Cambridge International AS & A Level

ACCOUNTING 9706/22
Paper 2 Fundamentals of Accounting February/March 2023
MARK SCHEME
Maximum Mark: 90

Published

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 International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the February/March 2023 series for most
Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level
components.

This document consists of 16 printed pages.

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Generic Marking Principles

These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.

GENERIC MARKING PRINCIPLE 2:

Marks awarded are always whole marks (not half marks, or other fractions).

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these
features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.

GENERIC MARKING PRINCIPLE 4:

Rules must be applied consistently, e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.

GENERIC MARKING PRINCIPLE 5:

Marks should be awarded using the full range of marks defined in the mark scheme for the question
(however; the use of the full mark range may be limited according to the quality of the candidate
responses seen).

GENERIC MARKING PRINCIPLE 6:

Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.

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Social Science-Specific Marking Principles

(for point-based marking)

1 Components using point-based marking:

• Point marking is often used to reward knowledge, understanding and application of skills.
We give credit where the candidate’s answer shows relevant knowledge, understanding
and application of skills in answering the question. We do not give credit where the answer
shows confusion.

From this it follows that we:

a DO credit answers which are worded differently from the mark scheme if they clearly
convey the same meaning (unless the mark scheme requires a specific term)
b DO credit alternative answers/examples which are not written in the mark scheme if they
are correct
c DO credit answers where candidates give more than one correct answer in one
prompt/numbered/scaffolded space where extended writing is required rather than list-type
answers. For example, questions that require n reasons (e.g. State two reasons …).
d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required.
(Check for evidence it is understood and not used wrongly.)
e DO NOT credit answers which are obviously self-contradicting or trying to cover all
possibilities
f DO NOT give further credit for what is effectively repetition of a correct point already
credited unless the language itself is being tested. This applies equally to ‘mirror
statements’ (i.e. polluted/not polluted).
g DO NOT require spellings to be correct, unless this is part of the test. However spellings of
syllabus terms must allow for clear and unambiguous separation from other syllabus terms
with which they may be confused (e.g. Corrasion/Corrosion)

2 Presentation of mark scheme:

• Slashes (/) or the word ‘or’ separate alternative ways of making the same point.
• Semi colons (;) bullet points (•) or figures in brackets (1) separate different points.
• Content in the answer column in brackets is for examiner information/context to clarify the
marking but is not required to earn the mark (except Accounting syllabuses where they
indicate negative numbers).

3 Calculation questions:
• The mark scheme will show the steps in the most likely correct method(s), the mark for
each step, the correct answer(s) and the mark for each answer
• If working/explanation is considered essential for full credit, this will be indicated in the
question paper and in the mark scheme. In all other instances, the correct answer to a
calculation should be given full credit, even if no supporting working is shown.
• Where the candidate uses a valid method which is not covered by the mark scheme,
award equivalent marks for reaching equivalent stages.
• Where an answer makes use of a candidate’s own incorrect figure from previous working,
the ‘own figure rule’ applies: full marks will be given if a correct and complete method is
used. Further guidance will be included in the mark scheme where necessary and any
exceptions to this general principle will be noted.

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4 Annotation:
• For point marking, ticks can be used to indicate correct answers and crosses can be used
to indicate wrong answers. There is no direct relationship between ticks and marks. Ticks
have no defined meaning for levels of response marking.
• For levels of response marking, the level awarded should be annotated on the script.
• Other annotations will be used by examiners as agreed during standardisation, and the
meaning will be understood by all examiners who marked that paper.

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Abbreviations and guidance

The following abbreviations may be used in the mark scheme:

OF = own figure. The answer will be marked correct if a candidate has correctly used their own
figure from a previous part or calculation.

W = working. The working for a figure is given below. Where the figure has more than one mark
associated with it, the working will show where individual marks are to be awarded.

CF = correct figure. The figure has to be correct i.e. no extraneous items have been included in the
calculation.

Extraneous item = an item that should not have been included in a calculation, including indirect
expenses such as salaries in calculation of gross profit when there is one OF mark for gross profit’.

Curly brackets, }, are used to show where one mark is given for more than one figure. If the
figures are not adjacent, each is marked with a curly bracket and a symbol e.g. }*

row = all figures in the row must be correct for this mark to be awarded.

Marks for figures are dependent on correct sign/direction

Accept other valid responses. This statement indicates that marks may be awarded for answers
that are not listed in the mark scheme but are equally valid.

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ANNOTATIONS

The following annotations are used in marking this paper and should be used by examiners.

Annotation Use or meaning

 Correct and relevant point made in answering the question.

× Incorrect point or error made.

LNK Two statements are linked.

REP Repeat

A An extraneous figure

BOD Benefit of the doubt given.

