Pearson LCCI Level 2 Certificate In Book-keeping And .
L2PearsonLCCI Level 2 Certificate inBook-keeping andAccounts (VRQ)(ASE2007X)SPECIFICATIONIssue 2
PearsonLCCI Level 2 Certificatein Book-keeping andAccounts (VRQ)(ASE2007X)SpecificationIssue 2
Edexcel, BTEC and LCCI qualificationsEdexcel, BTEC and LCCI qualifications are awarded by Pearson, the UK’s largestawarding body offering academic and vocational qualifications that are globallyrecognised and benchmarked. For further information, please visit our qualificationwebsites at www.edexcel.com, www.btec.co.uk or www.lcci.org.uk. Alternatively,you can get in touch with us using the details on our contact us page atqualifications.pearson.com/contactusAbout PearsonPearson is the world's leading learning company, with 40,000 employees in morethan 70 countries working to help people of all ages to make measurable progressin their lives through learning. We put the learner at the centre of everything wedo, because wherever learning flourishes, so do people. Find out more about howwe can help you and your learners at qualifications.pearson.comThis specification is Issue 2. Key changes are sidelined. We will inform centres ofany changes to this issue. The latest issue can be found on our website.AcknowledgementsThis specification has been produced by Pearson on the basis of consultation withteachers, examiners, consultants and other interested parties. Pearson would like tothank all those who contributed their time and expertise to the specification’sdevelopment.References to third party material made in this specification are made in good faith.Pearson does not endorse, approve or accept responsibility for the content ofmaterials, which may be subject to change, or any opinions expressed therein.(Material may include textbooks, journals, magazines and other publications andwebsites.)All information in this specification is correct at time of publication.ISBN 978 1 446 92687 1All the material in this publication is copyright Pearson Education Limited 2015
IntroductionLCCI qualificationsLCCI qualifications are widely regarded by employers as preparing students for keyfunctions of modern international business. Employers, universities and professionalbodies such as the Association of Chartered Certified Accountants (ACCA) recognisethem across the world.This new and engaging range of qualifications has been developed in collaborationwith professional bodies, employers and customers. We have conducted in-depth,independent consultation to ensure that the qualifications develop the breadth anddepth of knowledge, skills and understanding that students need to be effectiveemployees, and that the qualifications support progression pathways.LCCI offers a wide range of qualifications; they are available at levels 1 to 4 acrossthe following subject areas: English Language Marketing and Customer Service Business, Administration and IT Finance and Quantitative.This specification is part of the Finance and Quantitative suite of LCCI qualifications.
Purpose of the specificationThis specification sets out: the objectives of the qualification any other qualification(s) that a student must have completed before taking thequalification any prior knowledge and skills that the student is required to have before takingthe qualification any other requirements that a student must have satisfied before they will beassessed or before the qualification will be awarded the knowledge, understanding and skills that will be assessed as part of thequalification the method of assessment and any associated requirements relating to it the criteria against which a student’s level of attainment will be measured(such as assessment criteria).
Qualification aimThe aims of this qualification are to enable students to develop: an understanding of the basic principles underlying the recording of businesstransactions the ability to prepare and interpret accounts for sole traders, partnerships,non-trading organisations and limited companies.This qualification is suitable for students who are working, or who are preparing towork in, an accounting environment maintaining financial records and preparingaccounts. Students attempting this qualification should have the knowledge andskills equivalent to the LCCI IQ Level 1 Book-keeping qualification.Candidates who achieve Level 2 Book-keeping and Accounts may progress to theLCCI IQ Level 3 Accounting qualification.Candidates should have a standard of English equivalent to LCCI IQ Level 1 Englishfor Business.
