Pearson LCCI

Certificate in Accounting
(VRQ)
Level 3
(ASE20104)

Examiners’ Report
March 2018

1 LCCI Certificate in Accounting ASE20104

LCCI Qualifications
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March 2018
Publication code: ER57511A

All the material in this publication is copyright

© Pearson Education Ltd 2018

1 LCCI Certificate in Accounting ASE20104 Level 3

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.

This assessment covers 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 numerical questions such as preparation

of the statement of financial position for a limited company, budgeted
statement of profit or loss and budgeted statement of financial position,
adjustment columns of the extended trial balance, statement of cash flows,
and calculation of the accounting rate of return and net present value for
capital investment appraisal. The performance on written questions was
very poor in this series.

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

demonstrate underpinning knowledge and understanding of fundamentals
by preparing for the exams according to the specification and by combining
the theory and practice. This will help them to answer explain, discuss and
evaluate question expected at this level.

2 LCCI Certificate in Accounting ASE20104

Question 1
The majority of candidates scored above average marks for this question.

Part (a) Candidates were able to state two stakeholders interested in the
financial statements of a business.

See below an example of (a).

Part (b) Candidates were able to state the two ratios used to measure the
liquidity of a business.

See below an example of (b).

Part (c) The majority of candidates were able to prepare the statement of
financial position as expected for a company format. Candidates
experienced difficulties when dealing with the calculation of the retained
earnings, revaluation reserve and general reserve.

See below an example of (c.)

3 LCCI Certificate in Accounting ASE20104

4 LCCI Certificate in Accounting ASE20104
 Examiner Comments
The financial statements of a company must be prepared in a
company format.

Candidates must show the figures in detail and subtotals should

be included in the financial statements with labels, as
appropriate, using the IAS terminology.

All calculations must be supported by workings/notes.

Examiner Tip
For a company statement of financial position, the trade and
other receivables or trade and other payables must be shown
as one figure with the workings in the notes/workings.

Visit the LCCI website link shown in the paper summary for
the correct formats for the statements.

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

Part (a) The majority of candidates were able to prepare the budgeted
statement of profit or loss for the period requested. Main mistakes related
to the rent, general expenses and depreciation expenses. Some candidates
from a few centres recorded the wrong figures for the revenue and
purchases despite the fact that these were provided.

See below an example of (a).

5 LCCI Certificate in Accounting ASE20104

Part (b) The majority of candidates were able to identify the correct
accounting concept for the treatment of the rent charge for the period
provided in the question. Most candidates were unable to provide an
explanation of the concept by relating this to the scenario of rent charge
that had been provided; where this had been attempted, the explanation
was generic, relating to the concept only and not the scenario.

Part (c) Candidates were unable to prepare the budgeted statement of the
financial position as expected. Main mistakes related to not accounting the
accumulated depreciation, drawings and trade payables correctly.

See below an example of (c).

6 LCCI Certificate in Accounting ASE20104

Part (d)(i) The majority of candidates were unable to explain the purpose
of preparing a cash budget; where candidates attempted this question their
response was to identify the purpose but they did not develop it further.

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

Part (d)(ii) The majority of candidates were able to state the name of the
two other budgets.

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

7 LCCI Certificate in Accounting ASE20104

 Examiner Comments
Expenses for budgeted profit or loss must be recorded on an
accrual basis, hence expenses need to be adjusted for the
prepayments etc.

Examiner Tip
Budgeted financial statements are prepared for the period
rather than according to each month in the period until stated
otherwise, but the budgets are prepared for each month in
columnar format.

Question 3
The majority of candidates scored below average marks on this question.

Part (a) The majority of candidates struggled to calculate the depreciation

charge for the year. Main mistakes were not accounting correctly for the
cost and accumulated depreciation of the delivery vehicle disposed of,
hence calculating the carrying value incorrectly to calculate the depreciation
charge for the year.

See below an example of (a).

8 LCCI Certificate in Accounting ASE20104

Part (b) The majority of candidates were unable to complete the adjustment
columns of the extended trial balance for the adjustments provided,
including the depreciation charge and the delivery vehicle disposed of, as
some transactions relating to disposal were already recorded.

See below an example of (b).

Part (c) The majority of candidates were unable to calculate the difference
in the loss on the motor vehicle disposed of; this was meant to be
completed by changing the method of depreciation from the reducing
balance method to the straight line method. The main mistake was either
calculating the revised carrying value for all the vehicles, or simply
calculating the loss by using only one method, which demonstrated a lack
of understanding of the requirement of the question.

See below an example of (c).

9 LCCI Certificate in Accounting ASE20104

Part (d) The majority of candidates were unable to identify and explain the
relevant principle of professional ethics by applying their response to the
scenario provided.

See below an example of (d).

Part (e) The majority of candidates were able to state only one
disadvantage of trading as a private limited company. Some candidates
from a few centres stated the advantages rather than the disadvantage.

