Accounting 2019 v2.

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IA2 high-level annotated sample response
August 2018

Examination – combination response (25%)

This sample has been compiled by the QCAA to assist and support teachers to match evidence
in student responses to the characteristics described in the instrument-specific marking guide
(ISMG).

Assessment objectives
This assessment instrument is used to determine student achievement in the following
objectives:
1. comprehend accounting concepts, principles and/or processes relating to fully classified
financial statement reporting for a trading GST business
3. analyse and interpret financial data and information relating to fully classified financial
statement reporting for a trading GST business
4. evaluate accounting practices relating to fully classified financial statement reporting for a
trading GST business to make decisions and propose recommendations
5. synthesise and solve an accounting problem relating to fully classified financial statement
reporting for a trading GST business
6. create a business report (extract) that communicates meaning to the business owner of a
trading GST business.
Note: Objective 2 is not assessed in this instrument.
171535
 Instrument-specific marking guide (ISMG)
Criterion: Comprehending
Assessment objective
1. comprehend accounting concepts, principles and/or processes relating to fully classified
financial statement reporting for a trading GST business

The student work has the following characteristics: Marks

• identification of significant characteristics in the response

• thorough understanding of accounting concepts, principles and/or processes 4–5
• perceptive use of accounting terminology.

• identification of appropriate characteristics in the response

• adequate understanding of accounting concepts, principles and/or processes 2–3
• adequate use of accounting terminology.

• identification of inappropriate characteristics in the response

• vague or partial understanding of accounting concepts, principles and/or processes 1
• inconsistent and/or narrow use of accounting terminology.

• does not satisfy any of the descriptors above. 0

Criterion: Synthesising and solving

Assessment objective
5. synthesise and solve an accounting problem relating to fully classified financial statement
reporting for a trading GST business

The student work has the following characteristics: Marks

• effective application of significant and relevant accounting principles and processes to

identify errors relating to fully classified financial statement reporting for a trading GST
business 6–7
• effective application of accounting principles and processes to correct the errors
• solution produced that thoroughly solves the problem.

• appropriate application of relevant accounting principles and processes to identify substantial

errors relating to fully classified financial statement reporting for a trading GST business
4–5
• appropriate application of accounting principles and processes to correct the errors
• solution produced that effectively solves the problem.

• fundamental application of accounting principles and processes to identify minimal errors

relating to fully classified financial statement reporting for a trading GST business
2–3
• application of fundamental accounting principles and processes to correct minimal errors
• solution produced that solves elements of the problem.

• inconsistent application of accounting principles and processes to identify superficial errors

• rudimentary application of accounting principles and processes to correct aspects of the
1
errors
• inappropriate or partial solution produced.

• does not satisfy any of the descriptors above. 0

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
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 Criterion: Analysing
Assessment objective
3. analyse and interpret financial data and information relating to fully classified financial
statement reporting for a trading GST business

The student work has the following characteristics: Marks

• examines financial data and information through the identification of significant and relevant
relationships
5–6
• thorough interpretation of trends in the financial data and information
• thorough and logical explanation of issues for one area of performance.

• examines financial data and information through the identification of relationships

• interpretation of trends in the financial data and information 3–4
• explanation of issues for one area of performance.

• examines financial data or information through the identification of superficial relationships

• superficial interpretation of financial data or information 1–2
• narrow or partial statements about the issues.

• does not satisfy any of the descriptors above. 0

Criterion: Evaluating
Assessment objective
4. evaluate accounting practices relating to fully classified financial statements reporting for a
trading GST business to make decisions and propose recommendations

The student work has the following characteristics: Marks

• perceptive judgments for proposed changes to accounting practices relating to one area of
performance
• thoroughly justified decisions for the area of performance relevant to the accounting context 3–4
• convincing recommendations for the area of performance pertinent to the accounting
context.

• judgments for proposed changes to accounting practices relating to one area of performance
• decisions for the area of performance relevant to the accounting context 2
• recommendations for the area of performance suitable for the accounting context.

• rudimentary or partial judgments for proposed changes to accounting practices relating to

one area of performance
1
• inconsistent or partial decisions for the accounting context
• inconsistent or partial recommendations for the accounting context.

• does not satisfy any of the descriptors above. 0

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
Page 3 of 9
 Criterion: Communicating
Assessment objective
6. create a business report (extract) that communicates meaning to the business owner of a
trading GST business

The student work has the following characteristics: Marks

• succinct, with effective language choices to communicate analysis, interpretation and

evaluation to the business owner
3
• logical sequencing and organisation of ideas in a business report (extract)
• minimal errors in spelling, grammar and punctuation.

• appropriate language choices to communicate analysis, interpretation and evaluation to

the business owner
2
• clear sequencing and organisation of ideas in a business report (extract)
• some errors in spelling, grammar and punctuation evident.

• inappropriate language choices to communicate business data, information or advice

• unclear or fragmented sequencing of ideas in a business report (extract) 1
• frequent errors in spelling, grammar and punctuation.

• does not satisfy any of the descriptors above. 0

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
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 Task
See the sample assessment instrument for IA2: Examination — combination response (25%)
(available on the QCAA Portal).

Sample response
Criterion Marks allocated Result

Comprehending (Part A)
5 5
Assessment objective 1

Synthesising and solving (Part B)

7 7
Assessment objective 5

Analysing (Part C)
6 6
Assessment objective 3

Evaluating (Part C)
4 4
Assessment objective 4

Communicating (Part C)
3 3
Assessment objective 6

Total 25 25

The annotations show the match to the instrument-specific marking guide (ISMG) performance-
level descriptors.

