FAPS & MATS key points & questions

Question 1

Credit balance on the VAT account?

Answer 1

Liability to HMRC

Question 2

When does an amount go to suspense?

Answer 2

When accounts are under or over-cast

Question 3

Profit or loss on a disposal?

Answer 3

Calculate the original cost less accumulated depreciation to date = carrying amount. Then work out the difference between that and what it was sold for.

Question 4

Definition of going concern

Answer 4

Presumes that the business will continue trading for the foreseeable future and has no intention =s to significantly reduce in scale.

Question 5

Definition of Accruals basis

Answer 5

Income and expenses are recorded at the time they are incurred rather than when cash is paid.

Question 6

Definition of materiality

Answer 6

How significant the transactions or errors are within the accounts. If it is big enough to significantly change the decisions of the users then it is material.

Question 7

Accruals are a liability

Answer 7

so a credit on the ETA (included in creditors)

Question 8

Prepayments are an asset

Answer 8

so a debit on the ETA (included in debtors)

Question 9

Closing inventory on ETA

Answer 9

credit P&L
Debit balance sheet

Question 10

Wages

Answer 10

Expense (dr) on P&L

Question 11

Describe & explain what the accounting equation is, importance and how it’s used.

Answer 11

Assets = liabilities + capital + profit - drawings. It tests the basic principles of double-entry. If DE is done correctly then the AE will always balance. The equation is how the balance sheet is laid out.

Question 11

Describe and explain the P&L

Answer 11

Shows how the business performed over a period of time.

Question 11

Describe and explain the balance sheet

Answer 11

Shows the STRENGTH & LIQUIDITY of the business. A snapshot of the business’ financial position at a specific point in time. A & Ls are split between current and non-current

Question 11

What type of transaction are discounts received?

Answer 11

other INCOME so credit on profit & loss

Question 12

What type of transaction are discounts allowed?

Answer 12

Expense = debit

Question 13

Net assets

Answer 13

NC assets + current assets - NC liabilities - current liabilities

Question 14

order of assets and liabilities on balance sheet

Answer 14

liquidity - so those that take the longest to turn to cash at the top. Debtors, bank, cash

Question 15

OAR

Answer 15

actual oh/s divided by rate

Question 16

under-absorbed overheads

Answer 16

budget is less than actual

Question 17

Valuation using absorption costing

Answer 17

Higher profit because closing inventory is valued higher as fixed production overheads are included in cost of sales

Question 18

Valuation using marginal costing

Answer 18

Lower profit as closing inventory is valued lower.

Question 19

How to calculate closing inventory

Answer 19

Direct production costs divided by number produced times number left in stock

Question 20

SV cost

Answer 20

sv total cost less variable cost = fixed element

Question 21

Breakeven point in units

Answer 21

Total fixed overheads divided by contribution PER UNIT

Question 22

Margin of safety ratio

Answer 22

budgeted units - breakeven divided by budgeted units

Question 23

BE sales revenue

Answer 23

BE units x selling price

Question 24

Target profit in units

Answer 24

target profit plus fixed costs divided by contribution

Question 25

what happens if the BE point decreases

Answer 25

Margin of safety increases

Question 26

Profit-volume ratio

Answer 26

contribution/sales x 100

Question 27

What should you do if your client has underpaid tax and is refusing to disclose the error to HMRC?

Answer 27

Make a money laundering report (as this is illegal money) and cease to act for the client

Question 28

3 secondary money laundering offences

Answer 28

Concealing, arranging, acquiring

Question 29

Inventory buffer

Answer 29

re-order level - (av lead time x av usage)

Question 30

Minimum re-order quantity

Answer 30

av usage x av lead time

Question 31

Explain how accounting for inventory is an example of the accruals concept

Answer 31

Matched the cost of the inventory to the financial period in which it will generate income from the sale of the inventory.

Question 32

Name 3 safeguards to ensure confidentiality to put in place if you’ve been asked to act for 2 competing clients

Answer 32

1 - have separate teams of staff to work on each client
2 - signed confidentiality agreements from all staff to deter them from discussing the client’s affairs
3 - have clear guidance in place for staff about confidentiality

Question 33

Another name for capital

Answer 33

Equity

Question 34

What to think about when re-apportioning costs

Answer 34

Is it a direct allocation or do I need to re-apportion based on the budget costs and values given?

Question 35

BE point in units

Answer 35

Fixed costs/contribution in units

Question 36

Potential consequences of non-compliance when dw client monies?

Answer 36

Legal action - court
Professional body disciplinary action
Professional status taken away

Question 37

In what situations can you not hold money on behalf of a client?

Answer 37

When you suspect money laundering
We don’t hold investment money

Question 38

Explain whether confidentiality is a legal requirement, ethical one or both

Answer 38

It is both - required under GDPR law to protect confidential info and data protection act. AAT members must follow code of ethics and fundamental principles

Question 39

3 bodies it would be relevant to disclose confidential info to?

Answer 39

AAT
Police
NCA
HMRC - but need written consent to report to HMRC