a-level principles of accountslevel principles of accounts review(f).pdf · logic needs...

A Level Principles of AccountsA-Level Principles of Accounts

• Paper 2 Mock Exam Review (2011 )• Tony LimTony Lim• Department of Business Administration• Institute of Vocational Education (Tuen

Mun)u )• 19/3/2011

@IVE(Tuen Mun)

(A) Paper 2 syllabus overview(A) Paper 2 syllabus overview

• Costing -principles and methods(eg Overheads absorption in Job ( g pCosting or Activity-based Costing)

• Planning and controlPlanning and control(eg Standard Costing, Budgeting)Decision making• Decision making(eg Marginal Costing, CVP, Investment Appraisal )

• Financial accounting theory2

(B)Mock Exam-Principles of Accounts Paper 2

• Section A (60%): TWO compulsoryTWO compulsory

• Section B (40%): Any TWO out of three questions y q

Use two different answer books forUse two different answer books for Section A and Section B in AL Exam.

3

(C) General Comments(C) General Comments1) Do not use pencil in answering1) Do not use pencil in answering.2) Lack of workings (e.g. steps for ) g ( g p

calculations) based on scenarios given, or unclear presentationor unclear presentation.

3) Broad understanding of the topics in ) g pthe syllabus, and able to analyse the

i i i tiscenarios given in questions.

4

(D) Exam Statistics(D) Exam Statistics(D) Exam Statistics(D) Exam StatisticsPaper 2 Q1 Q2 Q3 Q4 Q5 TotalPaper 2 Q1 Q2 Q3 Q4 Q5 Total

% of Attempt 100% 100% 24% 88% 88%Attempt

Full Mark 30 30 20 20 20 10010 63 11 14 7 26 7 35 5 08 28 14Average 10.6335%

11.1437%

7.2636%

7.3537%

5.0825%

28.1428%

Std Dev 5 94 5 92 2 98 3 68 2 70 17 39Std Dev. 5.94 5.92 2.98 3.68 2.70 17.39

Maximum 28.0093%

28.0093%

13.5068%

20.00100%

15.5078%

78.5079%93% 93% 68% 100% 78% 79%

Minimum 0 0 0 0 0 0

(E) 2011 Mock Paper 2(E) 2011 Mock Paper 2Q ti O (30 k )Question One (30 marks)Topics related:1) Costing systems: process costing

Under FIFO inventory methodyNormal loss vs Abnormal loss

16 marks16 marks2) Cost-volume-profit (CVP) analysis

Break-even point and decision makingBreak-even point and decision making14 marks

6

Mock Exam-Question 1(30%)Q ( )1a)1a) Most students failed to consider the ‘Opening WIP’ Most students failed to consider the ‘Opening WIP’

leading to wrong“leading to wrong“Product Product started and completedstarted and completed in the in the g gg g ppperiodperiod--$161,400$161,400”.”. They mixed it up with They mixed it up with “Product “Product completedcompleted in the periodin the period--$181,400$181,400”.”.

7

Mock Exam-Question 1(30%)Q ( )11b&b&c)c) Ignored the requirement of decimal places in Ignored the requirement of decimal places in

‘Production Cost per Unit Calculation, and lack of ‘Production Cost per Unit Calculation, and lack of p ,p ,workings.workings.

8

Mock Exam-Question 1(30%)Q ( )11b&b&c)c) Ignored the requirement of decimal places in Ignored the requirement of decimal places in

‘Production Cost per Unit Calculation, and lack of ‘Production Cost per Unit Calculation, and lack of p ,p ,workings.workings.

9

Mock Exam-Question 1(30%)Q ( )1b)1b) ““It is the company policy to have the cost of normal It is the company policy to have the cost of normal

loss entirely absorbed by the finished goods.”loss entirely absorbed by the finished goods.”

Shortcut Method is not allowed here and normal loss should be included in the value of finished goods.g

10

Mock Exam-Question 1(30%)Q ( )1c)1c) Wrong Wrong treatment of normal loss scrap valuetreatment of normal loss scrap value

W P A t C l l t dW P A t C l l t dWrong Process Accounts Calculated.Wrong Process Accounts Calculated.

