22 questions · about 2% of the marks we indexed · examined in 9 of 9 sessions.
Questions by year
2026
2026 May/June · Paper 12 · Q11 markPurpose of accounting and book-keeping
2026 May/June · Paper 12 · Q21 markThe accounting equation
2025
2025 Oct/Nov · Paper 12 · Q11 markPurpose of accounting and book-keeping
2025 Oct/Nov · Paper 12 · Q21 markThe accounting equation
2025 May/June · Paper 12 · Q11 markPurpose of accounting and book-keeping
2025 May/June · Paper 12 · Q21 markThe accounting equation
2025 May/June · Paper 22 · Q5 (d)5 marksPurpose of accounting and book-keeping
2024
2024 Oct/Nov · Paper 12 · Q11 markPurpose of accounting and book-keeping
2024 Oct/Nov · Paper 12 · Q21 markThe accounting equation
2024 Oct/Nov · Paper 22 · Q2 (d)5 marksPurpose of accounting and book-keeping
2024 May/June · Paper 12 · Q11 markPurpose of accounting and book-keeping
2024 May/June · Paper 12 · Q21 markThe accounting equation
2023
2023 Oct/Nov · Paper 12 · Q11 markPurpose of accounting and book-keeping
2023 Oct/Nov · Paper 12 · Q21 markThe accounting equation
2023 Oct/Nov · Paper 12 · Q201 markThe accounting equation
2023 Oct/Nov · Paper 22 · Q3 (c)1 markPurpose of accounting and book-keeping
2023 May/June · Paper 12 · Q11 markPurpose of accounting and book-keeping
2023 May/June · Paper 12 · Q21 markThe accounting equation
2023 May/June · Paper 12 · Q251 markThe accounting equation
2022
2022 Oct/Nov · Paper 12 · Q11 markThe accounting equation
2022 Oct/Nov · Paper 12 · Q21 markThe accounting equation
2022 May/June · Paper 12 · Q11 markPurpose of accounting and book-keeping
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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.
Q1Purpose of accounting and book-keeping · Core · Paper 1 style · 1 mark
(a)Which activity is book-keeping rather than accounting?[1]
Show answer
(a) A entering each day's credit sales in the sales journal
Book-keeping is the detailed recording of transactions in the books of prime entry and ledgers, so entering credit sales in the sales journal is book-keeping. Comparing profits (B), using statements for a decision (C) and explaining a ratio (D) are accounting: analysing, interpreting and communicating the information.
Q2Purpose of accounting and book-keeping · Core · Paper 1 style · 1 mark
(a)Which is NOT a purpose of measuring the profit or loss of a business?[1]
Show answer
(a) D to record every transaction in a book of prime entry
Recording transactions in books of prime entry is a book-keeping task, not a reason for measuring profit. A, B and C are all reasons why the profit figure is needed (drawings, monitoring progress, information for lenders).
Q3Purpose of accounting and book-keeping · Core · Paper 2 style · 4 marks
(a)Explain the difference between book-keeping and accounting.[2]
(b)State two reasons why a business owner needs to know the profit or loss of the business.[2]
Show answer
(a) Book-keeping is the detailed recording of financial transactions in the books of the business; accounting uses those records to prepare, summarise, analyse and interpret financial statements.
1 mark: book-keeping = recording transactions (in books of prime entry/ledgers). 1 mark: accounting = summarising/analysing/interpreting/communicating the recorded information (e.g. preparing financial statements).
(b) Any two, e.g. to decide how much can be taken as drawings; to compare performance with earlier years; to support a loan application; to calculate tax; to decide whether to expand or close.
1 mark each for any two valid reasons: drawings decision; monitoring progress/comparison with previous periods or other businesses; information for lenders/bank; tax assessment; planning decisions (expand, cut costs, close).
Q4Purpose of accounting and book-keeping · Core · Paper 2 style · 4 marks
(a)State what is meant by profit.[1]
(b)State what is meant by a loss.[1]
(c)State the effect of (i) a profit and (ii) a loss on the owner's capital.[2]
Show answer
(a) Profit is the amount by which the income (revenue) of a period is greater than the expenses of that period.
