Examiner’s Report
December 2019
Pearson LCCI Certificate in Financial
Accounting
Level 3(ASE20097)
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2 LCCI ASE20097, December 2019
Introduction
The Pearson LCCI Level 3 Certificate in Financial Accounting (VRQ) gives
candidates an overview of the fundamental accounting principles and concepts
that underlie all financial accounting. Candidates are introduced to topic areas that
they are likely to encounter in their working lives in practical, scenario-based
situations.
To this end, the assessment for the December 2019 examination covered the
following topics:
• The purpose of maintaining financial records
• Recording financial transactions
• Balancing accounts and trial balances
• The purpose of the extended trial balance
• Producing financial statements of a sole trader and partnership
• Interpreting a financial statement.
To achieve a good grade, it was important that candidates were able to succeed
at all these processes. Across the cohort, most candidates coped well with topics
involving calculations in general and on the preparation of statement of financial
position of a company. It was the more descriptive and interpretative aspects of
the paper, those questions involving ‘explain’, ‘discuss’, and ‘evaluate’, that
differentiated candidates the most. In order to ensure the highest marks possible,
both centres and candidates should consider spending more time developing the
skills and knowledge required to answer this type of question.
The next section of this report will look at a range of questions and show examples
of candidates’ work. The section will explain how the candidate has performed and
give tips on how to improve. At the end of this report you will find a summary that
gives some recommendations to centres to help improve candidate performance.
It is also strongly recommended that this report is used in conjunction with the
mark scheme.
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Question 1
Candidates scored above average marks on this question. This question was based
on the preparation of the adjustment columns of the extended trial balance with
calculation of inventory valuation and allowance for doubtful debts adjustment at
the year end.
Most candidates calculated the correct inventory valuation, but the majority
struggled to calculate the doubtful debts adjustments. The main mistake was not
adjusting the omission of the set off in the control account to calculate the
allowance for doubtful debts. A few candidates struggled with the entries in
adjustment columns relating to the carriage inwards and outwards and rental
income owing.
A good answer for part (b)is shown below.
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Examiner Comments
Candidates completed the adjustment columns correctly, except
the carriage outwards and the suspense entries.
Examiner Tips
If an item is recorded in a different account, then the entry to
correct the account must be recorded on the opposite side.
6 LCCI ASE20097, December 2019
Question 2
Candidates scored below average marks on this question. The question was based
on preparation of ledger accounts relating to the trade payables ledger control
account and bank column of a cash book. The written questions were based on
discussion of continuation to maintain subsidiary ledgers, stating stakeholders and
their interests in the business along with purposes of the financial statements
provided.
Many candidates prepared the trade payables ledger control account for the month
to a reasonable standard. The main mistakes were either not recording the
opening minority balance due to the overpayment or showing the payments as
one figure after the discount.
Most candidates struggled to complete the cash book-bank column. Candidates
either took the closing balance provided as the opening balance or recorded on
the wrong side and contaminated the account with the non- cash/bank items such
as interest charged and discount received, which demonstrated lack of
understanding of basic accounting concepts. Most candidates were unable to use
the correct labels.
Only a few candidates attempted the question relating to discussion of
continuation to maintain subsidiary ledgers, where candidates tried the discussion
it was on points related to the control accounts rather than the subsidiary ledgers
to form the decision.
Most candidates were able to state the reason for a competitor interest in a sole
trader’s business and stated the two other stakeholders correctly, along with the
purpose of each of the financial statement provided.
A good answer for parts (a)(i) and (ii) is shown below.
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Examiner Comments
The candidate had incorrect labels in both parts. The candidate
also missed out the figure mark for the trade payables ledger
control account as they stated the payments separately instead of
total amount from cash book.
Examiner Tips
Entries in control accounts are either from day books or from
journals, so the labels must be day books such as cash book for
payments and journal for interest charge.
The label for the bank column of the cash book must have names
of the individual suppliers to identify who has been paid.
8 LCCI ASE20097, December 2019
Question 3
Candidates scored average marks on this question. This question was based on
the preparation of a statement of profit or loss for a partnership, including the
appropriation account. The written questions were to state the provisions applied
to interest on capital and interest on partners’ loans in the absence of a
partnership agreement. It also asked candidates to explain the reason for a
partner lending the money as a loan rather than investing it as a capital in the
partnership to allow the interest on capital.
Most candidates were unable to state the provisions for interest on capital and
interest on partners’ loans in the absence of a partnership agreement as they
either did not attempt this part or calculated the interests based on the information
provided.
