F3.Ffa Exam Report.j18
F3.Ffa Exam Report.j18
F3.Ffa Exam Report.j18
FA/FFA papers
For CBE exams covering September 2017 to June 2018
General Comments
There were two sections to the examination paper and all of the questions were compulsory.
Section A consisted of 35 multiple choice questions (two marks each) which covered a broad
range of syllabus topics. Section B had two longer questions (15 marks each) testing the
candidates’ understanding and application of financial accounting skills in more depth.
The following paragraphs report on each section and focus on some of the key learning points.
Section A
It was pleasing to see that the majority of candidates attempted all of the questions. Candidates
preparing for the next examination of FA/FFA are advised to work through the sample questions
discussed here and to carefully review how each of the correct answers were derived. The
following three questions are reviewed with the aim of giving future candidates an indication of the
types of questions asked, guidance on dealing with exam questions and to provide a technical
debrief on the topics covered by the specific questions selected.
Example 1
M Co’s trial balance does not agree and therefore a suspense account with a debit balance of
$3,000 has been opened.
This question tests a candidates understanding of the errors that may occur in financial statements
and whether an impact on the suspense account will arise.
As an equal debit and credit entry has been performed there will be no impact on the suspense
account. M Co can correct this error of principle by debiting equipment repairs and crediting plant
and equipment.
Option A is an error of commission where M Co has completed the following double entry in error:
Dr Bank $3,000
Cr Payables control account $3,000
The credit entry should have been recorded within the receivables control account. Again, this
error will not impact the suspense account. M Co can fix the error by debiting payables control
account and crediting receivables control account.
Option B is an error of omission where the account is omitted from the trial balance entirely.
Interest received is a credit balance and for the trial balance to balance a suspense account on the
credit side would be required, not the debit side.
Option D will impact the suspense account as a positive bank balance (debit) has incorrectly been
recorded as an overdraft (credit) on the trial balance. This will result in debits being understated by
$1,500 and credits being overstated by $1,500. The error will have resulted in a debit entry to the
suspense account of $3,000 in order for the trial balance to balance.
Example 2
On 1 October 20X6, N Co had 400,000 25c ordinary shares in issue. On 1 January 20X7, there
was a rights issue of one for five at $1.50. The entry in the share premium account was omitted in
error and as a result the trial balance at 30 September 20X7 did not agree.
What balance would have been entered in the suspense account when it was opened?
A $400,000 Dr
B $400,000 Cr
C $100,000 Dr
D $100,000 Cr
This question tests a candidate’s ability to record a share issue in the financial statements. To
identify the amount that would have been recorded in the suspense account it would be useful to
consider how the share issue would have been recorded in the financial statements in full.
Dr Bank $120,000
Cr Share capital (80,000 x 25c) $20,000
Cr Share premium (40,000 x (1.50 – 0.25)) $100,000
Therefore, the answer is D as it is a credit to share premium that has been omitted from the
financial statements.
Distractors A & B arise where the 400,000 shares are mistaken as a monetary amount of
$400,000. If this were the case, the number of shares in issue would have been 1,600,000
($400,000 / 25c) which in turn would result in 320,000 new shares being issued under the rights
(1,600,000 x 1/5). The share premium arising would have been $400,000 (320,000 x ($1.50 –
0.25)).
Example 3
D Co’s year-end balance on the receivables control account does not agree to the total of the list of
receivables ledger balances of $560,000. The following errors have been identified:
(1) An irrecoverable receivable balance of $30,000 has been correctly written off in the
receivables control account but no adjustment has been made in the relevant customer’s
account in the receivables ledger
(2) Early settlement discounts of $12,500, which were not expected to be taken at the time the
invoice was raised, have been omitted from both the receivables control account and the
receivables ledger balances
What was the balance on the receivables control account AFTER the errors were corrected?
A $505,000
B $530,000
C $542,500
D $517,500
The receivables control account and the list of receivables should agree. To correctly answer this
question, candidates need to use the relevant information given about the list of receivables
reconciliation. The irrecoverable receivable has not been adjusted in the list of balances so will
need to be taken into account in the reconciliation. The early settlement discount was not
expected to be taken at the time the invoice was raised and therefore, the sale and receivable
would have been recorded at the gross amount in accordance with IFRS 15 Revenue from
Contracts with Customers. The correct adjustment for this discount when taken would be to Dr
$
Total list of receivables ledger balances 560,000
Irrecoverable debt write off (30,000)
Settlement discounts (12,500)
Adjusted receivables 517,500
Section B
Section B type questions will test the preparation of basic financial statements (including
Statements of cash flows) for single entities (single companies or sole traders) and simple
consolidated financial statements. It can also include some basic accounts interpretation aspects.
The standard of answers in section B was generally good and the majority of candidates attempted
both questions. The following comments explain how candidates might be able to improve their
performance in the exam.
Candidates should ensure that they have a good understanding of double entry book-keeping and
how an adjustment made in the statement of profit or loss might impact elsewhere (for example in
the statement of financial position). The following comments may be of assistance when preparing
the required statement for a single entity:
Read the requirement first to determine the statement that you have been asked to
prepare.
Carefully read through the trial balance and decide what should be included in your
required statement (i.e. have you been asked to prepare a statement of profit or loss or a
statement of financial position). Remember not everything given in a trial balance will need
to be used for the statement you are being asked to prepare.
Adjustments or calculations may be required to arrive at a figure for the financial statements
you are being asked to prepare or asked as a separate task within the question.
Select the correct format and title for the statement of profit or loss or statement of financial
position in accordance with IAS 1.
Attempt all parts of the question.
Common adjustments for depreciation are required in these questions. Ensure that you are
able to calculate depreciation using both the straight line and reducing balance methods
and adopt the correct method relevant to the information in your question.
Candidates should read the question carefully and follow the instructions contained therein. For
example, some questions will tell you to use $’000 or $m. Others will give you instructions to
ignore brackets or signs when entering negative numbers. Note also that where a pro-forma
answer shows headings such as “Less: cost of sales”, that no minus sign or brackets should be put
round the figure as the heading already indicates that the figure is negative. In questions requiring
the preparation of statements of cash flows, all figures should be entered as positive and there are
drop down lists for candidates to indicate whether the figure is positive or negative.
Conclusion
Both the FA and FFA exam require candidates to have a thorough understanding of financial
accounting techniques and the capability of preparing financial statements for both single and
group entities. Candidates are advised to engage with practise questions and to know the formats
of financial statements. In the exam you should ensure you answer/attempt all questions in the
time available.