advanced diploma synoptic - osborne books · 2018. 5. 2. · 2 advanced diploma synoptic tutor...

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AdvancedDiplomaSynoptic Practice assessment 2

© Osborne Books Limited, 2016

a s s e s s m e n t i n f o r m a t i o n Read the scenario carefully before attempting the questions.Complete all 7 tasks.Tasks 1.1-1.4 in Section 1 require you to write your answers in this document.Tasks 2.1 to 2.3 in Section 2 require you to download files and work outside the assessment environmentin a spreadsheet software program. The files are available, as indicated, on the Osborne Books website.You should ensure that you save all your files prior to finishing and marking this assessment.

a d v i c eRead each question carefully before you start to answer it.Attempt all questions.You will have 3 hours to answer all parts of the assessment.Note: Important information for the live assessmentIn the live assessment you will have 90 minutes to complete Section 1 and 90 minutes to complete Section2. Any used time will not be transferable between Sections. For example, if you complete Section 1 in 80minutes, you will still have 90 minutes to complete Section 2.You will not be able to go back and review Section 1 once you have finished it, so double check youranswers before you leave Section 1!

s c e n a r i o b a c k g r o u n dYou are Joe Francis, a part qualified accountant who works at Finishing Touches, a business makingcurtain, blinds and soft furnishings. The business is owned by Rebecca Pin and Neil Pleat, trading as apartnership. You are responsible for all aspects of accounting and bookkeeping.

2 a d v a n c e d d i p l o m a s y n o p t i c t u t o r z o n e

Section 1Task 1.1: 15 marksThis task is based on a workplace scenario separate to the rest of the assessment. Maya is an accountant who works in a medium sized accountancy practice, Della, Bright and Philips. Shehas recently been discussing the AAT Code of Ethics with a colleague, who made the followingstatements. Maya would like to clarify if they are correct or not.

(a) Identify whether the following statements are correct or not regarding the AAT Code of Ethics.

Statement Correct Not correct

(a) The AAT Code of Ethics sets out very clear principles forAccounting Technicians to adhere to

(b) Client information is only confidential whilst you work atDella, Bright and Philips

(2 marks)

In the following situations, identify whether Maya does or does not comply with the principle ofprofessional behaviour.(b) Identify whether the behaviour is ethical or unethical:

Behaviour Ethical Unethical

(a) Maya has written some inappropriate remarks about hermanager on a social media site, which she does not thinkthe manager will see

(b) Maya ensures she complies with all relevant laws thataffect Della, Bright and Philips

(2 marks)

Maya has recently been asked by her uncle, who runs a small chain of newsagents, if she could ask Della,Bright and Philips to become his accountants. He would like Maya to be included in the team. (c) If Maya does what her uncle asks, what threat will she be facing to her objectivity?

(a) A familiarity threat(b) A self-review threat(c) A self-interest threat

(1 mark)

p r a c t i c e s y n o p t i c a s s e s s m e n t 2 3

(d) What action should Maya take to safeguard against this threat? Tick all that could apply.

Action Tick to do (a) Inform her uncle she will only be on the team for the first year, to ensure

the firm fully understands his business (b) Inform her manager of her relationship with the new client(c) Request any work she is involved in be reviewed in detail by her manager

(3 marks)

Maya is currently working with a client, Beautiful Face, who makes beauty products. During the course ofher work, she has found out that a new product they are about to launch can cause a severe reaction ifthe customer is allergic to eggs, which the client is aware of. There is no warning on any packagingcurrently. (e) What action must Maya now take?

Action Tick to do (a) Inform the client that she knows there is a problem(b) Follow the internal procedures for reporting unethical behaviour within

Della, Bright and Philips

(2 marks) Maya is considering ‘whistleblowing’ about the problem with the cosmetic product to the relevantregulatory body. (f) Complete the following: Maya will be protected / not be protected from dismissal from Della, Bright and Philips if she

whistleblows, if she is acting in self-interest / good faith. This is because she is breakingconfidentiality due to her duty to the public / employer.

(3 marks)Maya realises she had accidentally submitted a tax return containing incorrect information. The client doesnot want to adjust the mistake and resubmit the return, which means the tax is underpaid by a significantamount. (g) Complete the following: Maya’s client will be guilty of money laundering / failure to disclose if they do not amend the tax

return. Maya must inform the National Crime Agency / Money Laundering Reporting Officer. (2 marks)


Task 1.2: 16 marksFinishing Touches has recently been asked to make several sets of curtains for a hotel, which will generatesales of £20,000 excluding VAT. Rebecca raised an invoice for the deposit of £7,500 on 20 July 20-6, whichis paid on 23 July 20-6. Rebecca raises the final invoice on 12 August 20-7 and this is paid on 18 August20-7.

