Maintaining
Financial Records
(FA2)
September 2025August 2026
Examiner’s report
The examining team share their observations from the
marking process to highlight strengths and weaknesses
in candidates’ performance, and to offer constructive
advice for those sitting the exam in the future.
Contents
General comments about performance ............................... 2
Example 1 .......................................................................... 2
Example 2 .......................................................................... 3
Example 3 .......................................................................... 3
Example 4 .......................................................................... 4
Example 5 .......................................................................... 4
Example 6 .......................................................................... 5
Conclusion ........................................................................ 6
Examiner’s report – FA2 September 2025 – August 2026
1
General comments about performance
The purpose of this report is to provide candidates with a useful resource which, when
considered alongside previous reports, can help maximise their chances of success in future
sittings.
The most effective way to use these reports is to review both the technical content of each
question and the approach required to answer it, recognising that different question types may
require slightly different strategies.
This computer-based examination consists of 50 compulsory objective test questions, each
worth two marks. In addition to multiple-choice questions, candidates may encounter number
entry, multiple response and multiple response matching question formats in the FA2 exam.
This report discusses six questions that some candidates found challenging.
Example 1
Naima and Burton have been in partnership for many years. They share profits in the ratio 2:1.
Alan joined the partnership which revised the partnership ratio to 5:3:2. At this date goodwill in
the partnership, which will not be carried into the new partnership, was estimated to be
$360,000.
Which TWO of the following statements are TRUE?
A
B
C
D
The balance on Burton’s capital account will decrease due to the entries for goodwill
Alan will pay $72,000 for his share of the goodwill
$108,000 will be debited to Burton’s capital account in respect of goodwill
$180,000 will be credited to Naima’s capital account in respect of goodwill
The correct answers are B and C.
When a new partner is added to a partnership agreement they typically pay an amount to join
the partnership. For the Naimo and Burton partnership goodwill was $360,000 at the date Alan
joined.
The first step is to allocate goodwill to the capital accounts of the original partners using the
original profit sharing ratio (2:1). The capital of the new partner is then introduced before the
goodwill is removed by allocating it to each new partner using the new profit-sharing agreement
(5:3:2).
Allocate goodwill to original
partners
Reverse goodwill allocation
Net effect of goodwill
entries
Naima
Burton
Alan
$360,000 x 2/3 = $360,000 x 1/3 =
$240,000 Cr
$120,000 Cr
$360,000 x 5/10
$360,000 x 3/10
$360,000 x 2/10
= $180,000 Dr
= $108,000 Dr
= $72,000 Dr
$60,000 Cr
$12,000 Cr
$72,000 Dr
Therefore, $72,000 of Alan’s capital introduced will cover the cost of his allocation of goodwill
upon entering the partnership and Burton’s account is debited $108,000 in respect of goodwill.
Examiner’s report – FA2 September 2025 – August 2026
2
Option A is not correct as Burton’s capital account is credited $120,000 and debited $108,000
therefore Burton’s capital account increases as a result of the entries for goodwill.
Option D is not correct as $180,000 will be debited, not credited, to Naimo’s capital account in
respect of goodwill.
Example 2
Clara is preparing her financial statements for the year ended 30 June 20X7. She runs a small
online business selling catering equipment.
Which of the following would be used to identify the point at which a sale would be
recognised in Clara’s accounting system?
A
Bank payment received from a customer on 30 June 20X7
B
Quote issued to a customer on 1 April 20X7
C
Delivery note signed by customer on 1 June 20X7
D
Purchase order received from customer on 20 May 20X7
The correct answer is C.
Sales will only be recognised in the accounting system of Clara when the goods have been
transferred to the customer. The primary document that evidences a sale is the delivery note.
When the customer signs the delivery note they are confirming the transfer of the goods, and
the sale can be recognised.
Option A is not correct as accounting principles dictate that a sale should be recognised when
it occurs, not when it is paid.
Option B is not correct as a quote is not a binding transaction and the sale has not yet occurred.
When the quote is issued the customer must still decide whether the price is acceptable to
them and then place the order.
Option D is not correct as the purchase order will only confirm to Clara that her customer
wishes to order the goods. The goods have not been transferred to the customer and therefore
the sale has not yet occurred.
Example 3
Swift Co prepares its financial statements for the year to 31 March. The following insurance
policies were taken out during the year ended 31 March 20X9 with the full amounts paid on the
first day of the policy.
Policy
Amount
Term
Expiry
Motor insurance
$7,200
Annual
31 May 20X9
Buildings insurance
$30,000
Annual
30 November 20X9
What amount should be included in the statement of financial position for prepaid
insurance at 31 March 20X9?
Examiner’s report – FA2 September 2025 – August 2026
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The correct answer is $21,200. Candidates would enter 21200 into the number entry field.
The motor insurance relates to the period from 1 June 20X8 to 31 May 20X9 and is paid on 1 June
20X8. Therefore, two months of the policy are prepaid (April and May 20X9). ($7,200 ÷ 12
months) x 2 prepaid months = $1,200.