SEEN Noted but no credit given

OF Own figure

Highlight Highlight

Off page Off page comment

Comment

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Question Answer Marks

1(a) Prepare the statement of profit or loss for the year ended 31 December 2022. 9

Nibras and Raif

Statement of profit or loss for the year ended 31 December 2022

$ $

Revenue 88 300 (1)

Add income:

Allowance for irrecoverable debts 380 (1)

Rent receivable 6 600 (1)

6 980

95 280

Less expenses:

Insurance 13 200 (1)

Interest on loan (Raif) 900 (1)

Motor vehicle expenses 12 420

Repairs and maintenance 8 270

Wages and salaries 18 460

Depreciation:

Motor vehicles 27 700 (1)

Premises 4 400 (1)

85 350 (1)

Profit for the year 9 930 (1) OF

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Question Answer Marks

1(b) Prepare the appropriation account for the year ended 31 December 2022. 3

Appropriation account for the year ended 31 December 2022

$ $

Profit for the year 9 930

Less: interest on
capitals

Nibras (18 000) } (1) for

both
Raif (12 000) }

(30 000)

(20 070)

Less: salary (6 000) (1)

(Nibras)

(26 070)

Shares of residual
loss

Nibras (15 642) } (1) OF for

both
Raif (10 428) }

(26 070)

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Question Answer Marks

1(c) Calculate by how much Nibras’ current account balance at 31 December 8

2022 would have been different if there had been no partnership agreement
during the year ended 31 December 2022.

With agreement
$ $

Opening balance 5 950 *(1) OF Salary 6 000 (1) OF

both *

Share of loss 15 642 (1) OF Interest on 18 000

capital

Drawings 19 200 (1) Closing balance 16 792 * both

40 792 40 792

Without agreement
$ $

Opening balance 5 950 * (1) OF Share of profit 5 190 (1)

both * (50%)

Drawings 19 200 (1) Closing balance 19 960 * both

25 150 25 150

Result:
The current account balance would decrease by ($19 960 – $16 792)
= $3 168 (1) OF

1(d) State one reason for including interest on drawings in a partnership 1

agreement.

Interest on drawings will deter a partner from making excessive drawings (1).

1(e) State the double entry for recording interest on drawings. 2

Debit: partners’ current accounts (1)

Credit: appropriation account (1)

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Question Answer Marks

1(f) Advise the partners which option they should choose. Justify your answer 7
by discussing both options.

Option 1 (max 3)
• Will be a permanent source of capital (1)
• Will not affect the profit before appropriation (1)
• Nibras may expect greater rewards/more control (1)

Option 2 (max 3)
• Temporary source of finance so no longer-term adverse implications (1)
• Interest charges will reduce profits (1)
• Will the partnership be able to obtain a bank loan? (1)

Decision supported by a comment (1)

Accept other valid responses.

Question Answer Marks

2(a) Prepare the kitchen equipment account for the year ended 31 December 4
2022.

Kitchen equipment

2022 $ 2022 $

Jan 1 Balance 3 450 (1) Dec Statement of 1 180 (1)OF

b/d 31 profit or loss /
Depreciation

Dec Cash 1 680 (1) Dec Balance c/d 3 950

31 31

5 130 5 130

2023

Jan 1 Balance 3 950 (1)

b/d

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Question Answer Marks

2(b) State two reasons why the reducing balance method of depreciation might 2
be chosen by a business for depreciating non-current assets.

• Takes account of the fact that some non-current assets lose most value in
earlier years (1)
• May equalise the charge against profits each year when maintenance costs
are taken into account (1)
• Matches depreciation to earlier years when non-current asset provides most
benefit to business (1)

Max 2
Accept other valid responses.

2(c) Prepare a journal entry to record the charge for depreciation of vehicles for 5
the year ended 31 December 2022. A narrative is not required.

Journal

Dr Cr
$ $

Statement of profit or loss 9 000 (1) OF

Provision for depreciation 9 000 (1) OF

Workings

Net book value of original delivery vehicle: ($24 000 – $10 500) = $13 500 (1)

Cost of new delivery vehicle: $22 500 + $13 500 = $36 000 (1)

Depreciation on new delivery vehicle: 25%  $36 000 = $9 000 (1)OF

2(d)(i) Define each of the following terms: 1

capital expenditure.

A payment to purchase a non-current asset for example purchase of property (1)

2(d)(ii) Define each of the following terms: 1

capital receipts.

Receipt from non-recurring activities for example sale of property (1)

2(e)(i) Calculate the total amount for each of the following: 1

capital expenditure.

$94 200 (1)

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Question Answer Marks

2(e)(ii) Calculate the total amount for each of the following: 1

capital receipts.

