Examiners’ report

T3 Maintaining Financial Records

June 2009

General Comments
As in recent sittings, the paper was made up of two sections.
Section A included 20 multiple choice questions of two marks each, and section B included 4 questions of 25
marks each. All questions in both sections were compulsory.

This structure allows a broad syllabus coverage to be achieved in each sitting. As a result, focussing preparation
on a selection of topics is not recommended. Candidates must ensure that they have prepared for all topics on
the syllabus.

A number of candidates had clearly undertaken adequate preparation across the whole syllabus. Such candidates
were able to achieve very good marks.

Specific Comments

Question One
The various parts of this question tested candidates knowledge of some of the technical matters included in the
syllabus.

As noted in previous reports, candidates are not expected to demonstrate detailed technical knowledge. However,
the need to ensure that some key terms are understood and can be properly used is an important part of
assessing a candidate’s ability to be considered as an effective accounting technician. As this term implies,
technical knowledge is required.
Thus, candidates should ensure that they have a clear grasp of the key technical issues included in the syllabus.

Those candidates who demonstrated their grasp of such matters obtained good marks. Furthermore, it is
interesting to note that there is a strong correlation between the number of marks obtained in question 1 and a
candidate’s overall mark. Those candidates who demonstrate a good understanding of technical matters, tend to
score good marks in the rest of the paper. This is probably a result of good preparation, which ensures that the
candidate has developed an ability to work out the answer to a question from the data provided, rather than
attempting to reproduce an answer learned by rote from a previous exam paper.

(a) In general, this part was well answered, but some confusion / lack of clarity was apparent in a number of
cases. Confusion was demonstrated by candidates who listed errors which would not be revealed by preparing a
trial balance. This may also have been because the candidate simply listed any error they could think of without
thinking about the answer. Lack of clarity was evident in answers which were incomplete - eg ‘error of
transposition’, with no explanation. If an error of transposition is made in the daybook, and this incorrect value is
posted correctly to the general ledger, the trial balance will still balance, as the debit and credit entries will have
the same (incorrect) value. However, if the error of transposition occurs in only one of the entries in the general
ledger, the debit and credit totals of the trial balance will be different.
Candidates should ensure that their answer is clear, as markers cannot make assumptions about what a
candidate meant to write.

(b) This point also applies to part (b). Some candidates provided brief – but clear – statements, which obtained
marks. However, answers which simply stated that the primary objective of both customers and suppliers was to
decide whether to continue to conduct business were not awarded marks, as these answers did not provide any
reference to the basis of the decision (eg so that customers would continue to receive goods and services, or so
that suppliers could assess the creditworthiness of the customer.)

(c) The term ‘provision’ has a specific meaning, related to uncertainty (usually about the timing of the payment

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or the amount of the payment). To avoid confusion, the CAT exams do not refer to a ‘provision for depreciation’ or
a ‘provision for bad debts’, as these accounting entries do not fit with the definition of a provision. Instead, the
terms ‘accumulated depreciation’ and ‘allowance’ respectively are used. Those candidates who provided
simplistic answers referring to depreciation and bad debts could not be awarded marks.

(d) There were a number of very good answers to this part of the question. In the main, such answers were brief,
but offered a clear statement about differences between physical existence and the entries in the non-current
asset register. A number of candidates provided answers which hinted at correct statements, but could not be
awarded marks because insufficient information was provided. An example of this was a reference to an asset
having been scrapped, without noting that the non-current asset register had not been updated. (If an asset had
been scrapped AND this had been recorded in the non-current asset register, there would be no discrepancy.
Consequently, and answer such as this was incomplete.

(e) This was probably the most difficult art of the entire exam, as it tested candidates’ ability to explain a basic
principle. Those candidates who focussed on making simple statements (such as noting that historical cost
means that the value at which a transaction took place is used to record it, and that this value normally remains
unchanged) obtained good marks.

However, as disappointing number of candidates had clearly not allocated any study time as thus provided vague
comments (such as historical cost is the past cost) could not be awarded marks.

Question Two
As noted in successive reports, the need to accurately complete reconciliations is a core skill for an accounting
technician. This question tested candidates’ ability to complete a receivable reconciliation. Those candidates who
had developed the ability to think logically were rewarded with high marks, with a number of candidates
obtaining full marks for the question.
Those candidates who did not score well tended to repeat the errors noted at previous sitting, such as:
• incorrect value used for entries / reconciling adjustments;
• adjusting entries on wrong side of ledger account;
• reconciling adjustments added, rather than deducted or vice versa; items which required adjusting
entries in the ledger account treated as reconciling adjustments, or vice versa.

Once again, a number of candidates presented a ledger account in which the entries were treated as additions or
deductions. As it was not clear which of these were intended to be debit entries and which were intended to be
credit entries, this approach did not answer the question. It is essential that candidates understand that, when a
ledger account is required, answers should be presented in the correct format. These need not be the ‘T’ account
format used in the suggested solutions, but it MUST clearly indicate whether each entry is a debit entry or a
credit entry.

One puzzling issue is that some candidates who produced answers which were otherwise good answers, did not
attempt part (b) of the question. This is hard to understand, as marks were awarded for the application of a
number of reasonably straightforward points, as noted in the published solutions.

Question Three
As in previous sittings in which the topic of accounting for non-current assets has been tested, answers ranged
form extremely good to poor. Once again, those candidates who had ensured that their study provided them with
a sound overview of the key points of the topic were able to achieve good marks.

As noted above in the comments on other questions, the main reasons that other candidates did not score well
could be summarised as a lack of clarity.

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Specific examples of this were:
in part (a) (ii), calculating accumulated depreciation for an extra year, leading to a reduced net book value, and
thus, an overstated profit on disposal;
in part (a) (iii), omitting either the disposal or the addition when calculating the value of assets to be depreciated;
incorrect application of the straight line method of depreciation;
confusion of values between cost and net book value so that calculations were based on a mixture of both types
of value.
In part (a) (iv), neglecting to include the profit on disposal in the calculation of profit.

Some of these issues – in particular the calculation of the net book value of the disposed asset - undoubtedly
arose as a result of not reading the question carefully enough.

In part (b), some candidates included incorrect entries – for example the net book value or accumulated
depreciation - in the cost ledger account. In other cases, entries were not identified as being either debit entries
or credit entries.

Part (c) followed logically from the previous parts of the question. The starting point was the cost value as
obtained in part (b). In many cases, this part of the question was answered well. Where candidates did not
obtain marks, the main reason was a lack of awareness of how the values which had already been calculated
should be used.

Question Four
The preparation of final accounts was tested in this question. Given that questions on this paper are for 15
marks, the requirement was limited to a number of key figures in the accounts.

An encouraging number of candidates scored high marks on this question, with some obtaining full marks.

Unfortunately, some candidates did not score well. This was mainly due to confusion over how to calculate some
of the key figures, for example:
NRV of inventory
Cost of sales
Prepayment
Charge to income statement including accrual and prepayment
Other problems evident in weaker answers was recognising which items should be included in current assets
and /or current liabilities

In the final part of the question, it was surprising to note that a number of candidates who had produced good
answers to the other parts of the question did not pick up marks. The main reason for this was a lack of clarity
on how to use the values already calculated in order to calculate closing capital. The fact that only two marks
were available for this question should have alerted candidates to the fact that a brief calculation was required.
The requirement to calculate profit in the previous part of the question was also expected to hint that the final
part could be answered by updating the opening capital in the trail balance with the values for profit and
drawings.

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