9706 Example Candidate Responses Paper 3 (For Examination From 2016)

Cambridge International AS and A Level
Accounting
9706
Paper 3 – Structured Questions
For examination from 2016
Cambridge International AS and A Level A 9700 1

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Contents
Contents .............................................................................................................................. 3
Introduction .......................................................................................................................... 4
Assessment at a glance ....................................................................................................... 6
Paper 3 – Structured Questions........................................................................................... 7
Question 1 ........................................................................................................................ 7
Question 2 ...................................................................................................................... 16
Question 3 ...................................................................................................................... 26
Question 4 ...................................................................................................................... 36
Question 5 ...................................................................................................................... 45
Question 6 ...................................................................................................................... 52
Introduction
Introduction
The main aim of this booklet is to exemplify standards for those teaching Cambridge International AS and
A Level Accounting (9706), and to show how different levels of candidates’ performance (high, middle and
low) relate to the subject’s curriculum and assessment objectives.
In this booklet, candidate responses have been chosen to exemplify a range of answers. Each response is
accompanied by a brief commentary explaining the strengths and weaknesses of the answers.
For each question, each response is annotated with a clear explanation of where and why marks were
awarded or omitted. This, in turn, is followed by examiner comments on how the answer could have been
improved. In this way it is possible for you to understand what candidates have done to gain their marks and
what they will have to do to improve their answers. At the end there is a list of common mistakes candidates
made in their answers for each question.
This document provides illustrative examples of candidate work. These help teachers to assess the standard
required to achieve marks, beyond the guidance of the mark scheme. Some question types where the
answer is clear from the mark scheme, such as short answers and multiple choice, have therefore been
omitted.
The questions, mark schemes and pre-release material used here are available to download as a zip file
from Teacher Support as the Example Candidate Responses Files. These files are:
Question Paper 22, June 2016

Question paper 9706_s16_qp_22.pdf
Mark scheme 9706_s16_ms_22.pdf
Question Paper 32, November 2016
Question paper 9706_w16_qp_32.pdf
Mark scheme 9706_w16_ms_32.pdf
Past papers, Examiner Reports and other teacher support materials are available on Teacher Support at
https://teachers.cie.org.uk
4 Cambridge International AS and A Level Accounting 9706

Introduction
How to use this booklet
Answers by real candidates in exam

Examiner comments are
conditions. These show you the types
alongside the answers,
of answers for each level.
linked to specific part of the
Discuss and analyse the answers with
answer. These explain
your learners in the classroom to
where and why marks
improve their skills.
were awarded. This helps
you to interpret the
standard of Cambridge
exams and helps your
learners to refine their
exam technique.
This explains how the candidate could have improved

their answer and helps you to interpret the standard of
Cambridge exams and helps your learners to refine
exam technique.
This lists the common mistakes candidates made in

answering each question. This will help your learners to
avoid these mistakes at the exam and give them the
best chance of achieving a high mark.
Cambridge International AS and A Level Accounting 9706 5

Assessment at a glance
Assessment at a glance
For Cambridge International AS & A Level Accounting, candidates:

 take Papers 1 and 2 only (for the Cambridge International AS Level qualification)
or
 follow a staged assessment route by taking Papers 1 and 2 (for the Cambridge International AS Level
qualification) in one series, then Paper 3 (for the Cambridge International A Level qualification) in a later
series
or
 take Papers 1, 2 and 3 in the same examination series, leading to the full Cambridge International
A Level.
All components are externally assessed.
Weighting
Component
AS Level A Level
Paper 1 Multiple Choice 1 hour

30 multiple choice questions based on the AS Level syllabus content 30% 15%
30 marks
Paper 2 Structured Questions 1 hour 30 minutes

Four structured questions on the AS Level syllabus content
Question 1 on financial accounting (30 marks)
70% 35%
Questions 2 and 3 on financial accounting (2  15 marks)
Question 4 on cost and management accounting (30 marks)
Total 90 marks
Paper 3 Structured Questions 3 hours

Paper 3 tests the additional content for the A Level, but also requires a
knowledge and understanding of the AS Level content.
Section A: Four structured questions on financial accounting (4  25
– 50%
marks)
Section B: Two structured questions on cost and management accounting
(2  25 marks)
Total 150 marks
Teachers are reminded that the latest syllabus is available on our public website at www.cie.org.uk and
Teacher Support at https://teachers.cie.org.uk

Question 1
Example candidate response – high Examiner comments

1 1 This script is a good
example of a high-level
answer.
2 No marks are awarded

for the third answer. The
question asked candidates
to state the difference
between a donation and a
member subscription. This
answer simply states
features of each.
2
Mark for (a) = 2/3
3 No marks are awarded

for the shopkeeper's wages.
3
The candidate does not
adjust the accruals and
prepayments correctly.

Example candidate response – high, continued Examiner comments
Mark for (b) = 13/15
4 This is a good answer.

The candidate recognises
that there will be a possible
hidden cost of lower quality,
which may reduce sales if
the chairman buys cheaper
4 products.

