WACE Accounting Finance ATAR common mistakes
WACE Accounting Finance ATAR · Understand the traps and how to avoid them.
Recording a credit sale by debiting Cash instead of Accounts Receivable, then later reversing an entry that was never correct in the first place.
Candidates pattern-match on the word 'sale' and reach for the cash account, forgetting that the double-entry rule depends on whether consideration has been received, not on whether revenue has been earned.
What to do instead
Before writing any entry, state the two accounts affected and classify each (asset, liability, equity, income, expense). Apply the rule: debit increases assets and expenses, credit increases liabilities, equity and income. For a credit sale, debit Accounts Receivable and credit Sales Revenue.
Preparing a trial balance that balances and then concluding the ledger is error-free.
The trial balance only proves debits equal credits; candidates confuse arithmetic agreement with accuracy of classification or omission.
What to do instead
Learn the six errors a trial balance cannot detect (omission, commission, principle, original entry, reversal, compensating) and be ready to identify each from a described scenario. When asked whether an error is detectable, test specifically whether it disturbs the equality of debits and credits.
Treating a piece of equipment purchased mid-year as a full-year depreciation charge, or applying the diminishing-balance rate to the original cost rather than the carrying amount.
Candidates memorise a single formula and apply it mechanically without checking the date of acquisition or the method specified.
What to do instead
Write the method name at the top of the working. For straight-line, divide (cost minus residual value) by useful life, then pro-rate by months held. For diminishing balance, multiply the opening carrying amount by the rate each period. Show the pro-rata fraction explicitly.
Classifying a product cost as a period cost (or vice versa), for example expensing factory supervisor salaries as administration.
Candidates classify by job title or department name rather than by whether the cost attaches to units produced.
What to do instead
Ask one question: does this cost change with units produced or is it incurred to make the product? If yes, it is product cost (direct material, direct labour, manufacturing overhead) and sits in inventory until sold. Selling, administration and finance costs are period costs expensed in the period.
Preparing a cash budget by listing all revenues and expenses from the income statement rather than only cash receipts and payments, and ignoring the timing lag on debtors and creditors.
Candidates conflate profit with cash flow and forget that credit transactions settle in later periods.
What to do instead
Build the budget from the receipts and payments columns only. Apply the collection pattern to credit sales (for example 60 per cent in the month of sale, 40 per cent the following month) and the payment pattern to credit purchases. Exclude non-cash items such as depreciation entirely.
Calculating a ratio correctly but then interpreting it in isolation, for example declaring a falling current ratio a sign of weakness without checking the industry benchmark or the composition of inventory.
Candidates treat ratio analysis as an arithmetic exercise and stop at the number, missing the comparative judgement the question is really testing.
What to do instead
For every ratio, write three things: the formula, the result, and a comparison against a benchmark (prior year, competitor or industry). Then state one plausible cause and one limitation of the ratio. Structure answers as result, interpretation, limitation.
Confusing return on equity with return on assets, or using profit before interest and tax when the question asks for a return to shareholders.
Candidates memorise ratio names without tracking which capital base and which profit figure belong together.
What to do instead
Anchor each ratio to its denominator. Return on assets uses profit before interest and tax over total assets; return on equity uses profit after tax over ordinary shareholders' equity. Write the denominator first, then select the matching profit figure.
Choosing the investment with the highest total cash inflow instead of the highest net present value, or discounting at the wrong rate.
Candidates ignore the time value of money and treat raw cash totals as comparable, and they default to the cost of capital when the question supplies a risk-adjusted rate.
What to do instead
Always discount each year's cash flow at the rate stated in the question, sum the present values, then subtract the initial outlay to get NPV. Recommend the project with the highest positive NPV. Use the stated discount rate, not an assumed one, and state the decision rule explicitly.
Confusing the roles of the Reserve Bank and ASIC, or assuming the Australian Securities Exchange itself regulates company disclosure.
Candidate knowledge of the regulatory landscape is often a vague list of acronyms without mapped functions.
What to do instead
Build a two-column table: institution and precise function. Reserve Bank sets monetary policy and oversees payment system stability; ASIC enforces corporate and financial services law and market conduct; APRA prudentially supervises banks, insurers and superannuation; the ASX operates the market and applies listing rules. Test yourself by matching each function to one body.
Describing an ethical dilemma by naming the principle involved but not applying an ethical decision framework or identifying the affected stakeholders and the consequence of each option.
Candidates treat ethics questions as vocabulary tests and give a one-line answer where the question asks for a reasoned recommendation.
What to do instead
Use a fixed structure: identify the stakeholders, state the ethical issue, list two or three options, evaluate each against consequences and duties, then recommend one with justification. Name the specific principle (integrity, objectivity, confidentiality, professional competence) at the point where it is breached.