TASC Accounting Level 3 common mistakes
TASC Accounting Level 3 · Understand the traps and how to avoid them.
Recording a credit sale net of trade discount but then also deducting the discount again when posting to the receivables ledger, so the sales journal and the control account disagree.
Candidates learn trade discount and cash discount separately and apply both mechanically; trade discount is already netted in the invoice price, so a second deduction double-counts it.
What to do instead
Before posting, write the invoice arithmetic as a ladder: gross list price, less trade discount, equals invoice value; only settlement (cash) discount appears later at payment. Reconcile the sales journal total to the receivables control account before moving on.
Preparing a bank reconciliation by adjusting the cash book for unpresented cheques and uncredited lodgements, and adjusting the bank statement for bank errors.
The two records look symmetric, so candidates treat all differences as belonging to whichever side is convenient rather than asking who has already recorded the item.
What to do instead
Use a single test: does the cash book already show it? Items the business has recorded but the bank has not (unpresented cheques, lodgements not yet credited) adjust the bank statement balance; items the bank has recorded but the business has not (bank charges, direct debits, dishonoured cheques, standing orders) adjust the cash book. Then prove both restated balances equal.
Classifying an item by its label rather than its substance, for example treating redeemable preference shares as equity because they are called shares, or treating a finance lease as an operating expense because payments are described as rent.
Candidates memorise definitions as vocabulary and do not apply the underlying obligation-and-control tests under pressure.
What to do instead
For every balance-sheet item, ask two questions in writing: is there an unavoidable obligation to transfer cash or other resources, and does the entity control the asset? Redeemable preference shares create an obligation, so they are liabilities; a lease transferring substantially all risks and rewards is a finance lease, so split it into asset and liability and charge interest and depreciation separately.
Producing a statement of cash flows that starts from profit and then includes non-cash and working-capital adjustments in the wrong direction, such as subtracting an increase in payables.
Candidates recall the list of adjustments but not the logic of why each one reverses an accrual-based figure, so signs are guessed.
What to do instead
Annotate each line with its cash effect. An increase in a liability means cash was retained, so add it; an increase in an asset means cash was absorbed, so deduct it. Add back non-cash charges such as depreciation and losses on disposal, and remove gains. Check the net figure against the movement in cash and cash equivalents as a final proof.
Calculating overhead absorption rates on budgeted activity but then absorbing overheads on a different actual base, or using the wrong denominator for the recovery rate (for example direct labour hours when the rate is per machine hour).
The pre-determined rate and the absorption process are learned as separate steps, and exam pressure leads to using whichever figure appears last in the question.
What to do instead
Write the rate as a formula before substituting: budgeted overhead divided by budgeted base, and state the base explicitly. Then absorb using actual activity on that same base. Finish by computing over- or under-absorption as absorbed overhead minus actual overhead, and state whether it is over or under.
Treating all costs as variable when computing a special-order or make-or-buy decision, or including apportioned fixed overhead and sunk costs in the relevant cost.
Candidates default to full absorption cost because it is the figure on the cost card, and they find it hard to exclude costs already incurred.
What to do instead
Build a differential cost schedule listing only future cash flows that differ between alternatives. Exclude sunk costs, apportioned fixed overhead that will not change, and non-cash items. Include opportunity costs of scarce resources and any incremental fixed costs or lost contribution explicitly, then compare with the offer price or buy price.
Preparing a process account without recognising normal loss scrap value, or valuing abnormal loss and abnormal gain at the wrong cost per unit.
Candidates compute the cost per unit using total input units rather than expected good output, and forget that scrap proceeds from normal loss reduce the cost of good output.
What to do instead
Sequence it: total process cost less scrap value of normal loss, divided by expected good output (input less normal loss), gives the cost per good unit. Value abnormal loss and abnormal gain at that same unit cost, and remember an abnormal gain is debited to the process account and credited to the abnormal gain account, with its scrap value treated as a reduction of the gain.
Designing or evaluating a control environment by listing controls without linking each control to a specific risk, so the answer never shows how the control prevents or detects the error.
Candidates learn control names (segregation of duties, authorisation, reconciliation) as a checklist and reproduce them regardless of the scenario described.
What to do instead
For each risk identified, state the exposure, the control that addresses it, and the evidence or test that would show the control operates. For example: risk of fictitious suppliers, control is independent matching of purchase order, goods received note and invoice plus a supplier master-file change log reviewed by a manager, test is tracing a sample of new suppliers to approved documentation.
Treating a computerised accounting system as automatically accurate and omitting input, processing and output controls from the answer.
Candidates assume software removes error, so they discuss only access passwords and backups and miss validation checks, batch totals and exception reports.
What to do instead
Structure the answer by stage: input controls (data validation, batch and hash totals, source document authorisation), processing controls (sequence checks, exception reports, reconciliation of interface files), output controls (distribution logs, review of reports before action) and master-file controls (amendments authorised and logged). Note that backups address availability, not accuracy.
Discounting a project's cash flows without adjusting the discount rate for the risk of the project, or comparing an IRR with a hurdle rate that is stated on a different basis (for example a before-tax rate against after-tax cash flows).
Candidates focus on the mechanics of NPV and IRR and treat the discount rate as a given number rather than a judgement about risk and tax.
What to do instead
State the basis of the rate explicitly before discounting: is it nominal or real, pre- or post-tax, and does it reflect the project's risk? Match cash flows to the rate on every dimension. When ranking mutually exclusive projects, use NPV, and explain that IRR can mislead when project scale or cash-flow timing differs.