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AS & A Level Accounting (9706)

Accounting for non-current assets Banker

27 questions · about 3% of the marks we indexed · examined in 9 of 9 sessions.

Questions by year

2026

  • 2026 May/June · Paper 12 · Q41 markCost of non-current assets
  • 2026 May/June · Paper 12 · Q51 markDisposals and part-exchange
  • 2026 May/June · Paper 12 · Q61 markDepreciation methods and calculation
  • 2026 May/June · Paper 22 · Q1 (c)3 marksDisposals and part-exchange

2025

  • 2025 Oct/Nov · Paper 12 · Q51 markCost of non-current assets
  • 2025 Oct/Nov · Paper 12 · Q61 markRevaluation
  • 2025 Oct/Nov · Paper 12 · Q71 markRevaluation
  • 2025 Oct/Nov · Paper 22 · Q3 (a(i), a(ii), b, c)12 marksDepreciation methods and calculation · Disposals and part-exchange · Revaluation
  • 2025 May/June · Paper 12 · Q61 markDepreciation methods and calculation
  • 2025 May/June · Paper 12 · Q71 markDepreciation methods and calculation
  • 2025 May/June · Paper 22 · Q1 (a(i), a(ii), b)5 marksDepreciation methods and calculation · Disposals and part-exchange

2024

  • 2024 Oct/Nov · Paper 12 · Q61 markDepreciation methods and calculation
  • 2024 Oct/Nov · Paper 12 · Q71 markDepreciation methods and calculation
  • 2024 May/June · Paper 12 · Q51 markDepreciation methods and calculation

2023

  • 2023 Oct/Nov · Paper 12 · Q51 markDisposals and part-exchange
  • 2023 Oct/Nov · Paper 12 · Q61 markDepreciation methods and calculation
  • 2023 Oct/Nov · Paper 12 · Q141 markDisposals and part-exchange
  • 2023 Oct/Nov · Paper 22 · Q2 (a, b, c, d)15 marksDepreciation methods and calculation · Disposals and part-exchange
  • 2023 May/June · Paper 12 · Q41 markDepreciation methods and calculation
  • 2023 May/June · Paper 12 · Q51 markDisposals and part-exchange

2022

  • 2022 Oct/Nov · Paper 12 · Q31 markDisposals and part-exchange
  • 2022 Oct/Nov · Paper 12 · Q41 markDepreciation methods and calculation
  • 2022 Oct/Nov · Paper 22 · Q1 (b)4 marksDepreciation methods and calculation
  • 2022 May/June · Paper 12 · Q21 markDepreciation methods and calculation
  • 2022 May/June · Paper 12 · Q31 markDepreciation methods and calculation
  • 2022 May/June · Paper 12 · Q41 markDisposals and part-exchange
  • 2022 May/June · Paper 22 · Q2 (a, c, d, e)13 marksDepreciation methods and calculation · Disposals and part-exchange · Revaluation

References only, not question text. Open Official paper ↗ where Cambridge publishes the paper, or see the official Cambridge past-papers page; for other papers, ask your school. “Paper 42” means Paper 4, variant 2.

Practice questions

Original questions written by HomiLabs in the style of the exam, with answers and mark schemes. They are not Cambridge past paper questions and have not been reviewed by Cambridge. Try each one before opening the answer.

Q1Depreciation methods and calculation · Core · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) A $7,000
    (48,000 − 6,000) ÷ 6 = $7,000. $8,000 ignores the residual value; $9,000 wrongly adds the residual value to cost.
Q2Depreciation methods and calculation · Core · Paper 2 style · 6 marks

Hamza Printers, Lahore, bought a printing machine on 1 January 2024 for Rs 1,250,000. Installation cost Rs 50,000. The machine is expected to last 5 years and then be sold for Rs 100,000. The straight-line method is used and the financial year ends on 31 December.