11

Mock Exam-Question 1(30%)Q ( )11dd)) Most candidates did not know how to treat abnormal Most candidates did not know how to treat abnormal

loss. Many of them misundertood ‘the nearest cents’.loss. Many of them misundertood ‘the nearest cents’.yy

If approx. is taken only in the final step

12

Mock Exam-Question 1(30%)Q ( )1e)1e) At breakeven point: At breakeven point: Contribution = Total Fixed CostsContribution = Total Fixed Costs

Many candidates omitted the common fixed cost Many candidates omitted the common fixed cost $85,000$85,000yy $ ,$ ,

Also many did not really understand the term Also many did not really understand the term -- direct fixed costsdirect fixed costsdirect fixed costsdirect fixed costs

13

Mock Exam-Question 1(30%)Q ( )1f)1f) Most candidates overlooked the instruction to Most candidates overlooked the instruction to

“calculate the contribution per pack and breakeven in “calculate the contribution per pack and breakeven in p pp ppacks for each proposal.packs for each proposal.”

14

Mock Exam-Question 1(30%)Q ( )1f)1f) Most candidates overlooked the instruction to Most candidates overlooked the instruction to

“calculate the contribution per pack and breakeven in “calculate the contribution per pack and breakeven in p pp ppacks for each proposal.packs for each proposal.”

15

Mock Exam-Question 1(30%)Q ( )1g)1g) Almost all candidates ignored the limited capacityAlmost all candidates ignored the limited capacity..

Half of the spare capacity = 28,000 packs Half of the spare capacity = 28,000 packs p p y , pp p y , pFull capacity = 2 x 28,000 packs = 56,000 packsFull capacity = 2 x 28,000 packs = 56,000 packsSales volume cannot be increased to 58,000 packs in Sales volume cannot be increased to 58,000 packs in Proposal A.Proposal A.

16

Mock Exam-Question 1(30%)Q ( )1g)1g) (Continued)(Continued)

---Lack of separate workings of each proposalproposal.

---Poor workings presented.g p

---Incorrectly calculating the sale volume under different

proposals.p p

17

2011 Mock Paper 22011 Mock Paper 2Question Two (30 marks)Topics related:p1) Material Budget 9 marks2) Cash Budget 19 marks2) Cash Budget 19 marks3) Budgetary Control in budget 5 marks

18

Mock Exam-Question 2(30%)Q ( )2a)2a) Some students failed to score marks, because of lack of Some students failed to score marks, because of lack of

workings shownworkings shown (in columnar form)(in columnar form), e, e..gg.. no Production no Production gg ( )( ),, ggBudget prepared before Material Purchases Budget, and Budget prepared before Material Purchases Budget, and their final answertheir final answerss wwereere wrong.wrong.

19

Mock Exam-Question 2(30%)Q ( )2a)2a) Continued: The Material Purchases Budget prepared Continued: The Material Purchases Budget prepared

after the Production Budget, and some ignored the after the Production Budget, and some ignored the g , gg , g‘Target Closing Stock’.‘Target Closing Stock’.

20

Mock Exam-Question 2(30%)Q ( )2b)2b) Most failed to include the Material Closing Stock. Most failed to include the Material Closing Stock.

Some were Some were carelessly to ignore the to ignore the labourlabour hours in hours in y ggFixed Overheads absorption.Fixed Overheads absorption.

21

Mock Exam-Question 2(30%)( )2c) In Cash Budget preparation, most students were

able to present:p

-- the correct opening bank balance

--the calculation of receipts from customers, but lacking of workings shown.

Unable to present:

--the payments to suppliers, and labour,p y pp , ,

--the payments of Fixed Overheads,

--(Repaid to)/ Reimbursed by director

22

Mock Exam-Question 2(30%)( )2c) Continued.