(a) When is the tax point for the deposit and the final invoice?

(a) 20 July 20-6 and 12 August 20-7(b) 23 July 20-6 and 18 August 20-7(c) 23 July 20-6 and 16 August 20-7

(2 marks)At the end of October 20-6, you were unexpectedly called away to look after a sick relative for two weeks.Before you left you explained the VAT return needed to be finished and submitted, so asked Rebecca andNeil to organise the accountant who produces year-end accounts to cover it. On your return, on 14November 20-6, you find they forgot to do it and no VAT has been paid. Finishing Touches operate nospecial accounting schemes and this is the first time they have not submitted a VAT return on time. (b) What are the consequences for Finishing Touches of this? Tick all that apply.

(a) HMRC will issue a Surcharge Liability Notice to Finishing Touches(b) Finishing Touches will have to pay 2% of the unpaid VAT as a fine(c) If Finishing Touches is late again during the following twelve months the

business may have to pay a default surcharge

(2 marks)


Scenario backgroundFor Tasks 1.2 to 1.4You are Joe Francis, a part qualified accountant who works at Finishing Touches, a business makingcurtains, blinds and soft furnishings. The business is owned by Rebecca Pin and Neil Pleat, and tradesas a partnership. You are responsible for all aspects of accounting and bookkeeping.

Rebecca and Neil have recently travelled to Italy to meet with several fabric suppliers. They have bothsubmitted their expenses and have analysed all the input VAT, including that on entertaining the suppliers,as recoverable on their expenses forms. Neil and Rebecca want you to include the input VAT on thebusiness expenses in the next VAT return. (c) Complete the following sentence: You must claim / not claim the input VAT on the expenses as business entertaining is a legitimate

expense/ not recoverable for VAT. (2 marks) (d) Appling the conceptual framework from the ethical code, which of the following best describes the

situation faced by you?

(a) A familiarity threat to professional behaviour(b) A self-review threat to objectivity(c) A familiarity threat to objectivity (2 marks)

(e) What action should you take? Tick all that apply.

(a) Explain that input tax not accounted for correctly would be consideredmoney laundering

(b) Prepare the VAT return and amend it without telling Rebecca and Neil(c) Contact the AAT helpline for advice

(2 marks)

You are preparing the year-end accounts for March 20-7. You have the following information regardingadministrative expenses. There was an accrual of £750 made in 31 March 20-6, which has now reversed. The cashbook for the yearshows administration costs of £25,645. You have a bill of administrative expenses showing a total cost of£3,300 for the quarter ending 30 April 20-7. This was received and paid for after the year-end. (f) Complete the following statement: The administrative account needs an adjustment for prepaid expenses / accrued expenses /

prepaid income / accrued income dated 31March 20-6 / 31 March 20-7 / 30 April 20-7for £

(4 marks)


If you did not account for administrative expenses in this way you would not be complying with theconceptual framework (g) What elements or underlying principles of the framework would you not be complying with? Tick all

options that apply.

(a) Timeliness(b) Accruals(c) Verifiability(e) Going concern(f) Comparability

(2 marks)


Task 1.3: 14 marksFinishing Touches has always valued inventory on a LIFO (Last In Last Out) basis for its managementaccounts. An example inventory card for lining material, LMC 154, for March 20-7 is shown below. Therewas no opening inventory on 1 March 20-7. 300m was issued to a job on 13 March 20-7.

LMC 154 Lining material – cream 154cm width

Date purchased No of metres Cost per metre Total cost £1 March 100 5.60 56010 March 120 5.75 69012 March 100 5.85 58520 March 110 5.90 649

Finishing Touches is considering changing to FIFO (First in First Out) as an alternative to LIFO for itsmanagement accounts.

(a) Calculate the cost of the 300m issue under FIFO and LIFO and the balance in inventory.

Value of issue Balance on 31 March 20-7

FIFO

LIFO

(8 marks)

(b) Write an email to Neil Pleat and Rebecca Pin to report on the following points:1 The difference between the value of inventory under LIFO and FIFO.2 The reason why LIFO might be preferable for management accounts reporting, commenting

on how the pricing of the lining material is moving.3 The reason FIFO must be used at the year-end, rather than LIFO.