  1. (a) Calculate the annual depreciation charge. [2]
  2. (b) Calculate the carrying amount of the machine at 31 December 2026. [2]
  3. (c) State the accounting concept applied when depreciation is charged, and explain how it is applied. [2]
Show answer
  1. (a) Rs 240,000
    Cost = 1,250,000 + 50,000 installation = 1,300,000 (M1). (1,300,000 − 100,000) ÷ 5 = Rs 240,000 (A1).
  2. (b) Rs 580,000
    Three years' depreciation = 3 × 240,000 = 720,000 (M1). 1,300,000 − 720,000 = Rs 580,000 (A1).
  3. (c) Matching (accruals) concept: the cost of the machine is spread over the years in which it helps to earn revenue.
    1 mark for naming matching/accruals; 1 mark for explaining that the cost is charged against the revenue of the periods that benefit from the asset.
Q3Depreciation methods and calculation · Core · Paper 2 style · 6 marks

Rukhsana runs a tailoring workshop in Peshawar and owns sewing machines and a delivery motorcycle.

  1. (a) State two causes of depreciation of non-current assets. [2]
  2. (b) Explain the effect on the financial statements if a business does not provide for depreciation. [2]
  3. (c) State three figures needed to calculate a straight-line depreciation charge. [2]
Show answer
  1. (a) Wear and tear through use; obsolescence (also: passage of time, depletion).
    1 mark each for any two of: wear and tear; obsolescence (new technology/fashion); passage of time (e.g. lease); depletion (e.g. a quarry).
  2. (b) Expenses are understated so profit is overstated, and non-current assets are overstated in the statement of financial position.
    1 mark profit overstated (expenses too low); 1 mark non-current assets/capital overstated.
  3. (c) Cost of the asset, expected residual value, expected useful life.
    All three for 2 marks; two correct for 1 mark.
Q4Depreciation methods and calculation · Core · Paper 2 style · 5 marks

A freelance designer in Dhaka buys a laptop for $2,400 and depreciates it at 30% per annum using the reducing balance method.

  1. (a) Calculate the depreciation charge for each of the first two years. [2]
  2. (b) Calculate the carrying amount at the end of year 2. [1]
  3. (c) Explain why the reducing balance method suits a laptop. [2]
Show answer
  1. (a) Year 1 $720; year 2 $504
    30% × 2,400 = 720 (B1); 30% × 1,680 = 504 (B1).
  2. (b) $1,176
    2,400 − 720 − 504 = $1,176.
  3. (c) Laptops become obsolete quickly and lose most value in the first years, so a larger charge early matches the fall in value.
    1 mark obsolescence/early loss of value; 1 mark matching charge with benefit/value.
Q5Depreciation methods and calculation · Core · Paper 2 style · 5 marks

Zainab Fashions, Faisalabad, bought shop fittings for Rs 360,000 on 1 July 2025. Its year ends on 31 December. Fittings are depreciated at 12.5% per annum on cost, calculated monthly.

  1. (a) Calculate the depreciation charge for the years ended 31 December 2025 and 31 December 2026. [3]
  2. (b) The owner says, 'Depreciation means I am saving money to replace the fittings.' Explain why this is not correct. [2]
Show answer
  1. (a) 2025 Rs 22,500; 2026 Rs 45,000
    12.5% × 360,000 = 45,000 per year (M1). 2025: 6 months → 22,500 (A1). 2026: 45,000 (A1).
  2. (b) Depreciation is a non-cash expense: it reduces profit but no money is set aside, so cash is not saved unless the owner chooses to keep it in a separate fund.
    1 mark non-cash/book entry; 1 mark no cash set aside/does not create a replacement fund.
Q6Depreciation methods and calculation · Standard · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) A $11,250
    Year 1: 25% × 80,000 = 20,000 (CA 60,000). Year 2: 25% × 60,000 = 15,000 (CA 45,000). Year 3: 25% × 45,000 = $11,250. $20,000 is the straight-line style charge on cost; $33,750 is the carrying amount at the end of year 3.
Q7Depreciation methods and calculation · Standard · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) A $5,400
    20% × 36,000 = 7,200 per year; April to December = 9 months; 7,200 × 9/12 = $5,400. $7,200 charges a full year; $1,800 charges only 3 months.
Q8Depreciation methods and calculation · Standard · Paper 2 style · 8 marks

SwiftDrop, a courier business in Nairobi, bought a delivery van for $40,000. It uses the reducing balance method at 40% per annum.

