Cambridge International AS & A Level ACCOUNTING 9706 / 32 Paper 3 Financial Accounting February/March 2025 MARK SCHEME Maximum Mark: 75 Published 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, which woul d have considered the acceptability of alternative answers. Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report f or Teachers. Cambridge International will not enter into discussions about these mark schemes. Cambridge International is publishing the mark schemes f or the February/March 2025 series f or most Cambridge IGCSE, Cambridge International A and AS Level components , and some Cambridge O Level components. This document consists of 16 printed pages. © Cambridge University Press & Assessment 2025 [Turn over

Cambridge International AS & A Level
ACCOUNTING 9706 / 32
Paper 3 Financial Accounting February/March 2025
MARK SCHEME
Maximum Mark: 75
Published
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, which woul d have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report f or
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes f or the February/March 2025 series f or most
Cambridge IGCSE, Cambridge International A and AS Level components , and some Cambridge O Level
components.
This document consists of 16 printed pages.
© Cambridge University Press & Assessment 2025 [Turn over

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Generic Marking Principles These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alon gside the specific content of the mark scheme or generic level descript i o n s for a question. Each question paper and mark scheme will also comply with these marking principles. GENERIC MARKING PRINCIPLE 1: Marks must be awarded in line with: • the specific content of the mark scheme or the generic level descriptors for the question • the specific skills defined in the mark scheme or in the generic level descriptors for the question • the standard of response required by a candidate as exemplified by the standardisation scripts. GENERIC MARKING PRINCIPLE 2: Marks awarded are always whole marks (not half marks, or other fractions). GENERIC MARKING PRINCIPLE 3: Marks must be awarded positively : • marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the scope of the syllabus and mark scheme, referring to your Team Leader as appropriate • marks are awarded when candidates clearly demonstrate what they know and can do • marks are not deducted for errors • marks are not deducted for omissions • answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assess ed by the question as indicated by the mark scheme. The meaning, however, should be unambiguous. GENERIC MARKING PRINCIPLE 4: Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level descriptors. © Cambridge University Press & Assessment 2025 Page 2 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Generic Marking Principles
These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alon gside the
specific content of the mark scheme or generic level descript i o n s for a question. Each question paper and mark scheme will also comply with these
marking principles.
GENERIC MARKING PRINCIPLE 1:
Marks must be awarded in line with:
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
GENERIC MARKING PRINCIPLE 2:
Marks awarded are always whole marks (not half marks, or other fractions).
GENERIC MARKING PRINCIPLE 3:
Marks must be awarded positively :
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond
the scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assess ed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.
GENERIC MARKING PRINCIPLE 4:
Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.
© Cambridge University Press & Assessment 2025 Page 2 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED GENERIC MARKING PRINCIPLE 5: Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the fu ll mark range may be limited according to the quality of the candidate responses seen). GENERIC MARKING PRINCIPLE 6: Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or grade descriptors in mind. © Cambridge University Press & Assessment 2025 Page 3 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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GENERIC MARKING PRINCIPLE 5:
Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the fu ll mark range may
be limited according to the quality of the candidate responses seen).
GENERIC MARKING PRINCIPLE 6:
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.
© Cambridge University Press & Assessment 2025 Page 3 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Social Science - Specific Marking Principles (for point - based marking) 1 Components using point - based marking: • Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer shows confusion. From this it follows that we: a DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark scheme requires a specific term) b DO credit alternative answers/examples which are not written in the mark scheme if they are correct c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended writing is required rather than list - type answers. For example, questions that require n reasons (e.g. State two reasons …). d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used wrongly.) e DO NOT credit answers which are obviously self - contradicting or trying to cover all possibilities f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested. This applies equally to ‘mirror statements’ (i.e. polluted/not polluted). g DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for c lear and unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion) 2 Presentation of mark scheme: • Slashes (/) or the word ‘or’ separate alternative ways of making the same point. • Semi colons (;) bullet points (•) or figures in brackets (1) separate different points. • Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to ea rn the mark (except Accounting syllabuses where they indicate negative numbers). © Cambridge University Press & Assessment 2025 Page 4 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
PUBLISHED
Social Science - Specific Marking Principles
(for point - based marking)
1 Components using point - based marking:
• Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer
shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer
shows confusion.
