Edexcel IGCSEAccountingGeneral Applications15 Marks

The following information relates to T. Khan's business for the year ended 31 December 2023:

(a)Prepare the Statement of Comprehensive Income (Income Statement) for T. Khan for the year ended 31 December 2023.[10]
(b)Calculate T. Khan's gross profit margin for the year ended 31 December 2023. Show your working.[3]
(c)State one limitation of using gross profit margin as the sole indicator of business performance.[2]

Mark scheme

Marking points from the official mark scheme. The mark or mark type is shown in brackets.

(a) Statement of Comprehensive Income (10 marks)
B1 for correct heading (Name, Statement of Comprehensive Income, For the year ended 31 December 2023).
B1 for Sales Revenue.
B1 for Cost of Sales.
B1 for Opening Inventory.
B1 for Purchases.
B1 for Closing Inventory.
B1 for Gross Profit.
B1 for list of Expenses (e.g. Wages, Rent, Insurance).
B1 for correct total Expenses.
B1 for Profit for the year.
All figures must be correct for full marks per line item.
Format must be correct.
Note: specific figures for Sales, Purchases, Inventory, and Expenses would be provided in the actual question paper, leading to specific numerical values for marks.
(b) Gross Profit Margin Calculation (3 marks)
M1 for formula (Gross Profit / Sales Revenue x 100).
M1 for correct substitution of values.
A1 for correct percentage (e.g. 25%).
(c) Limitation of Gross Profit Margin (2 marks)
B1 for stating a valid limitation (e.g. does not consider operating expenses, only reflects purchasing and selling efficiency, ignores other income/expenses, can be manipulated by inventory valuation).
B1 for explanation/elaboration of the limitation.

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