  1. (a) Calculate the depreciation charge for each of the four years using the reducing balance method. [3]
  2. (b) The van will be worth $5,184 after four years. Calculate the annual charge if the straight-line method were used instead. [1]
  3. (c) Explain why the reducing balance method may be more suitable for the van. [2]
  4. (d) State the effect on profit for year 1 of using the reducing balance method instead of the straight-line method. [2]
Show answer
  1. (a) Year 1 $16,000; year 2 $9,600; year 3 $5,760; year 4 $3,456
    40% × 40,000 = 16,000; 40% × 24,000 = 9,600; 40% × 14,400 = 5,760; 40% × 8,640 = 3,456. M1 for applying 40% to the carrying amount, A2 all four correct (A1 for two or three correct).
  2. (b) $8,704
    (40,000 − 5,184) ÷ 4 = $8,704.
  3. (c) A van loses more of its value in its early years, and repair costs rise as it gets older, so a high early charge gives a more even total cost each year.
    1 mark each for any two of: van loses most value early; carrying amount closer to resale value; maintenance rises with age so depreciation + repairs is more even; van used most heavily when new.
  4. (d) Profit is $7,296 lower.
    16,000 − 8,704 = 7,296 (M1); profit lower/decreases (A1).
Q9Depreciation methods and calculation · Standard · Paper 2 style · 8 marks

Mehran Engineering has a financial year ending 31 March. At 1 April 2024 its machinery cost $150,000 and the provision for depreciation was $42,000. A further machine costing $60,000 was bought on 1 October 2024. Machinery is depreciated at 10% per annum on cost, on a monthly basis. No machinery was sold.

  1. (a) Calculate the depreciation charge for each of the years ended 31 March 2025 and 31 March 2026. [3]
  2. (b) Prepare the provision for depreciation of machinery account for the two years, balancing it at the end of each year. [5]
Show answer
  1. (a) 2025: $18,000; 2026: $21,000
    2025: 10% × 150,000 = 15,000 + 10% × 60,000 × 6/12 = 3,000 → 18,000 (M1 A1). 2026: 10% × 210,000 = 21,000 (A1).
  2. (b) Closing balances: 31 March 2025 $60,000; 31 March 2026 $81,000.Provision for depreciation of machinery accountDr CrDate Details $ | Date Details $2025 Mar 31 Balance c/d 60,000 | 2024 Apr 1 Balance b/d 42,000 | 2025 Mar 31 Statement of P/L 18,000 60,000 | 60,000Provision for depreciation of machinery account (second year)Dr CrDate Details $ | Date Details $2026 Mar 31 Balance c/d 81,000 | 2025 Apr 1 Balance b/d 60,000 | 2026 Mar 31 Statement of P/L 21,000 81,000 | 81,000
    B1 opening balance b/d 42,000; B1 each year's charge credited from statement of profit or loss (own figure); B1 balance c/d 2025; B1 balance b/d 2025 brought down; B1 balance c/d 2026. Dates and narratives needed.
Q10Depreciation methods and calculation · Standard · Paper 2 style · 6 marks

Oakfield Dental Clinic depreciates office equipment at 20% per annum on cost. A full year's depreciation is charged in the year of purchase and none in the year of disposal. On 1 January 2025 equipment at cost was $90,000; none of it was fully depreciated. On 3 March 2025 new equipment was bought for $14,000. On 30 November 2025 an item bought in 2022 for $8,000 was sold for $2,500.

  1. (a) Calculate the depreciation charge for office equipment for the year ended 31 December 2025. [3]
  2. (b) Calculate the profit or loss on the disposal of the item sold. [3]
Show answer
  1. (a) $19,200
    Equipment held at year end at cost: 90,000 − 8,000 + 14,000 = 96,000 (M1 M1). 20% × 96,000 = $19,200 (A1). Full year on the new item, nothing on the item sold.
  2. (b) Loss $700
    Depreciation charged 2022, 2023, 2024 = 3 × 1,600 = 4,800 (M1). Carrying amount = 8,000 − 4,800 = 3,200 (A1). Proceeds 2,500 → loss $700 (A1).
Q11Depreciation methods and calculation · Standard · Paper 2 style · 6 marks

Lumière Bakery, in Montreal, bought an oven for $50,000 at the start of year 1. Its policy is to depreciate the oven at 20% per annum using the reducing balance method. Years 1 and 2 were correct, but in year 3 the bookkeeper charged 20% of the original cost.

