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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

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GCE Ordinary Level

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MARK SCHEME for the May/June 2010 question paper
for the guidance of teachers

7110 PRINCIPLES OF ACCOUNTS

7110/22 Paper 22 (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 must be read in conjunction with the question papers and the report on the
examination.

• CIE will not enter into discussions or correspondence in connection with these mark schemes.

CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.
 Page 2 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2010 7110 22

1 (a) Owner’s capital $3 000 (1)

Capital employed $6 500 (1) [2]

(b)
Item Book of prime entry Effects on Effect on current Effect on capital
current assets liabilities

(i) Cash book –$200 No effect –$200

(ii) Purchases day book (1) +$1 500 (1) +$1 500 (1) No effect (1)

(iii) Sales day book (1) +$800 (1) No effect (1) +$800 (1)

(iv) Cash book (1) –$4 000 (1) No effect (1) No effect (1)

(v) Cash book (1) –$1 440 (1) –$1 500 (1) +$60 (1)
[16]

(c) Trial balance of Leung as at 31 May 2010

Dr Cr
$ $
Gross profit 6 650 (1)
Inventory (stock) 4 600 (1)
Bank loan 3 500 (1)
Trade receivables (debtors) 1 200 (1)
Trade payables (creditors) 2 100 (1)
Office equipment 4 000 (1)
Cash (bank) 1 750 (1)
Discount received 150 (1)
Rent and expenses 3 850 (1)
Capital 3 000 (1)
15 400 15 400

Marks awarded for description and figure. [10]

[Total: 28]

© UCLES 2010
 Page 3 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2010 7110 22

2 (a) Purchase Ledger Control Account

$ $
Bank/cash 47 000 (1) Balance b/d 1 700 (1)
Discount received 300 (1) Purchases 47 900 (1)
Balance c/d 2 300 (1)
49 600 49 600 [5]

(b) (i) Net pay of Susan $

Salary 950 (1)
Tax and social security 165
785 (1)of [2]

(ii) Cost of employing Susan $

160 × $5 = 800
20 × $7.5 = 150
Salary 950 (1)of
Social security 90
1 040 (1)of [2]

(c) Journal

Dr Cr
$ $
Wages and expenses 1 040 (1)of
Bank 785 (1)of
Tax authorities 255 (1)of [3]

(d) Tsang
Income statement (Trading and Profit and Loss Account) for the month ended 31 March 2010

$ $
Revenue (sales) 65 000
Opening inventory (stock) 3 400
Purchases 47 900 (1)
51 300
Closing inventory (stock) 2 900
Cost of sales 48 400
Gross profit 16 600 (2)1of
Discount received 300 (1)
16 900
Wages & expenses 2 500 (1)
Profit for the year (net profit) 14 400 (1)of

Alternatives formats accepted [6]

[Total: 18]

© UCLES 2010
 Page 4 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2010 7110 22

3 (a) Goodwill is the value of a business over and above the value of its recorded assets. (1)
Examples would include reputation, quality of service, brand names, location, existing
workforce, regular customers (1). [2]
OR
Goodwill is the difference between the value of the separate net assets of a business and the
total value of the business.

(b) Money measurement [2]

Prudence [2]

(c) Calculation:
(i) Chan (ii) David
$ $
Capital 31 August 2009 50 000 15 000
Less share of goodwill 20 000 (1) 10 000 (1)
Capital 1 September 2009 30 000 (1) 5 000 (1) [4]

(d) Newstart
Balance Sheet at 1 April 2009

$ $
Non-current (fixed) assets 33 000 (1)

Current assets
Inventory (stock) 12 000
Trade receivables (debtors) 7 000
19 000 (1)
Current liabilities
Trade payables (creditors) 11 000 (1)
Bank overdraft 6 000 (1)
17 000
Net current assets 2 000
35 000
Financed by:
Capital – Chan 30 000 (1)of
David 5 000 (1)of
35 000 [6]

© UCLES 2010
 Page 5 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2010 7110 22

(e) Newstart
Income statement (Profit and Loss Appropriation Account) for the year ended 31 March 2010

