7110 PRINCIPLES OF ACCOUNTS - Max...

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CAMBRIDGE INTERNATIONAL EXAMINATIONS

Cambridge Ordinary Level

MARK SCHEME for the October/November 2015 series

7110 PRINCIPLES OF ACCOUNTS

7110/11 Paper 1 (Multiple Choice), maximum raw mark 30

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.

Page 2 Mark Scheme Syllabus Paper

Cambridge O Level – October/November 2015 7110 11

© Cambridge International Examinations 2015

Question Number

Key Question Number

Key

1 B 16 B

2 D 17 C

3 B 18 B

4 A 19 A

5 D 20 D

6 A 21 C

7 C 22 A

8 D 23 D

9 A 24 B

10 C 25 C

11 C 26 C

12 B 27 D

13 A 28 D

14 B 29 B

15 A 30 C





7110 PRINCIPLES OF ACCOUNTS

7110/12 Paper 1 (Multiple Choice), maximum raw mark 30

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






Question Number

Key Question Number

Key

1 B 16 A

2 B 17 A

3 D 18 D

4 B 19 D

5 B 20 A

6 B 21 B

7 D 22 B

8 C 23 C

9 C 24 A

10 A 25 D

11 A 26 C

12 C 27 C

13 C 28 D

14 B 29 A

15 D 30 A





7110 PRINCIPLES OF ACOUNTING

7110/21 Paper 2 (Structured), maximum raw mark 120

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






1 (a)

Carston Garages account

Date Details $ Date Details $

July 12 Bank 194 (1) July 1 Balance b/d 200

Discount received 6 (1) July 15 Motor van

expenses

120 (1)

July 31 Balance c/d 460 July 26 Motor van

expenses

340 (1)

660 660

Aug 1 Balance b/d 460 (1of)

[5]

(b)

Motor van expenses account


July 1 Balance b/d 3200 July 31 Income statement/P & L 3985 (1of)

July 15 Carston Garages 120 (1)

July 23 Bank 200 (1)

July 26 Carston Garages 340 (1)

July 31 Balance b/d 125

3985 3985

Aug 1 Balance b/d 125 (1)

[5]

(c)

Account Subdivision of the ledger

Sales General/Nominal (1)

T Wong (credit

customer)

Sales/Trade receivables (1)

[2]




(d) (i) Expenditure spent running the business on a day to day basis. (1) Expenditure expected to provide a benefit within the current financial year. (1) [2]

(ii) A receipt from the sale of a non-current asset. (1) A loan received. (1) Additional capital. (1) Income/revenue from non-trading activities (1) Basic statement (1) expansion or example (1) Max 2 [2]

(e)

Transaction Revenue

expenditure

Revenue

receipt

Capital

expenditure

Capital

receipt

Sale of motor van � (1)

Purchased new motor

van tyres

� (1)

Cash discount

received

� (1)

Purchase a new

motor van

� (1)

Accept any alternative indication e.g. * or X [4]

[Total: 20]




2 (a)

General Journal

Debit

$

Credit

$

Purchases 950 (1)

Suspense 950 (1)

Suspense 170 (1)

Discount received 170 (1)

Rent 180 (1)

Suspense 180 (1)

Office fixtures/Fixtures & fittings 2 300 (1)

General expenses 2 300 (1)

[8]

(b)

Suspense account


30 Sept Balance/

Difference on TB/

Trial balance

960 (1of) 30 Sept Purchases 950 (1)

Discount received 170 (1) Rent 180 (1)

1 130 1 130

[4]




(c)

Error Increase/Decrease/

No effect Amount

$

1 The total of the purchases

journal had been under cast

by $950.

Decrease 950

2 Discount received, $85, had

been debited to the discount

received account.

Increase (1) 170 (1)

3 A payment of rent, $750, had

been correctly entered in the

cash book, but recorded in

the rent account as $570.

Decrease (1) 180 (1)

4 The purchases of office

fixtures, $2300, had been

recorded in the general

expenses account.