1 mark: income/revenue exceeds expenses for the period.
(b) A loss is the amount by which the expenses of a period are greater than the income of that period.
1 mark: expenses exceed income/revenue for the period.
(c) (i) A profit increases the owner's capital. (ii) A loss decreases the owner's capital.
1 mark each.
Q5Purpose of accounting and book-keeping · Core · Paper 2 style · 4 marks
(a)For each task, state whether it is book-keeping or accounting.(i) Posting the totals of the purchases journal to the ledger.(ii) Preparing an income statement for the year.(iii) Writing up the petty cash book.(iv) Calculating and commenting on the current ratio.[4]
Show answer
(a) (i) book-keeping (ii) accounting (iii) book-keeping (iv) accounting
1 mark each.
Q6Purpose of accounting and book-keeping · Core · Paper 2 style · 3 marks
(a)State two reasons why a business keeps accounting records.[2]
(b)State the name of the person who records the day-to-day transactions of a business.[1]
Show answer
(a) Any two, e.g. to know how much is owed to and by the business; to calculate profit or loss; to know the value of assets; to provide information for tax or lenders; to help control the business.
1 mark each for any two valid reasons.
(b) A book-keeper.
1 mark.
Q7Purpose of accounting and book-keeping · Core · Paper 2 style · 3 marks
(a)In June, Rana's tailoring business had income of $25,400 and expenses of $27,150. Calculate the result for June and state whether it is a profit or a loss.[2]
(b)State one decision that the owner of a business might make using accounting information.[1]
Show answer
(a) A loss of $1,750
25,400 − 27,150 = −1,750 (M1); a loss of $1,750 (A1, must say loss).
(b) e.g. whether to expand, whether to borrow, how much to take as drawings, whether to cut expenses, what prices to charge.
1 mark for any valid decision.
Q8Purpose of accounting and book-keeping · Standard · Paper 1 style · 1 mark
(a)Which statements about accounting are correct?1 It summarises, analyses and interprets the financial records of a business.2 It is concerned only with transactions paid in cash.3 It provides information that helps the owner make decisions.[1]
Show answer
(a) B 1 and 3 only
Statements 1 and 3 describe accounting. Statement 2 is wrong: credit transactions (credit sales, credit purchases, amounts owing) are recorded and summarised too, so any option that includes 2 is wrong.
Q9Purpose of accounting and book-keeping · Standard · Paper 2 style · 4 marks
(a)Kwame runs a small printing business in Accra. Explain two ways in which accounting information helps him to monitor the progress of his business.[4]
Show answer
(a) e.g. He can compare this year's profit with previous years to see whether the business is growing. He can compare actual expenses with what he planned, so he can see where costs are rising and take action.
Two points × (1 mark for the point + 1 mark for development). Points: comparison of profit/revenue with earlier periods; comparison with budgets/targets; comparison with similar businesses; checking liquidity (cash/bank, amounts owed by customers); identifying expenses that are rising.
Q10Purpose of accounting and book-keeping · Standard · Paper 2 style · 4 marks
(a)Ali sells fresh juice from a stall in Lahore. In March his sales were $3,150. His expenses were: cost of fruit used $780, wages of a helper $900, stall rent $650 and electricity $210. Calculate Ali's profit for March.[2]
(b)Ali wants to take $900 from the business for his own use each month. Using your answer to (a), explain whether this is sensible.[2]
(b) Not sensible: $900 is more than the profit of $610, so his capital would fall by $290 each month if this continued.
1 mark: compares drawings with profit (drawings > profit). 1 mark: explains that capital/resources of the business would fall (own figure accepted).
Q11Purpose of accounting and book-keeping · Standard · Paper 2 style · 3 marks
(a)Explain why a business that makes a profit for a year may still be short of money in its bank account.[3]
Show answer
(a) Profit is not the same as cash. Some sales may be on credit and the money not yet received; cash may have been spent on non-current assets or used to repay loans; the owner may have taken large drawings. None of these reduces profit, but they reduce the bank balance.
