Pearson LCCI

Certificate in Accounting
(VRQ)
Level 3
(ASE20104)

Examiners’ Report
January 2019

1 LCCI Certificate in Accounting ASE20104

LCCI Qualifications
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January 2019
Publication code: 63322_MS

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© Pearson Education Ltd 2019

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 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 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 an extended trial balance
• interpretation of financial statements
• budgetary control
• Introduction to decision making

Candidates performed very well on the topics related to the preparation of

the statement of profit or loss, the statement of changes in equity, the
reconciliation statement to reconcile the profit for the year to net cash from
operating activities, the completion of adjustment columns of the extended
trial balance, and the calculation of net present value after calculating the
cash inflows. The performance on written questions was better compared
to the previous series.

2 LCCI Certificate in Accounting ASE20104

Question 1
Most of the candidates scored high marks on this question.

A majority of the candidates were able to prepare the statement of profit

or loss of a company by showing the workings for the cost of sales,
administrative expenses and distribution costs with labels in the required
format as expected. The main mistakes made were not treating the carriage
inwards correctly, and calculating the allowance of doubtful debts and loss
on disposal incorrectly. Candidates from some centres were unable to
prepare the statement in the required format.

Examiner Comments
Candidates should practice having the correct format for the
financial statements of a company.

Examiner Tip
Distribution costs include anything incurred to sell the product,
hence the selling expenses are part of the distribution costs.

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

Part (a)(i) and (ii): A majority of the candidates were unable to state the
correct concept to record the non-current assets as capital expenditure
above the stated amount as a capital expenditure for part (i). In part (ii),
most of the candidates were unable to explain the reason for adjusting the
purchase of non-current asset with the owner’s own money by relating it
to the application of the relevant concept, despite the fact that the question
highlighted the fact that they were using their own money as a prompt.

Part (a)(iii-iv): A majority of the candidates were able to record the

transactions in the adjustment columns of the extended trial balance for
part (iii) concerning the discount and the returns, but they did struggle to
record the transaction relating to the use of personal money to purchase
the non-current asset by the owner of the business and recorded the
incorrect amount in the trade payables ledger control account.

The candidates struggled to adjust the profit for the year in part (iv) despite
the fact that they recorded the entries correctly in part (iii), which affected
the profit for the year such as discount and returns. The main mistakes
made were either adding one figure for the discount and returns or

3 LCCI Certificate in Accounting ASE20104

including the trade payables amount to calculate the adjusted profit for the
year.

Part (b) A majority of the candidates were able to state the two advantages
and two disadvantages of converting a sole trader to a limited company but
candidates from some centres stated the advantages and disadvantages of
converting a sole trader to a partnership.

Examiner Comments
Candidates must read the questions carefully before answering
especially the explain questions that require a comparison of
two types of the business organisations.

Examiner Tip
Profit for the year is affected only by the revenue items and in
terms of the direction, if the entry is a debit then it must be
subtracted and if the entry is correct then it must be added in
order to calculate the adjusted profit for the year.

Question 3
Most of the candidates scored high marks on this question.

Part (a)(i-iii): A majority of the candidates were able to prepare the

statement of changes in equity correctly for part (i) but some candidates
did struggle to calculate the bonus and right issue, hence the interim
dividend. A majority of the candidates struggled to answer part (ii) and (iii)
as they did not identify the stakeholder interested in the statement of
changes in the equity.

Part (b): A majority of the candidates were able to prepare the statement
to reconcile the profit for the year to the net cash from the operating
activities. The main mistake was either not accounting the depreciation
charge correctly, or calculating the depreciation charge incorrectly.

Part (c): A majority of the candidates were able to state the effect of the
bonus and right issue on the cash and cash equivalents, but they were
unable to justify the reason to score the second mark.

Part (d): A majority of the candidates were able to state the two ratios
correctly but candidates from some centres still stated the profitability
ratios despite the fact that the cash and cash equivalents were mentioned
in the question.

4 LCCI Certificate in Accounting ASE20104

 Examiner Comments
Dividend is paid out of the retained earnings, hence must be
deducted not added.