5 The candidate looks

closely at the impact of
employing new, cheaper
shop staff, by considering
the training cost
implications. Excellent
points.
5
Mark for (c) = 4/4
6 A fully correct answer.
Mark for (d) = 3/3

6
Total marks awarded =
22 out of 25
How the candidate could have improved their answer

(a) This candidate needed to provide one more difference between a donation and a member subscription to
gain the third mark.
(b) The candidate needed to apply the opening and closing adjustments for the shopkeeper’s wages in the
correct direction.
Mark awarded = (a) 2/3

Mark awarded = (b) 13/15
Mark awarded = (c) 4/4
Mark awarded = (d) 3/3
Total marks awarded = 22 out of 25

Example candidate response – middle Examiner comments

1
1 This answer is awarded
17/25. It is a good example
of a middle-level script.
2 This is a good example

2 of showing workings; doing
this allows the examiner to
refer to them and award
marks as appropriate.
3 The candidate correctly

identifies two differences
between a donation and a
3 member's subscription.
However, the question
asked for three differences,
so only two marks can be
awarded.
Mark for (a) = 2/3

Example candidate response – middle, continued Examiner comments
4 Good labelling of gross

profit.
5 The figure for water and

4
electricity is incorrect.
Looking back at the
5 workings above, it can be
seen that the candidate has
applied the adjustments of
$2 700 and $2 000 in the
wrong direction.
6 Again, good labelling,

allowing the examiner to
reward the own figure loss
6 for the year.
Mark for (b) = 12/15
7 Although it is a good
thing to do, motivating staff
7 will not necessarily increase
takings and reduce the
shop loss.
8 No marks can be
awarded for this. The
candidate does not
acknowledge the cost
8 associated with training. It is
also debatable whether
training alone will increase
takings or reduce the shop
loss.
Mark for (c) = 0/4

9 A perfectly correct
calculation.
9
Mark for (d) = 3/3

17 out of 25

(a) The candidate needed to give another difference here.
(b) The candidate used the wrong payment figure for the water and electricity ($14 500 rather than $14 800).
This led to an incorrect calculation of the charge allocated to the shop trading account.
(c) Neither of the two suggestions for improving the shop sales was valid. Ideas which would have a direct
and immediate impact on the level of sales in the shop were required here.


Example candidate response – low Examiner comments

1 1 Overall, this answer
scores 11/25 and is an
example of a low-level
script.
2
2 This is a good answer,
with the candidate
identifying three clear
differences between a
donation and a member
subscription.
Mark for (a) = 3/3
3 Very few marks can be

awarded here because the
3 expenses for depreciation
of the shop equipment,
shop insurance, and shop
water and electricity have
not been included. The
question identified the
proportions of the total for
insurance and electricity
4
that should be allocated to
the shop, together with
5 accruals and prepayments
in respect of them.
4 Good labelling of gross

profit.
5 Although the candidate

correctly includes the
shopkeeper’s wages as an
expense, the adjustments
for accrued and prepaid
wages has not been made
correctly, so no marks can
be awarded.
Mark for (b) = 4/15

Example candidate response – low, continued Examiner comments

6 Improving customer
service is not considered a
6 valid way to improve the
profit of the shop.
7 Attempting to increase
7 the number of customers,
thereby increasing
8 customer spending, should
lead to an increase in profit.
8 Bringing in better quality

goods would have a cost
9 associated with it. Had the
candidate identified this fact
and pointed out that, to be
of benefit, any extra
revenue generated should
be greater than any cost,
then marks would have
been awarded for this
suggestion.
Mark for (c) = 1/4
9 The answer for (d) is

fully correct.
Mark for (d) = 3/3

11 out of 25

(b) The candidate assumed that only the shopkeeper’s wages should be treated as an expense in the shop
trading account, but should also have taken into account the expenses for water, electricity and insurance,
as well as depreciation of the shop equipment, information about which was provided in the question.
(c) Two of the candidate’s points were valid here, but they needed more development and explanation to
earn further marks.


Common mistakes candidates made in this question

(a) Some candidates failed to identify three differences between a donation and a member subscription.
(b) Some candidates omitted some of the relevant shop expenses or did not adjust the accruals and
prepayments of them in the correct direction. Labelling was also an issue here. Often ‘cost of sales’, ‘gross
profit’ and ‘loss/profit for the year’ or ‘shop loss/profit’ were not mentioned. ‘Net loss’ was given, but this was
not accepted.
(c) Many candidates did not expand on the points they made. Simply making a valid point earned 1 mark but
each point needed to be expanded by identifying how this would impact on sales or profit to earn any extra
marks.
(d) Some candidates attempted to prepare an income and expenditure account, which was not needed.
Candidates should have focused solely on the receipts from the sale of tickets and the costs associated with
the annual ball.

Question 2
1 1 This candidate is
awarded 24/25 marks for
question 2. This is a good
2 example of a high-level
response.
2 A good example of the

candidate showing their
workings.
3 An excellent example of
a manufacturing account.
All items are labelled and,
where necessary, the
candidate provides
workings in brackets for the
3 calculation of factory profit.
Mark for (a) (i) = 8/8
4 Again, an excellent
4 example of a well presented
and labelled income
statement. Note the final
figure is identified as ‘Profit
for the year’, the correct
wording in line with IAS1.
Mark for (a) (ii) = 7/7

5 5 The candidate shows

whether items have been
deducted from the starting
profit for the year figure
here. They also show their
workings below, and these
are fully referenced in their
answer. Doing this allows
the examiner to refer to the
workings and award marks
accordingly.
Mark for (b) = 5/5


6 The candidate is
awarded 4 marks here. For
the final mark, they needed
to add something extra
about option 1, such as the
fact that it avoids
unnecessary redundancies,
6 or make a comment about
7 option 2.
7 Here, a mark is
awarded for a decision, and
a further mark is awarded
as that decision is justified.
In other words, the
8
candidate backs up their
judgment.
8 The candidate goes on

to fully justify their decision.
Mark for (c) = 4/5

24 out of 25

(c) The candidate needed to add a further valid comment here. Selling extra units at a lower price would be
unlikely to yield greater profitability. Indeed, it may result in less profit. Therefore, no mark could be awarded
for this.
Mark awarded = (a) (i) 8/8, (ii) 7/7



