7110 PRINCIPLES OF ACCOUNTS

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1 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS GCE Ordinary Level MARK SCHEME for the May/June 2007 question paper 7110 PRINCIPLES OF ACCOUNTS 7110/02 Paper 2 (Structured), maximum raw mark 100 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. All Examiners are instructed that alternative correct answers and unexpected approaches in candidates scripts must be given marks that fairly reflect the relevant knowledge and skills demonstrated. 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 2007 question papers for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

2 Page 2 Mark Scheme Syllabus Paper 1 (a) (i) Evidence of purchase of goods on credit OR Evidence of purchasing advertising Purchases journal General Journal [max. 2] (ii) Evidence of a refund/reduction of amount owed Purchases returns journal (OR, appropriate comment) [max. 2] (iii) Evidence of payment for goods/services Cash book (OR, appropriate comment) [max. 2] [6] Sam Stryder Purchases Ledger Control Account Purchases returns Bank Discounts received Sales ledger control account Balance c/d Balance b/d Purchases Interest on overdue account (2)/ Accept three-column format including headings Debit and Credit and opening and closing balances [9] (c) To provide totals of sales/purchases To provide totals of debtors/creditors To locate errors As a deterrent against fraud Check on purchase/sales ledgers Assist in preparation of final accounts from incomplete records Audit staff efficiency [max. 2] [Total: 17]

3 Page 3 Mark Scheme Syllabus Paper 2 (a) Carson Journal April Bad debts 148 Johnston April Bad debts Turner April Profit and loss account Provision for doubtful debts 936 (2) 936 [7] Iqbal 29 April Balance b/d April Cash 72 Johnston 29 April Balance b/d April Bad debts 148 Turner 29 April Balance b/d April Bank April Bad debts [4] (c) Profit and loss account for the year ended 30 April 2007 Dr Expenses Bad debts 788 Provision for doubtful debts 936 CR Balance Sheet as at 30 April 2007 Current assets Debtors (No marks if bad debts shown in extract) Less: provision for doubtful debts [4] (d) Prudence/conservatism. Matching/accruals [max. 1] [1] [Total: 16]

4 Page 4 Mark Scheme Syllabus Paper 3 (a) Calculation of goodwill Payment for business Fixed assets Stock Debtors Bank Creditors Goodwill Accept any presentation [5] Goodwill Fixed assets Stock Debtors Bank Falcon Balance Sheet as at 30 April Capital Creditors Accept alternative presentation [7] [Total: 12]

5 Page 5 Mark Scheme Syllabus Paper 4 (a) Workings % (i) Gross profit/sales x % (ii) Net profit/sales x 100 7% (iii) Net profit/capital x % [9] (i) Gross profit/sales This ratio is important in measuring success in selling goods The ratio can be compared against previous years The ratio can be compared against other businesses In Tom Martin s business 70% of sales income has been spent on cost of sales [max. 3] (ii) Net profit/sales This ratio measures the overall success of the organisation It can be compared against other businesses It can be compared against previous years Tom Martin s business has spent 23% of sales income on expenses [max. 2] (iii) Net profit/capital at start of year This measures the profitability of Tom Martin s business investment This can be compared year to year It can be compared with returns on other ways of investing the capital It can be compared with other businesses [max. 2] (c) Stock Debtors Less: provision for doubtful debts Bank Creditors Working capital [4] [Total: 20]

6 Page 6 Mark Scheme Syllabus Paper 5 (a) Marie Delaney Trading and Profit and Loss Account for the year ended 30 April 2007 Opening stock Purchases Carriage on purchases Closing stock Cost of goods sold Gross profit c/d Wages and salaries ( ) Motor expenses Rent and rates ( ) Bank interest and charges Interest on loan Sundry expenses Provision for depreciation fixtures and equipment (25% x 8440) motor vehicles 40% ( ) Net profit c/d Sales (2) (2) Gross profit b/d Discounts rec d Accept any recognisable layout [21] Marie Delaney Balance Sheet as at 30 April 2007 Fixed assets Fixtures and equipment Motor vehicles Current assets Stock Debtors Prepaid rent Cost Depr n NBV Capital Net profit Drawings Long-term liability Loan Keiley Current liabilities Loan Keiley Creditors Bank overdraft Accrued wages Interest on loan accrued Accept any recognisable layout [14] [Total: 35]

MARK SCHEME for the May/June 2006 question paper 7110 PRINCIPLES OF ACCOUNTS. 7110/02 Paper 2 maximum raw mark 100

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS GCE O Level MARK SCHEME for the May/June 2006 question paper 7110 PRINCIPLES OF ACCOUNTS 7110/02 Paper 2 maximum raw mark 100 This mark scheme is published