Cambridge International AS & A Level

ACCOUNTING 9706/22
Paper 2 Structured Questions May/June 2020
MARK SCHEME
Maximum Mark: 90

Published

Students did not sit exam papers in the June 2020 series due to the Covid-19 global pandemic.

This mark scheme is published to support teachers and students and should be read together with the
question paper. It shows the requirements of the exam. The answer column of the mark scheme shows the
proposed basis on which Examiners would award marks for this exam. Where appropriate, this column also
provides the most likely acceptable alternative responses expected from students. Examiners usually review
the mark scheme after they have seen student responses and update the mark scheme if appropriate. In the
June series, Examiners were unable to consider the acceptability of alternative responses, as there were no
student responses to consider.

Mark schemes should usually be read together with the Principal Examiner Report for Teachers. However,
because students did not sit exam papers, there is no Principal Examiner Report for Teachers for the June
2020 series.

Cambridge International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the June 2020 series for most Cambridge
IGCSE™ and Cambridge International A & AS Level components, and some Cambridge O Level
components.

This document consists of 10 printed pages.

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9706/22 Cambridge International AS & A Level – Mark Scheme May/June 2020
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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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1(a) Credit purchases 4

Trade payables
$ $
Payments 70 300 Opening balance 4 980 (1)
{(1)
Discounts received 940 Purchases 73 480 (1)OF
Closing balance 7 220 (1) 00 000
78 460 78 460

Accept alternative presentations

1(b) Depreciation of furniture and equipment 3

$
Opening valuation 26 800
New furniture 5 200 (1)
32 000
Less closing valuation 28 300 (1)
Depreciation 3 700 (1) OF

1(c) Drawings 5

Cash account
$ $
Opening balance 820 (1)* Cash banked 112 400 (1)
Cash sales 133 200 (1) Wages of assistant 18 800 (1)
Drawings 2 410 (1)OF
000 000 Closing balance 410 *
134 020 134 020

*Both
Accept alternative presentations

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1(d) Tariq 9

Income statement for the year ended 30 September 2019

$ $
Revenue 133 200
Less Opening inventory 7 410
Purchases [$73 480 (of) – $390 73 090
(1)]
80 500
Closing inventory 8 080
Cost of sales 72 420
Gross profit 60 780 (1)
Discounts received 940 (1)
61 720
Rent W1 16 960 (2)OF
Depreciation of furniture and equipment 3 700 (1)OF
Accountant's fees 640 (1)
Loan interest 580
Wages of assistant 18 800 (1)
40 680
Profit for year 21 040 (1)OF

W1 Rent
Payment $14 930 + $990 (1) + $1 040 (1) = 16 960

1(e) Business entity: a business has its existence separate from its owners (1) only 2
(i) transactions that affect the business should be recorded in the accounting records (1)

Max 2

1(e) Substance over form: financial statements must give a complete and accurate picture of 2
(ii) events (1) so economic impact is taken into account and legal form is disregarded (1)

Max 2

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1(f) Advice (1) 5

Reducing inventory:
Would achieve improvement in liquidity (1)
Would reduce storage costs (1)
Would reduce chance that items become out of date and are wasted (1)
But negative impact if inventories run out and demand not met (1)
Delaying payments to suppliers:
Would achieve improvement in liquidity (1)
Might cause the loss of cash discounts/negative impact on profits (1)
But negative impact if credit terms not met leading to loss of suppliers/credit
terms/interest charges (1)

Award up to 2 marks for each course of action (overall maximum 4 marks) plus 1
mark for advice

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2(a) Advantage (Max 1 advantage) 4

Provides a more realistic charge against profits (1) as some assets lose more value in
their first years (1)/as the asset reduces in value so the depreciation charge reduces (1).

1 + 1 mark for development

Accept other valid responses.

Disadvantage ( Max 1 disadvantage)

Is more complicated to calculate (1) as the charge changes each year because it is
based on the decreasing net book value at the beginning of each year (1) rather than the
more straightforward equal charge per year when using the straight-line method (1).

1 + 1 mark for development

Accept other valid responses.

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2(b) Balance of provision for depreciation account at 31 December 2019 4

Vehicle A Vehicle B

Depreciation charge 7 200 ($40 000 × 20%) 8 000 (1)

for 2018
($36 000 × 20%)
(1)
Depreciation charge 5 760 ($32 000 × 20%) 6 400 (1)
for 2019
($28 800 × 20%)

12 960 14 400

Balance is $27 360 (1)OF

2(c) Delivery vehicles cost account 5

$ $
2018 2020
Jan 1 Bank: delivery 36 000 * Feb 1 Disposal Delivery 40 000 (1)
vehicle A vehicle B
April 1 Bank: delivery 2020
vehicle B 40 000 *(1) Dec Balance c/d 74 000
31
2020 Bank: delivery
Feb 1 vehicle C 30 000 (1)
Disposal 8 000 (1) 000 000
114 000 114 000
2021 (1)
Jan 1 Balance b/d 74 000
*Both

