CA ANZ Core 1 common mistakes
CA ANZ Core 1 · Understand the traps and how to avoid them.
Treating the accounting equation as optional when recording a transaction - posting one side of an entry (e.g., recording a cash receipt without the corresponding revenue or liability) and then reconciling later by plugging a suspense balance.
Candidates under time pressure focus on the 'obvious' account in a scenario and skip the double-entry discipline, especially when the transaction is described in narrative form rather than as a journal template.
What to do instead
Before writing any answer, state the entry in words: identify the two or more accounts affected, classify each (asset/liability/equity/income/expense), and confirm debits equal credits. Practise converting 20 narrative transactions per study session into journal form until the two-sided check is automatic.
Applying the wrong recognition or measurement basis - for example, expensing an item that meets the definition of an asset, or recognising revenue before the performance obligation is satisfied - because the candidate pattern-matches on the account name rather than the underlying criteria.
Exam scenarios deliberately use familiar labels in unfamiliar situations (e.g., 'legal fees' that are directly attributable to an asset acquisition). Candidates rely on memory of textbook examples instead of working through definitions.
What to do instead
For every recognition question, write the definition and recognition criteria in the margin first, then test the facts against each element explicitly. Build a one-page decision tree covering asset, liability, revenue and expense recognition and rehearse it on mixed scenarios.
Computing a product or job cost using only the obvious direct costs and forgetting to absorb overhead, or absorbing overhead using the wrong base, so the reported unit cost and any resulting pricing or inventory figure is understated.
Overhead is described in separate paragraphs of the scenario and is easy to overlook when the question asks directly for 'the cost per unit'. Candidates also default to labour hours even when the question specifies machine hours or a different driver.
What to do instead
Adopt a fixed costing template: direct materials, direct labour, then overhead applied at the stated predetermined rate and base. Always show the application base and rate in the working. Practise reconciling applied versus actual overhead and explaining the resulting under- or over-absorption.
Mixing up contribution margin and gross margin, or treating a sunk cost or allocated fixed cost as relevant, when recommending whether to accept a special order, make or buy, or discontinue a segment.
Candidates carry over financial-reporting habits into decision analysis, and the scenarios are written so that a superficially 'unprofitable' segment looks like it should be dropped until unavoidable fixed costs are considered.
What to do instead
For every decision question, list the costs and tick only those that are future, incremental and differ between alternatives. Explicitly cross out sunk and unavoidable allocated costs in the working. Recalculate contribution per unit or per limiting factor before ranking alternatives.
Choosing a capital project on the basis of accounting profit or the payback period alone, or discounting at the wrong rate, and failing to state the reinvestment and scale assumptions behind the comparison.
Payback is the easiest number to compute under time pressure, and candidates confuse the cost of capital with the project's internal rate of return or with the coupon rate on existing debt.
What to do instead
Always compute net present value first using the stated discount rate and treat internal rate of return and payback as supporting evidence. In written answers, state the assumptions (cash flows not profit, timing, reinvestment at the discount rate, mutually exclusive versus independent projects) in a short explicit sentence.
Describing a system control in general terms ('the system validates the entry') without naming the specific control type, the risk it addresses, and how it would be tested, leaving the answer too vague to earn marks.
Candidates know the vocabulary of controls but have not practised linking a named control (e.g., field format check, reasonableness check, segregation of duties, exception report) to a specific risk and a specific test procedure.
What to do instead
Use a three-part sentence structure for every control answer: risk - control - test. For example: 'Risk of invalid codes entered; a validation check against the master file prevents this; test by attempting to post an invalid code and inspecting the exception log.' Rehearse this on ten different business cycles.
Concluding that an audit provides absolute assurance, or that a material weakness found in internal control automatically means the financial report is misstated, and answering assurance questions with overstated certainty.
The distinction between reasonable and absolute assurance, and between a control deficiency and a financial statement misstatement, is subtle and candidates simplify it into a binary 'reliable or not' judgement.
What to do instead
Memorise and apply the standard phrases: reasonable, not absolute, assurance; inherent limitations of audit; materiality; and the separate conclusions on controls versus the financial report. When a deficiency is identified, state whether it is a deficiency, significant deficiency or material weakness, and then state the effect on the audit approach rather than jumping to a misstatement conclusion.
Confusing taxable income with accounting profit and omitting adjustments such as non-deductible expenses, temporary differences, or the treatment of tax losses, when calculating tax expense or deferred tax.
Candidates treat the tax rate as a simple multiplier on profit and do not systematically work through the reconciliation items, particularly where the scenario buries a non-deductible fine or a depreciation versus capital allowance difference.
What to do instead
Build a standard reconciliation from accounting profit: add back non-deductible items, remove non-assessable income, adjust for temporary differences, then apply the rate. Separately classify each difference as permanent or temporary and state whether it creates a deferred tax asset or liability and why it meets the recognition criteria.
Spotting an ethical issue in a scenario but resolving it with a generic statement ('the accountant should act ethically') rather than identifying the specific threat, the applicable fundamental principle, and a concrete course of action with the party to whom it should be escalated.
Candidates recognise the 'ethics question' and switch to moralising rather than applying the conceptual framework of threats and safeguards they have been taught.
What to do instead
Use a fixed four-step template: identify the threat type (self-interest, self-review, advocacy, familiarity, intimidation), name the affected fundamental principle, evaluate the significance, then specify the safeguard or action and the escalation path. Practise on short scenarios until the template is produced in under three minutes.
In integrated case questions, answering each sub-question in isolation and ignoring facts given earlier in the case, so the recommendation is technically correct but contradicts information in the scenario or fails to address the client's stated objective.
Cases are long, and candidates read once, then answer from memory of the first paragraph, missing later facts that change the analysis or the weighting of marks.
What to do instead
Read the requirements before the case, then read the case once annotating each paragraph with the requirement it serves. Before writing, produce a one-line answer plan linking each requirement to specific case facts, and finish by checking that every recommendation references at least one fact from the case and addresses the stated objective.