Technician Diploma in Accounting
What this domain tests
The Technician Diploma in Accounting domain examines whether a candidate can record transactions accurately, adjust the ledger at period end, and present financial statements for sole traders, partnerships and companies, alongside the cost accounting and control skills that support those figures.
Recording and adjusting
Every transaction preserves the accounting equation: assets = liabilities + capital. Debits increase assets and expenses; credits increase liabilities, capital and income. The cycle runs journal → ledger → unadjusted trial balance → period-end adjustments → financial statements. Master these adjustments: accruals (cost incurred but not yet invoiced), prepayments, depreciation, irrecoverable debts and the allowance for receivables, and closing inventory.
Financial statements by entity
- Sole trader: income statement, then statement of financial position.
- Partnership: add an appropriation account - interest on capital, partners' salaries, then residual profit in the profit-sharing ratio - and keep capital and current accounts separate.
- Company: statement of profit or loss and other comprehensive income, statement of changes in equity, statement of financial position; close off share capital and retained earnings.
Cost accounting
Classify costs as direct or indirect, then absorb overheads using a predetermined rate built on budgeted figures. Compare overhead absorbed with overhead incurred to find over- or under-absorption. Under marginal costing the product cost is variable only, and contribution = sales − variable costs.
Worked example
Budgeted overheads are 120,000 and budgeted machine hours 15,000, so the absorption rate is 120,000 ÷ 15,000 = 8 per machine hour. Actual overheads are 128,000 and actual hours 16,200, so overhead absorbed is 16,200 × 8 = 129,600. Absorbed exceeds incurred by 1,600, so overhead is over-absorbed and cost of sales falls by 1,600.
Traps that cost marks
- Computing the absorption rate with actual hours rather than budgeted hours.
- Reversing over- and under-absorption: absorbed above incurred is over-absorbed.
- Sharing partnership profit before deducting interest on capital and salaries.
- Expensing capital items, or omitting accruals and prepayments.
- Treating the suspense account as a permanent home for an error instead of a temporary holding place.