Examiner Comments
The financial statements of a company must be prepared in
a company format.
Financial statements must have subtotals with labels.

Examiner Tip
The figures in financial statements must have the labels
and all the figures must be supported with the
accompanying notes/workings with labels.

Visit the LCCI website link shown in the paper summary

for the correct formats for the statements.

10 LCCI Certificate in Accounting ASE20104

Question 4
The majority of candidates scored average marks on this question.

Part (a) The majority of candidates were able to calculate the profit for the
year. The main mistake was missing out the depreciation charge as it was
excluded from the fixed overheads for the year provided.

See below an example of (a).

Part (b) The majority of candidates were able to calculate the accounting
rate of return (ARR) correctly by using the correct formula for ARR. Some
candidates had problems calculating the average investment because they
did not consider the residual value after three years.

See below an example of (b).

11 LCCI Certificate in Accounting ASE20104

Part (c) The majority of candidates were able to calculate the net present
value by using the correct cash inflows. Some candidates from a few
centres added the present value of the net inflows to the initial investment
to calculate the net present value.

See below an example of (c).

Part (d) The majority of candidates were unable to calculate the payback
period correctly as they either did not account the cash inflows correctly or
because they rounded down the figure for months, which demonstrated
lack of understanding.

Part (e) The majority of candidates were unable to evaluate the results of
the three different methods of the capital investment appraisal obtained to
form a decision.

Part (f) The majority of candidates were unable to calculate the number of
the additional units to be sold to earn the required profit as most candidates
just calculated the number of the units required to sell to earn the required
/target profit.

See below examples of (f).

12 LCCI Certificate in Accounting ASE20104

 Examiner Comments
Payback period can be expressed either in years or
months/days but must be rounded up to the whole month
or day. It is incorrect to round down because this means
that the investment would not be fully recovered during
that period.

Candidates must express the accounting rate of return as a

percentage.

Examiner Tip
For payback period, the net cash flows are used.

For accounting rate of return, average profit and average

investment are used in the formula. For average
investment, if the residual value is provided it must be
added to the initial investment to find out the average.

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

Part (a) The majority of candidates were able to state the qualitative
characteristics of the financial reporting under the International
Accounting Standards Board (IASB) framework.

See below an example of (a).

13 LCCI Certificate in Accounting ASE20104

Part (b) The majority of candidates were able to calculate the value of the
plant and machinery purchased. The main mistake was not accounting the
value of the disposal correctly to calculate the purchase of plant and
machinery as the values provided for the opening and closing balances were
carrying values.

See below an example of (b).

Part (c) The majority of candidates were able to prepare the statement of
the cash flows as expected by showing the figures with correct labels and
subtotals with labels. Candidates from some centres did not record the
opening and closing balances of the cash and cash equivalents with the net
increase or decrease provided correctly, despite the fact that the opening
and closing balances were provided and net increase and decrease for the
year could be calculated.

See below an example of (c).

14 LCCI Certificate in Accounting ASE20104

15 LCCI Certificate in Accounting ASE20104
Part (d) The majority of candidates were unable to identify the name of the
financial statement to record the dividend paid, other than the statement
of cash flows.

See below an example of (d).

Part (e) The majority of candidates were unable to discuss the information
provided to form a decision as to whether the business will be able to
receive the loan or not.

Examiner Comments
To get full marks on discussion/evaluation/ written
questions, check the marks and have the same number of
points/arguments/justification to make the decision.
Do not just state the fact but state the impact on the
business from the information provided.

Examiner Tip
Cash and cash equivalents include the cash in hand and
cash at bank (bank overdraft). It also includes short-term
investments.

Cash and cash equivalents at the beginning and at the end

are always provided in the question and must be correct.

Net increase and decrease can be worked out from the

cash and cash equivalents at the beginning and at the end
and must be correct. If the net increase or decrease,
working through the statement, does not balance, then
you must go back and check your figures but do not
change the figures in investing or financing activities just
to balance this figure.
Visit the LCCI website link shown in the paper summary
for the correct formats for the statements.

16 LCCI Certificate in Accounting ASE20104

Paper Summary

Candidates performed very well on numerical question such as preparation

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

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 the labels for the figures used in the workings.

 Candidates must learn and prastice preparation of ledger accounts

with full details.

 Candidates must learn and practise preparation of all financial

statements with full details and in the proper format for the
company accounts.

 Candidates must learn and practise preparation of all budgets with

full details.

 Do not just practise numerical questions but also understand the

theory to be able to answer the explain questions.

 Practise discuss question by providing the comparative statements

for both sides.

 Practise how to analyse the results from the information provided to

consider reasons or the potential impact the results will have on the
business currently or in future.

 Visit Pearson website for various resources to support candidates

learning

17 LCCI Certificate in Accounting ASE20104

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

18 LCCI Certificate in Accounting ASE20104

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

19 LCCI Certificate in Accounting ASE20104