Part (b) for 6 marks required an explanation of potential going concern indicators from the scenario. This was answered well by many candidates.

The scenario contained many going concern indicators and candidates were able to easily identify an adequate number of indicators. However, the explanation of why these indicators might imply that Strawberry Kitchen Designs Co (Strawberry) was not a going concern was not as well answered.

Many candidates’ explanations of indicators were limited to “this could indicate the company is not a going concern” this is not an adequate explanation and so would not score marks. The answer needed to explain how the indicator could stop Strawberry from being a going concern.

For example “a major customer ceasing to trade” is a going concern indicator because it means that future sales and cash flows could be reduced if this customer is not replaced.

In addition a small minority spent significant time calculating ratios using the limited financial data available.

Ratios were not specifically required, and whilst there were some available marks for explanations of current or quick ratios falling, this time would have been better served explaining any of the numerous indicators from the non-financial information given in the scenario.