1 1 This answer is awarded
15/25. A good example of a
middle-range script.
2 The carriage inwards

has been applied in the
wrong direction, so no mark
2 can be awarded here.
3
3 Had the candidate
labelled this figure as ‘cost
4 of raw materials used’, the
examiner would have been
able to award an ‘own
figure’ mark.
4 Good labelling of prime

cost figure, allowing the
5 examiner to award an ‘own
figure’ mark.
5 Unfortunately, this is as
far as the candidate takes
the manufacturing account.
An ‘own figure’ mark is
awarded for the well-
labelled cost of production.
However, the question
indicated that finished
goods were transferred at
6 cost plus 25 %. This has not
been done by the
candidate.
6 Good labelling of both

the cost of production and
the gross profit, allowing the
examiner to reward both
7
with ‘own figure’ marks.
7 No mark can be
awarded for the final
answer. The label of ‘net
profit’ is not allowable under
IAS1. Had the candidate
labelled the figure ‘profit for
the year’ an ‘own figure’
mark could have been
awarded.

8 The correct starting

8 position for the calculation
is required here.
9
9 Correct calculation of
10
lost revenue.
10 Correct calculation
based on the candidate’s
own figure from part (a).
This allows the examiner to
award ‘own figure’ marks
both for this and the final
answer.
Mark for (b) = 3/5
11 11 A good definite
decision.
12 12 The candidate justifies

their decision, so earns a
mark here.
13 A good point about the

impact on workers if option
13 2 were chosen.
Mark for (c) = 3/5

15 out of 25


(a) (i) The candidate treated the carriage inwards on raw materials as income rather than an expense. The
label and figure for the cost of raw material used were also missing. The manufacturing account stopped at
the cost of production. The candidate should have added the factory profit element, and combined it with the
cost of production, to arrive at the transfer cost.
(a) (ii) Failing to calculate the factory profit in (a) (i) meant that this was not included in the income statement.
The label of ‘net profit’ for the final figure was not accepted; it should have been ‘profit for the year’ in line
with International Accounting Standard 1 (IAS1).
(b) This was quite well done. The inventory adjustment was based on the candidate’s own figures and so
could be rewarded. The decrease in general office expenses was missed as a direct result of the candidate
not calculating the factory profit so this was not adjusted here.
(c) The candidate made valid points here. However, they also needed to consider other points specific to
option 1, such as not damaging relationships with suppliers. In a question where candidates are asked to
choose between different options, evaluation of the alternative(s) is also likely to be rewarded. Presenting a
one-sided answer will not receive full marks.



1 This receives a total of
12/25 and is an example of
1 a low-level answer.
2 A label such as ‘Cost of

raw materials consumed’ is
required here. This would
have earned a mark.
2 .
3 The candidate gives the
figure and correctly labels it,
3 earning a mark.
4 4 The candidate has

crossed out the Factory
Supervisor’s salary. This
should have been included
5 as part of the indirect costs
6 of the factory.
5 The candidate attempts

to calculate the factory profit
on the transfer of finished
goods. However, the
percentage has been
calculated on the prime cost
figure rather than the cost of
production figure, which
would include factory
indirect costs. The label is
also wrong; it should be
‘Factory profit’. Correct label
and figure were required for
the mark. Had the
candidate calculated a
figure for factory profit
based on their own factory
cost of production and
correctly labelled it, an ‘own
figure’ mark would have
been awarded.
6 The candidate has

correctly labelled their own
figure for cost of production.
Thus an ‘own figure’ mark is
awarded.

7 The candidate has not

labelled this figure as ‘gross
profit’, so no ‘own figure’
7
mark can be awarded.
8 This has been

8 incorrectly included here.
9 An ‘own figure’ mark

can be awarded as the
9 candidate has correctly
labelled their own figure
answer.

10 This section earns no

10
marks. The candidate has
taken an incorrect approach
to try to calculate the
revised profit figure. They
should have started with
their own profit figure from
part (a) and adjusted that by
the various components to
arrive at an alternative profit
figure.
Mark for (b) = 0/5
11 The candidate simply

repeats the answer to their
earlier profit calculations
here. It is not a decision, so
no marks can be awarded.
12 This is a valid point.

11
13 This, too, is a valid
point.
12 14 The candidate does not

choose an option based on
their figures, so does not
get a mark here.
13
Mark for (c) = 2/5
14
12 out of 25


(a) (i) The cost of raw materials used was not labelled, so no mark could be awarded for the figure given
here. Candidates should always label items, as marks can only be awarded if both the label and figure are
present. The candidate included the factory supervisor’s salary in the list of factory overheads then crossed it
out, so no mark could be awarded for this. The calculation of the factory profit was worked out using the
prime cost rather than the cost of production.
(a) (ii) Again, the issue here was not labelling items, in this case the gross profit. The factory profit calculated
in (a) (i) needed to be included in this section as well.
(b) The candidate started their answer from the wrong point, reworking the income statement. They needed
to start with their own figure of profit for the year from (a) (ii) and make adjustments to that.
(c) The candidate needed to make a recommendation to the management here. When the question asks
candidates to choose an option, any comment such as ‘choose option 1’ will be rewarded with one easily
obtained mark.


