Financial Accounting Technician Level 1 common mistakes
Financial Accounting Technician Level 1 · Understand the traps and how to avoid them.
Recording a transaction on the wrong side of the account because the candidate reasons from the bank statement or cash perspective rather than from the debit/credit rules for the account type - for example debiting a payable when paying a supplier, or crediting an asset when cash is received.
Candidates learn debit/credit as 'left and right' and then try to memorise lists, so under time pressure they fall back on everyday intuition ('money went out, so debit'). The intuition is correct only for the bank account as an asset, and breaks for every other account.
What to do instead
Before writing any entry, state the two accounts affected, classify each (asset, liability, income, expense, equity), and apply the rule for that class: assets and expenses increase on the debit side; liabilities, income and equity increase on the credit side. Then check that total debits equal total credits before moving on. Practise by writing the classification in the margin next to each journal line for a week of practice questions.
When a trial balance fails to agree, the candidate posts the whole difference to a suspense account and stops, treating the suspense entry as the correction rather than as a temporary holding place that must be cleared.
Suspense accounts are taught as the mechanical answer to an imbalance, so candidates learn the journal but not the follow-up work of locating and correcting the underlying errors.
What to do instead
Treat the suspense account as a to-do list. After opening it, work through the standard search sequence: re-add the trial balance columns, check each ledger balance was carried forward correctly, look for a one-sided entry by halving the difference, test for transposition and slide errors by dividing by 9, and check for entries posted to the wrong side. Only clear suspense when each item is traced to a specific error and corrected through the journal.
Assuming every difference between the cash book and the bank statement is an error, and adjusting the cash book for items such as unpresented cheques or deposits not yet credited.
Candidates conflate the two halves of the reconciliation. Because the cash book is the entity's own record, they assume the bank statement is wrong whenever the two disagree, and they adjust whichever figure looks easier.
What to do instead
Sort every reconciling item into two piles first. Items already in the cash book but not yet on the statement - unpresented cheques, uncredited lodgements, uncleared direct debits in transit - go in the bank reconciliation statement and never touch the cash book. Items on the statement the entity has not yet recorded - bank charges, interest, direct credits, dishonoured cheques, standing orders - are entered in the cash book. Errors belong to whichever record contains them.
Omitting the general journal entirely and posting source-document information straight into ledger accounts, so no narrative, date or double-entry audit trail exists for adjustments, corrections and non-cash transactions.
Candidates associate bookkeeping with T-accounts and see the journal as a formality, especially when a question asks only for ledger balances. They then lose marks on questions that require the journal entry itself, and cannot reconstruct their own workings.
What to do instead
Adopt a fixed habit: every transaction, including cash transactions, is first described as a journal entry with date, accounts debited and credited, amounts and a short narrative. Only then post to the ledger. When a question asks for ledger accounts, still draft the journal in the margin - it is faster to check, and it earns marks on the journal-format questions.
Calculating depreciation on the cost of a non-current asset in every year, ignoring accumulated depreciation, and charging a full year's depreciation in the year of acquisition or disposal regardless of the date.
The straight-line formula is learned as 'cost times rate', and the concept of carrying amount is treated as a presentation detail rather than the basis for the charge. Timing rules are easily overlooked when a question gives only a year-end date.
What to do instead
Write the formula as (cost minus residual value) divided by useful life for straight-line, or carrying amount times rate for reducing balance, and label the carrying amount explicitly each year. For part-year assets, compute the monthly charge and apply it from the month of acquisition to the month of disposal, following the policy stated in the question. Show a three-column working: opening accumulated depreciation, charge for the year, closing accumulated depreciation.
Treating a payment received in advance from a customer, or an invoice received for a period partly after the year end, as income or expense of the current period because the cash moved.
Cash accounting is intuitive and accruals is a convention that has to be applied deliberately. Candidates also confuse the direction of the adjustment: they know something must be adjusted but cannot decide whether it is a prepayment or an accrual.
What to do instead
Ask one question for every item: has the benefit been consumed by the year end? If an expense has been incurred but not invoiced, accrue it (debit expense, credit accrual). If it has been paid but not consumed, prepay it (debit prepayment, credit expense). For income, reverse the logic: invoiced but not yet earned is deferred income; earned but not yet invoiced is accrued income. Draw a small timeline of the period covered against the accounting period before writing the entry.
Writing off a bad debt without also removing the related VAT or, more commonly, crediting the customer's receivable account and debiting the expense, then later failing to reverse a recovery through the same receivable account.
The double entry for bad debts is short and candidates memorise only the expense side, so the personal ledger is left with a balance that no longer exists. Recoveries are then recorded as fresh sales.
What to do instead
For a write-off, debit bad debts expense and credit the individual customer's receivable account, so the personal ledger is cleared. For a later recovery, reverse the write-off first (debit receivable, credit bad debts recovered or the expense), then record the cash receipt against the receivable. Check that the receivables ledger total still agrees to the control account after each write-off.
Valuing closing inventory at selling price, or including goods held on consignment or sale-or-return, and then using that figure directly in cost of sales without testing it against net realisable value.
Candidates apply the 'lower of cost and net realisable value' rule as a phrase but do not know which costs are permitted in cost, and they assume goods physically on the premises belong to the entity.
What to do instead
Build the cost figure from purchase price plus directly attributable costs such as freight and duty, excluding trade discounts and administration overhead. Then compare each line or category with net realisable value and use the lower. Exclude goods owned by others and include goods in transit that the entity owns under the stated delivery terms. Recompute cost of sales as opening inventory plus purchases less closing inventory using the corrected figure.
Entering the gross amount of a credit note or invoice in the sales or purchases day book and then posting the same gross figure to the control account, so the control account no longer agrees with the ledger and VAT is double counted.
Candidates see the total on the document and copy it, forgetting that the day book records the net figure with VAT posted separately to the VAT account.
What to do instead
Post the net amount to the sales or purchases day book and the control account, and post the VAT element separately to the VAT account. When reconciling, remember the control account is maintained on the same net basis. If a question gives only a gross figure, strip out VAT at the stated rate before writing anything.
Preparing the statement of profit or loss and statement of financial position from the trial balance without first processing the year-end adjustments, or netting an adjustment against the wrong statement - for example deducting drawings from profit instead of from capital.
The trial balance is treated as finished data, and the link between the adjustments, the extended trial balance and the two statements is not visualised. Drawings and capital are confused because both sit in the equity section.
What to do instead
Use an extended trial balance with adjustment columns and separate profit or loss and financial position columns, so each adjustment is shown in both statements at once. Process every adjustment through the journal first. In the statement of financial position, capital is opening capital plus profit less drawings; drawings never reduce profit. Reconcile the profit figure to the movement in capital as a final check.