Extras / My errors / esp green light tests / practice assessments

Question 1

AAT professional qualities

Answer 1

Independence
Accountability
Scepticism
Social responsibility

Question 2

AAT personal qualities

Answer 2

Reliability
Responsibility
Respect
Timeliness
Courtesy

Question 3

Error - what to remember when listing profit appropriation?

Answer 3

I didn’t put in negatives for items out (eg salaries)

Question 4

Reminder about the transactions for Goodwill

Answer 4

Use the Capital account (not current)

Question 5

Drawings go to which account

Answer 5

Current

Question 6

Profit share to which account

Answer 6

Current

Question 7

Interest on capital … capital or current account?

Answer 7

Current

Question 8

If doing a profit appropriation T-Account what goes where?

Answer 8

Total Profit for the year on the right (CR)
Add any Interest on drawings on the right (CR) (DR from rel. c/a)
Then Debit off the appropriations (CR the relevant c/a)

Question 9

Only use the capital account for Capital

Answer 9

Assuming there’s a current account.

Remember question I got wrong on AAT because it had red herring profit share and drawings included to mislead.

Question 10

Watch out for exact wording on profit appropriation

Answer 10

Flo’s total profit share in the AAT green light test.

I gave it as profit and interest on capital but should have deducted interest on drawings also to give her “total profit share for the year including appropriations”

Ie. Interest on drawings and capital are “appropriations”

Question 11

Capital/current accounts…

Answer 11

Sole trader prob just has one account.

Partner has capital (only for actual capital injections involve bank)
And current:
Everything else: profit share, salary, drawings and interest on capital or drawings.

Current account is working account.

Question 12

For partnerships the SFP ‘financed by’ section…

Answer 12

Has a line each for Capital accounts then Current accounts.

Use opening balances
Then lines for
Add: Salary
           Int on cap.
           Profit share
Less: Drawings
            Int on drawings
            Goods for own use

Each line has a column for each partner.
There are totals for each column.
So it is a grid-like format

Then there is a column to right of capital section with total capital.
And a total to the right of the Current totals showing total current.
Then a final total of these 2 sub totals with a thick line (equals net assets)

Question 13

AAT green light tests Ledger accounts Q4122 and 4123

When asked which side an account balance is “carried down” on…

Answer 13

…use the side I have noted the “c/d” at.

Question 14

What must be shown in SPL of ltd companies?

Answer 14

Tax charge.

Question 15

Is there a tax charge in the SPL of an Incorporated partnership (LLP)

Answer 15

No.

Because even though it’s ‘incorporated’ members are self-employed for tax purposes and the LLP is not taxed as a whole.

Question 16

Question bank asked what type of financial info most likely to be missing … note about capital contribution as I had this as a possible

Answer 16

Explanation was that it would be seen on bank statement so not really missing.

Question 17

Calculation of sole traders capital account … error I made in question bank?

Answer 17

The owner had taken some stock for own use which I’d worked out in one part of question.

I worked out what his drawings would be based on 25% of GP
But I then deducted the stock he took from this as it wasn’t cash.

This was wrong because it’s still drawings..
DR drawings / CR inventory (to transact the non-cash drawings he took)

Question 18

When calculating COGS remember…

Answer 18

Net off purchases returns to get the Purchases figure to use.
DON’T net off prompt payment discount … this is income.

Question 19

When filling in little SPL tables with cogs sub amounts
Don’t put a subtotal for OI + P
Just put 3 lines:
OI
P
-CI (put a minus in front of the CI amount as hinted in the question detail.

Answer 19

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Question 20

Watch out for details in the Dropdown choices
Eg I correctly placed the bank amount in the current liabilities section of an SFP since it was a credit amount but I labelled it ‘Bank’ when there was actually a ‘Bank overdraft’ option available

I assume I would have lost a mark

Answer 20

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Question 21

Review the dropdown label choices VERY carefully

Answer 21

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Question 22

Watch out for details

Answer 22

Appropriation accounts - some deductions p/m and some p/a ?

