Pearson LCCI

Certificate in Accounting
(VRQ)
Level 3
(ASE20104)

Examiners’ Report
July 2017

1 LCCI Certificate in Accounting ASE20104

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July 2017
Publication code: 58612_ER

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© Pearson Education Ltd 2017

1 LCCI Certificate in Accounting ASE20104 Level 3

Introduction
Pearson (LCCI) redeveloped the new Level 3 Certificate in Accounting
(VRQ) (ASE20104) specification as a part of the 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 of 100 marks comprising a total of five questions, all of

which 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 the statement of

financial position, preparation of the extended trial balance and
calculation of the number of units needed to achieve the required profit
by using the break-even point formula.

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 theory with practice.

2 LCCI Certificate in Accounting ASE20104

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

Part (a) Only well-prepared candidates scored high marks on this

question. The majority were unable to prepare the statement of financial
position from the information provided and adjust the figures where these
were either not recorded or were recorded incorrectly.

Candidates from a few centres prepared the statement of change in

equity for the items of the equity section and recorded one item as a total
figure for equity.

Other mistakes were either recording the current assets in total, missing
the revaluation reserve or adjustment of inventory from the retained
earnings and recording the bank loan as a current liability. Most
candidates also missed the labels for either the total assets or total equity
and liabilities.

3 LCCI Certificate in Accounting ASE20104

See below an example of (a)

4 LCCI Certificate in Accounting ASE20104

Part (b) The majority of candidates stated two accounting concepts to
prepare the financial statements. The main mistake was not recording the
name of the ‘going concern concept’ correctly, as candidates missed the
word ‘concern’.

See below an example of (b)

Part (c) The majority of candidates stated two qualitative characteristics

of financial reporting under the International Accounting Standards Board
Framework.

See below an example of (c)

Examiner Comments
Candidates must list individual current assets /liabilities and
equity items.

Examiner Tip
Must use the standard format to prepare the financial
statements for the companies.
Must show the workings/notes relating to the figures that are
adjusted.

5 LCCI Certificate in Accounting ASE20104

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

Part (a) Candidates completed the adjustment columns of the extended

trial balance with correct figures by using the labels provided,
demonstrating understanding of double entry bookkeeping. The main
mistake was either other payables and other receivables recorded the
other way around or recorded in the wrong row.

6 LCCI Certificate in Accounting ASE20104

See below an example of (a)

7 LCCI Certificate in Accounting ASE20104

Part (b)(i) The majority of candidates calculated the value of the closing
inventory at the year-end after adjusting the value for the damaged
inventory and comparing the cost or net realisable value according to the
accounting standards.

See below an example of (b)(i)

Part (b)(ii) Candidates were unable to describe the effect on gross profit
due to the change in inventory in the previous task (b)(i). Most
candidates either missed the effect on gross profit or stated it incorrectly.

See below an example of (b)(ii)

Part (b)(iii) The majority of candidates stated two methods used to

calculate the cost of inventory. The main mistake was either to state
periodic or perpetual as a method for its inventory cost calculation, which
is actually a procedure to maintain the inventory records rather than a
method to calculate the cost of inventory.

See below an example of (b)(iii)

8 LCCI Certificate in Accounting ASE20104

Part (c) The majority of candidates calculated the amount for the
adjustment required for the allowance for doubtful debts in the statement
of profit or loss.

See below an example of (c)

Examiner Comments

Candidates must read the labels carefully so that the entry

is recorded in the correct row/cell.

Examiner Tip

Candidates must total the adjustment columns to ensure

that the double entries have been completed for all the
transactions provided.

9 LCCI Certificate in Accounting ASE20104

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

Part (a)(i) Candidates were unable to calculate the interest on capital for
each partner correctly.

The main mistakes were not realising the change in the rate of the
interest during the year from 6% to 9% and the additional capital
introduced by a partner.

See below an example of (a)(i)

10 LCCI Certificate in Accounting ASE20104

Part (a)(ii) Candidates prepared the current accounts for all the partners
in columnar format by recording the opening balances correctly, as one of
the partners has a debit balance, and by recording the other entries, such
as the interest on capital, salaries, loss share and drawings, to calculate
the amount transferred to the capital account.

The main mistakes were either not having the correct label for the
amount transferred to the capital account and dates for all the
transactions or by recording the items that are not recorded in the current
accounts such as profit on realisation and assets taken by the partner on
dissolution and purchase consideration.

See below an example of (a)(ii)

11 LCCI Certificate in Accounting ASE20104

Part (b) Candidates were unable to calculate the profit on realisation for
each partner after it was taken over by a company. The main mistakes
were either recording the non-current assets at cost or not recording the
motor vehicle taken by a partner.

