NSSCO Accounting (6143) common mistakes
NSSCO Accounting (6143) · Understand the traps and how to avoid them.
When a trial balance still fails to balance after correcting errors, the candidate plugs the remaining difference into the suspense account and calls the trial balance 'balanced' instead of first checking whether the difference is divisible by 2 (one-sided entry) or 9 (transposition), then clearing the suspense account only with genuine correcting entries.
Candidates treat the suspense account as a dumping ground because they have been taught 'open a suspense account' but not the diagnostic step that precedes it; they also confuse suspense with the capital or drawings account, so the plug looks legitimate on the face of the ledger.
What to do instead
Before touching suspense, compute the difference and apply the tests: divisible by 2 → look for a balance omitted from one side; divisible by 9 → look for transposition or slide; otherwise look for addition errors or a wrong-column posting. Record each correction as a journal with a named account on both sides, and show the suspense account being written off to nil. Practise a two-error case where the suspense balance is deliberately zero.
In the trading section, candidates add carriage inwards to purchases but then also include it in the cost of the closing inventory figure, or they deduct returns outwards from purchases without deducting returns inwards from sales, producing a double-counted cost of sales and a distorted gross profit.
The proforma is memorised as a list of lines without the logic of 'net purchases = purchases less returns outwards plus carriage inwards', so candidates cannot tell which items belong to the purchases line and which are separate.
What to do instead
Write the cost of sales as a labelled equation every time: opening inventory + purchases + carriage inwards − returns outwards − closing inventory. Then check that each of the four adjustment items appears exactly once. Rehearse a question with both returns inwards and returns outwards and confirm returns inwards reduce sales only.
When asked to adjust for depreciation, candidates debit the asset account instead of the expense account, or they calculate depreciation on the carrying amount when the question specifies the straight-line method on original cost, and they omit the depreciation charge from the profit and loss account while still showing it in the balance sheet.
Double entry for depreciation (Dr depreciation expense, Cr accumulated depreciation) is counter-intuitive because the asset account itself is untouched; candidates also skip the policy wording in the question and default to whichever method they practised last.
What to do instead
Use the mnemonic 'expense up, provision up' and write the journal out in full before calculating. Underline the method and rate in the question stem. Always show three figures: charge for the year in the P&L, accumulated depreciation in the balance sheet, and carrying amount. Do one question where an asset is bought mid-year and apportion the charge by months.
Candidates record a dishonoured cheque by reversing the original receipt in the cash book but then also adjust the bank reconciliation statement for the same item, so the item is corrected twice and the reconciled balance is wrong by the amount of the cheque.
The distinction between items known to the business but not yet on the bank statement (cash book adjustments) and items on the statement not yet in the cash book (reconciliation adjustments) is not internalised; the dishonoured cheque looks like a bank-side event because it originates with the bank.
What to do instead
Draw a two-column table headed 'Adjust the cash book' and 'Adjust the reconciliation' and sort every item into exactly one column before writing anything. Remember the rule: if the business already knows about it, fix the cash book; if only the bank knows, fix the reconciliation. Do a question containing a dishonoured cheque, an unpresented cheque, an uncredited deposit and a standing order, and verify each lands in one column only.
In partnership accounts, candidates split the residual profit between partners in the profit-sharing ratio without first deducting interest on capital and partners' salaries, or they charge interest on drawings to the appropriation account as an expense rather than crediting it to the appropriation account as income.
The appropriation account is treated as a simple division of profit; candidates also carry over the instinct that interest is always an expense, which is true for a loan but not for drawings.
What to do instead
Build the appropriation account in a fixed order: profit for the year, add interest on drawings, less interest on capital, less salaries, then divide the residual in the profit-sharing ratio. Show each partner's current account with the four components as separate lines. Check that the sum of the current account balances equals the total appropriation.
For a non-profit organisation, candidates treat subscriptions received in cash as the income for the year even when the question gives subscriptions in arrears and in advance, and they put the receipts and payments account surplus in the balance sheet as if it were retained profit.
The receipts and payments account is a cash summary prepared on the same basis as a cash book, and candidates do not convert it to the accruals basis required for the income and expenditure account; the two statements look similar so the distinction is lost.
What to do instead
Always convert: subscription income = received + opening arrears − closing arrears − opening advance + closing advance. Present the income and expenditure account on the accruals basis and use the accumulated fund, not a surplus, in the balance sheet. Do one question that requires both statements from the same data and reconcile the closing cash to the receipts and payments account.
Candidates compute closing inventory at cost only, ignoring the lower of cost and net realisable value rule, and they include goods held on consignment or goods received on sale-or-return as owned inventory, overstating both inventory and profit.
The valuation rule is stated in one line of the syllabus but rarely practised with numbers, and ownership questions require reasoning about who bears the risk, which candidates avoid under time pressure.
What to do instead
For every inventory line, compute cost and NRV side by side and take the lower figure, showing the write-down as a separate line. Apply the ownership test explicitly: who holds title, who bears the loss if goods are damaged? Exclude consignment goods and include goods in transit only if the business owns them. Rehearse a question with three inventory categories, one of which is damaged.
When a company issues shares at a premium or makes a bonus issue, candidates credit the entire proceeds to share capital, or they use the share premium account to pay a cash dividend, and they omit the appropriation of profit to the general reserve from the statement of changes in equity.
The distinction between share capital, share premium and reserves is not linked to the legal rules; candidates treat all equity as one pool of money available for distribution.
What to do instead
Learn three rules and apply them mechanically: proceeds above par go to share premium; a bonus issue converts reserves to share capital with no cash movement; dividends are paid from distributable profits only, never from share premium. Lay out the equity section as share capital + share premium + reserves + retained profit, and show each movement as a line in the statement of changes in equity.
In manufacturing accounts, candidates add factory overheads to the prime cost to get production cost but forget to adjust for work in progress, and they classify a factory supervisor's salary or factory rent as an administrative expense instead of a production cost.
The prime cost to production cost to cost of goods completed chain has three adjustment points and candidates collapse it into one line; the classification of overheads depends on where the cost is incurred, which requires judgement they have not practised.
What to do instead
Write the three-stage proforma with WIP adjustments at both ends: prime cost + factory overheads + opening WIP − closing WIP = production cost; then production cost + opening finished goods − closing finished goods = cost of goods sold. Classify each overhead by asking 'where was this cost incurred?' and put anything inside the factory gate into factory overheads.
Candidates post a sales return to the sales day book or record a credit purchase in the purchases returns day book, then compound the error by posting the wrong side in the ledger, so the trial balance still balances and the error goes undetected until the final accounts are wrong.
The books of original entry are learned as a list of names rather than as a mapping from source document to book to ledger account, so candidates cannot trace a transaction end to end.
What to do instead
For every transaction type, write the full path: source document → book of original entry → ledger accounts (debit and credit named) → effect on trial balance. Use a grid with columns for sales, sales returns, purchases and purchases returns and fill it in from memory weekly. Test yourself with mixed transactions where the same supplier is both a customer and a creditor.