From this it follows that we:
a DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark
scheme requires a specific term)
b DO credit alternative answers/examples which are not written in the mark scheme if they are correct
c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended
writing is required rather than list - type answers. For example, questions that require n reasons (e.g. State two reasons …).
d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used
wrongly.)
e DO NOT credit answers which are obviously self - contradicting or trying to cover all possibilities
f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested.
This applies equally to ‘mirror statements’ (i.e. polluted/not polluted).
g DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for c lear and
unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion)
2 Presentation of mark scheme:
• Slashes (/) or the word ‘or’ separate alternative ways of making the same point.
• Semi colons (;) bullet points (•) or figures in brackets (1) separate different points.
• Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to ea rn the mark
(except Accounting syllabuses where they indicate negative numbers).
© Cambridge University Press & Assessment 2025 Page 4 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED 3 Calculation questions: • The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and t he mark for each answer • If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all other instances, the correct answer to a calculation should be given full credit, even if no supporting working is s hown. • Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivale nt stages. • Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full ma rks will be given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary an d any exceptions to this general principle will be noted. 4 Annotation: • For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct relationship between ticks and marks. Ticks have no defined meaning for levels of response marking. • For levels of response marking, the level awarded should be annotated on the script. • Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all exami ners who marked that paper. © Cambridge University Press & Assessment 2025 Page 5 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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3 Calculation questions:
• The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and t he mark
for each answer
• If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all
other instances, the correct answer to a calculation should be given full credit, even if no supporting working is s hown.
• Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivale nt
stages.
• Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full ma rks will be
given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary an d any
exceptions to this general principle will be noted.
4 Annotation:
• For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct
relationship between ticks and marks. Ticks have no defined meaning for levels of response marking.
• For levels of response marking, the level awarded should be annotated on the script.
• Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all exami ners
who marked that paper.
© Cambridge University Press & Assessment 2025 Page 5 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Annotations guidance for centres Examiners use a system of annotations as a shorthand for communicating their marking decisions to one another. Examiners are trained during the standardisation process on how and when to use annotations. The purpose of annotations is to inform the standard isation and monitoring processes and guide the supervising examiners when they are checking the work of examiners within their team. The meaning of annotations and how they are used is specific to each component and is understood by all examiners who mark the component. We publish annotations in our mark schemes to help centres understand the annotations they may see on copies of scripts. Note that there may not be a direct correlation between the number of annotations on a script and the mark awarded. Similarly, the use of an annotation may not be an indication of the quality of the response. The annotations listed below were available to examiners marking this component in this series. Annotations Annotation M eaning  Correct and relevant point made in answering the question. × Incorrect point or error made. LNK Two statements are linked. REP Repeat A An extraneous figure N0 No working shown AE Addition error (Arithmetic error) R1 Required item 1 R2 Required item 2 OF Own figure © Cambridge University Press & Assessment 2025 Page 6 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Annotations guidance for centres
Examiners use a system of annotations as a shorthand for communicating their marking decisions to one another. Examiners are trained during the
standardisation process on how and when to use annotations. The purpose of annotations is to inform the standard isation and monitoring
processes and guide the supervising examiners when they are checking the work of examiners within their team. The meaning of annotations and
how they are used is specific to each component and is understood by all examiners who mark the component.
We publish annotations in our mark schemes to help centres understand the annotations they may see on copies of scripts. Note that there may
not be a direct correlation between the number of annotations on a script and the mark awarded. Similarly, the use of an annotation may not be an
indication of the quality of the response.
The annotations listed below were available to examiners marking this component in this series.
Annotations
Annotation M eaning
 Correct and relevant point made in answering the question.
× Incorrect point or error made.
LNK Two statements are linked.
REP Repeat
A An extraneous figure
N0 No working shown
AE Addition error (Arithmetic error)
R1 Required item 1
R2 Required item 2
OF Own figure
© Cambridge University Press & Assessment 2025 Page 6 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Annotation M eaning EVAL Evaluation NAQ Not answered question BOD Benefit of the doubt given. SEEN Noted but no credit given Highlight Highlight Off page Off page comment Comment © Cambridge University Press & Assessment 2025 Page 7 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Annotation M eaning
EVAL Evaluation
NAQ Not answered question
BOD Benefit of the doubt given.
