Stuff I got wrong

Question 1

Your client sells a car with faulty breaks. What do you do?

Answer 1

Report to authorities as could be life threatening.

Question 2

If the sales day books is incorrectly totalled does this need to be corrected in the SLCA?

Answer 2

Yes because the figures in the SLCA come from the day book.

Question 3

If the cash receipts book was incorrectly totalled does that need to be corrected in the SLCA?

Answer 3

Yes it does because this is where the payment figures come from.

Question 4

Opening capital account is calculated by doing what when you have a trial balance from the previous year?

Answer 4

Last years capital
Add last years profit
Less last years drawings

Question 5

Do drawings go into the profit appropriation account?

Answer 5

NO!!!!!!!

Question 6

Premium in labour hours is just the extra bit. True or false

Answer 6

True

Question 7

When you are working out if overheads were absorbed correctly you must use the per hour or unit multiplied by the number of actual hours or unit.

Answer 7

DO NOT FORGET THIS!!!!!!!!!

Question 8

What is the role of the International Federation of Accountants (IFAC)?

Answer 8

International body representing accounting bodies

Serve public interest by strengthening accountancy profession

To achieve this it will promote adherence to high quality standards to high quality standards and international convergence

Question 9

Is it necessary for an accountant to be part of an accounting body to provide accountancy services

Answer 9

No it is not necessary.

Question 10

State four areas where it would be expected an accountant working in practice would be required to keep their knowledge up to date

Answer 10

Audit/accounting standards

Tax legislation

Criminal law affecting accountants

Ethical codes

Question 11

If a client threatens to go to a new accountant if you do not do what they want, what threat is it?

Answer 11

Intimidation

Question 12

What are the 4 sponsoring bodies of AAT?

Answer 12

ICAEW
ICAS
CIPFA
CIMA

Question 13

Is AAT’s code of ethics a code of conduct or a code of practice?

Answer 13

Code of practice

Question 14

State the four types of legal action that could be brought against an accountant if they fail to act properly when working on a client?

Answer 14

Breach of contract

Professional negligence

Breach of trust

Fraud

Question 15

If you are asked to provide a reference for a client but you do not know all the facts, what principle is being threatened?

Answer 15

Professional competence and due care

Not giving enough care to work

Question 16

Which UK body has overall responsibility for regulating the accounting profession within the UK?

Answer 16

The Financial Reporting Council (FRC)

Question 17

State which body would set the global ethical standards for accountants?

Answer 17

International Federation of Accountants (IFAC)

Question 18

State three reserved areas of accounting and say why they are reserved?

Answer 18

Audit
Investment business
Insolvency

These are reserved areas as they require specialist knowledge which is not covered in the syllabus of all qualifications.

Question 19

What is the consequence of losing a civil law claim including what courts will award?

Answer 19

The consequence will be an award of damages for losing the case. The aim of the damages is to compensate the injured party, not punish the person who has done wrong.

Question 20

What are the entries when there is a new addition through part exchange?

Answer 20

Dr Machinery at cost with bank amount
Cr Bank with payment

Dr Machinery at cost with part exchange amount
Cr Disposals with part exchange amount

Dr Depreciation charge if any in first year
Cr Accumulated depreciation if any in first year

Question 21

What actions should you take if your client wants you to produce unqualified accounts when there are significant errors?

Answer 21

Discuss with the client
Discuss with the partner
Keep written records
Consider contacting AAT
If client refuses to allow the changes, the firm should consider not working for them.
If the partner is willing to compromise the firms reputation then you should consider resigning

Question 22

If a client asks you to speak at an investor meeting, what threat is it and what should you do?

Answer 22

It is an advocacy threat.

You should not as you should appear independent.

Question 23

What must financial statements for a limited company include?

Answer 23

Statement of profit and loss
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements

Question 24

What is the main difference between the sole trader and limited company financial statements?

Answer 24

Because there is the difference in how the two are funded there is a difference in the accounts.

Sole traders have a proprietor’s interest section which shows the capital, profit and drawings.

Where as a limited company has an equity section.

Question 25

What are the advantages of a limited company?

Answer 25

Limited liability status
Easier to raise finance
Company continues to operate regardless of the ownership
Taxed under corporation tax

Question 26

What the disadvantages of a limited company?

Answer 26

Anyone can access accounts as they are on companies house

More regulations to comply with

Accounts of larger companies must be audited

Issues of shares are highly regulated

Question 27

Why might the client chose the diminishing balance method to depreciate vehicles

Answer 27

To follow the accruals basis of accounting.

Question 28

Irrecoverable debts are credited to what account?

Answer 28

Trade receivables

Question 29

Irrecoverable debts are credited to what account?

Answer 29

Trade receivables

Question 30

A fixed budget changes with activity levels, and takes into account different types of cost behaviour. True or false

Answer 30

False, fixed budgets do not change. Flexible change with activity levels.