June 2003

Edexcel International
London Examinations
GCE Advanced Level
Mark Scheme with Examiners Report
London Examinations Advanced Level GCE in

Accounting (9011)
June 2003
PaEdexcel International, A Level Mark Scheme and Examiners' Report
Accounting 9011, June 2003
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London Qualifications Limited 2003
Mark Scheme and Chief Examiner's Report

June 2003
ACCOUNTING 9011
Mark Scheme
Page 2 of 25
Chief Examiner's Report

Page 22 of 25
Grade Boundaries
Page 25 of 25
ACCOUNTING 9011, MARK SCHEME

PAPER 1
Section A
Question 1
(a)
Revaluation Account
Tools and Equipment

Stock of materials
5000
1000
Profit on Revaluation:
Urn
Pot
Pail
4000
4000
4000
Premises
18000
18000
18000
(3 marks)
Alternative answer:
Tools and Equipment

Stock of materials
5000
1000
Profit on Revaluation:
Urn
Pot
Pail
11000
11000
11000
Premises
Goodwill
39000
18000
21000 3
39000
(6 marks)
Page 2 of 25
Edexcel International, A Level Mark Scheme and Examiners' Report

(b)

Page 3 of 25
BALANCE SHEET AS AT 1 APRIL 2003
(c)
FIXED ASSETS
158000 4
19000 4
18550 4
195550
Premises
(140000 + 18000)
Vehicles
(28000 - 9000)
Tools and Equipment (23550 - 5000)
CURRENT ASSETS
7960
12480
Stock of materials
Debtors
Bank (16000 + 35000 - 40000)
44
Insurance Prepaid
4
4
11000
700
32140
11340
LESS: CURRENT LIABILITIES

Creditors
Expenses owing
10300
1040
NET CURRENT ASSETS
20800
216350
LESS: LONG TERM LIABILITY

Loan Pail
33200OF
183150
FINANCED BY:
CAPITAL
Urn
Pot
44OF
103400
72600
44OF
176000
CURRENT ACCOUNTS
Urn
Pot
4100
3050
4
4
7150
183150
16 x 4= (8 marks)
(25 marks)
Page 4 of 25

Question 2
Profit and Loss Account for the year ending 30 April 2003
(a)
Turnover (WN1)
Cost of Sales (WN2)
Gross Profit
Distribution Costs (WN3)
Administration Expenses (WN 4)
517700 (1)
267910
(2 1/2)
249790
1/2 OF
59440 (6)
27034 (6
1/2)
86474
163316
Interest Payable (WN5)
(2000) (1)
161316
18200 1/2
179516
Retained Profits from last year

Transfer to General Reserve
Transfer to Asset Replacement Reserve
Proposed Dividend
Retained Profit carried forward
70000 1/2
40000 1/2
20000 1
130000
49516 1 or
1/2 OF
(21 marks)
WORKINGS:
1/2
1/2
528000 - 10300 = 517700.
1.
Turnover -
2.
1/2
1/2
1/2
1/2
C.G.S. - 20250 + (268000 - 1380) - 18960 = 267910. 1/2 OF
3.
1/2
1
1
1
Dist / Costs - 13240 + 2700 + 3240 + 11620 +
1
1
11840 + 16800 = 59440. 1/2 OF
4.
1/2
1
1
1/2
1/2
1
Admin / Exps - 9140 +360 + 4980 + 840 + 784 + 2960 +
1
1/2
8400 - 430 = 27034. 1/2 OF
5.
1/2
1/2
Interest - 1000 + 1000 = 2000.

Page 5 of 25
(b) Revenue Reserves are those amounts, which have been voluntarily transferred from profit
and loss appropriation account, thus reducing the amount of profits left available for
dividend payments.
(0 2)
Capital Reserves are created in accordance with the Companies Act and cannot be utilised
for cash dividend payments. Non-cash dividends by the issue of bonus shares are
permissible.
(0 2)
(4 marks)
(Total 25 marks)
Question 3
Working 1. - Goodwill
Net Asset Worth Acquired:
1
1
1
1
1
1
(45000 + 15000 + 8000 + 12000) - (6450 + 3220) = 70330. 1 OF
Purchase Consideration
97000
Less: Net Asset worth

