DFS June 2007 Suggested Answers

Re:DFS June 2007 Suggested Answers

In the question. Tell me did you actually take this exam?

Re:DFS June 2007 Suggested Answers

I assume you have passed FRA to sit DFS in December. Accruing for interest is FRA standard and DFS will assume this knowledge. I would advise you to revisit FRA books before you commence with DFS studies in order to prepare you for the step up.

If the question states "half yearly" this means 6 months, so why would you accrue 12 months unless you want to lose marks?

The first half year has been paid so this would have been already accounted for the annual financial statements. The second half of the year's interest has not been included which the question is telling you, hence the provision (which is debit loan interest in the income statement and credit either accruals or the bank loan itself).

If you accrued for a full year's interest you would be overstating your expenses because you would have 18 months interest in the accounts instead of 12.

Kind regards
Steve

Re:DFS June 2007 Suggested Answers

It is prudent to match expenses with income but it is not prudent to match income with over inflated expenses.

Let's start from the beginning. The question has a March 2007 year end. That is 1 April 2006 to 31 march 2007 (12 months).

The instructions on page 5 of the June 2007 DFS examination bullet point 6 are:

Interest on the bank loan for the last six months of the year HAVE NOT BEEN INCLUDED IN THE ACCOUNTS in the trial balance

The loan in the trial balance is £14,000. The trial balance says it is a 7% bank loan.

The question clearly states the last six months interest have not been included so the calculation is:

£14,000 (per trial balance)
multiplied by
7% =
£980
multiplied by the fraction
6/12
= £490

The prudence concept has been achieved here because the first six months has already been accounted for the second six months IS being accounted for above.

If anyone else can offer a simpler explanation then please feel free to do so.

Kind regards
Steve

Re:DFS June 2007 Suggested Answers

So can I take it my answers are not misleading then?

Re:DFS June 2007 Suggested Answers

Thank you. I think they are fairly accurate based on my experience but you are more than welcome to reperform the paper but asking intermediate students wouldn't be appropriate as they haven't studied for DFS as yet.

Best regards
Steve

Re:DFS June 2007 Suggested Answers

justly wrote:

i ask them for guidance on my future dfs studies not to check your answers.

do you think you will pass DFS this time round. I hope so as you think know the answers.

I would stop now before you completely embarrass yourself justly.

Peugeot is a qualified accountant and FMAAT. He only does answers for people as the official ones don't come out. As he's done two papers in ACCA that take DFS further than AAT and works in practice I think you can rely on his answers!

Annette

Re:DFS June 2007 Suggested Answers

peugeot thankyou for doing these.I had dfs in June for attempt 2 and feel happy I have got your answers.thank you.

Re:DFS June 2007 Suggested Answers

Hi Frank,

Forgive me but I do not have my answers to hand.

A similar question came up on the other site. The narrative parts of my answers were kept extremely basic as there would have been an abundance of relevant and correct answers. I used the fixed assets as a basis of my report as these were quite higher than the previous year, which would have given rise to the increased depreciation. I didn't actually mention the increased depreciation in isolation, though I really ought to have done but I worked on the basis that in reality this would have been self-explanatory (additional fixed assets = higher depreciation). Obviously in AAT exams they would really expect depreciation to be mentioned. I also commented on the increased bank loan which gave rise to the increased interest. I also took the answer one step further and commented on the closing cash balances. This was not asked for but it would tie in to what you would talk about to management if the situation had been real-life. I think is were the confusion has arisen.

Those are the only areas I commented on. The operating cash flow would have been affected by issues such as debtors, creditors, stocks etc. If you didn't mention these I wouldn't worry too much. I didn't mention them purely because the numbers were not substantially different. Some students would have mentioned it others wouldn't have so I tried to stay "in the middle". Those that did would have scored marks those that didn't but referred to other areas that may have affected the operating cash flows would also have scored marks.

I deliberately kept all my "wordy" answers short and basic to try to avoid confusion though, on reflection, I do thnk my answer may have benefited from focusing a bit more on the debtors/stock issues etc rather than assuming the management in scenario would have knowledge of issues such as increased fixed assets = increased depreciation and increased loans = increased interest charges.

Kind regards and good luck.

Steve

Re:DFS June 2007 Suggested Answers

If you were okay with the rest of the paper then I wouldn't worry too much. There's a lot more in the paper to score marks on than just that one task in isolation.

Kind regards
Steve