Pearson LCCI

Certificate in Accounting
(VRQ)
Level 3
(ASE20104)

Examiners’ Report
December 2017
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Publication code: 54341_ER
© Pearson Education Ltd 2017

ASE20104
December 2017
Introduction
Pearson (LCCI) redeveloped the Level 3 Certificate in Accounting (VRQ)
(ASE20104) specification as a part of a Finance and Quantitative suite of
qualifications from Level 1 to Level 4.

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. Candidates are introduced to topic areas
they are likely to encounter in their working lives in practical, scenario-
based situations.

The qualification has been revised to allow candidates to progress to the

Pearson LCCI Level 4 Certificate in Financial Accounting (VRQ), which
extends and introduces new advanced topic areas in this field.

The assessment is out of 100 marks comprising a total of five compulsory

questions. All the questions are compulsory.

This assessment covered these topics:

 Accounting concepts and framework

 Recording financial transactions
 Preparation of an extended trial balance
 Preparation of financial statements
 Interpretation of financial statements
 Budgetary control
 Introduction to decision making.

Candidates performed very well on the preparation of statement of

financial position, adjustment columns of extended trial balance,
preparation of a cash budget and budgeted statement of profit or loss and
the calculation of net present value and accounting rate of return for
capital investment appraisal.

To progress to higher levels and to score high grades, candidates must

demonstrate the underpinning knowledge and understanding of
fundamentals by preparing for the exams according to the specification
and by combining the theory and practice, which will help them to answer
explain, discuss and evaluate questions expected at this level.
Question 1
The majority of candidates scored above average marks for this question.

Part (a) Candidates prepared the cash budget by showing the receipts
and payments to calculate the closing balance for each month. Main
mistakes were not splitting the receipts for cash sales and money
received from the trade receivables in the cash budget and not stating the
payment to the trade payables correctly with correct labels.

See below an example of (a).

Part (b) Candidates prepared the budgeted statement of profit or loss to a
required standard. Main mistakes were including the purchase of motor
vehicle in the purchases and not calculating the depreciation and bank
loan interest correctly.

See below an example of (b).

Part (c) The majority the candidates were able to state only one method
of funding rather than two methods of funding.

See below an example of (c).

Part (d) The majority of candidates were able to state three stakeholders
interested in the financial statements.

See below an example of (d).

Examiner Comments
Candidates must show the receipts for cash sales and money
received from the trade receivables separately in the cash
budget.

Examiner Tip
Cash budget is prepared on cash receipts and payment basis,
whereas the budgeted statement of profit or loss is prepared
on accrual basis.
Question 2
The majority of candidates scored average marks on this question.

Part (a) The majority of candidates were unable to calculate the adjusted
profit for the year after the adjustments relating to the inventory, interest
on bank loan and profit on disposal. They also included the retained
earnings with the appropriations for the year to calculate the closing
retained earnings, rather than just calculating the adjusted profit for the
year.

See below an example of (a).

Part (b) The majority of candidates were unable to prepare the statement
of financial position up to a required standard expected at this level. Main
mistakes were not accounting the revaluation of land and accumulated
depreciation on disposal and accounting the acquisition to calculate the
depreciation charge for the year, not updating the general reserve, not
showing the retained earnings after the appropriations and profit for the
year from the part (a) and subtotals for different sections of the
statement of financial position with labels.

See below an example of (b).

Examiner Comments

Candidates must read the question carefully to answer it

correctly.

Examiner Tip

The figures in financial statements must have labels and all

the figures must be supported with the accompanying
notes/workings with labels.
Question 3
The majority of candidates scored above average marks on this question.

Part (a) The majority of candidates were able to record the entries for the
transactions provided in the adjustment columns. Main mistakes were not
recording the cash sales, cash payments and entries relating to the
allowance for doubtful debts correctly.

See below an example of (a).

Part (b) The majority of candidates were able to state the name of the
accounting concept applied for creating the allowance for doubtful debts,
but they were unable to develop it further to relate it to the scenario as
the responses stated the generic definition of the prudence concept.

