Pearson LCCI

Certificate in Accounting
(VRQ)
Level 3
(ASE20104)

Examiners’ Report
June 2017

1 LCCI Certificate in Accounting ASE20104

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June 2017
Publication code: 58454_ER

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© Pearson Education Ltd 2017

1 LCCI Certificate in Accounting ASE20104 Level 3

Introduction
Pearson (LCCI) redeveloped the new specification at Level 3 Certificate in
Accounting (VRQ) (ASE20104) as a part of 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 developed 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 of 100 marks comprising of a total of 5 questions. All

the questions are compulsory.

This assessment covered these topics:

• Accounting concepts and framework

• Recording financial transactions
• Preparation of financial statements
• Preparation of accounting records from incomplete records
• Interpretation of financial statements
• Budgetary control
• Introduction to decision making

Candidates performed very well on preparation of statement of profit or

loss, statement of financial position, calculation of breakeven point and
preparation of cash budget.

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

demonstrate the underpinning knowledge and understanding of
fundamentals by preparing according to the specification and by
combining the theory and practice.

2 LCCI Certificate in Accounting ASE20104

Question 1
Majority of the candidates scored high marks for this question.

Part (a) Majority of the candidates were unable to state the accounting
concept which is followed to prepare a statement of profit or loss. Majority
of the candidates either left it blank or stated accounting concepts rather
than standards or stated the other accounting standards, which were not
relevant to the question.

See below an example of (a)

Part (b) Majority of the candidates prepared the statement of profit or

loss in the company format by showing the workings/notes for the
administrative expenses and distribution costs. Main mistakes were
relating to depreciation on buildings or including the bank interest or tax
in the category of the administrative expenses or distribution costs. Few
candidates prepared the statement of profit or loss in the sole trader
format by listing the individual expenses.

See below an example of (b)

3 LCCI Certificate in Accounting ASE20104

 Examiner Comments
Candidates must read the question requirement carefully to
understand what is required to write as an answer.

Pay attention to the name of the business to establish the type

of the business, to use the correct format to prepare the
financial statements.

Examiner Tip
Must use the standard format to prepare the financial
statements for the companies.
Must show the workings/notes relating to the different types of
the expenses such as cost of sales/administrative
expenses/distribution costs/finance costs etc.

4 LCCI Certificate in Accounting ASE20104

Question 2
Majority of the candidates scored average marks on this question.

Part (a) Majority of the candidates stated two disadvantages of setting up

a business as a franchise. Few candidates stated the advantages rather
than disadvantages.

See below an example of (a)

Part (b) (i) Majority of the candidates calculated the breakeven point for
the year in revenue. Common answers included the use of
contribution/sales ratio. Main mistakes were either ignoring the
depreciation as part of the fixed cost or not multiplying the breakeven
units with sales price per unit to calculate the breakeven in revenue. Few
candidates worked out the fixed cost for three months but the question
required the breakeven for the year.

See below an example of (b) (i)

Part (b) (ii) Majority of the candidates scored full marks for this part as
they used the figures for fixed costs and contribution per unit from part
(b) (i).

5 LCCI Certificate in Accounting ASE20104

Part (c) Majority of the candidates scored above average marks for this
part. Few candidates made mistakes either by showing the receipts from
sales together or payments for purchases together rather than splitting
between cash and credit sales and purchases. Few candidates recorded
the bank loan as the opening balance rather than the receipts.

See below an example of (c)

6 LCCI Certificate in Accounting ASE20104

Part (d) Candidates were unable to state the name of two other budgets
the company could prepare. Majority of the candidates either stated the
name of the budgeted financial statements or the name of the
manufacturing business such as production or labour budgets.

See below an example of (d)

Part (e) Candidates were unable to state two changes which the company
could make to their plans to improve the cash flow. Majority of the
candidates just stated the generic answers to improve the cash flow
rather than the changes in the plans of the company provided in the
question.

See below an example of (e)

Examiner Comments
Candidates must record the bank loan as receipt not as
opening balance.
The cash budget format starts with receipts, payments and
net cash inflow or outflow, opening balance and finishes
with closing balance.

Examiner Tip

Candidates must record each and individual transaction

separately in the body of the cash budget such as receipts
from cash sales and receipts from trade receivables for
credit sales and same for purchases.
Depreciation, discount allowed/received and bad debts are
not recorded in the cash budget.

7 LCCI Certificate in Accounting ASE20104

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

Part (a) Candidates were unable to state two adjustments needed to

calculate the net cash from the operating activities. Majority of the
candidates either stated the change in working capital or non-cash items
without identifying these individually such as changes in inventory, trade
receivables, trade payables and depreciation etc. There were responses
such as disposal of non-current assets rather than profit or loss on
disposal.

See below an example of (a)

Part (b) Candidates prepared the statement of cash flows by showing the
workings for the acquisition and disposal of the property, plant and
equipment. Main mistakes were either not recording the sub totals with
labels or not having the correct figure for the cash and cash equivalents
at the beginning or at the end of the year.

