The Accounting Equation
Assets = Liabilities + Capital (or Equity) Expanded form
Assets = Capital + (Profit − Drawings) + Liabilities Every transaction must keep the equation in balance.
Cambridge International A Level Accounting 9706
💼 Cambridge A Level Accounting Reference Sheet 2026
All the rules, formulas, and statement layouts Cambridge A Level Accounting students need — double-entry, depreciation, partnership and company accounts, cash flow statements, and the full ratio suite.
Double-Entry & Adjustments Financial Statements Partnerships & Companies Ratios & Cash Flow
Our reference sheets are free to download — save this one as PDF for offline revision.
Aligned with the latest 2026 syllabus and board specifications. This sheet is prepared to match your exam board’s official specifications for the 2026 exam series.
Every Core 9706 Rule, Formula and Layout in One Reference Sheet
Cambridge A Level Accounting (9706) demands accurate bookkeeping, correct year-end adjustments, and confident preparation of financial statements. This reference sheet brings together the accounting equation, depreciation methods, partnership and company accounts, IAS 7 cash flow statements, and the full ratio suite — everything you need across Papers 1–3.
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Accounting equation, double-entry rules, and trial balance
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Depreciation, doubtful debts, and year-end adjustments
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Partnership and company accounts (capital, reserves, dividends)
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IAS 7 cash flow statement and the full ratio suite
The Accounting Equation & Double-Entry
The foundation of every entry and statement in 9706.
Double-Entry Rules (DEAD CLIC)
Debit increases
Drawings, Expenses, Assets Credit increases
Capital, Liabilities, Income Every transaction has equal debit and credit entries — total debits always equal total credits.
Ledger Types
Sales (debtors) ledger
Personal accounts of trade receivables Purchases (creditors) ledger
Personal accounts of trade payables General (nominal) ledger
All other accounts (assets, liabilities, capital, income, expenses) Cash book
Combined receipts and payments record (also serves as a book of prime entry) Trial Balance
Lists all ledger balances at a point in time; debit total must equal credit total A balanced trial balance does NOT prove all entries are correct — errors of omission, commission, principle, original entry, complete reversal, and compensating errors are not detected.
Depreciation
Allocate the cost of a non-current asset over its useful life.
Straight-Line Method
Annual Depreciation = (Cost − Residual Value) ÷ Useful Life (years) Or: Annual Depreciation = Cost × Depreciation Rate (%) Charge is the same each year — suitable for assets used evenly over their life.
Reducing (Diminishing) Balance Method
Annual Depreciation = Net Book Value at Start of Year × Depreciation Rate (%) Net Book Value (NBV)
Cost − Accumulated Depreciation Higher charge in early years — suitable for assets that lose more value early (e.g. vehicles, IT equipment).
Units of Production / Revaluation
Units of production
((Cost − Residual Value) ÷ Total Estimated Output) × Actual Units Produced in Period Revaluation method
Depreciation = Opening Value + Additions − Closing Value − Disposals Disposal of a Non-Current Asset
Profit/Loss on Disposal = Sale Proceeds − Net Book Value at Disposal Profit on disposal is credited to the income statement; loss is debited.
Bad Debts, Doubtful Debts & Year-End Adjustments
Apply matching and prudence to give a true and fair view.
Bad & Doubtful Debts
Bad debt written off
Dr Bad Debts Expense Cr Trade Receivables Provision for doubtful debts (general)
Provision = Trade Receivables × Estimated % Doubtful Increase in provision
Dr Doubtful Debts Expense Cr Provision for Doubtful Debts Decrease in provision
Dr Provision for Doubtful Debts Cr Doubtful Debts (P&L) Prepayments & Accruals
Prepaid expense (asset)
Reduce expense in P&L; show prepayment under current assets in SOFP Accrued expense (liability)
Increase expense in P&L; show accrual under current liabilities in SOFP Accrued income
Increase income in P&L; show accrued income under current assets Income received in advance
Reduce income in P&L; show as current liability Apply matching: only the income/expense relating to the period belongs in the P&L.
Provisions
A provision is recognised when there is a present obligation, an outflow is probable, and the amount can be estimated reliably. Income Statement & SOFP Layouts
Examiners reward correctly-headed, properly-formatted statements.