The buildings insurance relates to the period from 1 December 20X8 to 30 November 20X9 and
is paid on 1 December 20X8. Therefore, eight months of the policy are prepaid (April to
November 20X9). ($30,000 ÷ 12 months) x 8 prepaid months = $20,000.
The total insurance prepaid is $21,200 ($1,200 + $20,000).
Example 4
Swallow Co is preparing its financial statements for the year ended 30 June 20X6. During the
year trade receivables increased by $600,000. Total sales for the year were $12 million, of which
25% were cash sales. No discount has been allowed on any of the sales and no irrecoverable
debts were written off during the year.
How much was received from credit customers in the year to 30 June 20X6?
A
$8.4m
B
$9.6m
C
$11.4m
D
$12.6m
The correct answer is A.
Total sales were $12,000,000 of which 25% were cash sales, this gives credit sales of
$9,000,000 ($12,000,000 x 75%). As there have been no irrecoverable debts written off during
the year, the increase in trade receivables of $600,000 is due to credit sales during the year
exceeding cash received. Cash received during the year is therefore $8,400,000 ($9,000,000
credit sales - $600,000 increase in trade receivables).
Option B is not correct as it adds the increase in trade receivables to credit sales.
Option C is not correct as it includes both cash and credit sales.
Option D is not correct as it includes both cash and credit sales and adds the increase in trade
receivables.
Example 5
Blackbird Co has prepared draft financial statements for the year ended 30 September 20X8. It
was found that advertising expenses have been incorrectly included in cost of sales.
What will be the effect on gross profit and profit for the year of correcting this error?
A
Increase gross profit, Decrease profit for the year
B
Increase gross profit, No effect on profit for the year
C
Decrease gross profit, Increase profit for the year
Examiner’s report – FA2 September 2025 – August 2026
4
D
Decrease gross profit, No effect on profit for the year
The correct answer is B.
Advertising expenses are a selling expense and should not be included in gross profit. When
removed from cost of sales, cost of sales will decrease, increasing gross profit.
Profit for the year will remain the same as reclassifying advertising expenses from cost of sales
to selling expenses will not impact the profit for the year.
Therefore, options A, C and D are not correct as gross profit increases and profit for the year will
not change.
Example 6
Falcon Co is reconciling its supplier statements to its trade payables ledger account at the
year-end date of 31 December 20X6. Hawk Co has sent a supplier statement to Falcon Co
showing an outstanding balance of $8,710. Falcon Co’s individual trade payables balance for
Hawk Co is $8,400.
The accounts payable clerk has provided the following information:
(1)
Falcon Co has not recognised a settlement discount received of $40 in the general
ledger for which the required payment conditions had been met
(2)
An invoice correctly recognised by Falcon Co as $1,900 is included in the supplier
statement at the incorrect amount $1,090
(3)
A payment of $160 made by Falcon Co on 28 December 20X6 has not been recorded on
Hawk Co’s supplier statement
(4)
The supplier statement issued by Hawk Co shows an invoice for $1,000 which has been
incorrectly omitted from Falcon Co’s general ledger
Calculate Hawk Co’s individual, reconciled trade payables balance.
The correct answer is $9,360. Candidates would enter 9360 into the number entry field.
Candidates should work through each point in turn and establish the impact, if any, on the
trade payables balance.
(1)
Falcon Co has not recognised a settlement discount that it received on a payment
made to Hawk Co. This means that the discount element of $40 is incorrectly still
included in the trade payables balance despite the liability being settled. The trade
payables balance must be reduced by $40.
(2)
Falcon Co has included an invoice for $1,900 in its trade payables but Hawk Co has
transposed the figures resulting in on $1,090 being recognised. This is an error on
the supplier statement ($1,900 - $1,090) and does not require an adjustment to
trade payables.
(3)
Falcon Co made a payment of $160 to Hawk Co which has been omitted from the
supplier statement issued by Hawk Co. This is a timing difference and does not
require an adjustment to trade payables.
Examiner’s report – FA2 September 2025 – August 2026
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(4)
Falcon Co has not recorded an invoice for $1,000 in its trade payables. The trade
payables balance must be increased by $1,000.
Falcon Co individual trade
payables balance
$
Hawk Co supplier statement
$
Unreconciled balance
8,400
Unreconciled balance
8,710
(1) Settlement discount
(40)
(2) Transposition error
810
(4) Omitted invoice
1,000
(3) Omitted payment
(160)
Reconciled balance
9,360
Reconciled balance
9,360
Candidates are not required to calculate the reconciled supplier statement balance but may
wish to do so as a check on the trade payables calculation as the two amounts should agree.
Conclusion
Poor performance in this examination is typically due to insufficient revision across the full
breadth of the syllabus, or a failure to read the question scenarios and requirements with
adequate care.
Candidates preparing for future sittings are strongly encouraged to ensure they develop a
thorough understanding of the key principles across all areas of the syllabus. In addition, it is
essential that candidates take the time to read each question carefully and apply logical
reasoning when formulating their responses. Doing so will significantly enhance their chances
of success in the examination.
Examiner’s report – FA2 September 2025 – August 2026
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