A Level Accounting: Preparation of financial statements (A Level) (Cambridge 9706) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions follow Cambridge International AS & A Level Accounting 9706 (syllabus for 2026, 2027 and 2028), section 3.1 Preparation of financial statements, A Level content. All businesses and figures are invented and amounts are in dollars. See the study guide, revision notes, course hub, printable checklist and free diagnostics.

Questions

1. (a) State two reasons why the partners of a firm need financial statements. [2] (b) Distinguish inherent goodwill from purchased goodwill. [2]

2. Bexmoor Studio: Ines and Jonas share profits 3:1 with capitals of 48,000 and 32,000. They admit Kemal, who pays 30,000 into the bank. The new ratio is 2:1:1. Premises rise from 70,000 to 82,000 and equipment falls from 20,000 to 15,000. Goodwill is valued at 16,000 and is not kept in the books.

(a) Prepare the revaluation account and share the result. [3] (b) Show the partners’ capital accounts after the admission. [5]

3. Hollinwood Dental: Lena, Marek and Nadia share profits 2:2:1 with capitals of 40,000, 35,000 and 20,000. Nadia retires. Goodwill is valued at 25,000 and is not kept in the books. Lena and Marek will share equally. Nadia’s balance becomes a loan.

(a) Calculate each partner’s goodwill entry. [3] (b) State the closing capital balances and the loan. [3]

4. Selbourne Garage: Oriel and Piet shared profits 3:2 until 31 August and equally afterwards. Year end 31 December; profit 90,000, earned evenly. Piet’s salary is 12,000 for the year. Prepare the appropriation account. [6]

5. Zelkova Clinic is dissolved. Rhea and Soren share profits 3:2 with capitals of 100,000 and 78,000. Book values: premises 120,000, equipment 36,000, inventory 14,000, trade receivables 20,000, bank 6,000, trade payables 18,000. Premises, equipment, inventory and receivables realise 135,000, 30,000, 11,000 and 18,500. Trade payables are settled for 17,400 and dissolution costs are 2,500.

(a) Prepare the realisation account. [5] (b) State the closing capital balances and the total paid out of the bank. [3]

6. Wetherlea Chess Club’s assets on 1 January were equipment 4,800, bank 1,900, subscriptions in arrears 240 and refreshment inventory 310. Liabilities were subscriptions in advance 130 and payables 280. Subscriptions received in the year were 5,150. At 31 December arrears were 180 and advance receipts 210.

(a) Calculate the accumulated fund on 1 January. [3] (b) Calculate subscriptions income for the year. [3]

7. Lowenby Youth Club’s receipts and payments summary shows: tuck shop sales 2,900; subscriptions 3,800; general donation 600; two life memberships of 400 each, received at the start of the year; tuck shop purchases paid 1,900; hall hire paid 1,500; insurance 380; equipment bought 1,200. Tuck shop inventory 150 opening and 220 closing; tuck shop payables 100 opening and 160 closing; subscriptions in arrears 90 opening and 60 closing; hall hire owing 150; equipment (cost 5,000 before the purchase) depreciated at 10% on closing cost; life memberships are released over 5 years.

(a) Calculate the tuck shop profit. [3] (b) Prepare the income and expenditure account. [6] (c) State the life membership balance at year end. [1]

8. Lowenby Youth Club needs 9,000 for a minibus. It holds 2,000 of spare cash and has 12 willing volunteers. A bank offers a three-year loan.

(a) State two methods of fundraising. [2] (b) Recommend how the club should pay, with reasons. [3]

9. Haverlock Furniture: raw materials 8,400 at the start and 9,600 at the end, purchases 52,600, returns outwards 1,000, direct wages 36,000, royalties on output 2,000, supervisor’s salary 14,000, factory heating 3,500, machine depreciation 5,500, work in progress 4,200 at the start and 3,700 at the end. Goods transfer at cost plus 20%.