Income Statement (Sole Trader / Company)
Revenue − Sales Returns = Net Revenue Net Revenue − Cost of Sales = Gross Profit Cost of Sales
Opening Inventory + Purchases (less Returns Out) + Carriage Inwards − Closing Inventory Gross Profit + Other Income − Operating Expenses = Operating Profit (Profit from Operations) Operating Profit − Finance Costs = Profit before Tax Profit before Tax − Tax = Profit for the Year Statement of Financial Position (SOFP)
Assets
Non-current Assets (at NBV) + Current Assets (Inventories, Trade Receivables, Cash & Equivalents) Equity & Liabilities
Equity (Share Capital, Reserves, Retained Earnings) + Non-current Liabilities (e.g. Long-term Loans) + Current Liabilities (Trade Payables, Accruals, Tax) Total Assets must equal Total Equity + Total Liabilities.
Partnership Accounts
Distinguish capital, current, and appropriation accounts clearly.
Appropriation Account
Net Profit + Interest on Drawings − Salaries to Partners − Interest on Capital = Residual Profit Residual Profit is shared between partners in their agreed Profit-Sharing Ratio (PSR) Capital vs Current Accounts
Capital account
Records permanent investments — only changes for capital introduced/withdrawn or revaluations Current account
Records the partner's running entitlements — share of profit, salary, interest on capital, less drawings and interest on drawings Goodwill on Admission / Retirement
Goodwill represents the partnership's reputation, customer base, and earning capacity above the value of net assets. On admission of a new partner
Dr Goodwill (using OLD ratio) Cr Old Partners' Capital. Then Dr Capital (using NEW ratio) Cr Goodwill to write off if goodwill is not retained in the books. Revaluation of Assets
Profits or losses on revaluation are shared between existing partners in the OLD profit-sharing ratio before changes take effect. Limited Company Accounts
Share capital, reserves, and dividend treatment are core 9706 content.
Share Capital
Authorised share capital
Maximum value of shares the company may issue Issued share capital
Value of shares actually issued at nominal (par) value Called-up vs paid-up
Called-up = amount requested from shareholders; paid-up = amount actually received Reserves
Capital reserves (non-distributable)
Share Premium, Revaluation Reserve Revenue reserves (distributable)
Retained Earnings, General Reserve Only revenue reserves are available for cash dividends.
Dividends
Final and interim dividends paid during the year are deducted from retained earnings (a movement in equity, not an expense). Proposed dividends
Disclosed by note only — not recognised as a liability until declared. Statement of Cash Flows (IAS 7 — Indirect Method)
Reconcile profit to cash and present cash movements by activity.
Operating Activities (Indirect Method)
Profit before Tax + Depreciation, + Loss on Disposal (or − Profit on Disposal) + Finance Costs (interest expense) ± Changes in Working Capital: − Increase in Inventory, − Increase in Receivables, + Increase in Payables (and vice versa) − Interest Paid, − Tax Paid = Net Cash from Operating Activities Investing Activities
− Purchase of Non-current Assets + Proceeds from Sale of Non-current Assets + Interest / Dividends Received Financing Activities
+ Proceeds from Share Issue, + New Loans Raised − Loan Repayments, − Dividends Paid Net change in cash & equivalents = Operating + Investing + Financing. Add to opening cash to reach closing cash.
Ratio Analysis
Calculate, compare, and interpret — examiners credit interpretation, not just arithmetic.
Profitability
Gross profit margin
(Gross Profit ÷ Revenue) × 100 Net (profit) margin
(Profit for the Year ÷ Revenue) × 100 Mark-up
(Gross Profit ÷ Cost of Sales) × 100 ROCE
(Profit before Interest and Tax ÷ Capital Employed) × 100, where Capital Employed = Total Equity + Non-current Liabilities Liquidity
Current ratio
Current Assets ÷ Current Liabilities Acid test (quick) ratio
(Current Assets − Inventories) ÷ Current Liabilities Efficiency (Activity)
Inventory turnover (times)
Cost of Sales ÷ Average Inventory Inventory days
(Average Inventory ÷ Cost of Sales) × 365 Trade receivables days
(Trade Receivables ÷ Credit Sales) × 365 Trade payables days
(Trade Payables ÷ Credit Purchases) × 365 Non-current asset turnover
Revenue ÷ Net Book Value of Non-current Assets Gearing & Investor
Gearing
(Non-current Liabilities ÷ Capital Employed) × 100 Earnings per share (EPS)
Profit attributable to Ordinary Shareholders ÷ Number of Ordinary Shares Dividend per share
Total Ordinary Dividends ÷ Number of Ordinary Shares Dividend cover
Profit for the Year ÷ Total Ordinary Dividends Price/earnings ratio (P/E)
Market Price per Share ÷ Earnings per Share Inventory Valuation & Manufacturing Accounts
Apply IAS 2 (lower of cost and net realisable value) and present manufacturing accounts in the correct order.
