Mark Scheme

September 2018
FINAL

Pearson LCCI
Level 3 Certificate in Accounting
ASE20104
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ASE20104
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General Marking Guidance

• All candidates must receive the same treatment. Examiners must

mark the first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be

rewarded for what they have shown they can do rather than penalised
for omissions.

• Examiners should mark according to the mark scheme not according to

their perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme

should be used appropriately.

• All the marks on the mark scheme are designed to be awarded.

Examiners should always award full marks if deserved, i.e. if the
answer matches the mark scheme. Examiners should also be prepared
to award zero marks if the candidate’s response is not worthy of credit
according to the mark scheme.

• Where some judgement is required, mark schemes will provide the

principles by which marks will be awarded and exemplification may be
limited.

• When examiners are in doubt regarding the application of the mark

scheme to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has

replaced it with an alternative response.

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Abbreviation

of Own Figure rule

Accuracy marks can be awarded where the candidates’ answer does not
match the mark scheme, though is accurate based on their valid method.

cao Correct Answer Only rule

Accuracy marks will only be awarded if the candidates’ answer is
correct, and in line with the mark scheme.

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4 6-18
Question Answer (AO2) 10 Mark
Number
1(a) Award 1 mark for each correct figure against correct label as
indicated.

Flintoff Ltd
Statement of changes in equity for the year ended 31 January 2018

Share Share Retained Total

capital premium earnings
$ $ $ $
Balance at 1 February 100 000 25 000 64 000 189 000
2017

Bonus issue 20 000 (20 000)

(1) (1)
Rights issue 15 000 4 500 19 500
(1) (1)
Dividends (9 800) (9 800)
(1)
Profit for the year 96 000 96 000
(1)
Balance at 31 January 135 000 9 500 150 200 294 700
2018 (1of) (1of) (1of) (1of)

(10)

Question Answer (AO1) 3 Mark

Number
1(b) Award 1 mark for each correct answer.

Operating activities (1)

Investing activities (1)
Financing activities (1)
(3)

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Question Answer (AO1) 6 Mark
Number
1 (c) Award 1 mark for each correct answer.

Stakeholder Interest

Customers To ensure continuity of supply of goods and

services.

Bank/ Providers of
To assess a loan application (1).
external finance

Competitors (1)
To assess the performance of a rival business.

To confirm the security of their

Employees
employment/bonus/pay rise (1).

Government (1) To ensure the correct amount of tax is paid.

To identify the return/dividend on their investment

Investors
(1).

To ensure that they will receive payment for goods

Suppliers (1)
supplied.

Accept any other appropriate responses.

(6)
Additional guidance
Accept Trade Payables instead of Suppliers.

TOTAL FOR QUESTION 1 = 19 MARKS

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Question AO2 (5) Mark
Number
2(a)(i) Award 1 mark for each correct figure as indicated.
Award 1 mark for all correct labels and dates.

Trade Receivables Ledger Control Account

Date Details $ Date Details $

1 May Balance 21 600 30 April Cash 96 325
2017 b/d 2018 book (1)
30 April Sales day 103 895 Returns 4 630
2018 book (1of) inwards (1)
day book
Journal 840
(1)
Balance 23 700
c/d
125 495 125 495
1 May Balance 23 700
2018 b/d (5)

Question AO2 (3) Mark

Number
2(a)(ii) Award 1 mark for each correct figure as indicated.
Award 1 mark for all correct labels and dates.

Trade Payables Ledger Control Account

Date Details $ Date Details $

30 April Cash 71 900 1 May Balance 17 950
2018 book (1) 2017 b/d
Balance 19 370 30 April Purchases 73 320
c/d 2018 day book (1of)
91 270 91 270
1 May Balance 19 370
2018 b/d

(3)

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Question Answer (AO2) 11 Mark
Number
2(b) Award one mark for each correct figure with understandable
label as indicated.

Edwina
Statement of profit or loss for the year ended 30 April 2018

$ $
Revenue 103 895
Returns inwards (4 630)
99 265 (1of)
Cost of sales
Opening inventory 26 350
Purchases 73 320
Closing inventory (31 580)
(68 090) (1of)
Gross profit 31 175 (1of)
Rental income W1 5 250 (2)
36 425
Expenses
Electricity W2 2 550 (2)
Allowance for doubtful 42 (2)
debts W3
General expenses 8 500
Irrecoverable debts 840
(11 932)
Profit for the year 24 493 (2/1of)

W1
$5 000 - $500 (1) + $750 (1) = $5 250

W2
$ 2 600 - $200 (1) + $150 (1) = $2 550

W3
$474 - $432 (1) = $42 (1)
(11)

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Question Answer AO1 (1) AO3 2
Number Mark
2(c) Award 1 mark for identification of the concept and up to 2
marks for justification/reasoning.