Goodwill =
70330
26670
1 OF
2 (1 OF)
DR
45000
15000
8000
12000
26670
CR
(a)
JOURNAL
Premises
Fixtures
Debtors
Stock
Goodwill (WN1)
Business Purchase
____________________
Business Purchase
Creditors
Bank
_____________________
1
1
1
1
(11)
106670
9670 1
6450 1
3220 1
Business Purchase
B. Eastern
_____________________
97000
Bank
70000 1
97000 1
6% Debentures
_____________________
Eastern
Bank
Ordinary Share Capital
_____________________
1 OF
70000 1
97000 1
67000 1
30000 1
( 26 = 13 marks)
2
Page 6 of 25

(b) BALANCE SHEET as at 1 June 2003

FIXED ASSETS
Goodwill
Premises (150000 + 45000)
Fixtures & Fittings (38500 + 15000)
Vehicles
CURRENT ASSETS
Stock (31000 + 12000)
Debtors (20600 + 8000)
Bank
(3200 + 70000 - 67000 - 3220)
26670 1 OF
195000 1
53500 1
27250
302420 1 OF
43000
28600
1
1
2980
74580
(4)
22150
Less: Creditors: Due within One Year

Creditors (15700 + 6450)
NET CURRENT ASSETS
52430 1 OF
354850
Less: Creditors: Due after One Year

6% Debentures (30000 + 70000)
100000 1
254850
FINANCED BY:
Ordinary Share Capital (220000 + 30000)
Retained Earnings
250000
4850
254850
(14 = 7 marks)
2
(c) GOODWILL BOUGHT:
To increase customer base.
To obtain business location.
To restrict competition.
To reduce costs via economies of scale, in the long-run.
To diversify business activity.
(First point 0 - 3 marks)
(Second point 0 2 marks)
(Total 25 marks)

Page 7 of 25
Section B
Question 4
(a)
Trading Profit and Loss Account for year ending 31 January 2003
SALES
Less: Cost of Goods Sold:
Stock at 1/2/02
Add: Purchases (WN3)
69000
9200
45100 3
54300
8300 (WN2)
Less: Stock at 31/1/03

GROSS PROFIT (WN 1)
Depreciation
Other expenses
(WN 4)
(WN 5)
46000 1
23000 2 (1 OF)
2100 1
10350 1
12450
NET PROFIT
10550
1 OF
WORKINGS:
1. Mark Up 50%, thus margin 33 %
69000 x 33 % = 23000
2. 69000 - 23000 = 46000
OF
3. 46000 + 8300 - 9200 = 45100
4. 16800 = 2100
8
5. 69000 x 15% = 10350
(9 marks)
(b) (i) RATE OF TURNOVER:

46000 1OF
(9200 + 8300) / 2
1
(ii)
= 5.26 Times
1 OF
PERIOD OF STOCKHOLDING
1
8750
46000
1 OF
12
2.28 months
1 OF
(OR: 69.43 DAYS)

(6 marks)
(Total 15 marks)
Page 8 of 25

Question 5
(a)
DEBT
SHAREHOLDERS FUNDS + DEBT
90000
50000 + 8000 + 2000 + 90000
x 100 = 60 %
1 OF
= 3 marks
OR:
DEBT
SHAREHOLDER FUNDS
90000
50000 + 8000 + 2000
OR:
x 100 = 150 %
DEBT
EQUITY + DEBT
90000
50000 + 90000
x 100 = 64.29 %
(3 marks)

Page 9 of 25
(b) (i) Reduces gearing to medium geared position.

(per first formula in (a))
90000
x 100 = 41.67 %
110000 + 14000 + 2000 + 90000
2 (1 OF)
(Statement = 1 )
(Calculation = 2 )
(ii) Nil Effect 1
(Statement = 1 )
(iii) Reduces gearing to a medium geared position.
(per first formula in (a))
62000
50000 + 8000 + 2000 + 62000
x 100 = 50.82 %
2 (1 OF)
(Statement = 1 )
(Calculation = 2 )
Accept variants of formula as per (a)
(7 marks)
(c) - Increased earnings via the use of fixed return capital.