Inventory Valuation Methods
FIFO (First-In, First-Out)
Issues are valued at the price of the earliest purchases; closing inventory is valued at the most recent prices AVCO (Average Cost)
Weighted average unit cost = Total Cost of Inventory ÷ Total Units Held; recalculated after each purchase (perpetual) or at period-end (periodic) IAS 2 rule
Inventory is valued at the LOWER of Cost and Net Realisable Value (NRV = Estimated Selling Price − Costs to Complete and Sell) Manufacturing Account
Prime cost
Direct Materials + Direct Labour + Direct Expenses Production cost of goods completed
Prime Cost + Factory Overheads + Opening Work-in-Progress − Closing Work-in-Progress Factory profit (if added) is eliminated as unrealised profit on closing finished-goods inventory in the SOFP.
Exam Technique — Papers 1–3
Cambridge marks reward neat presentation, correct headings, and clear interpretation.
Paper 1 (Multiple Choice)
Read every option before selecting; tick the choice that matches the accounting principle being tested (matching, prudence, materiality, going concern, consistency). Watch for terminology traps — e.g. 'capital expenditure' vs 'revenue expenditure', 'reserve' vs 'provision'. Paper 2 (Structured Questions)
Always include a proper heading: business name, statement title, and 'for the year ended …' / 'as at …'. Show all workings clearly — examiners award method marks even when the final figure is wrong. Use the exact line-item names from the syllabus (e.g. 'Profit for the year', 'Trade receivables').
Paper 3 (Extended / A2)
Calculate ratios first, then INTERPRET — compare year on year and against industry norms; identify causes (price, volume, cost mix). For evaluative questions, reach a clearly supported judgement; quote at least two contrasting points before concluding. How to Use This Reference Sheet
Boost your Cambridge exam confidence with these proven study strategies from our tutoring experts.
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Re-Draft Statements From Scratch
Re-prepare income statements, SOFPs, and cash flow statements from raw trial balances repeatedly. Speed and accuracy of layout is half the battle in Paper 2.
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Memorise Adjustment Postings
Drill the Dr/Cr postings for prepayments, accruals, depreciation, doubtful debts, and disposal until they are automatic — these are the highest-frequency Paper 2 marks.
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Calculate AND Interpret Ratios
For every ratio you calculate, write a one-sentence interpretation comparing the figure to the prior year or industry benchmark. Numbers without analysis won't reach the top band.
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Distinguish Capital From Current Accounts
In partnership questions, never mix capital account entries with current account entries. Use two separate columns and label every line with the partner's name.
Reference Sheet FAQ
Quick answers about this free PDF and how to use it for exam revision and active recall.
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What Accounting topics and equations does this formula sheet cover?
This page groups key Accounting formulas in one place for revision. Master Cambridge A Level Accounting (9706) with this 2026 reference sheet. Covers the accounting equation, double-entry, depreciation, year-end adjustments, partnership and company accounts, cash flow statements, rati… Always cross-check with your official syllabus and past papers for your exam session.
Can I use this instead of the official exam formula booklet in the exam?
No. In the exam you must follow only what your exam board allows in the hall—usually the official formula booklet or data sheet where provided. This page is a revision and teaching aid, not a replacement for board-issued materials.
Who is this formula sheet for (Post-Secondary)?
It is written for students preparing for assessments at Post-Secondary in Accounting, including classroom revision, homework support, and independent study. Teachers and tutors can also share it as a quick reference.
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This reference sheet aligns with Cambridge Assessment International Education International A Level Accounting (9706) syllabus content.
Always present financial statements with full headings, show all workings, and apply IAS rules (IAS 2 for inventory, IAS 7 for cash flow) where relevant.