Assessment Schedule - 2013
Interpret accounting information for sole proprietors (90980)
Evidence Statement
Question
Evidence
ONE
(a)
2013
Liquid Ratio
0.97:1
Current Ratio
2.74:1
Equity Ratio
0.71:1
(b)
For every $1 of current liabilities Every Occasion has in 2012 they have $2.40 in current
assets. We would expect that Every Occasion will be able to meet their debts as they fall
due over the next accounting period.
(c)
The current ratio has increased from 2.40:1 in 2012 to 2.74:1 in 2013. This is an
improvement in the current ratio and could be due to a proportionately greater increase in
current assets compared to current liabilities.
Every Occasion has just started selling adult costumes and therefore is likely to have
increased their inventory with new costumes. This will have increased current assets. If this
was funded through either a loan or owner contribution this would have no effect on current
liabilities and hence the current ratio would have increased.
(d)
Recommendation: Every Occasion could extend loan from the bank
Justification: The current loan that Every Occasion has is relatively small ($3000) compared
to the current assets and so it is reasonable to increase this. This would increase the bank
account and therefore the liquid assets of Every Occasion. This would improve the liquid
ratio and Every Occasion’s ability to meet their immediate (4-6 weeks) debts as they fall due.
This recommendation would also improve the current ratio as the current assets would
increase when bank increased, without impacting on current liabilities.
OR
Recommendation: Daphne could contribute more capital to Every Occasion.
Justification: This would increase the bank account and therefore the liquid assets of Every
Occasion. This would improve the liquid ratio and Every Occasion’s ability to meet their
immediate (4-6 weeks) debts as they fall due.
This recommendation would also improve the current ratio as the current assets would
increase when bank increased, without impacting on current liabilities.
(e)
The Equity ratio of 0.71:1 in 2013 for Every Occasion means that for every $1 of assets
Every Occasion has, Daphne, the owner, has contributed 71cents.
This is an improvement from 2012 where Daphne was in a vulnerable position having funded
less than half of the asset of Every Occasion. Every Occasion was in a risky position due to
outsiders having invested a greater proportion than Daphne the owner.
Daphne should be more confident with the positive change in equity ratio as she is less
vulnerable to outside investors in Every Occasion.
1
© NZCETA Accounting Level 1 Achievement Standard 90980 (1.5) Practice Assessment 2013
NZCETA has approval from NZQA to use their materials in the development of this resource.
Judgement Statement
N1
ONE of
 Calculates 2/3
analysis
measures
correctly
N2
TWO of
 Calculates 2/3
analysis
measures
correctly
A3
THREE of
 Calculates 2/3
analysis
measures
correctly
A4
FOUR of
 Calculates 2/3
analysis
measures
correctly

Describes the
current ratio


Explains the
current ratio of
2.40:1

Identifies the
current ratio
has improved



Identifies a
recommendati
on to improve
liquid ratio

Identifies a
recommendati
on to improve
liquid ratio

Describes
equity ratio
OR
Identifies
improvement
in equity ratio

Describes
equity ratio
OR
identifies
improvement
in equity ratio
Describes the
trend in
current ratio
OR
describes a
cause of the
improvement
in the current
ratio

Describes a
recommendati
on to improve
the liquid ratio

Describes a
recommendati
on to improve
the liquid ratio

Describes the
meaning of the
equity ratio

Describes the
meaning of the
equity ratio

Describes the
current ratio
Identifies the
current ratio
has improved

Explains the
current ratio of
2.40:1
Describes the
trend in
current ratio
OR
describes a
cause of the
improvement
in the current
ratio
M5
TWO of
 Explains the
trend in
current ratio
with a possible
cause
M6
ALL of
 Explains the
trend in
current ratio
with a possible
cause



Explains a
recommendati
on to improve
the liquid ratio
Explains the
improvement
in the equity
ratio related to
Every
Occasion

Explains a
recommendati
on to improve
the liquid ratio
Explains the
improvement
in the equity
ratio related to
Every
Occasion
E7
ONE of
 Fully explains
the trend in
current ratio
for Every
Occasion,
giving a
detailed
possible
reason
E8
BOTH of
 Fully explains
the trend in
current ratio
for Every
Occasion,
giving a
detailed
possible
reason


Justifies a
recommendati
on to improve
the liquid ratio
AND explains
the impact on
the current
ratio
Justifies a
recommendati
on to improve
the liquid ratio
AND explains
the impact on
the current
ratio
N0 – no relevant evidence
2
© NZCETA Accounting Level 1 Achievement Standard 90980 (1.5) Practice Assessment 2013
NZCETA has approval from NZQA to use their materials in the development of this resource.
Question
TWO
(a)
Evidence
Distribution Cost %
Administrative Expense %
Finance Cost %
Profit for the year %
2013
23.8%
25.2%
1.9%
15.2%
(b)
For every $1 of sales for Every Occasion in 2012, 3 cents was spent on interest (finance
costs)
(c)
The distribution cost % has increased from 19.4% in 2012 to 23.8% in 2013. This means
that Every Occasion spent 23.8 cents on distribution costs for every $1 of sales in 2013.
This is an increase of 4.4 cents per $1 of sales.
This was due to an increase in distribution costs. This could have been due to more
advertising Every Occasion conducted in order to launch their new range of adult fancy
dress costumes. The increased spending on advertising would increase distribution costs
which would increase the distribution cost %.
(d)
Recommendation: Every Occasion should find a cheaper insurance company/electricity
provider/telecommunications provider (any relevant expense)
Justification: If Every Occasion manages to find a cheaper insurance company it will reduce
the amount they spend on insurance premiums and hence their spending on administrative
expenses. This would result in a reduction in the administrative expense %.
A reduction in the administrative expenses would increase the profit for the year for Every
Occasion.
(e)
Percentage change in profit = 36.9%
This is a very positive change for Every Occasion as they have increased their profit by over
1/3 from 2012 to 2013.
This would be due to either an increase in income or decrease in expenses.
For example (ideas)
Every Occasion may have a higher mark up on the newly introduced adult costumes which
would increase gross profit and profit for the year.
Every Occasion may have paid off some of their loan resulting in less interest expense for
the year and increase in profit.
3
© NZCETA Accounting Level 1 Achievement Standard 90980 (1.5) Practice Assessment 2013
NZCETA has approval from NZQA to use their materials in the development of this resource.
Judgement Statement
N1
N2
ONE of
 Calculates
TWO analysis
measures
TWO of
 Calculates
TWO analysis
measures






Describes
finance cost %
Identifies
worsening of
distribution
cost %

Identifies a
recommendati
on to improve
the admin
expense %

Calculates the
percentage
change in
profit

Identifies a
possible cause
of the increase
in profit

Describes
finance cost %
Identifies
worsening of
distribution
cost %
Identifies a
recommendati
on to improve
the admin
expense %
A3
A4
THREE of
 Correctly
calculates
THREE
analysis
measures
FOUR of
 Correctly
calculates
THREE
analysis
measures

Describes the
finance cost %

Describes the
finance cost %

Describes the
trend in
distribution
cost %

Describes the
trend in
distribution
cost %

Describes a
recommendati
on for
improving the
admin
expense %

Describes a
recommendati
on for
improving the
admin
expense %
Calculates the
percentage
change in
profit


Identifies a
possible cause
of the increase
in profit
Calculates the
percentage
change in
profit
Calculates the
percentage
change in
profit

Describes a
possible cause
of the increase
in profit

Describes a
possible cause
of the increase
in profit
M5
M6
TWO of
 Explains the
trend in
distribution
costs
ALL of
 Explains the
trend in
distribution
costs

Explains a
recommendati
on which
would improve
the admin
expense % for
Every
Occasion

Correctly
calculates,
explains and
gives ONE
relevant cause
of the
improvement
in sales


Explains a
recommendati
on which
would improve
the admin
expense % for
Every
Occasion
Correctly
calculates,
explains and
gives ONE
relevant cause
of the
improvement
in sales
E7
E8
TWO of
 Fully explains
the trend (with
a relevant
cause) in
distribution
cost % for
Every
Occasion
ALL of
 Fully explains
the trend (with
a relevant
cause) in
distribution
cost % for
Every
Occasion

Justifies a
recommendati
on to improve
the admin
expense % for
Every
Occasion

Justifies a
recommendati
on to improve
the admin
expense % for
Every
Occasion

Correctly
calculates,
explains and
gives TWO
relevant
causes of the
improvement
in sales

Correctly
calculates,
explains and
gives TWO
relevant
causes of the
improvement
in sales
N0 – no relevant evidence
4
© NZCETA Accounting Level 1 Achievement Standard 90980 (1.5) Practice Assessment 2013
NZCETA has approval from NZQA to use their materials in the development of this resource.
Question
Evidence
THREE
(a)
Percentage change in sales
Mark Up %
Gross Profit %
2013
11.1%
195.5%
66.2%
(b)
For every $1 of sales in 2012 for Every Occasion 54.5 cents was left for Gross Profit. This
was available to cover expenses and profit for the year.
(c)
The mark up % for Every Occasion has increase from 120% in 2012 to 195.5% in 2013.
This means that on average Every Occasion added more to their cost price of their
costumes to get their selling price than they did in 2013.
This could have been due to :
 Every Occasion increasing the selling price of their costumes without an increase in the
cost of them.
 Every Occasion securing a cheaper supplier of costumes without lowering their selling
price
 Every Occasion may have a larger mark up on adult costumes which they are now
selling and hence their average mark up has increased.
(d)
 increase selling price
Assuming the price rise does not make Every Occasion lose too many customers it will
result in an increase in sales income as they are selling a similar quantity at a higher price
 decrease selling price
By lowering the selling price Every Occasion will attract more customers and therefore sell
more costumes. Assuming the increase in quantity outweighs the price reduction then sales
income for Every Occasion will increase
5
© NZCETA Accounting Level 1 Achievement Standard 90980 (1.5) Practice Assessment 2013
NZCETA has approval from NZQA to use their materials in the development of this resource.
Judgement Statement
N1
ONE of
 Calculates 1
analysis
measure
N2
TWO of
 Calculates 1
analysis
measure
A3
THREE of
 Calculates 2
analysis
measures
A4
THREE of
 Calculates 2
analysis
measures

Describes the
gross profit %

Describes the
gross profit %

Describes the
gross profit %


Describes the
trend in mark
up %

Describes the
trend in mark
up %

Describes the
trend in mark
up %


Describes
either option
for increasing
sales

Describes
either option
for increasing
sales

Describes a
possible cause
of the increase
in mark up %

Describes
either option
for increasing
sales

Describes the
gross profit %
Describes the
trend in mark
up %
OR
Describes a
possible cause
of the increase
in mark up %
M5
TWO of
 Explains the
gross profit %
for Every
Occasion
M6
ALL of
 Explains the
gross profit %
for Every
Occasion

Explains the
trend in mark
up % with a
possible cause

Explains either
option for
increasing
sales


Explains the
trend in mark
up % with a
possible cause
Explains either
option for
increasing
sales
E7
ONE of
 Justifies either
an increase or
decrease in
selling price
with reference
to assumption
E8
BOTH of
 Justifies either
an increase or
decrease in
selling price
with reference
to assumption


Fully explains
the trend in
Mark Up %
with a possible
cause for
Every
Occasion
Fully explains
the trend in
Mark Up %
with a possible
cause for
Every
Occasion
Describes
either option
for increasing
sales
N0 – no relevant evidence
6
© NZCETA Accounting Level 1 Achievement Standard 90980 (1.5) Practice Assessment 2013
NZCETA has approval from NZQA to use their materials in the development of this resource.
Judgement Statement
Score Range
Not Achieved
Achievement
Achievement
with Merit
Achievement
with Excellence
0–7
8 – 14
15 – 18
19 - 24
7
© NZCETA Accounting Level 1 Achievement Standard 90980 (1.5) Practice Assessment 2013
NZCETA has approval from NZQA to use their materials in the development of this resource.