See below an example of (b)

12 LCCI Certificate in Accounting ASE20104

Part (c) Candidates were unable to calculate the amount due to the
partner on dissolution or sale of the partnership business. This may be
due to candidates not knowing how to work out the amount due to the
partner, as this required a capital account for the partner, and question
asked candidates to calculate rather than prepare the capital account on
dissolution of the partnership. Where candidates tried, they either
recorded the items relating to the current account or did not record the
share of the purchase consideration due to the partner or the motor
vehicle taken by the partner.

See below an example of (c)

Examiner Comments
When a business is dissolved the accounts are to be closed
hence candidates must not bring the balances down.
For ledger accounts the dates and the labels must be
correct.

Examiner Tip
For calculate questions, where possible, try to calculate the
figures by preparing the ledger accounts.

13 LCCI Certificate in Accounting ASE20104

Question 4
The majority of candidates did not perform very well on this question.

Part (a) Well answered by majority of the candidates, demonstrating clear

understanding of the differences between the financial accounting and
management accounting.

See below an example of (a)

Part (b) Candidates were unable to justify whether absorption or marginal

costing should be used for decision making. Candidates mainly discussed
either one type of the costing method or where they discussed both they
did not make the final decision. Very few candidates answered this
question.

See below an example of (b)

14 LCCI Certificate in Accounting ASE20104

Part (c) The majority of candidates calculated the required number of
footballs to be produced to achieve the desired profit.

See below an example of (c)

Part (d) Candidates calculated the total profit by selling the products at
two different prices, either by using the total cost approach or using the
marginal costing technique. The main mistakes were either treating the
sale at reduced price as a purchase or deducting the fixed overheads
twice due to sales at two different prices.

See below examples of (d)

15 LCCI Certificate in Accounting ASE20104

Part (e) Candidates were unable to evaluate whether option 1 or option 2
should be chosen to improve the profitability of the business in the
following year. Most candidates calculated the profit for both options or
just stated the facts provided in the information rather than analysing the
provided information.

Examiner Comments
Candidates must provide the workings for each figure
calculated.

Examiner Tip
For discuss questions, candidate must state points for both
scenarios provided in the stem or question and make the
final justification.
For evaluation questions, candidates must support their
decision after analysing the information provided and must
avoid stating the facts.

16 LCCI Certificate in Accounting ASE20104

Question 5
The majority of candidates did not perform very well on this question.

Part (a) The majority of candidates stated the two stakeholders interested
in the cash budget of the business correctly.

See below an example of (a)

Part (b) Candidates were unable to prepare the trade receivables budget
for three months. Most candidates recorded the cash received from the
sales as recorded in the cash budget. Where candidates tried, they either
had the wrong labels or did not have the label for the closing balance.
Some candidates just prepared the trade receivables control account
rather than a trade receivables budget showing figures for each month.

See below an example of (b)

17 LCCI Certificate in Accounting ASE20104

Part (c) Candidates were unable to prepare the trade payables budget for
three months. Where candidates tried, they either had the wrong labels or
did not have the label for the closing balance. Some candidates just
prepared the trade payables control account rather than a trade payables
budget showing figures for each month.

See below an example of (c)

Part (d) Candidates were unable to prepare the inventory budget for three
months. Where candidates tried, they either had the wrong labels or did
not have the label for the closing balance. Some candidates just prepared
this inventory budget by recording the receipts from the customers and
payments to suppliers rather than the purchase or sales.

See below an example of (d)

18 LCCI Certificate in Accounting ASE20104

Part (e) Candidates were unable to identify the reason for a difference
and develop it further for a linked justification for the reason for a
difference between the figures in the statement of profit or loss and cash
budget.

See below an example of (e)

Part (f) Candidates were unable to identify the reasons for the business to
be concerned about its cash flow in the first three months of the business.
Where candidates tried, they did not relate it to the scenario provided and
stated the generic answer, which was not relevant according to the
scenario.

See below an example of (f)

Examiner Comments
Candidates must not record the items in the budget that are
not relevant for that budget, such as cash sales in the trade
receivables budget.

Examiner Tip
Candidates must read the question requirement carefully to
answer the question as explain question responses must be
related to the stem or information provided in the question.

19 LCCI Certificate in Accounting ASE20104

Paper Summary

Candidates demonstrated understanding of the preparation of statements

of financial position, preparation of extended trial balances and break-
even points.
Candidates need to practise explain/ discuss and evaluate questions.

The candidates will benefit from the following:

• Candidates must learn and practise the preparation of ledger

accounts with full details.
• Candidates must learn and practise the preparation of financial
statements with full details.
• Candidates must practise on analysing the financial information
according to the question requirement.
• Candidates must show their workings with reference numbers such
as W1, W2 etc.
• 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.

20 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

21 LCCI Certificate in Accounting ASE20104