Accounting

This video looks at how the general assessment principles are applied in A-level Accounting. It considers the importance of assessment objectives, command words and the role of different types of questions. It also looks at double entry skills and the different approaches to mark schemes.

Transcript

Hello and welcome to Inside assessment – bringing assessment to life in Accounting.  My name is Kevin Crosby and I am a senior examiner for A-level Accounting at AQA. The focus of this training is to explain the rationale that underpins the preparation of examinations and mark schemes.  This will enable you to prepare valid questions and examinations that you can use to assess your students’ progress at various stages of their learning.

Hopefully, you'll have already seen our what makes good assessment videos about the principles of assessment, which cover concepts such as validity and reliability and what those terms mean. In this video, I'm going to talk about how those principles apply in A-level Accounting.

The starting point for the development of questions, exam papers and mark schemes is the specification, which may seem obvious, but it determines what we can ask questions on, the terminology we can and cannot use in questions and the structure of the exam paper. To set questions, AQA can only use terminology given in the specification or additional information.  Here are some examples of terminology which can and cannot be used in questions:

Questions can refer to a ‘sales journal’ but not a ‘sales day book,’ they can refer to ‘liquid capital ratio’ but not ‘acid test ratio’, and they can refer to ‘trade receivable days’ but not ‘receivable days’ or ‘debtors’ collection period’. It is worth mentioning at this point that the alternative terminology may be acceptable in students’ answers, for example if they are assessing ratios and use the term ‘acid test’ in their answer this would be acceptable.  However, the question itself must be based on the terminology given in the specification.

Now time for an activity – as we can only write questions on the topics stated in the specification, here are a list of potential topics from different parts of the specification – partnership accounting and absorption and activity-based costing. Use your knowledge of the specification to consider which of these topics could be used as valid questions? You may wish to pause the video now.

In the case of Partnership accounting, we can ask questions on the admission of new partners and partners leaving but not the dissolution of the partnership. In Absorption costing we can ask students to calculate the overhead absorption rate and explain under/over absorption.

The specification gives us both the content and structure of the examination papers. The content of the papers is largely – Financial accounting in paper 1 and Management accounting in paper 2, however there is some cross over in content between 1 and 2. The logic of this is that some content is common to both aspects of accounting e.g. 1 the role of the accountant; 2 sources of finance and of course double entry which underpins the accounting process.

Clearly, if you are designing your own assessment, you may only want one exam paper or not have covered sufficient material to set two 3-hour exam papers which match the actual exam structure.  However, in order to provide students with the best possible preparation for the exam, it will help students if your assessment follows the overall structure of the actual examinations, particularly with regard to the assessment objectives.

The assessment objectives underpin the structure for the examination.  We will look at each individual assessment objective in greater detail after this, however we can begin with a quick overview.

The first assessment objective, referred to more commonly as AO1 requires students to demonstrate knowledge and understanding.  This is 25% of the exam and is tested in Section A – 30 marks with 10 marks for multiple choice and the remaining 20 for short answer questions.

AO2 requires an application of knowledge and understanding and is assessed in 35% of the exam (or 42 marks) and is mainly tested in Section B with 32 marks assigned in this section, but 10 marks are also assigned in Section C.

AO3 is to ‘Analyse and evaluate accounting data (to give its full title) to present information, make judgements and draw conclusions’.  It’s worth 40% of the final grade, therefore 48 marks are assigned to it, largely tested in Section C where 40 marks are allocated and also through shorter evaluative questions in Section B which make up a total of 8 marks.

If you are creating a mock exam or an exam for in-class which you wish to be representative, then even if your exam is for two hours rather than three, still aim for a correct representation of the assessment objectives, so 25% AO1 marks with one-third multiple choice questions, 35% AO2 marks and 40% AO3 marks.

