Students

Exam preparation and technique

This article provides advice on how you can best prepare for the Financial Accounting 3 paper, and the exam techniques that will allow you to make the most of your studies.

Pay attention to the mark allocation – both per question and per section of each question. It is far easier to get 50% for each part of each question than to get 100% for one part.”

The Financial Accounting 3 paper is as demanding and complex an exam paper as any you are likely to encounter on your path to becoming a professionally qualified accountant. Therefore, it is important that your preparation for the exam, and your performance on exam day, is the best that it can be. This will ensure that you have maximised your chances of exam success.

Here are a few ideas to help you with your preparation and, most importantly, with tackling exam questions. Think of these ideas as “good habits”, practice them in all of your study questions, and they will become automatic on exam day, thus greatly improving your chances of success.

Study well It is important to draw up a detailed study plan at the outset of the module. There are some very good study planning and technique hints in the early parts of the Learning and Practice Workbook for this module. You may not always be able to satisfy every part of your study schedule on a week by week basis (life is rarely that straightforward), but it is always good to have a plan that you can focus on and drive your preparation. Accounting is not a difficult subject to study, but it does require a great amount of study time in preparation.

Group accounting Group accounting and related areas account for 55% of the syllabus and needless to say will be a crucial part of your examination. You will be building upon knowledge gathered in the Financial Accounting 2 paper, thus ensuring you have a good base knowledge to begin with.

Ensure that you are strong on the fundamentals in this area, including good presentation of the three key workings: goodwill; non-controlling interest; and consolidated retained earnings. Also, become familiar with vital definitions that underpin the principles of group accounts.

Make sure you have fully mastered the four key areas of group accounting for this paper: ● complex groups (sub-subsidiaries); ● changes in group structure (piecemeal acquisitions and disposal of subsidiaries); ● foreign currency subsidiaries; and ● group Statements of Cash Flow.

Accounting standards This is a very demanding and important area of the syllabus (30% of the content) and breaks down into 19 different areas covering over 20 accounting standards. It is important to have both breadth of knowledge (across all the relevant accounting standards) and depth of knowledge (key definitions, principles and application) of individual standards.

Summaries of pertinent points are particularly helpful here but only AFTER you have been through the study material dealing with that particular topic in sufficient detail. If you do not have time to make your own, you could try accessing some good summary documents widely available online. Search for the PwC “IFRS Overview 2019” It contains a brief summary (one page or thereabouts) of the key points of each accounting standard. Regular access to brief summaries will greatly aid the learning process.

Question practice There are many benefits to be gained from looking at practice questions. I refer to it as “question experience”. Always try to begin with straightforward questions and understand the essential principles, and then you can move onto more demanding questions.

Remember, the hardest questions will often contain complexities which you cannot resolve. Don’t worry, move on. It is better to understand 80% of a question rather than not look at it at all.

It is imperative that you practice tackling as many questions as possible as if you were in an exam type situation; e.g. with a blank sheet of paper and no books in front of you. On other occasions, you can get some equally good benefit by reading a question carefully and then working through the model answer. If you are following the latter approach, try to tick off or highlight each part of the answer you understand. This also represents a good learning experience and makes good use of limited time.

Time management Ensure that your time management is impeccable. This means that each part of a question must be answered in the time allocated. The Financial Accounting 3 exam is a three hour exam (180 minutes). 100 marks are available, which equates to 1.8 minutes per mark. Calculate your time allocation (i.e. 10 marks x 1.8 = 18 minutes) before you start each new part of a question, and then STICK TO IT! Your watch is a vital tool during an exam!

Pay particular attention to the time allocated to written questions. You cannot answer a 20 mark (36 minute) question in 15 minutes – you just cannot! Think carefully about what the examiner is asking you to discuss.

You are asking for trouble (and very few marks) if you think you are being smart by giving a short answer and saving time. You may wish to present your answer using bullet points to explain key principles as opposed to lengthy paragraphs of text. The idea here is not to make your answers shorter but to improve the presentation and readability for the marker.

Answer all parts of the question Pay attention to the mark allocation – both per question and per section of each question. It is far easier to get 50% for each part of each question than to get 100% for one part, however strong you feel you are in that area. You MUST attempt each section, otherwise you cannot pick up the easy marks.

©Getty images/iStockphoto

Question 1: Compulsory (40 marks) Your performance in this question will go a long way to determining your overall success or failure in the paper. Therefore, students often feel that this justifies spending a disproportionate amount of time on this question – DO NOT! The maximum time to spend on this question is 40 x 1.8 minutes = 72 minutes. For every extra minute you spend on the question, you are diminishing your performance on one of the other questions and therefore reducing your chances of passing overall.

It is therefore recommended that you do this question LAST (in the final 72 minutes of the examination) so there is no possibility of overrunning! If you are lucky, you might even finish the other three questions slightly earlier, giving you a nice clear run at the compulsory question.

Satisfy all question requirements You must fully answer the question being asked. If the question asks you to advise the directors of the correct accounting and deferred tax treatment of a lease agreement, you must firstly specify the correct accounting treatment of the lease (including initial raising of the asset and liability, subsequent depreciation and finance cost charges, presentation of the asset and the liability in the statement of financial position).

Secondly, you then turn to the deferred tax treatment (carrying value of the net leased asset, tax base of the liability, and the subsequent recognition of the likely deferred tax liability). If you cover both of these aspects, you should be in line for a high mark on that question! Critical evaluation At this level, a question may ask you to critically evaluate a particular accounting treatment. It is essential that you answer such a question in two parts. Firstly, you must state all the relevant regulations that are applicable to the particular

Be alert when using figures and make sure that you are being accurate with your calculator.”

scenario, which will typically call upon your in-depth knowledge of an accounting standard. It is often good to give key definitions as background to the regulations (standards) you are referring to. For example, a question dealing with treatment of an outstanding legal claim will require the definition of a provision and a contingent liability, and in what circumstances it is appropriate to raise these items.

Secondly, you need to apply these regulations to the given scenario. Often (but not always!) the treatment suggested in a question will be inappropriate. You will need to point out why the proposed treatment is incorrect and outline the correct course of action to be take.

Limitations Pay careful attention to the limitations in the required section. If the question says that a statement of changes in equity (SOCE) is not required, not even the best SOCE in the world is going to earn you any marks! In other words, please read the question requirements carefully! Workings Many students produce solutions with inadequate workings. Think of your workings as an audit trail between the question paper and your final solution. If the audit trail is lost, it is impossible to determine what has been taken into account and you will therefore not be awarded marks.

Subtotal amounts on your workings and crossreference your solution (such as profit or loss; i.e. what has been asked for) to the place where the workings are presented. The number used and the calculations used in getting to that number must be presented.

Accuracy Be alert when using figures and make sure that you are being accurate with your calculator. Pay attention to information that is given in millions, thousands or units and make sure that your answer seems to be approximately correct by doing a quick review of the figures you have produced. Perhaps do key calculations twice!

Presentation Remember that marking is not an easy task! A neat appearance to your solution creates a good initial impression that may make the examiner more inclined to scratch around to try and find marks. Do ensure your handwriting is legible – a good quality pen helps in this regard! Try marking a friend’s question and you will quickly realise the importance of tidiness, legibility, layout of answers, etc.

I hope this article gives you some good ideas about how to maximise your chances of passing this complex paper. Please read it on a regular basis, and perhaps read it again just before your exam commences. It is good to have a sound strategy and have these ideas in your head as you tackle the paper. ●