1 mark: profit ≠ cash/bank. 1 mark each (max 2) for reasons: credit sales not yet received; purchase of non-current assets; drawings; loan repayments; increase in inventory; paying suppliers quickly.
Q12Purpose of accounting and book-keeping · Standard · Paper 2 style · 4 marks
(a)Ngozi owns a clothing shop in Lagos and is deciding whether to open a second shop. Explain two pieces of accounting information she should look at before deciding, and how each would help her.[4]
Show answer
(a) e.g. Profit for recent years: rising profits suggest the business can support expansion. Bank balance/working capital: shows whether she can pay for fitting out a second shop or whether she will need a loan.
Two × (1 mark information + 1 mark how it helps). Accept: profit trend; gross/profit margin; cash/bank balance; working capital; level of loans; expenses of the existing shop; forecast/budget figures.
Q13Purpose of accounting and book-keeping · Standard · Paper 2 style · 4 marks
(a)Explain why accounting records must be accurate and kept up to date. Give two reasons.[4]
Show answer
(a) e.g. Accurate records give a correct profit figure, so decisions such as drawings or expansion are based on true information. Up-to-date records show which customers owe money now, so they can be chased before the debts become irrecoverable.
Two × (1 mark reason + 1 mark explanation). Reasons: correct profit/decisions; credit control; paying suppliers on time to keep discounts and goodwill; tax returns; lenders/investors rely on them; detecting fraud or errors quickly.
Q14Purpose of accounting and book-keeping · Standard · Paper 2 style · 3 marks
(a)Explain the difference between income and capital introduced by the owner.[2]
(b)Ravi paid $5,000 of his own savings into the business bank account and also received $2,300 rent from sub-letting part of the shop. State how much of the $7,300 is income of the business.[1]
Show answer
(a) Income is earned by the business from its activities (e.g. sales, rent received) and increases profit. Capital introduced is money or assets put into the business by the owner; it increases capital but is not profit.
1 mark: income earned from trading/operations and included in profit. 1 mark: capital introduced is the owner's investment, not part of profit.
(b) $2,300
1 mark: only the rent received is income; the $5,000 is capital introduced.
Q15Purpose of accounting and book-keeping · Challenge · Paper 1 style · 1 mark
(a)Farah owns a stationery shop in Multan. Which item should NOT be recorded in the books of the shop?[1]
Show answer
(a) C Farah's private house rent paid from her personal bank account
Only transactions that affect the business are recorded. Farah's house rent paid from her personal account does not involve the business at all. D must be recorded (as drawings), because business goods have left the business. A and B are ordinary business transactions.
Q16Purpose of accounting and book-keeping · Challenge · Paper 2 style · 5 marks
(a)Mehwish makes and sells cakes from her home in Islamabad. She keeps no records except her bank statements. She is thinking of keeping a full set of accounting records.Advise Mehwish whether she should keep a full set of accounting records. Justify your answer by giving two points for and two points against.[5]
Show answer
(a) For: she could calculate her profit accurately and know whether the business is worth continuing; records help control customers who owe money and suppliers she owes; she would have evidence for a bank loan or tax. Against: it takes time she could spend baking; she may need to pay a book-keeper or buy software; for a very small business the bank statement may give enough information. Recommendation: e.g. she should keep records, because the benefit of knowing her true profit outweighs the cost.
Up to 2 marks for points for (e.g. accurate profit; credit control; information for lenders/tax; separates business and private money; helps decisions such as pricing). Up to 2 marks for points against (time; cost of book-keeper/software; needs skill; small business may not need it). 1 mark for a clear recommendation supported by the points. Recommendation mark only if both sides are discussed.
Q17Purpose of accounting and book-keeping · Challenge · Paper 2 style · 5 marks
(a)Below is a list of payments and receipts of a delivery business owned by Tomás for April.Cash from customers for deliveries $7,400Fuel $1,350Driver's wages $2,100New delivery van $18,000 (paid by loan received from bank $18,000)Insurance for April $240Cash taken by Tomás for his own use $1,500Van repairs $420Ignore depreciation. Calculate Tomás's profit for April.[3]
(b)Explain why the cash taken by Tomás is not treated as an expense of the business.[2]
Show answer
(a) $3,290
Expenses = fuel 1,350 + wages 2,100 + insurance 240 + repairs 420 = 4,110 (M1). Van (capital expenditure), loan received and drawings are not income or expenses (M1 for excluding them). Profit = 7,400 − 4,110 = 3,290 (A1).
