AAT Level 3 FAPS flashcards
AAT Level 3 FAPS · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Dual effect concept
- Every transaction affects at least two ledger accounts, one debit and one credit, so total debits always equal total credits.
- Trade discount
- Reduction in the list price given by a supplier; it is not recorded separately in the ledger and goods are recorded at the discounted net amount.
- Settlement discount received
- Reduction given by a supplier for early payment; the payables account is debited and the discount received account is credited.
- Sales day book
- Book of prime entry listing credit sales invoices; its periodic total is posted to debit receivables and credit sales.
- General journal
- Book of prime entry for non-standard entries such as corrections of error, opening entries and purchase of non-current assets on credit.
- Output VAT
- Sales tax charged on sales; it is credited to the VAT control account as a liability owed to the tax authority.
- Accounting equation
- Assets equal capital plus liabilities; every double entry must leave this equality intact after posting.
- Purpose of trial balance
- Lists the closing balances of all ledger accounts to check that debits equal credits; it does not prove the absence of errors.
- Imprest system
- Petty cash float restored to a fixed amount by reimbursing exactly the total of vouchers spent during the period.
- Unpresented cheque
- Cheque issued and entered in the cash book but not yet cleared through the bank; deduct it from the bank statement balance in the reconciliation.
- Lodgement not credited
- Cash banked and recorded in the cash book but not yet shown on the bank statement; add it to the statement balance in the reconciliation.
- Contra entry
- Offsetting a receivable and a payable with the same party; debit the payables ledger control and credit the receivables ledger control.
- Receivables control account
- Summary of sales ledger transactions: credit sales debit it, receipts and returns credit it, and its balance equals total receivables.
- Dishonoured cheque
- A customer's cheque returned unpaid by the bank; debit receivables and credit the cash book to reverse the original receipt.
- Supplier statement reconciliation
- Comparison of the supplier's statement with the payables ledger account to identify omissions, timing differences and errors before agreeing the balance.
- Aged receivables analysis
- Report grouping receivable balances by how long they are overdue, used to assess recoverability and to chase overdue debt.
- Accrued expense
- An expense used in the period but not yet invoiced or paid; debit the expense, credit accruals, and reverse the entry next period.
- Prepaid expense
- An amount invoiced and paid in the period that relates to a future period; debit prepayments, credit the expense, then reverse next period.
- Reducing balance depreciation
- The annual charge equals a fixed percentage of the asset's carrying amount, giving higher charges in the earlier years of use.
- Error of principle
- Transaction entered in the correct type of account but the wrong class, for example revenue expenditure recorded as a non-current asset.
- Error of commission
- Entry made to the correct class of account but the wrong individual account within that class, such as the wrong customer's account.
- Suspense account
- Temporary account holding the difference when a trial balance does not balance; it is cleared as each correction is journalised.
- Allowance for doubtful debts
- Estimate of receivables unlikely to pay; created by debiting expense and crediting the allowance, and shown as a deduction from receivables.
- Compensating error
- Two or more unrelated errors whose effects cancel out, so the trial balance still balances even though the ledger is wrong.
- Cost of sales formula
- Opening inventory plus purchases plus carriage inwards, less purchase returns and less closing inventory, deducted from revenue to give gross profit.
- Gross profit
- Revenue less cost of sales, reported in the statement of profit or loss before operating expenses and finance costs are deducted.
- Capital introduced
- Additional funds or assets brought into the business by the owner; added to opening capital in the capital section of the statement of financial position.
- Drawings
- Amounts or goods taken out of the business by the owner; deducted from capital and never treated as an expense.
- Net realisable value
- Estimated selling price less the costs to complete and sell; inventory is valued at the lower of cost and this figure.
- Carrying amount
- Cost of a non-current asset less accumulated depreciation; this is the figure reported in the statement of financial position.
- Statement of financial position
- Report of assets, liabilities and capital at a specific date; total assets must equal capital plus total liabilities.
- Extended trial balance
- Worksheet with adjustment, adjusted trial balance, profit or loss and financial position columns, used to draft the year-end statements.