SACE Stage 2 Accounting common mistakes
SACE Stage 2 Accounting · Understand the traps and how to avoid them.
Recording the GST component of a transaction as part of the revenue or expense amount instead of splitting it out to the GST Clearing account.
Candidates treat the invoice total as the accounting amount and forget that GST is a flow-through liability or asset, so revenue, purchases and the balance sheet all become overstated.
What to do instead
For every transaction, first ask 'is GST charged on this?' then divide the GST-inclusive amount by 11 to isolate the GST, and always write the three-line journal (amount excluding GST, GST Clearing, total cash or payable) before moving on.
Balancing the trial balance by forcing a plug into a suspense or 'rounding' account rather than locating the underlying error.
Time pressure and the belief that any balanced answer earns marks lead candidates to hide an out-of-balance figure instead of applying error-detection techniques.
What to do instead
If the trial balance does not balance, compute the exact difference, check whether it is divisible by 9 (transposition), by 2 (one-sided entry), and re-foot each column; only use a suspense account when the question explicitly permits it, and show the investigation working.
Preparing the income statement and balance sheet directly from the trial balance without first processing unrecorded adjustments such as accrued wages, prepaid insurance, depreciation and closing stock.
Candidates see a complete-looking trial balance and assume it is final, forgetting that the question supplies extra data precisely because those items are not yet recorded.
What to do instead
Before starting any report, list every additional piece of information in the question and write the adjusting journal for each one; tick them off as they are posted, and only then transfer balances to the statements.
Classifying costs by their nature (e.g. 'wages', 'electricity') when the question asks for behaviour-based classification into fixed, variable and mixed costs.
Candidates default to the account names shown in the ledger rather than analysing how the cost responds to changes in activity level.
What to do instead
For each cost, ask 'what happens to the total if output doubles?' and classify on that basis; for mixed costs, identify the fixed component and the variable rate per unit separately before using them in a CVP calculation.
Using total revenue or total cost instead of contribution margin when calculating break-even or the margin of safety.
The break-even formula is memorised loosely, so candidates divide fixed costs by selling price or by total cost per unit, producing a break-even point that ignores variable costs.
What to do instead
Always compute contribution margin per unit (selling price minus variable cost per unit) first and write it on the page; then break-even units equals fixed costs divided by contribution margin per unit, and margin of safety equals actual or budgeted sales minus break-even sales.
Ignoring the timing of cash flows and residual value when evaluating a capital investment, or ranking projects on total undiscounted returns.
Candidates compare headline profit figures and overlook that a dollar received in year five is worth less than one received now, and they forget to include scrap or residual value in the final year.
What to do instead
Lay out a year-by-year table with the initial outlay at year zero, each year's net cash inflow, and the residual value in the final year; apply the discount factors given, then compare net present value or use the payback and accounting rate of return only where the question specifies them.
Designing a set of internal controls that only lists documents or staff roles without linking each control to the specific risk it mitigates.
Candidates recall generic control names such as 'segregation of duties' and reproduce them without analysing the scenario's particular exposure, so the answer reads as a list rather than a control plan.
What to do instead
Structure each answer as risk, then control, then evidence: state what could go wrong in this business, name the control that prevents or detects it, and say what document or record would reveal the problem.
Describing a bank reconciliation as simply 'the balances are different' without reconciling items to the correct starting point, such as adding unpresented cheques to the bank statement balance rather than deducting them.
Candidates confuse which items belong to the cash ledger balance and which belong to the bank statement balance, so items are adjusted in the wrong direction.
What to do instead
Draw two columns labelled 'cash at bank ledger' and 'bank statement' and place each item only in the column it affects; unpresented cheques reduce the bank statement balance, deposits not yet credited increase it, and bank charges and dishonoured cheques adjust the ledger.
Presenting a recommendation on a business decision without quantifying the alternatives or stating the assumptions behind the figures.
Candidates treat the discussion section as an opportunity for general comment and forget that marks are awarded for supported reasoning using the calculated data.
What to do instead
For each option, state the relevant costs and revenues, exclude sunk costs and allocated fixed costs that do not change, compute the difference, and then write a recommendation that names the figures relied on and the qualitative factors that could overturn the numbers.
Applying ethical and professional standards as slogans ('be honest') rather than identifying the specific threat, the affected party and the safeguard available.
Candidates know the names of the principles but have not practised applying them to a scenario with competing pressures such as a manager asking for an adjusted estimate.
What to do instead
Use a fixed three-step frame: name the threat (self-interest, familiarity, intimidation), identify who is harmed and which principle is breached, then state the concrete action such as escalating to the audit committee, disclosing the conflict, or declining to record the entry.