$ $
Profit for the year (net profit) 10 250
Plus interest on drawings
Chan 750 (1)
David 1 000 (1)
1 750
12 000
Less salaries
Chan 8 000
David 7 000 (1) for both salaries
(15 000)
(3 000)
Share of losses
Chan (2 000) (1)of if correct split
David (1 000) (1)of if correct split
(3 000) [5]

[Total: 21]

4 (a) (i) Cost of sales $

Sales 250 000
Less 40% Gross profit 100 000
Cost of sales 150 000 (3) [3]

(ii) Raw materials (purchases) $

Opening stock 10 000
Purchases 165 000 (2)of
175 000
Closing stock 25 000 (1)
Cost of sales 150 000 (1)of [4]

(iii) Expenses $
Gross profit 40% 100 000
Expenses 80 000 (3)
Net profit 8% 20 000 [3]

(iv) Rate of inventory (stock) turnover

Cost of goods sold 150 000 (of)

= = 8.57 times (3)of [3]
Average inventory (stock) ((10 000 + 25 000)/2)

[Total: 13]

© UCLES 2010
 Page 6 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2010 7110 22

5 (a) Wang Yee

Manufacturing Account for the year ended 31 January 2010

$ $
Inventory (stock) of raw materials at 1 February 2009 14 700 (1)
Purchases of raw materials 75 600 (1)
90 300
Less: Inventory (stock) of raw materials at 31 January 2010 16 250 (1)
Cost of raw materials consumed 74 050 (1)
Direct factory wages ($62 140 + $1 120) 63 260 (1)
Prime cost 137 310 (1)
Rent 16 800 (1)
Factory managers salary 31 500 (1)
Provision for depreciation of plant and machinery 11 600 (1)
59 900
197 210
Add decrease in work in progress ($23 570 – $18 780) 4 790 (1)
Cost of production 202 000 (1) [11]

(b) Wang Yee

Income statement (trading and profit and loss account) for the year ended 31 January 2010

$ $
Revenue (sales) 342 500 (1)
Less Revenue (sales) returns 1 250 (1)
341 250
Inventory (stock) of finished goods at 1 February 2009 35 000 (1)
Cost of production 202 000 (1)of
Raw materials (purchases) of finished goods 15 500 (1)
252 500
Inventory (stock) of finished goods at 31 January 2010 32 500 (1)
Cost of sales 220 000
Gross profit 121 250
Rent 11 200 (1)
Office salaries 41 600 (1)
Distribution costs 28 650 (1)
Sundry office expenses ($9 870 – $630) 9 240 (1)
Finance costs (loan interest) ($2 400 + $800) 3 200 (2)
Provision for depreciation of
Office equipment ($24 000 × 20%) $4 800
($6 000 × 20% × 4 ÷ 12) 400 5 200 (2)
Increase in provision for doubtful debts 250 (1)
99 340
Profit for the year (net profit) 21 910 [15]

© UCLES 2010
Page 7 Mark Scheme: Teachers’ version Syllabus Paper
GCE O LEVEL – May/June 2010 7110 22

(c) Wang Yee

Balance sheet as at 31 January 2010

Cost Depreciation NBV

to date
$ $ $
Non-current (fixed) assets
Property (land and buildings) 80 000 80 000 (1)
Plant and machinery 90 000 43 600 46 400 (1)
Office equipment 30 000 17 200 12 800 (1)
200 000 60 800 139 200
Current assets
Inventory (stock)
Raw materials 16 250
Work in progress 18 780
Finished goods 32 500
67 530 (1)
Trade receivables (debtors) 45 000
Less: provision for doubtful debt 1 800
43 200 (2)
Other receivables (prepaid expenses) 630 (1)
111 360
Less: Current liabilities
Trade payables (creditors) 60 700 (1)
Other payables
(accrued expenses) ($1 120 + $800) 1 920 (2)
Loan repayable within 12 months
(bank overdraft) 33 030 (1)
95 650
Net current assets 15 710 (1)
154 910
Non-current (long term) liabilities
8% loan repayable 31 December 2015 40 000 (1)
114 910
Financed by:
Capital 110 000
Plus: Net profit 21 910
131 910
Less: Drawings 17 000
114 910 (1)of [14]

[Total: 40]

© UCLES 2010