SEEN Noted but no credit given
Highlight Highlight
Off page Off page comment
Comment
© Cambridge University Press & Assessment 2025 Page 7 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Abbreviations and guidance The following abbreviations may be used in the mark scheme: OF = own figure. The answer will be marked correct if a candidate has correctly used their own figure from a previous part or ca lculation. W = working. The working for a figure is given below. Where the figure has more than one mark associated with it, the working w ill show where individual marks are to be awarded. CF = correct figure. The figure has to be correct i.e. no extraneous items have been included in the calculation Extraneous item = an item that should not have been included in a calculation, including indirect expenses such as salaries in calculation of gross profit when there is one OF mark for gross profit’ Curly brackets, } , are used to show where one mark is given for more than one figure. If the figures are not adjacent, each is marked with a curly bracket and a symbol e.g. }* row = all figures in the row must be correct for this mark to be awarded Marks for figures are dependent on correct sign/direction Accept other valid responses. This statement indicates that marks may be awarded for answers that are not listed in the mark scheme but are equally valid. © Cambridge University Press & Assessment 2025 Page 8 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Abbreviations and guidance
The following abbreviations may be used in the mark scheme:
OF = own figure. The answer will be marked correct if a candidate has correctly used their own figure from a previous part or ca lculation.
W = working. The working for a figure is given below. Where the figure has more than one mark associated with it, the working w ill show where
individual marks are to be awarded.
CF = correct figure. The figure has to be correct i.e. no extraneous items have been included in the calculation
Extraneous item = an item that should not have been included in a calculation, including indirect expenses such as salaries in calculation of
gross profit when there is one OF mark for gross profit’
Curly brackets, } , are used to show where one mark is given for more than one figure. If the figures are not adjacent, each is marked with a
curly bracket and a symbol e.g. }*
row = all figures in the row must be correct for this mark to be awarded
Marks for figures are dependent on correct sign/direction
Accept other valid responses. This statement indicates that marks may be awarded for answers that are not listed in the mark scheme but are
equally valid.
© Cambridge University Press & Assessment 2025 Page 8 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 1(a)(i) State how a business creates a general reserve. 1 General reserve is created by transferring profit from profit for the year/retained earnings. (1) 1(a)(ii) Explain why a business would create a general reserve. 2 To retain profits within the business (1) as an alternative to paying dividends to the shareholders (1) It may be used to purchase non - current assets / for expansion (1) without borrowing. (1) The sum is kept to meet future operating loss (1) as a provision for emergencies (1) Max 2 Accept other valid responses. 1 b(i) Prepare for the year ended 31 December 2024: 5 a statement to show the profit from operations $ Balance at 1 January 2024 24 5 800 Transfer to general reserve (3 0 000) (1) Issue of bonus shares ($10 0 000 – $8 0 000) (2 0 000) (1) Payment of final dividend ($30 0 000  $0.11) (3 3 000) } Payment of interim dividend ($40 0 000  $0.06) (2 4 000) }(1) Profit for the year (balancing) 6 8 200 Balance at 31 December 2024 20 7 000 Profit for the year 68 200 Finance costs ($3 600 + $3 200) 6 800 (1) Profit from operations 75 000 (1)OF © Cambridge University Press & Assessment 2025 Page 9 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Question Answer Marks
1(a)(i) State how a business creates a general reserve. 1
General reserve is created by transferring profit from profit for the year/retained earnings. (1)
1(a)(ii) Explain why a business would create a general reserve. 2
To retain profits within the business (1) as an alternative to paying dividends to the shareholders (1)
It may be used to purchase non - current assets / for expansion (1) without borrowing. (1)
The sum is kept to meet future operating loss (1) as a provision for emergencies (1)
Max 2
Accept other valid responses.