  1. (a) Calculate the correct depreciation charge for year 3. [2]
  2. (b) State the effect of the error on the profit for year 3. [2]
  3. (c) State the effect of the error on the statement of financial position at the end of year 3. [2]
Show answer
  1. (a) $6,400
    CA at start of year 3 = 50,000 × 0.8² = 32,000 (M1); 20% × 32,000 = $6,400 (A1).
  2. (b) Profit understated by $3,600
    Charged 10,000, should be 6,400; difference 3,600 (M1); profit understated (A1).
  3. (c) Accumulated depreciation overstated by $3,600, so the carrying amount of non-current assets (and capital) is understated by the same amount.
    1 mark non-current assets/carrying amount understated by the amount; 1 mark capital (retained profit) understated.
Q12Depreciation methods and calculation · Standard · Paper 2 style · 8 marks

Shalimar Traders depreciates buildings at 2% per annum on cost (straight-line) and fixtures and fittings at 15% per annum using the reducing balance method. Land is not depreciated. Balances at 1 January 2025: Cost $ Accumulated depreciation $Land 200,000 0Buildings 350,000 56,000Fixtures and fittings 64,000 25,000There were no purchases or sales during 2025.

  1. (a) Calculate the depreciation charges for the year and prepare a journal entry to record them. A narrative is not required. [3]
  2. (b) Prepare an extract from the statement of financial position at 31 December 2025 showing non-current assets. [4]
  3. (c) State why land is not depreciated. [1]
Show answer
  1. (a) Buildings $7,000; fixtures $5,850. Debit $ Credit $Statement of profit or loss 12,850Provision for depreciation – buildings 7,000Provision for depreciation – fixtures 5,850
    B1 buildings 2% × 350,000 = 7,000; B1 fixtures 15% × (64,000 − 25,000) = 5,850; B1 correct debit/credit.
  2. (b) Cost Accumulated Carrying depreciation amountLand 200,000 – 200,000Buildings 350,000 63,000 287,000Fixtures and fittings 64,000 30,850 33,150 614,000 93,850 520,150
    B1 land with no depreciation; B1 buildings line; B1 fixtures line; B1 totals (own figures).
  3. (c) Land has an unlimited useful life (it does not wear out).
    1 mark.
Q13Depreciation methods and calculation · Challenge · Paper 2 style · 7 marks

Al-Noor Motors, a garage in Karachi, uses the revaluation method for its loose tools. On 1 January 2025 the tools were valued at Rs 84,000. During the year tools costing Rs 37,500 were bought and paid by bank. On 31 December 2025 the tools were valued at Rs 96,300.

  1. (a) Calculate the depreciation of loose tools for the year. [2]
  2. (b) Prepare the loose tools account for the year ended 31 December 2025. [3]
  3. (c) Explain two reasons why the revaluation method is used for loose tools rather than the straight-line method. [2]
Show answer
  1. (a) Rs 25,200
    Opening valuation 84,000 + purchases 37,500 − closing valuation 96,300 (M1) = Rs 25,200 (A1).
  2. (b) Loose tools accountDr CrDate Details Rs | Date Details Rs2025 Jan 1 Balance b/d 84,000 | 2025 Dec 31 Statement of P/L 25,2002025 Bank 37,500 | 2025 Dec 31 Balance c/d 96,300 121,500 | 121,500
    B1 opening valuation debit; B1 purchases debit; B1 depreciation credit and closing valuation c/d.
  3. (c) Loose tools are many low-cost items, so keeping a record of each one is impractical; they are lost, broken or replaced often, so a yearly valuation reflects their real use.
    1 mark each for any two of: many small items; low individual cost; no record of each item's cost/life; frequent loss, breakage or theft; useful lives vary/unpredictable.
Q14Depreciation methods and calculation · Challenge · Paper 2 style · 8 marks

Cloudline Data, a web-hosting company in Singapore, bought server equipment for $125,000. It expects to sell the equipment for $27,000 after three years.