- Potential of increased dividends for ordinary shareholders.
- If increased earnings are retained, internal financing for expansion
is facilitated without the need to raise capital externally, etc.
First Statement - 2 marks
Second Statement - 2 marks
Third Statement - 1 mark
(5 marks)
(15 marks)
Page 10 of 25

Question 6 (a) & (b)

+
May 2
Nil Effect 1
8000 1
10
12
18
500
21
-190
29
220
5000 1
Nil Effect 1
860
12100 1 OF
(All transactions must be attempted for OF marks)

(9 marks)
(b) REVENUE -
CAPITAL
Expenditure for running the business on a day to day basis, e.g.

expenses and stock purchased.
0-2 explanation
0-1 example
expenditure on acquiring fixed assets or adding to the value of fixed

assets, eg motor vehicle
0-2 explanation
0-1 example
(6 marks)
(Total 15 marks)
7.
(a) F R S 3 (1)
Material items which derive from events, or transactions that fall within the
ordinary activities of the reporting entity and which individually or, if of a similar
type, in aggregate need to be disclosed by virtue of their size or incidence if the
financial statements are to give a true and fair view.
(Standard 0 1)
(Development 0 4)
(b) S S A P 17 (1)
Those events both favourable and unfavourable, which occur between the
Balance Sheet date and the date on which the financial statements are approved
by the Board of Directors.
(Standard 0 1)
(Development 0 4)

Page 11 of 25
(c) F R S 3 (1)
The operations of the reporting entity that are sold or terminated and that satisfy
the following conditions:
(i)
Termination is completed in the period or before the earlier of three months

after the commencement of the Subsequent period and the date on which
the financial statements are approved.
(ii)
The former activities have ceased permanently.
(iii)
The termination has a material effect on the nature and forms of the
reporting entitys operations.
(iv)
The assets, liabilities, results of operation and activities are clearly

distinguishable, physically, operationally and for financial reporting
purposes.
(Standard 0 1)
(Development 0 4)
(d) F R S 14 (SSAP3) (1)

Basic earnings per share should be calculated by dividing the net profit or loss for
the period attributable to ordinary shareholders by the weighted average number
of ordinary shares during the period.
(Standard 0 1)
(Development 0 4)
Note: If formula given = (1) only
(Total 20 marks)
8.
(a) (i)
Going Concern
The enterprise will continue in operational existence for the foreseeable future.
The Profit Loss and Balance Sheet assume no necessity to liquidate or curtail
significantly the scale of operation.
(Name 0 1)
(Development 0 2)
(ii)
Accruals
Revenue and costs are accrued (that is recognised as they are earned or
incurred not as money is received or paid), matched with one another so far as
their relationship can be established or justifiably assumed and dealt with in
the Profit and Loss Account or the period to which they relate, provided that
where the Accruals concept is inconsistent with the prudence concept, the
latter prevails.
(Name 0 1)
(Development 0 2)
(iii)
Consistency
There is consistency of accounting treatment of like items within each
accounting period and from one period to the next.
(Name 0 1)
Page 12 of 25

(Development 0 1)
(iv)
Prudence
Revenue and Profits are not anticipated, but recognised by inclusion in the
Profit and Loss Account only when realised in the form of either cash or of
other assets, the ultimate cash realisation of which can be assessed with
reasonable certainty, provision is made for all known liabilities (expenses and
losses) whether the amount of these is known with certainty or is a best
estimate in the light of the information available.
(Name 0 1)
(Development 0 2)
(b)
Pure (or basic) research: Experimental or theoretical work undertaken

primarily to acquire new scientific or technical knowledge for its own sake,
rather than directed towards any specific aim or application.
(Name 0 1)
(Development 0 1)
Applied Research: Original or critical investigation undertaken in order to gain

new scientific or technical knowledge and directed towards a specific practical
aim.
(Name 0 1)
(Development 0 1)
Development: Use of scientific or technical knowledge in order to produce
new or substantially improved materials, devices, products or services. To
install new processes or systems prior to the commencement of commercial
production or commercial applications, or to improve substantially those
already produced or installed. Development expenditure should be written off
in the year of expenditure, except where circumstances may allow it to be
deferred:
- clearly define project,
- separately identifiable,
- outcome assessed with reasonable certainty.
(Name 0 1)
(Development 0 4)
(Total 20 marks)

Page 13 of 25
Paper 2
Section A
Question 1
(a)
Flexible budgets recognise the difference in cost behaviour (1) between fixed and variable costs
in relation to fluctuations in output, (1) turnover, or other variable factors.
Flexible budgets may be used in two ways;
i)
At planning stage (1) - considering the implications of a range of output scenarios.(1)
ii)
Retrospectively over a control period (1) - to compare actual results achieved with what
results should have been. (1)
(6 Marks)
(b)
Flexible Budget For The Year Ended 31 May 2003
Sales
Cost of sales
Gross profit
less
Wages
Salaries
Heat and power
Advertising
Bad debts
Depreciation
Net profit
Budget
000
750 (1)
(300)(1)
450 (1)
75 (1)
50 (1)
40 (1)
90 (1)
15 (1)
85 (1)
355
95 (1)OF
450
Actual
000
750
(295)
455
80
50
25
110
25
80
370
85
455
Variance
000
0
5
5 (1)OF
(5)
15
(20)
(10)
5
(15)
10 (1)OF
(5)
(12 Marks)
(c)
When the budget for the year is flexed to the actual level of activity (1) , the budgeted net profit
was 95 000 (1). The actual profit of 85 000 represented an underachievement (1) of the
projected profit by 10 000 (1). Although the cost of sales was below the budgeted level (1) by
10 000, and heat and power showed significant savings (1) other actual expenditures were
well above the budgeted level, particularly advertising (1) and bad debts (1). The managing
director should seek to control these expenditures (1) if actual profitability is to return to the
budgeted level. (1).
(MAX 7 Marks)
(Total 25 Marks)
Page 14 of 25

Question 2
(a) The angle of incidence equals the angle between the revenue line (1) and the total cost
line.(1)
Where the angle is narrow, the revenue line emanates from the zero intersection and the total
cost line emanates from a low cost (fixed cost) (1) at zero activity. Therefore the relationship will
be of relatively low fixed cost and high variable cost per unit (1). The narrow angle may also
conclude that profit margins are lower. (1)
(5 Marks)
(b)
Break even = Fixed Cost = 60 000 = 60 000 (1) = 15 000 Units (1)
Contribution 12 - 8
4
(1)
Projected Profit = 18 000 units - 15 000 units = 3 000 units x 4 = 12 000.
(1)
(1)
(1)
(6 Marks)
(c )
i)
10.50 - 8 = 2.50 Additional Contribution Per Unit x 2 000 =Up by 5 000 (1)
Total Profit 12 000 + 5 000 = 17 000 (1)
Break even point. No change
(1)
ii)
18 000 units - 12 727 units = 5 273 units x 5.50 = 29 000 (1) up by 17 000
(1)
Break even = 70 000 =70 000 = 12 727 units (1) reduced by 2 273 (1)
12 -6.50 5.50
iii)
19 000 units x 5 = 95 000 - 60 000 = 35 000 (1) Up 23 000 (1)
Break even = 60 000

12 - 7.00
5
iv)
= 60 000 = 12 000 units Down 3 000 units (1)
10 000 units x 4 + 11 000 units x 2.50 = 67 500 - 60 000 = 7 500 (1)

Down 4 500 (1)
Break even =
60 000
= 18 000 units (1)
10 000 x (12 - 8) + 8000 x (12 - 9.50)
Up 3 000 units (1)
(14 Marks)
(Total 25 Marks)

Page 15 of 25
Question 3
(a)
Manufacturing and Trading Account for the Month Ended 30 April 2003 (1)
Opening stock of raw materials

Purchases of raw materials
Closing stock of raw materials
Direct labour
PRIME COST (1)
Production Overheads
Rent & rates
Light, heat & power
Production Managers Salaries
Depreciation
Work In Progress
At start 1 May 2002
At end 30 April 2003
PRODUCTION COST (1)
Sales
Cost of Production
GROSS PROFIT
Junior
1 300
4 000
5 300
Senior
2 365
7 350
9 715
1 000
640
750
250
7 940
1 000
(1) 1 120
(1) 1 100
750
13 685
(480)
7 460
4 000
17 685
9 600 (1) 19 800

7 460
17 685
2 140 (1)OF 2 115
Total
1 125
4 625(1)
5 750
2 085 (3)
3 865
11 350 (3)
15 015
2 000
1 760
1 850
1 000
21 625
4 000
(480)
25 145 (1)OF
29 400
25 145
4 255
(15 Marks)
(b)
Apportionment - Following allocation overheads which cannot be allocated (1) are

apportioned between the cost centres (1) using a basis which is fair (1) e.g (1) rent on
the floor area occupied by the respective departments.
Rent and rates would appropriately be apportioned in relation to floor area occupied (1).
As the production of the Senior model involves more workers/takes more time and
therefore occupies more space, it would be appropriate to apportion on the basis of
production achieved or hours worked with the Senior model being apportioned a greater
share of the overhead (1). It would therefore seem that a disproportionate amount of the
overhead is being borne by Junior.(1).
(MAX 6 Marks)
(c)
AdvantagesDisadvantages-
Probable increase in production and productivity.