AO1 is the demonstration of knowledge and understanding of accounting concepts, principles and techniques. We interpret knowledge as: recalling facts.  We interpret understanding as using knowledge in a brief situation or scenario.  There should be a reasonable balance between knowledge and understanding, although there is no fixed ratio, but we would not want all knowledge or all understanding. An additional item to be aware of, is that there is a limit of no more than 10% of marks (i.e. 24 marks over the two papers) for knowledge only questions.

An example of questions that test knowledge and understanding are visible on the screen now. These questions are both linked to depreciation. The knowledge question asks students “What is the formula to calculate straight line depreciation?” which fulfils the aim of facilitating students to recall facts. Note: most knowledge only questions are MCQs. The understanding question asks students to calculate depreciation for the year which means students must use their knowledge to answer this question effectively.

The second assessment objective assesses students’ ability to apply knowledge and understanding of accounting principles, concepts and techniques.  AO2 is assessed primarily in Section B where most marks are available for computational questions that use point based mark schemes.

Characteristics of an AO2 computational question is that it will include a more complex scenario and require students to select data to use in their answers, for example there may be redundant data or only some data is needed for that particular task. AO2 is assessed as part of the assessment in Sections B and C.  It is worth 8 marks in section B and 10 marks in section C. AO2 is also assessed as part of the 6 mark 'Assess/Advise' questions in Section B and the 25-mark questions in Section C. This is because analysis and evaluation cannot take place without the application of knowledge and understanding. AO2 is assessed in the non-computational (written) questions in Section B and Section C.  It is worth 4 marks in each paper in section B and 10 marks in each paper in section C. AO2 is assessed as part of the 6 mark 'Assess/Advise' questions in Section B and the 25-mark questions in Section C. This is because analysis and evaluation cannot take place without the application of knowledge and understanding.

On screen is question 14 from paper 2 in 2019.  This includes a complex scenario requiring students to apply both knowledge and understanding of marginal costing techniques. The Knowledge required links to cost behaviour and contribution and the understanding required is that of the calculation of contribution and application of correct technique to calculate contribution per limiting factor. Students must carefully select information e.g. which costs to include in contribution calculation for example not Fixed costs; what to use as limiting factor and then select the correct production plan.

As this training is focused on assessment writing however, it is worth considering how an exam question and in particular the data given is presented.

Where possible, numerical data is presented in table form as this should be more accessible.

Sentences are as short as possible, but bear in mind that the meaning must be clear.

Irrelevant information is kept to a minimum – as mentioned earlier, to satisfy the selection criteria we do need to include some irrelevant information, but we do not seek to overload the student.  In this case the question could have provided the number of hours worked as a further distractor, however question setters felt that this was not necessary as the scenario was sufficiently complex, the technique involved is challenging and there is already selection required.

Information is grouped together – if AQA chose to present information on materials and labour in this question, then the information on materials would be kept together, and that on labour kept together.  In a financial accounting question relating to statement of financial position for example then references to non-current assets e.g. additions, disposals and depreciation would be grouped and not mixed in with information on share issues or inventory valuation.  This is designed so that students are not searching the content for information and can deal with tasks logically.

We also need to consider the number of marks awarded for the task.  In this case it was a 14-mark task – this could have been broken down into smaller tasks for example: Calculate the contribution per product.  Calculate the optimum production plan. Calculate the profit.  Care needs to be taken to make sure that by breaking the task down we don’t end up with AO1 questions. The maximum number of marks for an AO2 computational question is 14 and this may constrain what can be assessed – so, for example, it may not be possible to assess the whole of an income statement, which would include adjustments, in 14 marks so questions may have to focus on one section e.g. Trading.

Now we can look at the third assessment objective which is to ‘Analyse and evaluate accounting data to present information, make judgements and draw conclusions.’ AO3 is 40% of the marks of each exam and therefore the A-level overall.   The majority of the AO3 assessment takes place in Section C with 2 x 25-mark questions which each have 20 marks allocated for AO3, however AO3 is also assessed in Section B where there are two 6-mark questions which each include 4 marks of AO3.