  1. (a) Calculate the annual reducing balance rate that reduces the cost to the residual value in exactly three years. Give your answer as a whole-number percentage. [3]
  2. (b) Calculate the depreciation charge for year 2. [2]
  3. (c) Calculate the carrying amount at the end of year 2. [1]
  4. (d) Suggest one reason why the business chose the reducing balance method for this equipment. [2]
Show answer
  1. (a) 40%
    Rate = 1 − ³√(27,000 ÷ 125,000) (M1) = 1 − ³√0.216 = 1 − 0.6 (M1) = 0.4 = 40% (A1). Check: 125,000 × 0.6³ = 27,000.
  2. (b) $30,000
    Year 1: 40% × 125,000 = 50,000; CA 75,000 (M1). Year 2: 40% × 75,000 = $30,000 (A1).
  3. (c) $45,000
    75,000 − 30,000 = $45,000.
  4. (d) The equipment (e.g. computer servers) becomes out of date quickly and loses most of its value early, so a higher charge in early years matches its fall in value and use.
    1 mark for identifying early loss of value/obsolescence; 1 mark for linking to matching cost with benefit.
Q15Depreciation methods and calculation · Challenge · Paper 2 style · 6 marks

Kestrel Tools has a financial year ending 31 December. Its draft profit for 2025 is $68,400. A machine was bought on 1 October 2025 for $40,000; delivery cost $1,200. Policy: 15% per annum straight-line on cost, calculated monthly. The bookkeeper charged a full year's depreciation of $6,000 on the $40,000 and debited the delivery cost to carriage inwards.

  1. (a) Calculate the correct depreciation charge for the machine for the year ended 31 December 2025. [2]
  2. (b) Prepare a statement showing the corrected profit for the year. [4]
Show answer
  1. (a) $1,545
    Cost = 40,000 + 1,200 delivery = 41,200 (M1). 15% × 41,200 × 3/12 = $1,545 (A1).
  2. (b) $Draft profit 68,400Add depreciation wrongly charged 6,000Add delivery cost wrongly expensed 1,200Less correct depreciation (1,545)Corrected profit 74,055
    B1 add back 6,000; B1 add back 1,200; B1 deduct own correct depreciation; B1 corrected profit (own figure).
Q16Depreciation methods and calculation · Challenge · Paper 2 style · 8 marks

Farhan is opening a furniture workshop in Sialkot and will apply for a bank loan after his first year. He buys a CNC machine for $90,000, expected to last 5 years with a residual value of $10,000. He can use the straight-line method or the reducing balance method at 35% per annum. Profit before depreciation for year 1 is expected to be $60,000. He wants to choose the method that shows the higher profit.

  1. (a) Calculate the profit for year 1 under each method. [2]
  2. (b) Advise Farhan which method he should use. Justify your answer. [6]
Show answer
  1. (a) Straight-line $44,000; reducing balance $28,500
    SL: (90,000 − 10,000) ÷ 5 = 16,000; 60,000 − 16,000 = 44,000 (B1). RB: 35% × 90,000 = 31,500; 60,000 − 31,500 = 28,500 (B1).
  2. (b) Advice should favour the method that best reflects how the machine is used, applied consistently, rather than the one that flatters the loan application (e.g. reducing balance if the machine loses value fast).
    Points for SL: higher year-1 profit by $15,500; simple; suits even use. Points for RB: matches heavy early use/fall in value; more prudent; profits more even when repairs rise. Consistency concept: once chosen, the method must be kept, so a switch later to boost profit is not allowed; a bank will look at cash flow and security, not only profit; choosing a method only to impress the bank misleads users. Up to 4 marks for points (max 3 one side), 2 marks for a justified decision.
Q17Disposals and part-exchange · Core · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) A Loss of $2,500
    Carrying amount = 30,000 − 18,000 = 12,000. Proceeds 9,500 < 12,000 → loss of $2,500. 'Profit of $2,500' reverses the comparison; 'Loss of $20,500' ignores the accumulated depreciation.
Q18Disposals and part-exchange · Core · Paper 2 style · 7 marks

Greenleaf Accountants, Cape Town, sold an old office computer server for $7,200 cash. It had cost $18,000 and accumulated depreciation was $11,250.