Less supervision required
Maintaining quality
Staff feel that time is their own. Possible higher levels of
absenteeism.
Possible increase in accident levels.
(4 x 1 Mark Per Point)
(Total 25 Marks)
Page 16 of 25

Section B
Question 4
(a)
Leisure Centre Contract Account

000
Raw Materials
520
Cost - c/d
less Returns
30
less Materials On Site 70
420 (1)
Direct wages
115
plus Accrued Wages
5
120 (1)
Other Direct Exp
50
Plant
150
less
125
25 (1)
Site Management Sal 80
less HO Overheads
10
70 (1)
Scaffold Hire
150
Overheads
35
plus
120
155(1)
990
Cost -b/d
Profit -
Workings -
990
P/L Ac
Retained
2
3
000
990
990
Work Certified
Work Uncertified
210 (3)OF
200 (1)OF
1 400
410 (1) OF
1
1 300 (1)
100 (1)
1 400
1 000 (1)
1 300 (1)
210 OF
(11 Marks)
(b)
Balance Sheet (Extract) as at 30 April 2003
000
Fixed Assets
Plant
Plus
Current Assets
Raw Materials
WIP - Not Certified
Debtors
Prepaid Salaries
Less
Current Liabilities
Wages Accrued
150 less 25 = 125 (1)
Financed By:
Capital
Reserves - Retained Profit
70
100
300
10
1 Mark for 1 to 3 items correct

2 Marks for 4 or 5 items correct
200 (1)OF
(4 Marks)
(Total 15 Marks)

Page 17 of 25
Question 5
(a)
Year 0
Year 1
Year 2
Year 3
Year 4
Year 4
Cash Flow
300 000
50 000
80 000
90 000
140 000
40 000
10%
Factor
1.000
0.909
0.826
0.751
0.683
0.683
(300 000)
45 450 1 Mark for each
66 080 two rows correct
67 590
95 620
27 320
2 060
(3 Marks)
(b)
Weighted Average Cost of Capital

Ordinary shares
Preference Shares
Debentures
WACC
40 000
80 000
80 000
200 000
14 000
200 000
4 400
4 000
5 600
14 000
11%
5%
7%
100
7% (3)
(3 Marks)
(c)
The weighted average cost of capital represents the average return expected or committed to
those providing the long term finance of the company.(1) It will take into account the fixed or
maximum commitments to debenture and preference share holders.(1) It will also take into
account the expected returns of ordinary shareholders which can vary from time to time.(1)
The internal rate of return is the hurdle rate that must be achieved by all projects to be
considered for investment. (1) The internal rate of return will be set after considering the WACC
(1) and the alternative cost of borrowing from the open market (1) and the risk level of the
project or business (1).
(Max 4 Marks)
(d)
The management should as far as possible minimise the cost of borrowing by:
1. Consider issuing more preference shares (1). This is the lowest cost of borrowing. (1). This
will lower the gearing of the company if sufficient preference borrowers can be found. (1)
2. Borrow from the bank (1). This will not affect the WACC. (1)
(5 Marks)
(Total 15 Marks)
Page 18 of 25

Question 6
(a)
Allocation of overheads occurs where an overhead can be specifically identified as being
attributable to a specific department. (1)
Apportionment occurs where overheads are attributable to a number of departments (1) and
therefore must be apportioned to those departments on the most reasonable basis available (1)
(3 Marks)
(b)
Overheads
Allotment
Machining
000
85
32
24
2
1
144
(1)
Assembly
000
34
24
12
2
72
(1)
Finishing
000
13
16
18
1
48
(1)
Admin
000
80
6
(6)
Canteen
000
52
8 (1)
(60)
1 (1)
(1)
(5 Marks)
(c)
Budgeted Overhead Recovery Rate
Machinery
Assembly
Finishing
144000 OF
12000 Hrs
72000 OF
8000 Hrs
48000 OF
6000 Hrs
= 12 per hour
(1)OF
= 9 per hour
(1)OF
= 8 per hour
(1)OF
Assembly
Finishing
Budgeted Overhead On Actual Hours

