Assessment Report

Level 1 Accounting 2020

Standards 90976  90978  90980 

Part A: Commentary

Those candidates who spent time reading the resource information and understanding the business being examined were able to write more accurate, higher-level answers. It was also apparent that these candidates followed the instructions in the question.

A larger number of booklets were not attempted this year. Those candidates who did attempt the examination paper made a good attempt, with fewer partially answered papers this year.

The Level 1 Accounting examination focusses on sole proprietor trading and / or service businesses. It is important that candidates read the resource material for each standard carefully, as there are different businesses for each standard.

Candidates need to be familiar with the achievement standard explanatory notes and the accounting appendix (   

Part B: Report on standards

90976: Demonstrate understanding of accounting concepts for small entities

Candidates who were awarded Achievement commonly:

  • recognised the liabilities and / or calculated equity liabilities correctly
  • accurately completed the transaction analysis table
  • described definitions of the financial elements and / or accounting concepts.

Candidates whose work was assessed as Not Achieved commonly:

  • provided incomplete or inaccurate answers, or answers without definition.

Candidates who were awarded Achievement with Merit commonly:

  • knew all the parts of the element and concept definitions and explained these in context for Farmhouse Fruit and Vege (FFV)
  • used the information in the resource material provided
  • answered all parts of the questions.

Candidates who were awarded Achievement with Excellence commonly:

  • applied the accurate definitions they had learnt to the resource material in order to demonstrate a comprehensive understanding of financial elements and accounting concepts
  • answered all of the question being asked, including linking and detailing to the appropriate financial statement(s) when asked.

Standard-specific comments

In 2020, candidates’ application of the accounting concepts was better than the application of the financial elements. Candidates regularly struggle with accrual basis, unable to explain both sides of the transactions (e.g. decreasing insurance in the income statement for FFV).

This year, the transaction analysis table returned after several years, and it was completed to a high standard. 

The use of context is vital in answering to a high level. This includes the dollar figures, the specific name of the financial statement being affected, reference to the business activity (in this case selling fruit, veges, jams and preserves), and the impact on the business (Farmhouse Fruit and Vege). Whether the entity is a service or trading / retail business can impact on the explanations.

90978: Prepare financial statements for sole proprietors

Candidates who were awarded Achievement commonly:

  • classified income and expenses in the income statement
  • completed the cost of goods sold section of the income statement
  • classified assets and liabilities in the statement of financial position in accordance with the Level 1 Accounting appendix
  • used abbreviated account names
  • completed the property, plant and equipment table
  • distinguished between estimated receipts and payments in the cash budget
  • established an accurate ‘stem’ in the cash budget from the information provided
  • included foreign items in the various statements.

Candidates whose work was assessed as Not Achieved commonly:

  • could not classify income or expenses within an income statement
  • did not complete the cost of goods sold section of the income statement
  • could not classify assets and liabilities within a statement of financial position
  • included several foreign items
  • used incorrect headings or had no headings at all
  • used incorrect stems or account names
  • wrote sentences instead of account names in the cash budget
  • did not complete one or more questions or left large gaps.

 Candidates who were awarded Achievement with Merit commonly:

  • reported many of the balance-day adjustments correctly
  • had only a small number of foreign items across the paper
  • distinguished most of the cash and non-cash items in the cash budget
  • correctly classified most revenue and expense items using the headings provided in the instructions
  • correctly classified most assets and liabilities in the statement of financial position
  • used full account names in the cash budget and financial statements.

Candidates who were awarded Achievement with Excellence commonly:

  • calculated and reported balance-day adjustments correctly
  • prepared accurately classified financial statements without foreign items
  • had no detracting errors in their financial statements
  • comprehensively prepared the cash budget, recognising nearly all cash and non-cash items
  • correctly identified and reported the cash surplus in the cash budget and accurately completed the bank balance process
  • used the entire resource to ensure accurate classifications, especially the internet and phone costs in the income statement.

Standard-specific comments

Correctly classifying the assets and liabilities requires candidates to use the sub-classifications outlined in the Level 1 Accounting Appendix (current, non-current, investments, intangibles, property, plant and equipment). 

Candidates are encouraged to write answers clearly and check their calculations.

Candidates need to learn the heading layout of the income statement for both trading (retail) and service entities and know when to use which layout. They should also use the account names provided.

Candidates should be aware that accounts, especially expenses, can have more than one classification. It is important that the resource information is read carefully and used to avoid incorrect classifications for the entity being examined.

The stem in the cash budget should be account names, ideally from the trial balance, and not a sentence detailing type of payment or a long description.

90980: Interpret accounting information for sole proprietors

Candidates who were awarded Achievement commonly:

  • calculated at least two analysis measures correctly for each question
  • described the meaning of the analysis measure result
  • described a valid reason for the trend
  • wrote incomplete or invalid recommendations. e.g. increase bank to increase current ratio. This is incomplete as it does not recommend a way that this can happen.

Candidates whose work was assessed as Not Achieved commonly:

  • calculated some of the analysis measures accurately
  • referred to only the words in the formulae when trying to describe the reason for the trend, not the reason for the trend
  • did not answer the question being asked. e.g. wrote a reason for the trend for the wrong analysis measure
  • provided rote-learned answers that were not appropriate for Through the Lens Photography (TTLP) given that is a service entity, or contradicted the resource information
  • did not attempt the theory questions.

Candidates who were awarded Achievement with Merit commonly:

  • read the entire question and answered what was asked
  • answered in context using the entity name or owners name, and appropriate account names
  • explained the trend and reasons for the trends for TTLP by providing details of what happened based on information the resource, and explaining the impact on the accounts affected and classifications
  • made valid recommendations detailing what needs to happen (transaction or event) to improve the analysis measure and relevant account, appropriate for TTLP.

Candidates who were awarded Achievement with Excellence commonly:

  • understood that Through the Lens Photography is a service business and, therefore, does not have gross profit or inventory
  • clearly explained the impact of the purchasing the drone on relevant expenses, as opposed to the drone being an expense
  • took time to read and understand the business, and clearly integrated the resource material in their explanations
  • fully explained valid reasons for the trends, detailing what happened (e.g. an event/transaction) and the impact on the account(s), classification(s) and analysis measure
  • fully explained the reasons for trends and recommendations by answering all requirements of the question (e.g. impact on liquid ratio, impact on profit)
  • provided evidence to support their answers (data, figures, calculations)
  • fully justified the recommendation to improve an analysis measure by taking into consideration the resource, type of entity, the impact on the account(s) and classification(s) and analysis measure.

Standard-specific comments

It is important that candidates read the resource material carefully and become familiar with the entity being examined before answering the questions. This includes whether it is a service or retail/trading entity, and what they do.

It is important that candidates can classify accounts, consistent with the appendix referred to in the section for 90978, above. Account classifications influence the reasons for trends and recommendations.

Many candidates misunderstand the meaning of a percentage change calculation. For example, incorrectly stating that photography increased by 13.6% from last year (from 10% to 23.6%).

For excellence, candidates need to fully explain their thinking and justification, including linking the event to the account name, to the classification and to the analysis measure. Data and evidence should be included, if available, in the explanation.

Accounting subject page

Previous years' reports

2019 (PDF, 239KB)

2018 (PDF, 120KB)

2017 (PDF, 47KB)

2016 (PDF, 213KB)

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