  1. (a) Calculate the carrying amount of the server at the date of sale. [2]
  2. (b) Calculate the profit or loss on disposal and state where it is shown in the financial statements. [3]
  3. (c) State the double entry for the cash received. [2]
Show answer
  1. (a) $6,750
    Cost 18,000 − accumulated depreciation 11,250 (M1) = $6,750 (A1).
  2. (b) Profit $450, shown as other income (added to gross profit) in the statement of profit or loss.
    7,200 − 6,750 = 450 (M1) profit (A1); B1 statement of profit or loss as income (or deducted from expenses).
  3. (c) Debit bank (cash); credit disposal account.
    1 mark each side.
Q19Disposals and part-exchange · Standard · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) A Profit of $2,400
    Carrying amount = 32,000 − 22,400 = 9,600. Allowance 12,000 − 9,600 = profit $2,400. 'Loss of $20,000' compares the allowance with cost, ignoring depreciation.
Q20Disposals and part-exchange · Standard · Paper 2 style · 7 marks

Sana Bakery, Multan, sold an oven for Rs 120,000 by bank transfer. The oven had cost Rs 450,000 and accumulated depreciation on it was Rs 315,000.

  1. (a) Prepare journal entries to record the disposal. Narratives are required. [4]
  2. (b) Prepare the disposal account. [3]
Show answer
  1. (a) Debit Rs Credit RsDisposal account 450,000 Equipment (ovens) account 450,000Transfer of cost of oven soldProvision for depreciation account 315,000 Disposal account 315,000Transfer of depreciation on oven soldBank 120,000 Disposal account 120,000Proceeds of sale of ovenStatement of profit or loss 15,000 Disposal account 15,000Loss on disposal of oven
    B1 each correct entry with narrative (four entries).
  2. (b) Disposal accountDr CrDate Details Rs | Date Details Rs Equipment 450,000 | Provision for dep. 315,000 | Bank 120,000 | Statement of P/L 15,000 450,000 | 450,000
    B1 cost debited; B1 depreciation and proceeds credited; B1 loss Rs 15,000 credited (CA 135,000 − 120,000).
Q21Disposals and part-exchange · Standard · Paper 2 style · 8 marks

Indus Cold Storage sold an old generator for Rs 85,000 cash. The bookkeeper credited the proceeds to the sales account and made no other entries. The generator had cost Rs 300,000 and its accumulated depreciation was Rs 240,000.

  1. (a) Prepare the journal entries needed to correct the error. Narratives are not required. [4]
  2. (b) Calculate the effect of the error on the profit for the year. [2]
  3. (c) State the effect of the error on non-current assets in the statement of financial position. [2]
Show answer
  1. (a) Debit Rs Credit RsSales 85,000 Disposal 85,000Disposal 300,000 Machinery (generator) 300,000Provision for depreciation 240,000 Disposal 240,000Disposal 25,000 Statement of profit or loss (profit on disposal) 25,000
    B1 each entry. Profit on disposal = 85,000 − (300,000 − 240,000) = Rs 25,000.
  2. (b) Profit overstated by Rs 60,000
    Revenue included 85,000; correct income is profit on disposal 25,000 (M1); overstated by Rs 60,000 (A1).
  3. (c) Non-current assets overstated by Rs 60,000 (the carrying amount of the generator was not removed).
    1 mark overstated; 1 mark Rs 60,000 carrying amount.
Q22Disposals and part-exchange · Standard · Paper 2 style · 8 marks

Mei owns a catering business in Kuala Lumpur. Her old van has a carrying amount of $11,500. She needs a new van with a list price of $58,000.Option 1: the dealer gives a trade-in allowance of $13,000 on the old van and Mei pays the balance.Option 2: Mei sells the old van privately for $15,500 after paying $600 for advertising, and the dealer gives her a 4% trade discount on the new van because there is no trade-in.

  1. (a) Calculate the net cash paid out under each option. [4]
  2. (b) Advise Mei which option to choose. Justify your answer. [4]
Show answer
  1. (a) Option 1 $45,000; option 2 $40,780
    Option 1: 58,000 − 13,000 = 45,000 (M1 A1). Option 2: 58,000 × 96% = 55,680; less net private sale 15,500 − 600 = 14,900; 40,780 (M1 A1).
  2. (b) Option 2 saves $4,220 in cash, but Mei must weigh the time, risk and delay of a private sale.
    For option 2: saves 4,220; higher profit on disposal (3,400 v 1,500). For option 1: quick and certain, no advertising effort, no risk the private buyer pulls out, no period without a van. 1 mark each for up to 3 points (both sides), 1 mark for a justified decision.
Q23Disposals and part-exchange · Challenge · Paper 2 style · 8 marks