Machinery
11 500 x 12OF=
138 000
(1)OF
7 500 x 9OF=
67 500
(1)OF
6 500 x 8=OF
52 000
(1)OF
Actual Overhead Cost

143 000
(Under)/Over Absorbed Overhead

(5 000)
70 000
47 500
(2 500)
4 500
Total Under absorbed Overhead (3 000) (1)OF

(7 Marks)
(Total 15 Marks)

Page 19 of 25
Section C
Question 7
(a)
The aspects that can be isolated are price (1) and usage (1).
Price variance is calculated - (Std Price - Act Price) x Act Usage (1)
Usage variance is calculated - (Std Qty - Act Qty) x Std Price (1)
(4 Marks)
(b)
Possible factors;
Specification of quantity and quality of materials;
Forecast movements in prices;
Availability of bulk purchases;
Current wastage percentages;
Training and skill level of staff and its impact upon wastage;
Ideal or optimum standards set.
Or any other valid point.
(1) Mark for identification and (1) Mark for development x 4 Points
(8 Marks)
(c)
Possible advantages;
Aid to accurate budgeting;
Yardstick to measuring actual costs;
Target level of efficiency;
Cost consciousness;
Management by exception from variances;
Standard costs aid estimating;
Standards aid production scheduling;
Motivation of staff.
Or any other valid point.
(1) Mark for identification and (1) Mark for development x 4 Points
(8 Marks)
(Total 20 Marks)
Page 20 of 25

Question 8
(a)
Characteristics;
Generally continuous operation;
Generally high volume of low cost items;
Often a loss in process;
May also be a by-product;
Not possible to identify separate units of production until completion.
(1) Mark for identification of characteristic + (1) Mark for development +
(1) Mark for example.
X2
(6 Marks)
(b)
Equivalent production;
Production in terms of completed units; (1)
Units assessed to identify inputs, completions, wastage and closing stock; (2)
Value of opening stock from previous period plus value of inputs; (1)
Cost per equivalent unit established; (1)
Monetary valuation of completed units and closing work in progress established; (2)
Separate assessments made for material, labour and overheads as well as in total; (1)
(8 Marks)
(c)
Normal loss unavoidable in the normal course of production e.g evaporation; (1)
Abnormal loss results from error in production e.g carelessness, accidents; (1)
Normal losses anticipated (1) and therefore the loss costed into the product (1);
Abnormal losses not anticipated, therefore require valuation to be written off as a
loss in the profit and loss account (2)
(6 Marks)
(Total 20 Marks)

Page 21 of 25
A LEVEL ACCOUNTING 9011, CHIEF EXAMINERS REPORT

PAPER 1
General Comments
Overall the standard of response to the questions was much improved this year. All questions
were attempted and showed that the topics were accessible to candidates from the majority of
centres.
There was evidence, particularly with regard to Questions 2 and 3, that certain centres are not
providing an adequate grounding to allow candidates to perform to the best of their ability in the
examination.
Question 1
Overall there was a good response when answering this question.
(a)
(b)
(c)
This section elicited good answers from the majority of candidates.

The main weaknesses were with regard to the treatment of goodwill, i.e. entries being
reversed. Also, the vehicle taken over and the loan were treated as additional capital.
A reasonable response, but many candidates failed to include the current accounts for the
two remaining partners in the balance sheet.
Question 2
(a)
(b)
This section produced a mixed response. It was evident that the required division of
expenditure into the appropriate groupings was not well appreciated. Many candidates
mixed distribution and administration charges. Where the division was indicated
candidates lost marks due to failing to identify items correctly, e.g. the discount values
being treated as distribution items. Some candidates cost themselves time by also
producing a balance sheet; this was not required.
Reasonable answers overall with regard to differentiating the reserves. Some candidates
confused capital and revenue reserves with capital and revenue expenditure.
Question 3
(a)
(b)
(c)
This was a less popular question and was either well answered or dealt with poorly.
Many candidates confused business purchase with revaluation. It was also evident that
the use of journal entries was not well appreciated. Even where partly correct, candidates
lost marks by leaving items out, e.g. the debenture issue.
The response to this section varied in accordance with the candidates attempts at section
(a). A major failing here was to ignore the original assets of Westonia Ltd in the new
balance sheet.
The majority response was, quite rightly, reputation but many candidates failed to
mention other factors, e.g. cost reduction via economies of scale.
Question 4
This was a popular question.
(a)
Full marks were awarded to many candidates in this section. Again it was evident that the
candidates in some centres where not adequately prepared. The cost of sales was
inaccurately calculated and no attempt was made to calculate a purchases figure. The
majority correctly calculated the expenses and depreciation figures.
Page 22 of 25

(b)
(i) Overall correctly calculated.

