A-Level POA Question Sample
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- Mar 9
- 4 min read
A-Level POA Question Sample
It's important to understand that A-Level Principles of Accounts (POA) questions can vary significantly, but they generally emphasize both the application of accounting principles and the analysis of financial information. Here's a breakdown of the typical question types and a sample scenario:
Typical A-Level POA Question Types:
Financial Statement Preparation:
This involves creating statements like the Statement of Financial Position (balance sheet), Statement of Profit or Loss (income statement), and Statement of Cash Flows.
Analysis of Financial Statements:
This requires calculating and interpreting financial ratios (e.g., liquidity ratios, profitability ratios).
Accounting Concepts and Principles:
Questions may test your understanding of fundamental accounting concepts like accruals, prepayments, depreciation, and inventory valuation.
Scenario-Based Questions:
These present a business situation and ask you to apply your accounting knowledge to solve problems or make decisions.
Sample A-Level POA Scenario:
Scenario:
"BrightTech Solutions" is a company that sells and repairs electronic devices. Here's some financial information for the year ended 31 December 2024:
Sales revenue: $500,000
Cost of goods sold: $300,000
Operating expenses: $100,000
Inventory (1 January 2024): $50,000
Inventory (31 December 2024): $70,000
Accounts receivable: $80,000
Accounts payable: $60,000
Non current assets: $250,000
Cash at bank: $50,000
Possible Questions:
Prepare the Statement of Profit or Loss for BrightTech Solutions for the year ended 31 December 2024.
Calculate the following ratios:
Gross profit margin
Net profit margin
current ratio.
Analyze the company's profitability and liquidity based on the calculated ratios.
Explain the accounting concept of "accruals" and provide an example of how it might apply to BrightTech Solutions.
Let's provide answers to the sample A-Level POA questions.
BrightTech Solutions Answers:
1. Statement of Profit or Loss for the Year Ended 31 December 2024:
BrightTech Solutions
Statement of Profit or Loss
For the Year Ended 31 December 2024
Sales Revenue: $500,000
Cost of Goods Sold: $300,000
Gross Profit: $200,000
Operating Expenses: $100,000
Net Profit: $100,000
2. Ratio Calculations:
Gross Profit Margin:
(Gross Profit / Sales Revenue) * 100%
($200,000 / $500,000) * 100% = 40%
Net Profit Margin:
(Net Profit / Sales Revenue) * 100%
($100,000 / $500,000) * 100% = 20%
Current Ratio:
Current Assets / Current Liabilities
Current Assets: Inventory ($70,000) + Accounts Receivable ($80,000) + Cash at Bank ($50,000) = $200,000
Current Liabilities: Accounts Payable ($60,000)
$200,000 / $60,000 = 3.33 (approximately)
3. Analysis of Profitability and Liquidity:
Profitability:
The gross profit margin of 40% indicates that BrightTech Solutions is efficient in managing its cost of goods sold.
The net profit margin of 20% shows a healthy level of overall profitability after considering operating expenses.
Liquidity:
The current ratio of 3.33 suggests that the company has strong liquidity. It has significantly more current assets than current liabilities, indicating its ability to meet its short-term obligations.
4. Accounting Concept of Accruals:
Explanation:
The accruals concept states that revenue and expenses should be recognized in the period they are earned or incurred, regardless of when the cash is received or paid.
Example in BrightTech Solutions:
If BrightTech Solutions completed a repair service for a customer in December 2024, but the customer will not pay until January 2025, the company should still recognize the revenue in the 2024 financial statements. This would involve creating an "accrued revenue" account.
Also, if BrightTech solutions had used some electricity in December 2024, but the bill would not be received until January 2025, then the company would need to create an accrued expense.
Important Notes:
These answers provide a basic framework. In a real exam, you would need to show your workings and provide more detailed explanations.
It is very important to understand the meaning of the ratios, and what they indicate about the business.
Key Considerations for A-Level POA:
Accuracy: Pay close attention to detail when preparing financial statements and calculating ratios.
Understanding: Don't just memorize formulas; understand the underlying accounting principles.
Analysis: Be able to interpret financial information and draw meaningful conclusions.
Clarity: Present your answers in a clear and organized manner.
To prepare well, it is important to practice many past year papers, and to understand the accounting concepts very thoroughly.
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