Most candidates prepared the statement of profit or loss involving adjustments
and the appropriation account. The main mistake was including the interest on the
loan in the appropriation account.
Most candidates who tried this question were unable to state the difference in
interest rate of both capital and loan as a reason for the partner providing the loan
rather than investing more capital and its impact of higher return for the partner.
A good answer for part (b) is shown below.
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Examiner Comments
The candidate prepared the statement of profit or loss, including
the appropriation account, using the correct format by showing
the individual partners’ names in full. They did not, however,
calculate the general expenses after adjusting the amount owing,
rent expenditure after adjusting the prepayment and interest on
capital for one of the partners.
Examiner Tips
The loan provided to the partnership by a partner is treated in
the same way as a loan provided by an outsider to the business.
So, loan interest is included in the expenses not in the
appropriation account and the amount of loan is shown as a
liability not as capital in the statement of financial position.
11 LCCI ASE20097, December 2019
Question 4
Candidates scored high marks on this question. This question was based on the
preparation of the statement of cash flows and disposal account, including
calculation of the total amount on the rights issue and acquisition of new
equipment. The written question was on stating the characteristics of private and
public limited companies.
Most candidates stated the characteristics of the private and limited companies
correctly, but candidates from a few centres stated the characteristics of the
private and public sector rather than a private and public limited company.
Most candidates did prepare the disposal account correctly but missed the dates
for all the entries and labels were not correct, especially for the profit on disposal.
Most candidates achieved average marks on calculation questions as they either
miscalculated the second rights issue or did not add the first and second rights
issue together, but acquisition of new equipment was calculated correctly.
Most candidates prepared the statement of cash flows correctly. The main
mistakes were either not having the subtotal for each section, such as investing
and financing activities, or the total was shown without a label.
A good answer for part (d) is shown below.
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Examiner Comments
The candidate prepared the statement of cash flows to a very high
standard, in the correct format, by showing the subtotals with
correct labels and workings.
Examiner Tips
Candidates must show the figures for the subtotals with labels
for the financial statements.
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Question 5
Candidates scored below average marks on this question. This question was based
on the preparation of the statement of financial position from the incomplete
records of a new business, involving calculations of the capital and revenue
expenditure, total trade payables and adjusted profit for the year. The written
questions were to explain the effect on equity due to the kitchen improvements
written off in the first year and evaluate the impact on profitability and liquidity
due to changing supplier with no credit terms but only offering trade discount.
Most candidates struggled to calculate the capital and revenue expenditure as they
treated the legal fee to purchase a non-current asset and the new signage as the
revenue expenditure, but they were able to calculate the trade payables and
adjusted profit correctly.
Most candidates scored average marks on the preparation of the statement of
financial position. The main mistakes were not deducting the depreciation for the
kitchen renovations or calculating the bank loan correctly, along with missing out
the drawings as these were taken as the cash and cash equivalent, which was
actually a balancing figure.
Most candidates stated the effect on profit for the year rather than the effect on
equity, as required in the question.
Most candidates took the trade discount offered by the sole trader to the customer
and, hence, stated their responses accordingly instead of the trade discount
without credit terms offered to the sole trader by the supplier due to a change of
the supplier.
A good answer for part (d) is shown below.
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Examiner Comments
The candidate prepared the statement of financial position, in the
correct format, by using the correct labels and by showing the
subtotals with labels.
The candidate lost two marks in total; one for premises figure
being wrong as this showed the new signage as a current asset
and one for wrong calculation of the bank loan.
Examiner Tips
Any expense incurred before the use of non-current assets is a
part of capital expenditure.
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Paper Summary
Based on their performance on this paper, candidates are offered the following
advice:
• Practise journal entries for the adjustments for extended trial balance.
• Practise preparing ledger accounts with correct labels and bringing the
balances down as required.
• Practise preparing financial statements with correct labels and showing the
subtotals with labels, as appropriate, by using the IAS terminology.
• Practise not only numerical questions but also understand the theory to be
able to answer the ‘explain’ questions.
• Practise ‘discuss’ questions by providing the comparative statements for
both sides.
• Practise how to analyse the results from the information provided by giving
the reasons or considering what impact these will have on the business
currently or in future.
Please visit Pearson’s website for various resources to support candidates’
learning:
www.lcci.org.uk
Grade Boundaries
The grade boundaries for this paper can be found on Pearson’s website:
http://qualifications.pearson.com/en/support/support-topics/results-
certification/grade-boundaries.html
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