(ii) This ratio was less well recognised, and, where correctly calculated, candidates failed
to indicate what the number indicated, i.e. months or days.
Question 5
This was a popular question.
(a)
(b)
(c)
A good response, the essential formula(s) being correctly identified by the majority of
candidates.
In this section some candidates changed the formula identified in (a). If an acceptable
variant this was marked accordingly. The other major failures were the omission of the
share premium and profit and loss balances when recalculating (b) (iii). Some candidates
reduced both the debentures and share capital by the value of the fixed assets sold.
The majority response to this section was limited to the prospect of increased earnings
and thus the potential for increased dividends. A minority of candidates only indicated
other factors, e.g. the potential of an increase in share price.
Question 6
(a)
(b)
(i) A number of candidates explained the effect on the current assets and current
liabilities, but failed to provide an answer to the effect on the net current assets.
(ii) Answers to part (ii) reflected (i) above.
A good response with the differences being well understood overall. Again as in
Question 2, some candidates confused this with capital and revenue reserves.
Question 7
A major failing by candidates was to identify the accounting standards, which relate to each of
the items given.
(a)
(b)
(c)
(d)
Many candidates confused this with extraordinary items. In some cases a word for word
definition from the standard of exceptional items was given, but the standard was not
identified!
Generally well recognised with many good answers.
Most candidates only gave a basic definition and failed to provide an appropriate
development.
A basic definition via presenting the appropriate formula, but little further development
beyond this.
Question 8
This was the most popular question from Section C.
(a)
The majority of candidates correctly identified the four concepts. The variation was in
the explanation, e.g. for consistency many simply stated that this was how accounts
should be prepared, but no indication of an accounting base with regard to, for example,
depreciation.
(b)
The majority of candidates correctly identified the three definitions. A further expansion
on development expenditure was a problem for some candidates.

Page 23 of 25
Paper 2
General Comments
Candidates demonstrated a sound overall knowledge and understanding of the topics examined
and were well prepared for the examination. They were fully able to access the paper and apply
cost accounting principles throughout. All questions were equally attractive to candidates and
were answered to the same good standard.
Question 1
Candidates were able to explain the purpose of a flexible budget and the effect of cost
behaviour on budget variations. Some candidates were less clear about the timing and reasons
why management might prepare a flexible budget. Candidates were able to flex the budget
from the information given with most candidates obtaining high marks.
In evaluating the position in the final part of the question, candidates often limited themselves to
one specific point instead of considering a range of points, thus restricting the marks awarded.
Question 2
Most candidates could explain the angle of incidence, however, a minority believed this to be
the angle of the variable cost line. Part (b) was well answered by all candidates who then
demonstrated their ability to apply the principles of break even in the scenarios set in part (c).
Some candidates lost marks because they failed to fully address the question by correctly
calculating the break even and total profit but not stating the impact upon the original figures, as
required.
Question 3
Although part (a) was generally well answered with no overall weaknesses, some candidates
failed to include a total column as required, causing both a loss of marks and difficulties to them
in their calculations. The critical evaluation of the allocation of rent and rates demonstrated a
sound understanding of the principles of apportionment. The advantages and disadvantages of
piecework were consistently well answered.
Question 4
Candidates prepared accurate contract accounts taking full account of the year end
adjustments. The principle of retaining profit using the formula given was accurately applied by
many candidates. Less confidence was shown in the presentation of balance sheet extracts.
Generally, work not certified and debtors were not recorded. Retained profit was also not
recorded as a reserve.
Question 5
Most candidates accurately prepared the net present value of the investment. Many candidates
accurately calculated the weighted average cost of capital, however, a minority of candidates
included a bank loan in the WACC calculation. Only a minority of candidates were able to
describe the difference between the weighted average cost of capital and the internal rate of
return and few candidates related part (d) of the question to their answers in the earlier parts of
the question.
Page 24 of 25