(a) Not labelling or wrongly labelling items such as ‘gross profit’ or ‘profit for the year’.
(b) Many candidates approached the question in the wrong way, e.g. by starting at the wrong point.
(c) Many candidates omitted to make a recommendation and/or failed to discuss both options.

Question 3

candidate setting out and
1
labelling their workings
before starting on their
answer.

2 2 This excellent answer to

question 3 is awarded
25/25.
3 The whole section for

3 non-current assets is
5 correct and properly
4
labelled.
4 A correct label for the

intangible asset of goodwill,
for which a mark is
awarded.
5 This figure is correct.

The inclusion of workings at
6 the beginning of a question
allows the examiner to look
back and award marks if
appropriate.
6 Again, the correct use

of the full label for trade and
7 other receivables.
7 Excellent use of labels.
8 Here, the 8 % debenture

8
is correctly separated from
the current liabilities and
labelled as a non-current
liability.
Mark for (a) = 16/16

9 It is often a good idea to

9 include workings before
starting the written answer
to a question. This allows
the examiner to award
marks where appropriate.
10 The candidate starts by

10 making a tentative
assessment.
11 The candidate starts to

11 justify their decision here,
using the financial data from
the earlier calculations
shown in their workings.
12 12 They now compare the
two options on financial
grounds.
13 The candidate now

13 develops their argument by
bringing in other factors to
support their conclusion.


14 The candidate now
sums up their arguments for
14 and against Husna’s
decision.
15 Although the candidate

started this answer with a
rather tentative assessment
in their opening paragraph,
they now finish with a
conclusion that is firmly
based on their arguments
15 for and against Husna’s
decision. This is an
excellent example of a well-
constructed and balanced
argument and worthy of full
marks.
Mark for (b) = 9/9

25 out of 25

(a) Although the layout of the statement of financial position was in line with IAS1, other layouts are also
acceptable. This candidate set out their workings before writing their answer. This allowed the examiner to
check through for any errors that might have appeared, and is generally recommended practice.
(b) Again, the candidate set out the calculations relevant to their answer right at the start, something which is
recommended practice.


1 1 This answer is awarded

14/25.
2 2 The candidate clearly

presents their workings
here; doing this allows the
examiner to check the
workings against the
answer and award marks
accordingly.

3 The candidate worked

out a value for goodwill in
3 their workings above.
Unfortunately, they have not
transferred their answer to
the statement of financial
position, so no marks can
be awarded for the
workings. For workings to
earn marks, the figures
have to be used in the main
answer.
4 Again, the candidate

made an attempt in their
4 workings to calculate a
revaluation reserve, which
they called Realisation
profit. Unfortunately, the
figure calculated has not
been brought into the
statement of financial
position.

5 Good separation and

5 labelling of the non-current
liability.
Mark for (a) = 12/16
6 This was given in the

6 question, so no mark
awarded.
7 A valid point about

Husna’s position now the
7 business has been sold.
8 Another valid point

about what she has
possibly given up by selling
the business.
9 The candidate does not

8
give a final assessment of
whether or not Husna made
the correct decision. Had
9
they done so, they would
have gained a mark, simply
for making a judgement.
Mark for (b) = 2/9

14 out of 25


(a) The candidate set out their workings before attempting the statement of financial position. In doing so,
they prepared what they termed a realisation account, arriving at a realisation profit of $111 500.
Unfortunately, they did not identify this as the figure required in the statement for goodwill, and consequently
did not include it. Thus, no marks could be awarded for their workings. Instead, they included what they
believed to be goodwill in their workings for the owner’s capital account. This resulted in failing to calculate
the revaluation reserve which was required for the statement. These factors were the reasons for full marks
not being awarded.
(b) This section was not answered well. The candidate made two valid points about Husna no longer having
responsibility for running the business and not earning a higher profit if the business improved. However,
they needed to support this with calculations. For example, they could have compared what Husna would
earn from selling the business with what she earned from running it or would earn from getting her nephew
to run it. Closer reading of the question, which specified that answers should be supported with calculations,
might have helped the candidate here. The fact that nine marks were available for this question should have
told the candidate that they needed to make several points, backed up by figures where appropriate. Finally,
they needed to make a definite assessment about whether or not Husna made the correct decision.



1 This answer earns a
total of 9/25 marks.
1
2 2 The candidate correctly
uses this figure, but the
amount of $815 100 is
3
incorrect so no marks can
be awarded for it.
4
3 No addition has been
made for the extra
equipment.
4 Good use of the correct

label here.
5 5 Ideally, only the amount

of cash held by the
company should have been
included here. The bank
account was overdrawn and
should have been shown as
a current liability. In the
statement of financial
position, items should not
be netted off.
6 The 8 % debentures
6 require a heading of ‘Non-
current liabilities’ in order for
a mark to be awarded.
Mark for (a) = 8/16
7 No mark can be
awarded here, as the
calculation of bank interest
is incorrect. The candidate
7 is also mixing up the two
situations. The bank interest
would have been paid to
Husna if she had sold the
business. The salary would
have been paid to her
nephew if she had kept the
business.