(6 marks)



EMAIL

To: Rebecca Pin; Neil Pleat

From: Joe Francis

Date: 4 April 20-7

Subject: FIFO vs LIFO

Dear Rebecca and Neil

1.

2.

3.

1 0 a d v a n c e d d i p l o m a s y n o p t i c t u t o r z o n e

Task 1.4: 15 marksToday’s date is 14 April 20-7. Rebecca and Neil have been reviewing how they deal with their suppliers.Historically, Finishing Touches have paid a 50% deposit to the supplier for orders of 20 metres or more ofa fabric, which they have then asked customers to pay for. The customers are expressing concern aboutthis policy and some have gone elsewhere as a result. However, many customers come to FinishingTouches as they source ‘unique’ fabrics. Rebecca and Neil have decided that they will inform all their suppliers that they need 30 days credit or willstop buying from them. Several of their main suppliers are small independent fabric printers, who rely onFinishing Touches trade. They may be unable to continue operating if they need to give 30 days credit. You have expressed your doubts about the new supplier policy and Rebecca and Neil has dismissed yourconcerns and suggested if you feel strongly about it, you could consider working elsewhere. (a) Identify and explain the sustainability issues regarding Rebecca and Neil’s request. (3 marks)

(b) Explain the ethical issues that you face as a consequence of Rebecca and Neil’s actions andidentify what actions you can take to remain ethical in this situation. (3 marks)

p r a c t i c e s y n o p t i c a s s e s s m e n t 2 1 1

You receive the following email from Rebecca Pin.

To: Joe Francis < [email protected]>From: Rebecca Pin Cc: Neil Pleat Date: 12 April 20-7Subject: Limited CompanyHi Joe, Neil and I are thinking of converting the partnership to a private limited company. I have done someinitial research and was wondering whether you could clarify the following areas, as the information Ihave found is a little confusing to me. 1) By changing from a partnership to a limited company, Neil and I would have limited liability, and atthe moment we have unlimited liability. Please explain what this means, illustrating with an example. 2) A limited company produces sets of accounts to comply with accounting standards and accountingpolicies. Can you explain the difference between the two, illustrating with an example of each? 3) I have read that the accounts need to be ‘comparable’ and ‘understandable’. Please explain howthese apply to a set of limited company accounts, with an example for each. As I am not an accountant, I would be grateful if you could communicate your responses in a clearmanner. Many thanksRebecca

(c) Reply to Rebecca, addressing all three points she has raised, copying Neil Pleat in. (9 marks)

To: Rebecca Pin From: Joe Francis < [email protected]>Cc: Neil Pleat Date: 14 April 20-7Subject: Limited Company


Task 2.1: 10 marksToday’s date is 31 March 20-7.Finishing Touches lists all purchase orders placed with their suppliers. This list is kept on an Excelspreadsheet. Rebecca and Neil would like you to do some analysis on the purchases made in the lastthree months, to allow them to discuss discounts with the suppliers. They would also like you to allow onlyapproved suppliers to be used for orders to be made. Download the spreadsheet file ‘Tutor Zone Practice Assessment 2 Task 2.1 data.xlsx’ from the OsborneBooks website. Save the spreadsheet file in an appropriate location and rename it using the following format: ‘your initial-surname-AAT no-dd.mm.yy-Task 2.1’. For example: J Francis -123456-12.03.xx-Task 2.1 A high degree of accuracy is required. You must save your work as an .XLS or .XLSX file at regularintervals to avoid losing your work.

(a) Open your renamed spreadsheet. In the worksheet called ‘Purchases 1 Jan to 31 Mar 20-7’,column D needs to show net amount of each purchase order, as the gross amount has beenentered in error. All purchases are VATable at standard rate. • In cell D1, enter the VAT rate 20%, ensuring it is shown as a percentage correctly. In cell D2

enter ‘Net Amount’, formatted in bold, wrapped text and centred. • Use a formula to calculate the net amount of each purchase order in cells D3 to D57, using

absolute referencing to D1 and format them to £000.00.• Show a total purchases figure at the bottom in cell D58.

(2 marks)

(b) To identify the high value items the ‘Purchases 1 Jan to 31 Mar 20-7’ worksheet needs to filtered.• Use the filter function on the ‘Purchases 1 Jan to 31 Mar 20-7’ worksheet and filter the table

by net amount, low to high, excluding Column E. (1 mark)

Section 2Scenario backgroundFor Tasks 2.1 to 2.3You are Joe Francis, a part qualified accountant who works at Finishing Touches, a business makingcurtains, blinds and soft furnishings. The business is owned by Rebecca Pin and Neil Pleat. You are responsible for all aspects of accounting and bookkeeping.