23

Mock Exam-Question 2(30%)( )2d)

24

Mock Exam-Question 2(30%)( )2e)

25

2011 Mock Paper 22011 Mock Paper 2Question Three (20 marks)Topics related:pAccounting Concepts1) Prudence Concept 5 marks1) Prudence Concept 5 marks2) Research and Development Cost 5 marks3) Revenue Recognition 5 marks4) Revised Net Profit 5 marks

26

Mock Exam-Question 3a) i)Mock Exam Question 3a) i)

Mock Exam-Question 3(20%)( )3a)3a)

i)i) Unsatisfactory, unable to apply the Prudence Unsatisfactory, unable to apply the Prudence Concept correctly within the case. Concept correctly within the case.

Have the provision of $100,000 for the legal Have the provision of $100,000 for the legal claim without explanationclaim without explanationclaim without explanationclaim without explanation

Failed to identify the contingent liability of Failed to identify the contingent liability of $220,000.$220,000.

Unaware of the disclosure of contingent liabilityUnaware of the disclosure of contingent liability Unaware of the disclosure of contingent liability Unaware of the disclosure of contingent liability in the notes to the accountsin the notes to the accounts

28

Mock Exam-Question 3(20%)( )3a) i)3a) i)

29

Mock Exam-Question 3a) ii)Mock Exam Question 3a) ii)

Mock Exam-Question 3a) ii)Mock Exam Question 3a) ii)

Mock Exam-Question 3(20%)( )3a)3a)

ii)ii) Unsatisfactory, unable to distinguish clearly the Unsatisfactory, unable to distinguish clearly the treatments for Research costs and Development treatments for Research costs and Development costs. costs.

Unable to identify the wrong action to avoidUnable to identify the wrong action to avoid Unable to identify the wrong action to avoid Unable to identify the wrong action to avoid research cost in order to manipulate the net profitsresearch cost in order to manipulate the net profits

Training cost has been charged to expense Training cost has been charged to expense without explanationwithout explanation

Fail to explain the reasons to capitalize the Fail to explain the reasons to capitalize the development costsdevelopment costs

32

development costs.development costs.

Mock Exam-Question 3(20%)( )3a) ii)3a) ii)

33

Mock Exam-Question 3a) iii)Mock Exam Question 3a) iii)

Mock Exam-Question 3(20%)( )3a)3a)

iii)iii) Worst performance among the three cases. Unable Worst performance among the three cases. Unable to apply the realisation concept during revenue to apply the realisation concept during revenue recognition. recognition.

Unable to deal with the loss making contractUnable to deal with the loss making contract Unable to deal with the loss making contract.Unable to deal with the loss making contract.

Without the concept of deferred revenue over the Without the concept of deferred revenue over the life of the contract.life of the contract.

Didn’t allow for the profit margin in the comingDidn’t allow for the profit margin in the coming Didn t allow for the profit margin in the coming Didn t allow for the profit margin in the coming years.years.

35

Mock Exam-Question 3(20%)( )3a) iii)3a) iii)

36

Mock Exam-Question 3(20%)( )3b)3b) The necessary adjustments required: The necessary adjustments required:

37

2011 Mock Paper 22011 Mock Paper 2Question Four (20 marks)Topics related:pInvestment Appraisal1) Net present value method 9 marks1) Net present value method 9 marks2) Payback period 3 marks3) Accounting rate of return 8 marks4) Analysis and appraisal 3 marks

38

Mock Exam-Question 4(20%)( )4)4) Generally, some students failed to take care the Generally, some students failed to take care the

requirements of insurance premium and the rising of requirements of insurance premium and the rising of q p gq p gservicing and fuel charges : servicing and fuel charges :

39

Mock Exam-Question 4(20%)( )4a)4a) Fairly answered. Some failed to calculate correctly Fairly answered. Some failed to calculate correctly

due to ignorance of purchase discounts, disposal due to ignorance of purchase discounts, disposal g p , pg p , pvalue, and insurance premiums. value, and insurance premiums.

40

Mock Exam-Question 4(20%)( )4a)4a) Continued. Continued.

