01
technical
ADJUSTMENT
OF PROFIT
Where a question requires the adjustment of
profits, candidates will be told in the requirements
what figure to start their computation with
(normally the net profit figure for an unincorporated
business, or the profit before taxation figure for a
limited company). They will also be told that they
should list all of the items referred to in the notes
to the question, indicating (by the use of zero (0))
any items that do not require adjustment. Please
see the end of this article for different wording used
in variant papers.
This approach has been adopted so that candidates
avoid wasting time, and to help them score full marks.
Previously, candidates sometimes rewrote the
entire profit and loss account from the question,
thus taking more time with their answers than
was necessary. This problem should be avoided if
candidates are asked to start their computation
with a given figure.
There are obviously marks available for adjusting
items that require adjustment, but also marks for
making no adjustment where an adjustment is
unnecessary. For example, in Question 2 from the
June 2009 Paper F6 (UK) exam, the following items
were included in gifts and donations:
£
Gifts to customers (pens costing £60
each and displaying the company’s name) 1,200
Gifts to customers (hampers of food
costing £25 each) 1,100
Donation to local charity (the company
received free advertising in the charity’s
magazine)
400
There are obviously marks available for adjusting
items that require adjustment, but also marks
for making no adjustment where an adjustment
is unnecessary.
Relevant to ACCA Qualification Papers F6 (UK), F6 (MYS),
There was a half mark each for adding back the
first two items (as they are not allowable), but also
a half mark for making no adjustment in respect
of the third item (as it is allowable). Previously,
there have been many problems with candidates’
answers to this type of question. Taking the above
gifts and donations as an example, a typical
approach would have been to include £2,300 in the
adjusted profit computation, and then to support
this with a set of explanatory notes. Not only does
this approach take longer for candidates, but it
can also often be very difficult to mark. Another
common problem is where no mention is made
of items that do not require any adjustment. This
again makes marking very difficult as it is not
clear if such items have been considered or simply
forgotten, and means that candidates may not
gain as many marks as they would have if a better
approach had been adopted. The new required
approach will standardise candidates’ answers,
and should avoid all of the above problems. Based
on Question 2 from the Paper F6 (UK) exam
from June 2009, answers should, therefore, be
presented as in Table 1 (on page 2).
Where a question requires the adjustment of
profits, and candidates are told in the requirement
to follow this approach, they will not be able to
obtain full marks if the layout/approach suggested
here is not followed. However, it will be possible for
some credit to be awarded, since markers will be
instructed to give some credit where candidates
present their answers using explanatory notes but
to give no credit where no mention is made of items
not requiring adjustment.
student accountant 11/2009
Studying Paper F6?
Performance objectives 19 and 20 are linked
questions
F6 (SGP), F6 (VNM), and CAT Papers 9 (LSO), 9 (MYS) and 9 (SGP)
Trading profit for the year ended 31 March 2009
£
Profit before taxation
640,000
Depreciation
85,660
Amortisation of leasehold property
6,000
Deduction for lease premium
Gifts of pens to customers
1,200
Gifts of hampers to customers
1,100
Donation
0
Legal fees re: renewal of lease
0
Legal fees re: issue of debentures
0
Entertaining suppliers
1,300
Entertaining employees
0
Income from property
Bank interest
Dividends
Profit on disposal of shares
Interest payable
0
Capital allowances
735,260 (235,260)
Trading profit
Variant papers
The same wording will apply in CAT Paper 9 (SGP)
and Paper F6 (VNM), as above in Paper F6 (UK).
The instruction in Paper F6 (SGP) will be
included in the supplementary instructions at
the start of the paper, and shall be worded as
follows: ‘All computations should indicate, by the
use of ‘0’, any item of income or expense that is
tax exempt, not taxable, or which does not require
adjustment, as appropriate.’ The instruction
will be slightly different in CAT Paper 9 (MYS)
£
4,920
20,600
12,400
54,000
80,700
62,640
235,260
500,000
and Paper F6 (MYS). In these papers, candidates
will be instructed to indicate, by the use of the
word ‘nil’, any item referred to in the question
for which no adjusting entry needs to be made in
the computation. In CAT Paper 9 (LSO), candidates
will be told that their answer should list all of the
items (income and expenditure) referred to in the
question, indicating (by the use of ‘0’) any that are
not taxable or allowable.
David Harrowven is examiner for Paper F6 (UK)
02