Comprehending
[4–5] Question 1
thorough
understanding
The usefulness of financial statements is limited if users believe the values
of assets are absolute. The historical cost of an asset is its purchase price.
Question 1: This value, over many years, does not consider the changing value of the
the effect of historical
cost on financial
dollar especially in times of inflation. Most non-current assets lose value,
statements being used up over their life, therefore the concept of depreciation
addresses this issue. Depreciation considers the residual value and
Question 2: estimated life. As both of these elements are estimated, the accuracy of
the relationship between
accounts receivable and the net value for any asset is contestable.
provision for doubtful
debts

identification of
significant
characteristics

Question 1:
changing value of the
dollar, net value

Question 2:
revenue being offset
with relevant expense,
estimated bad debts
affecting profit figure

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
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 Comprehending [4–5] Question 2
perceptive use of
accounting The provision for doubtful debts account allows revenue recorded in the
terminology period (net credit sales) to be offset against a relevant expense (bad
Question 1:
debts) in the same period. Provision for doubtful debts is an estimated
financial statements, figure only based on accounts receivable who may or may not be able to
assets, historical cost, pay their debts in the next accounting period (bad debts). This estimate is
inflation, depreciation based on past experience regarding unpaid accounts. Provision for
Question 2: doubtful debts is a contra entry (negative asset) that offsets the balance of
provision for doubtful accounts receivable (asset) in the Statement of Financial Position.
debts, credit sales,
accounting period,
contra entry

Question 3

Synthesising and
solving [6–7]

effective application of
accounting principles
to identify errors

Three errors have been

identified.

effective application of
accounting principles
to correct the errors

Three errors have been

corrected.

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
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 solution produced

Financial data and

information has been
used to correctly
complete the Statement
of Profit or Loss.

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
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 effective application of
accounting principles
to identify errors

Four errors have been

identified.

effective application of
accounting principles
to correct the errors

Four errors have been

corrected.

solution produced

Financial data and

information has been
used to correctly
complete the Statement
of Financial Position.

Analysing [5–6] Question 4

thorough and logical
explanation of issues Issues identified
cost of goods sold and A $20 000 decrease in gross profit and a $30 000 decrease in net profit
bad debts indicate issues with profitability. Analysis indicates the increase in the cost
of the goods sold and bad debts is responsible for the downturn in profit
identification of this year. The cost of goods sold has increased relative to last year
significant and resulting in gross profit decreasing 8%; for every dollar of sales,
relevant relationships
approximately 54 cents roughly represents cost of goods sold indicated by
cost of goods sold, bad the gross profit ratio of 46%, 6% lower than the industry average. The
debts and sales returns, increase in inventory purchases is also evidenced by accounts payable
and profit; inventory increasing a little over 55% so that 16.50 cents in each dollar of assets
turnover and cost of
goods sold; accounts was attributable to accounts payable compared with 11.39 cents in the
receivable turnover and past year, and this is not due to inventory build-up as the balance of
bad debts; advertising inventories has decreased nearly 8%. This indicates the goods sold have
and inventory turnover,
and net sales; net profit cost more to purchase. The increase in sales returns indicates quality
and rate of return on issues with the goods as there is a no refund policy.
investment

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
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 thorough Turnover of inventories has been faster by 10 days in the current year due
interpretation of
trends to the 100% increase in credit sales. An increase of 37.5% in advertising
also relates to this change in the sales mix. Increased advertising and
all profitability ratios turnover, however, have not resulted in an effective increase in total net
below industry averages
and previous year’s
sales. Secondly, the 4.6% or $10 000 increase in operating expenses can
figures be levelled at the 1000% increase in bad debts and directly related to the
75% increase in accounts receivable over the past year – evidence of a
push for increased credit sales. While these may be prior debts, their
timing, given the large increase in credit sales ($55 000), would not
appear to be a coincidence. The turnover of accounts receivable days
increasing from 88 days to 96 days, while impacting more significantly on
cash flow, is further indication of poor management of the credit function.

The rate of return on investment, is currently unsustainable at less than

1%, indicative of overcapitalisation, and is significantly lower than the
industry average of 5%.

Evaluating [3–4] Proposed changes

perceptive judgment Cost of goods sold and bad debts must be reduced to improve net profit
for proposed changes
which will increase the rate of return on investment.
bad debts and cost of
goods sold reduced to Investigation into the current purchasing terms is required to decrease
improve net profit and
rate of return on
costs of goods sold. The business should negotiate better prices with
investment current suppliers, if possible, or choose new suppliers who can offer bulk
purchasing discounts without sacrificing quality. Customer satisfaction will
affect future sales.
thoroughly justified
decisions
lower cost of goods sold A review of the control of debtors is required to decrease the bad debts
and better debtor control with possible consideration of outsourcing of the credit function or hiring of
a credit manager if the business is to continue to offer credit. The business
convincing would need to consider the costs involved with both options. If a credit
recommendations manager is employed, the policy regarding control of debtors would need
to be broadened. Checking the credit worthiness of all potential credit
negotiation of better
terms; a new supplier;
customers, reducing the current credit terms from 60 days to 30 days and
outsource credit function implementing an aged debtors’ analysis would significantly decrease the
or employ a credit possibility of bad debts occurring resulting in an improved net profit.
manager

Communicating [3]

The response is succinct, with effective language choices to communicate

analysis, interpretation and evaluation to the business manager. The business
report (extract) contains logical sequencing and organisation of ideas. Minimal
errors in spelling, grammar and punctuation are present.

Accounting 2019 v2.0 Queensland Curriculum & Assessment Authority

IA2 high-level annotated sample response August 2018
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