8 A correct calculation of
debenture interest, but used
in the wrong context, so no
8
9 The candidate gets a
mark for making an
assessment here. However,
they do not go on to justify
9 this or to consider what
might have happened if
Husna had not sold to the
limited company.
Mark for (b) = 1/9

9 out of 25

The main issue with this answer was that the candidate did not set out any workings before starting their
statement of financial position. Therefore, it was impossible to award any marks for wrong figures.
(a) With the non-current assets, the candidate only included the original values for premises and equipment,
in the first case not taking the revalued figure of $1 000 000 and in the second not adding the new equipment
of $14 600. There was a good attempt at calculating and labelling goodwill.
In the current assets, the candidate netted off the cash in hand and the bank overdraft. Netting off figures in
this way should be avoided when preparing the statement. The bank overdraft should have appeared in the
current liabilities as an overdraft.
As the candidate did not update the non-current assets with their purchase valuation, so too the equity did
not include the revaluation reserve. However, it did through the 8 % debentures. These are non-current
liabilities and should have been included as such under the appropriate heading.
(b) The calculations presented by the candidate were not relevant to the situation, other than the bank
interest of $9 600. This was used incorrectly, so no marks could be awarded. The candidate made an
assessment of the decision taken by the owner but would have earned more marks if they had discussed
this fully.


(a) Many of the points mentioned in relation to the low-level answer were typical of the common errors made.
The main issue with the statement of financial position was failing to label items. Incorrect treatment of the
debentures was common. Many candidates did not show any workings and so the examiner was unable to
reward some items.
(b) Many candidates did not discuss the two choices (selling or retaining the business). Likewise, failing to
include any calculations, even though prompted to do so by the question, was common.

Question 4

1 This is awarded 24/25
and is a good example of a
1 high-level script.

of a full answer.
Mark for (a) = 5/5
3 A good example of what

a qualified audit report is
and a reason why the report
may be qualified.
Mark for (b) = 2/2

2
4 The candidate identifies
the correct IAS and also
gives the contents of the
IAS.
3
5 An excellent example of
4 using the figures given in
the question and linking
them back to the IAS
referred to in the opening
sentence.
5
6 6 This IAS is not relevant
to this answer.
7 A good example here of

7 the application of prudence.
8
8 This IAS is not relevant
to the answer.
9 A good summary of the

arguments in the first
paragraph.
9
Mark for (c) = 8/8

10 10 The candidate provides

11 good examples of the
effects on shareholders of a
12 qualified audit report.
11 Giving shareholders
13 confidence.
14
12 Attracting other
15
potential investors.
13 The impact on the share

price, which will definitely
affect shareholders.
14 This expands on the

16 17 earlier point about
potentially bringing in new
shareholders.
18 19
15 Here the candidate
refers to the effect on the
20 company rather than the
shareholders, so no marks
can be awarded for this
point.
Mark for (d) = 5/6
16 A definite evaluation.
17 Justification for the

earlier evaluation.
18 A well-balanced
judgement of Aamir's
actions.
19 The effect of the action

taken by the unqualified
auditor.
20 Further justification of
why the audit report has no
validity.
Mark for (e) = 4/4

24 out of 25

(a) The candidate included five valid duties of an auditor. Although they presented them as continuous text, it
would have been perfectly acceptable to present them as a numbered list or bullet points; this may save time
in an examination.
(c) The candidate set out relevant calculations and discussed them with reference to the correct accounting
standard (IAS2). However, IAS36 was not relevant to this question and could have been omitted.
(d) The candidate only missed out one benefit here. They could also have considered the negative effects on
shareholders of not providing a true and fair view of the accounts, as this would also have earned marks.

Mark awarded = (e) 4/4

1 This is awarded 16/25

1
and is a good example of a
middle-range script.
2 The first four points of

this answer are valid and
are awarded a mark each.
The final point repeats point
(iv).
Mark for (a) = 4/5

2
3 One valid point.
Mark for (b) = 1/2

3


4 Incorrect IAS
considered, so no mark
awarded.
4 5 Here the candidate

mentions the correct IAS
and indicates why it may be
5
applicable to the case.
6 The candidate does not

6 obtain full marks here
7 because they do not make
any reference to the figures
given in the question.
7 Further development on
the impact of a wrong
valuation on the current
8 assets and profit.
8 Further development
here, too.
Mark for (c) = 6/8
9 Although ‘something
fishy’ is really a slang term,
9 the point made by the
candidate is valid and is
awarded a mark.
10 10 Here, the answer does

not describe the impact on
11 the shareholder, which is
what the question asked for.
11 This will have a direct

impact on the shareholders
and is awarded a mark.
Mark for (d) = 2/6


12 Two valid points in this
first sentence are both
awarded a mark.
12
13 Good development by
13 the candidate of their earlier
comment.
14 Repetition of the first

sentence.
Mark for (e) = 3/4

14
16 out of 25

(a) The candidate gave four valid duties of an auditor. One more duty was needed for full marks in this
section, e.g. providing a report containing a comment on the true and fair view of the accounts.
(b) Again, the candidate only needed to add something to the effect that the auditor had been unable to
gather all the necessary audit evidence to gain the extra mark.
(c) Like many others, this candidate stated the wrong IAS here, although the points they made were valid
ones. However, the candidate did not make any reference to the figures given in the question. Had they
stated the net realisable value of $750 000 and the repair costs, then reached a figure at which the inventory
should be recorded, it would have been possible to award full marks for the answer.
(d) This answer needed to be more specific about the effect on shareholders of not providing a true and fair
view. The candidate made two valid comments, but these were general. They needed to mention effects
such as: the shareholders might lose confidence in the company and sell their shares, or the shareholders
might not invest further in the business.
(e) To gain the extra mark, the candidate simply needed to state the action that should have been taken, i.e.
a qualified auditor should have been appointed.



