Lecturer Margaret D’Arcy shares some helpful tips for those facing the CAP2 Financial Reporting Interim Assessment exam.
The exam is 90 minutes in duration, so time management is critical to ensure that all questions are fully attempted. The errors noted by the examiner in previous reports are easily corrected and students should ensure that these are avoided.
Time management: as part of your preparation for the exam, you should ensure that you attempt the past papers under exam conditions.
Answer the question asked: take time to read the requirement and ensure that you answer it.
Solutions: identify clearly the part of the question you’re attempting and show workings clearly. Students should bear in mind that solutions provided to past exam papers are for teaching and learning purposes; solutions provided by students in exams will often be much shorter and still achieve full marks.
Suggestions specific to financial reporting...
Layout of financial statements: it’s important to use the correct layout and ensure that the financial statements (SOPLOCI, SOFP, SOCIE and SOCF) are completed fully.
Journals: a focus of the financial reporting exam is on journal preparation/correction, so it’s important that you have good journal preparation knowledge. In correcting journals posted, it can be easier under exam pressure to take a two-step approach:
- Reverse the incorrect journal posted as detailed in the exam question; and
- Set out the correct journal to record the transaction.
Know your basics: the examiner has identified a number of frequently-occurring errors in this exam. The following points are key to avoiding these errors:
- Allowance for bad debts: the change in the allowance is recognised in the SOPL while the trade receivables figure in the SOFP is presented net of the balance on the allowance account;
- Include the impact of any additions/disposals of assets when calculating the depreciation charge for the period. Note the entity’s accounting policy – time- apportion or charge a full year in the year of purchase and none in the year of disposal;
- Be clear on the journals and presentation in relation to revaluation of assets (if unsure, review examples 4–8 of Session 2 CAP 2);
- Know how to account for the disposal of assets;
- Be able to record the impact of accruals and pre-payment on the financial statements;
- It’s easy to get confused by discounts received and allowed: discounts received reduce the payable and are presented as income in the SOPL; discounts allowed reduce the receivable and are presented as an expense in the SOPL; and
- Be able to split the balance on the lease obligation between current and non-current liabilities.