Rahim Logistics has a year end of 31 December and depreciates vehicles at 20% per annum on cost, calculated monthly. At 1 January 2025 it owned vehicle A (bought 1 January 2022 for $40,000) and vehicle B (bought 1 July 2023 for $56,000). On 1 April 2025 vehicle A was part-exchanged for vehicle C, list price $52,000. The dealer allowed $9,000 for vehicle A and the balance was paid by cheque.

  1. (a) Calculate the total depreciation charge on vehicles for the year ended 31 December 2025. [3]
  2. (b) Prepare the disposal account for vehicle A. [5]
Show answer
  1. (a) $21,000
    Vehicle A 3 months: 2,000; vehicle B full year: 11,200; vehicle C 9 months: 20% × 52,000 × 9/12 = 7,800 (M1 for monthly basis, A1 two correct, A1 total 21,000).
  2. (b) Disposal account – vehicle ADr CrDate Details $ | Date Details $2025 Apr 1 Vehicles 40,000 | 2025 Apr 1 Provision for dep. 26,000 | 2025 Apr 1 Vehicles (trade-in) 9,000 | 2025 Dec 31 Statement of P/L 5,000 40,000 | 40,000
    B1 cost 40,000 debited; B1 depreciation 26,000 (3 years 24,000 + 3 months 2,000); B1 trade-in allowance credited (debit vehicles); B1 loss 5,000; B1 dates/narratives.
Q24Disposals and part-exchange · Challenge · Paper 2 style · 7 marks

Takumi Textiles, Osaka, bought a machine on 1 January 2022 for $64,000. It is depreciated at 25% per annum using the reducing balance method, with a full year's charge in the year of purchase and none in the year of sale. The machine was sold on 1 January 2025 at a loss of $3,800.

  1. (a) Calculate the carrying amount of the machine on 1 January 2025. [3]
  2. (b) Calculate the sale proceeds. [2]
  3. (c) Explain what the loss on disposal shows about the depreciation charged on the machine. [2]
Show answer
  1. (a) $27,000
    64,000 × 0.75 = 48,000; × 0.75 = 36,000; × 0.75 = 27,000 (M1 for RB method, M1 three years, A1).
  2. (b) $23,200
    27,000 − 3,800 loss (M1) = $23,200 (A1).
  3. (c) The machine was under-depreciated: the charges in earlier years were too low, so its carrying amount was above its real market value. The loss is a correction of past profits.
    1 mark under-depreciated/carrying amount too high; 1 mark earlier profits overstated or estimates (rate/life) wrong.
Q25Revaluation · Core · Paper 2 style · 5 marks

Aster Ltd owns land bought for $180,000. A professional valuer now values it at $260,000. The directors decide to show the land at the new value.

  1. (a) Calculate the amount credited to the revaluation reserve. [1]
  2. (b) State the double entry to record the revaluation. [2]
  3. (c) Explain why the increase is not shown as income in the statement of profit or loss. [2]
Show answer
  1. (a) $80,000
    260,000 − 180,000 = $80,000.
  2. (b) Debit land account $80,000; credit revaluation reserve $80,000.
    1 mark each side.
  3. (c) Realisation concept: the gain is not realised until the land is sold, so it is a reserve, not profit; showing it as profit could lead to dividends paid out of an unrealised gain.
    1 mark unrealised/realisation concept; 1 mark development (not available for dividends / would overstate profit).
Q26Revaluation · Standard · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) B $180,000
    Carrying amount = 400,000 − 80,000 = 320,000; 500,000 − 320,000 = $180,000. $100,000 compares with cost and ignores the accumulated depreciation.
Q27Revaluation · Standard · Paper 2 style · 8 marks

Harbour View Ltd bought premises on 1 January 2016 for $600,000 and depreciates them at 2% per annum on cost. On 1 January 2026, when accumulated depreciation was $120,000, the premises were revalued at $900,000. The remaining useful life is 40 years.