ContentsSpecification at a glance1Knowledge, skills and understanding2ContentAssessment214Assessment summary14Entry and assessment information15Student entry15Combinations of entry15Age15Resitting the qualification15Awarding and reporting15Access arrangements, reasonable adjustments and specialconsideration16Equality Act 2010 and Pearson equality policy17Malpractice18Language of assessment18Other information19Guided Learning Hours (GLH)19Student recruitment19Prior learning and other ort, training and resources21Appendix 1: Glossary of International AccountingStandards (IAS) terminology25
Specification at a glanceThe Pearson LCCI Level 2 Certificate in Book-keeping and Accounts consists of oneexternally examined paper.Title: Pearson LCCI Level 2 Certificate in Book-keeping and AccountsExternally assessed100% of thetotalqualificationOverview of content1. Advanced aspects of the specification for Level 1 Book-keeping2. Partnerships3. Limited liability companies4. Incomplete records5. Manufacturing accounts6. Stock valuation7. Non-trading organisations8. Control accounts9. Suspense accounts10. Calculation and interpretation of ratios11. Preparation, by the use of ratios, of simple financial statementsOverview of assessment The time allowance for the examination is three hours. There will be five questions on the examination paper. Students are required to answer four questions. No question will becompulsory. Each question will carry equal marks. The answers required will be predominantly of a quantitative nature, butstudents will be expected to demonstrate their understanding of the subjectsat an appropriate level. A positive marking approach is used. Although students will be penalised forinitial calculation errors, they will gain marks for consequential ‘own figures’ aslong as the correct use of principles has been demonstrated.Pearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 20151
Knowledge, skills and understandingContentThe following content must be covered to prepare students for the final assessmentof this qualification.Subject contentWhat students need to learn:1.1 Advancedaspects of thespecificationfor Level 1Book-keepingUndertake more advanced examples of any specificationtopic contained in the specification at Level 1 and notcovered elsewhere in this specification. Special referencewill be made to the following:1.2 Advancedaspects raight-lineand reducing/diminishingbalance recording transactions through double entry the journal errors in the accounts trading and profit and loss accounts the balance sheeta) State the significance and purpose of depreciationb) Distinguish between different methods of depreciation;determining the effect of each method on the charge tothe profit and loss account and on the presentation ofthe asset on the balance sheetc) Recognise the relationship between the type of asset andthe depreciation method chosend) Prepare asset accounts maintained at coste) Determine the difference between a depreciationexpense account and an account for the accumulatedprovision for depreciationf) Prepare entries in the depreciation expense accountincluding transfer to the profit and loss account at thefinancial year endg) Prepare entries in the accumulated provision fordepreciation account, and balance the account at eachfinancial year endh) Prepare an asset disposal accounti)Calculate the profit or loss on the disposal of an assetj) Prepare entries for assets sold for cash, or traded in orexchanged for a replacement asset2Pearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 2015
Subject contentWhat students need to learn:1.3 Adjusting foraccruals andprepaymentsa) State the significance of an accrualb) Prepare end-of-period adjustments in expense accountsfor accrualsc) State the significance of an expense prepaymentd) Prepare end-of-period adjustments in expense accountsfor prepaymentse) Make adjustments for end-of-period expense accrualsand expense prepayments in the profit and loss accountand balance sheetf) Make adjustments in the trading account and balancesheet for end-of-period ‘outstanding’ purchases, i.e.goods received but invoices still awaitedg) State the significance of income accrualsh) Make end-of-period adjustments in income accounts forincome accruali)State the significance of income prepaymentj) Make end-of-period adjustments in income accounts forincome prepaymentk) Make adjustments for end-of-period income accruals andincome prepayments in the profit and loss account andbalance sheetl)1.4 Bad debts andprovision fordoubtful debtsPrepare the recording of two areas of expense within theone expense account, with distinctive balances, e.g. rentand rates accounta) Prepare entries for the recovery of bad debts previouslywritten off in the year in which the bad debt is recoveredb) Prepare entries for the recovery of bad debts previouslywritten off in the year prior to the year in which the baddebt is recoveredc) State the reason why a provision for doubtful debts ismade at the financial year endd) State the difference between a specific provision for aspecific debt and a general provision for other debtse) Prepare the provision for doubtful debts account for anumber of years, and adjust the provision at the end ofeach financial yearf) Demonstrate the effect that a provision for doubtfuldebts has on the presentation of debtors on the balancesheetPearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 20153