OI / CI - read very carefully … sometimes reversed.

Question 23

IMPORTANT

What do you do about partners accounts when they are retiring?

Answer 23

Transfer any current account amount into their capital account.
For a question where there is an agreement to pay out £10k to the leaver and rest to be a loan…

Transfer current account
Sort the goodwill amount
Pay out bank amount £10k
Transact the loan amount whatever left.
Capital and current must be zero.

I transferred amount from current to loan so net effect would be same but presume would be wrong.

Question 24

When building a partnership appropriation account what to remember

Answer 24

Notice it says in the question ‘you must put in zero amounts’ to get full marks.

This means eg. If someone has zero salary …put it in as an item with a zero amount.

Question 25

When doing an appropriation amount what to remember about minus signs

Answer 25

Put them in the top half to get to the residual amount. But notice that the bottom of the share section ends with ‘Total residual amt distributed’ .... so don’t put negatives in the share amounts as you are adding them up to get to that total. UNLESS it’s a LOSS in which case negatives at the bottom also.

Question 26

When preparing a capital t account for a new partner (or in other situations) what to remember

Answer 26

Include a Balance b/d figure at the top ... even though it’s a zero.

Question 27

Preparing a SFP.... what to remember about Trade receivables?

Answer 27

Net off the Allowance for Doubtful debt ... even if not specified. ... see question bank 4.9

Question 28

Companies act 2006 applies to?

Answer 28

Only INCORPORATED entities Ltd co & LLP (not sure plc) LLPs must follow some but not all it’s provisions

Question 29

Need to read the ‘conceptual framework’ Also see question bank 5.18 ‘predictive value’ and ‘confirmatory value’ ... read up as haven’t heard of... Also 5.21

Answer 29

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Question 30

Question bank q (BBP ass 1) had ‘cash is paid to a supplier’ and a grid to tick the balances affected . 1. Even though it said ‘cash’ in the question it meant bank. 2. It said ‘and some discount taken’ but I missed that I shd have ticked the Credit column of Income for this (I put no change for income)

Answer 30

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Question 31

Drawings go to a sole traders capital account?

Answer 31

Yes it seems sole traders don’t really have current accounts

Question 32

International Ethics Standards Board for Accountants, what do they do?

Answer 32

This body sets global ethical standards for accountants

Question 33

In a BBP question bank about an owners capital account... What about the T-account to remember? What about equipment bought by personal CC?

Answer 33

Include the zero b/d balance at the beginning. | The personal CC amount went in ...

Question 34

Need to read up on PLCs so could have answered BPP ass1 Task 4 a ii.

Answer 34

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Question 35

Revise what items have to be shown as separate lines in SPL

Answer 35

``` Depreciation - No Revenue - Yes Closing inventory - No Finance cost - Yes Dividends - No ```

Question 36

``` In applying fundamental accounting concepts the preparers of Financial info are also using...which? Legislation. Accounting standards. Judgement. Financial reporting standards. ```

Answer 36

Judgement

Question 37

For a ‘OI + P - CI = Cogs’ question... Normally need given 3 items to work out 4th missing one... BUT don’t be thrown by being given a NET figure that is actually 2 eg. ‘Inventory decreased by 550 during the year’ but no OI or CI How to handle?

Answer 37

Doesn’t matter OI and -CI individually because have just been given the net. Also know Cogs so problem is solved. So: OI + P - CI = Cogs OI - CI + P = Cogs (OI -CI) + P = Cogs 550 + P = Cogs P = Cogs - 550 (NB if had been told CI was 550 higher than OI then same thing... P = Cogs + 550 (Just be careful when shuffling the equation)

Question 38

In question bank when given figures for assets and for liabilities at start and end of year and asked to draw up capital account what to note.?

