AAT POBC common mistakes
AAT POBC · Understand the traps and how to avoid them.
When preparing the bank reconciliation, deducts unpresented cheques from the bank statement balance and adds outstanding lodgements - i.e. applies the two adjustments in the reverse direction.
They memorise 'cheques and lodgements' as a pair of adjustments without anchoring them to which balance they start from, so the direction flips as soon as the question supplies a bank statement balance rather than a cash book balance.
What to do instead
Write the starting balance at the top of the answer and label it explicitly. Starting from the bank statement balance: add cheques drawn but not yet presented, deduct amounts paid in but not yet credited. Starting from the cash book balance: do the opposite. Self-check: the reconciled figure must equal the corrected cash book balance.
Moves straight from the bank statement to the reconciliation without first writing up the cash book for items that appear only on the statement - bank charges, interest, direct debits, standing orders, dishonoured cheques, BACS receipts.
They treat the reconciliation statement as the single place where everything gets adjusted; the two-stage method (update the cash book, then reconcile) is not fixed in their routine.
What to do instead
Always run stage 1 first: a two-column cash book, post every statement item not yet in the cash book, balance it, then reconcile that corrected balance. Rule to apply every time: statement-only items are cash book adjustments; cash-book-only items are reconciling items. An item is never both.
States that an error of principle, an error of commission, an error of original entry, a complete omission or a reversed entry will put the trial balance out of balance.
They conflate 'the entry was wrong' with 'the entry was one-sided'; the trial balance only tests that total debits equal total credits, not that the correct accounts were used.
What to do instead
Learn the two lists. Out of balance: single entry, addition or transcription error, different amounts posted to each side, wrong side of one account only. Still balances: complete omission, error of principle, error of commission, error of original entry, reversal of entries, compensating errors.
Enters the sales returns day book total on the debit side of the receivables control account, or the purchase returns total on the credit side of the payables control account.
They copy day book totals across mechanically as 'sales goes to receivables, purchases goes to payables' without asking what the transaction does to the balance owed.
What to do instead
For each total ask 'does this increase or decrease what the customer or supplier owes?'. Returns reduce the balance, so sales returns are credited to the receivables control and purchase returns are debited to the payables control. Contra between the two ledgers: debit payables control, credit receivables control.
Describes a direct debit as a fixed amount set up by the payer through their own bank, and a standing order as a variable amount collected by the payee.
Both are recurring automated payments, so the descriptions blur; the defining difference - who holds the authority and who controls the amount - is not learned as a contrasting pair.
What to do instead
Direct debit: payer signs an authority in favour of the payee, the payee collects, the amount can vary, payer is covered by the direct debit guarantee. Standing order: the payer instructs their own bank, amount and date are fixed, only the payer can change or cancel it.
Approves a payments system in which one person prepares the cheques/BACS run, posts the payables ledger and performs the bank reconciliation, and judges the system adequate because the person is experienced and it is efficient.
They evaluate controls on competence and speed rather than on segregation of duties, and do not see the fraud risk of one individual controlling a payment from start to finish.
What to do instead
Name the four duties - authorising, recording, custody of cash and cheques, and reconciliation - and state that no one person should combine them, especially not preparing payments and reconciling the bank account. Then state the compensating control, e.g. independent managerial review of the reconciliation.
When the petty cash imprest is topped up, records the reimbursement as the full imprest amount (e.g. £150) rather than the amount actually spent.
The float is always described as 'a £150 imprest', so £150 is the number that sticks; they forget that the cash still in the tin stays in the tin.
What to do instead
Reimbursement = imprest amount minus cash remaining (notes plus coins counted). Prove it both ways: cash remaining + reimbursement = imprest, and the petty cash book balance b/d after the top-up must return to the imprest figure.
Omits receipts in the petty cash book - staff refunds for private calls, petty cash sales - or records them on the payments side, so the analysis totals no longer cross-cast.
They think of petty cash purely as money going out and treat the book as a payments list rather than as a cash account with two sides.
What to do instead
Keep a receipts column on the debit side for refunds and petty cash sales, total both sides, and prove the book: opening balance + receipts − payments = closing balance. Only the payments side feeds the reimbursement claim.
Clears a suspense account by entering the correction on the same side as the suspense balance, or records only the suspense half and omits the entry to the account that was misposted.
They treat suspense as a balancing figure to be cancelled rather than as an account that must be reversed, and they rush to make the trial balance balance again.
What to do instead
First establish where suspense sits: if the debit column of the trial balance was short, suspense has a credit balance. Every correction has two halves - the account wrongly treated, and suspense on the opposite side. After all corrections the suspense account must be exactly nil; if it is not, one correction is wrong.
Posts a suspense entry to correct every error listed, including an error of principle or a complete omission that never passed through the suspense account at all.
Correction of errors and suspense accounts are taught together, so they assume 'correction of error' and 'suspense entry' are the same thing.
What to do instead
Test each error before writing the journal: did it leave the trial balance out of balance? If not, the correction is an ordinary two-sided journal between real accounts with no suspense involved. Only errors that created a one-sided or unequal entry get a suspense half.