Mark Scheme

January 2019

Pearson LCCI
Certificate in Accounting
(ASE20104)
LCCI Qualifications

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Publication code: 63324_MS
© Pearson Education Ltd 2019

ASE20104
2 January 2019
General Marking Guidance

• All candidates must receive the same treatment. Examiners must

mark the first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be

rewarded for what they have shown they can do rather than penalised
for omissions.

• Examiners should mark according to the mark scheme not according to

their perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme

should be used appropriately.

• All the marks on the mark scheme are designed to be awarded.

Examiners should always award full marks if deserved, i.e. if the
answer matches the mark scheme. Examiners should also be prepared
to award zero marks if the candidate’s response is not worthy of credit
according to the mark scheme.

• Where some judgement is required, mark schemes will provide the

principles by which marks will be awarded and exemplification may be
limited.

• When examiners are in doubt regarding the application of the mark

scheme to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has

replaced it with an alternative response.

• Where marks are awarded for own figure answers, these marks can only be
awarded if evidence of how the candidate arrived at their values has been
provided (their workings).

• If candidate's fail to provide their workings when instructed in the paper, it

may not be possible to achieve all marks associated with the question, even
if the final answer is correct.

• For calculation questions full marks can be awarded where correct answer is
seen with no workings shown, unless question states that candidate must
provide workings.

ASE20104
3 January 2019
Abbreviation

of Own Figure rule

Accuracy marks can be awarded where the candidates’ answer does not
match the mark scheme, though is accurate based on their valid method.

cao Correct Answer Only rule

Accuracy marks will only be awarded if the candidates’ answer is
correct, and in line with the mark scheme.

ASE20104
4 January 2019
Question AO2 (18) Mark
Number
1 Award marks for correct figures with understandable labels as
indicated.
Pearlpup plc
Statement of profit or loss for the year ended 31 December 2018
$ $
Revenue 932 750
(1)
Cost of sales Note 1 (445 750)
(2/1of)
Gross profit 487 000
(1of)
Expenses
Administrative expenses Note 2 (150 225)
(4)
Distribution costs Note 3 (199 770)
(6)
Profit from operations 137 005
(1of)
Finance costs (8 000)
(1)
Profit before tax 129 005
(1of)
Taxation (25 000)
Profit for the year 104 005
(1of)
Note 1
Cost of sales $ $
Opening inventory 176 000
Purchases 465 000
Carriage inwards 18 750
Closing inventory (214 000) (1)
445 750 (1of)
Note 2
Administrative expenses $
Administrative expenses $99 545 +$1 700 101 245 (1)
Depreciation charge on plant and equipment 45 840 (1)
Allowance for doubtful debts 3 140 (1)
150 225 (1of)
Note 3
Distribution costs $
Selling expenses$170 486 -$1 200 169 286 (1)
Depreciation charge on delivery vans 16 904 (1)
Depreciation charge on plant and equipment 11 460 (1)
Loss on disposal $5 120 (1) - $3 000 = $2 120 2 120 (2/1of)
(1of)
199 770 (1of)

(18)
TOTAL FOR QUESTION 1 – 18 MARKS

ASE20104
5 January 2019
Question AO1 (2) Mar
Number k
2(a) (i) Award marks as indicated.

Sejal records the purchase of all non-current assets (1)

over $250 as capital expenditure in order to comply with
the materiality (1) concept.

(2)

Question AO3 (2) Mar

Number k
2(a) (ii) Award 1 mark for identification and 1 mark for linked
justification /reasoning.

Sejal should have recorded this transaction as an

introduction of capital into the business as she used her
personal money (1), as the business and the owner are two
separate entities (1).

Accept any other appropriate responses. (2)

ASE20104
6 January 2019
Question AO2(10) Mark
Number
2(a) Award marks as indicated.
(iii)
Sejal
Extended trial balance extract at 31 December 2018

Adjustments
Debit Credit
$ $ $
Equity 43 250 390
(1)
Discount allowed 1 350 15
(1)
Discount received 2 475 15
(1)
Fixture and fittings 2 410 390
(1)
Purchases 185 780 390
(1)
Purchases returns 7 450 135
(1)
Revenue 231 765
Sales returns 5 945 135
(1)
Trade payables 78 950 90
ledger control (1)
Trade receivables 98 257
ledger control
Suspense 390 390
(1) (1) (10)

Question AO2 (4) Mark

Number
2(a)(iv) Award marks as indicated.

