Examiner’s Report
November 2019
Pearson LCCI Certificate in Accounting
Level 3(ASE20104)
2 LCCI ASE20104, November 2019
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3 LCCI ASE20104, November 2019
Introduction
The Pearson LCCI Level 3 Certificate in Accounting (VRQ) gives candidates an
overview of the fundamental accounting principles and concepts that underlie all financial accounting and an introduction to management accounting. Candidates
are introduced to topic areas that they are likely to encounter in their working lives in practical, scenario-based situations.
To this end, the assessment for the November 2019 examination covered the
following topics:
• Accounting concepts and frameworks • Preparation of an extended trial balance
• Preparation of financial statements • Interpretation of financial statements
• Budgetary control • Introduction to decision making.
To achieve a good grade, it was important that candidates were able to succeed
at all these processes. Across the cohort, most candidates coped well with topics
involving calculations in general and on the preparation of a statement of financial
position of a company. It was the more descriptive and interpretative aspects of
the paper, those questions involving ‘explain’, ‘discuss’, and ‘evaluate’, that
differentiated candidates the most. In order to ensure the highest marks possible,
both centres and candidates should consider spending more time developing the
skills and knowledge required to answer this type of question.
The next section of this report will look at a range of questions and show examples
of candidates’ work. The section will explain how the candidate has performed and
give tips on how to improve. At the end of this report you will find a summary that
gives some recommendations to centres to help improve candidate performance.
It is also strongly recommended that this report is used in conjunction with the
mark scheme.
4 LCCI ASE20104, November 2019
Question 1
Candidates scored above average marks on this question. This question was based
on the preparation of a statement of profit or loss for a limited company, with a
`state’ question on minimum amount of share capital and number of directors for
a public limited company.
The majority of candidates struggled to state the minimum amount of share capital
and number of directors for a public limited company as they either did not
attempt this part or stated the wrong amount for share capital and the wrong
number for directors.
The majority of candidates were able to prepare the statement of profit or loss to
a very high standard by showing the working notes on cost of sales, administrative
expenses and distribution costs with labels.
A good answer for part (b) is shown below.
5 LCCI ASE20104, November 2019
Examiner Comments
This is an excellent example for preparing the financial statements
for a limited company by showing the notes with narratives/labels
and clear cross referenced.
Examiner Tips
It is important that candidates practice the correct company
format for financial statements, as these are assessed
regularly, to know the correct terminology used in a statement
of profit or loss such as profit from operations and profit for the
year.
A decrease on allowance for doubtful debts must be deducted to
calculate the final figure for administrative expenses.
6 LCCI ASE20104, November 2019
Question 2
Candidates scored below average marks on this question. This question was based
on completion of the adjustment columns of the extended trial balance, impact of
the correction of the errors provided on profit for the year and a ‘state’ question
on the name of the other columns of the extended trial balance.
The majority of candidates completed the adjustment columns of the extended
trial balance correctly to a reasonable standard. The main mistakes were not
adjusting the closing inventory correctly due to damaged goods and comparing it
with the net realisable value, which was only 50% of the normal selling price, and
correction of disposal proceeds entry as the amount was recorded in the sales day
book and the amount being still outstanding.
The majority of candidates were able to state the two other columns of the
extended trial balance correctly, but a few candidates demonstrated a lack of
understanding of the extended trial balance as their responses included the name
of the ledger accounts rather than the columns. Candidates from a few centres
were clearly guessing and some adopted a strategy of putting either ticks
randomly or all ticks in one column.
A good answer for part (a) is shown below.
7 LCCI ASE20104, November 2019
8 LCCI ASE20104, November 2019
Examiner Comments
All entries were recorded correctly except disposal proceeds being
recorded in the sales day book. The candidate credited the
disposal account with the difference between the balance provided
on the disposal account and disposal proceeds rather than
recording the disposal proceeds in this account by crediting it and
removing it from revenue.
Examiner Tips
The totals of the adjustment columns of the extended trial
balance must balance to ensure that all the entries are completed
using the double entry rule.
Candidates must understand the revenue and capital expenditure
to understand the items affecting the profit for the year.
Revenue expenditure on the debit side of the adjustment column
will decrease the profit for the year and on the credit side will
increase the profit for the year.
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Question 3
Candidates scored above average marks on this question. This question was based
on the preparation of the statement of cash flows for a company along with two
`state’ questions on benefits of the change in cash and cash equivalents and
identification of distributable and non-distributable reserves and an `explain’
question on creation of share premium.
The majority of candidates were able to prepare the statement to reconcile the
profit for the year to net cash from operating activities and the statement of cash
flows to a required standard. Candidates from a few centres still struggle with the
correct terminology used for the statement of cash flows such as net
increase/decrease in cash and cash equivalents, net cash used /from investing or
financing activities. The main mistakes related to the preparation of the statement
of cash flows as candidates did miss out the revaluation for land to calculate the
acquisition of the land and buildings and did not show the issue of the shares
correctly. The majority of candidates just took the difference of the opening and
closing balances of the share capital and share premium without recognising that
there was bonus issue during the year. This demonstrates a lack of understanding
of the purpose of preparing the statement of cash flows and of not including the
short-term investment in the cash and cash equivalents at the year end as these
were included in the investing activities.