Before we look at the AO3 questions in more depth – it is perhaps worth discussing what the objective is assessing and how it is assessed.  Assessment objective 3 is assessed in the extended writing questions. In each paper there are two 6-mark questions in Section B and two 25-mark questions in Section C. In the 6-mark questions 67% of the marks are identified as AO3 whereas in the 25-mark questions it is 80% of the marks – this indicates a greater focus on the skills of analysis and evaluation in the 25-mark question.  This greater focus can also be seen in the mark scheme level descriptors. In the top-level descriptor for the 6 marks question the focus is on making a judgement that is based on clear and balanced analysis. Whereas the top-level descriptor for the 25-mark question also requires a conclusion/solution (supported by multiple judgements), as well as an evaluation of the significance and limitations of the evidence. In short, the 6-mark question assesses part of AO3, whereas the 25-mark question assesses all aspects of AO3.

Note: ‘logical chain of reasoning’ (6 marker) and ‘logically reasoned’ (25 marker) refers to the links made between separate points in the construction of the judgement/conclusion. These links should be plausible for the reasoning to be considered strong.

In the example on screen from Paper 2 in 2020, the computational question was to prepare a cash budget, and this developed to the 6-mark AO3 question which gave a short scenario regarding how cash flow could be improved and then asked students to assess whether this would the most appropriate method.  The common characteristics to 6-mark questions are that they are linked to AO2 computational questions, and they provide the opportunity for analysis in relation to either pros/cons or advantages/disadvantages.

This question will only include 1 of 5 potential command words including Advise, Assess, Discuss, Evaluate and Justify, however up until now we have only ever used ‘assess’ and ‘advise’.  Other command words you may see in accounting papers, such as “state,” “describe” or “explain” will not be included in 6-mark questions as these do not advise the student that analysis and evaluation are required.  If creating a 25-mark question, you should consider what makes your question valid. To do this, you should follow the AQA standard approach, which is to include:

Appropriate content – there are some topics that lend themselves to evaluative questions, possibly because they naturally lead to solutions e.g. capital investment appraisal, or because they lend themselves to evaluation e.g. ratio analysis. When choosing the content we may at this stage identify particular parts of the subject content we want to assess.  So, for example, we may choose to assess 3.8 Analysis and evaluation of financial information, we then may decide to focus on profitability or liquidity. This is not to say that other topics would not make 25-mark questions or that they could be part of the answer.

Another factor to consider is that within a 25-mark question there must be sufficient data that students can use to complete calculations or interpret the information; so if we stick to the previous example regarding the analysis and evaluation of financial information - you could provide data to enable students to calculate ratios or you could give them ratios that they need to interpret.  Be careful not to state in your question that students should calculate ratios as this has to be part of them answering the overall question – if you did specify calculations then your question would become an AO2 one.

The data/information and evidence produced will usually be conflicting; so, some good, some bad. This is to facilitate evaluation.

Next, we need a scenario or case study to support the data and give the students a context for the question. The scenario needs to be developed to provide more information that will enable students to demonstrate astute evaluation – for example we could provide ratios for a competitor – this would allow comparison but also question whether this is the correct comparison to use? Developing the scenario may also allow us to incorporate more subject content – for example if we wanted to incorporate budgeting into our question we could make the figures budgeted, or suggest alternative sources of finance to overcome a liquidity problem.

Reviewing the scenario/case study enables the identification of limitations of evidence – this could take the form of missing information for example we may not give ratios for comparison, or objectives may not be clear for example when considering investments.

To provide consistency, any question should be worded using evaluative command words like advise, evaluate etc.  Make sure that demands are clear, such as asking for a justified recommendation, evaluating both financial and non-financial factors.

Finally, any mark scheme should indicate possible AO2 content and application and suggest how answers may show analysis, evaluation and a consideration of other limiting factors.

To help you recall the key differences between the assessment objectives, please see the description of each on screen.