$16 540 (4) W

W
$
16 450
(30) (1)
(270) (1)
390 (1)
16 540 (1of) (4)
Additional guidance
Correct answer only scores 4 marks.
Accept split of $30 and $270.
No specific layout required.

ASE20104
7 January 2019
Question AO1 (4) Mark
Number
2(b) Award 1 mark for each advantage up to a
maximum of 2 marks and 1 mark for each
disadvantage up to a maximum of 2 marks.

Advantage

Limited liability so personal assets are safe (1)

Possibility to raise more finance by issue of shares (1)

Disadvantage

Strict format for preparation of final accounts (1)

Strict rules to submit and file accounts (1)

Accept any other appropriate responses. (4)

TOTAL FOR QUESTION 2 – 22 MARKS

ASE20104
8 January 2019
Question AO2(9) Mark
Number
3(a) (i) Award 1 mark for correct figure against correct labels as indicated.

Malahar Ltd
Statement of changes in equity for the year ended 31 December
2018

Share Share Revaluation Retained Total

capital premium reserve earnings
$ $ $ $ $
1 January 2018 250 000 62 500 180 000 165 290 657 790

Final dividend (25 000) (25 000)

(1)
Bonus issue 50 000 (50 000)
(1) (1)
Rights issue 100 000 25 000 125 000
(1) (1)
Interim dividend (40 000) (40 000)
(1)
Revaluation 50 000 50 000
reserve (1)
Profit for the 118 125 118 125
year (1)
31 December 400 000 37 500 230 000 218 415 885 915
2018 (1of) (9)

Question AO1 (1) Mark

Number
3(a) (ii) Award 1 mark as indicated.

Shareholders (1)

Accept any other appropriate responses. (1)

Question AO1 (1) Mark

Number
3(a) (iii) Award 1 mark as indicated.

To know the return on their investment (1).

Accept any other appropriate responses. (1)

ASE20104
9 January 2019
Question Answer AO2 (5) Mark
number
3(b) Award marks for correct figures with understandable labels as
indicated.
Malahar Ltd
Reconciliation of profit for the year to net cash from
operating activities for the year ended 31 December
2018

$
Profit for the year 118 125
Depreciation charge for the year 67 000 (1)
Decrease in inventory 9 920 (1)
Increase in trade receivables (19 200) (1)
Decrease in trade payables (10 870) (1)
Net cash from operating activities 164 975 (1of)

(5)

Question AO3 (2) Mark

Number
3(c) Award 1 mark for identification and 1 mark for linked
justification /reasoning.

The cash and cash equivalents will increase with right issue but not
with bonus issue (1) as the the right issue involves issue of shares to
shareholders to raise cash but bonus issue involves issue of shares by
using the reserves (1).

Accept any other appropriate responses. (2)

Question AO1 (2) Mark

Number
3(d) Award marks as indicated.

Current ratio (1).

Quick ratio (acid test) (1).

(2)
TOTAL FOR QUESTION 3 – 20 MARKS

ASE20104
10 January 2019
Question AO2 (4) Mark
Number
4(a) Award marks as indicated.

$
Cost 55 000 (1)
at 31 March 2019

Depreciation charge 1 250 (2) W1

for period ending 31 March 2019
W1
1 050 (1)
200 (1)
1 250
Accumulated depreciation 22 250 (1of)
at 31 March 2019
(4)
Additional guidance
Correct answer only scores 4 marks.
No specific layout required.

Question AO2 (4) Mark

Number
4(b)(i) Award marks as indicated.

$250 (4) W

W
$
375
(200) (1of)
(125) (1)
(300) (1)
(250) (1of)
(4)
Additional guidance
Correct answer only scores 4 marks.
No specific layout required.

ASE20104
11 January 2019
 Question AO2 (2) Mark
Number
4(b)(ii) Award marks as indicated.

$1 600 (2) W

W
$
1 900
(300) (1)
1 600 (1of)
(2)
Additional guidance
Correct answer only scores 2 marks.
No specific layout required.