1 b(i) Prepare for the year ended 31 December 2024: 5
a statement to show the profit from operations
$
Balance at 1 January 2024 24 5 800
Transfer to general reserve (3 0 000) (1)
Issue of bonus shares ($10 0 000 – $8 0 000) (2 0 000) (1)
Payment of final dividend ($30 0 000  $0.11) (3 3 000) }
Payment of interim dividend ($40 0 000  $0.06) (2 4 000) }(1)
Profit for the year (balancing) 6 8 200
Balance at 31 December 2024 20 7 000
Profit for the year 68 200
Finance costs ($3 600 + $3 200) 6 800 (1)
Profit from operations 75 000 (1)OF
© Cambridge University Press & Assessment 2025 Page 9 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 1(b)(ii) Prepare for the year ended 31 December 2024: 12 the statement of cash flows in accordance with IAS7. Statement of cash flows for year ended 31 December 2024 $ $ Cash flows from operating activities Profit from operations 7 5 000 Depreciation: Office premises ($32 0 000 + $12 0 000 – $41 8 000) 2 2 000 (1) Office equipment ($23 5 000 + $2 5 000 – $ 8 400 – $21 4 000) 3 7 600 (1) Motor vehicles ($11 6 000/80%)  20% 2 9 000 (1) 8 8 600 Loss on disposal 3 500 } Increase in inventories (3 4 000) } Decrease in trade receivables 1 0 000 } Increase in trade payables 2 3 000 }(1) Cash from operations 16 6 100 Interest paid ($6 0 000  12% + $8 0 000  8%)  6/12 ( 6 800) (1) Net cash from operating activities 15 9 300 Cash flows from investing activities Purchase of office equipment ($2 5 000 – ($ 8 400 – $ 3 500)) (2 0 100) (1) Purchase of motor vehicles ($11 6 000/80%) (14 5 000) (1) Net cash used in investing activities (16 5 100) (1)OF Cash flows from financing activities Issue of 8% debenture 8 0 000 } Repayment of 12% debenture (6 0 000) }(1) Dividend paid – final dividend (3 3 000) } – interim dividend (2 4 000) }(1)OF Net cash used in financing activities (3 7 000) (1)OF Net decrease in cash and cash equivalents (4 2 800) (1) Cash and cash equivalents at 1 January 2024 4 800 Cash and cash equivalents at 31 December 2024 (3 8 000) © Cambridge University Press & Assessment 2025 Page 10 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Question Answer Marks
1(b)(ii) Prepare for the year ended 31 December 2024: 12
the statement of cash flows in accordance with IAS7.
Statement of cash flows for year ended 31 December 2024
$ $
Cash flows from operating activities
Profit from operations 7 5 000
Depreciation:
Office premises ($32 0 000 + $12 0 000 – $41 8 000) 2 2 000 (1)
Office equipment ($23 5 000 + $2 5 000 – $ 8 400 – $21 4 000) 3 7 600 (1)
Motor vehicles ($11 6 000/80%)  20% 2 9 000 (1) 8 8 600
Loss on disposal 3 500 }
Increase in inventories (3 4 000) }
Decrease in trade receivables 1 0 000 }
Increase in trade payables 2 3 000 }(1)
Cash from operations 16 6 100
Interest paid ($6 0 000  12% + $8 0 000  8%)  6/12 ( 6 800) (1)
Net cash from operating activities 15 9 300
Cash flows from investing activities
Purchase of office equipment ($2 5 000 – ($ 8 400 – $ 3 500)) (2 0 100) (1)
Purchase of motor vehicles ($11 6 000/80%) (14 5 000) (1)
Net cash used in investing activities (16 5 100) (1)OF
Cash flows from financing activities
Issue of 8% debenture 8 0 000 }
Repayment of 12% debenture (6 0 000) }(1)
Dividend paid – final dividend (3 3 000) }
– interim dividend (2 4 000) }(1)OF
Net cash used in financing activities (3 7 000) (1)OF
Net decrease in cash and cash equivalents (4 2 800) (1)
Cash and cash equivalents at 1 January 2024 4 800
Cash and cash equivalents at 31 December 2024 (3 8 000)
© Cambridge University Press & Assessment 2025 Page 10 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 1(c) Advise whether or not CF Limited has made a good decision to take over the delivery services. Justify your 5 answer. Good decision (max 2) In - house costs should be lower as no profit for contractors (1) Provide better service (on time / speedy) to the customers (1) No need to renew service contract with the transportation company (1) Bad decision (max 2) Negative impact on the cash flows (1) Need additional finance / interest may have to be paid (1) Incur additional expenses such as salaries for drivers and depreciation (1) Decision supported with a comment (1) Accept other valid responses. Question Answer Marks 2(a) State three differences between goodwill and a tangible asset. 3 Goodwill Tangible asset No physical existence Has physical existence (1) Cannot be sold separately Can be sold separately (1) The value tends to be subjective The value tends to be objective (1) Max 3 Accept other valid responses. © Cambridge University Press & Assessment 2025 Page 11 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Question Answer Marks
1(c) Advise whether or not CF Limited has made a good decision to take over the delivery services. Justify your 5
answer.