2(d) Obsolescence/technological change (1) 2

Lapse of time (1)
Inadequacy (1)
Depletion (1)
Max 2
Accept other valid responses

3(a) Reasons for dissolving a partnership 3

Business is making a loss (1)

Partners cannot agree (1)
A partner has died/retired (1)
The objectives of the partnership have been achieved (1)
Legal reasons such as insanity of partner (1)

Max 3
Accept other valid responses

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3(b) Realisation account 7

$ $
Motor vehicles 19 400 Discount received 270 (1)
Furniture and equipment 11 900 Capital Xu, motor 15 100 (1)
vehicle
(1)
Inventory 7 480 Bank, trade receivables 9 880 (1)
(W1)
Trade receivables 11 200 Bank, furniture and 7 300
equipment
(1)
Bank, dissolution 620 (1) Bank, inventory 6 530
expenses
Realisation loss: Xu 5 760 (1)OF
00 000 Zoe 5 760
50 600 50 600

Alternative answer showing different treatment of trade payables

Realisation account
$ $
Motor vehicles 19 400
Furniture and equipment 11 900 Capital Xu, motor 15 100 (1)
vehicle
(1)
Inventory 7 480 Bank, trade receivables 9 880 (1)
(W1)
Trade receivables 11 200 Bank, furniture and 7 300
equipment
(1)
Bank, dissolution 620 (1) Bank, inventory 6 530
expenses
Bank: Trade payables 5 130 * Trade payables 5 400 *(1)
Realisation loss: Xu 5 760 (1)OF
00 000 Zoe 5 760
55 730 55 730

In the alternative version there is one mark for both entries relating to trade
payables.

W1: (11200 – 800) × 0.95

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3(c) 5
$
Capital account balance 18 000
(1)
Current account balance (2 480)
Loan account 4 300 (1)
Motor vehicle taken over (15 100) (1)
Loss on realisation (5 760) (1)OF
Amount due from Xu (1 040) (1)OF

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4(a) Managers could be involved in setting targets/budgets for their areas of responsibility (1) 6
resulting in possible increase in motivation (1)
If managers are not involved in setting targets/budgets motivation could be reduced (1)
especially if targets are seen to be unachievable/unrealistic (1)
Managers’ efficiency could be improved (1) as a result of having clear objectives/targets
(1)
However, budgetary control might prove to be restrictive (1) resulting in otherwise
beneficial opportunities being rejected by managers(1)

Any three points (1 + 1 for development)

Accept other valid responses.

4(b) Contribution per unit 3

$ $
Selling price 69 (1)
Less Variable costs
Direct materials 6.60
Direct labour 43.16
Other 2.24
52 (1)
Contribution 17 (1)OF

4(c) $ 3
Total contribution 24 500 × $17 416 500 (1)
Less fixed costs 374 000
Actual profit 42 500 (1)
Target profit 50 000
7 500 (1)

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4(d) Option A profit 6

(i)
Maximum capacity using overtime is 28 000 units + 20%, i.e. 33 600 units
Demand for Option A: 24 500 units + 40%, i.e. 34 300 units
Hence 33 600 will be produced (1)
Normal contribution becomes $17 – $3 (reduction in selling price) + 0.33 (discount on
materials) = $14.33 (1)OF
1 
Contribution in overtime = $14.33 −  × $43.06, i.e. 10.79  = $3.54 (1)OF
4 
$
Contribution from normal working 28 000 × $14.33 (of) 401 240 (1)OF
Contribution in overtime 5 600 (of) × $3.54 19 824
421 064 (1)OF
Less fixed costs 374 000
47 064 (1)OF

4(d) Option B profit 5

(ii)
Change in contribution: $17 + 0.60 (cheaper materials), i.e. $17.60 per unit
Change in fixed costs per annum:

$
Current fixed costs 374 000
Increased depreciation 4 000 (1)
Interest charges (8% × $20 000) 1 600
Advertising campaign 60 000 (1)
439 600 (1)OF

$
Contribution from normal working 28 000 × $17.60 (of) 492 800 (1)OF
Less fixed costs 439 600
53 200 (1)OF

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4(e) Advice (1) 7

Justification

Reasons for choosing Option A:

Will increase profits by $4 564 (1of) on latest performance (1)

Will not involve any permanent change in fixed costs (1)
Not changing fixed costs will be beneficial if increased demand is not maintained (1)
Will ensure factory is working to full capacity making most efficient use of existing
resources (1)
Will avoid applying for bank loan which will increase company’s liabilities (1)
Application for bank loan for Option B may be refused (1)

Reasons for choosing Option B

Will increase profits by the larger amount $10 700 (1)OF on latest performance (1)
Will achieve target profit for factory (1) and exceed target by $3 200 (1)
Option A does not achieve target profit ((1) and misses target by $2 936 (1)
Will avoid the use of overtime working which may not suit workforce (1)

Will avoid the use of overtime working which may cause deterioration in quality of
production (1)
Will ensure factory is working to full capacity making most efficient use of existing
resources (1)

Advice (1) plus Max (6) for justification

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