Cambridge 9706, Paper 1 & 2. 1,558 questions, 2020 to 2026.
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The statement of financial position for a sole trader: non-current and current assets, current and non-current liabilities, and capital.
60 past paper questions on this topic since 2020, across 13 exam sessions.
| Year | Paper 1 | Paper 2 | Total | Chart |
|---|---|---|---|---|
| 2026 | 3 | 0 | 3 | |
| 2025 | 8 | 3 | 11 | |
| 2024 | 15 | 1 | 16 | |
| 2023 | 10 | 0 | 10 | |
| 2022 | 8 | 0 | 8 | |
| 2021 | 6 | 0 | 6 | |
| 2020 | 5 | 1 | 6 |
The whole topic on one page, with answers and mark schemes. Printing this page prints just this list.
A sole trader’s financial year ends on 31 December. How is the profit for the year calculated? A net assets at 1 January −net assets at 31 December + drawings for the year B net assets at 1 January −net assets at 31 December −drawings for the year C net assets at 31 December −net assets at 1 January + drawings for the year D net assets at 31 December −net assets at 1 January −drawings for the year
CCorrect answer
A sole trader’s financial year ends on 31 December. How is the profit for the year calculated? A net assets at 1 January −net assets at 31 December + drawings for the year B net assets at 1 January −net assets at 31 December −drawings for the year C net assets at 31 December −net assets at 1 January + drawings for the year D net assets at 31 December −net assets at 1 January −drawings for the year
CCorrect answer
Which statement about a sole trader is not correct?
CCorrect answer
Jaime provided the following information.
What was the profit for the year?
CCorrect answer
At 31 December, the following information is available about a company’s banking transactions.
Which value for bank should be recorded in the statement of financial position at 31 December?
ACorrect answer
A sole trader rented out part of his business office on 1 January 2024 at $500 per month for 24 months. During the year ended 31 December 2024, he received the following amounts:
CCorrect answer
The following information is extracted from the draft statement of financial position of a limited company at 31 December.
What is the maximum amount of dividend that the limited company can declare?
CCorrect answer
Jane has just completed her first year in business as a sole trader. The following details are available for the year ended 31 December.
How much capital did Jane begin the business with?
CCorrect answer
A draft statement of financial position shows a bank balance of $1400. The following information is now available.
Which figure is shown on the bank statement?
ACorrect answer
A draft statement of financial position shows a bank balance of $1400. The following information is now available.
Which figure is shown on the bank statement?
ACorrect answer
Sunil was reviewing the statement of financial position of a business. The statement of profit or loss was not available. Why was Sunil interested in the current assets of the business?
DCorrect answer
A trainee accountant recently produced the financial statements for a business for the year ended 31 December 2024. However, the following errors were discovered. Error
The business sells all goods with a mark‑up of 20%. The draft profit for the year ended 31 December 2024 was $36 960.
(a) Complete the table to identify and describe the accounting concept which has been ignored in each of the errors. [8 marks]
(b) Calculate the revised profit for the year ended 31 December 2024. [6 marks]
The owner of the business wishes to correct the errors that the trainee accountant has made.
(c) State which accounting concept should be applied when deciding whether or not to record this asset in the statement of financial position. [1 marks]
The business has a highly skilled workforce, and the owner is of the opinion that this asset should be reflected in the statement of financial position.
(a)
(b)
Bilal provided the following information for his service business for the year ended 31 December 2024. 1 Receipts and payments for the year ended 31 December 2024 included:
2 On 3 On 1 January 2024, the allowance for irrecoverable debts was $632. On 31 December 2024, Bilal decided to increase the allowance for irrecoverable debts by 1%. 4 On 1 January 2024, electricity charges of $270 were outstanding. On 31 December 2024, electricity charges of $490 were prepaid. 5 On 1 May 2024, part of the business premises was rented out at $1650 for every three months receivable in advance. 6 On 1 November 2024, the advertising campaign commenced. It will end on 31 January 2026. 7 During the year ended 31 December 2024, a motor vehicle, cost $21 000, was sold for $9100. It had been depreciated for three years at 20% per annum using the reducing balance method. No depreciation is provided in the year of sale. 8 Non-current assets at
(a) Prepare the statement of profit or loss for the year ended 31 December 2024. Use the space provided on page 4 to show your workings. [14 marks]
Workings: Revenue Allowance for irrecoverable debts Electricity charges Rent received Advertising campaign Profit or loss on disposal of motor vehicle Depreciation
(b) Prepare an extract from the statement of financial position at 31 December 2024, showing the assets section only. [7 marks]
At 31 December 2024, the cash at bank balance was $8950.