Good decision (max 2)
In - house costs should be lower as no profit for contractors (1)
Provide better service (on time / speedy) to the customers (1)
No need to renew service contract with the transportation company (1)
Bad decision (max 2)
Negative impact on the cash flows (1)
Need additional finance / interest may have to be paid (1)
Incur additional expenses such as salaries for drivers and depreciation (1)
Decision supported with a comment (1)
Accept other valid responses.
Question Answer Marks
2(a) State three differences between goodwill and a tangible asset. 3
Goodwill Tangible asset
No physical existence Has physical existence (1)
Cannot be sold separately Can be sold separately (1)
The value tends to be subjective The value tends to be objective (1)
Max 3
Accept other valid responses.
© Cambridge University Press & Assessment 2025 Page 11 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 2(b) Calculate the purchase consideration payable by W Limited. 3 $ Total value of assets taken over 40 2 000 (1) Goodwill W1 12 3 000 (1) Purchase consideration 52 5 000 (1)OF W1 ($3 7 100 + $4 1 300 + $4 4 600)/3 = $4 1 000 $4 1 000  3 = $12 3 000 2(c) Complete the capital accounts of Ada and Brian, showing the final settlement with the partnership’s cash at bank 8 account. Ada Brian Ada Brian $ $ $ $ Current account 1 0 000 } Balance b/d 20 0 000 15 0 000 W Limited 31 5 000 }} 21 0 000 }}(1)OF Current account 5 000 }(1) Profit on realisation W1 7 0 800 (1)OF 4 7 200 (1)OF Bank 5 4 200 (1)OF 7 800 (1)OF 32 5 000 21 0 000 32 5 000 21 0 000 W1 $ Consideration 52 5 000 OF Carrying value of assets taken over 40 8 000 (1) 11 7 000 Discount on trade payables 1 000 (1) Profit on realisation 11 8 000 © Cambridge University Press & Assessment 2025 Page 12 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Question Answer Marks
2(b) Calculate the purchase consideration payable by W Limited. 3
$
Total value of assets taken over 40 2 000 (1)
Goodwill W1 12 3 000 (1)
Purchase consideration 52 5 000 (1)OF
W1 ($3 7 100 + $4 1 300 + $4 4 600)/3 = $4 1 000 $4 1 000  3 = $12 3 000
2(c) Complete the capital accounts of Ada and Brian, showing the final settlement with the partnership’s cash at bank 8
account.