As double entry is worth such a high proportion of marks, it seems sensible to consider this skill within this presentation. As you will know, there is a requirement that all examinations (this is both papers) contain double entry application marks – this is between 60 – 72 marks e.g. 25-30%; most of these marks will be for the preparation of financial statements or cash budgets but there is a requirement that double entry itself is assessed. These marks are typically for the preparation of financial statements or cash budgets, but there is a requirement that double entry itself is assessed. Double entry does not have to involve both entries, so preparing a ledger account would be considered double entry even if the corresponding entry is not required.

Basic double entry is AO1 – so preparing ledger accounts, control accounts etc would be considered as AO1 (and appear in section A of the exam). If, however, the information is presented in such a way that students have to select the information to prepare an account then this would be AO2. Bearing this in mind, this is a good opportunity to consider how AO1 questions can become AO2 questions.  On screen is an example of an AO1 question from Paper 1 2019 asking students to prepare a purchases ledger control account.  Pause the video to consider how this could be made into an AO2 question.

Before I provide you with my ideas, please remember that for your ideas to be correct, information for AO2 questions must be presented in such a way that students have to select information in order to prepare an account.

Some ideas to respond to this particular activity could be that question setters could provide additional information in the form of cash transactions so that students had to select the relevant information, or we could provide the information to prepare both the sales and purchases leger control account, perhaps with some additional distractors such as cash sales/purchases and ask students to prepare either one or both control accounts.

It is worth noting at this stage that if you create your own assessment materials for double entry tasks, then they must be prescriptive and demand a high level of precision to answer effectively. When students are answering double entry task questions, we expect them to use the correct terminology for the entries in the ledger accounts. For example, the entry for a dishonoured cheque in the sales ledger (control) account should be bank or cash book, but not dishonoured cheques. Other common transactions that students often label incorrectly are on screen now.

Linked to both the two previous items we’ve looked at; Assessment Objectives 1&2 and Double entry, is how we write mark schemes to evaluate students’ answers. There are 2 alternative mark schemes we use in A-level accounting; the first is a point based mark scheme, like the example on screen now, which we use for all computational and double entry questions as well as some basic written questions. A point based approach is used where there is only 1 or a limited number of correct responses.  Where correct responses can be varied then a Levels of Response mark scheme should be used. Levels of Response mark schemes are used when responses can be varied or complex.  As you can see from the on-screen example, examiners are provided with different descriptions for each level and they are asked to fit the answer to the corresponding description.  All AO3 questions are marked using a Levels of Response mark scheme and some AO1 answers are marked via this method too.

Now for a quick activity to help you consider which mark scheme approach; point based mark scheme or Levels of Response based mark scheme would be best applied to the following questions? You may wish to pause the video whilst you work this out.

The first two questions have either only one correct answer or very limited responses that could be correct, so would be appropriate to mark using point-based approach. Questions 3 and 4 can be correctly answered in a number of different ways and therefore are best marked using a Levels of Response approach.  In order to delve into Levels of Response mark schemes a little deeper, let’s have a look at the mark scheme for question 3 which some of you may have recognised as a question from the 2019 series.

The mark scheme for the question “Describe two limitations of using break-even analysis” is a Levels of Response mark scheme and, as you can see, the levels given are generic and describe the characteristics of answers ranging from strong to weak. Indicative content lists are also included in Levels of Response mark schemes, and these denote items that may be included in answers – it is important to note that an answer does not have to include all the indicative content and they’re not exhaustive so a student could include something not listed and assuming their answer remains correct and relevant to the question they still receive the full range of marks available.

To summarise on how to write your own effective exam materials, please start with the specification – decide on content and use terminology from the specification.

Refer to the assessment objectives to balance question types:

• AO1 25%
• AO2 35%
• AO3 40%

And match the content you want to examine to the relevant Aos (remember double entry is usually AO1).

I hope this session has given you an insight into the assessment design process at AQA and if you have any further questions then please do email business-studies@aqa.org.uk

Thank you for your time.

Questions you may want to think about

• How can you use these insights to prepare your learners for exams?
• Do your internal assessments reflect the approach of the exam? To what extent do you want them to?
• What’s the most important or surprising thing that you’ve learned? How might it influence your teaching?