Pearson LCCI

Certificate in Financial
Accounting (VRQ)
Level 3
(ASE20097)

Examiners’ Report
December 2018

1 LCCI Certificate in Financial Accounting ASE20097 Level 3

LCCI Qualifications
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December 2018
Publication code: 63244_ER
All the material in this publication is copyright
© Pearson Education Ltd 2018

1 LCCI Certificate in Financial Accounting ASE20097

Introduction
Pearson (LCCI) redeveloped Level 3 Certificate in Financial Accounting (VRQ)
(ASE20097) as a part of the Finance and Quantitative suite of qualifications from
Level 1 to Level 4.

This revised qualification gives candidates an overview of the fundamental

accounting principles and concepts that underlie all financial accounting.
Candidates are introduced to topic areas they are likely to encounter in their
working lives in practical, scenario based situations.

The qualification has been developed with a view to allow progression on to the
Pearson LCCI Level 4 Certificate in Financial Accounting (VRQ), which introduces
candidates to advanced topic areas in financial accounting.

The assessment is out of 100 marks comprising of a total of 5 questions. All the
questions are compulsory.

This assessment covered these topics:

• The purpose of maintaining financial records
• Recording financial transactions
• Balancing accounts and trial balance
• The purpose of the extended trial balance
• Produce financial statements of a sole trader and partnership
• Introduction to interpretation of financial statements

Candidates performed very well on the completion of adjustments columns of an

extended trial balance, preparation of statement of profit or loss, partnership
appropriation account and on preparation of statement of cash flows but they did
struggle on written questions such as explain, discuss and evaluate.

2 LCCI Certificate in Financial Accounting ASE20097 Level 3

Question 1
A majority of the candidates scored average marks on this question.

Part (a) A majority of the candidates were unable to identify the relevant financial
statement according to the interest and stakeholders provided to them. Those
candidates who answered this question correctly were able to identify only two
financial statements correctly.

Part (b)(i) A majority of the candidates were unable to prepare the agency
commission account correctly as they treated it as an expense rather than revenue
account hence recorded the items on the wrong side and struggled with using
correct labels as well. Those candidates who recorded the amount on correct side
ignored the irrecoverable debts entry completely.

Part (b)(i) A majority of the candidates were able to prepare the general expenses
account correctly.

Part (c) A majority of the candidates were able to prepare the statement of profit
or loss correctly. The main mistakes were not accounting the petty expenses
correctly.

Part (d) A majority of the candidates were able to identify the accounting concept
applied correctly for the irrecoverable debts.

Examiner Comments
If there are no accruals or prepayments for an income or an
expense the balancing figure is transferred to the statement of
profit or loss.

Ledger accounts must have date columns and the balance must
be brought down after balancing the ledger account.

Examiner Tip
Candidates must establish whether the ledger account is an
expense or income account to record the entries on the correct
side.

3 LCCI Certificate in Financial Accounting ASE20097 Level 3

Question 2
A majority of candidates scored average marks on this question.

Part (a) A majority of the candidates were able to state two errors not identified
by preparing the trial balance. The main mistake was not stating the ‘complete
reversal’ error correctly as candidates just stated ‘reversal’.

Part (b)(i) A majority of the candidates were unable to calculate the closing
inventory correctly. The main mistakes were not including the inventory valuation
provided, showing only the adjustments, or the adjustments were not dealt with
correctly by applying the rule, cost or net realisable value (whichever is lower).

Part (b)(ii) A majority of the candidates only stated the adjustment required for
the office expenses rather than calculating the correct amount for the office
expenses after the adjustment.

Part (c) A majority of the candidates completed the adjustment columns of the
extended trial balance correctly. The main mistakes were not accounting the
adjustment for the inventory and office expenses correctly.

Part (d) A majority of the candidates stated the generic explanation of the accruals
concept rather than stating why the adjustment for office expenses was needed.
Where candidates tried to relate it with scenario, they only stated that non-
adjustment will affect the profit rather than being specific that the profit will be
understated, and the related justification/reasoning was missing in most of the
cases.

Examiner Comments
Candidates must read the question carefully to answer it
correctly rather than assume that it will be the same as previous
session.

Examiner Tip
For explain questions, identify your point and provide detail to
further develop the answer.

4 LCCI Certificate in Financial Accounting ASE20097 Level 3

Question 3
A majority of the candidates scored average marks on this question.

Part (a) This part was not answered very well at all. A majority of the candidates
just stated that goodwill is an intangible asset, which is a description of goodwill
and was not required in the question.

Part (b) A majority of the candidates were unable to prepare the goodwill account
as expected with correct labels and this topic is covered at lower level as well.
Candidates from a few centres either recorded the amounts on the wrong side or
recorded the same amount of goodwill on both sides without split or had split
according to the correct ratio in the details column but not shown in the amount
column. A few candidates had three amounts columns to show the split of the
goodwill on the credit side and two amounts columns on the debit side, which
demonstrates a lack of understanding of the ledger account relating to goodwill.

Part (c) A majority of the candidates prepared the capital account correctly.
Candidates from some centres combined current accounts into capital accounts.