Ada Brian Ada Brian
$ $ $ $
Current account 1 0 000 } Balance b/d 20 0 000 15 0 000
W Limited 31 5 000 }} 21 0 000 }}(1)OF Current account 5 000 }(1)
Profit on
realisation W1 7 0 800 (1)OF 4 7 200 (1)OF
Bank 5 4 200 (1)OF 7 800 (1)OF
32 5 000 21 0 000 32 5 000 21 0 000
W1 $
Consideration 52 5 000 OF
Carrying value of assets taken over 40 8 000 (1)
11 7 000
Discount on trade payables 1 000 (1)
Profit on realisation 11 8 000
© Cambridge University Press & Assessment 2025 Page 12 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 2(d) Prepare the journal entry of W Limited to record the acquisition of the partnership business. 2 Dr Cr $ $ Equipment 17 4 000 } Motor vehicles 4 8 000 } Inventory 8 9 000 } Trade receivables 9 1 000 } Goodwill 12 3 000 }(1) Ordinary shares 30 0 000 } Share premium 22 5 000 }(1)OF 2(e) Explain why W Limited did not accept the initial request for five times the average profit. Support your answer with 4 relevant calculations. W Limited can pay less purchase consideration / issue fewer shares to acquire the partnership business. (1) The future profit is only estimated on the basis of the profits of past years. (1) The partnership’s financial statements have not been audited. (1) It is difficult to estimate whether the partnership’s profit can sustain at its current level for the coming 5 years as propo sed by Ada and Brian (1) There are uncertainties in the future, such as economic outlook, trend, demand, technology and political issues. (1) The profit of the partnership is in the declining trend in the last 3 years. (1) Goodwill = 2  $41 000 = $82 000 (1) Goodwill = 5  $41 000 = $205 000 (1) Max 2 marks for calculations. Max 2 marks for comments Accept other valid responses. © Cambridge University Press & Assessment 2025 Page 13 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
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Question Answer Marks
2(d) Prepare the journal entry of W Limited to record the acquisition of the partnership business. 2
Dr Cr
$ $
Equipment 17 4 000 }
Motor vehicles 4 8 000 }
Inventory 8 9 000 }
Trade receivables 9 1 000 }
Goodwill 12 3 000 }(1)
Ordinary shares 30 0 000 }
Share premium 22 5 000 }(1)OF
2(e) Explain why W Limited did not accept the initial request for five times the average profit. Support your answer with 4
relevant calculations.
W Limited can pay less purchase consideration / issue fewer shares to acquire the partnership business. (1)
The future profit is only estimated on the basis of the profits of past years. (1)
The partnership’s financial statements have not been audited. (1)
It is difficult to estimate whether the partnership’s profit can sustain at its current level for the coming 5 years as propo sed
by Ada and Brian (1)
There are uncertainties in the future, such as economic outlook, trend, demand, technology and political issues. (1)
The profit of the partnership is in the declining trend in the last 3 years. (1)
Goodwill = 2  $41 000 = $82 000 (1)
Goodwill = 5  $41 000 = $205 000 (1)
Max 2 marks for calculations.
Max 2 marks for comments
Accept other valid responses.
© Cambridge University Press & Assessment 2025 Page 13 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 2(f) Evaluate whether or not Ada and Brian made the right decision to choose option 1. Justify your answer. 5 They are only minor shareholders and cannot make any decision (1) Given that the value of each share has a premium of $0.75, this implies that the prospect of W Limited is promising (1) They can enjoy dividend / increase in share value (1) They may not receive dividend / share value may fall (1) They can use the cash for any other purposes (1) After running the partnership business for thirty years, it is better for them to keep cash for their retiring life. (1) It may be difficult for Ada and Brian to realise their shareholdings. (1) Max 4 Decision supported with a comment (1) Accept other valid responses. Question Answer Marks 3(a) State three limitations of using ratios to evaluate the performance of a business. 3 The value of many non - current assets is based on historical cost instead of current value. (1) Ratios are based on past events. (1) Financial statements only show the monetary value. (1) Information may not be accurate. (1) Ratios only show the results without referring to the causes of the results. (1) The financial statements are only prepared on a particular date. (1) Different businesses have different accounting policies. (1) Max 3 Accept other valid responses. © Cambridge University Press & Assessment 2025 Page 14 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
PUBLISHED
Question Answer Marks
2(f) Evaluate whether or not Ada and Brian made the right decision to choose option 1. Justify your answer. 5
They are only minor shareholders and cannot make any decision (1)
Given that the value of each share has a premium of $0.75, this implies that the prospect of W Limited is promising (1)
They can enjoy dividend / increase in share value (1)
They may not receive dividend / share value may fall (1)
They can use the cash for any other purposes (1)
After running the partnership business for thirty years, it is better for them to keep cash for their retiring life. (1)
It may be difficult for Ada and Brian to realise their shareholdings. (1)
Max 4
Decision supported with a comment (1)
Accept other valid responses.
Question Answer Marks
3(a) State three limitations of using ratios to evaluate the performance of a business. 3
The value of many non - current assets is based on historical cost instead of current value. (1)
Ratios are based on past events. (1)
Financial statements only show the monetary value. (1)
Information may not be accurate. (1)
Ratios only show the results without referring to the causes of the results. (1)
The financial statements are only prepared on a particular date. (1)
Different businesses have different accounting policies. (1)
Max 3
Accept other valid responses.