$67 800 (1)

Question Answer Marks

3(a)(i) Calculate each of the following ratios for the year ended 30 November 2022. 2

Acid test ratio (to two decimal places)

Current assets less inventory $15 850

= (1) = 0.87:1 (1)
Current liabilities $18 300

3(a)(ii) Calculate each of the following ratios for the year ended 30 November 2022. 2

Trade receivables turnover (days)

Trade receivables  365 $9 600

= (1)  365 = 37 days (1)
Credit Sales $94 800

3(a)(iii) Calculate each of the following ratios for the year ended 30 November 2022. 2

Trade payables turnover (days)

Trade payables  365 $6 580

= (1)  365 = 28 days (1)
Credit purchases $88 300

3(b) Explain the importance of the acid test ratio to a business. 2

The acid test ratio indicates its ability to pay its short-term debts (1) without selling
its inventory (1).

Max 2
Accept other valid responses.

3(c) Identify two ways in which the owner of a business could improve the acid 2
test ratio.

Reducing cash drawings (1)

Borrowing more long-term (1)
Investing more capital (1)
Sale of non-current assets (1)
Reduce inventory holding (1)

Max 2
Accept other valid responses.

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Question Answer Marks

3(d) Discuss the changes that have occurred in the trade receivables turnover 5
ratio and the trade payables turnover ratio for Haniya’s business during the
year ended 30 November 2022

The trade receivables ratio has worsened (1) reducing liquidity. There could be
less control over credit customers leading to irrecoverable debts (1)

The trade payables ratio has improved (1) reducing liquidity. This may attract
more discounts received improving profits (1)

The business may experience cash flow problems as a result of paying suppliers
before receiving settlement from customers (1)

Max 5
Accept other valid responses.

Question Answer Marks

4(a)(i) Define each of the following terms: 1

contribution per unit

Contribution per unit is the difference between the selling price per unit and the
variable costs per unit (1)

4(a)(ii) Define each of the following terms: 1

stepped costs.

Stepped costs are fixed for a given level of activity and change when that level is
exceeded (1)

4(a)(iii) Define each of the following terms: 1

margin of safety.

Margin of safety is the difference between actual/forecast output and the break-
even level of output (1)

4(b) State two benefits of using marginal costing. 2

Avoids the arbitrary apportionment of fixed costs (1)

Avoids problems of under- or over-absorption of overheads (1)
Useful for short-term decision making (1)
Enables identification of breakeven point/margin of safety (1)
Identifies the relative merits of each product where a variety of products are made
(1)

Max 2
Accept other valid responses.

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Question Answer Marks

4(c) Calculate the monthly break-even point in units. 3

Contribution per unit is: $59 – ($21.60 + $32.80) = $4.60 (1)

Break-even point is: $18 400/$4.60 (1)OF = 4000 units (1) OF

4(d) Prepare a marginal costing statement to show the monthly forecast profit if 7
the improved product is made.

G Limited
Marginal costing statement for one month for improved product

$ $

Revenue: 8640  $65 561 600 (1)

Less variable costs

Materials 8640  $27.60 238 464 (1)

Labour

Normal working: 8000  4  $8.20 262 400 (1)

Overtime: 640  4  $12.30 31 488 (1)

(532 352)

Contribution 29 248 (1) O

F

Less fixed costs $18 400 + $500 (18 900) (1)

Profit for month 10 348 (1) O

F

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Question Answer Marks

4(e)(i) Calculate the profit for the 8 weeks for each option. 4

Option A

Contribution from 6 machines 216 000 (1)

Additional contribution from overseas supplier

(75%  9600 units)  contribution ($42 – $34) 57 600 (1)

273 600

Less fixed costs ($12000  8) + $4200 (100 200) (1)

Profit for two months 173 400 (1)OF

4(e)(ii) Calculate the profit for the 8 weeks for each option. 4

Option B

Contribution from 6 machines 216 000

Additional contribution from 2 hired machines

(7 weeks  2 machines  300 units)  $15 63 000

279 000 (1)

Less fixed costs W1 (98 800) (2)

Profit for two months 180 200 (1)OF

W1 Fixed costs Option B:

$96 000 + hire charges (7 weeks  2 machines  $150, i.e. $2 100) + training
costs $700 (1) = $98 800 (1) OF

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Question Answer Marks

4(f) Advise the directors which option they should choose. Justify your answer 7
by considering both financial and non-financial factors.

Option A (Max 3)

• Regular customers are more likely to be supplied (1)

• Will quality be maintained for goods bought in? (1)
• Reliability of overseas supplier (1)
• Risk losing customers if the quality is not acceptable (1)
• Is delivery guaranteed? (1)
• Is delivery cost guaranteed (1)
• Any possibility of exchange rate problems? (1)
• Possibility of damage in transit (1)
• Effect on the labour force due to reduced production (1)

Option B (Max 3)

• Produces higher profit (1)

• Regular customers may not be supplied / regular customers may go to
competitors (1)
• Will efficiency suffer due to working on new machines? (1)
• Do they have any contingency plans for any further machinery problems (1)

Decision supported by a comment (1)

Accept other valid responses.

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