BB AD Exam common mistakes
BB AD Exam · Understand the traps and how to avoid them.
Recording a transaction by its cash movement rather than by the accrual event it represents, so revenue is booked when the invoice is paid and expenses when the supplier is paid.
Cash is the most familiar and visible number in any business, so candidates default to the intuitive 'money in, money out' story instead of applying the revenue recognition and matching principles.
What to do instead
Before journalizing, state aloud the two questions: what obligation was created or settled, and in which period was the performance or consumption? Practice by taking ten everyday transactions and writing the accrual entry, the cash entry, and the adjusting entry side by side until the distinction becomes automatic.
Classifying a cost as product cost or period cost by its label (for example calling all salaries period costs) instead of by its behaviour relative to the production process.
Cost terminology is learned as vocabulary lists, so candidates pattern-match on the account name rather than tracing the cost through the value chain to determine whether it attaches to inventory.
What to do instead
For each cost, ask whether it would still be incurred if production stopped this month. If yes, it is a period cost; if it follows the units, it is product cost. Build a two-column table of ten costs from a single scenario and justify each placement in one sentence.
Computing a capital budgeting decision on incremental cash flows that include sunk costs or allocated fixed overhead, or that omit working capital recovery and tax effects on disposal.
Accounting income statements include allocations and prior spending, and candidates carry that framing into project analysis, where only future incremental cash matters.
What to do instead
Use a fixed checklist for every project: initial outlay including working capital, operating cash flows after tax, terminal flow including salvage and tax on gain or loss, and recovery of working capital. Cross out any line item that is not future and not incremental before discounting.
Treating a legal issue as a fairness question and answering what the outcome should be rather than what the governing rule requires.
Candidates reason from general notions of justice or business custom, and they have not memorized which source of law controls in the fact pattern presented.
What to do instead
For each fact pattern, first name the area of law and the controlling rule in one line, then apply the elements of that rule to the facts one at a time. If an element is not satisfied, say so explicitly rather than arguing the result is harsh.
Shifting a supply or demand curve and then reading the new equilibrium from the original curve, or confusing a movement along a curve with a shift of the curve.
The graphical mechanics are learned quickly but the causal story behind each shift is not, so candidates move lines without deciding which variable actually changed.
What to do instead
Before drawing, write the sentence: 'The event changes [determinant], which affects [buyers/sellers], so [curve] shifts [direction].' Then mark the old equilibrium, the new curve, and the new intersection in that order, and state the effect on both price and quantity.
Designing or evaluating an internal control as a single strong procedure, ignoring segregation of duties, authorization, and independent reconciliation around it.
Candidates focus on the control that is visible in the scenario and do not test whether one person can both execute and conceal an error or fraud.
What to do instead
For any control described, run the 'one person' test: could a single employee initiate, record, and conceal the transaction? If yes, name the missing complementary control (custody separation, approval limit, or independent reconciliation) and state the specific risk it addresses.
Preparing the statement of cash flows by starting from net income but failing to remove non-cash items and to adjust for changes in every working capital account with the correct sign.
The indirect method has many small adjustments, and candidates remember the categories but not the direction of each change, so a receivables increase is added rather than subtracted.
What to do instead
Use a sign rule written at the top of the scratch sheet: an increase in an asset is subtracted, an increase in a liability is added. Then reconcile the final cash figure to the actual change in the cash account as a built-in check before moving on.
Computing variances in isolation and stopping at the dollar amount without decomposing the variance into its price and quantity components or identifying who is accountable for each.
Candidates treat the variance formula as the answer, and the standard cost card is applied mechanically without asking what operational decision produced the gap.
What to do instead
For every variance, present three lines: total variance, price or rate component, and efficiency or quantity component, then assign each component to the manager who controls it. If the two components have opposite signs, explain the trade-off in one sentence.
Answering a data analytics question by describing the tool or the report format instead of specifying the data field, the test, and the conclusion the test supports.
Analytics content is often studied as software features, so candidates describe menus and dashboards rather than the audit or managerial assertion being tested.
What to do instead
Structure every answer as: field examined, test applied (duplicates, gaps, recalculation, trend, exception threshold), expected result, and the assertion or decision affected. Practice converting five generic analytics terms into that four-part sentence.
Calculating a ratio or a cost of capital correctly but then interpreting it without a benchmark, trend, or comparison group, so the conclusion is a restated number rather than an assessment.
Candidates stop when the arithmetic is finished because the computation feels like the deliverable, and interpretation requires a reference point that the prompt does not always supply.
What to do instead
After any ratio, add one sentence of context: compare to prior period, to an industry norm, or to a covenant threshold, and state whether the result is favorable or a warning sign and what management action it implies. If no benchmark is given, say what benchmark you would obtain.