AAT Level 4 INAC cheat sheet

Internal control has five components: control environment, risk assessment, control activities, information and communication, and monitoring.

Segregation of duties separates authorisation, custody, recording and reconciliation so no one person controls a whole transaction cycle.

The fraud triangle: opportunity, pressure (incentive) and rationalisation; removing opportunity is the control's main target.

Three lines of defence: operational management (first), risk and compliance functions (second), internal audit (third).

A bank reconciliation starts from the bank statement or cash book and adjusts for unpresented cheques, unrecorded lodgements, bank charges, standing orders and errors.

The imprest system restores a petty cash float to a fixed amount each period; total reimbursed equals the float less cash remaining.

A trial balance proves debits equal credits but does not detect errors of principle, omission, commission, reversal or compensating errors.

An audit trail must allow each transaction to be traced from source document to ledger entry and back again.

Data protection principles require personal data to be processed lawfully, kept accurate, retained no longer than necessary and held securely.

Contribution per unit = selling price less variable cost per unit; total contribution = contribution per unit x units sold.

Break-even units = fixed costs / contribution per unit; break-even revenue = break-even units x selling price.

Margin of safety = (budgeted sales - break-even sales) / budgeted sales, expressed as a percentage.

Target profit volume = (fixed costs + target profit) / contribution per unit.

Absorption rate = total budgeted overhead / total budgeted activity (e.g. labour hours or machine hours).

Under- or over-absorption = actual overhead incurred less overhead absorbed; a positive figure is under-absorption.

High-low method: variable cost per unit = (cost at high activity - cost at low activity) / (high activity - low activity).

A flexible budget is recast for actual activity; comparing it with actual results isolates expenditure variances from volume effects.

Relevant costs are future, incremental cash flows; sunk costs, committed costs and apportioned fixed overheads are excluded from decisions.

Statement of financial position: assets less liabilities equals equity; equity comprises share capital, reserves and retained earnings.

Retained earnings = opening retained earnings + profit for the year - dividends paid.

Goodwill on consolidation = consideration transferred + non-controlling interest + fair value of prior holding - fair value of net assets acquired.

Group retained earnings include the parent's balance plus the parent's share of post-acquisition subsidiary profits less unrealised intra-group profit.

Current ratio = current assets / current liabilities; quick ratio = (current assets - inventory) / current liabilities.

Gearing = debt / (debt + equity), or prior-charge capital divided by total capital employed.

Return on capital employed = operating profit / capital employed, where capital employed = total assets less current liabilities.

Inventory turnover in days = (average inventory / cost of sales) x 365; receivables days = (trade receivables / credit sales) x 365.

Under IAS 7, cash flows are classified as operating, investing or financing activities.

VAT output tax less input tax equals VAT payable to, or repayable by, HMRC for the period.

A taxable person must register for VAT when taxable turnover exceeds the registration threshold in any rolling 12-month period.

Standard-rated supplies carry the standard rate; zero-rated supplies are taxable at 0% and allow input tax recovery; exempt supplies do not.

Input tax on business entertainment of UK clients and on cars available for private use is generally blocked.

Capital allowances: annual investment allowance gives 100% relief on qualifying plant and machinery up to the prescribed limit.

Writing-down allowance on the main pool is applied to the reducing balance after the annual investment allowance.

Trading losses can be carried forward against future profits of the same trade, or carried back against total profits of the preceding year.

Corporation tax is charged on taxable total profits: trading profits plus non-trading income and chargeable gains, less qualifying deductions.

Payment dates depend on profits and status; a company may pay corporation tax quarterly if profits exceed the quarterly instalment threshold.

Internal control has five components: control environment, risk assessment, control activities, information and communication, and monitoring.

Segregation of duties separates authorisation, custody, recording and reconciliation so no one person controls a whole transaction cycle.

The fraud triangle: opportunity, pressure (incentive) and rationalisation; removing opportunity is the control's main target.

Three lines of defence: operational management (first), risk and compliance functions (second), internal audit (third).

A bank reconciliation starts from the bank statement or cash book and adjusts for unpresented cheques, unrecorded lodgements, bank charges, standing orders and errors.

The imprest system restores a petty cash float to a fixed amount each period; total reimbursed equals the float less cash remaining.

A trial balance proves debits equal credits but does not detect errors of principle, omission, commission, reversal or compensating errors.

An audit trail must allow each transaction to be traced from source document to ledger entry and back again.

Data protection principles require personal data to be processed lawfully, kept accurate, retained no longer than necessary and held securely.

Contribution per unit = selling price less variable cost per unit; total contribution = contribution per unit x units sold.

Break-even units = fixed costs / contribution per unit; break-even revenue = break-even units x selling price.

Margin of safety = (budgeted sales - break-even sales) / budgeted sales, expressed as a percentage.

