HN Accounting
Illustration of marking under the new guidelines
The following is a reproduction of a real candidate script for Outcome 1 of DE5C 34 Preparing
Final Accounts submitted in session 2009–2010. This has been marked using the new
guidelines to illustrate a possible approach to marking.
Below is an extract from the Unit specification for F7JT 34 Preparing Final Accounts detailing
the requirements of this particular task, with the error tolerance section highlighted.
Outcome 1
Prepare final accounts for business organisations
Knowledge and/or Skills




Business organisations
Profit and loss accounts
Balance sheets
Adjustments to the final accounts
Evidence Requirements
Candidates will need to provide evidence to demonstrate their Knowledge and/or Skills by
showing that they can:
 Prepare a profit and loss account and balance sheet, from a year end trial balance, for either
a partnership or limited company operating as a trader or manufacturer.
 Incorporate a minimum of eight different year end adjustments (appropriate to the type of
business) into the accounts, from the following: straight line depreciation, reducing balance
depreciation, bad debts, allowance for bad debts, accruals, prepayments, closing stock,
dividends, debenture interest, corporation tax, transfer to reserve, drawings, interest on
capital, interest on drawings, partnership salaries.
The evidence should be generated under supervised conditions with access restricted to a pro
forma layout for the relevant set of final accounts only.
The figures must be accurate within a tolerance of three arithmetic or
computational errors with a maximum of three errors of principle.
Assessment Guidelines
It is recommended that the assessment of this Outcome be completed within one and a half
hours. The assessment should be presented as a trial balance, with a minimum of eight year
end adjustments, for either a partnership or limited company (for internal use) operating as
either a trader or manufacturer. From this information candidates should prepare a profit and
loss account and balance sheet.
It is strongly recommended that a different type of business organisation be used each time the
Outcome is assessed.
July 2010
1
Below is a transcript of a candidate’s submission for Outcome 1 of DE5C 34 Preparing Final
Accounts which was presented in a college in Scotland during the academic session 2009–2010
by an HNC Accounting candidate. The assessment question will be largely familiar to centres as
it is the assessment exemplar question for DE5C 34.
Trading Profit and Loss Account of Morvern Enterprises plc
for the year ended 31 March 20X9
£000s
Turnover {Sales}
Less Cost of sales
Opening stock
+ purchases
- closing stock
GROSS PROFIT
£000s
3,900
280
1,920
2,200
300
Add any Income
Investment income
Administration costs
+ accrued
Directors salary
+ accrued
Debenture interest due
Hire of machinery
+ accrued EP#1
Depreciation: Plant
Motors
Increase in bad debt
Bad debts
£000s
1,900
2,000
144
2,144
840
3
46
4
18
2
EP#2
Profit on disposal of
discontinued operation
843
50
16
20
40
9
12
3
939 AE#1
1,209
Retained profit b/f
Net Profit before tax
Less corporation tax
Net profit after tax
120
1,329
364
1,693
104
1,589
Appropriations:
Ordinary dividend proposed
Preferential dividend proposed
General reserve
Retained profit
120
8
400
2,117 AE#2
July 2010
2
Balance Sheet of Morvern Enterprises plc as at 31 March 20X9
FIXED ASSETS
Motor vehicles
Plant
£000s
£000s
£000s
48
800
848
12
320
332
36]
480]
516
Fixed asset investment
Good will
Short term investment
1,400
320
300
CURRENT ASSETS
Stock
Debtors (- provision for bad debt)
Bank
Prepayment (machine hire)
Less Current Liabilities
Creditors
Debenture interest
Accruals
Corporation tax
EP#3
300
928 EP#4
30
2 EP#5 possibly
1,310
622
16
7
104
749
561
3,097
EP#6
Financed by:
Ordinary share capital @ £1 each
Preference shares
Reserves
Retained profit
General Reserve
8% Debentures
July 2010
Authorised Issued
1,200
1,200
100
100
2,117
400
200
4,017
3
Workings:
Depreciation
Plant 5% x 800 = 40 {P}
Motor Vehicles - 25% reducing balance
MV @ cost = 48
Accum depn 12
NBV
36
25% of NBV
9 {P}
Doubtful Debts
Old provision 10
New provision 12 {P & CA} – less from debtors
Debenture interest
8% = 0.08 x 200
= 16 {P & CL}
July 2010
4
Making an assessment decision
The candidate script above illustrates one approach to marking under the new guidelines. At
each error the assessor identifies if the error is one of arithmetic (denoted AE and a number) or
one of principle (denoted EP and a number). This allows the assessor to continue to mark the
submission and keep track of the errors all the way through. The candidate can then review
his/her performance on the basis of the assessor having identified areas of weakness as has
always been the case. There are clear guidelines in the Unit specifications for candidates to
identify the threshold for their performance.
Consequential marking will still apply, as always, which is why in the Balance Sheet the
incorrect calculation of the depreciation for the second category of assets was not error of
principle number four, it was classed as the same error.
In the same vain, the error in the current assets section of the balance sheet (EP#5) where the
candidate identified correctly that the hire of machinery included a prepayment, this would not
have been an error of principle had he/she treated this figure as a prepayment in the profit and
loss account.
Consistency of approach where candidates have treated a figure incorrectly but consistently, ie
had the candidate included this figure in the current liabilities, he/she would not have had this as
an error as it follows on logically from a previous calculation, it would be marked as correct
consequentially.
He/she has treated the hire of machinery as an accrual in the P&L so it follows that this figure
should be included as a current liability. The candidate here included the figure as a current
asset, albeit correctly identifying it from the question, but not treating the figure consistently in
his/her submission, having treated it as an accrual in the profit and loss account.
For this candidate, re-assessment is required. He/she has exceeded the acceptable error
tolerance level for errors of principle. Re-assessment should be given for the entire task
following the guidelines for the task as noted in the Unit specification. In order to facilitate this,
the entire paper must be marked not just up to the point where the error tolerance for the task is
reached. This will allow the candidate to address ALL of the areas of weakness not just those
which occur in part of the submission, thus avoiding the need for further remediation.
July 2010
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