Increase (1) 2 300 (1)

[6]

(d) This error occurs when a transaction is entered using the correct amount and on the correct

side, but in the wrong account (1) of the same class. (1) Right amount (1)/right side (1) Wrong account (1)/same class (1) Wrong name or person (1)/same class (1) Allow any two combinations from the above answers. [2]

[Total: 20]




3 (a)

Aina and Barry

Appropriation Account for the year ended 30 April 2015

$ $

Profit for the year (19 800 – 2000) 17 800 (1)

Add interest on drawings: Aina 450 (1)

Barry 600 (1)

1 050

18 850

Less Interest on capital: Aina 2 000 (1)

Barry 400 (1) + 800 (1) 1 200 (2)

3 200

Salary: Barry 8 000

(11 200)

7 650

Share of profit: Aina 4 590 (1of)

Barry 3 060 (1of)

Accept alternative presentation [8]




(b)

Current accounts

Details

Aina

$

Barry

$

Details Aina

$

Barry

$

Balance b/d 800 Balance b/d 6 500

Drawings 7 500 10 000 (1) Interest on loan 2 000 (1of)

Interest on

drawings

450 600 (1of) Interest on

capital

2 000 1 200 (1of)

Salary 8 000

Balance c/d 10 160 Share of profit 4 590 3 060 (1of)

Balance c/d 2 160

8 750 20 760 8 750 20 760

Balance b/d 2 160 Balance b/d 10 160 (1)of both

[6]

(c) More skills/expertise available

More capital available

Responsibilities shared

Discussions before decisions are made

Share losses

Max 2 × (1) [2]




(d)

Suggestions Accounting principle/concept

1 Remove the provision for doubtful debts

from the income statement.

Prudence or Accrual/Matching (1)

2 Increase the value of the premises from

cost to the current market value.

Historic cost (1)

3 Reduce the depreciation rate on

computers from 30% to 10% per annum.

Consistency (1) or Prudence (1)

4 Record expenses paid without adjustment

for amounts owing.

Accrual/Matching (1)

[4]

[Total: 20]




4 (a) (i) 000 126100

140000 90 =× (2)

90 000 + 36 000 (1) = 126 000 (1) [2]

(ii) 90 000 – (11 000 + 37 000) (1) = 116 000 (2) [2] (iii) 36 000 (1) – 18 900 = 17 100 (2) [2]

(b)

Workings 30 September

2015

30 September

2014

Profit margin

(profit for the year

to revenue)

=×100000126

900 18 (1of)

15.00% (1of) 12.13%

Rate of inventory

turnover ( )=

+ /2000 37 000 11

000 90

(1)

3.75 times(1of) 2.00 times

Working capital

ratio (current ratio) =

++

000 27

800 2 200 14 000 37

(1)

2.00:1 (1of) 2.60:1

Quick ratio

(acid test ratio) =+

000 27

800 2 200 14

(1)

0.63:1 (1of) 1.10:1

[8]

(c) (i) Inventory turnover has increased (1) Inventory is being sold at a faster rate (1) Inventory level has increased substantially over the year (1) Inventory control is needed (1)

MAX 3 × (1) [3]

(ii) Both liquidity ratios have fallen in the year (1) Working capital ratio is at the benchmark level of 2:1 (1) Quick ratio is lower than the yardstick of 1:1 but is still at an acceptable level (1) There is very little cash available to pay trade payables (1)

MAX 3 × (1) [3]

Based upon own figures.

[Total: 20]




5 (a) Cheng

Income Statement for the year ended 30 September 2015

$ $

Revenue 315 000 (1) Inventory 1 October 2014 36 800

Purchases (165 000 (1) + 3000) 168 000 (1)

Purchase returns (2 600) (1)

202 200

Less Inventory 30 September 2015 (29 980)

Cost of sales (172 220) (1) Gross profit 142 780 (1of)

Plus other receivables:

Commission receivable (12 500 (1) + 2500) 15 000 (1) 157 780

Less expenses:

Wages and salaries 34 800 (1)

Motor vehicle expenses 17 200 (1)

Rent (15 000 (1) – 3000) 12 000 (1)

Bank loan interest (1200 (1) + 600) 1 800 (1)

Heat and light 6 500 (1)

Operating expenses (7100 (1) + 1100) 8 200 (1)

Depreciation: Motor vehicles 8 000 (1)

Fixtures and fittings (1)

Bad debts 2 000 (1)

Increase in Provision for doubtful debts 600 (2)

