QUESTIONS AND ANSWERS

Exam
WEST LEVEL 2 SPIRITS EXAMS

TESTED AND CONFIRMED A+ ANSWERS

 Level 3 Finance and Accounting In- class Exam.

1. Identify the four functions of money

One function is store of value

Second function is medium of exchange
Third function is unit of account
Fourth function is legal tender

2. Describe two functions of money

One function is store of value it’s when the value of money doesn’t change no matter how long
you have held that money for

Second function is legal tender it’s when it is a valid form of payment in a specific country

3. What legal tender is available in the England and Wales in the form of notes

£5, £10, £20 and £50

4. What legal tender is available in the England and Wales in the form of notes

£5, £10, £20 and £50

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5. State 4 reasons to plan your finances

One reason is to stay out of debt

Second reason is you can set financial goals
Third reason is you can save for retirement
Fourth reason is you can stop yourself from overspending

6. Outline Identify 2 ways to pay

Cash and debit card
 7. How many stages are in the life cycle?

there five different stages in life

8. State the different life stages

Childhood, Adolescent, Young Adult, Middle age and Elderly

9. Explain the financial needs AND The implications of different life stages…

Childhood:

The need is limited the are also reliant on parents will buy sweets or toys. May be encouraged to
save or parents or grandparents may set up savings account for you into which they make regular
payments and may rely on pocket money

Adolescent:

The need are they want to be more independent and slightly less reliant on parents as they may
socialise away from family. They may look for a part-time job, Still partially reliant on pocket money.
More likely to receive cash as gifts and may be willing to save up small amounts of money to make a
big purchase

Young Adult:

The needs are they might start university or a career also looking to be more independent.
Might buy a car or renting or buying a flat or house and looking to settle down and may start family
or consider marriage. They might acquire a student loan for university or borrow money for a car or
purchase one on finance. Maybe take out a mortgage and start to earn money to support self and
others. Able to issue credit and debit cards

Middle age:

The needs are to support family. Maybe saving for children's futures, e.g. university or weddings
and looking to improve lifestyle. Enjoy having access to additional money to spend on luxuries such
as holidays. Has saving accounts for specific purposes. Is paying a mortgage also planning for own
future through pensions and retirement plans. Likely to be at the stage of life when income peaks but
matched with high expenditure

Elderly:

The needs are fewer dependants and may downsize e.g. move from family home to smaller
retirement home. Fewer financial needs for assets but may be higher for services such as health care.
Mortgage payments stop or become lower. Less income as reliant on a pension rather than salary

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10. State 5 payment methods.

 Cash, Debit card, Credit Card, Bank Transfers and mobile payment

11. Describe the purpose of a standing order etc?

The purpose of standing order is a method of making payments, where an individual instructs
their bank to pay a business a fixed amount of money and the one in control of the money has a
decision whether to send money or not.

12. Explain three benefits of paying by credit card?

One benefit is you earn rewards such as cash back or points.

Second benefit is protection against credit card fraud.
Third benefit is credit score information for free.

13. What is the difference between Direct Debit and Standing order?

Direct Debit can only be set up by the organisation to which you're making the payment. Normally,
you sign a agreement that gives the company permission to take funds from your account in an
agreed way like a monthly phone bill. It normally confirms who's receiving the payment, the account
to be debited

Standing order is a regular payment that you can set up to pay other people, organisations or
transfer to your other bank accounts. You can amend or cancel the standing order as and when you
like.

14. What are premium bonds?

Premium Bonds are an investment product issued by National Savings and Investment. Unlike
other investments, where you earn interest or a regular dividend income, you are entered into a
monthly prize draw where you can win between £25 and £1 million tax free.

15. What is insurance?

a means of protection from financial loss in which, in exchange for a fee, a party agrees to
guarantee another party compensation in the event of a certain loss, damage, or injury
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 16. State 3 types of insurance

Life Insurance, Car Insurance and House insurance

17. What are the risk and rewards of shares?

Risks

Share values can dramatically in price, even to zero.

Credit Risk. Owners of ordinary shares are generally the last in the line of creditors if a company fails
and there may be no chance of getting any money back.
Unexpected Events.

Rewards
You stay ahead of inflation
Investing will help you build wealth
Investing will get you o retirement
Investing can help you save on taxes
Invest to meet other financial goals
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18. What does BACS stand for?

Bankers' Automated Clearing System

19. What does BACs do? State one benefit and one drawback Hint (Facilitate what?)

BACS is an electronic system to make payments directly from one bank account to another.
They're mainly used for Direct Debits and direct credits from organisations. One benefit is Bacs
payments are the cheapest way to send payments and one drawback is Bacs payments only clear
on business days

20. What does CHAPS stand for?

Clearing house automated payment system

21. What does CHAPS do? Sate one benefit and one drawback.

CHAPS is a sterling same-day system that is used to settle high-value wholesale payments as well
as time-critical, lower-value payments like buying or paying a deposit on a property. One benefit
 is its’s useful for transferring very large amounts of money the same day. One drawback is the
cost, as most banks charge £20-30 for the service.

22. How many examples of Current Accounts have we discussed? Hint ( Student account, Basic
account)

23. Give 2 features of a premium current account

24. Describe two features of a student account

25. Explain two drawback of a basic current account

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