Target profit volume = (fixed costs + target profit) / contribution per unit.

Absorption rate = total budgeted overhead / total budgeted activity (e.g. labour hours or machine hours).

Under- or over-absorption = actual overhead incurred less overhead absorbed; a positive figure is under-absorption.

High-low method: variable cost per unit = (cost at high activity - cost at low activity) / (high activity - low activity).

A flexible budget is recast for actual activity; comparing it with actual results isolates expenditure variances from volume effects.

Relevant costs are future, incremental cash flows; sunk costs, committed costs and apportioned fixed overheads are excluded from decisions.

Statement of financial position: assets less liabilities equals equity; equity comprises share capital, reserves and retained earnings.

Retained earnings = opening retained earnings + profit for the year - dividends paid.

Goodwill on consolidation = consideration transferred + non-controlling interest + fair value of prior holding - fair value of net assets acquired.

Group retained earnings include the parent's balance plus the parent's share of post-acquisition subsidiary profits less unrealised intra-group profit.

Current ratio = current assets / current liabilities; quick ratio = (current assets - inventory) / current liabilities.

Gearing = debt / (debt + equity), or prior-charge capital divided by total capital employed.

Return on capital employed = operating profit / capital employed, where capital employed = total assets less current liabilities.

Inventory turnover in days = (average inventory / cost of sales) x 365; receivables days = (trade receivables / credit sales) x 365.

Under IAS 7, cash flows are classified as operating, investing or financing activities.

VAT output tax less input tax equals VAT payable to, or repayable by, HMRC for the period.

A taxable person must register for VAT when taxable turnover exceeds the registration threshold in any rolling 12-month period.

Standard-rated supplies carry the standard rate; zero-rated supplies are taxable at 0% and allow input tax recovery; exempt supplies do not.

Input tax on business entertainment of UK clients and on cars available for private use is generally blocked.

Capital allowances: annual investment allowance gives 100% relief on qualifying plant and machinery up to the prescribed limit.

Writing-down allowance on the main pool is applied to the reducing balance after the annual investment allowance.

Trading losses can be carried forward against future profits of the same trade, or carried back against total profits of the preceding year.

Corporation tax is charged on taxable total profits: trading profits plus non-trading income and chargeable gains, less qualifying deductions.

Payment dates depend on profits and status; a company may pay corporation tax quarterly if profits exceed the quarterly instalment threshold.

Internal control has five components: control environment, risk assessment, control activities, information and communication, and monitoring.

Segregation of duties separates authorisation, custody, recording and reconciliation so no one person controls a whole transaction cycle.

The fraud triangle: opportunity, pressure (incentive) and rationalisation; removing opportunity is the control's main target.

Three lines of defence: operational management (first), risk and compliance functions (second), internal audit (third).

A bank reconciliation starts from the bank statement or cash book and adjusts for unpresented cheques, unrecorded lodgements, bank charges, standing orders and errors.

The imprest system restores a petty cash float to a fixed amount each period; total reimbursed equals the float less cash remaining.

A trial balance proves debits equal credits but does not detect errors of principle, omission, commission, reversal or compensating errors.

An audit trail must allow each transaction to be traced from source document to ledger entry and back again.

Data protection principles require personal data to be processed lawfully, kept accurate, retained no longer than necessary and held securely.

Contribution per unit = selling price less variable cost per unit; total contribution = contribution per unit x units sold.

Break-even units = fixed costs / contribution per unit; break-even revenue = break-even units x selling price.

Margin of safety = (budgeted sales - break-even sales) / budgeted sales, expressed as a percentage.

Target profit volume = (fixed costs + target profit) / contribution per unit.

Absorption rate = total budgeted overhead / total budgeted activity (e.g. labour hours or machine hours).

Under- or over-absorption = actual overhead incurred less overhead absorbed; a positive figure is under-absorption.

High-low method: variable cost per unit = (cost at high activity - cost at low activity) / (high activity - low activity).

A flexible budget is recast for actual activity; comparing it with actual results isolates expenditure variances from volume effects.

Relevant costs are future, incremental cash flows; sunk costs, committed costs and apportioned fixed overheads are excluded from decisions.

Statement of financial position: assets less liabilities equals equity; equity comprises share capital, reserves and retained earnings.

Retained earnings = opening retained earnings + profit for the year - dividends paid.

Goodwill on consolidation = consideration transferred + non-controlling interest + fair value of prior holding - fair value of net assets acquired.

Group retained earnings include the parent's balance plus the parent's share of post-acquisition subsidiary profits less unrealised intra-group profit.

Current ratio = current assets / current liabilities; quick ratio = (current assets - inventory) / current liabilities.

Gearing = debt / (debt + equity), or prior-charge capital divided by total capital employed.