(94 700)

Profit for the year 63 080

[22]




(b) Cheng

Statement of Financial Position at 30 September 2015

Assets

Non-current assets Cost Accumulated

depreciation

Book

value

$ $ $

Motor vehicles 50 000 18 000 32 000 (2) (1of) Fixtures and fittings 24 000 21 600 2 400 (2) (1of) 74 000 39 600 34 400

Current assets

Inventory 29 980 (1) Trade receivables 32 000 (1)

Less Provision for doubtful debts (1 600) 30 400 (1) Other receivables (3000 (1) + 2500 (1)) 5 500

Cash and bank (19 500 (1) – 3000 (1)) 16 500

82 380

Total assets 116 780

Capital and liabilities

Capital 15 000

Profit for the year 63 080 (1) of 78 080

Less Drawings (18 000) (1) 60 080

Non-current liabilities/Long-term liabilities (1)

6% Bank loan 30 000 (1) Current liabilities

Trade payables 25 000 (1) Other payables (600 (1) + 1100 (1)) 1 700

26 700

Total liabilities 116 780

[18]

[Total: 40]





7110 PRINCIPLE OF ACCOUNTS

7110/22 Paper 2 (Structured), maximum raw mark 120

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






1 (a) Cash Book (Bank Columns)


Oct 1 Balance b/d 705 Oct 1 Bank charges 35 (1)

Ng 150 (1)

YJ Electric 250 (1)

___ Balance c/d 270

705 705

Oct 1 Balance b/d 270 (1of)

[4]

(b) Bank Reconciliation Statement at 1 October 2015

$ $

Balance as per bank statement 1358

Plus

Amounts not yet credited:

Sampson 625 (1) 1983

Less

Cheques not yet presented:

Yang Stores 849 (1) Lam 364 (1)

Xevera 500 (1) 1713

Balance as per cash book 270 (1)of [5]

(c) (i) Sales ledger (1) (ii) Sales invoice (1) [2]

(d)

Izzat account


Oct 1 Balance b/d 750 (1) Oct 6 Sales returns 280 (1)

5 Sales 1440 (1) 21 Bank 800 (1)

____ 22 Bad debt 1110 (1of)

2190 2190

[5]




(e) General Journal

Date Dr

$

Cr

$

Oct 22 Bad debt 1110 (1)of

Izzat 1110 (1)of

Balance owing written off as

irrecoverable (1)

[3]

(f) Large storage capacity

Accuracy/reduction in errors

Speed of processing/timely info/less time consuming

Security of data

To prepare the trial balance

To prepare financial statements/income statement/balance sheet

To prepare exception reports

3 points × (1) [3]

[Total: 22]




2 (a)

Sales ledger control account


Aug 1 Balance b/d 27 520 Aug 31 Sales returns 1 700 (1)

31 Sales 32 400 (1) Bank 40 150 (1)

Interest charged 600 (1) Discount allowed 780 (1)

Bad debts 2 900 (1)

_____ Balance c/d 14 990 (1)

60 520 60 520

Sept 1 Balance b/d 14 990 (1of)

[8]

(b)

Error Type of error

1 Omission

2 Principle (1)

3 Reversal (1)

4 Commission (1)

[3]




(c) General journal

Details Dr

$

Cr

$

Tong 560 (1)

Sales 560 (1)

Sales 800 (1)

Disposal of fixtures and

fittings

800 (1)

Discount allowed 112 (1)

R Biggs 112 (1)

Mia 75 (1)

Mason 75 (1)

[8]

(d) Used as a balancing figure when the trial balance does not balance (1) Enables draft financial statement to be prepared (1) Assist/help in correction of errors (1) Max 1 [1]

[Total: 20]




3 (a) Fairview Manufacturing

Manufacturing Account for the year ended 31 October 2015

$ $

Inventory 1 November 2014 108 000

Purchases of raw materials 486 000

Carriage in on raw materials 18 000 (1) 612 000

Inventory 31 October 2015 (94 000)

Cost of raw materials consumed 518 000 (1of)+w no aliens

Factory wages (295 000 + 9000) 304 000 (1) Direct packaging 33 000 (1)

Prime cost 855 000 (1)w +of if no aliens

Factory overheads:

Indirect packaging 22 000 (1) Rent 24 000 (1) Management salaries 75 600 (1) Indirect expenses 8 500 (1) Depreciation – Factory equipment 35 000 (1)

165 100

1 020 100 (1)of Work in progress at:

1 November 2014 84 300

31 October 2015 (81 400)

2 900 (1) Cost of production/Factory cost 1 023 000 (1of) +w [13]

(b)

$ $

Time worked: 140 @ $6 840 (1) 28 @ $7.50 210 (1)

1050

Less Tax and social security 250

Pension contribution 60

(310) (1) Net pay 740(1of) [4]

(c) Pay slip (1) [1]

[Total: 18]




4 (a)

Workings Answer

Inventory at 1 August

2014

Cost of goods sold 285 000 (1)

+ 65 000 – 295 000 $55 000 (1)

Rate of inventory

turnover }

}

000)/265000(55

000285

+

(1) 4.75 times (1of)

Expenses paid for the

year ended 31 July

2015

Gross profit 95 000 (1) – Profit (35 000)

Expenses 60 000 (1) Less accrued (8000) (1)

$52 000 (1of)

Working capital ratio

(current ratio) }

}

8000 000 52

000 13000 42000 65

+

++ (1) 2:1 (1)

Quick ratio

(acid test ratio) }

}

8000 000 52

000 13 000 42

+

+ (1) 0.92:1 (1)

[12]

(b)

Proposal Working capital

(Increase,

decrease, no

effect)

Amount

$

1 Sell excess non-current assets

for $4000 Increase 4000

2 Sell old inventory costing

$15 000, for $9000 cash

Decrease (1) 6000 (1)

3 Allow a trade receivable 5% cash

discount for early payment of a

debt of $10 000

Decrease (1) 500 (1)

4 Pay expenses accrued of $8000 No effect (1) Nil (1)

5 Bring additional capital into the

business, motor vehicle $5000

and cash $1000

Increase (1) 1000 (1)

[8]

[Total: 20]




5 (a) Ning

Income Statement for the year ended 30 September 2015

$ $

Revenue 248 200

Less Sales returns (7 850)

240 350 (1)

Inventory 1 October 2014 20 450

Purchases 104 750

Carriage inwards 3 400 (1) 128 600 (1)

Less Inventory 30 September 2015 (17 300)

Cost of sales (111 300) (1) Gross profit 129 050 (1) of no aliens

Discount received 8 250 (1) Commission received 5 900 (1) 14 150

143 200

Less expenses:

Advertising (10 800 (1)–900 (1))* 9 900

Distribution (17 200 (1) + 2600 (1))* 19 800

Electricity 4 230 (1) Wages and salaries 35 000 (1) Insurance 5 000 (1) Loss on disposal 2 270 (1) Depreciation: Leasehold 4 000 (1) Computer equipment 13 000 (1) Fixtures and fittings 3 000 (1) Bank loan interest

(3000 (1) + 1000 (1)* 4 000 (2) Bad debts 6 400 (1) Increase in Provision

for doubtful debts 400 (2) (107 000)

Profit for the year 36 200

[23]

* must be netted for 2

nd mark




(b) Ning

Statement of Financial Position at 30 September 2015

Assets

Non-current assets Cost Accumulated Book

Depreciation Value

$ $ $

Leasehold premises 80 000 24 000 56 000 (1 of) Computer equipment 75 000 36 000 39 000 (1 of) Fixtures and fittings 30 000 20 500 9 500 (1 of) 185 000 80 500 104 500

Current assets

Inventory 17 300 (1) Trade receivables 38 000 (1) Less Provision for doubtful debts 1 900 36 100 (1 of) Other receivables 900 (1)

54 300

Total assets 158 800

Capital and liabilities

Capital 50 000 (1) Plus Profit for the year 36 200 (1) of 86 200

Less Drawings (25 000) (1) 61 200

Non-current liability (1) 8% Bank loan 40 000 (1) Current liabilities

Trade payables 38 700 (1)

Other payables (1000 (1) + 2600 (1)) 3 600

8% Bank loan 10 000 (1) Bank 5 300 (1) 57 600

Total liabilities 158 800

[17]

[Total: 40]

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