  1. (a) Prepare the journal entries to record the revaluation. Narratives are not required. [4]
  2. (b) Calculate the depreciation charge for the year ended 31 December 2026. [2]
  3. (c) State where the revaluation reserve is shown in the financial statements and why it is not included in profit. [2]
Show answer
  1. (a) Debit $ Credit $Provision for depreciation – premises 120,000 Premises 120,000Premises 420,000 Revaluation reserve 420,000
    B1 B1 transfer of accumulated depreciation 120,000; M1 increase 900,000 − 480,000; A1 420,000 credited to revaluation reserve.
  2. (b) $22,500
    900,000 ÷ 40 remaining years (M1) = $22,500 (A1).
  3. (c) In the equity section of the statement of financial position (and statement of changes in equity); the gain is not realised because the premises have not been sold.
    1 mark equity/reserves; 1 mark unrealised (realisation concept).
Q28Revaluation · Challenge · Paper 3 style · 7 marks

Daraz Storage Ltd bought land for $250,000 in 2020. In 2024 the land was revalued to $320,000 and the increase was credited to a revaluation reserve. In 2026 the land was revalued to $230,000. Land is not depreciated.

  1. (a) Calculate how the decrease in value in 2026 is treated. [2]
  2. (b) Prepare the journal entry for the 2026 revaluation. A narrative is not required. [3]
  3. (c) Explain why the whole decrease is not taken to the revaluation reserve. [2]
Show answer
  1. (a) Decrease $90,000: $70,000 debited to the revaluation reserve; $20,000 charged as an expense in the statement of profit or loss.
    320,000 − 230,000 = 90,000 (M1); 70,000 against reserve, remaining 20,000 to profit or loss (A1).
  2. (b) Debit $ Credit $Revaluation reserve 70,000Statement of profit or loss (impairment/revaluation loss) 20,000 Land 90,000
    B1 reserve 70,000; B1 profit or loss 20,000; B1 land credited 90,000.
  3. (c) The reserve holds only the earlier gain of $70,000 on this asset; a fall below original cost is a real loss and, by prudence, must be recognised in profit.
    1 mark reserve only contains the previous surplus on this asset; 1 mark fall below cost is a loss charged to profit (prudence).
Q29Cost of non-current assets · Core · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) A $113,700
    108,000 (after 10% discount) + 3,500 + 2,200 = $113,700. The maintenance contract is revenue expenditure ($115,500 wrongly includes it); $125,700 ignores the trade discount.
Q30Cost of non-current assets · Standard · Paper 2 style · 7 marks

Pine Crest Hotel, Murree, spent the following during the year: RsNew boiler 850,000Installation of the boiler 45,000Repainting guest rooms 120,000Building a new dining extension 2,400,000Repairing roof after a storm 75,000Legal fees on buying an adjacent plot of land 60,000

  1. (a) Calculate the total capital expenditure. [3]
  2. (b) The installation cost was debited to the repairs account. State the effect on profit and on non-current assets. Ignore depreciation. [2]
  3. (c) Explain why it is important to distinguish between capital and revenue expenditure. [2]
Show answer
  1. (a) Rs 3,355,000
    Capital: boiler 850,000, installation 45,000, extension 2,400,000, legal fees 60,000 (M1 identifying, M1 excluding repainting and repairs) = Rs 3,355,000 (A1).
  2. (b) Profit understated by Rs 45,000; non-current assets understated by Rs 45,000.
    1 mark each.
  3. (c) Wrong classification misstates profit and asset values, so the financial statements would not give a true and fair view to users.
    1 mark profit misstated; 1 mark assets misstated/true and fair view.

Similar questions

Questions that test the same subtopic in different years, grouped so you can work on one skill at a time.

References only: find each question in its paper (official link where available, otherwise through your school).

Depreciation methods and calculation Banker16 questions · 9/9 sessions
Disposals and part-exchange 11 questions · 7/9 sessions
Revaluation Rare4 questions · 2/9 sessions
Cost of non-current assets Rare2 questions · 2/9 sessions

Subtopics

Our analysis of how often each subtopic was examined and how many marks it carried, 2022 to May/June 2026.

SubtopicMarks indexedSessions
Depreciation methods and calculation Banker419/9
Disposals and part-exchange 217/9
Revaluation Rare92/9
Cost of non-current assets Rare22/9

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