1 This question earns a
total of 10/25, an example
1 of a low-level script.
2 This is incorrect. It is not

2 the duty of an auditor to
3 suggest improvements such
as this to the management.
3 Both (iii) and (iv) make

the same point about the
auditor providing a report to
the members.
4
Mark for (a) = 3/5
5 4 This statement is partly

correct. The auditor may
6 7 identify missing transactions
and documents. However,
the candidate needed to
add some sort of definition
of a qualified audit report, or
to indicate when one is
8
issued.
Mark for (b) = 1/2
5 Not specific enough.

The candidate needed to
mention IAS2 and inventory
being valued at the lower of
cost and net realisable
value.
6 No reference in the
answer to the financial data
given in the question. If the
candidate had used this
data, it would have been
possible to award more
marks.
7 IAS36 is not relevant to

this question.
8 This statement is too

general; the candidate
needed to state which
assets.
Mark for (c) = 0/8


9 Some good points are
9 made in the answer to this
10 section.
11 10 The shareholders will

obtain information on
12 performance from the
accounts rather than the
audit report.
13 11 A good point about

whether or not to invest in
the company.
12 Another good point

about the impact of the
14 audit report on shareholder
confidence.
13 The point relating to

shareholder confidence is
backed up by a specific
example.
Mark for (d) = 4/6
14 Two good points.

However, the answer
needed to be developed by
adding points such as:
Aamir should not have
signed the audit report, he
may be biased because of
his links with family
members, or indicating any
action that should be taken,
e.g. appointing a qualified,
independent auditor.
Mark for (e) = 2/4

10 out of 25


(a) The candidate needed to add two additional comments in order to gain full marks. They could have
stated that an auditor attends the stock count, checks trade or other payables, or verifies that the assets
belong to the company.
(b) The candidate needed to state that the auditor was not able to obtain all the necessary information to
enable them to make their judgement.
(c) The candidate did not demonstrate any knowledge about IAS2. A general comment about IASs was not
sufficient to be rewarded. The situation is not one of impairment in respect of IAS, but of inventory valuation.
A comment about the inventory being shown at the lower of cost and net realisable value and using the
figures from the question to demonstrate this might have earned four marks, even without stating IAS2.
(d) This was quite a good answer containing valid points. If the candidate had considered the other side of
the argument, such as the fact that auditors do not prepare the accounts or correct errors, and that the
information presented did not provide a complete picture of the business’s performance, they would have
gained the extra two marks.
(e) Stating that a qualified auditor needs to be appointed or the existing auditor may be biased would have
gained the other marks here.


The most common errors were that in general candidates did not develop their answers sufficiently.
The most common issues were with part (c). Some candidates had problems with valuation of inventory and
the effects of not valuing it correctly on the financial statements. Many candidates stated the wrong IASs.
Candidates should be aware that numbered lists or bullet points are acceptable and will be rewarded if
correct. Using bullet points instead of continuous text may allow candidates more time for other questions.

Question 5

1 1 This candidate is
2 awarded 21/25. A good
example of a high-level
script.
2 Correct identification of
the method of costing used.
3 Mark for (a) = 1/1
the cost per unit from the
given data.
4 Mark for (b) = 2/2
4 Throughout their
answer to (c), the candidate
shows all their workings,
allowing the examiner to
award marks as
appropriate. This section
receives full marks.


5 A good summary of all
the calculations.
Mark for (c) = 12/12
6 This is not a decision

about whether or not the
method of costing should be
used, but simply a comment
on it. Therefore no marks
can be awarded for it.

identifies a benefit from the
use of the method, which is
rewarded.
5
to describe the action the
owner can take.
9 The use of the phrase

‘more accurate’ is quite
common but is incorrect
and so is not rewarded. A
mark would have been
awarded if the candidate
6 had said the method is
more reliable or realistic
than some other methods.
7
10 This is not a true
8 9 statement, as the earlier
calculations are quite
complex. No marks
awarded.
10
11 The candidate
continues by indicating
correctly the negative
11 aspects of using the
method. Marks are awarded
for the comments on
expense and the need to
train staff.

12 A valid comment about

an increase in workload.
12
13 The candidate makes a
definite decision and earns
marks accordingly.
13
Mark for (d) = 6/10

21 out of 25
(d) This was the only section for which full marks were not awarded. The candidate attempted to balance
their argument well and made a recommendation. However, if they had added that the benefits of Activity
Based Costing (ABC) include the fact that it indicates where costs can be saved and controlled, and also
mentioned cost drivers and cost pools, the extra marks would have been awarded.



1 Incorrect method stated,
1
so no mark awarded.
Mark for (a) = 0/1
2 A correct calculation.
2
Mark for (b) = 2/2

3
of one of the alternative
approaches which could
have been used, as shown
on the mark scheme.
Mark for (c) = 12/12
4 A good, definite
decision.
5 Good development of
why the decision has been
made, and the benefits this
analysis should bring to the
business.
6 The candidate only

focuses on the positive
aspects of ABC here. More
marks could have been
awarded if they had
4 mentioned the cost, the
time taken, and the fact that
5 specialist staff are required.
7 Further development
7 here.
6
8 And here.
Mark for (d) = 4/10

8 18 out of 25


(a) The candidate named the wrong method of costing used here. However, this did not stop the rest of the
answer being rewarded.
(d) Although the candidate gave a valid recommendation, their answer did not explain why ABC (Activity
Based Costing) makes it possible to enable cost reduction or discuss the use of cost pools and cost drivers,
which would have gained more marks. There was also no consideration of the negative side to using ABC,
such as the fact that it takes time, is expensive because it requires more qualified staff, and that it may not
be easily understood by Samir. Considering the negative aspects would have provided more balance to the
argument as to whether or not this analysis should continue to be used, and also earned several more
marks.