(a) Prepare the manufacturing account to the transfer price. [6] (b) Finished goods at transfer price were 18,000 at the start and 24,000 at the end. Calculate the provision for unrealised profit at each date, the charge for the year and the closing inventory in the statement of financial position. [4]

10. Prestwold Ltd: property, plant and equipment at cost 240,000 at 1 January; additions 60,000; disposals at cost 30,000. Accumulated depreciation 96,000 at 1 January; charge 32,000; on disposals 21,000. Disposal proceeds 7,500. Equity at 1 January: share capital 150,000 in shares of 1 each, share premium 20,000, general reserve 12,000, retained earnings 88,000. In the year: a bonus issue of 1 share for every 10 from retained earnings, profit for the year 46,000, a transfer of 5,000 to general reserve and dividends of 20,000.

(a) Prepare the closing figures of the schedule of non-current assets. [3] (b) Prepare the statement of changes in equity totals at 31 December. [5] (c) State the disposal result and its place in the statement of cash flows. [2]

11. Stansfield Ltd: profit before tax 58,000 after finance costs of 4,000; depreciation 14,000; loss on disposal 2,000; inventories fall 6,000; receivables rise 8,000; payables fall 3,000. It paid tax 11,000 and interest 4,000, bought non-current assets for 45,000, sold others for 5,000, issued shares for 30,000, repaid a loan of 10,000 and paid dividends of 12,000. Opening cash 7,000. Prepare the statement of cash flows. [8]

Answers

1. (a) Any two: shows each partner’s profit share and balance [1]; settles disputes or supports a loan [1]. (b) Inherent goodwill is built by the business itself and is not recorded [1]. Purchased goodwill is the price paid above the fair value of net identifiable assets, recorded as an asset [1]. [4] Examiner insight: Two distinct reasons are likely to be needed for two marks.

2. (a) Premises gain 12,000 credited and equipment loss 5,000 debited [1]. Gain 7,000 [1]. Ines 5,250 and Jonas 1,750 [1]. (b) Goodwill credits: Ines 12,000, Jonas 4,000 [1]. Debits: Ines 8,000, Jonas 4,000, Kemal 4,000 [1]. Ines 48,000 + 5,250 + 12,000 − 8,000 = 57,250 [1]. Jonas 33,750 [1]. Kemal 30,000 − 4,000 = 26,000 [1]. [8] Examiner insight: Reconciling the closing total to old capital plus gain plus cash helps you find a slip.

3. (a) Credits in the old ratio: Lena 10,000, Marek 10,000, Nadia 5,000 [1]. Debits equally: 12,500 each [1]. Net: Lena and Marek debit 2,500 each; Nadia credit 5,000 [1]. (b) Lena 37,500 [1], Marek 32,500 [1], loan to Nadia 25,000 [1]. [6] Examiner insight: Naming the ratio used on each side of the goodwill entry helps your method gain credit.

4. Salary: Piet 12,000 [1]. Residual 78,000 [1]. Old terms 8/12: 52,000, Oriel 31,200, Piet 20,800 [1]. New terms 4/12: 26,000, 13,000 each [1]. Oriel total 44,200 [1]. Piet total 12,000 + 20,800 + 13,000 = 45,800 [1]. [6] Examiner insight: Take the salary out before sharing the residual by time.

5. (a) Debit assets at book value 190,000 [1] and costs 2,500 [1]. Credit proceeds 194,500 [1] and discount on trade payables 600 [1]. Profit 2,600 [1]. (b) Rhea 100,000 + 1,560 = 101,560 [1]; Soren 78,000 + 1,040 = 79,040 [1]; bank paid out 6,000 + 194,500 − 17,400 − 2,500 = 180,600 [1]. [8] Examiner insight: Show the discount as a credit, or the account will not balance.

6. (a) Assets 7,250 [1]; liabilities 410 [1]; accumulated fund 6,840 [1]. (b) 5,150 − 240 [1] + 180 + 130 [1] − 210 = 5,010 [1]. [6] Examiner insight: Writing each adjustment step by step shows method.

7. (a) Purchases 1,900 + 160 − 100 = 1,960 [1]. Cost of sales 150 + 1,960 − 220 = 1,890 [1]. Profit 2,900 − 1,890 = 1,010 [1]. (b) Income: subscriptions 3,800 − 90 + 60 = 3,770 [1]; life membership 160 [1]; donation 600 [1]; tuck shop profit 1,010 gives total income 5,540. Expenses: hall hire 1,650 [1]; depreciation 620 [1]; insurance 380 gives total 2,650. Surplus 2,890 [1]. (c) 800 − 160 = 640 liability [1]. [10] Examiner insight: Equipment purchases and the life membership receipt are capital items, so putting them in income is likely to lose credit.

