The purpose of the study reported herein was to identify the common mistakes made by junior secondary students in Hong Kong when learning algebra and to compare teachers' perceptions of students' ability with the results of an algebra test. An algebra test was developed and administered to a sample of students (aged between 13 and 14 years). From the responses of the participating students (N = 815), it was found that students in schools with a higher level of academic achievement had better algebra test results than did those in schools with a lower level of such achievement. Moreover, it was found that a teacher's perception of a student's ability has a correlation with that student's level of achievement. Based on this finding, an instrument that measures teaching effectiveness is discussed. Last but not least, typical errors in algebra are identified, and some ideas for an instructional design based on these findings are discussed. (Contains 5 tables and 2 figures.)