Concept
Prudence (1)

Explanation
An allowance for doubtful debts is an estimate of the amount of
accounts receivable that will not be paid by customers (1), therefore
applying the prudence concept ensures that profits/current assets are
not overstated. (1)

Accept any other appropriate responses.

(3)
Additional guidance
Accept Accruals concept with relevant explanation.

TOTAL FOR QUESTION 2 = 22 MARKS

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Question Answer AO2 (18) Mark
Number
3(a) Award marks for correct figures with understandable labels as
indicated.
Anekka Ltd
Statement of financial position at 31 July 2018
Assets $
Non-current assets
Property, plant and equipment W1 2 165 920 (3)
Current assets
Inventory 353 180 (1)
Trade receivables 530 000 (1)
883 180 (1of)
Total assets 3 049 100
Equity and liabilities
Equity
Share capital (ordinary shares of $1 each) 500 000 (1)
Share premium 250 000
Revaluation reserve 322 800 (1)
General reserve 85 000 (1)
Retained earnings W2 910 750 (4of)
Total equity 2 068 550 (1of)
Non-current liabilities
6% bank loan 400 000 (1)
Current liabilities
Cash and cash equivalents 125 450
Trade and other payables 415 450 (1)
Tax payable 39 650 (1)
580 550
Total liabilities 980 550 (1of)
Total equity and liabilities 3 049 100 (1of)
W1 $
Land and buildings 2 250 000
Accumulated depreciation (550 000)
1 700 000 (1)
Machinery 1 450 000
Accumulated depreciation (984 080)
465 920 (1)
Total 2 165 920 (1of)

W2
$
Retained earnings at 1 August 797 500
Profit for the year 198 250 (1) or 995 750 (1)

Dividend paid (50 000) (1)

Transfer to general reserve (35 000) (1)
Retained earnings at 31 July 910 750 (1of) (18)
Additional guidance
Only award of mark if total assets and total equity and liabilities are equal.

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Question Answer (AO2) 1 Mark
Number
3(b)(i) Award 1 mark as indicated.

1.48 times (1of based on turnover/net assets)

Or

1.20 times (1of based on turnover/total assets)

(1)
Additional guidance
No specific layout required.

Question Answer (AO2) 1 Mark

Number
3(b)(ii) Award 1 mark as indicated.

0.91:1 (1of based on (current assets – inventory)/

current liabilities)
(1)
Additional guidance
No specific layout required.

Question Answer (AO2) 1 Mark

Number
3(b)(iii) Award 1 mark as indicated.

53 days (1 based on (Net trade receivables/credit

sales) x 365 days)

Or
58 days (1 based on (trade receivables/credit
sales) x 365 days)
(1)
Additional guidance
No specific layout required.

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 ASE20104
12 6-18
Question AO2 (11) Mark
Number
4(a) Award 1 mark for each correct row with understandable labels as indicated.

Sunil
Cash budget for the six-month period ending 31 March 2019

Oct Nov Dec Jan Feb Mar

2018 2018 2018 2019 2019 2019
$ $ $ $ $ $
Receipts
Sales 47 500 48 750 50 000 51 250 52 500 53 750 (1)
Equity 40 000 (1)
Total receipts 87 500 48 750 50 000 51 250 52 500 53 750
Payments
Direct material 18 500 19 000 19 500 20 000 20 500 21 000 (1)
Direct labour 7 600 7 800 8 000 8 200 8 400 8 600 (1)
Variable overheads 1 900 1 950 2 000 2 050 2 100 2 150 (1)
Fixed overheads 7 000 7 000 7 000 7 000 7 000 7 000 (1)
Selling and distribution 9 250 9 500 9 750 10 000 10 250 10 500 (1)
expenses
Machine 12 000 1 000 1 000 1 000 (1)
Drawings 5 000 5 000 5 000 5 500 5 500 5 500 (1)
Interest 133
Total payments 49 250 50 383 63 250 53 750 54 750 55 750
Net inflow /(outflow) 38 250 (1 633) (13 250) (2 500) (2 250) (2 000)
Opening balance (15 960) 22 290 20 657 7 407 4 907 2 657
Closing balance 22 290 20 657 7 407 4 907 2 657 657 (1of) (11)

