ii) Overhead under absorption

Assembling department under-absorbed. (1)

Under-absorption of overheads means that the amount of overheads absorbed into

production was less than the amount of actual overheads incurred. (1)

In the assembly department the number of direct labour hours worked was less than
estimated.

Absorption rate from (b) (ii) was $3.10 per direct labour hour.

Total overhead to be absorbed was $18 624.

Using the actual labour hours worked the overhead absorbed would be

5570 × $3.10 = $17 267 (1)

Conclusion – overhead under- absorbed of $1357 – This would be debited to the

income statement. (1)
(Max 3)

NOTE

One mark for identifying the correct department

One mark for an explanation of over or under absorption
One mark for some illustration relating to the figures
One mark for the entry required in the income statement.
(Max 3 in each part) [6]

[Total: 30]

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