Edexcel International A Level Accounting: Role and purpose, concepts and conventions (YAC11) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover outcomes 1.1.1 to 1.1.2 and 1.1.8 to 1.1.10 of the Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11) specification, Issue 2, September 2018. This is Unit 1 content, so it is International AS material that also counts towards the full International A Level. All money amounts are in dollars.

Course hub: Edexcel A-Level Accounting. Checklist: YAC11 topic checklist. Free 10-minute diagnostics. Learn first from the study guide or the revision notes. For wider practice use the principles practice set.

Questions

1. State the three parts of the role of accounting. [3]

2. Fenmark Tiles has an owner, a bank lender and a tile supplier. Identify two of these users. For each, state one piece of accounting information they would want and why. [4]

3. Yelverton Joinery reports the following.

                     Month 1    Month 2
Revenue               36,000     42,000
Cost of sales         21,600     27,300

(a) Calculate gross profit as a percentage of revenue for each month. [4] (b) Explain one way the manager could use the result. [2]

4. Name the accounting concept applied in each case.

(a) Yelverton Joinery records fitted doors as revenue in December, when they are installed, though the customer pays in February. [1] (b) The owner’s family holiday is paid from the business bank account and recorded as drawings. [1] (c) A damaged batch of timber is valued at its expected selling price less repair costs, not at cost. [1] (d) The financial statements spread the cost of a van over its useful life because the business is expected to keep trading. [1] (e) The method used to calculate the allowance for irrecoverable debts is the same as last year. [1]

5. Sunderby Kites has a year end of 31 December. On 1 September it paid 2,400 for twelve months of insurance. Electricity used in December was 290, but the bill arrives in January.

(a) Calculate the insurance expense for the year and the prepayment at the year end. [3] (b) State the amount and the classification of the electricity at the year end. [2]

6. Sunderby Kites holds three inventory lines at the year end.

Line              Units   Cost   Selling price   Selling costs
Stunt kites          40     22              30               4
Delta kites          60     15              17               3
Spare line sets     100      6               5               0

Costs and prices are per unit.

(a) Value each line using the lower of cost and net realisable value (NRV). [3] (b) Calculate total inventory and the effect on profit compared with valuing at cost. [2] (c) Name the concept applied. [1]

7. Hollowell Print bought land for 150,000. An agent now values it at 210,000.

(a) State the amount at which the land is recorded under historic cost. [1] (b) State one advantage and one limitation of historic cost. [2] (c) The company’s most experienced press operator is a major reason for its success. Explain why this is not in the statements. [3]

8. Veldane Cycles has revenue of 640,000 and treats an item as material if it costs at least 0.5% of revenue.

(a) Calculate the threshold. [1] (b) A workshop pump costing 380 is expected to last five years. State and justify its treatment. [2] (c) A machine costs 9,600. State its treatment and the percentage of revenue. [1]

9. Veldane Cycles has a year end of 31 October. A customer orders a bike on 12 October for 4,800 and pays a deposit of 1,200 on 14 October. The bike is delivered on 6 November and the balance is paid on 20 December.

(a) State the revenue recognised in the year to 31 October. [1] (b) State how the deposit is shown at 31 October. [1] (c) State the revenue recognised in November. [1] (d) State the trade receivables balance on 30 November. [1] (e) Name the concept applied. [1]

10. Brackwen Candles owes a bank loan that has been called in. The owner expects to close in two months. Machinery has a carrying value of 18,000 and would sell for 6,500. Inventory costing 9,000 would sell for 5,000.

(a) Explain the going concern concept. [2] (b) Calculate the reduction in asset values if the statements were prepared on the basis that the business will close. [3] (c) Explain why users need this information. [1]

11. (a) State the IAS term for each: stock, debtors, net book value and bad debts. [4] (b) Explain two benefits of businesses using International Accounting Standards. [2]

12. Marnock Pottery has a year end of 31 December and a draft profit of 31,500. The following errors are found.

• Pots that cost 240 were taken by the owner for family use and charged as an expense.
• A customer deposit of 900 for pots to be delivered in January was included in revenue.
• Inventory at cost of 4,200 includes damaged pots that cost 600. They can be sold for 350 after repairs costing nothing further.
• Insurance of 1,800 for twelve months from 1 October was all charged to this year.

(a) For each error, name the concept breached and state the adjustment to profit. [8] (b) Calculate the corrected profit. [2]

Answers

1. Record [1], analyse [1], communicate [1] information to users. [3] Examiner insight: Answers that say only “keep records” tend to earn one point, so give the three verbs in the order the specification uses.

2. Owner [1]: wants profit for the year [1], to decide on drawings or reinvestment. Lender [1]: wants evidence of ability to repay [1], to judge whether interest and capital will be paid. Other pairs are acceptable, such as supplier and trade payables position, to decide whether to supply on credit. [4] Examiner insight: A named user with a vague need (“how the business is doing”) is weaker than a link between that user and a specific figure.

3. (a) Month 1: 36,000 - 21,600 = 14,400 [1]; 14,400 / 36,000 = 40.0% [1]. Month 2: 42,000 - 27,300 = 14,700 [1]; 14,700 / 42,000 = 35.0% [1]. (b) The margin fell by five points although gross profit rose [1]. The manager could investigate supplier prices or discounting, and decide whether to raise selling prices [1]. [6] Examiner insight: A full calculation line showing gross profit first helps a marker see your method even if the final percentage slips.

