BCS Written Accounting cheat sheet

Accounting equation: Assets = Liabilities + Equity; every transaction preserves this equality, so debits always equal credits in amount.

Accrual basis: revenue is recognised when the performance obligation is satisfied and expenses when incurred, not when cash moves; adjusting entries at period end enforce this.

Depreciation methods: straight line = (cost - residual) / useful life; reducing balance applies a fixed rate to carrying amount; units of production charges per output unit.

Inventory under IAS 2 is measured at the lower of cost and net realisable value; cost includes purchase price, import duties and conversion costs, excluding abnormal waste.

FIFO assigns oldest costs to cost of sales, so rising prices inflate profit and closing inventory; weighted average smooths price movements.

Bank reconciliation: adjusted bank balance = statement balance + deposits in transit - outstanding cheques +/- bank errors; adjusted book balance = cash book balance +/- unrecorded items.

Trial balance detects unequal debits and credits only; errors of principle, compensating errors, complete omission and transposition of equal amounts remain undetected.

Statement of financial position classifies items as current when realised within 12 months or the operating cycle; goodwill and development costs are non-current intangibles.

Contribution margin = sales - variable costs; contribution per unit = selling price - variable cost per unit; it funds fixed costs and then profit.

Break-even units = fixed costs / contribution per unit; break-even sales value = fixed costs / contribution-to-sales (C/S) ratio; margin of safety = actual sales - break-even sales.

Overhead absorption rate = budgeted overhead / budgeted activity base; under- or over-absorption = absorbed overhead - actual overhead incurred.

High-low method: variable cost per unit = (cost at high activity - cost at low activity) / (high units - low units); fixed cost = total cost - variable cost per unit x units.

Standard costing variances: material price = (standard price - actual price) x actual quantity; material usage = (standard quantity - actual quantity) x standard price.

Labour rate variance = (standard rate - actual rate) x actual hours paid; labour efficiency variance = (standard hours for output - actual hours worked) x standard rate.

Relevant costing ignores sunk costs and apportioned fixed overheads; it includes incremental, avoidable and opportunity costs of the decision.

Process costing: abnormal loss is valued at full production cost and written off; abnormal gain is credited to the process account and debited to the abnormal gain account.

Audit risk model: audit risk = inherent risk x control risk x detection risk; the auditor controls detection risk through the nature, timing and extent of procedures.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification (transactions); existence, rights and obligations, completeness, valuation, presentation (balances).

Audit evidence is more reliable when obtained from independent external sources, when controls are effective, and when gathered directly by the auditor rather than indirectly.

Materiality is set at overall financial statement level and at performance materiality (usually a fraction of overall materiality) for designing procedures.

The auditor's report expresses an unmodified opinion, qualified opinion, adverse opinion or disclaimer; a key audit matter section is required for listed entities.

Independence threats: self-interest, self-review, advocacy, familiarity, intimidation; safeguards include rotation, second partner review and removing the fee dependency.

Going concern: if material uncertainty exists but disclosure is adequate, an unmodified opinion with a separate material uncertainty section is issued.

Internal control components (COSO): control environment, risk assessment, control activities, information and communication, and monitoring activities.

Taxable income = accounting profit +/- disallowed expenses +/- allowable deductions; accounting depreciation is added back and tax depreciation or capital allowances deducted.

Progressive personal tax: tax is computed by applying each band rate to the slice of income falling in that band; marginal rate applies only to the top slice.

Withholding tax is deducted at source on specified payments such as dividends, interest, royalties and certain service fees; it is creditable against final liability.

Capital allowances replace depreciation for tax: initial allowance applies in the year of acquisition and annual allowance on the reducing balance, subject to a maximum.

Loss relief rules: trading losses may be carried forward against future trading profits, and often carried back against prior profits, subject to statutory time limits.

Indirect tax on supplies: output tax on sales less input tax on purchases equals the net amount payable; exempt supplies generally do not permit input tax recovery.

Tax avoidance uses legal arrangements within the letter of the law; tax evasion involves concealment or false statements and attracts penalties and criminal liability.

Transfer pricing rules require related-party transactions to be priced at arm's length; documentation is required to support the pricing policy.

A valid contract requires offer, acceptance, consideration, intention to create legal relations and capacity; absence of any element may render it void or voidable.

An offer lapses on rejection, revocation before acceptance, death, or expiry of a stated time; a counter-offer destroys the original offer.

Directors owe fiduciary duties: act in good faith in the company's interest, exercise care and skill, avoid conflicts of interest, and not misuse company property or information.

Agency: the agent binds the principal when acting with actual authority (express or implied) or apparent authority arising from the principal's representation.

Corporate governance codes separate the roles of chair and chief executive and require independent non-executive directors and an audit committee of independent members.

Piercing the corporate veil is exceptional; courts generally uphold separate legal personality unless the company is a mere facade for fraud.

Companies must maintain statutory registers and file annual returns; failure to file within the deadline attracts penalties and possible strike-off.

Insolvency tests: cash-flow test (inability to pay debts as they fall due) and balance-sheet test (liabilities exceeding assets).