(b) It is drawings: money taken by the owner for private use. It was not spent to earn the business's income, so it reduces capital rather than profit.
1 mark: it is drawings/for private use. 1 mark: reduces capital, not an expense of earning revenue (business entity).
Q18Purpose of accounting and book-keeping · Challenge · Paper 2 style · 6 marks
(a)Sana runs a tuition centre in Karachi. In January her fee income was $12,600 and her expenses were $9,450. In February her fee income was $14,100 and her expenses were $11,280. Calculate her profit for each month.[2]
(b)Calculate the percentage change in profit from January to February. Give your answer correct to two decimal places.[2]
(c)Sana's fee income rose. Explain why it is still important for her to measure profit every month.[2]
Show answer
(a) January $3,150; February $2,820
12600−9450 = 3150 (1); 14100−11280 = 2820 (1).
(b) a fall of 10.48%
(2820−3150) ÷ 3150 × 100 (M1) = -10.48% , i.e. a decrease (A1).
(c) Higher income does not always mean higher profit: her expenses rose faster than income, so profit fell. Measuring profit shows this early so she can control costs or change fees.
1 mark: income rising does not guarantee profit rising/expenses rose faster. 1 mark: allows early action (control costs, review fees, decisions).
Q19Purpose of accounting and book-keeping · Challenge · Paper 2 style · 5 marks
(a)Hamid runs a computer repair business. He calculates his profit for the year as cash received $46,800 minus cash paid for expenses $39,200. Calculate the profit he has worked out.[1]
(b)At the end of the year customers owed Hamid $3,900 for repairs done during the year, and he owed $1,150 for electricity used during the year. There were no such amounts at the start of the year. Calculate the correct profit for the year.[2]
(c)Explain why Hamid's method does not measure profit correctly.[2]
Show answer
(a) $7,600
46800 − 39200 = 7600.
(b) $10,350
7600 + 3900 (M1) − 1150 (M1) = 10350. Allow A1 for the final figure only if both adjustments are correct.
(c) Profit should include all income earned and all expenses incurred in the year, whether or not cash has been received or paid. His method leaves out work done on credit and expenses owing.
1 mark: income/expenses must relate to the period (earned/incurred), not to cash movements. 1 mark: identifies credit income not received or expenses unpaid as the cause.
Q20The accounting equation · Core · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) A $34,500
Capital = assets − liabilities = 48000 − 13500 = 34500. B wrongly adds the liabilities to the assets.
Q21The accounting equation · Core · Paper 2 style · 4 marks
(a)State the accounting equation.[1]
(b)Calculate the missing figure for each business.(i) Assets $62,000; Liabilities $17,500; Capital ?(ii) Assets ?; Liabilities $8,200; Capital $41,300(iii) Assets $29,750; Liabilities ?; Capital $23,900[3]
Show answer
(a) Assets = Liabilities + Capital (owner's equity)
1 mark. Accept Assets − Liabilities = Capital.
(b) (i) $44,500 (ii) $49,500 (iii) $5,850
1 mark each.
Q22The accounting equation · Core · Paper 2 style · 4 marks
(a)State whether each item is an asset or a liability of a business.(i) Delivery van(ii) Bank loan repayable in five years(iii) Amounts owed by credit customers(iv) Amounts owed to suppliers(v) Inventory of goods for resale(vi) Bank overdraft[3]
1 mark for each two correct answers (6 correct = 3 marks).
(b) An amount owed by the business to someone outside the business (e.g. a supplier or lender).
1 mark.
Q23The accounting equation · Core · Paper 2 style · 3 marks
(a)Explain what is meant by the owner's capital.[1]
(b)Explain why the accounting equation always balances after every transaction.[2]
Show answer
(a) The amount the business owes to its owner: the owner's investment plus profits retained, less drawings (assets minus liabilities).