Part (d)(i) A majority of the candidates were unable to correctly calculate the
interest on capital according to the information provided - that the interest on
capital was on balances on both 1 October and 1 July. The candidates calculated
it on the opening balances on 1 October only.

Part (d)(ii) A majority of the candidates were able to prepare the appropriation
account correctly by showing the split at the start of the year. Candidates from a
few centres did not show the total column at all.

Part (e) A majority of the candidates were unable to provide the comparative
statement for a partnership and private limited company with which to form a
decision on whether to continue as a partnership or convert to a private limited
company. Candidates who did try either stated the features of both forms of the
organisations separately or just stated the features of one form of organisation.

Examiner Comments
When preparing appropriation accounts, include the split at the
start of the year along with a total column where the change in
the partnership happens during the year.

Examiner Tip
Goodwill accounts must have only one column for the amount
on the debit side and one column on the credit side. Figures
must be shown on the debit side when using the old profit-
sharing ratio and on the credit side when using the new profit-
sharing ratio, with details as partner’s capital account.

5 LCCI Certificate in Financial Accounting ASE20097 Level 3

Question 4
A majority of the candidates scored below average marks on this question.

Part (a) A majority of the candidates struggled to balance the statement of

financial position even though there were eight figures to be easily calculated from
the provided information and four marks related to the subtotals and totals etc.

Part (b) A majority of the candidates were unable to state two reasons for the
decrease in the allowance for doubtful debts as they stated the reasons for having
the allowance for doubtful debts by relating it to the prudence concept. This
indicates rota learning rather than an understanding of the theory behind the
accounting terms and procedures.

Part (c) Only a few candidates answered this question. Their responses indicate
that the candidates did not understand the question as they stated the uses of the
calculator rather than how it should be recorded by relating to the materiality
concept.

Examiner Comments

Candidates must show the subtotals for each section with labels
in financial statements.

Examiner Tip

Write the format for the financial statements and then record
the figures provided to work out the missing figures according
to the information provided.

6 LCCI Certificate in Financial Accounting ASE20097 Level 3

Question 5
A majority of the candidates scored average marks on this question.

Part (a) A majority of the candidates were able to calculate the cost of the land
purchased correctly. The main mistakes were not accounting the carrying value
and depreciation charge on the disposal correctly.

Part (b) A majority of the candidates prepared the statement of the cash flows to
the required standard. The main mistakes were not calculating the net cash from
operating activities, issue of shares due to bonus issue and dividend paid.

Part (c)(i) A majority of the candidates struggled to analyse the return on capital
employed and asset turnover ratio, but the analysis of the inventory turnover and
quick ratio was better compared to the previous series. A majority of the
candidates treated the asset turnover ratio as inventory turnover ratio. Candidates
from a few centres stated ‘any supported evaluation’ as an overall evaluation as
published in the MSs rather than evaluating the performance of the businesses’
provided.

Part (c)(ii) A majority of the candidates were able to state the two other ratios
correctly to evaluate the performance of the business.

Examiner Comments

For evaluate question the candidates are expected to comment on

an overall evaluation such in this question ‘performance of
business X is better than Business Y’ and must not state ‘any
supported decision’ as per MS.

Examiner Tip

Candidates must state the increase and decrease in the net cash
and cash equivalents during the year correctly by working out
the figure from the cash and cash equivalents at the start and at
the end of the year.

7 LCCI Certificate in Financial Accounting ASE20097 Level 3

See Examples for candidates’ responses to reflect the
presentation.

Q2c

Q3d(i)

8 LCCI Certificate in Financial Accounting ASE20097 Level 3

Q5a

Q5b

9 LCCI Certificate in Financial Accounting ASE20097 Level 3

Paper Summary
Candidates performed very well on the completion of adjustments columns of an
extended trial balance, preparation of statement of profit or loss, partnership
appropriation account and on preparation of statement of cash flows but they did
struggle on written questions such as explain, discuss and evaluate.

The candidates will benefit from the following:

• Candidates must learn and practice the International Accounting Standards

(IAS) terminology and formats.

• Candidates must show their workings for any figure they calculate, with
reference numbers such as W/Note1, W/Note2 etc.

• Candidates must use the labels for the figures used in the
Notes/workings.

• Practice journal entries for the adjustments for extended trial balance.

• Practice preparing ledger accounts with correct labels and bringing the
balances down.

• Practice preparing financial statements with correct labels and showing the
sub totals with labels as appropriate by using the IAS terminology.

• Do not just practice numerical questions but also understand the theory to
be able to answer the explain questions.

• Practice discuss question by providing the comparative statements for both

sides.

• Practice analysis of results from the information provided with a view to

answering the issue in the question, i.e. what impact it will have on the
business currently or in future.

• Visit Pearson website for various resources to support candidates’ learning

https://qualifications.pearson.com/en/qualifications/lcci/financial-and-
quantitative/financial-accounting-sept-2015.coursematerials.html

Grade Boundaries
Grade boundaries for this, and all other papers, can be found on the website on
this link:

http://qualifications.pearson.com/en/support/support-
topics/results-certification/grade-boundaries.html

10 LCCI Certificate in Financial Accounting ASE20097 Level 3