Pearson LCCI

Certificate in Accounting
(VRQ)
Level 3
(ASE20104)

Examiners’ Report
April 2018

2012-2013

1 LCCI Certificate in Accounting ASE20104

LCCI Qualifications

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© Pearson Education Ltd 2018

1 LCCI Certificate in Accounting ASE20104 Level 3

Introduction
Pearson (LCCI) redeveloped the Level 3 Certificate in Accounting (VRQ)
(ASE20104) as 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 questions.

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 numerical questions, such as

preparation of statement of profit or loss for a limited company, statement
of profit or loss and statement of financial position, consolidated statement
of financial position and preparation of cash budgets. The performance on
written questions was better this time.

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

demonstrate the underpinning knowledge and understanding of
fundamentals by preparing for the exams according to the specification and
by combining the theory and practice, which will help them to answer
explain, discuss and evaluate questions 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) Majority of theThe majority of candidates were able to prepare the
statement of profit or loss as expected for a company format. Main errors
were not accounting for heat and lighting, carriage inwards and carriage
outwards correctly and recording rental income as an expense.

See below an example of (b).

3 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 in the

financial statements with labels, as appropriate, by using the IAS
terminology.

All calculations must be supported by the workings/notes with

labels.

Examiner Tip
For a company statement of profit or loss, expenses must be
shown as either administrative expenses or distribution costs
as one figure, with the workings with labels in the
notes/workings.

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

4 LCCI Certificate in Accounting ASE20104

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

Part (a) The majority of candidates were able to prepare the statement of
profit or loss for the period requested. Main errors were relating to the
general expenses and depreciation expenses.

See below an example of (a).

Part (b) Candidates were unable to prepare the equity and liabilities extract
of the statement of the financial position from incomplete records as
expected. Main errors were not accounting for the opening equity,
additional equity as this was mostly netted off from drawings, not
accounting for disposal proceeds for the family holiday as drawings and not
accounting for the loan in the current and non-current liabilities correctly.

See below an example of (b).

5 LCCI Certificate in Accounting ASE20104

Part (c) The majority of candidates were able to state the name of the two
accounting ratios to measure the profitability correctly. Candidates from
few centres either stated the liquidity ratios or stated the name of the
profits, such as gross profit or net profit, without the percentage or margin
to score the marks.

See below an example of (c).

Examiner Comments
Depreciation charge must be accounted for the year after
adjusting the disposal or acquisition, as appropriate, according
to the information provided by using the relevant depreciation
method.

Examiner Tip
Bank loan can be shown in the non-current or current
liabilities depending on the payment period, so candidates
must read the information provided carefully.

6 LCCI Certificate in Accounting ASE20104

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

Part (a) The majority of candidates were able to calculate the goodwill
arising on consolidation correctly. Main mistakes were not accounting the
revaluation and retained earnings correctly.

See below an example of (a).

Part (b) The majority of candidates were able to calculate the total retained
earnings correctly. The main error, from few candidates, was not
accounting the retained earnings from the subsidiary company correctly.

See below an example of (b).

Part (c) The majority of candidates were able to calculate the non-
controlling interest correctly.

See below an example of (c).

7 LCCI Certificate in Accounting ASE20104

Part (d) The majority of candidates prepared the consolidated statement of
financial position correctly. Main errors were not accounting goodwill under
non-current assets and non-controlling interest under equity and not
showing the sub total for the total liabilities with a label.

See below an example of (d).

8 LCCI Certificate in Accounting ASE20104

Examiner Comments
Retained earnings of subsidiary at the time of acquisition
are considered for a goodwill calculation.
Retained earnings of subsidiary after acquisition are
considered for a total retained earnings calculation.
Financial statements must have subtotals with labels.

Examiner Tip
The figures in consolidated financial statements must be
calculated by adding the parent and subsidiary figures,
except the equity part.

9 LCCI Certificate in Accounting ASE20104

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

Part (a) The majority of candidates were unable to explain one purpose of
preparing a cash budget despite the fact most of the candidates prepared
the cash budget in part (c) correctly. Their responses were either generic,
related to the advantages of budgetary control/budgeting, not related to
cash budget, or identification was there but not developed further.