(c) An analysis is required of the value of purchases that Finishing Touches has made, to help themnegotiate discounts for the following quarter. For all the purchases in the ‘Purchases 1 Jan to 31Mar 20-7’ worksheet, insert a pivot chart and pivot table into a new worksheet. Produce a pivot chartfor the total net purchases by supplier.• Rename this worksheet ‘Total net purchases by supplier’.• Insert a clustered column chart.• Highlight the largest supplier’s column in green and the smallest supplier’s column in

orange.• Format the data series to include the total purchases for each supplier in the format 0,000

with no decimal places.• Add the following title to the chart: ‘Total net purchases by supplier’, font size 16.• Resize the chart so the data is clearly visible.

(4 marks)

(d) Rebecca and Neil want to set up a purchasing system, where only approved suppliers can be used.They want you to amend the ‘Purchases 1 Jan to 31 Mar 20-7’ worksheet so they can use it as apurchasing template for April 20-7 onwards. In the worksheet ‘Purchases 1 Jan to 31 Mar 20-7’,apply data validation to the range of cells C3:C57• Only the list of approved suppliers shown in cells E3 to E11 can be used in a drop down box

for each cell in column C.• When you choose any cell in column C, the message ‘Please choose from the drop down

list’ appears.• A suitable warning is shown if users try to manually change a supplier that is not on the

approved list into any cell in column C. (2 mark)

(e) Ensure that only the list of approved suppliers in cells E3:E11 is protected using the password ‘123’so that nobody can change the list without this code.

(1 mark)

At the end of this task you should have one spreadsheet (saved as an .XLS or .XLSX file). This shouldhave two worksheets titled ‘Purchases 1 Jan to 31 Mar 20-7’ and ‘Total net purchases by supplier’ withinformation and data in them.


Task 2.2: 16 marksToday’s date is 10 February 20-7.Rebecca Pin and Neil Pleat are opening a shop and they have asked you to do some analysis for them.They would like you to determine the level of profit likely, based on their current assumptions and costs.You have been given a spreadsheet containing their data and some current pricing and cost information.You will need to adjust the data, in line with their instructions, to calculate the budget for the FinishingTouches shop. Download the spreadsheet file ‘Tutor Zone Practice Assessment 2 Task 2.2 data.xlsx’ from the OsborneBooks website.Save the spreadsheet file in an appropriate location and rename it using the following format: ‘your initial-surname-AAT no-dd.mm.yy-Task 2.2’. For example: J Francis -123456-12.03.xx-Task 2.2. A high degree of accuracy is required. You must save your work as an .XLS or .XLSX file at regularintervals to avoid losing your work.

(a) Open this file. In the worksheet called ‘Shop analysis’ insert ‘Finishing Touches’ in cell A1 in bold,font size 12.

Insert a row below row 1. In A2, enter ‘Analysis for new shop year ending 31 March 20-8. In cells F9 to F15 on the ‘Shop analysis’ worksheet, enter a formula that links to the data in cells

C6 to C12 on the ‘Shop information’ worksheet, ensuring costs show as negative. (2 marks)

(b) On the worksheet ‘Shop analysis’, insert ‘Average price’ in A4. Enter the average price in F4 byreferring to the ‘Revenue’ information in the ‘Shop information’ worksheet. Calculate the revenue inF6.

Using the ‘Materials’ and ‘Skilled labour’ cost information in the ‘Shop information’ worksheet createa formula to calculate the costs of materials and labour at the sales level of 1,000 in the worksheet‘Shop analysis’. Ensure the costs show as negative. Calculate the operating profit at sales volumeof 1000.

(3 marks)

(c) Rebecca and Neil would like to do some sensitivity analysis on sales. They have asked you tocalculate the new operating profit for 1,500 sales, incorporating the following adjustments:• Increase shop staff costs by 50%.• Increase administration by 15%.• The average price will be 5% lower.• Increase skilled labour by an additional 10% to allow for expected overtime.

Put a total border around cells F16 and G16 (single top line, double underline). In F6 to G16, useconditional formatting to show costs as red and income as black, with no ‘-‘ signs showing and thenumbers to be £0,000.

Format the ‘Level of sales (year)’ boxes in F3 and G3 to have a light blue background and the‘Average price’ boxes in F4 and G4 to have a light green background.

