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AAT tips for June 2009

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Unit 30: Introductory Accounting (IAC)
Section1: Double Entry Bookkeeping and Trial Balance
* Write down the entries to record information in the purchase day book, purchase returns days book, sales day book and/ or the sales return day book in the subsidiary (sales or purchases ledger) and the main ledger.
* Perform calculations in relation to VAT when recording the above information.
* Write down the entries to record information in the cash book in the subsidiary (sales or purchases ledger) and the main ledger.
* Produce journal entries to correct errors and clear a suspense account.
* Draw up a trial balance from given information ensuring that debit and credit balances are placed on the appropriate side of the trial balance.

Section 2: Tasks and Questions
* Perform a petty cash reconciliation, suggesting reasons for any differences between the ledger balance and the actual cash count.
* Calculation of VAT amounts, potentially involving discounts.
* Explanation of documents used in the sales or purchase process and different methods of placing orders or making or receiving payment.
* Recording entries in the wages and salaries control account.
* Reconciliation of purchase or sales ledger balance to the balance per the purchase or sales ledger control account, suggesting reasons for any differences.
* Perform a bank reconciliation.
* Check documentation such as an invoice for accuracy.
* Produce a letter to a customer or supplier requesting payment or disputing an invoice.

Unit 3: Preparing Ledger Balances and an Initial Trial Balance (PLB)
Section1: Processing Exercise
Using given information:
* transfer the opening balances from given information to the subsidiary (sales or purchases) ledgers and the main ledgers
* record additional information provided in the books of prime entry in the ledger accounts
* balance off the ledger accounts showing clearly both the balances carried down and brought down
* transfer these final balances to the trial balance and add up the two columns to ensure the trial balance balances.
Section 2: Tasks and Questions
* Perform a petty cash reconciliation, suggesting reasons for any differences between the ledger balance and the actual cash count.
* Calculation of VAT amounts, potentially involving discounts.
* Produce journal entries to correct errors and clear a suspense account.
* Reconciliation of purchase or sales ledger balance to the balance per the purchase or sales ledger control account, suggesting reasons for any differences.
* Perform a bank reconciliation.

Unit 6: Evaluating Costs and Revenues (ECR)
* Stock cards.
* Journals.
* Direct/Indirect Labour costs.
* Allocation and Absorption.
* Overhead absorption rates.
* Costing methods.
* Flexing budget.
* Breakeven points/Margin of Safety.
* Limiting factor analysis.
* Net present value and payback periods for projects.
* Process costing.

Unit 5: Financial Records and Accounts (FRA)
* Incomplete records.
* Disposals.
* Accruals and pre payments.
* Adjustment to the bad debt provision.
* Stock valuation.
* Appropriation account.
* Goodwill.
* Preparation of a profit and loss and balance sheet Define accruals and going concern concept.

Unit 8: Contributing to the Management of Performance & Enhancement of Value (PEV)
* Calculation of standard and actual costs.
* Calculation and interpretation of materials, labour and fixed overhead variances (expenditure and volume, broken further into efficiency and capacity) including interdependence of variances.
* Operating statement reconciling standard to actual costs.
* Explain the difference between absorption costing and marginal costing variances.
* Calculation of revised variances dealing with a change in a price index.
* Forecast using time series analysis and explanation of trend and seasonal variations.
* Ratio analysis – calculate and report on gross profit margin, operating profit margin, return on net assets, stock turnover in days, debtors days, gearing, interest cover, labour utilisation rates.
* Revised profit and loss account and ratios with comments.
* Calculation and explanation of lifecycle costs (including discounted lifecycle) and/or target costs.

Unit 9: Contributing to the Planning & Control of Resources (PCR)
* Preparation of sales budget, production budget, materials usage budget, materials purchases budget, labour utilisation budget, cost of production budget.
* Revised budgets considering restrictions which have been introduced.
* How to overcome restrictions (e.g. subcontracting/alternatives).
* Calculating costs per unit and selling price per unit (budgeted and actual) in order to initially draw up a flexed budget statement (including using the high-low technique for splitting mixed costs and flexing stepped costs).
* Statement comparing actual and flexed budgeted costs and identification of total variances.
* Report on reasons for total variances and action required to investigate variances.
* Explain purposes of budgets (including capital budgets).
* Explain steps required to motivate managers to achieve budgets.
* Explain rolling and incremental budgets.

