AS ACCOUNTING. ACCN2 Financial and Management Accounting Report on the Examination June Version: 1.0

Transcription

1 AS ACCOUNTING ACCN2 Financial and Management Accounting Report on the Examination 2120 June 2016 Version: 1.0

2 Further copies of this Report are available from aqa.org.uk Copyright 2016 AQA and its licensors. All rights reserved. AQA retains the copyright on all its publications. However, registered schools/colleges for AQA are permitted to copy material from this booklet for their own internal use, with the following important exception: AQA cannot give permission to schools/colleges to photocopy any material that is acknowledged to a third party even for internal use within the centre.

3 Overview Students continue to demonstrate improved examination technique and in particular are now producing full structured answers in response to written questions. Increasingly answers are supported by workings which are referenced to the answer in the question. However students are losing marks through, what appears to be carelessness, for example by transferring numbers inaccurately from the question or workings to the final answer and also miscalculating answers, for example writing down X x.03 and calculating X x 0.3. Students should be encouraged to check their calculations and workings to ensure maximum reward for their answers. 3 of 6

4 Question 1 (a) This question required students to prepare a cash budget for a month. The question was well answered with students presenting recognisable budgets with approx. 1 / 3 students achieving full marks. Many provided numerically correct answers but could not be awarded the quality of presentation mark as they did not label the budget correctly and more significantly failed to show the currency they were working in. (b) This question tested students understanding of the difference between cash and profit, requiring the calculation of a revised profit figure for the month of June. This question was not well answered with a significant number of students not even attempting an answer. Many students failed to apply the accruals concept and treated the income statement as a repeat of the cash budget. Others recognised the difference in approach but prepared the calculation for the year rather than the month required by the question. Question 2 (a) This question required students to prepare a statement of changes in equity recording the issue of shares at a premium and dividend payments. The answers to this question showed a distinct improvement on previous years with over 30% of students gaining full marks. Most students were able to prepare a statement of changes in equity and calculate correctly the share issue and dividends. However, some students did lose marks for not labelling correctly, with a number still showing the date of the transaction in the statement rather than the description eg 30 November 2015 rather than Share issue. A significant number of answers did not include the profit for the year and/or showed the dividends in the incorrect column. Most students were able to calculate the share issue, but some struggled to distinguish between the share value and the premium. This question also provided examples of students with correct workings but incorrect final answers again students should be encouraged to check workings and also to see if the final answer looks reasonable. (b) This question required students to calculate the gearing ratio. This question provided mixed responses with over 25% of students gaining full marks but also 25% scoring zero and a further 7.5% not attempting the question at all. The main problem for students who knew the ratio formula was matching this to the data in the question, with many confusing equity with capital employed; for example stating the ratio as Non-current liabilities Capital employed x 100 but then using equity instead of capital employed. Despite being asked for the gearing ratio at 30 April 2016, many students also used the opening equity figure, rather than their own figure from 2a, thus losing out on the own figure mark. (c) This question required students to consider the implications for the company of the gearing calculated in 2b. Students were able to provide reasonably full answers, however these were very disappointing. Many students had no understanding of gearing and referred to liquidity and even return on capital employed. 4 of 6

5 Those students who showed an understanding of gearing often failed to answer the question by suggesting how the gearing could be improved rather than the implications. Worryingly, a significant number felt that there was a correct level of gearing and that high gearing was always bad and that low gearing was good. It is important that students realise that low gearing could be bad for a business as it may miss out on business opportunities through lack of investment and also that high gearing can be beneficial in times of increasing profits. The better answers did explain the implications of gearing for the future of the business and its impact on current and potential investors. However, a number of students felt that equity figure provided a pool of funds to repay the debenture when it became due, not recognising the fact that the funds provided would already have been used by the business. Question 3 (a) This question required students to complete the ledger accounts at the year-end; balancing the accounts and showing the transfer to the income statement. Students found this question challenging. In many cases all the entries were reversed, which is concerning. Students were often able to calculate the provision for doubtful debts at the year-end and the depreciation charge for the year but were unable to record these correctly in the ledger accounts. Many did not balance the accounts and even more did not show the transfer to the income statement. (b-e) These questions focused on the calculation of adjustments to financial statements. 3b related to income received in this case: rent receivable and 3c to inventory valuation not surprisingly these proved to be challenging with under 50% of answers correct. 3d and 3e related to the application of the business entity concept; with 3d requiring the calculation of the amount that should be included in the income statement and 3e requiring the appropriate concept to be identified. Students found these easier with over 80% getting the correct answer. (f) This question required students to combine their answers to the previous questions to prepare the current assets section of the balance sheet. Students found this task quite challenging often including extraneous items either: from the income statement; the bank overdraft or the rent received paid in advance. A significant number of students, however, were able to correctly adjust the trade receivables figure for the provision for doubtful debts and the closing inventory for the damaged stock which is pleasing. 5 of 6

6 Question 4. (a) This question required students to calculate the rate of inventory turnover. The answers to this were a little disappointing with less than half gaining full marks. A number of students were able to state the formula correctly and calculate the answer, but could not be awarded both marks available as they did not state what the answer meant eg 5 times or 73 days. (b) This question required students to understand the application of IT to inventory valuation by identifying differences that could occur between the computer system and the physical inventory. The majority of students were able to correctly identify the differences, however often struggled with the effect these would have on the inventory valuation for example they would correctly calculate the error of 90 in note 1 but then add this to the computer valuation. A number of students calculated the difference in the inventory value and not the value of the physical inventory, eg they made the adjustments but did not include the original computer valuation, thus losing a mark. It is vital that students read the question carefully to ensure they answer the question set and do not throw away marks. (c) This question required students to suggest strategies to improve inventory turnover and also to explain problems their strategies might cause. The answers to this written task demonstrate the improvement made by students over the years the answers were extensive, showing good exam technique with most gaining full marks for quality of written communication. The best answers identified a strategy, explained how this would improve inventory turnover and then dealt with any problems this might cause for the business. However a number of students failed to read the question and presented more than two strategies or did not deal with the problems. A significant number of answers showed a lack of understanding of the topic area. Many students clearly did not appreciate the dynamic nature of inventory turnover compared to the static measure provided by the ratio. They also failed to appreciate the link between the numerator and denominator in the ratio for example, many students suggested that increasing purchases would increase cost of sales and that this would increase the rate of inventory turnover; failing to realise that increasing purchases would also increase inventory and thus not increasing the rate of turnover. Perhaps because the formula focuses on cost of sales many students answers focused on the issue of increasing the number of times inventory was purchased rather than when it was sold. Mark Ranges and Award of Grades Grade boundaries and cumulative percentage grades are available on the Results Statistics page of the AQA Website. Converting Marks into UMS marks Convert raw marks into Uniform Mark Scale (UMS) marks by using the link below. UMS conversion calculator 6 of 6