Insert a formula in G17 showing the percentage increase in operating profit for the increasedvolume.


On the ‘Shop analysis’ worksheet, use ‘Show formulas’ to show all formulas. Use print screen tocopy and paste this to a new worksheet called ‘Formulas’. Go back to the ‘Shop analysis’worksheet and remove ‘Show formulas’.

(6 marks)

Rebecca and Neil have now asked you what level of sales would be needed to earn an operating profit of£350,000 from the shop. (d) Insert a column between F and G and copy and paste the values and formats from the new column

H into the new column G. In column H, use ‘Goal seek’ to determine what the level of sales in theyear will need to be to earn an operating profit of £350,000.

(2 marks)

(e) Use the pro forma contained in the worksheet called ‘Email’ to do the following: • Report the output analysis for sales levels 1,000 and 1,500 to Rebecca and Neil. Explain

how the two different output levels affect the profit, referring to how the rent, materials andadministration staff costs behave.

• Comment on the amount of revenue needed to earn an operating profit of £350,000. (3 marks)

At the end of this task you should have one spreadsheet (saved as an .XLS or .XLSX file) to upload toyour computer with the following four worksheets: ‘Shop information’, ‘Shop analysis’, ‘Email’ and‘Formulas’.


Task 2.3: 14 marks Today’s date is 30 April 20-7.You are producing the financial statements for the year ended 31 March 20-7 for Rebecca Pin and NeilPleat. The profit for the year in the statement of profit or loss currently shows profits of £259,158. The business is still operating as a partnership. You are given the following information:The staff are entitled to a 2% productivity bonus based on revenue, in any month where the gross profitmargin was above 50%. This has not yet been accrued for in the accounts. • Rebecca has drawn a salary of £35,600 and Neil a salary of £25,000. • Rebecca’s and Neil’s capital accounts averaged £65,000 and £70,000 during the year respectively.

Interest on the capital accounts is £3,250 for Rebecca and £3,500 for Neil. • The residual profit after adjustments is shared between Rebecca and Neil in the ratio 4:3. Details of the revenue per month for the year are in a separate spreadsheet. Download the spreadsheetfile ‘Tutor Zone Practice Assessment 2 Task 2.3 data.xlsx’ from the Osborne Books website.Save the spreadsheet file in an appropriate location and rename it using the following format: ‘your initial-surname-AAT no-dd.mm.yy-Task 2.3’. For example: J Francis -123456-12.03.xx-Task 2.3. A high degree of accuracy is required. You must save your work as an .XLS or .XLSX file at regularintervals to avoid losing your work.You are required to prepare the appropriation account for Finishing Touches for the year ended 31 March20-7.

(a) Use the information supplied in the table in the worksheet ‘Staff bonus’ in the following manner: • Format all headings to have bold, size 11 font and centred.• Sort the whole table from April to March. • Calculate the gross profit percentage in E5 to E16 and format the cells to % to 2 d.p. • Enter the bonus rate % into F1 and the gross profit margin it needs to be above in F2,

colouring these two cells yellow. • Use an IF statement to calculate the bonus due to staff for each month. Show your results

in columns F.• Total each of the columns C, D and F. • For columns C, D and F, rows 5 to 17, custom format the cells in GBP currency with the

thousand separator and two decimal places (eg £3,200.00). Right align these cells. • Set the print area to A1 to F17. Insert a header with the time, today’s date, the page number,

the worksheet name and the tab name.(6 marks)


(b) Design a partnership appropriation statement in the spreadsheet to appropriate the profit for theyear ended 31 March 20-7 between the two partners in accordance with the partnership agreement.

Open a new worksheet and name it ‘Appropriation Account’ and colour the tab orange. Start with the profit for the year and use separate lines for each of the entitlements or charges

adjusting this profit. Reduce the profit by the staff bonus amount in (a), linking the data from the‘Staff bonus’ worksheet.

Include:• The residual profit available for appropriation. • Each partner’s share of that residual profit. • The total amount distributed to each partner for the year.

Custom format your statement to show GBP currency with the thousand separator, no decimals,and black font for positive.

(8 marks)

At the end of this task you should have one spreadsheet (saved as an .XLS or .XLSX file) to upload to yourcomputer with the following two worksheets: ‘Staff bonus’ and ‘Appropriation Account’.


advanced diploma synoptic - osborne books · 2018. 5. 2. · 2 advanced diploma synoptic tutor...

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