Unit 11: Drafting Financial Statements (DFS)
The first half of the exam will be about the preparation of limited company financial statements. The second half will address interpretation of company financial statements. You should expect to see the following key workings:
* preparation of an Income Statement and Balance Sheet for a limited company based on a trial balance and additional information
* preparation of a Consolidated Income Statement or Balance Sheet (with adjustments for inter-group trading, fair value adjustments, goodwill and minority interest)
* preparation of an individual company Cash Flow Statement
* calculation of key accounting ratios and an interpretation thereof.
Other topics that could be examined are:
* discussion of confidentiality within accounting records
* discussion of the concepts of "control" and "significant influence" in accounting for subsidiary and associate companies
* calculation and discussion of accounting issues from any of the accounting standards covered on the course.
In recent exams, typical areas of the standards to gain particular attention are as follows:
* inventory valuation
* business combinations
* impairments
* elements of the accounting equation.
It would be unwise to try and predict these questions, as they vary from sitting to sitting and are rarely repeated in the short-term.

Unit 33: Management Accounting (MAC)

* Preparation of sales budget, production budget, materials usage budget, materials purchases budget, labour utilisation budget and cost of production budget (including calculation of OAR and absorbed overheads).
* Revised budgets considering restrictions which have been introduced.
* How to overcome restrictions (e.g. subcontracting/alternatives).
* Explanation of the purposes of budgets (including capital budgets).
* Explain steps required to motivate managers to achieve budgets.
* Explanation of rolling and incremental budgets.
* Calculating percentage changes in costs and price index.
* Calculation of standard and actual costs.
* Calculation and interpretation of materials, labour and fixed overhead variances (expenditure and volume, broken further into efficiency and capacity) including interdependence of variances.
* Operating statement reconciling standard to actual costs.
* Explain the difference between absorption costing and marginal costing variances.
* Calculation of revised variances dealing with a change in a price index.
* Forecast using time series analysis and explanation of trend and seasonal variations.
* Ratio analysis – calculate and report on gross profit margin, operating profit margin, asset turnover, return on net assets, stock turnover in days, debtors days, current ratio, gearing, interest cover and labour utilisation rates.
* Preparation of a revised profit and loss account and ratios with comments.
* Calculation and explanation of lifecycle costs (including discounted lifecycle) and/or target costs.
* Explain of value analysis.

Unit 18: Preparing Business Tax Computations (BTC)

The first half of the exam will be about an unincorporated business. The second half will address companies. You should expect to see the following key workings:

* adjustment of trading profit for a sole trader/partner or company
* calculation of capital allowances for plant and machinery and industrial buildings for a sole trader/partner or company
* calculation of Class 2 and Class 4 NIC for a self-employed trader
* calculation of chargeable gains, most probably for a company. A disposal of shares with rights and/or bonus issues will probably feature here
* calculation of profits chargeable to corporation tax
* calculation of corporation tax, most probably for an accounting period straddling a financial year where rates have changed. Calculation may involve marginal relief, short periods of account and associates.

A number of the following will also appear:

* pages from the income tax or corporation tax return (corporation tax return has not featured for several sittings)
* discussion or calculation of capital gains reliefs (gift relief, replacement of business assets relief, entrepreneur's relief). NB entrepreneurs' relief is new this year and topical
* administration of tax and/or practice ethics – penalties for errors are new this year
* opening year rules or closing year rules for a self-employed business – neither have been examined for several years.

Other topics that could be examined are:

* discussion/application of the badges of trades
* corporation tax losses
* income tax losses
* allocation of profit between partners
* long periods of account for companies.

Unit 19: Preparing Personal Tax Computations (PTC)

The examiner has commented that this unit is compact so you should expect to see virtually all of it examined at every sitting. Key workings are:

* calculation of employment income including benefits. Expect a wider range of benefits than have been examined in previous years. Cars and fuel normally feature, accommodation often appears
* calculation of property income for more than one property. Expect furnished and unfurnished property and properties let for only part of the year
* production of a taxable income working showing clearly non-savings, savings and dividend income. Savings and dividends should be grossed up at the appropriate rates and personal allowance deducted
* calculation of income tax payable, usually for a higher rate payer
* calculation of capital gains on disposal of a number of assets – shares will normally feature here. Expect matching rules, bonuses or rights
* utilisation of capital losses of the current year and the prior year. Interaction of losses with annual exemption
* capital gains tax payable.

A number of the following may also appear:
* pages from the tax return (employment, property, capital gains tax – NB this is the first year that the capital gains tax pages have been examinable so these could be tested)
* administration of tax and/or practice ethics – penalties for errors is a new topical subject
* explanation of the tax calculation of other benefits, capital gains or property income rules
* calculation/explanation of principal private residence relief
* calculation/explanation of relief available for charitable giving and/or investing in a pension.

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