Edexcel A-Level Accounting: Social and ethical accounting (YAC11) – 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 cover topic 1.6, Social and ethical accounting, of the Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11) specification, Issue 2, September 2018: outcomes 1.6.1 to 1.6.4. The topic is in Unit 1 (WAC11), the International AS unit, so it applies to both the International AS and the full International A Level. There are no tiers. All businesses and figures are invented.

Learn the content first in the study guide and the revision notes. Course hub: /boards/edexcel/a-level/accounting/. Checklist: /checklists/edexcel/a-level/accounting/. Diagnostics: /diagnostics/.

Questions

1. Define the term “non-financial factor” and give one example relating to a workforce. [2]

2. Identify two stakeholders of a sole trader, other than the owner, and explain one interest each has in the business’s accounting decisions. [4]

3. Explain how a decision to buy timber from the cheapest available supplier could affect the use of natural resources. [2]

4. Sedgebrook Print Works pays its machine operators a day rate of 12.50 per hour for a 38-hour week. The owner proposes to pay piecework at 0.95 per unit instead. A typical operator produces 560 units a week.

(a) Calculate a typical operator’s weekly earnings under each method. [2] (b) Explain two workforce or health and safety implications of the switch to piecework. [4]

5. Hillcrest Garden Supplies has trade receivables of 84,000 at the year end. The allowance for irrecoverable debts at the start of the year was 3,100, and the business policy is an allowance of 4%. Overdue debts have not improved. A partner is about to join; the owner asks for 1.5% “so the profit looks better”.

(a) Calculate the effect on profit for the year of an allowance of (i) 4% and (ii) 1.5%. [4] (b) Explain why the owner’s request is unethical. [3]

6. Achterberg and Pimlott are admitting Adaeze as a partner. Goodwill is to be valued at twice the average profit of the last three years. The correct profits are 36,000, 41,000 and 46,000. Achterberg proposes to record repairs of 9,000, carried out in the latest year, in the following year instead.

(a) Calculate goodwill using the correct profits and using Achterberg’s proposal. [4] (b) Explain the ethical problem and who would be harmed. [3]

7. Bramblecote Upholstery is pricing a job to re-cover hotel furniture. Direct materials are 2,400. Direct labour is 60 hours at 14 per hour. Overheads are absorbed at 9 per direct labour hour. The price is total cost plus 25%.

(a) Calculate the price of the job. [4] (b) The owner proposes to use a cheaper fabric that is not fire-retardant, saving 600 on materials, without telling the hotel. Evaluate the proposal. [6]

8. Thornaby Laundry must buy a washing machine. Both machines last 5 years and are depreciated on the straight-line basis.

	Machine A	Machine B
Cost	60,000	84,000
Residual value	5,000	9,000
Annual running costs	14,000	8,500

Machine B uses much less water and is quieter.

(a) Calculate the total annual charge to profit for each machine. [4] (b) Recommend which machine Thornaby Laundry should buy. [5]

9. Oakmere Ceramics is the largest employer in a small town. The owner plans to move production to a cheaper site 150 km away. Explain how the decision might affect three different stakeholders. [6]

10. Pennock Bakery is considering replacing six bakers, each paid 21,000 a year, with an automated production line. The line costs 300,000, has a life of 6 years and a residual value of 30,000, and is depreciated on the straight-line basis. It adds maintenance of 18,000 and energy costs of 7,000 a year. Redundancy pay of 27,000 would be paid once, in the first year.

(a) Calculate the annual effect on profit, and the effect in the first year. [4] (b) Evaluate whether Pennock Bakery should automate. [8]

11. Rookwood Cycles has revenue of 400,000, a gross margin of 30% and expenses of 84,000, which are expected to stay the same. The owner wants the accountant to prepare a projection for a bank loan using 25% sales growth. The accountant’s evidence supports 5% growth. Assume the gross margin stays the same.

(a) Calculate projected profit for the year under each growth rate. [4] (b) Discuss the ethical issues and recommend what the accountant should do. [6]

Answers

1. A factor relevant to a decision that cannot be measured reliably in money [1]. Example: staff morale after redundancies are announced [1]. [2] Examiner insight: The example must fit the context asked for; “reputation” does not relate to a workforce.

2. Employees [1]: they want job security and fair pay, so a cost-cutting decision may threaten their jobs [1]. Bank [1]: it wants to know that profit and cash flow can cover loan repayments and interest [1]. [4] Examiner insight: Each interest needs a reason linked to the decision; naming four stakeholders with no explanation answers only half the question.

3. The cheapest supplier may source timber from forests that are not replanted [1], so the purchase adds to the depletion of a natural resource, a cost that does not appear in the business’s own accounts [1]. [2] Examiner insight: “Explain” needs the chain from the decision to the effect; “it is bad for the environment” is a statement, not an explanation.

4. (a) Day rate: 38 × 12.50 = 475 [1]. Piecework: 560 × 0.95 = 532 [1]. (b) Operators may rush to raise output [1], which raises the risk of accidents on the machines (health and safety) [1]. Pay now varies with output [1], so a slow week cuts earnings, reducing security and possibly morale (workforce) [1]. [6] Examiner insight: Each implication needs a cause and a consequence; two undeveloped points such as “accidents” and “morale” earn far less.

