CSEC POA common mistakes
CSEC POA · Understand the traps and how to avoid them.
When posting a transaction, the candidate writes the debit and credit entries on the same side of the two ledger accounts (e.g. debits both the receiver and the giver), or reverses them so the account that should be debited is credited.
The candidate memorises 'debit the receiver, credit the giver' as a slogan without anchoring it to the dual-aspect concept and the accounting equation. Under exam pressure they lose track of which account is receiving the value and which is giving it, especially for expenses paid by cheque or goods returned to a supplier.
What to do instead
Before writing any entry, state the two accounts affected and classify each (asset, liability, capital, income, expense). Apply the rule to the classification, not to the parties: assets and expenses increase on the debit side, liabilities, capital and income increase on the credit side. After writing the entry, test it by asking 'does this keep assets = liabilities + capital true?'
The candidate records the full selling price of goods in the sales account and the purchases account when the transaction is a credit sale or a purchase return, instead of using the correct books of original entry, and mixes cash and credit transactions in the same day book.
The candidate treats all sales and purchases as identical and does not separate the books of original entry by the nature of the transaction. They also confuse returns inwards (sales returns) with returns outwards (purchases returns) because the wording is similar.
What to do instead
Build a one-page map of the seven books of original entry and the source document that feeds each: sales day book (invoice), purchases day book (invoice received), returns inwards book (credit note issued), returns outwards book (credit note received), cash book (cheque counterfoil/receipt), petty cash book (petty cash voucher), general journal (memo). Practise sorting ten mixed transactions into the correct book before posting any of them.
The candidate prepares a trial balance that balances and concludes the ledger is free of error, then fails to identify errors that a trial balance cannot reveal, such as an error of principle, complete omission, compensating errors, or a transaction posted to the wrong account of the same class.
The candidate equates 'trial balance balances' with 'records are correct'. Textbooks list the errors not disclosed by a trial balance, but candidates rarely apply the list to a scenario because they have not practised classifying a described error against it.
What to do instead
Memorise the six errors a trial balance does not reveal (omission, commission, principle, original entry, reversal, compensating) and, for each, write a one-line example. When given an error in an exam, first ask 'does it affect one account only, or two accounts by equal amounts on the same side?' Errors affecting one account or equal amounts on the same side leave the trial balance in balance.
When correcting an error, the candidate writes a single journal entry that changes only one account, or uses a suspense account for an error that never affected the trial balance agreement.
The candidate does not distinguish between errors that caused a difference on the trial balance (which require a suspense account) and errors that did not (which are corrected by a straightforward double entry between the two affected accounts). They also forget that every correction must still be a double entry.
What to do instead
For each error, write down the entry that was actually made, then the entry that should have been made, then the correcting entry as the difference between the two. Only use the suspense account where the original error left one side of the ledger short or long. Always check the correcting entry has equal debits and credits before moving on.
The candidate prepares a bank reconciliation by treating the cash book balance and the bank statement balance as the same figure, or adjusts the cash book for items that belong only on the statement (unpresented cheques, deposits not yet credited).
The candidate does not separate timing differences (items in one record but not yet the other) from genuine errors. They also confuse the direction of adjustments because they have not visualised the two records side by side.
What to do instead
Draw two columns labelled 'cash book' and 'bank statement'. Put every reconciling item in the column of the record that has not yet recorded it: unpresented cheques and uncredited deposits go to the bank statement column; bank charges, interest, dishonoured cheques and standing orders go to the cash book column. Adjust the cash book only for items the bank already knows about, then reconcile the adjusted cash book to the statement.
The candidate prepares the income statement without adjusting for closing inventory, accruals, prepayments, depreciation or bad and doubtful debts, and simply lists the trial balance figures as given.
The candidate treats the trial balance as the final answer rather than the starting point. They run out of time and skip the year-end adjustments, or they do not understand that the adjustments affect both the income statement and the statement of financial position simultaneously.
What to do instead
Before writing any statement, list the adjustments given in the question and tick them off one at a time. For each adjustment, write the double entry first (e.g. closing inventory: debit inventory, credit cost of sales; accrual: debit expense, credit accruals). Then carry the figures into both statements. Leave a working column showing each adjustment so the marker can see the treatment.
When preparing a statement of financial position, the candidate shows the net profit for the year inside the current assets or omits it from capital altogether, and fails to deduct drawings from capital.
The candidate does not connect the income statement to the statement of financial position through the capital account. They also confuse drawings (a reduction of capital) with an expense in the income statement.
What to do instead
Always compute closing capital as opening capital + net profit − drawings (and + any capital introduced). Show this as a working. In the statement of financial position, capital is a single figure under the 'Capital and liabilities' section; net profit and drawings never appear as separate lines in current assets or current liabilities.
In partnership questions, the candidate splits profit in the profit-sharing ratio before deducting partners' salaries, interest on capital and interest on drawings, or applies interest on drawings as a credit to the appropriation account instead of a debit.
The candidate treats the appropriation account like an ordinary income statement and does not follow the prescribed order of appropriations. They also mix up the direction of interest on drawings, which is income to the partnership and therefore a credit in the appropriation account and a debit to the partner's current account.
What to do instead
Write the appropriation account in a fixed order every time: net profit brought down, add interest on drawings, less interest on capital, less partners' salaries, less share of residual profit. Residual profit is then divided in the profit-sharing ratio. Remember interest on drawings is earned by the firm (credit appropriation, debit current account); interest on capital and salaries are charged by the firm (debit appropriation, credit current account).
For a company, the candidate records the issue of shares at par when the question states a premium, or omits the share premium account, and treats debenture interest as a charge to the appropriation of profit rather than an expense in the income statement.
The candidate does not distinguish between share capital, share premium and reserves, and does not separate finance costs from appropriations. They also confuse the treatment of dividends, which are appropriations, with interest, which is an expense.
What to do instead
For every share issue, record the cash received in full, credit the share capital account with the nominal value and credit the share premium account with the excess. In the income statement, show debenture interest as a finance cost before profit for the year. Show dividends and transfers to reserves only in the statement of changes in equity or the appropriation section, never as an expense.
For a club or non-profit organisation, the candidate prepares a trading and profit and loss account instead of a receipts and payments account and an income and expenditure account, or includes the club's accumulated fund as income in the income and expenditure account.
The candidate applies the sole trader template to every organisation. They do not distinguish between cash-based records (receipts and payments) and accrual-based records (income and expenditure), and they do not understand that the accumulated fund is the equivalent of capital, not revenue.
What to do instead
Memorise the two statements and their basis: receipts and payments account is a summary of the cash book for the period (cash basis); income and expenditure account is the equivalent of the income statement (accrual basis). The accumulated fund is the opening balance of the equivalent of capital and appears in the statement of financial position, adjusted by any surplus or deficit for the year. Practise converting a receipts and payments account into an income and expenditure account by adding accruals and prepayments.