4. (a) Realisation [1]. (b) Business entity [1]. (c) Prudence [1]. (d) Going concern [1]. (e) Consistency [1]. [5] Examiner insight: A single concept name is enough for each part, but one chosen from the wrong clue of the scenario will not gain credit.

5. (a) Monthly cost = 2,400 / 12 = 200 [1]. Four months used (September to December): 4 x 200 = 800 expense [1]. Prepayment = 2,400 - 800 = 1,600 [1]. (b) An accrued expense of 290 [1], shown as an other payable (a current liability) [1]. [5] Examiner insight: Counting months inclusively from the payment date is the usual slip, so write the months out before multiplying.

6. (a) Stunt kites: net realisable value (NRV) = 30 - 4 = 26, cost 22 is lower, so 40 x 22 = 880 [1]. Delta kites: NRV = 17 - 3 = 14, lower than 15, so 60 x 14 = 840 [1]. Spare line sets: NRV = 5, lower than 6, so 100 x 5 = 500 [1]. (b) Total = 880 + 840 + 500 = 2,220 [1]. Cost = 2,380, so profit is lower by 160 [1]. (c) Prudence [1]. [6] Examiner insight: Comparing cost with NRV line by line, not on the total, is what this question rewards; a total-only comparison hides the 40 stunt kites staying at cost.

7. (a) 150,000 [1]. (b) Advantage: objective and can be checked to an invoice [1]. Limitation: may understate the current value of assets in a period of rising prices [1]. (c) Money measurement [1]. The operator’s skill cannot be given a reliable amount in money [1], so it is not recorded as an asset [1]. [6] Examiner insight: Naming the concept alone does not explain why the item is absent, so add the reason in a second sentence.

8. (a) 0.5% x 640,000 = 3,200 [1]. (b) 380 is below 3,200 (0.06% of revenue) [1], so it is immaterial and is treated as an expense, though it lasts five years [1]. (c) 9,600 / 640,000 = 1.5%, which is above the threshold, so it is material and is recorded as a non-current asset [1]. [4] Examiner insight: Showing the comparison with the threshold, not just the label “material”, is what supports the conclusion.

9. (a) 0 [1]. (b) A current liability (other payables), as goods are not yet supplied [1]. (c) 4,800 [1]. (d) 4,800 - 1,200 = 3,600 [1]. (e) Realisation [1]. [5] Examiner insight: Candidates often treat the deposit as revenue because cash arrived; tie your answer to the delivery date.

10. (a) Trading is expected to carry on for the foreseeable future [1], so assets stay at carrying value and costs are spread over their lives [1]. (b) Machinery: 18,000 - 6,500 = 11,500 [1]. Inventory: 9,000 - 5,000 = 4,000 [1]. Total reduction 15,500 [1]. (c) Users such as the bank or suppliers would otherwise overestimate what is available to repay them [1]. [6] Examiner insight: Applying the figures to the scenario, instead of restating a definition, is usually what separates stronger answers here.

11. (a) Inventory [1]; trade receivables [1]; carrying value [1]; irrecoverable debts [1]. (b) Two benefits, each stated and explained. For example, comparability between businesses, because the same rules are applied [1]; trust in the statements, because they follow recognised rules and not the preparer’s choice [1]. [6] Examiner insight: The specification says candidate responses should use IAS terms, so older terms in your own answers are a risk.

12. (a) Owner’s use: business entity [1]; add back 240 to profit [1]. Deposit: realisation [1]; reduce profit by 900 [1]. Damaged pots: prudence [1]; NRV 350, write-down 600 - 350 = 250, so reduce profit by 250 [1]. Insurance: accruals [1]; 9 months unused = 1,800 / 12 x 9 = 1,350, so increase profit by 1,350 [1]. (b) 31,500 + 240 - 900 - 250 + 1,350 [1] = 31,940 [1]. [10] Examiner insight: Writing each adjustment with its sign, then summing, lets a marker follow your working even if one item is misread.

Where marks are usually lost

• Defining a concept without applying it to the scenario.
• Naming users without linking them to a figure or need.
• Counting the wrong number of months for a prepayment.
• Treating a deposit as revenue before delivery.
• Using prudence to justify understating profit.
• Writing market value when historic cost is asked.
• Using older terms such as stock, debtors and net book value.
• Stating a result as material or immaterial without a comparison.
• Adding an adjustment to profit when it should be deducted, and the reverse.

Next steps

• Revision notes
• Study guide
• Edexcel A-Level Accounting hub
• Checklist
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Frequently asked questions

How do you answer a question that asks you to name an accounting concept? Name the concept, apply it to the scenario and say what it does to profit or to the statement of financial position. Defining a concept without applying it to the business in the question loses marks.

Is a customer deposit treated as revenue? No. Under the realisation concept, revenue is recognised only when the goods or services are provided, so a deposit received before delivery is a liability. Treating it as revenue is a common error.

How do you decide whether an item is material? An item is material if a user might decide differently because it was left out or wrong. Support your answer with a comparison, for example the item as a percentage of revenue or profit, rather than simply stating that it is material or immaterial.

Which terms should you use in Edexcel IAL Accounting answers? The specification says examiners use IAS terms throughout Unit 1 and Unit 2, so use terms such as inventory, trade receivables and carrying value. Older terms such as stock, debtors and net book value should be avoided.

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11) specification, Issue 2, September 2018, published by Pearson Education Limited.