Return on capital employed = operating profit / capital employed, where capital employed = total assets less current liabilities.

Inventory turnover in days = (average inventory / cost of sales) x 365; receivables days = (trade receivables / credit sales) x 365.

Under IAS 7, cash flows are classified as operating, investing or financing activities.

VAT output tax less input tax equals VAT payable to, or repayable by, HMRC for the period.

A taxable person must register for VAT when taxable turnover exceeds the registration threshold in any rolling 12-month period.

Standard-rated supplies carry the standard rate; zero-rated supplies are taxable at 0% and allow input tax recovery; exempt supplies do not.

Input tax on business entertainment of UK clients and on cars available for private use is generally blocked.

Capital allowances: annual investment allowance gives 100% relief on qualifying plant and machinery up to the prescribed limit.

Writing-down allowance on the main pool is applied to the reducing balance after the annual investment allowance.

Trading losses can be carried forward against future profits of the same trade, or carried back against total profits of the preceding year.

Corporation tax is charged on taxable total profits: trading profits plus non-trading income and chargeable gains, less qualifying deductions.

Payment dates depend on profits and status; a company may pay corporation tax quarterly if profits exceed the quarterly instalment threshold.

Internal control has five components: control environment, risk assessment, control activities, information and communication, and monitoring.

Segregation of duties separates authorisation, custody, recording and reconciliation so no one person controls a whole transaction cycle.

The fraud triangle: opportunity, pressure (incentive) and rationalisation; removing opportunity is the control's main target.

Three lines of defence: operational management (first), risk and compliance functions (second), internal audit (third).

A bank reconciliation starts from the bank statement or cash book and adjusts for unpresented cheques, unrecorded lodgements, bank charges, standing orders and errors.

The imprest system restores a petty cash float to a fixed amount each period; total reimbursed equals the float less cash remaining.

A trial balance proves debits equal credits but does not detect errors of principle, omission, commission, reversal or compensating errors.

An audit trail must allow each transaction to be traced from source document to ledger entry and back again.

Data protection principles require personal data to be processed lawfully, kept accurate, retained no longer than necessary and held securely.

Contribution per unit = selling price less variable cost per unit; total contribution = contribution per unit x units sold.

Break-even units = fixed costs / contribution per unit; break-even revenue = break-even units x selling price.

Margin of safety = (budgeted sales - break-even sales) / budgeted sales, expressed as a percentage.

Target profit volume = (fixed costs + target profit) / contribution per unit.

Absorption rate = total budgeted overhead / total budgeted activity (e.g. labour hours or machine hours).

Under- or over-absorption = actual overhead incurred less overhead absorbed; a positive figure is under-absorption.

High-low method: variable cost per unit = (cost at high activity - cost at low activity) / (high activity - low activity).

A flexible budget is recast for actual activity; comparing it with actual results isolates expenditure variances from volume effects.

Relevant costs are future, incremental cash flows; sunk costs, committed costs and apportioned fixed overheads are excluded from decisions.

Statement of financial position: assets less liabilities equals equity; equity comprises share capital, reserves and retained earnings.

Retained earnings = opening retained earnings + profit for the year - dividends paid.

Goodwill on consolidation = consideration transferred + non-controlling interest + fair value of prior holding - fair value of net assets acquired.

Group retained earnings include the parent's balance plus the parent's share of post-acquisition subsidiary profits less unrealised intra-group profit.

Current ratio = current assets / current liabilities; quick ratio = (current assets - inventory) / current liabilities.

Gearing = debt / (debt + equity), or prior-charge capital divided by total capital employed.

Return on capital employed = operating profit / capital employed, where capital employed = total assets less current liabilities.

Inventory turnover in days = (average inventory / cost of sales) x 365; receivables days = (trade receivables / credit sales) x 365.

Under IAS 7, cash flows are classified as operating, investing or financing activities.

VAT output tax less input tax equals VAT payable to, or repayable by, HMRC for the period.

A taxable person must register for VAT when taxable turnover exceeds the registration threshold in any rolling 12-month period.

Standard-rated supplies carry the standard rate; zero-rated supplies are taxable at 0% and allow input tax recovery; exempt supplies do not.

Input tax on business entertainment of UK clients and on cars available for private use is generally blocked.

Capital allowances: annual investment allowance gives 100% relief on qualifying plant and machinery up to the prescribed limit.

Writing-down allowance on the main pool is applied to the reducing balance after the annual investment allowance.

Trading losses can be carried forward against future profits of the same trade, or carried back against total profits of the preceding year.

Corporation tax is charged on taxable total profits: trading profits plus non-trading income and chargeable gains, less qualifying deductions.

Payment dates depend on profits and status; a company may pay corporation tax quarterly if profits exceed the quarterly instalment threshold.