5. (a) (i) 84,000 × 4% = 3,360 [1]; the allowance rises by 260, so profit is reduced by 260 [1]. (ii) 84,000 × 1.5% = 1,260 [1]; the allowance falls by 1,840, so profit is increased by 1,840 [1]. (b) It breaks prudence: receivables and profit are overstated by 2,100 compared with the policy [1]. There is no evidence debts are more likely to be paid; the only reason is to impress the new partner [1]. The new partner would join on figures that are not a true and fair representation [1]. [7] Examiner insight: State the direction of each effect on profit; a bare “260” and “1,840” leaves the reader unsure whether profit rises or falls.

6. (a) Correct average = (36,000 + 41,000 + 46,000) ÷ 3 = 41,000 [1]; goodwill = 82,000 [1]. Proposed average = (36,000 + 41,000 + 55,000) ÷ 3 = 44,000 [1]; goodwill = 88,000 [1]. (b) The repairs belong to the latest year, so moving them breaks the accruals concept [1]. Goodwill is overstated by 6,000 [1]. Adaeze would pay for, or be credited with, goodwill that does not exist, so the existing partners gain at her expense [1]. [7] Examiner insight: Show the averages before doubling; a wrong goodwill figure with clear working still shows the method.

7. (a) Labour = 60 × 14 = 840 [1]. Overheads = 60 × 9 = 540 [1]. Total cost = 2,400 + 840 + 540 = 3,780 [1]. Price = 3,780 × 1.25 = 4,725 [1]. (b) The saving lowers cost to 3,180, so the price could fall to 3,975 or the margin rise [1], which may help win the contract [1]. But non-fire-retardant fabric puts hotel guests and staff at risk (health and safety) [1]. A fire could lead to claims, legal action and lasting damage to reputation [1]. Hiding the change from the hotel is dishonest [1]. Judgement: reject the proposal; the saving is small and the risk to people is serious [1]. [10] Examiner insight: Evaluate needs both sides and a final decision; listing only dangers lacks the balance the command word asks for.

8. (a) Machine A depreciation = (60,000 − 5,000) ÷ 5 = 11,000 [1]; total = 25,000 [1]. Machine B depreciation = (84,000 − 9,000) ÷ 5 = 15,000 [1]; total = 23,500 [1]. (b) Machine B costs 1,500 a year less [1], but needs 24,000 more cash at the start, which may affect liquidity [1]. It uses less water, saving a natural resource and protecting against rising water bills [1]. It is quieter, improving conditions for staff and neighbours [1]. Recommend Machine B, provided the extra 24,000 can be financed [1]. [9] Examiner insight: A recommendation should name one option and give the condition it depends on; “either could be chosen” does not recommend.

9. Owner: lower costs should raise profit [1], but moving costs and lost staff experience may reduce it at first [1]. Employees: many may lose their jobs or face a long journey [1], harming income and morale [1]. Local community: the town loses its largest employer [1], so local shops lose spending and unemployment rises [1]. [6] Examiner insight: Cover three different stakeholders, each with an effect and a consequence.

10. (a) Wages saved = 6 × 21,000 = 126,000 [1]. Depreciation = (300,000 − 30,000) ÷ 6 = 45,000 [1]. Annual increase in profit = 126,000 − 45,000 − 18,000 − 7,000 = 56,000 [1]. First year = 56,000 − 27,000 = 29,000 [1]. (b) For: profit rises by 56,000 a year, and by 29,000 even in the first year [1]. Quality may be more consistent, and fewer staff work beside hot ovens [1]. Against: six bakers lose their jobs [1]. The town loses local spending, and the bakery its image as a local employer [1]. Extra energy use affects natural resources [1]. The figures are estimates; a breakdown could stop all production [1]. Some bakers could be retrained to run the line [1]. Judgement: automate, retraining where possible, since the gain is large [1]. [12] Examiner insight: Social points should come from the scenario (six bakers, energy, ovens); generic lists tend to earn little.

11. (a) At 25%: revenue 500,000, gross profit 150,000 [1]; profit = 66,000 [1]. At 5%: revenue 420,000, gross profit 126,000 [1]; profit = 42,000 [1]. (b) The 25% projection overstates profit by 24,000 [1]. Projections must rest on realistic assumptions to be a true and fair representation [1]. The bank may lend more than can be repaid, harming both the bank and the business [1]. The accountant’s own integrity and reputation are at risk [1]. Recommend: present the 5% projection with its assumptions stated [1], and refuse to present 25% as the expected figure [1]. [10] Examiner insight: Quantify the misstatement from part (a) in part (b); using your own figure makes the ethical point concrete.

Where marks are usually lost

• Answering “Evaluate” with points on one side only, or with no final judgement.
• Writing about “the environment” or “society” without the details given in the scenario.
• Giving a figure for a change in allowance without saying whether profit rises or falls.
• Calling an unethical treatment “illegal” instead of naming the concept it breaks.
• Ignoring the cash needed up front when comparing annual charges.
• Forgetting one-off costs, such as redundancy pay, in the first year.

Next steps

• Revision notes
• Study guide
• Exam preparation for the Unit 1 paper
• Course hub
• Printable checklist
• All free 10-minute diagnostics
• Book a free trial class

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11) specification, Issue 2, September 2018 (first teaching September 2015), Unit 1: The Accounting System and Costing, topic 1.6 Social and ethical accounting, outcomes 1.6.1-1.6.4.