Assets Workings:
(c)(i) Explain, with reference to an accounting concept, why Bilal: maintains an allowance for irrecoverable debts [2 marks]
(c)(ii) Explain, with reference to an accounting concept, why Bilal: always uses the same method of depreciation for each class of non-current asset. [2 marks]
(d) Advise Bilal which option he should choose. Justify your choice by discussing both options. [5 marks]
Bilal hopes to expand his business and to move to larger premises. He is considering the following options. Option A: Renting out the whole of the current business premises and taking out a lease on new premises. Option B: Selling the current business premises and using the proceeds to partly finance the purchase of new premises. He is aware that he will also need a bank loan to finance the balance of the purchase price of the new premises.
(a)
Workings: W1 Cash fees $78 440 + credit fees ($34 290 – $4 200) = $108 530 (1) W2 Rent receivable: $550 8 = $4 400 (1) W3 Original allowance: $632/$15 800% = 4% (1) New allowance: 5% 11 600 = $580 (1) Decrease in allowance: $632 – $580 = $52 (1) OF W4 Business premises: 2% $120 000 = $2 400 (1) Motor vehicle: 20% $26 000 = $5 200 (1) Furniture and equipment: $22 000 10% = $2 200 (1)
End of 2021: $21 000 80% = $16 800 End of 2022: $16 800 80% = $13 440 End of 2023: $13 440 80% = $10 752 Loss on disposal: $10 752 (1) – $9 100 = $1 652 (1) OF W6 $4 500 2/15 = $600 (1) W7 $3 610 – $270 (1) – $490 (1)= $2 850
(b)
W1 Advertising campaign $3 900 (1) + electricity charges $490(1) = $4 390
(d)
discussing both options. Option A (max 2)
Bilal provided the following information for his service business for the year ended 31 December 2024. 1 Receipts and payments for the year ended 31 December 2024 included:
2 On 3 On 1 January 2024, the allowance for irrecoverable debts was $632. On 31 December 2024, Bilal decided to increase the allowance for irrecoverable debts by 1%. 4 On 1 January 2024, electricity charges of $270 were outstanding. On 31 December 2024, electricity charges of $490 were prepaid. 5 On 1 May 2024, part of the business premises was rented out at $1650 for every three months receivable in advance. 6 On 1 November 2024, the advertising campaign commenced. It will end on 31 January 2026. 7 During the year ended 31 December 2024, a motor vehicle, cost $21 000, was sold for $9100. It had been depreciated for three years at 20% per annum using the reducing balance method. No depreciation is provided in the year of sale. 8 Non-current assets at
(a) Prepare the statement of profit or loss for the year ended 31 December 2024. Use the space provided on page 4 to show your workings. [14 marks]
Workings: Revenue Allowance for irrecoverable debts Electricity charges Rent received Advertising campaign Profit or loss on disposal of motor vehicle Depreciation
(b) Prepare an extract from the statement of financial position at 31 December 2024, showing the assets section only. [7 marks]
At 31 December 2024, the cash at bank balance was $8950.
Assets Workings:
(c)(i) Explain, with reference to an accounting concept, why Bilal: maintains an allowance for irrecoverable debts [2 marks]
(c)(ii) Explain, with reference to an accounting concept, why Bilal: always uses the same method of depreciation for each class of non-current asset. [2 marks]
(d) Advise Bilal which option he should choose. Justify your choice by discussing both options. [5 marks]
Bilal hopes to expand his business and to move to larger premises. He is considering the following options. Option A: Renting out the whole of the current business premises and taking out a lease on new premises. Option B: Selling the current business premises and using the proceeds to partly finance the purchase of new premises. He is aware that he will also need a bank loan to finance the balance of the purchase price of the new premises.
(a)
Workings: W1 Cash fees $78 440 + credit fees ($34 290 – $4 200) = $108 530 (1) W2 Rent receivable: $550 8 = $4 400 (1) W3 Original allowance: $632/$15 800% = 4% (1) New allowance: 5% 11 600 = $580 (1) Decrease in allowance: $632 – $580 = $52 (1) OF W4 Business premises: 2% $120 000 = $2 400 (1) Motor vehicle: 20% $26 000 = $5 200 (1) Furniture and equipment: $22 000 10% = $2 200 (1)
End of 2021: $21 000 80% = $16 800 End of 2022: $16 800 80% = $13 440 End of 2023: $13 440 80% = $10 752 Loss on disposal: $10 752 (1) – $9 100 = $1 652 (1) OF W6 $4 500 2/15 = $600 (1) W7 $3 610 – $270 (1) – $490 (1)= $2 850
(b)
W1 Advertising campaign $3 900 (1) + electricity charges $490(1) = $4 390
(d)
discussing both options. Option A (max 2)
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