See below an example of (a).

Part (b) The majority of candidates were able to identify one way
(sometimes more than one way) to reduce the irrecoverable debts but were
unable to explain further for the linked justification/reasoning to score the
second mark.

See below an example of (b).

Part (c) The majority of candidates were able to prepare the cash budget
correctly from the provided information. The main error was not recording
the opening balance correctly for the starting month.

See below an example of (c).

10 LCCI Certificate in Accounting ASE20104

Part (d) The majority of candidates were able to state one reason for not
including the depreciation charge in the cash budget.

See below an example of (d).

Parts (e)(i) and (ii) The majority of were able to calculate the trade
receivables and trade payables to be included in the statement of financial
position correctly.

See below an example of (e)(i) and (ii).

11 LCCI Certificate in Accounting ASE20104

Part (f) The majority of candidates were able to state the three advantages
for a sole trader of forming a partnership.

See below examples of (f).

Part (g) The majority of candidates were unable to evaluate the

performance of two sole trade businesses. Candidates either stated the fact
whether the ratio was higher or lower or better or worse without analysing
the ratios by stating the possible reason or impact on the business. But,
overall, evaluation was normally done.

See below examples of (g).

12 LCCI Certificate in Accounting ASE20104

Examiner Comments
Candidates must record the opening balance for the cash
budget.
For explain questions, must develop your answer further to
score the second mark.

Examiner Tip
The cash budget must be in the correct format such as
receipts - individual items with totals for the receipts,
payments - individual items with totals for the payments,
net inflows (receipts) or outflows (payments),-difference
of total receipts and total payments, opening balances and
final row with closing balances.

13 LCCI Certificate in Accounting ASE20104

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

Part (a)(i) The majority of candidates were unable to state one advantage
or one disadvantage of the payback period as a method of capital
investment appraisal. The responses for advantages were too generic,
such as either easy to understand or takes cash flows into account, which
is a characteristic of this method not an advantage. Candidates from only
few centres stated the disadvantage correctly as expected.

Part (a)(ii) The majority of candidates were unable to state one

advantage or one disadvantage of the accounting rate of return (ARR) as
a method of capital investment appraisal. The responses were too generic
for advantages such as “takes profit into account”, which is a
characteristic of this method not an advantage, and for disadvantages it is
difficult to understand or time consuming.

Part (b) The majority of candidates were able to calculate the profit or loss
for the three products but this was not calculated by using the marginal
costing technique to show the contribution and fixed overheads were not
apportioned correctly as stated in the information provided.

See below an example of (b).

14 LCCI Certificate in Accounting ASE20104

Part (c) The majority of candidates were able to calculate the number of
the units to be sold to earn the required profit correctly. Few candidates
struggled to find the contributing per unit for this product.

See below an example of (c).

Part (d)(i) The majority of candidates, who prepared the part (b)
calculations using the marginal costing, were able to identify the product
to be discontinued correctly.

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

Part (d)(ii) The majority of candidates were able to calculate the total profit
for the year ended correctly for the remaining two products based on their
answer for part (d)(i).

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

Part (e) The majority of candidates were unable to provide the comparative
responses of a sole trader or a private limited company to form the decision
whether the sole trader should continue as a sole trader or form a private
limited company. The majority of responses stated only one comparison
either related to the liability or finance.

See below an example of (e).

15 LCCI Certificate in Accounting ASE20104

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

Examiner Tip
Contribution is used to decide whether to continue with a
product or discontinue a product not the profit or loss.

16 LCCI Certificate in Accounting ASE20104

Paper Summary

Candidates performed very well on numerical questions, such as

preparation of statement of profit or loss for a limited company, budgeted
statement of profit or loss and budgeted statement of financial position,
consolidated statement of financial position and preparation of cash budget.
Although the performance on written questions was better this time,
candidates need to practise explain/ discuss and evaluate questions.
Overall, performance was better compared to the previous session.

The 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 practise 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 questions by providing the comparative statements

for both sides.

 Practise analysing the results from the information provided by

giving the reasons or what impact it will have on the business
currently or in future.
 Visit Pearson website for various resources to support candidates
learning

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

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