CAMBRIDGE INTERNATIONAL EXAMINATIONS

GCE Advanced Level

MARK SCHEME for the October/November 2013 series

9706 ACCOUNTING
9706/43 Paper 4 (Problem Solving – Supplement),
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 2013 series for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level components and some Ordinary Level
components.
 Page 2 Mark Scheme Syllabus Paper
GCE A LEVEL – October/November 2013 9706 43

1 (a) Partners Capital Accounts

A B C A B C
$ $ $ $ $ $
Bal. b/d 45 000 35 000 27 500 (1)
Goodwill 14 400 (1) 9 600 (1) Goodwill 12 000 (1) 8 000 (1) 4 000 (1)
Re-valuation 3 750 (1) 2 500 (1) 1 250 (1)
Loan a/c 30 250 (1)of
Bal c/d 38 850 30 900
57 000 43 000 31 500 (1)of 57 000 43 000 31 500
Bal. b/d 38 850 30 900 (1)of
[12]

(b) Income statement and appropriation account for year ending 30 June 2013

9 months to 31 March 2013 3 months to 30 June 2013

$ $ $ $
Gross profit 238 500 79 500 (1)
Bad debts rec 6 000 (1)
244 500 79 500
Wages 112 500 37 500 (1)
Rent 20 625 6 875 (2)
Heat and light 9 450 3 150 (2)
Sundries 2 250 750 (1)
Loan interest 605 (2)of
(144 825) (48 880)
Net profit 99 675 (1)of 30 620 (1)of
Int. on cap
A 3 038 (1)of 777 (1)
B 2 363 (1)of 618 (1)
C 1 856 (1)of
(7 257) (1 395)
92 418 29 225

Profit
A 46 209 (1)of 17 535 (1)of
B 30 806 (1)of 11 690 (1)of
C 15 403 (1)of
(92 418) (29 225)
NIL NIL [22]

(c) More capital may be invested. (2)

More knowledge, experience becomes available. (2)
May offer wider range of services to customers. (2)
More cover available during absences (sickness, holidays). (2)
Losses may be shared. (2)
max 6 [6]

[Total: 40]

© Cambridge International Examinations 2013

 Page 3 Mark Scheme Syllabus Paper
GCE A LEVEL – October/November 2013 9706 43

2 (a) Voronez plc

At 30 June 2012

Ordinary share capital $

Issue of 120 000 ordinary $1 shares 120 000 (1)
Bonus issue one share for every four held 30 000 (1)
150 000
Rights issue one share for every six held 25 000 (1)
Statement of financial position 175 000 (1)OF

Preference share capital $

Issue of 40 000 redeemable preference $1 shares 40 000 (1)
Statement of financial position 40 000

Share premium $
Premium on issue of ordinary shares 120 000 @ $0.10 12 000 (2)
Premium on issue of preference shares 40 000 @ $0.15 6 000 (2)
Premium on rights issue of ordinary shares 25 000 @ $0.60 15 000 (2)OF
Statement of financial position 33 000 (1)OF

Retained earnings $
Profit for the year (after preference dividend $2000) 100 000 (1)
Dividend on ordinary shares 120 000 @ $0.10 (12 000) (2)
Transfer to ordinary share capital (bonus issue) (30 000) (1)
Statement of financial position 58 000 (1)OF [17]

(b) Voronez plc

At 30 June 2013

Ordinary share capital $

Balance at start of year 175 000 (1)OF
Purchase of own shares (80 000) (1)
Statement of financial position 95 000 (1)of

Share premium $
Balance at start of year 33 000 (1)OF

Capital redemption reserve $

Purchase of own shares 80 000 (1)

Retained earnings $
Balance at start of year 58 000 (1)OF
Profit for the year 86 000 (1)
Preference dividend (2 000) (1)
Capital redemption reserve – par value of shares (80 000) (2)
Capital redemption reserve – premium on redemption (10 000) (2)
Statement of financial position 52 000 [12]

(c) Dividends must be paid from revenue reserves (retained earnings). (1)
No dividend can be paid if no retained earnings (1) or revenue reserves (1).
Dividends may not be paid from share capital (1) or capital reserves (1). [5]

© Cambridge International Examinations 2013

 Page 4 Mark Scheme Syllabus Paper
GCE A LEVEL – October/November 2013 9706 43

(d) (i) A capital redemption reserve is created to protect the creditors of the business (1), to
ensure the capital and cash of the company is not taken out of the business (1). [2]

(ii) The whole of the amount of the redemption is taken from retained earnings (1). This is
because no new issues of shares have been made to help fund the redemption (1). [2]

(iii) The capital redemption reserve may be used to issue bonus shares (1) to existing
shareholders (1). [2]

[Total: 40]

3 (a) Budgeted income statement for the year ending 31 May 2014

$ $

Revenue 58 870
Opening inventory 4 800
Ordinary goods purchased 23 770 (1)both
28 570
Closing inventory 5 100 (1)both
Cost of sales 23 470
Gross profit 35 400
Discount received
Less: 238 (1)
Discount allowed 1 177 (1)
Bad debts 589 (1)
Rent 10 000 (1)
Administration costs 10 300 (1)
Interest 480 (1)
Insurance 1 850 (1)
Loss on disposal 500 (1)
Depreciation
Fixtures and fittings 2 300 (1)
Vehicle 7 200 (1)
34 396
Budgeted profit for the year 1 242 (1)of [13]

© Cambridge International Examinations 2013

Page 5 Mark Scheme Syllabus Paper
GCE A LEVEL – October/November 2013 9706 43

(b) Budgeted statement of financial position at 31 May 2014

$ $ $
Non-current assets Cost Depreciation Net book value
Fixtures and fittings 23 000 9 400 13 600 (1)of
Vehicle 18 000 7 200 10 800 (1)of
41 000 16 600 24 400
Current assets
Inventory 5 100 (1)
Trade receivables
11 900 + 58 870 (1)of – 59 700 (1)
– 1177 (1)of – 589 (1)of 9 304
Other receivables (insurance) 500 (1)
14 904
Current liabilities
Trade payables
6100 + 23 770 (1)of – 20 700 (1)
– 238 (1)of 8 932
Other payables (interest) 240 (1)
Cash and cash equivalents
(bank) 5 340 (1) 14 512
Net current assets 392
24 792
Non-current liabilities
*Bank loan (6%) 8 000 (2)
16 792

Capital at 1 June 2013 25 550

Capital introduced 5 000 (1)
Profit for the year 1 242 (1)of
31 792
Drawings 15 000
16 792

*Bank 2 marks for correct figure.

1 mark for incorrect figure if it is a balancing figure. [17]

9 304 (1)of
(c) Trade receivables days = × 365 = 57.7 days
58 870 (1)of

4 950 (1)
+ Inventory days = × 365 = 77.0 days
23 470 (1)of

8 932 (1)of
– Trade payables days = × 365 = 137.2 days
23 770 (1)of

(2.5) days (1)of [7]

© Cambridge International Examinations 2013

Page 6 Mark Scheme Syllabus Paper
GCE A LEVEL – October/November 2013 9706 43

(d) Improve credit control for trade receivables/trade payables.

Use factoring.
Reduce inventory levels.
Sell surplus non-current assets (if any).
Take additional bank loan.
Introduce additional capital
Reduce drawings.
Any three × 1 mark [3]

[Total: 40]

© Cambridge International Examinations 2013