Question 6
Candidates were generally able to demonstrate a high degree of skill in the application of
overhead apportionment. Many candidates however, failed to address the requirement to make
all calculations to the nearest 000 at all levels, which resulted in some difficult calculations for
the candidates. Budgeted hourly recovery rates were accurately calculated, but the ascertaining
of actual over or under recovery of overheads resulted in less certainty of calculation by the
candidate.
Question 7
Candidates were well prepared in the identification and calculation of material price and usage
variances. They were also aware of the advantages of standard costing. Less certainty was
expressed at the factors that need to be taken into account when setting material standards.
Question 8
Candidates were familiar with the characteristics of industries using process costing. They were
less certain when describing the process of determining the equivalent units and value.
Candidates were aware of the factors affecting normal and abnormal losses and their valuation.
A LEVEL ACCOUNTING 9011, GRADE BOUNDARIES

Grade
Lowest mark
for award of
grade
69
62
54
46
38
30
Note: Grade boundaries may vary from year to year and from subject to subject, depending
on the demands of the question paper.

Page 25 of 25
Edexcel Publications, Adamsway, Mansfield, Notts, NG18 4LN, UK

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Registered Office: Stewart House, 32 Russell Square, London WC1B 5DN, UK

June 2003

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Edexcel International

Mark Scheme with Examiners Report

London Examinations Advanced Level GCE in

Mark Scheme and Chief Examiner's Report

Chief Examiner's Report

ACCOUNTING 9011, MARK SCHEME

Tools and Equipment

Tools and Equipment

Edexcel International, A Level Mark Scheme and Examiners' Report

Edexcel International, A Level Mark Scheme and Examiners' Report

BALANCE SHEET AS AT 1 APRIL 2003

LESS: CURRENT LIABILITIES

NET CURRENT ASSETS

LESS: LONG TERM LIABILITY

Edexcel International, A Level Mark Scheme and Examiners' Report

Interest Payable (WN5)

Retained Profits from last year

Edexcel International, A Level Mark Scheme and Examiners' Report

Less: Net Asset worth

Edexcel International, A Level Mark Scheme and Examiners' Report

(b) BALANCE SHEET as at 1 June 2003

Less: Creditors: Due within One Year

Less: Creditors: Due after One Year

Edexcel International, A Level Mark Scheme and Examiners' Report

Less: Stock at 31/1/03

(b) (i) RATE OF TURNOVER:

(OR: 69.43 DAYS)

Edexcel International, A Level Mark Scheme and Examiners' Report

Edexcel International, A Level Mark Scheme and Examiners' Report

(b) (i) Reduces gearing to medium geared position.

Accept variants of formula as per (a)

(c) - Increased earnings via the use of fixed return capital.

Edexcel International, A Level Mark Scheme and Examiners' Report

Question 6 (a) & (b)

(All transactions must be attempted for OF marks)

Expenditure for running the business on a day to day basis, e.g.

expenditure on acquiring fixed assets or adding to the value of fixed

Edexcel International, A Level Mark Scheme and Examiners' Report

Termination is completed in the period or before the earlier of three months

The former activities have ceased permanently.

The assets, liabilities, results of operation and activities are clearly

(d) F R S 14 (SSAP3) (1)

Edexcel International, A Level Mark Scheme and Examiners' Report

Pure (or basic) research: Experimental or theoretical work undertaken

Applied Research: Original or critical investigation undertaken in order to gain

Edexcel International, A Level Mark Scheme and Examiners' Report

Flexible Budget For The Year Ended 31 May 2003

Edexcel International, A Level Mark Scheme and Examiners' Report

19 000 units x 5 = 95 000 - 60 000 = 35 000 (1) Up 23 000 (1)

Break even = 60 000

= 60 000 = 12 000 units Down 3 000 units (1)

10 000 units x 4 + 11 000 units x 2.50 = 67 500 - 60 000 = 7 500 (1)

Edexcel International, A Level Mark Scheme and Examiners' Report

Opening stock of raw materials

9 600 (1) 19 800

Apportionment - Following allocation overheads which cannot be allocated (1) are

Probable increase in production and productivity.

Edexcel International, A Level Mark Scheme and Examiners' Report

Leisure Centre Contract Account

150 less 25 = 125 (1)

1 Mark for 1 to 3 items correct

Edexcel International, A Level Mark Scheme and Examiners' Report

Weighted Average Cost of Capital

Edexcel International, A Level Mark Scheme and Examiners' Report