Time value: future value = present value x (1 + r)^n; present value = future value / (1 + r)^n; use annuity factors for level cash flows.

Net present value discounts cash flows at the cost of capital; accept projects with positive NPV; IRR is the rate at which NPV equals zero.

Weighted average cost of capital = (E/V x Ke) + (D/V x Kd x (1 - tax rate)); use market values for weights where available.

Capital asset pricing model: Ke = risk-free rate + beta x (market return - risk-free rate); beta measures systematic risk.

Dividend growth model: Ke = (D1 / P0) + g, where g is the expected constant growth rate in dividends.

Working capital cycle = inventory days + receivable days - payable days; a shorter cycle releases cash and reduces financing needs.

Gearing = debt / (debt + equity) or debt / equity; higher gearing raises financial risk and the required return on equity.

Payback ignores cash flows after the cut-off and the time value of money; it is used as a screening measure of liquidity and risk.

Government budgets are prepared on a cash basis in many jurisdictions, while accrual-based financial statements report assets, liabilities, revenue and expenses.

The Consolidated Fund receives general revenues; withdrawals require legislative appropriation, and the Contingency Fund covers urgent unforeseen expenditure pending approval.

Public sector entities report under IPSAS, which is based on accrual accounting and converges with IFRS for private-sector-style transactions.

Budgetary control compares actual against approved estimates; variances are classified as favourable or adverse and reported to the legislature.

Value for money audit examines economy (cost of inputs), efficiency (output per input) and effectiveness (achievement of intended outcomes).

Public accountability requires transparency, probity and stewardship; the auditor-general reports findings to the legislature, not to the executive.

Commitment accounting records obligations before cash is paid, preventing overspending of an appropriation.

Performance reporting uses service delivery measures and key performance indicators against stated targets in the annual report.

An accounting information system comprises people, procedures, data, software and hardware; it captures, records, processes and reports transactions.

Input controls: batch totals, hash totals, validity checks, field format checks and sequence checks detect errors at data entry.

Processing controls include run-to-run totals, reasonableness tests, limit checks and reconciliation of master file updates to control totals.

Segregation of duties in IT separates system development, operations and data control; programmers must not have access to live data or production libraries.

General controls cover access security, change management, backup and disaster recovery; application controls cover specific transaction processing.

Audit trail requirements: each transaction must be traceable from source document to ledger and back, with time stamps and user identification logged.

Computer-assisted audit techniques include test data, parallel simulation, embedded audit modules and generalised audit software for file interrogation.

Encryption protects data confidentiality in transit and at rest; digital signatures provide authentication and non-repudiation of electronic transactions.

Accounting equation: Assets = Liabilities + Equity; every transaction preserves this equality, so debits always equal credits in amount.

Accrual basis: revenue is recognised when the performance obligation is satisfied and expenses when incurred, not when cash moves; adjusting entries at period end enforce this.

Depreciation methods: straight line = (cost - residual) / useful life; reducing balance applies a fixed rate to carrying amount; units of production charges per output unit.

Inventory under IAS 2 is measured at the lower of cost and net realisable value; cost includes purchase price, import duties and conversion costs, excluding abnormal waste.

FIFO assigns oldest costs to cost of sales, so rising prices inflate profit and closing inventory; weighted average smooths price movements.

Bank reconciliation: adjusted bank balance = statement balance + deposits in transit - outstanding cheques +/- bank errors; adjusted book balance = cash book balance +/- unrecorded items.

Trial balance detects unequal debits and credits only; errors of principle, compensating errors, complete omission and transposition of equal amounts remain undetected.

Statement of financial position classifies items as current when realised within 12 months or the operating cycle; goodwill and development costs are non-current intangibles.

Contribution margin = sales - variable costs; contribution per unit = selling price - variable cost per unit; it funds fixed costs and then profit.

Break-even units = fixed costs / contribution per unit; break-even sales value = fixed costs / contribution-to-sales (C/S) ratio; margin of safety = actual sales - break-even sales.

Overhead absorption rate = budgeted overhead / budgeted activity base; under- or over-absorption = absorbed overhead - actual overhead incurred.

High-low method: variable cost per unit = (cost at high activity - cost at low activity) / (high units - low units); fixed cost = total cost - variable cost per unit x units.

Standard costing variances: material price = (standard price - actual price) x actual quantity; material usage = (standard quantity - actual quantity) x standard price.

Labour rate variance = (standard rate - actual rate) x actual hours paid; labour efficiency variance = (standard hours for output - actual hours worked) x standard rate.

Relevant costing ignores sunk costs and apportioned fixed overheads; it includes incremental, avoidable and opportunity costs of the decision.

Process costing: abnormal loss is valued at full production cost and written off; abnormal gain is credited to the process account and debited to the abnormal gain account.

Audit risk model: audit risk = inherent risk x control risk x detection risk; the auditor controls detection risk through the nature, timing and extent of procedures.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification (transactions); existence, rights and obligations, completeness, valuation, presentation (balances).

Audit evidence is more reliable when obtained from independent external sources, when controls are effective, and when gathered directly by the auditor rather than indirectly.