© Cambridge University Press & Assessment 2025 Page 14 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 3(b)(i) Calculate, to two decimal places, the following ratios for the year ended 31 December 2024: 4 dividend yield Dividend per share ($60 000  110% (1) +$35 000)/500 000 $0.202 (1)OF ($0.202 / $2.85)  100 (1)OF for correct formula 7.09% (1)OF 3(b)(ii) price/earnings (PE) 3 Earnings per share $19 0 000/50 0 000 $0.38 (1) $2.85/$0.38 (1)OF for correct formula 7.50 (1)OF 3(b)(iii) gearing ratio 2 [$20 0 000/($67 2 000+$20 0 000)] x 100 (1) for correct formula 22.94% (1) 3(c) Calculate the working capital cycle (round up each component to the next whole day). 4 Days Inventory turnover ($5 6 000 + $7 8 000)/2 = $6 7 000 ($6 7 000/$54 8 000)  365 45 (1) Trade receivables turnover ($11 0 000/$98 8 000)  365 41 (1) 86 Trade payables turnover ($5 4 500/$57 0 000)  365 35 (1) 51 (1)OF © Cambridge University Press & Assessment 2025 Page 15 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
PUBLISHED
Question Answer Marks
3(b)(i) Calculate, to two decimal places, the following ratios for the year ended 31 December 2024: 4
dividend yield
Dividend per share ($60 000  110% (1) +$35 000)/500 000 $0.202 (1)OF
($0.202 / $2.85)  100 (1)OF for correct formula 7.09% (1)OF
3(b)(ii) price/earnings (PE) 3
Earnings per share $19 0 000/50 0 000 $0.38 (1)
$2.85/$0.38 (1)OF for correct formula 7.50 (1)OF
3(b)(iii) gearing ratio 2
[$20 0 000/($67 2 000+$20 0 000)] x 100 (1) for correct formula 22.94% (1)
3(c) Calculate the working capital cycle (round up each component to the next whole day). 4
Days
Inventory turnover
($5 6 000 + $7 8 000)/2 = $6 7 000
($6 7 000/$54 8 000)  365 45 (1)
Trade receivables turnover
($11 0 000/$98 8 000)  365 41 (1)
86
Trade payables turnover
($5 4 500/$57 0 000)  365 35 (1)
51 (1)OF
© Cambridge University Press & Assessment 2025 Page 15 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025 PUBLISHED Question Answer Marks 3(d) Discuss the performance of B plc in managing its working capital cycle as compared with X plc. 5 As B plc has a longer working capital cycle so it appears that B plc performs less well than X plc (1) because the business needs more funds to finance the working capital. (1) B plc holds inventory for a longer period (1) / allows longer credit period to its customers (1) / repays suppliers faster (1) Max 5 Accept other valid responses. 3(e) Discuss the performance of B plc as measured by its PE ratio as compared with X plc. 4 B plc’s share price in relation to X plc may be lower (1) and the earnings per share may be higher (1) B plc has a lower PE ratio than X plc which is not good for the business (1) and it appears that the investors have less confidence in B plc than in X plc. (1) Max 4 Accept other valid responses. © Cambridge University Press & Assessment 2025 Page 16 of 16

9706 / 32 Cambridge International AS & A Level – Mark Scheme February/March 2025
PUBLISHED
Question Answer Marks
3(d) Discuss the performance of B plc in managing its working capital cycle as compared with X plc. 5
As B plc has a longer working capital cycle so it appears that B plc performs less well than X plc (1) because the business
needs more funds to finance the working capital. (1)
B plc holds inventory for a longer period (1) / allows longer credit period to its customers (1) / repays suppliers faster (1)
Max 5
Accept other valid responses.
3(e) Discuss the performance of B plc as measured by its PE ratio as compared with X plc. 4
B plc’s share price in relation to X plc may be lower (1) and the earnings per share may be higher (1)
B plc has a lower PE ratio than X plc which is not good for the business (1) and it appears that the investors have less
confidence in B plc than in X plc. (1)
Max 4
Accept other valid responses.
© Cambridge University Press & Assessment 2025 Page 16 of 16

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