SAMPLE ASSESSMENT TASKS

ACCOUNTING AND FINANCEATAR YEAR 11

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Sample assessment taskAccounting and Finance – ATAR Year 11Task 1 – Unit 1

Assessment type: Project

ConditionsPeriod allowed for completion of the task: 2 weeksSome of the task requirements may be completed in class.

Task weighting5% of the school mark for this pair of units

_______________________________________________________________________________________________________

Kay Jay has recently retired from the professional cycling circuit and has managed to save a small sum of money. He has no formal business or accounting qualifications but has good people skills and is considering purchasing a small business in your local area. He does not mind what sort of business he operates and may need finance to realise his goal.

You have been asked to conduct research for Kay Jay to help him decide on the course of action to take.

1. Complete the table below outlining the characteristics of three different types of business ownership: sole trader, partnership and small proprietary company. (10 marks)

(40 marks)

Characteristics Sole trader PartnershipSmall proprietary

company

a. number of owners One owner

b. liability of owners

c. ability to raise capital

d. distributions of profits

e. transfer of ownership

f. accounting/legal entity

g. continuity of existence

Sample assessment tasks | Accounting and Finance | ATAR Year 11

22. Explain two (2) advantages and two (2) disadvantages of each type of business ownership (sole

trader, partnership and small proprietary company).Note: Do not provide the same advantage or disadvantage for different types of business ownerships i.e. do not use the same information more than once. (12 marks)

3. Kay Jay may need finance to purchase his desired business. Describe three (3) sources of finance suitable for purchasing a business. (6 marks)

4. In order to obtain finance from a financial institution to purchase a business, Kay Jay will be required

to supply financial and legal information. Describe three (3) items of information he may be required to supply. (6 marks)

5. a) If Kay Jay purchases a business, he will need to be aware of GST implications. Identify whatthe acronym stands for and define GST. (2 marks)

b) Explain four (4) GST legal requirements for sole traders and partnerships. (4 marks)

6. After purchasing a business Kay Jay may find himself in financial difficulties if inappropriate business decisions are made. This could result in bankruptcy.

a) Explain the concept of bankruptcy as outlined in the Bankruptcy Act 1966. (2 marks)

b) Outline three (3) disadvantages of becoming bankrupt. (3 marks)

7. Which type of business ownership would you recommend to Kay Jay? Explain five (5) reasons to justify your choice. (10 marks)

Total = 55 marks

Sample assessment tasks | Accounting and Finance | ATAR Year 11

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Marking key for sample assessment task 1 — Unit 1

1. Complete the table below outlining the characteristics of different types of business ownership.

Description Marks

Characteristics of different types of business ownership1–10

(0.5 marks per each characteristic)

Characteristics Sole trader PartnershipSmall proprietary

company

a. number of owners 1 2 – 20 Less than 50

b. liability of owners Unlimited liability Unlimited liability Limited liability

c. ability to raise capital Limited Limited Shareholders

d. distributions of profits Not shared Shared Directors decide

e. transfer of ownership If business sold If part of agreement Shares may be sold

f. accounting/legal entity Accounting entity Accounting entity Legal entity

g. continuity of existence No No Yes

Sample assessment tasks | Accounting and Finance | ATAR Year 11

42. Explain two (2) advantages and two (2) disadvantages of each type of business ownership (sole

trader, partnership and small proprietary company). Note: Do not provide the same advantage or disadvantage for different types of business ownerships i.e. do not use the same information more than once.

Description Marks

Explains two advantages of sole trader, partnership and small proprietary company 1–6(1 per advantage)

Answer could include, but is not limited to, any two of the following for each business type.Advantages of sole trader one owner doesn’t need to consult with others ease of formation the owner makes all business financial and operational decisions the owner keeps all profitsAdvantages of partnership ease of formation business responsibilities may be shared among the partners losses may be shared among the partners additional capital and expertise may be contributed by partnersAdvantages of small proprietary company separate legal entity limited liability ability to raise capital through shares

Subtotal /6

Explains two disadvantages 1–6(1 per disadvantage)

Answer could include, but is not limited to, any two of the following for each business type.Disadvantages of sole trader unlimited liability not a legal entity sources of finances may be limited limited expertise in all aspects of business operationDisadvantages of partnership unlimited liability not a legal entity business profits shared mutual agency – each partner responsible for the implications of business actions of other partnersDisadvantages of small proprietary company ownership of the company and control of the company are separated shareholders aren’t able to make decisions on behalf of the company high cost of establishment (when compared to sole trader and partnership) many rules and regulations need to be followed

Subtotal /6Total /12

Note: a duplicate advantage or disadvantage for a particular business type does not receive a second mark.

Sample assessment tasks | Accounting and Finance | ATAR Year 11

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3. Kay Jay may need finance to purchase his desired business. Describe three (3) sources of finance suitable for purchasing a business.

Description Marks

Describes in detail an appropriate source of finance for purchasing a business 2 (per source of finance)

States an appropriate source of finance for purchasing a business 1 (per source of finance)

Total /6Answer could include, but is not limited to, the following types of finance. bank loan – loans available for either a short term or long term for either current or non-current assets mortgage – long-term finance, generally for non-current assets lease – the business is able to hire and use a non-current asset over a period of time and then purchase

at the expiration of the lease overdraft – facility for businesses to keep withdrawing funds from their cash accounts when the balance

reaches zero loans from family and friends

4. In order to obtain finance from a financial institution to purchase a business, Kay Jay will be required to supply financial and legal information. Describe three (3) items of the information he may be required to supply.

Description Marks

Describes in detail an appropriate type of financial or legal information 2(per type of information)

States an appropriate type of financial or legal information 1 (per type of information)

Total /6Answer could include, but is not limited to: certificate of registration or incorporation and/or copy of business name registration details of any security offered such as property valuations, certificate of titles evidence of financial performance, such as income statement and balance sheet, personal or business

tax returns, bank statements business plan cash flow projections any leases or hire purchase details

5. a) If Kay Jay purchases a business, he will need to be aware of GST implications. Identify what the acronym stands for and define GST.

Description MarksCorrectly identifies that the GST acronym stands for goods and services tax 1Correctly defines GST 1

Total /2Definition of GST could be either of the following: GST is a federal tax collected by business which imposes a 10% levy on most goods and services GST is a broad-based consumption tax levied on most goods and services conducted by business

carrying on an enterprise in Australia.

Sample assessment tasks | Accounting and Finance | ATAR Year 11

6b) Explain four (4) GST legal requirements for sole traders and partnerships.

Description Marks

Explains the GST legal requirements for sole traders and partnerships 1–4(1 per requirement)

Total /4Answer could include, but is not limited to: must register for GST if they have an annual turnover above $75,000 must have registered for an ABN may decide not to register for GST if their turnover is below $75,000 may choose not to register for GST if they believe the record keeping will be too great must complete a BAS statement for each tax period

6. After purchasing a business, Kay Jay may find himself in financial difficulties if inappropriate business decisions are made. This could result in bankruptcy.

a) Explain the concept of bankruptcy as outlined in the Bankruptcy Act 1966. b) Outline three (3) disadvantages of becoming bankrupt.

Description MarksExplains the concept of bankruptcy 2States the meaning of bankruptcy but incorrectly explains the concept or does not explain it 1

Answer could include, but is not limited to: when people are unable to pay their debts and their affairs are administered by a registered trustee people who have unmanageable debt and who voluntarily lodge a petition to become bankrupt and have

that petition upheld people who are unable to pay a creditor the amount owing of $5000 or more, and have the creditor

apply to have the person declared bankrupt

Outlines three disadvantages of becoming bankrupt 1–3(1 per consequence)

Answer could include, but is not limited to: business and personal assets may be sold to cover debt creditors can continue to demand payment for secured debts ability to travel overseas will be affected as permission to travel is required and passport may have to be

surrendered ability to obtain future credit will be affected government rates and charges (council rates, water rates) still need to be paid credit rating is negatively affected as reporting agencies keep a record of bankruptcy for up to five years

or longer

Total /5

Sample assessment tasks | Accounting and Finance | ATAR Year 11

77. Which type of business ownership would you recommend to Kay Jay? Explain five (5) reasons

to justify your choice.

Description Marks1–2

Explains a valid reason for the recommended type of business ownership 2 (per reason)States a valid reason but incorrectly justifies it or does not justify it 1 (per reason)

Total /10Answer could include, but is not limited to:Sole trader ease of formation one owner not required to share business profits with others owner makes all financial business decisions owner makes all operational business decisions accounting entityPartnership ease of formation Partnership Act provides regulations/guidance of operation capacity for increased finance because of number of partners increased expertise available (partners contribute) sharing of business responsibilities sharing of business losses accounting entitySmall proprietary company unlimited liability legal entity capacity for increased capital raised through shares separation of ownership and control transfer of ownership continuity of existence shareholders not bound by the financial actions/decisions of other shareholders

Sample assessment tasks | Accounting and Finance | ATAR Year 11

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Sample assessment taskAccounting and Finance – ATAR Year 11Task 11 – Unit 2

Assessment type: Test

ConditionsTime for the task: 30 minutes under invigilated conditionsCalculators may be used

Task weighting5% of the school mark for this pair of units

_______________________________________________________________________________________________________

Refer to the following table when answering question 1.

Profitability ratios Formula Industry average

profit profitnet sales 14.00% or 0.14:1

gross profit gross profitnet sales 35.00% or 0.35:1

expense operating expensesnet sales 21.00% or 0.21:1

rate of return on assets profitaverage total assets 200.00% or 2.0:1.0

1. An extract from the income statement of Gravity Enterprises for the year ended 30 June 2016 revealed the following:

Gravity Enterprises Income statement (extract) for the year ended 30 June 2016

$SalesGross profit Profit (Loss)

250,000 60,000

(10,500)

Note: Total Assets at 1 July 2015 = $28,000 and at 30 June 2016 = $40,000

a) In the table above, industry average figures for profitability ratios are provided. Calculate the four (4) profitability ratios for Gravity Enterprises. Round to two decimal places.

(15 marks)

b) For the gross profit ratio and the profit ratio, state one (1) possible reason for the variation between your calculation for Gravity Enterprises and the industry average. Outline one (1) suggestion to improve the ratio.

(4 marks)

Sample assessment tasks | Accounting and Finance | ATAR Year 11

92. a) Which of the following ratios is the best indicator of short-term risk? (1 mark)

quick asset ratio profit ratio debt to equity ratio expense ratio

b) Justify your choice. (1 mark)

3. Explain the main difference between liquidity ratios and the leverage ratio. (2 marks)

4. Although specific financial items are used to measure business performance, ratio results are not absolute. Outline two (2) reasons for the limitations of ratio analysis and give an example to support one (1) of the reasons.

(3 marks)

Total = 26 marks

Sample assessment tasks | Accounting and Finance | ATAR Year 11

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Marking key for sample assessment task 11 — Unit 2

1. a) Calculate the four (4) profitability ratios for Gravity Enterprises. Round to two decimal places.

Description MarksRatio CalculationsGross profit 60,000 (1)/250,000 (1) = 0.24 x 100% = 24.00% 2Expense 60,000 (1) – (10,500) (1) = 70,500

70,500/250,000 (1) = 28.20% (1) 4

Profit (10,500) (1)/250,000 (1) = (4.20)% 2Rate of return on assets

28,000 (1) + 40,000 (1) = 68,000 (1) / 2 = 34,000 (1)(10,500) (1) / 34,000 (1) = (30.88)% (1) 7

Total /15

Note: Working does not have to be shown i.e. award full marks if ratios are correct without workings.

b) For the gross profit ratio and the profit ratio, state one (1) reason for the variation between your calculation for Gravity Enterprises and the industry average. Outline one (1) suggestion to improve the ratio.

Description MarksOutlines one (1) suggestion to improve the ratio for the variation in the gross profit ratio 1Result 24.0%. Industry average 35.0%.Answer could include, but is not limited to any one of the following reasons. the selling prices may be below the industry average cost of sales may be above the average combination of the twoSuggestion could be any one of the following, but is not limited to: raise prices but improve quality control reduce the cost of sales by sourcing cheaper supplies and buying in bulk become more efficient e.g. producing on a larger scale

States one reason and one suggestion for the variation in the profit ratio. 2(1 mark each)

Result (4.2%). Industry average 14.0%.Answer could include, but is not limited to: the business is making losses as profit is well below the average and expense ratio higher than industry

average expenses are high suggesting the level of control over expenses is insufficient the business overheads and depreciation are not controlled and may be higher than average.Suggestion to improve the ratio: review all expenses and operating costs with a view to reducing them as they are contributing to profits

that are much lower than industry average review any depreciation methods applied to assets as they may be over-estimated thus reducing the

final profit ratioTotal /4

Sample assessment tasks | Accounting and Finance | ATAR Year 11

112. a) Which of the following ratios is the best indicator of short-term risk?

quick asset ratio profit ratio debt to equity ratio expense ratio

b) Justify your choice.

Description MarksCorrectly selects the best indicator (quick asset ratio) 1Provides a valid reason for selection 1

Total /2Answer could include, but is not limited to: measures the ability of the business to meet its immediate short-term debts, as it considers current

assets less inventory and prepayments, and current liabilities less bank overdraft measures current assets which can readily be converted to cash and current liabilities

3. Explain the main difference between liquidity ratios and the leverage ratio.

Description MarksExplains the difference between liquidity ratios and the leverage ratio 1–2

Total /2Answer could include, but is not limited to:Liquidity ratios measure the ability of a business to meet its short term debts and obligations by measuring current

assets and current liabilities measure the ability of a business to pay its short term liabilities when they fall due by measuring current

assets and current liabilitiesButThe leverage ratio considers debt to equity – measures whether the business debt level is manageable or sustainable by

measuring total liabilities and total equity measures the liabilities of a business compared to its equity

4. Although specific financial items are used to measure business performance, ratio results are not absolute. Outline two (2) reasons for the limitations of ratio analysis and give an example to support one (1) of those reasons.

Description Marks

Outlines appropriate reason for limitation of ratio analysis 1–2(1 per reason)

Provides a relevant example 1Total /3

Answer could include, but is not limited to: the concept that, on its own, for one financial period, a ratio does not provide very useful information,

basis for comparison or indication of trendsExample: additional financial data is needed to support the ratio analysis for one financial period different accounting practices used can distort comparisons in figuresExample: leasing equipment versus buying equipment ratios should be measured for consecutive financial periodsExample: examining past financial periods helps to determine trends ratios should be compared with industry benchmarks or industry averages for that particular type of

businessExample: service industry results should not be compared with a business producing goods, or businesses

producing similar types of goods should be used ratios are based on the financial reports of a business, assuming that errors have not been made in themExample: if sales are overstated, or expenses understated, or liabilities minimised, ratio results will be distorted

Sample assessment tasks | Accounting and Finance | ATAR Year 11