← Company financial statement preparation

Writing an "explain in detail" answer

Every paper asks at least two or three of these, and they are Excellence-weighted every time. The structure below is what a schedule is actually looking for, whatever the topic.

The four-part shape, every time

  • Name the relevant account(s) — the specific line(s) in the financial statements this affects.
  • State the figure — with the arithmetic shown, not just the final number.
  • State the effect — which statement or note it changes, and in which direction (increase/decrease, inflow/outflow).
  • If two transactions are being compared or contrasted (a recurring format), do the same three steps for BOTH, then explicitly say how they differ or how they net together.
Real paper — 2022 Explaining the impact of provisional tax on current liabilities Income tax expense for the year is $73 600. Provisional tax of $52 300 has already been paid. Explain the impact on current liabilities at balance date. Name the account: Taxation payable, a current liability. State what the $52 300 represents: tax already paid to the IRD during the year, based on this year's profit. State the figure: taxation payable is reduced to $73 600 − $52 300 = $21 300. ✓ Taxation payable at balance date = $21 300 — the full expense LESS what has already been paid, explained in words, not just calculated. ✕

A correct figure with no explanation earns little on this question type

These questions test whether you can explain WHY, not just calculate. A bare number with no reference to which account it affects, or no statement of the direction of the effect, misses most of the marks even when the arithmetic is right. Always write the sentence, not just the sum.

Practise just this