AAT Level 3 FAPS common mistakes
AAT Level 3 FAPS · Understand the traps and how to avoid them.
Writes the journal with the debit and credit the wrong way round - e.g. to write off an irrecoverable debt, debits the customer's receivable account and credits the irrecoverable debts expense, or credits the account it has just described as 'increased'.
Journals are learned as 'two lines' rather than as a movement in two balances. Under time pressure the candidate follows the order the accounts appear in the narrative instead of deciding which balance is rising and which is falling.
What to do instead
Write the narrative first in plain words ('reduce the receivable, increase the expense'), state rise or fall for each account, then apply DEAD CLIC. Finish every journal with a 10-second sanity check: does the balance being created or removed move in the direction the story implies, and do the two columns total the same?
Records VAT-inclusive invoice totals in the sales, purchases and expense accounts and treats the VAT element as a cost, so the VAT account is never cleared and gross profit is overstated.
The invoice total is the visible number on the document; the net figure has to be derived, and candidates under exam pressure post what they see.
What to do instead
Build the habit of splitting every VAT invoice before posting: net to the trading account, VAT to the VAT account (output VAT credited, input VAT debited). Test the finished VAT account - its balance must equal the liability or repayment due, and adding all net figures plus VAT must reconcile to the gross totals in the records.
In a bank reconciliation, adds unpresented cheques to the bank statement balance and treats uncleared lodgements as cash book adjustments - i.e. puts timing differences and genuine cash book errors through the same route.
'Reconcile' is read as 'make the two balances equal', so both lists of items get corrected in whichever figure looks wrong at the time.
What to do instead
Sort every item into one of two buckets before touching either figure: cash book errors and omissions (correct in the cash book, then re-derive the revised cash book balance) versus timing differences (adjust in the reconciliation statement only). Within timing differences: unpresented cheques reduce the statement balance, uncleared lodgements increase it. Never post a timing difference to the ledger.
Reconciles the receivables or payables control account to the ledger list of balances while ignoring contra items, then plugs the remaining difference into a suspense account.
A contra is not on any single invoice, so it is invisible when the candidate scans the day books for one-sided entries; the reconciliation appears to 'nearly' work and the plug hides it.
What to do instead
Tick off every ledger-list balance against the control account both ways and look deliberately for pairs of equal amounts sitting on opposite sides - that is a contra. Post it (Dr payables control, Cr receivables control), rebuild the reconciliation with no forced figure, and treat any residual difference as unevidenced until explained.
Posts a suspense account entry to correct an error of principle, commission, original entry, reversal or complete omission - errors that never stopped the trial balance agreeing.
All corrections are lumped together as 'errors go through suspense', a rule learned from the one or two error types where that is true.
What to do instead
Apply a single test before choosing suspense: is one side of the double entry missing, or is one amount wrong? If yes - suspense. If both sides were posted and the trial balance still agreed, the correction goes directly between the two accounts concerned and suspense is never touched. State the error type explicitly before writing the journal.
Reverses the direction of accruals and prepayments - records a prepayment as Dr expense, Cr prepayments - or adjusts the statement of profit or loss without making the matching statement of financial position entry.
One worked example (usually a accrued expense) is memorised, then pattern-matched to a prepayment question without re-deriving the entry.
What to do instead
Ignore the label and describe the year-end position in words first: 'we hold an asset for next period' or 'we owe for this period'. The entry then follows mechanically - prepayment Dr prepayments Cr expense; accrual Dr expense Cr accruals. Check that the expense account closes at the true cost of the period and that every adjustment lands in both statements.
Calculates cost of sales by taking the purchases figure straight from the trial balance, leaving opening inventory unadjusted and omitting closing inventory from both the trading account and the statement of financial position.
The purchases balance is presented ready-made in the trial balance, so it is used as if it were the cost of sales figure.
What to do instead
Always write the cost of sales working out in full, in order: opening inventory + purchases (and carriage inwards) − closing inventory. Show closing inventory twice - as a credit in the inventory account reducing the charge, and as a current asset in the statement of financial position - and check gross profit changes by exactly the inventory adjustment.
Charges a full year of depreciation on a non-current asset acquired part-way through the year, and on disposal debits the disposal account with cost but leaves the accumulated depreciation on the asset.
The trial balance supplies a single depreciation figure for the existing pool, so the new addition is simply missed; disposals are memorised as a one-line entry rather than a four-line transfer.
What to do instead
Maintain a per-asset schedule (date acquired, cost, accumulated depreciation, this year's charge) and apply the stated policy pro rata from the month of acquisition. For a disposal complete all legs: Dr disposal at cost, Dr accumulated depreciation, Cr disposal at carrying amount, then the proceeds and the balancing profit or loss. Confirm the disposal account closes to nil.
Charges the whole revised allowance for doubtful debts to the statement of profit or loss each year, or debits it to irrecoverable debts as though a balance had been written off.
The allowance and the expense are conflated: the closing balance is treated as if it were the charge for the year.
What to do instead
Work out the movement, not the balance: movement = closing allowance − opening allowance. A rise is Dr irrecoverable debts expense, Cr allowance; a fall is the reverse. The statement of profit or loss carries only the movement; the statement of financial position carries only the closing allowance as a deduction from receivables.
In the extended trial balance, extends adjusted figures into the wrong statement columns, or fails to carry the profit for the year into the capital section (and to deduct drawings), so the statement of financial position does not balance and the candidate forces a figure.
The extended trial balance is treated as two independent lists to be copied out, and the profit line is seen as a plug rather than a real double entry.
What to do instead
Extend all adjustments first, then total each pair of columns. Derive profit as the difference between the profit or loss column totals, enter that same figure in the statement of financial position columns, and add it to the capital section (opening capital + profit − drawings). Accept the statements only when both the profit figure and the statement of financial position balance are achieved without a forced number.