Prepare to pass
The golden rule for success in any assessment is to prepare thoroughly. The examiners’ reports generally draw attention to two main reasons for incorrect choices being made: (1) a lack of awareness/understanding of topics, and (2) taking insufficient care in reading questions, which leads to confused thinking. As each exam will include broad coverage of the syllabus, to maximise your chances of success you must have studied the whole syllabus. It is also important to practise exam-standard questions.
Of course, it is essential that you use all questions carefully and follow up on your responses. Whether a question was answered correctly or incorrectly during exam preparation, it will provide an opportunity to enhance your understanding of the topic. By reflecting on why a specific option is correct, you can improve your understanding, while reflecting on why the other options are wrong can help to overcome misunderstanding and eliminate confusion. When attempting questions as part of your preparation, it is useful to remember that the key purpose of the exercise is to enhance your understanding – not just to get the right answer. When reviewing each option, it is important to ensure that you understand exactly what the underlying point is – and to make sure that you reflect on this to enhance your learning.
Read the question
The amount of time, effort, and discussion that is put into each question before it appears in an exam is likely to surprise most candidates. Every question is subjected to a number of rigorous reviews as it progresses from an idea in the writer’s mind to the exam. These reviews mean that you need to read the question extremely carefully, remembering that the wording has been chosen deliberately. This is intended to ensure that the question is unambiguous and does not mislead candidates.
An example of the need to read the question carefully might be the way in which a question communicates cost information. It is not unusual for a question to relate to a production period of, say, three months, but for fixed costs to be stated as an annual figure. To get the correct answer, candidates must have recognised this fact. This is not an attempt to catch out candidates, but rather to ensure that candidates can apply the technique in a real-life situation, where information must be clearly understood and is frequently communicated in this way.
A further aspect is to recognise that the answer will be based on the data or other information included in the question. There are two aspects to this. First, in order to ensure that questions are not too long, the data may have been simplified. To some candidates, this may seem to be unrealistic when compared to a real-life situation. A particular example of this is the way in which the labour cost is described in many questions. More often than not, direct labour is described as a variable cost, even though candidates may appreciate that this assumption will be totally unrealistic. Therefore, each question should be answered on the basis of the data provided. Second, only the data included in a question is required to obtain the answer. This means that you should not waste time wondering about additional data or inferring additional data into the question.
An example of this could be a question that tests the ability to calculate the closing balance on a ledger account. The question may give details of transactions during a period and a closing prepayment, but there may be no reference to an opening prepayment. In such cases, you can assume that this was $0. As already noted, the writer will have sought to keep the question as short as possible by omitting unnecessary words such as ‘the opening prepayment was $0’ or ‘there was no opening prepayment’.
It is imperative that the ‘prompt’ (the actual question that is to be answered) is read carefully. For example, a question may give information on receivables, irrecoverable debts and required allowances for receivables. Here, the prompt could require any of the following to be calculated:
- the movement on the allowance;
- the closing receivables allowance;
- the expense to profit or loss; or
- the carrying amount of receivables to be reported in the statement of financial position.
A candidate who assumes that they know what the prompt is (usually on the basis of a question they have seen previously), rather than actually reading it, is likely to select the wrong option.
It is a common mistake to think that some CBE question types are easy. In particular, that where one of the options is the correct answer (e.g. in MCQs), all you have to do is make the correct selection. While it is fair to say that some questions may appear to be easier to tackle than others (e.g. selecting one option is easier than multiple-response or number fill), that is often not the case as the answer will not be obvious.
A question from an FA2 examiner’s report illustrates this:
Sample question 1
Which of the following errors will be detected by extracting a trial balance?
- A cash receipt of $936 was recorded in the cash received daybook as $693
- An invoice issued to Tom Barry was posted to Barry Scott’s account
- The sales tax column of the purchase day book was overcast by $99
- An invoice issued to a customer was recorded as a credit note
It is clear that all the options are errors, but which one will be detected by a trial balance? A trial balance can only detect errors where the double entry is not 'equal and opposite'. If a total in a book of prime entry (in this case, the purchase day book) is incorrectly cast, this would cause the original double entry to be out of balance, because the sum of the columns will differ from the sum of the total. Thus, the third option is the correct answer. If we hadn’t quickly spotted this we could work through each option and eliminate the incorrect answers.
Errors that originate in the initial recording of a transaction in a book of prime entry (in this case, the cash received daybook) cannot cause an imbalance in the trial balance as both sides of the double entry would be incorrect by the same amount.
The second option does not relate to the double entry; this is referring to an invoice being posted to an incorrect memorandum account, so is also incorrect.
The last option is referring incorrect treatment of the whole entry (both debit and credit); this would not cause an imbalance in the trial balance.
From this we can see that a candidate who is clear about the types of error that cause differences between the posting of a debit and credit will be able to answer this question without undue difficulty, but clear thinking and application of knowledge is needed.
Work out your answer
As the incorrect answers are based on common mistakes, it follows that attempting to guess the correct answer is not likely to be productive. Rather, it is essential that you use your understanding of the topic to work out your answer. This will prevent you from being distracted by incorrect options.
The following question is from an MA2 examiner’s report:
Sample question 2
The following unit costs are incurred in the production of 1,000 units of a product in a period: