CA ANZ Core 1 cheat sheet

Conceptual Framework: an asset is a present economic resource controlled as a result of past events; a liability is a present obligation to transfer an economic resource; equity is the residual interest.

Recognition requires relevance and faithful representation; measurement bases are historical cost, fair value, value in use, current cost and fulfilment value.

Accrual accounting records revenue when performance obligations are satisfied and expenses when incurred, not when cash moves; cash basis is not permitted under accounting standards.

The accounting equation Assets = Liabilities + Equity holds after every transaction; double entry requires each transaction to have equal debits and credits.

Depreciation allocates a depreciable amount (cost less residual value) over useful life; methods include straight-line, diminishing balance and units of production.

Inventory is measured at the lower of cost and net realisable value; cost includes purchase price, conversion costs and costs to bring inventory to its present location and condition.

Revenue under IFRS 15 is recognised through five steps: identify the contract, identify performance obligations, determine transaction price, allocate price, recognise when obligations are satisfied.

A provision is recognised when a present obligation exists from a past event, an outflow is probable and the amount can be reliably estimated; contingent liabilities are only disclosed.

Consolidation is required where a parent controls a subsidiary; control is power over the investee, exposure to variable returns and ability to use power to affect returns.

Contribution margin = sales revenue less variable costs; contribution margin ratio = contribution per unit divided by selling price per unit.

Break-even units = fixed costs divided by contribution per unit; break-even revenue = fixed costs divided by contribution margin ratio.

Margin of safety = (actual or budgeted sales less break-even sales) divided by actual or budgeted sales, expressed as a percentage.

Target profit volume in units = (fixed costs plus target profit) divided by contribution per unit.

Absorption costing assigns fixed production overhead to units via a predetermined rate = budgeted overhead divided by budgeted activity level.

Under- or over-absorbed overhead = overhead absorbed less overhead actually incurred; under-absorption increases cost of goods sold.

Relevant costs for decisions are future, incremental and avoidable; sunk costs are irrelevant and allocated common fixed costs are generally irrelevant.

A special order is accepted when incremental revenue exceeds incremental costs and no better use of capacity exists; opportunity cost must be included.

Variances: material price = (standard price less actual price) x actual quantity; material usage = (standard quantity less actual quantity) x standard price.

Activity-based costing assigns overhead to cost pools driven by activities, reducing distortion where products consume overhead differently.

Time value: future value = present value x (1 + r)^n; present value = future value divided by (1 + r)^n.

Net present value discounts all incremental cash flows at the cost of capital; accept projects with NPV greater than zero, rank mutually exclusive projects by highest NPV.

Internal rate of return is the discount rate giving NPV of zero; accept if IRR exceeds the required rate, but IRR can mislead with non-conventional cash flows.

Weighted average cost of capital = (E/V x cost of equity) + (D/V x cost of debt x (1 - tax rate)).

Capital asset pricing model: cost of equity = risk-free rate + beta x (market return less risk-free rate).

Dividend growth model: cost of equity = expected dividend per share divided by current share price plus growth rate.

Working capital cycle = inventory days plus receivable days less payable days; a shorter cycle reduces financing needs.

Payback period ignores cash flows after the cut-off and the time value of money; it measures liquidity risk rather than value creation.

Gearing = debt divided by (debt plus equity); higher gearing raises financial risk and the cost of equity.

Input, processing, storage and output controls are the four generic control layers of an accounting information system.

Segregation of duties in IT separates custody of assets, authorisation, recording and reconciliation; incompatible duties must not sit with one user.

General IT controls cover access management, change management, IT operations and program development; application controls cover input, processing and output.

Input controls include field validation, check digits, batch totals, range checks and maker-checker authorisation.

Processing controls include run-to-run totals, control totals, exception reports and sequence checks.

Output controls include distribution logs, report reconciliation and review of exception reports by an independent officer.

A disaster recovery plan addresses restoring IT operations after disruption; a business continuity plan addresses continuing the whole business.

Data analytics for audit includes CAATs, full population testing, journal entry testing and Benford's law analysis for unusual patterns.

Cloud and third-party arrangements require review of service organisation assurance reports and data residency and privacy obligations.

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

Sufficient appropriate audit evidence is judged by relevance and reliability; external evidence is more reliable than internal, and original documents more reliable than copies.

Assertions tested include occurrence, completeness, accuracy, cut-off, classification, existence, rights and obligations, valuation and presentation.

Materiality is set for the financial report as a whole and for performance materiality; it drives the extent of testing and evaluation of misstatements.

The auditor's opinion is unmodified, qualified, adverse or disclaimer; scope limitation leads to qualified or disclaimer, misstatement to qualified or adverse.

Internal control has five components: control environment, risk assessment, control activities, information and communication, and monitoring.

The fraud risk assessment presumes risk in revenue recognition and management override of controls; both require specific procedures.

Going concern evaluation covers at least twelve months from the date of the financial report; significant doubt requires disclosure and possibly an emphasis of matter.

Independence requires the auditor to avoid financial interests, close business relationships and self-review threats; safeguards must be documented.

Australian GST is 10 percent; an entity must be registered when GST turnover reaches the registration threshold, and GST credits arise on creditable acquisitions.

Goods and services tax is collected on taxable supplies, offset by input tax credits, and remitted through business activity statements.

Company tax is levied on taxable income = assessable income less allowable deductions; losses may be carried forward subject to continuity of ownership or business tests.

Capital gains are included in assessable income; the discount for individuals and trusts generally applies to assets held more than twelve months.

Trading stock may be valued at cost, market value or replacement value, with the chosen method applied consistently.

Fringe benefits tax is payable by employers on benefits provided to employees; the FBT year ends 31 March, distinct from the income tax year.

Division 7A limits tax-free loans, payments and debt forgiveness from private companies to shareholders and associates.

Tax depreciation uses the effective life of the asset or the instant asset write-off where applicable, under diminishing value or prime cost methods.

Pay as you go withholding and instalments are remitted periodically; failure to withhold correctly can make the entity liable for the amount.

A contract requires offer, acceptance, consideration, intention to create legal relations and capacity; absence of any element prevents formation.

A company is a separate legal entity; directors owe duties of care and diligence, good faith, avoiding conflicts, and not misusing position or information.

Insolvent trading occurs when a company incurs a debt while insolvent or becomes insolvent by incurring it; directors can be personally liable.

The Corporations Act prohibits misleading or deceptive conduct in trade or commerce and false or misleading representations.

Agency arises by express or implied appointment, ratification, necessity or estoppel; the principal is bound by acts within the agent's authority.

The ethical threats in the code are self-interest, self-review, advocacy, familiarity and intimidation; each requires evaluation and safeguards.

The fundamental principles are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Confidentiality continues after the relationship ends; disclosure is permitted where required by law or with consent.

Negligence requires a duty of care, breach of that duty, causation and loss; professional advisers owe a duty to those they reasonably foresee relying on their work.

Case response structure: identify the issue, apply the relevant standard or principle, analyse the data, and conclude with a recommendation.

Allocate response time to marks; a question worth 10 marks generally needs roughly 10 distinct, developed points.

Quantitative workings should show formula, inputs and result; marks are awarded for method even where the final figure is wrong.

Use only the facts given; assumptions must be stated explicitly and kept consistent throughout the response.

Ethical dilemmas in cases are answered by naming the threat, the principle at risk, the safeguard and the recommended action.

When recommending between options, compare on the decision criterion stated in the case (NPV, cost, risk, compliance) and justify the ranking.

Professional communication uses concise structure, headings, and clear conclusions; avoid unexplained jargon and unsupported assertions.

Reconcile conflicting data before analysing; state which figure is used and why, and quantify the effect of the difference.