ICSAN Intro Accounting common mistakes
ICSAN Intro Accounting · Understand the traps and how to avoid them.
When a trial balance fails to agree, the candidate posts the whole difference to a suspense account and declares the trial balance 'corrected', without classifying whether the error is one-sided (affecting the trial balance) or two-sided (not affecting it).
Suspense accounts are taught as the universal plug for an unbalanced trial balance, so candidates reach for them mechanically. They have not internalised that errors of principle, omission, commission, original entry and complete reversal leave the trial balance in balance and therefore must never be routed through suspense.
What to do instead
Before touching suspense, apply a two-question test in writing: (1) does the error change total debits or total credits by unequal amounts? If no, suspense is not involved. (2) Is the correction a single entry or a double entry? Drill this by sorting a list of ten errors into 'suspense' and 'journal only' columns, and always state the reason in one sentence.
Recording cash sales, credit sales, purchases and returns in the wrong book of prime entry, or omitting the dual entry so that only the control account or only the ledger is updated.
Candidates memorise book names as labels rather than as functions tied to the source document. Without anchoring each book to its document (invoice, credit note, paying-in slip, petty cash voucher), the destination becomes a guess, and the 'posted to ledger but not day book' half-entry is easily missed.
What to do instead
Build a one-page matrix: source document → book of prime entry → debit account → credit account → whether the control account is affected. Rehearse it until automatic, then for every transaction narrate aloud 'document, book, debit, credit' before writing anything.
Treating a bank statement credit balance as a favourable cash position, and reversing the treatment of unpresented cheques and uncredited deposits in the reconciliation.
The statement is written from the bank's point of view, where the customer's money is a liability. Candidates learn the reconciliation as a formula to memorise rather than as two parallel records of the same cash, so the sign conventions invert under exam pressure.
What to do instead
Always reconcile starting from the cash book balance and adjust only for items the cash book has not yet recorded (bank charges, standing orders, direct credits, dishonoured cheques), then adjust the statement balance separately for timing items. Write the direction of each adjustment in words beside the figure before calculating.
Charging the full cost of a non-current asset as an expense in the year of purchase, or calculating depreciation on cost each year while ignoring accumulated depreciation and the carrying amount.
Candidates conflate the cash outflow with the expense and have not separated capital expenditure from revenue expenditure. The reducing-balance method is also applied to original cost because the formula is recalled without its meaning.
What to do instead
For every asset, maintain a three-column working: cost, accumulated depreciation, carrying amount. State the method and rate explicitly, and show the depreciation charge as a percentage of the opening carrying amount for reducing balance. Confirm the disposal working removes both cost and accumulated depreciation.
Preparing the income statement on an accruals basis but leaving the statement of financial position receivables and payables at the cash-paid or cash-received figures, so the two statements do not articulate.
Accruals and prepayments are learned as adjustments to profit only. Candidates do not see that each adjustment has a second leg in the statement of financial position, so the balance sheet is completed from the trial balance without the adjustment.
What to do instead
After every adjustment, write the double entry explicitly (e.g. Dr expense, Cr accrual) and tick both the income statement line and the statement of financial position line. Finish with a reconciliation check: opening capital plus profit less drawings must equal closing capital.
Writing off a bad debt without also considering whether it was previously provided for, and failing to adjust the allowance for receivables to the required closing percentage of the remaining receivables.
Bad debts and allowances are treated as one topic rather than two linked steps. Candidates forget that a written-off debt must reduce the allowance base, and they post the closing allowance itself as the expense instead of the movement.
What to do instead
Use a fixed sequence: write off the debt (Dr irrecoverable debts, Cr receivables), recompute the required allowance on the revised receivables, then post only the difference to the allowance account. Show the allowance account as a ledger with opening balance, movement and closing balance.
In partnership accounts, splitting the whole profit in the profit-sharing ratio while ignoring interest on capital, partners' salaries and interest on drawings, and failing to close the current accounts correctly.
The appropriation account is compressed into a single ratio in candidates' minds. Interest on drawings in particular is forgotten because it is a credit to the appropriation account, reversing the intuition that interest is always an expense.
What to do instead
Build the appropriation account line by line in the order given in the question, then post each item to the individual partner's current account. Remember the sign rule: interest on capital and salary are debits to appropriation, interest on drawings is a credit. Reconcile each current account to its opening balance.
Calculating a ratio correctly but interpreting it in isolation, for example calling a higher gross margin 'better' without asking what happened to volume, or treating a fall in the current ratio as automatically adverse.
Ratio questions are answered as arithmetic once the formula is recalled, and candidates lack a framework linking the ratio to the underlying business cause. They also mix up which figure belongs in the numerator for margin versus mark-up.
What to do instead
For every ratio, write three things: the formula, the movement, and one plausible cause plus one consequence. Anchor margin and mark-up by testing with simple numbers (cost 100, profit 25: margin 20%, mark-up 25%). Compare against a prior year or industry figure before judging.
In incomplete records, calculating profit from the opening and closing capital figures without adding back drawings and deducting capital introduced, or balancing the cash account with the wrong sign.
The statement of affairs approach is memorised as 'closing capital minus opening capital' and the adjustments are treated as optional extras. Candidates also confuse drawings (a deduction from capital) with expenses.
What to do instead
Write the full equation before substituting: profit = closing capital + drawings − capital introduced − opening capital. For cash, use a T-account with opening balance, receipts, payments and the balancing figure, and check that the missing figure is labelled 'balancing figure' rather than assumed.
Applying the realisation, consistency and prudence conventions as slogans, for example revaluing assets upwards on the basis of prudence or recording a provision for a future loss that has no present obligation.
Conventions are learned as definitions to recite rather than as decision rules that resolve specific measurement questions. Prudence is often inverted into deliberate understatement, which the framework does not permit.
What to do instead
Convert each convention into a test question: does the item meet the definition of an asset or liability, and is there evidence? Practise with short scenarios where prudence and consistency pull in different directions, and always justify the treatment by reference to the definition rather than to the label.