Examiner Tip
Use the reserve entry for the bonus issue. This cannot be
used for anything else (such as share premium) first.
Candidates must justify the point stated in the explain
questions to score the second mark.

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

Part (a): A majority of the candidates were unable to calculate the cost,
depreciation charge and accumulated depreciation as the candidates were
unable to identify the difference between the capital and revenue
expenditure at the purchase of the non-current asset, or calculate the
depreciation charge according to the months of the assets ownership,
despite the fact it was on straight line method. Candidates did not add the
depreciation charge to the opening accumulated depreciation provided in
the information to calculate the accumulated depreciation at the end of
budgeted period.

Part (b)(i-ii): A majority of the candidates were unable to calculate the

budgeted adjusted profit for the year for part (i) after deducting the
depreciation charge, insurance and the fuel expenses relating to new non-
current asset. Most of the candidates started preparing the full statement
of profit or loss, which was not what was required.

The majority of the candidates were unable to calculate the cash and cash
equivalents at the end of budgeted period for part (ii) as candidates
included the other items instead of just one item relating to the fuel of the
new non-current asset.

Part (c)(i-ii): A majority of the candidates were unable to balance the

statement of financial position as the candidates were unable to calculate
the drawings for the period, and the trade and other payables, correctly,
only scoring the marks for the non-current assets, current assets total and
loss for the period using their own figures from the previous tasks.

Part (d): Most candidates struggled to analyse the data provided in the
form of the cash budget to evaluate the performance of the business.

5 LCCI Certificate in Accounting ASE20104

 Examiner Comments
For evaluate questions, the candidates are expected to state
the possible reason or impact on the business.

Examiner Tip
The statement of financial position must balance and must
have the trade and other receivables, and trade and other
payables, on one line in the respective sections of current
assets and current liabilities.

Question 5
Most of the candidates scored average marks on this question.

Part (a): A majority of the candidates were able to calculate the net cash
inflows correctly for all the years. Some candidates did struggle with the
fixed overheads.

Part (b) A majority of the candidates were able to calculate the net present
value by using the figures from the previous task correctly for both options.
But candidates from some centres either took the outflows as positive or
the inflows as negative figures, hence calculated the net present values as
negative values.

Part (c): A majority of the candidates who read the question carefully were
able to state the two other methods of capital investment correctly but
there was a common answer/response seen relating to the two funding
methods, which had been asked in the previous series. This suggests rote
learning without reading the question.

Part (d): A majority of the candidates were able to state the comparative
statements for both options to score the marks for the discussion and were
able to from a decision based on their discussion.

Examiner Comments
Outflow, or initial investment, means the money going out
of the business, hence must be stated as a negative figure.
Inflow, or money earned, means money coming into
business, so must be stated as positive figures.

6 LCCI Certificate in Accounting ASE20104

Examiner Tip
Depreciation is a non-cash item. hence not included for the
calculation of the net cash inflows.

7 LCCI Certificate in Accounting ASE20104

See below the examples of the candidates’ responses to
reflect the presentation.
Q2a(iii)

Q2a(iv)

8 LCCI Certificate in Accounting ASE20104

Q3a(i)

Q3b

9 LCCI Certificate in Accounting ASE20104

Q4a

Q4b(i)

Q5b

10 LCCI Certificate in Accounting ASE20104

Paper Summary
Candidates performed better on numerical questions relating to the
preparation of the statements from the provided information. They
demonstrated improved performance on written questions compared to
previous series but there is still room to improve on performance in ‘discuss’
and ‘explain’ questions.

The candidates will benefit from the following:

• Candidates must learn and practice 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
Notes/workings.

• Candidates must learn and practice preparation of ledger accounts

with full details.

• Candidates must learn and practice the preparation of all financial

statements, with full details and in proper format for the company
accounts.

• Candidates must learn and practice the preparation of all budgets

with full details.

• Do not just practice numerical questions but also try to understand

the theory to be able to answer the explain questions.

• Practice ‘discuss’ question by providing the comparative statements

for both sides.

• Practice analysing the results from the information provided by

producing responses based on the reasons for change, or looking at
what impact factors will have on the business currently or in future.

• Visit the Pearson website for various resources to support

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

11 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

12 LCCI Certificate in Accounting ASE20104