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3.4 Final Accounts Preparation > Extras / My errors / esp green light tests / practice assessments > Flashcards

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

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1
Q

AAT professional qualities

A

Independence
Accountability
Scepticism
Social responsibility

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2
Q

AAT personal qualities

A 
Reliability
Responsibility
Respect
Timeliness
Courtesy
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3
Q

Error - what to remember when listing profit appropriation?

A

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

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4
Q

Reminder about the transactions for Goodwill

A

Use the Capital account (not current)

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5
Q

Drawings go to which account

A

Current

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6
Q

Profit share to which account

A

Current

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7
Q

Interest on capital … capital or current account?

A

Current

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8
Q

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

A

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)

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9
Q

Only use the capital account for Capital

A

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.

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10
Q

Watch out for exact wording on profit appropriation

A

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”

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11
Q

Capital/current accounts…

A

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.

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12
Q

For partnerships the SFP ‘financed by’ section…

A

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)

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13
Q

AAT green light tests Ledger accounts Q4122 and 4123

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

A

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

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14
Q

What must be shown in SPL of ltd companies?

A

Tax charge.

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15
Q

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

A

No.

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

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16
Q

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

A

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

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17
Q

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

A

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)

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18
Q

When calculating COGS remember…

A

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

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19
Q

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.

A

.

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20
Q

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

A

.

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21
Q

Review the dropdown label choices VERY carefully

A

.

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22
Q

Watch out for details

A

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

OI / CI - read very carefully … sometimes reversed.

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23
Q

IMPORTANT

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

A

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.

24
Q

When building a partnership appropriation account what to remember

A

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.

25
Q

When doing an appropriation amount what to remember about minus signs

A

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.

26
Q

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

A

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

27
Q

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

A

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

28
Q

Companies act 2006 applies to?

A

Only INCORPORATED entities
Ltd co & LLP (not sure plc)

LLPs must follow some but not all it’s provisions

29
Q

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

A

.

30
Q

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)
A

.

31
Q

Drawings go to a sole traders capital account?

A

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

32
Q

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

A

This body sets global ethical standards for accountants

33
Q

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

A

Include the zero b/d balance at the beginning.

The personal CC amount went in …

34
Q

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

A

.

35
Q

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

A 
Depreciation - No
Revenue - Yes
Closing inventory - No 
Finance cost - Yes
Dividends - No
36
Q 
In applying fundamental accounting concepts the preparers of Financial info are also using...which?
Legislation.
Accounting standards.
Judgement.
Financial reporting standards.
A

Judgement

37
Q

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?

A

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)

38
Q

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.?

A

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

39
Q 
Question bank 3.15
Remember if given a list of possibles and asked to calc COGS:
CI
OI
PP discount
Ps 
Purchase Returns
A

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

40
Q

What is the Trading account

A

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

41
Q

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

A

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)

42
Q

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

A

Transfer balance on current account to capital account

43
Q

Appropriation account - how to handle interest on drawings?

A

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

44
Q

Appropriation account terminology of the sections

A

Top section is called Allocating

Bottom section is called Apportioning, or appropriating or sharing.

45
Q

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.

A

.

46
Q

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

A

.

47
Q

The Appropriation account as a T Account…

A

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…

48
Q

Drawings account to note

A

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

49
Q

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

A

Closing Debit balance

50
Q

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’

A

‘Balance carried down on the Debit side’

51
Q

Osborne assess 1 Task 6

Unclear statement ‘The SPL shows every overhead or expense incurred’

A

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

52
Q

Do Drawings amounts appear on the Profit appropriation account?

A

No

53
Q

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

A

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

54
Q

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…

A

.

55
Q

Share premium is shown where?

A

Statement of Financial Position

56
Q

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.

A

.

57
Q

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

A

.

3.4 Final Accounts Preparation (6 decks)

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