AAT Level 4 AMAC flashcards
AAT Level 4 AMAC · 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.
- Consolidated goodwill formula
- Consideration transferred plus non-controlling interest less the fair value of identifiable net assets acquired. Goodwill is tested annually for impairment under IFRS.
- Non-controlling interest
- The share of a subsidiary's net assets and profits not owned by the parent. It is presented separately in the group statement of financial position and income statement.
- Revaluation surplus treatment
- A gain on revaluing property, plant and equipment is recognised in other comprehensive income and accumulated in equity, unless it reverses a previous revaluation decrease.
- Provision recognition criteria
- A provision is recognised only when a present obligation exists from a past event, an outflow of resources is probable and the amount can be reliably estimated.
- Production budget calculation
- Budgeted sales units plus required closing inventory units less opening inventory units equals the number of units to be produced in the period.
- Flexed budget purpose
- A flexed budget restates the original budget for the actual level of activity, so variances reflect price and efficiency rather than volume differences.
- Zero-based budgeting
- A budgeting method where every cost must be justified from a nil base rather than adjusted from the prior year, encouraging the removal of unnecessary costs.
- Rolling budget
- A budget continually updated by adding a new period as the earliest expires, so the planning horizon always remains constant.
- Cash budget collections
- Expected cash receipts are calculated by applying the business's collection pattern to credit sales, excluding bad debts and allowing for settlement discounts.
- Contribution per unit
- Selling price less variable cost per unit. It measures the amount each unit contributes towards covering fixed costs and then generating profit.
- Limiting factor ranking
- When a resource is scarce, products are ranked by contribution per unit of the limiting factor, not by contribution per unit of product.
- Break-even sales units
- Fixed costs divided by contribution per unit. At this level of output total contribution exactly equals total fixed costs, giving neither profit nor loss.
- Relevant cost criteria
- A relevant cost is a future, incremental cash flow that differs between alternatives. Sunk costs and apportioned fixed overheads are excluded from decisions.
- Material usage variance
- Standard quantity for actual output less actual quantity used, multiplied by standard price. It measures efficient or inefficient use of material.
- Labour efficiency variance
- Standard hours for actual output less actual hours worked, multiplied by the standard rate. It isolates productivity from pay-rate differences.
- Segregation of duties
- Authorising a transaction, recording it and holding the related asset should be performed by different people to reduce the risk of error or fraud.
- Bank reconciliation adjustment
- Adjusted bank statement balance equals statement balance plus deposits not yet credited less unpresented cheques, with bank errors corrected.
- Sales ledger control account
- A summary account of all customer transactions. Its balance should agree with the total of individual customer ledger balances at the period end.
- Error of principle
- A bookkeeping error where a transaction is recorded in the wrong class of account, such as revenue expenditure debited to a non-current asset account.
- Three-way match
- Before a supplier invoice is paid, it is matched to the purchase order and the goods received note to confirm price, quantity and receipt.
- Annual investment allowance
- A capital allowance giving 100% relief on most plant and machinery purchases up to the annual limit. Cars are excluded from the allowance.
- Corporation tax taxable profits
- Trading profits plus property income plus non-trading loan relationship income plus chargeable gains, less qualifying charitable donations and allowable losses.
- Trading loss carry-back
- A trading loss may be carried back twelve months against total profits of the same company, with any excess carried forward against future total profits.
- VAT input tax recovery
- Input tax on purchases is recoverable where it relates to taxable supplies, including zero-rated supplies, but not to exempt supplies.
- Personal allowance taper
- The personal allowance is reduced by one pound for every two pounds of income above one hundred thousand pounds, reaching nil at the income limit.
- Income tax ordering rules
- Non-savings income is taxed first, then savings income, then dividend income. The personal allowance is allocated against income in that order.
- Capital gains annual exemption
- A fixed amount of net gains is exempt from capital gains tax each tax year. It is deducted before the applicable rate is applied to remaining gains.
- Inheritance tax nil-rate band
- The threshold below which an estate pays no inheritance tax. A residence nil-rate band may apply where a main residence passes to direct descendants.
- Audit risk model
- Audit risk equals inherent risk multiplied by control risk multiplied by detection risk. Detection risk is the component the auditor controls.
- Positive confirmation
- A request to a third party to confirm a balance in all cases. A non-reply prompts follow-up, unlike negative confirmation which replies only on disagreement.
- Days sales outstanding
- Trade receivables divided by credit sales, multiplied by 365. It measures the average number of days taken to collect amounts owed by customers.
- Annualised cost of discount
- Discount percentage divided by one hundred less the discount, multiplied by 365 divided by the number of days saved by early payment.