2. PartnershipsSubject contentWhat students need to learn:2.1 The formationof apartnershipand thepartnershipagreementa) Describe the significance of a business partnershipb) State why an agreement may be drawn up and what itcan be expected to includec) Explain what happens where no partnership agreementexistsd) Prepare journal and ledger entries for the formation of anew partnershipe) Demonstrate how sole trader assets and liabilitiesbecome partnership assets and liabilitiesf) Calculate capital introduced by a sole trader to apartnershipg) State the significance and effect of goodwill introduced,in the event of a sole trader joining the partnershiph) Explain the purpose of the personal accounts ofpartners, i.e. capital and current accountsi)2.2 Preparation ofpartnershipfinal accountsPrepare partners' capital and current accounts incolumnar formata) Demonstrate the distinction between the partnershipprofit and loss account and the appropriation accountb) Demonstrate how to deal with interest on a loan madeby a partner to the partnershipc) Explain the reason for allowing interest on capital andcurrent account balances and for charging interest ondrawingsd) Calculate interest on capital and current accountbalances and interest on drawingse) Prepare entries for interest in the appropriation accountand in partners' current accountsf) Prepare a partnership balance sheet in horizontal orvertical format2.3 Retirement ofa partner atthe end of afinancial year4a) Prepare a revaluation accountb) Make adjustments for goodwill necessary on theretirement of a partnerc) Calculate amounts due to a retiring partner by cash,other assets, or by transfer to a loan accountPearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 2015
Subject contentWhat students need to learn:2.4 Admission of anew partnerat thebeginning of afinancial yeara) Prepare a revaluation accountb) Make adjustments for goodwill necessary on theadmission of a partnerc) Record cash and other assets and liabilities introducedby the new partner2.5 Change in theratio in whichprofits andlosses areshareda) Make adjustments for goodwill necessary when a changeoccurs in the ratio in which profits and losses are shared2.6 Dissolution ofpartnershipa) Prepare a dissolution or realisation accountb) Write off goodwill where it is not to remain as an asset inthe partnership ledgerb) Prepare the entries in the partnership ledger for assetsand/or liabilities taken over by an individual partnerc) Prepare the entries for partners' loans upon dissolutiond) Prepare the entries for the sale of partnership assets forcashe) Prepare the entries for the collection of amounts frompartnership debtors and the treatment of bad debts anddiscountsf) Prepare the entries for the settlement of partnershipcreditors and the treatment of discountsg) Prepare the entries for the treatment of goodwill ondissolutionh) Prepare the entries to close partners' personal accountsi)Prepare the entries necessary to deal with outstandingdebit balances on partners' personal accounts. Apply therule in Garner v Murrayj) Prepare the entries to deal with the sale of a partnershipas a going concern and the settlement of the purchaseconsideration whether received in cash or in securitiessuch as shares or debenturesk) Make the transfer of securities to the partners on anagreed basisPearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 20155
3. Limited liability companiesSubject contentWhat students need to learn:3.1 Formation of acompanymeaning,purpose andeffecta) Distinguish between a private company (limited) and apublic company (Public Limited Company, i.e. plc)b) Explain the difference between preference share capitaland ordinary share capital and the nature of the rewardthat each expects to receivec) Explain the difference between authorised share capitaland called up share capitald) State the difference between share capital and loancapitale) Differentiate between the types of loan capital, e.g.debentures, loan stock, bank loan.f) Calculate loan interest and recognise that interest is acharge to the profit and loss account3.2 Preparation offinal accountsfor a limitedcompanya) Prepare a profit and loss account in vertical format toshow the net profit of a companyb) Enter the payment of the company directors’ fees and/orsalaries in the profit and loss accountc) Prepare the appropriation section of the profit and lossaccountd) Calculate dividends by using the nominal % forpreference share