1 mark.
(b) Every transaction has two equal effects (duality), e.g. an asset increases and another asset decreases, or an asset and a liability both increase, so assets always equal liabilities plus capital.
1 mark: every transaction has two aspects/duality. 1 mark: the two effects are equal, so both sides change by the same amount (or example).
Q24The accounting equation · Standard · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) B assets increase and liabilities increase
Inventory (an asset) increases and the amount owed to the supplier (a trade payable, a liability) increases by the same amount. Capital is unchanged because no income or expense has arisen, so A is wrong.
Q25The accounting equation · Standard · Paper 2 style · 5 marks
(a)For each transaction, state the effect (increase, decrease or no effect) on total assets, total liabilities and capital.(i) The owner pays $10,000 of personal money into the business bank account.(ii) Goods for resale bought by cheque, $1,800.(iii) A trade payable is paid $950 by bank transfer.(iv) The owner takes $400 cash for private use.(v) A bank loan of $6,000 is received.[5]
Show answer
(a)(i) assets increase, liabilities no effect, capital increase(ii) no effect on total assets (inventory up, bank down), liabilities no effect, capital no effect(iii) assets decrease, liabilities decrease, capital no effect(iv) assets decrease, liabilities no effect, capital decrease(v) assets increase, liabilities increase, capital no effect
1 mark for each transaction with all three effects correct.
Q26The accounting equation · Standard · Paper 2 style · 4 marks
(a)Zainab's boutique had the following balances on 30 June:Premises $85,000Fixtures $12,400Inventory $9,650Trade receivables $4,300Bank $2,780Trade payables $6,120Loan from Habib Bank (repayable in 2031) $30,000Wages owing $540Calculate (i) total assets, (ii) total liabilities and (iii) Zainab's capital on 30 June.[4]
Q27The accounting equation · Standard · Paper 2 style · 4 marks
(a)On 1 May Chen started a business by paying $20,000 into a business bank account. During May:1 bought equipment by cheque, $7,5002 bought inventory on credit from Lee Traders, $3,2003 received a bank loan, $5,0004 sold goods that had cost $1,000 for $1,600 cashCalculate the total assets, total liabilities and capital after transaction 4.[4]
Show answer
(a) Assets $28,800; Liabilities $8,200; Capital $20,600
Q28The accounting equation · Challenge · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) C $77,000
Paying the supplier: bank −4,000 and payables −4,000. Equipment on credit: assets +6,000 and liabilities +6,000. Assets = 75000 − 4,000 + 6,000 = 77000 (liabilities become 24000; capital stays 53000). B forgets to reduce the bank balance.
Q29The accounting equation · Challenge · Paper 2 style · 5 marks
(a)On 1 January Imran's capital was $54,300. During the year his business made a profit of $17,850, he took drawings of $11,200 and he paid in additional capital of $4,000. Calculate his capital on 31 December.[2]
(b)On 31 December the business's liabilities were $23,650. Calculate its total assets.[1]
(c)Explain why drawings reduce the owner's capital but are not an expense.[2]
(c) Drawings are resources taken out by the owner for private use, so the owner's claim on the business falls. They are not used to earn income, so they are not charged in the income statement.
1 mark: capital = owner's claim, which is reduced by withdrawals. 1 mark: not incurred to earn revenue/business entity, so not an expense.
Q30The accounting equation · Challenge · Paper 2 style · 6 marks
(a)Precious owns a catering business in Nairobi. At the start of June the business had assets of $36,000 and liabilities of $9,000. During June:1 Precious brought her own car, valued at $8,500, into the business.2 The business received a loan of $12,000 from a finance company.3 Precious took food that had cost the business $650 for a family wedding.4 A supplier was paid $2,400 by bank transfer.Calculate the total assets, total liabilities and capital at the end of June. Show your working.[5]
(b)Explain why transaction 4 does not change the capital.[1]
Show answer
(a) Assets $53,450; Liabilities $18,600; Capital $34,850