41

Mock Exam-Question 4(20%)( )4b)4b) Most students failed to Most students failed to recogniserecognise how to apply the how to apply the

payback period , and the adjustment of insurance payback period , and the adjustment of insurance p y p , jp y p , jpremium.premium.

42

Mock Exam-Question 4(20%)( )4c)4c) Students mixed up with previous a and b, and got lost Students mixed up with previous a and b, and got lost

in the preparation of Income Statement.in the preparation of Income Statement.p pp p

43

Mock Exam-Question 4(20%)( )4 c)4 c) ContinuedContinued.

44

Mock Exam-Question 4(20%)( )4d)4d) Unfamiliar to apply the average accounting rate of Unfamiliar to apply the average accounting rate of

return method.return method.

45

Mock Exam-Question 4(20%)( )4e)4e) Unable to mention about any reservation of using Unable to mention about any reservation of using

NPV in evaluating a project. Some ignored the use NPV in evaluating a project. Some ignored the use g p j gg p j gof payback period for evaluation.of payback period for evaluation.

46

2011 Mock Paper 22011 Mock Paper 2Question Five (20 marks)Topics related:pStandard Costing – Variance Analysis1) Interpretation of variances 3 marks1) Interpretation of variances 3 marks2) Standard Contribution 3 marks3) Calculation of variances 8 marks4) Reconciliation statement 4 marks5) Standard costing vs Budgetary Control

2 marks47

2 marks

Mock Exam-Question 5(20%)( )5a)5a)

48

Mock Exam-Question 5(20%)( )5a)5a) Fairly answered, but ignored to apply the fact Fairly answered, but ignored to apply the fact

‘purchase of inferior quality materials’.‘purchase of inferior quality materials’.p q yp q y

49

Mock Exam-Question 5(20%)( )5 b)5 b)

50

Mock Exam-Question 5(20%)( )5 b)5 b) Failed to take into account of allowance factors, Failed to take into account of allowance factors,

which would affect the unit standard cost calculation.which would affect the unit standard cost calculation.

51

Mock Exam-Question 5(20%)( )5c)5c) Unfamiliar with the variances calculation by Unfamiliar with the variances calculation by

including the allowance factors, and using including the allowance factors, and using g , gg , gcontribution margin to calculate Sales Volume contribution margin to calculate Sales Volume Variance.Variance.

52

Mock Exam Question 5(20%)Mock Exam-Question 5(20%)

53

Mock Exam Question 5(20%)Mock Exam-Question 5(20%)

54

Mock Exam-Question 5(20%)5d) O ll k l d b t th5d) Overally poor knowledge about thereconciliation statement.

55

Mock Exam-Question 5(20%)5e) Poor concept to identify the difference of Standard Costing and Budgetary Control

56

(F) Review of external examiners’ comment(a)

1. To have clear presentation of workings/ steps helped candidates to gain marks. It is specially important when complicated calculations involved or when the decision logic needs explanation. Facts and assumptions must be readclearly before answering.y g2. To practise writing effectively, mastering the correct terminology, and giving precise answer.terminology, and giving precise answer.3. Step marks would be deducted to a decision without supporting calculations

57

supporting calculations.4. A few did not label the variances properly

(F)Review of external examiners’ comment

5. To read questions carefully in order to answer correctly.

6. The topics included in syllabus are analytical tools to assist a manager to make better decisions.g

7. Students must analyse questions from the management's perspective.management s perspective.

58

(G) Before examination(G) Before examination

• Plan: Study and RevisionPlan: Study and Revision• Center location• Stationery: Calculator and ball pens• Good sleep for at least two nights before• Good sleep for at least two nights before

exam

59

During ExaminationDuring Examination

• Scan all questions• Keep timeKeep time• Answer the most familiar questions first• Keep time*After the morning examinationAfter the morning examination

• Take a rest during lunch

60

• Try hard & good luck !Th k• Thank you.

• IVE (Tuen Mun)• IVE (Tuen Mun).

61