The majority of candidates struggled to state the two benefits of the change in
cash and cash equivalents as they just stated that there is no overdraft or loan,
but without stating the benefit of not having an overdraft as the positive cash and
cash equivalent was already provided, so it was just stating the fact.
The majority of candidates struggled to explain one reason for share premium.
Where they tried, they were only able to identify the share premium being a
difference between the issue price and nominal value of the shares but were
unable to develop it further to score the second mark.
The majority of candidates were able to identify the distributable and non-
distributable reserves correctly but again candidates from a few centres were
clearly guessing by putting one tick as distributable and one for non-distributable
reserve.
A good answer for part (b) is shown below.
10 LCCI ASE20104, November 2019
Examiner Comments
Candidate recorded the short-term investment in the investing
activities, and hence lost a mark for not having the cash and cash
equivalents correct at the year end.
Examiner Tips
It is important that candidates practice using the correct
company format along with correct labels for financial
statements as these are assessed regularly.
Short term investments are treated as cash and cash
equivalents, hence not included in the investing activities.
11 LCCI ASE20104, November 2019
Question 4
Candidates scored above average marks on this question. This question was based
on calculation of the capital investment appraisal methods starting with accounting
rate of return and net present value, calculation of break-even point and
evaluation to choose the purchase of a machine.
The majority of candidates were able to calculate the accounting rate of return
and net present value correctly. The main mistakes were not calculating the
average profit for accounting rate of return and for net present value, not adding
back depreciation to calculate the net cash flows for each year, not adjusting the
repairs for the last two years and not including the residual value for the net cash
inflows for the last year.
The majority of candidates struggled to evaluate whether to purchase machine A
or B as they either stated the facts provided, such as accounting rate of
return(ARR) or net present value(NPV) or cost of one is either higher or lower than
the other, without analysing it. This required the possible impact on the business
or the reason for the difference between both machines.
The majority of candidates were able to calculate the break-even point correctly.
The main mistake was not rounding up the number of the units as their answer
stated the units in decimals.
A good answer for parts (a)(i), (a)(ii) and (c) is shown below.
12 LCCI ASE20104, November 2019
13 LCCI ASE20104, November 2019
Examiner Comments
The candidate used the correct formula for accounting rate of
return but lost one mark as the average investment was calculated
incorrectly.
The candidate used the correct method for net present value but
lost two marks for not adjusting the repairs cost for year 3 and 4.
The candidate calculated contribution incorrectly for part c as this
is the variable cost, as the contribution per unit is the difference
between the selling price per unit and variable cost per unit.
Candidate scored the final of mark as they rounded up the number
of units correctly.
Examiner Tips
To show the breakeven units correctly the figure must be
rounded up as you cannot sell a unit as a fraction. Normal
mathematical rule does not apply.
14 LCCI ASE20104, November 2019
Question 5
Candidates scored average marks on this question. This question was based on
the preparation of the trade receivables budget and calculation of the total
receipts, along with written questions on stating the name of the other two
budgets, explanation on one benefit of cash sales and discussion on offering cash
discount to customers.
The majority of candidates struggled to prepare the trade receivables budget for
the three months as they either struggled to work out the opening balance, as two
types of the credit terms were provided, or where they calculated the receipts
correctly these were not shown after discount allowed.
The majority of candidates struggled to calculate the total receipts for each of the
months. Despite having the correct cash sales figures they did not use the receipts
from the trade receivables budget correctly. They either used the closing balance
or added the discount allowed figures to the receipts from trade receivables to
record the figures for each of the months.
The majority of candidates struggled to explain one benefit of introducing cash
sales. Where they tried they were able to identify only that the cash will be
received immediately, but were unable to develop it further to score the second
mark.
The majority of candidates were able to state the name of the two budgets
correctly, as expected.
The majority of candidates were able to form a decision relating to offering a cash
discount by discussing the impact on the profitability and liquidity.
A good answer for parts (a) and (b) is shown below.
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16 LCCI ASE20104, November 2019
Examiner Comments
The candidate did not calculate the correct opening balance for
trade receivables, receipts for the first two months and discount
allowed for the month of November, and hence lost four marks.
Candidate did use the receipt figures from the trade receivables
budget correctly in part b to calculate the total receipts by adding
to the correct cash sales figures for each of the respective months,
hence scored full marks for part b.
Examiner Tips
The receipts in the trade receivables budget are shown net of
discount allowed.
17 LCCI ASE20104, November 2019
Paper Summary
Based on their performance on this paper, candidates are offered the following
advice.
• Practice preparing ledger accounts with correct labels and bringing the
balances down as required. • Practice preparing financial statements with correct labels and showing the
subtotals with labels, as appropriate, by using the IAS terminology.
• Practice not only numerical questions but also understand the theory to be able to answer the ‘explain’ questions.
• Practise ‘discuss’ questions by providing the comparative statements for both sides.
• Practice how to analyse the results from the information provided by giving
the reasons or considering what impact these will have on the business currently or in future.
Please visit Pearson’s website for various resources to support candidates’
learning:
www.lcci.org.uk
Grade Boundaries
The grade boundaries for this paper can be found on Pearson’s website:
http://qualifications.pearson.com/en/support/support-topics/results-
certification/grade-boundaries.html