Answer 38

In the answer bank the A and L figures were netted off and entered as b/d (or c/d) figures (as would expect)

Question 39

``` Question bank 3.15 Remember if given a list of possibles and asked to calc COGS: CI OI PP discount Ps Purchase Returns ```

Answer 39

Do NOT include PP discount as this goes in SPL as income

Question 40

What is the Trading account

Answer 40

The SoPL is actually 2 statements. The Trading account (detailing sales, CoS, and resulting GROSS Profit) Then The Profit and Loss account which factors in everything else and ends with NET Profit

Question 41

When constructing the cogs part of a SOPL using drop downs..what not to do

Answer 41

Don’t put a subtotal for OI + Ps | Just put the 3 figs OI, Ps, CI one after the other and a negative against the CI (says so in the question)

Question 42

When a partner retires from a partnership business what to do with current capital accounts?

Answer 42

Transfer balance on current account to capital account

Question 43

Appropriation account - how to handle interest on drawings?

Answer 43

Goes in top section (no negative against it because it’s adding to the profit to be distributed ... the residual amount will be higher)

Question 44

Appropriation account terminology of the sections

Answer 44

Top section is called Allocating | Bottom section is called Apportioning, or appropriating or sharing.

Question 45

From AAT comment note that even if there is a negative residual amount after allocation part of appropriation ‘this does not mean the business made a loss’ We allocated more profit than the business made.

Answer 45

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Question 46

Appropriation account. Remember that the ‘residual to distribute’ and ‘total residual distributed’ amounts should be the same... (and can be either both positive or both negative figures) So if allocations took it to a negative amount...eg. residual to distribute. -100 You would also be putting negatives against each persons share of ‘loss’ Karen -50 Andrew. -50 Total residual distributed -100

Answer 46

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Question 47

The Appropriation account as a T Account...

Answer 47

Think of profit on the ETB Profit is on the Cr side. So Dr Profit and Cr Appropriation account at eoy. *Then do ‘Allocations’: Dr Appropriation for eg. partners salaries; int. on cap.; commission. (Cr side goes to partners current account) Cr Appropriation for eg. Interest on Drawings. (Dr side goes to partners’ current account) *Then do ‘appropriations’ Dr Appropriation for share of residual profits. (Cr side to partners current accounts) **** If there was a Loss on the ETB (Fig in Dr side on the ETB) Then it’s the opposite to begin the process... You would CR the Profit or loss account and Dr the Appropriation account and work from there...

Question 48

Drawings account to note

Answer 48

..it seems a drawings account is maintained through the year and then written off to the current accounts only at Eoy..

Question 49

If the ‘Balance c/d’ is on the right do you have a ?: ‘Closing Debit balance’ ‘Closing Credit balance’

Answer 49

Closing Debit balance

Question 50

If you have a ‘Balance c/d’ entry on the left is the ‘Balance carried down on the Debit side’ Or ‘Balance carried down on the Credit side’

Answer 50

‘Balance carried down on the Debit side’

Question 51

Osborne assess 1 Task 6 | Unclear statement ‘The SPL shows every overhead or expense incurred’

Answer 51

Osborne answer is false So it seems to mean ‘SPL shows every overhead or expense incurred IN DETAIL’

Question 52

Do Drawings amounts appear on the Profit appropriation account?

Answer 52

No

Question 53

Watch out when using ..... OI + P - CI = CoS ... and given a sales figure and told margin or markup

Answer 53

In one practice I went and took sales figure worked back but put it in equation as Purchases instead of as COS

Question 54

Watch out for sole traders labelling of capital account... I labelled drawings as drawings but answer had ‘bank’ (“Drawings from the bank were £13,300”) Goods for own use went in as goods for own use though...

Answer 54

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Question 55

Share premium is shown where?

Answer 55

Statement of Financial Position

Question 56

Final checks: Check account names - should not be same as Account name working in !!!! Check don’t miss a question!!!! Check put things on right side (posted profits on dr side of a ca)!!!!! Remove gaps.

Answer 56

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Question 57

Looks like sole traders have a drawings account but not a current account.

Answer 57

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