8. (a) Any two: sponsored event; raffle or sale; donation or grant request [1] [1]. (b) For cash and fundraising: no interest or repayment [1]. Against: fundraising is uncertain and slow; a loan is certain but costs interest [1]. Recommend using the 2,000 and fundraising, borrowing only any shortfall [1]. [5] Examiner insight: A recommendation is likely to need both sides weighed and a clear choice.

9. (a) Raw materials used 8,400 + 52,600 − 1,000 − 9,600 = 50,400 [1]. Prime cost 50,400 + 36,000 + 2,000 = 88,400 [1]. Overheads 14,000 + 3,500 + 5,500 = 23,000 [1]. Cost of production 88,400 + 23,000 + 4,200 − 3,700 = 111,900 [1]. Factory profit 22,380 [1]. Transfer price 134,280 [1]. (b) Opening 18,000 × 20/120 = 3,000 [1]; closing 4,000 [1]; charge 1,000 [1]; inventory 24,000 − 4,000 = 20,000 [1]. [10] Examiner insight: The royalty is a direct expense in prime cost; only the change in the provision is charged.

10. (a) Cost 240,000 + 60,000 − 30,000 = 270,000 [1]. Depreciation 96,000 + 32,000 − 21,000 = 107,000 [1]. Carrying amount 163,000 [1]. (b) Bonus issue 15,000 shares: share capital 165,000 [1]; share premium 20,000 unchanged [1]; general reserve 17,000 [1]; retained earnings 88,000 − 15,000 + 46,000 − 5,000 − 20,000 = 94,000 [1]; total 296,000 [1]. (c) Carrying amount of disposals 9,000, so loss 1,500 [1]; proceeds of 7,500 are an investing inflow and the loss is added back in operating activities [1]. [10] Examiner insight: Check the total equals opening equity plus profit less dividends.

11. Operating: 58,000 + 4,000 + 14,000 + 2,000 = 78,000 [1]. Working capital 6,000 − 8,000 − 3,000 = −5,000, giving 73,000 [1]. Interest and tax paid 15,000, so 58,000 [1]. Investing: −45,000 + 5,000 = −40,000 [1]. Financing: 30,000 − 10,000 − 12,000 = 8,000 [1]. Net increase 26,000 [1]. Closing cash 33,000 [1]. Clear headings and stated treatment of interest and dividends [1]. [8] Examiner insight: IAS 7 allows more than one classification for interest and dividends paid, so state your choice.

Where marks are usually lost

• Crediting goodwill to the incoming partner rather than the old partners.
• Forgetting the revaluation gain or loss in the capital accounts.
• Sharing the whole year’s profit in one ratio after a mid-year change.
• Leaving the discount on trade payables out of the realisation account.
• Ignoring arrears and advance receipts in subscriptions income.
• Counting equipment purchases or life membership receipts as income.
• Charging the whole provision for unrealised profit instead of the change.
• Naming fundraising methods with no recommendation or balance.

Frequently asked questions

Are these Cambridge 9706 financial statements questions from past papers? No. They are original questions with worked answers on section 3.1 of Cambridge 9706 A Level Accounting, written for revision. Use them alongside the official past papers.

What are common mistakes in partnership admission questions? Common errors include crediting goodwill to the incoming partner rather than the old partners, and forgetting the revaluation gain or loss in the capital accounts.

What are common mistakes in club accounts questions? Ignoring arrears and advance receipts in subscriptions income, and counting equipment purchases or life membership receipts as income, are common ways to lose marks.

How can I check partnership capital accounts after an admission? Reconcile the closing capital total to the old capital plus any revaluation gain plus the cash brought in by the new partner. A difference points to a slip.

Next steps

• Review the revision notes and study guide.
• Use the checklist and course hub.
• Take the free 10-minute diagnostics.
• Book a free trial class on the trial page.

Official syllabus

Cambridge International AS & A Level Accounting 9706, syllabus for examination in 2026, 2027 and 2028, section 3.1, published by Cambridge University Press & Assessment.