Materiality is set at overall financial statement level and at performance materiality (usually a fraction of overall materiality) for designing procedures.

The auditor's report expresses an unmodified opinion, qualified opinion, adverse opinion or disclaimer; a key audit matter section is required for listed entities.

Independence threats: self-interest, self-review, advocacy, familiarity, intimidation; safeguards include rotation, second partner review and removing the fee dependency.

Going concern: if material uncertainty exists but disclosure is adequate, an unmodified opinion with a separate material uncertainty section is issued.

Internal control components (COSO): control environment, risk assessment, control activities, information and communication, and monitoring activities.

Taxable income = accounting profit +/- disallowed expenses +/- allowable deductions; accounting depreciation is added back and tax depreciation or capital allowances deducted.

Progressive personal tax: tax is computed by applying each band rate to the slice of income falling in that band; marginal rate applies only to the top slice.

Withholding tax is deducted at source on specified payments such as dividends, interest, royalties and certain service fees; it is creditable against final liability.

Capital allowances replace depreciation for tax: initial allowance applies in the year of acquisition and annual allowance on the reducing balance, subject to a maximum.

Loss relief rules: trading losses may be carried forward against future trading profits, and often carried back against prior profits, subject to statutory time limits.

Indirect tax on supplies: output tax on sales less input tax on purchases equals the net amount payable; exempt supplies generally do not permit input tax recovery.

Tax avoidance uses legal arrangements within the letter of the law; tax evasion involves concealment or false statements and attracts penalties and criminal liability.

Transfer pricing rules require related-party transactions to be priced at arm's length; documentation is required to support the pricing policy.

A valid contract requires offer, acceptance, consideration, intention to create legal relations and capacity; absence of any element may render it void or voidable.

An offer lapses on rejection, revocation before acceptance, death, or expiry of a stated time; a counter-offer destroys the original offer.

Directors owe fiduciary duties: act in good faith in the company's interest, exercise care and skill, avoid conflicts of interest, and not misuse company property or information.

Agency: the agent binds the principal when acting with actual authority (express or implied) or apparent authority arising from the principal's representation.

Corporate governance codes separate the roles of chair and chief executive and require independent non-executive directors and an audit committee of independent members.

Piercing the corporate veil is exceptional; courts generally uphold separate legal personality unless the company is a mere facade for fraud.

Companies must maintain statutory registers and file annual returns; failure to file within the deadline attracts penalties and possible strike-off.

Insolvency tests: cash-flow test (inability to pay debts as they fall due) and balance-sheet test (liabilities exceeding assets).

Time value: future value = present value x (1 + r)^n; present value = future value / (1 + r)^n; use annuity factors for level cash flows.

Net present value discounts cash flows at the cost of capital; accept projects with positive NPV; IRR is the rate at which NPV equals zero.

Weighted average cost of capital = (E/V x Ke) + (D/V x Kd x (1 - tax rate)); use market values for weights where available.

Capital asset pricing model: Ke = risk-free rate + beta x (market return - risk-free rate); beta measures systematic risk.

Dividend growth model: Ke = (D1 / P0) + g, where g is the expected constant growth rate in dividends.

Working capital cycle = inventory days + receivable days - payable days; a shorter cycle releases cash and reduces financing needs.

Gearing = debt / (debt + equity) or debt / equity; higher gearing raises financial risk and the required return on equity.

Payback ignores cash flows after the cut-off and the time value of money; it is used as a screening measure of liquidity and risk.

Government budgets are prepared on a cash basis in many jurisdictions, while accrual-based financial statements report assets, liabilities, revenue and expenses.

The Consolidated Fund receives general revenues; withdrawals require legislative appropriation, and the Contingency Fund covers urgent unforeseen expenditure pending approval.

Public sector entities report under IPSAS, which is based on accrual accounting and converges with IFRS for private-sector-style transactions.

Budgetary control compares actual against approved estimates; variances are classified as favourable or adverse and reported to the legislature.

Value for money audit examines economy (cost of inputs), efficiency (output per input) and effectiveness (achievement of intended outcomes).

Public accountability requires transparency, probity and stewardship; the auditor-general reports findings to the legislature, not to the executive.

Commitment accounting records obligations before cash is paid, preventing overspending of an appropriation.

Performance reporting uses service delivery measures and key performance indicators against stated targets in the annual report.

An accounting information system comprises people, procedures, data, software and hardware; it captures, records, processes and reports transactions.

Input controls: batch totals, hash totals, validity checks, field format checks and sequence checks detect errors at data entry.

Processing controls include run-to-run totals, reasonableness tests, limit checks and reconciliation of master file updates to control totals.

Segregation of duties in IT separates system development, operations and data control; programmers must not have access to live data or production libraries.

General controls cover access security, change management, backup and disaster recovery; application controls cover specific transaction processing.

Audit trail requirements: each transaction must be traceable from source document to ledger and back, with time stamps and user identification logged.

Computer-assisted audit techniques include test data, parallel simulation, embedded audit modules and generalised audit software for file interrogation.

Encryption protects data confidentiality in transit and at rest; digital signatures provide authentication and non-repudiation of electronic transactions.