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 OR:

Sunil
Cash budget for the six-month period ending 31 March 2019

Oct Nov Dec Jan Feb Mar

2018 2018 2018 2019 2019 2019
$ $ $ $ $ $
Receipts
Sales 47 500 48 750 50 000 51 250 52 500 53 750 (1)
Equity 40 000 (1)
Total receipts 87 500 48 750 50 000 51 250 52 500 53 750
Payments
Direct material 18 500 19 000 19 500 20 000 20 500 21 000 (1)
Direct labour 7 600 7 800 8 000 8 200 8 400 8 600 (1)
Variable overheads 1 900 1 950 2 000 2 050 2 100 2 150 (1)
Fixed overheads 7 000 7 000 6 800 6 800 6 800 6 800 (1)
Selling and distribution 9 250 9 500 9 750 10 000 10 250 10 500 (1)
expenses
Machine 12 000 1 000 1 000 1 000 (1)
Drawings 5 000 5 000 5 000 5 500 5 500 5 500 (1)
Interest 133
Total payments 49 250 50 383 63 050 53 550 54 550 55 550
Net inflow /(outflow) 38 250 (1 633) (13 050) (2 300) (2 050) (1 800)
Opening balance (15 960) 22 290 20 657 7 607 5 307 3 257
Closing balance 22 290 20 657 7 607 5 307 3 257 1 457 (1of)
(11)

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Question Answer AO2 (3)
Number Mark
4(b) Award marks as indicated.

4 800 units (3) W1

W1
($12 200 + $35 800) (1) = $48 000 / $10 (1) = 4 800 (1of)

(3)
Additional guidance
No specific layout required.
Correct answer only scores 3 marks.

Question Answer AO3 (4) AO5 (1) Mark

Number
4(c) Award up to 4 marks for discussion of the benefits/
limitations, with a maximum of 3 marks for each.
Award 1 mark for justified/supported decision.

Benefits

The cash budget enables a business to see whether there is a deficit

or surplus (1).

To enable a business to make arrangements to overcome deficit and

invest surplus (1).

Provides additional evidence to the audited reports to the providers

of external finance to obtain finance for future projects (1).

Limitations

Relies on estimates so may not be accurate. (1)

Must be used in conjunction with other budgets (1).

A cash budget does not include non-financial factors such as skill of

employees etc (1)

Any supported decision (1)

Accept any other appropriate responses. (5)

Total for Question 4 = 18 marks

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 Question Answer (AO3) 2
Number Mark
5 (a)(i) Award 1 mark for identification of an
advantage and 1 mark for linked
justification/reasoning.

Leasing will not have an adverse effect on cash

outflow (1) as you pay small amounts over a
period of time (1).

Accept any other appropriate responses. (2)

Question Answer (AO1) 2

Number Mark
5 (a)(ii) Award 1 mark for each correct point as
indicated up to a maximum of 2 marks.

• (Share) Capital
• Bank
• Cash
• Debentures
• Bank loan
• Hire purchase
• Trade-in allowance.
(2)

Question Answer (AO2) 6

Number Mark
5 (b) Award marks as indicated.

Year Net cash Discount Present

inflows factor at value
$ 8% $

0 (270 000) 1.000 (270 000)

(1)
1 120 000 0.926 111 120
(1)
2 120 000 0.857 102 840
(1)
3 120 000 0.794 95 280
(1)
4 120 000 0.735 88 200
(1)
Net present value 127 440
(1of)
(6)
Additional guidance
Correct answer only scores 6 marks.

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Question Answer AO2 (3)
Number Mark
5(c) Award marks as indicated.

25% (3)

$32 000 (1) / $128 000 (1) X 100% = 25% (1of)

Or

($96 000 / 3) (1) / ($256 000 / 2) (1) = 25% (1of)

(3)
Additional guidance
No specific layout required.
Correct answer only scores 3 marks.

Question Answer AO4 (4) AO5 (1)

Number Mark
5(d) Award 1 mark for each valid point of analysis up to a
maximum of 4 marks.
Award 1 mark for evaluation.
Evaluation mark can only be awarded if at least two methods
of capital investment appraisal are analysed.

Payback

Both machines recovered the investment during their useful life (1)
but M3 is more efficient at recovering the cost than M4 (1)

Net present value

M4 is better than M3 as it gives a positive net cash inflow (1) after

taking time value of money into account. (1).

Any supported evaluation (1)

Accept any other appropriate responses.

(5)

Total for Question 5 = 18 marks

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