capital and a monetary amount pershare for ordinary share capitale) Differentiate between an interim dividend and arecommended final dividend on ordinary share capitalf) Calculate the retained profit for the yearg) Prepare a vertical balance sheet in good formath) Differentiate between creditors fallingyear and creditors falling due in moreDifferentiate between creditors fallingyear and creditors falling due in morei)due within onethan one year.due within onethan one yearDifferentiate between provisions and reservesj) Determine what is included under the heading 'Capitaland reserves'k) State the significance of the main reserve headings,profit and loss, share premium, revaluationl)Present the fixed assets on the balance sheet showingtheir cost, accumulated depreciation and net book valuem) Present an orderly presentation of current assetsn) Show the working capital or net current assets6Pearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 2015
4. Incomplete recordsSubject contentWhat students need to learn:4.1 Calculation ofnet profit inthe absence ofproperrecordsa) State the significance and use of a statement of affairs4.2 Factors in theproduction ofdetailed finalaccounts fromincompleterecordsb) Calculate apparent profit by measuring the increase incapitalc) Make adjustments for drawings and for new capitalintroduced in order to arrive at the net profita) Calculate a total sales figure for a period from openingand closing debtors, cash received from customers, baddebts written off, discounts allowed, etc.b) Calculate a total purchases figure for a period fromopening and closing creditors, cash paid to suppliers,discounts received, etc.c) Construct expense accountsd) Construct a trading and profit and loss account and abalance sheet from incomplete records, for a sole tradere) Construct a trading and profit and loss account(including appropriation) and a balance sheet, fromincomplete records, for a partnership5. Manufacturing accountsSubject contentWhat students need to learn:5.1 Manufacturingaccountsa) Prepare accounts in vertical and T-account formatb) Define cost accounting terms: direct materials, directlabour, direct expense, prime cost, factory or productionoverhead and production costc) Make adjustments for the change in work in progressand show its location in the manufacturing accountd) Transfer completed production at coste) Transfer completed production at cost plus a margin ofprofitf) Make the corresponding entry for manufacturing profitg) Make a provision for unrealised manufacturing profitPearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 20157
6. Stock valuationSubject contentWhat students need to learn:6.1 Stockvaluationa) Value stock when a choice has to be made between costand net realisable value6.2 Physicalstocktaking asa basis forstockvaluationa) Show the effect on stock valuation of goods incustomers' hands, e.g. on sale or return and ofcustomers’ goods on our premisesb) Adjust a stock valuation to the financial year end, whenthe physical stocktaking occurs before or after the actualyear endc) In 6.2 b), adjustments will mainly be for sales, salesreturns, purchases and purchases returns6.3 Stock lossesa) Calculate the cost of goods stolen from stockb) Calculate the loss of stock arising from fire, flood, etc.c) Record appropriate entries for an insurance claim arisingfrom loss of, or damage to, stock7. Non-trading organisationsSubject contentWhat students need to learn:7.1 Receipts andpaymentsaccounta) Prepare a summary of cash and bank transactionsb) Distinguish between capital and revenue items in thereceipts and payments accountc) Reconcile closing balance on the receipts and paymentsaccount with the balance at bank and cash in hand7.2 Theaccumulatedfunda) Define the meaning of the accumulated fundb) State the causes for an increase or decrease in theaccumulated fundc) Calculate the amount of the accumulated fund at thestart of a financial yeard) Make entries for donations as a direct entry to theaccumulated fund7.3 Tradingactivitieswithin a nontradingorganisation,e.g. arestauranttradingaccount8a) Make adjustments to cash paid and received to obtainpurchases and salesb) Account for those expenses properly chargeable to thetrading activity of the non-trading organisationc) Calculate the trading profitPearson LCCI Level 2 Certificate in Book-keeping and Accounts (VRQ)Specification – Issue 2 – June 2015 Pearson Education Limited 2015
Subject contentWhat students need to learn:7.4 Income andexpenditureaccounta) Recognise the nature and purpose of an income andexpenditure accountb) Account for subscriptions received during the financialyearc) Account for subscriptions in arrears or in advance at thestart of the financial yeard) Account for subscriptions in arrears or in advance at theend of the financial yeare) Account for lifetime subscriptionsf) Account for donations which are not trea
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