Question Answer AO2 (7)

Number Mark
4(c) Award marks for correct figures with understandable labels
as indicated.
Nishant
Budgeted statement of financial Position at 31 March 2019
$
Assets
Non-current assets
Motor vehicles 32 750 (1of based
on a)
Current assets
Inventories 30 000
Trade and other receivables 114 400
Cash and cash equivalents 1 600
146 000 (1of)
Total assets 178 750
Equity and liabilities
Equity
Balance at 1 January 2019 50 000
Loss for the period (250) (1of from bi)
Drawings (14 500) (1)
Total equity 35 250 (1of)
Current liabilities
Trade and other payables 143 500 (1)
Total equity and liabilities 178 750 (1of)
(7)
Additional guidance
Award final of mark if the total equity and liabilities are equal to total assets.

ASE20104
12 January 2019
Question AO4(4) and AO5(1)
Number Mark
4(d) Award 1 mark for analysis up to a maximum of 4 marks.
Award 1 mark for evaluation.

The drawings figure for the three months exceeds the budgeted profit (1)
which in the long term could affect the equity of the owner (1).

The purchase of the new motor vehicle in March has resulted in a large
outflow of cash (1) the owner needs to consider other sources of funding
which require less outflow of cash (1).

The amount of trade receivables is expected to increase over the three

months (1), Nishant could consider offering a cash discount (1).

Any supported evaluation (1)

Accept any other appropriate responses.

(5)

TOTAL FOR QUESTION 4 – 22 MARKS

ASE20104
13 January 2019
Question AO2(5) Mark
Number
5(a) Award 1 mark for each row as indicated.

Year 1 2 3 4 5
$ $ $ $ $
Revenue 600 000 600 000 675 000 700 000 725 000
Direct (300 000) (300 000) (325 000) (325 000) (325 000)
materials
Direct (50 000) (55 000) (60 500) (66 550) (73 200)
labour
Variable (10 000) (12 500) (15 000) (17 500) (20 000)
overheads
Fixed (120 000) (120 000) (120 000) (120 000) (120 000)
overheads

Net cash 120 000 112 500 154 500 170 950 186 800
inflows (1) (1) (1) (1) (1)
(5)
Additional guidance
Correct answer only scores 5 marks.
No specific layout required.

ASE20104
14 January 2019
Question AO2(6) Mark
Number
5(b) Award marks as indicated.

Option 1 Option 2

$ $
(450 000.00) (1) (250 000.00) (1)
337 477 .05 (1of) 517 357 .95 (1of)
112 522 .95 (1of) W1 267 357 .95 (1of) W2

W1 W2

Option 1 Option 2
Year Discount Net cash Present Net cash Present
factor flows values flows values
@11%
0 1.000 (450 000) (450 000) (250 000) (250 000)
(1) (1)

1 0.901 120 000 108 120.00 115 000 103 615.00

2 0.812 112 500 91 350.00 107 500 87 290.00

3 0.731 154 500 112 939.50 149 500 109 284.50

4 0.659 170 950 112 656.05 165 950 109 361.05

5 0.593 186 800 137 457.40 181 800 107 807.40

+ 45 000 (1of based (1of)
231 800 on a)

Net present value 112 522.95 267 357.95

(1of) (1of) (6)

Question AO1(2)
Number Mark
5(c) Award mark as indicated.

Payback period (1)

Accounting rate of return (1)

Accept any other appropriate responses. (2)

ASE20104
15 January 2019
Question Answer AO3 (4) AO5 (1) Mark
Number
5(d) Award 1 mark for each point of discussion up to a
maximum of 4 marks.
Award 1 mark for supported decision.

• Option 1 needs a higher investment compared

to option 2 (1) so will increase the borrowing
cost (1) which will reduce the profit for the year
(1).

• Option 1 gives the higher net cash inflow

compared to option 2 from the sales (1) but has
lower net present value (1).

• Option 1 has a higher production capacity

compared to option 2 (1) so will be able to meet
increased demand in future (1).

• Option 1 provides the residual value whereas

option 2 has nil value (1), this can be further
used to finance the new machine after five years
(1).

Accept any other appropriate responses. (5)

TOTAL FOR QUESTION 5 – 18 MARKS

TOTAL FOR PAPER= 100 MARKS

ASE20104
16 January 2019