See below an example of (b).

Part (c) The majority of candidates stated the names of the inventory
valuation, except the first in first out, correctly. The main mistake was not
stating the weighted average cost method correctly.

See below an example of (c).

Examiner Comments
Explain questions must be developed further to score the
additional marks.

Examiner Tip
Check the total of the debit and column columns to ensure
that all the transitions are recorded according to the double
entry rule and show the total amount for debit or credit
entry if there is more than one transaction affecting a
particular account.
Question 4
The majority of candidates scored below average marks on this question.

Part (a) The majority of candidates were able to calculate the profit on
realisation for a partner. The main mistake was not treating the motor
vehicles and trade payables correctly.

See below an example of (a).

Part (b) The majority of candidates calculated the amount due to the
partner. Main mistakes were either not including the current account
balance or share of profit on realisation.

See below an example of (b).

Part(c)(i) The majority of candidates were unable to explain the one
disadvantage of being a shareholder compared to a partner. The majority
of candidates stated an advantage rather than a disadvantage.

Part (c)(ii) The majority of candidates were unable to explain the one
disadvantage of being a sole trader compared to a partner. The majority
of candidates stated an advantage rather than a disadvantage.

See below examples of (c)(ii).

Part (d) This was a state question for a difference between the
redeemable and irredeemable shares. 40% of candidates did not attempt
this question at all.

See below an example of (d).

Part (e) The majority of candidates were unable to evaluate the
performance of both businesses from the profitability and liquidity ratios
provided. The majority of candidates stated just the facts about whether
the ratios were higher or lower compared to each other, rather than
analysing the possible reasons for or impact of these ratios on the
business of being higher or lower than the other business.

Examiner Comments
Candidates must read the question carefully to answer it
correctly.

Examiner Tip
For all numerical questions there must be a label for a
figure. Where possible, try to calculate the figure by
preparing a ledger account with labels.
Question 5
The majority of candidates scored below average marks on this question.

Part (a)(i) The majority of candidates calculated the net present value
correctly. Few candidates stated the net present value as a negative
figure.

See below an example of (a)(i).

Part (a)(ii) Candidates struggled to calculate the payback period from the
cash flows provided.

See below an example of (a)(ii).

Part (a)(iii) The majority of candidates calculated the accounting rate of

return correctly by calculating the profit for the life of the project and by
using the correct formula and expressing it as a percentage.

See below an example of (a)(iii).

Part (a)(iv) The majority of candidates were able to state one advantage
of net present value correctly as compared to the payback period method
of capital investment appraisal.

See below an example of (a)(iv).

Part (b)(i) The majority of candidates were able to calculate the break-
even point in units.

See below an example of (b)(i).

Part (b)(ii) The majority of candidates were able to calculate the margin
of the safety in units.

See below an example of (b)(ii).

Part (c) Candidates were unable to justify their decision whether to accept
the order at a reduced price from a customer by relating the justification
to the marginal costing technique.

Examiner Comments
To get full marks on the discussion/evaluation/ written
questions, check the marks and have the same number of
points/arguments/justifications to make the decision.

Examiner Tip
Net present value is calculated by deducting the cost of
investment from the total of the present value of cash flows.
Candidates must learn the accounting rate of return formula.
Paper Summary

Candidates need to practise explain/discuss and evaluate questions.

Candidates will benefit from the following:

 Candidates must learn and practise using the International

Accounting Standards (IAS) terminology and formats to show
subtotal and totals including the labels for financial statements.
 Candidates must show their workings/notes with reference number
such as W1/Note1, W2/Note 2 etc.
 Candidates must use labels for the figures used in the workings.
 Candidates must learn and practise preparation of ledger accounts
with full details.
 Candidates must learn and practise preparation of all financial
statements with full details.
 Candidates must learn and practise preparation of all budgets with
full details.
 Candidates must practise analysing the financial information
according to the question requirement.
 Visit the Pearson website for various resources to support
candidates’ learning
https://qualifications.pearson.com/en/qualifications/lcci/financial-
and-quantitative/accounting-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