1 Overall, this question is
1 awarded 9/25.
2
the method used.
Mark for (a) = 1/1
3 A correct formula, which

is rewarded. However, the
candidate does not get the
correct final answer, which
3 should have been $1.58.
Mark for (b) = 1/2
4 These are not workings.

The candidate is quoting
the figures from the
question.
4
5 As the candidate shows
their workings here, it has
been possible to award
marks for any correct
elements.
5 6
6 A mark is awarded for
identifying $8, which must
be the result of a calculation
by the candidate.
7 7 One mark for $32.
Mark for (c) = 2/12
8 Not a valid comment.

8
The candidate needed to
specify what ABC is more
precise than, or how it is
9 more precise.
9 The method does use

cost drivers, so a mark is
10 awarded here.

to develop the point about
cost drivers, so a further
mark is awarded here.


11 11 Two valid points about
ABC being more expensive
and time-consuming than
traditional methods.
12 The candidate
12 completes their answer by
giving a decision.
Mark for (d) = 5/10

9 out of 25

(b) The candidate used the correct numerator and denominator for their calculation, but then miscalculated.
If time allows in the examination, it is always worth double-checking workings.
(c) The candidate took the wrong approach in their calculations. They mistakenly multiplied their initial
calculation by the $1.59 they had calculated in (b). They appear to have mixed up two ways of answering
here, using the first method shown in the mark scheme along with the second method. Therefore, very few
marks could be awarded. If they had used the second method on the mark scheme but taken their own
figure of $1.59, they would have gained high marks, as, even though their figure was incorrect, they applied
it correctly.
(d) There was some repetition here (‘ABC is time-consuming and expensive’ and comments on the use of
cost drivers) and a corresponding lack of depth to the answer. When considering the positive aspects of
ABC, this candidate needed to add something about it helping Samir to monitor costs more effectively and
identify areas where cost savings could be made. On the negative side, they could have mentioned the fact
that it is of little benefit as Samir only produces one product. The inclusion of these points would have moved
the candidate a long way towards full marks for this section.


The wrong method of costing was often stated.
When discussing the results calculated, some candidates failed to consider both sides of an argument or
develop points relating to these.
Some candidates failed to conclude their answer with a clear recommendation or decision in (d).
Some candidates omitted to show any workings; it is often possible to earn some marks for correct workings
even if the overall answer is incorrect.

Question 6

1 This candidate is
awarded 22/25 for this
1 answer.
2
2 A good example of
comparing a cash budget
with a statement of cash
3 flow, which is what the
question asked for. Many
candidates simply
described each, and no
marks could be awarded.

4
use of a cash budget.
the sales figures for each
month. The candidate has
remembered to add back
the discount when making
the calculation.
Mark for (b) (i) = 3/3
the discount allowed, taken
from the earlier answer.
5
Mark for (b) (ii) = 3/3
Mark for (b) (iii) = 1/1

6 Fully correct and well-

6 labelled presentation of the
trade receivables budget.
Mark for (c) = 8/8
7 A partially correct
7 calculation of the cash
deficit. The candidate does
not include the $15 000
advertising cost, which
means that only 4/5 marks
are awarded.
Mark for (d) = 4/5
8 The idea of delaying

payments to suppliers is
rewarded. However, the
making of a rights issue
would take some time to
organise. The reduction/
elimination of the overdraft
is a short-term problem, so
no marks are awarded for
8 the comment about the
rights issue.
Mark for (e) = 1/2

22 out of 25


(a) (ii) The candidate provided one valid benefit here. However, a second was needed, for example, that it
helps managers plan and control their cash flow in the future, or that it motivates staff.
(d) The candidate correctly identified and used $1 600. The only thing they missed from their calculations is
the $15 000 advertising cost. Using that would have given them full marks.
(e) Making a rights issue is not a valid way of raising cash quickly in the short term. To implement a rights
issue would take time, and the company needs an immediate solution to their cash flow issues.

Mark awarded = (b) (i) 3/3, (ii) 3/3, (iii) 1/1


1 1 This answer receives a
total of 14/25. It is at the
lower end of a middle level
script.
2 2 A valid statement.
3 A valid point about the

3 benefits of preparing a cash
budget.
4 This is not rewarded as

it repeats the first point.
4
5 No marks can be
5 awarded for this answer as
the candidate has not taken
into account the discount
allowed.

6 Both of these
calculations are correct and
6
are awarded a mark.
7 7 This is incorrect, so no
8 A correct calculation is
set out here, but with a
8 wrong answer of 2.5 %
rather than 5 %.

9 uses their own sales figures
calculated in (b) (i).
Therefore, full marks are
awarded for calculations
based on the candidate's
own figures.
Mark for (c) = 8/8

10 A mark is awarded for

10 correctly identifying $1 600.
However, the candidate
then writes about the
decision. The question
asked for a calculation of
how much sales needed to
increase, so no further
marks can be awarded
here.
Mark for (d) = 1/5
11 This is not a valid

statement. This would have
no effect on the business
11 overdraft.
12 If the company took this

action, it would have a
12 direct positive effect on the
business bank balance, so
this is awarded a mark.
Mark for (e) = 1/2

14 out of 25


(a) (ii) A second point, such as helping to plan cash flows, would have earned the extra mark.
(b) This was a good example of a candidate not using the discount allowed when calculating their sales
figure, and was quite a common error. This was correctly identified twice in part (ii), but the calculation of the
percentage was incorrect in part (iii), despite use of the correct numerator and denominator. Double-
checking of answers, if time permits, might have helped to overcome this.
(d) Again, the candidate correctly identified $1 600. However, they needed to do a calculation for this answer
instead of just writing about the issue.
(e) Motivating workers is not a way of reducing a cash flow problem. Reducing costs or delaying payments
are valid suggestions and would have been rewarded.



