FA2 S20-A21 Examiner's Report
FA2 S20-A21 Examiner's Report
FA2 S20-A21 Examiner's Report
Financial Record
(FA2)
September 2020-
August 2021
Examiner’s report
The examining team share their observations from the
marking process to highlight strengths and
weaknesses in candidates’ performance, and to offer
constructive advice for those sitting the exam in the
future.
Contents
General Comments ............................................................. 2
Example 1 ........................................................................ 2
Example 2 ........................................................................ 3
Example 3 ........................................................................ 4
Example 4 ........................................................................ 4
Example 5 ........................................................................ 5
Conclusion ........................................................................... 6
The intention of this report is that, when considered in conjunction with previous
reports, candidates at future sittings will have a resource which maximises their
chance of success. The most effective way to use these reports is to consider both the
technical content of each question, and the approach to answering the question –
noting that different question types will require slightly different approaches. This
computer-based examination consists of 50 compulsory objective test questions worth
two marks each.
Example 1
How much interest will be charged on the drawings in the year ended 31
December 20X7?
A. $200
B. $100
C. $50
D. $150
Partners may incur interest on their drawings if this is included in the partnership
agreement. The firm of accountants that Khan works for charges interest on
drawings at 5% per year on a pro-rata basis. Khan has drawn $2,000 from the
business twice in the year ended 31 December 20X7. The first withdrawal on 1
January 20X7 was at the beginning of the accounting period. The 5% interest
will therefore be applied for the full 12 months. The second withdrawal was on
1 July 20X7. The period between this date and the reporting date is six months,
therefore the interest for this period needs to be time apportioned. Interest is to
be calculated as follows:
$
1 January $2,000 x 5% 100
1 July $2,000 x 5% x 6/12 50
150
Janice has the following entries in her rent account for the year end 31 December
20X5.
The bill for rent for the quarter ended 28 February 20X6 for $1,500 was not received
until 1 March 20X6.
What is the statement of profit and loss charge for rent for the year end 31
December 20X5?
The opening balance on the accruals account of $425 firstly needs to be reversed by
debiting accruals and crediting the rent expense. The rent paid of $5,100 during the
year is to be recorded as debit rent expense and credit bank. Finally, the closing
accrual needs to be calculated and recorded. The invoice of $1,500 relates to
December, January and February. Only the month of December relates to the year
ended 20X5. Therefore, the closing accrual will be $500 ($1,500 x 1/3) and this will be
recorded as debit rent expense, credit accruals.
5,600 5,600
Are the following types of business likely to maintain a sales day book?
Yes No
1. A retailer selling goods for cash only
2. A property developer selling two or three
large buildings a year
This question tests a candidate’s understanding of the sales daybook and when
it may be used. The purpose of a sales daybook is to capture the credit sales
of a business. It is useful for those businesses that have numerous credit sale
transactions. The daybook is totalled periodically and posted to the general
ledger.
A retailer selling goods for cash in statement 1 would not maintain a sales
daybook as the sales daybook is used to capture credit sales only. Therefore,
the appropriate selection is no.
The property developer is also not likely to maintain a sales daybook as there
are only two to three transactions in a year, therefore, maintaining a daybook is
not relevant and the selection should also be no.
Example 4
Which of the following are part of the process of producing final accounts from
a trial balance?
A. 1, 2 and 3
B. 1 and 3 only
C. 2 and 3 only
D. 1 and 2 only
Both (1) and (3) are examples of the process of preparing final accounts. At the
reporting date a review for accruals is undertaken. This is to ensure that
The purchase of a non-current asset is not part of the process of producing final
accounts and would be recorded immediately when purchased. The cost of
purchase would be recognised within non-current assets on the statement of
financial position and spread over the asset’s useful life through a depreciation
charge.
Example 5
Yes No
1. The purchase of goods for $200 had been credited to
the purchases account and debited to the supplier's
personal account
As noted in Example 3, candidates must select the correct answer for each of
the statements.
Finally, statement 4 would cause an imbalance. The trial balance records all
the balances from the ledger accounts. When transactions are initially recorded,
there should be equal debit and credit entries. If a closing balance on a ledger
account is not included in the trial balance, then the trial balance totals will not
agree.
Conclusion
The first is that there was a lack of awareness / understanding of fundamental issues
in the syllabus (e.g. the treatment of accruals). The second is that the questions were
not read carefully enough, which led to confused thinking.
These are two of the reasons which have been highlighted in the reports for all
previous sittings. Candidates preparing for future sittings are strongly encouraged to
ensure that they have developed a clear understanding of the key points of each area
of the syllabus and that they read carefully and think logically when attempting
questions.