See below an example of (b)

8 LCCI Certificate in Accounting ASE20104

Part (c) Candidates were unable to evaluate the information provided to
reach at the final decision. Candidates either recorded the increase or
decrease in the ratios and information provided without analysing these
for the possible reasons or impact on business.

See below an example of (c)

9 LCCI Certificate in Accounting ASE20104

 Examiner Comments
If figures are calculated then must enter these into the
main body of the financial statements.

Candidates must show the totals of each section/subsection

of the financial statements with a label.

Each figure if not from the question must be supported by

the workings.

Examiner Tip
Cash and cash equivalents at the beginning of the year and
at the year-end must be correct as these are always
provided in the question.

The net increase or decrease should be correct based on the

cash and cash equivalents at the beginning of the year and
at the year-end provided. If it does not match then
candidates must go back and check their answers for the
operating, investing and financing activities.

For evaluation questions candidates must support their

decision with valid reasons.

Question 4
Majority of the candidates scored average marks on this question.

Part (a) (i) Well answered by majority of the candidates. Main mistakes
were adding the cash purchases or ignoring the closing balance of the
trade payables.

See below an example of (a) (i)

10 LCCI Certificate in Accounting ASE20104

Part (a) (ii) Well answered by majority of the candidates. Main mistakes
were not adding the cash purchases or ignoring the closing inventory.
See below an example of (a) (ii)

Part (a) (iii) Majority of the candidates calculated the revenue by adding
the correct percentage to the cost of sales figure from part (a) (ii).

See below an example of (a) (iii)

Part (a) (iv) Candidates were unable to calculate the total drawings from
the provided information. Majority of the candidates just deducted the
expenses provided from the cash banked rather than deduct the cash and
expenses paid to calculate the cash drawings. Few candidates just listed
the money withdrawn from bank for personal use as total drawings.

See below an example of (a) (iv)

11 LCCI Certificate in Accounting ASE20104

Part (b) Candidates were unable to prepare the statement of financial
position form the data provided and by using the information from the
previous tasks such as drawings.

See below an example of (b)

12 LCCI Certificate in Accounting ASE20104

Part (c) Candidates were unable to provide the advice by referring to the
accounting standard. Majority of the candidates just stated that it is the
incorrect way of valuing the inventory which was already stated in the
question.

See below an example of (c)

Part (d) Majority of the candidates stated the accounting concepts used
for valuing the inventory correctly.

See below an example of (d)

Examiner Comments
Candidates must use the correct labels for the financial
statements and label for each of the sub totals such as total
equity and total liabilities if there are both non-current and
current liabilities.
Statement of financial position must balance, if it does not
balance then go back to identify the mistakes.

Examiner Tip
Candidates must identify the point and develop it further to
get full marks on explaining questions.

13 LCCI Certificate in Accounting ASE20104

Question 5
Majority of the candidates scored below average marks for this question.

Part (a) (i) Majority of candidates stated the difference between a share
and a debenture correctly

See below an example of (a) (i)

Part (a) (ii) Majority of candidates stated the difference between a right
issue and bonus issue.

See below an example of (a) (ii)

Part (b) (i) Majority of the candidates calculated the net cash flows for
each year correctly. Main mistake was to either deduct or add
depreciation from the revenue for each year.

See below an example of (b) (i)

Part (b) (ii) Majority of the candidates applied the discounting factors
correctly to calculate the net present value. Main mistake was to take the
cash inflows as the negative figure and initial investment as the positive
figure.

See below an example of (b) (ii)

14 LCCI Certificate in Accounting ASE20104

Part (b) (iii) Candidates were unable to calculate the accounting rate of
return as they either were unable to calculate the average investment or
average profit as majority of the candidates used the cash inflows from
part (b) (i).

See below an example of (b) (iii)

15 LCCI Certificate in Accounting ASE20104

Part (c) Candidates were unable to discuss both methods of the capital
investment appraisal to reach the final decision to decide which method is
most suitable for decision making. Majority of the candidates answered
whether the project should go ahead or not by using the answers from
the previous parts b (ii) and (iii).

See below an example of (c)

Examiner Comments
Candidate must use the columns to present the calculations
for the cash inflows or net present value to keep them on the
track.

Examiner Tip
Candidates must show the initial investment against the 0
year as a negative figure as this is outflow.

Candidate must read the question requirement carefully to

answer the question.

16 LCCI Certificate in Accounting ASE20104

Paper Summary

Candidates demonstrated clear understanding on preparation of financial

statements for all types of the organisations such as sole traders and
companies. Candidates need to practice on explain/ discuss and evaluate
question.
The candidates will benefit from the following:

• Candidates must learn and practice the definitions of the key terms
according to the accounting standards and framework stated in the
specification.
• Candidates must practice on analysing the financial information
according to the question requirement.
• Candidates must show their workings with reference number such
as W1, W2 etc.
• Candidates must learn and practice the International Accounting
Standards (IAS) terminology and formats to show subtotal and
totals including the labels for financial statements.

17 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

18 LCCI Certificate in Accounting ASE20104