1 This answer is awarded
11/25.
1 2
2 The candidate needed
to identify why being based
on estimates is not the case
for a statement of cash flow.
3 Had they said ‘because it
uses actual historical data’,
it would have been possible
to award a mark.

4
3 A correct statement
about using the budget for
control purposes.
4 This describes the

contents of a cash budget,
not what it can be used for.
5 Mark for (a) (ii) = 1/2
5 The candidate has only

used the cash received
from credit customers,
without taking into account
the discount allowed. The
answer for January has also
been incorrectly added.
6 Two correct
6 calculations, but the one for
March is incorrect.
7 No indication of
workings here, so it is
impossible to determine
how the candidate has
arrived at this percentage
7 figure.


8 The correct opening
balance for January. The
candidate has brought
8 forward their own closing
9 figures as the opening
figures for February and
March, so ‘own figure’
10 marks can be awarded
here.
9 Only the total sales for

the month are included
here. If the candidate had
used their own total sales
11 figures from part (b) (i), an
extra 3 marks could have
12
been awarded.
10 Correct receipts for one

month only, so 1/2 marks.
Mark for (c) = 5/8
the $15 000 advertising
cost, and the candidate
identifies correctly that,
when paid, this will reduce
the opening bank balance.
13 12 Marks are awarded for

using the correct
information in the correct
manner here, even though
the answer is incorrect.
13 By looking at the
14 workings, it is possible to
reward the multiplication by
2 of the candidate’s figure.
15 Mark for (d) = 2/5
14 There is a cost
associated with offering
more cash discount; it is
unlikely to increase the
overall bank overdraft.
15 A valid point.
Mark for (e) = 1/2

11 out of 25


(a) (i) The candidate correctly stated that a cash budget is based on estimates. However, to add that a
statement of cash flows is not, could not be rewarded. The candidate needed to state what each is based on
here.
(a) (ii) The second point needed to describe what a cash budget can be used for, rather than what it shows.
(b) The candidate did not include the discount allowed when calculating their sales figures, basing them on
cash received. The calculation of the discount rate was incorrect, and no workings were shown. It is
essential for candidates to show workings at all times.
(c) The candidate did not use their own figures calculated for sales in part (b). Had they done so, marks
would have been awarded. Also, only cash receipts for one month were used; the ‘second’ month’s receipts
also need to be accounted for in the cash budget.
(d) The candidate started their answer from the wrong point by trying to rewrite the budget to include the
$15 000.
(e) Providing more cash discounts might possibly bring in more cash, but the cost of doing this may exceed
the amount brought in. For a mark to be awarded, the candidate needed to consider this point.

 Not comparing and contrasting a cash budget and a statement of cash flow, only describing them.
 Not identifying a second valid use of a cash budget.
 Not taking into account the discount when calculating sales.
 Not bringing own figures into the cash budget; even incorrect figures would have earned marks, if used
appropriately.
 Attempting to redraft the cash budget in part (d).
 Suggesting long-term solutions, such as share issues, to a short-term cash flow problem.

Cambridge International Examinations
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Cambridge International AS and A Level

For examination from 2016

Cambridge International AS and A Level A 9700 1

Please follow the link below to register your interest.

Assessment at a glance ....................................................................................................... 6

Paper 3 – Structured Questions........................................................................................... 7

Question Paper 22, June 2016

4 Cambridge International AS and A Level Accounting 9706

How to use this booklet

Answers by real candidates in exam

This explains how the candidate could have improved

This lists the common mistakes candidates made in

Cambridge International AS and A Level Accounting 9706 5

For Cambridge International AS & A Level Accounting, candidates:

Paper 1 Multiple Choice 1 hour

Paper 2 Structured Questions 1 hour 30 minutes

Paper 3 Structured Questions 3 hours

6 Cambridge International AS and A Level Accounting 9706

Paper 3 – Structured Questions

Example candidate response – high Examiner comments

2 No marks are awarded

3 No marks are awarded

Cambridge International AS and A Level Accounting 9706 7

Example candidate response – high, continued Examiner comments

Mark for (b) = 13/15

4 This is a good answer.

8 Cambridge International AS and A Level Accounting 9706

Example candidate response – high, continued Examiner comments

5 The candidate looks

6 A fully correct answer.

Mark for (d) = 3/3

How the candidate could have improved their answer

Mark awarded = (a) 2/3

Total marks awarded = 22 out of 25

Cambridge International AS and A Level Accounting 9706 9

Example candidate response – middle Examiner comments

2 This is a good example

3 The candidate correctly

Mark for (a) = 2/3

10 Cambridge International AS and A Level Accounting 9706

Example candidate response – middle, continued Examiner comments

4 Good labelling of gross

5 The figure for water and

6 Again, good labelling,

Mark for (b) = 12/15

Mark for (c) = 0/4

Cambridge International AS and A Level Accounting 9706 11

Example candidate response – middle, continued Examiner comments

Total marks awarded =

How the candidate could have improved their answer

Mark awarded = (a) 2/3

Total marks awarded = 17 out of 25

12 Cambridge International AS and A Level Accounting 9706

Example candidate response – low Examiner comments

Mark for (a) = 3/3

3 Very few marks can be

4 Good labelling of gross

5 Although the candidate

Mark for (b) = 4/15