AAT December 2009 Exam Tips

All AAT December 2009 Exam Tips are provided by PQ Magazine!


Crystal ball time – PQ magazine gets you exam ready for December with PQ magazine’s hot tips for the December.

Unit 3: PLB

Section1: Processing Exercise
Using given information:
Transfer the opening balances from given information to the subsidiary (sales or purchases) ledgers and the main ledgers
Record additional information provided in the books of prime entry in the ledger accounts
Balance off the ledger accounts showing clearly both the balances carried down and brought down
Transfer these final balances to the trial balance and add up the two columns to ensure the trial balance balances
Section 2: Tasks and Questions
Perform a petty cash reconciliation, suggesting reasons for any differences between the ledger balance and the actual cash count
Calculation of VAT amounts, potentially involving discounts
Produce journal entries to correct errors and clear a suspense account
Reconciliation of purchase or sales ledger balance to the balance per the purchase or sales ledger control account, suggesting reasons for any differences
Perform a bank reconciliation

More PLB advice
You will need to:
Know your double entry and how to “balance off” accounts.
Understand the concept of control accounts and apply this to the sales or purchase ledgers and possibly wages and VAT.
Show how entries are made to the day books and be able to post transactions to the sales, purchase and general ledgers plus account for the VAT.
How to complete double entries in the cash and petty cash books and account for VAT.
Be able to communicate effectively via email, letter and memo.

Unit 5: FRA
You will need to know, understand and –
Apply “double entry” principles to depreciation, sole trader and partnership accounts the extended trial balance (ETB) and incomplete records for a business.
Ensure accurate records are maintained for fixed assets through the recording of the acqusition, disposal or part exchange of such assets. Record the details of this in the ledger accounts including depreciation.
Prepare suspense accounts and account for the errors in a trial balance through the use of the journal.
Prepare final accounts for sole traders and partnerships from a trial balance.
Identify and resolve discrepancies in the accounting records and communicate effectively your findings with possible solutions through emails, letters, memos and reports.

Unit 6: ECR

Section 1 of the exam mainly covers the following core areas:
Maintaining Stock records i.e. identifying what method is used in a prepared stock card i.e. FIFO, LIFO or AVCO and then preparing another using an alternative method. The impact of these methods on Stock valuation and profit is often tested too.
Journal entries for receipt and issue of materials, labour, or overheads in a cost book keeping system.
Process costing: preparation of a statement of equivalent units.
Calculation of labour costs, especially the treatment of basic labour cost and overtime premium.
Allocation, Apportionment & Reapportionment of overheads followed by the calculation and/or the explanation of any over/under absorption of overheads.
Section 2 covers the following core areas:
Understanding the behaviour of costs as activity changes ie how to identify variable, fixed costs and split semi-variable costs into variable and fixed elements using the high-low method.
Breakeven point and Margin of Safety calculation in units, expressed as a %, in revenue terms and/or discussion question. Students could be asked to calculate the level of units to sell to achieve a target profit.
Limiting factors with a strong understanding of contribution per unit and contribution per unit of limiting factor and using the appropriate contribution to rank the products and calculate the optimal production plan.
Project appraisal with calculations for NPV and simple payback. Only an discussion question on IRR is required but no calculations of it are examined.

Unit 6: ECR
You will need to know, understand and :
Calculate the closing stock value on a stock card using FIFO, LIFO or AVCO.
Be able to allocate, apportion and reapportion costs across departments. Calculate an overhead recovery rate to given data.
Show an understanding of double entry in relation to the under or over absorption of overheads. Be aware of ABC and Process Costing techniques.
Apply short term decion making techniques to the treatment of fixed and variable costs. Identify the limiting factor in a given situation to calculate the break-even point in £’s or units. Calculate and explain the margin of safety in relation to target profit and target contribution.
Explain long term decision making techniques, payback, DCF, NPV and IRR. Apply the techniques to given data and prepare a report on your findings.

Unit 8: PEV
Calculation of standard and actual costs.
Calculation and interpretation of materials, labour and fixed overhead variances (expenditure and volume, broken further into efficiency and capacity) including interdependence of variances.
Operating statement reconciling standard to actual costs.
Explain the difference between absorption costing and marginal costing variances.
Calculation of revised variances dealing with a change in a price index.
Forecast using time series analysis and explanation of trend (regression equation) and seasonal variations.
Ratio analysis – calculate and report on gross profit margin, operating profit margin, return on net assets, stock turnover in days, debtors days, gearing, interest cover, labour utilisation rates.
Revised profit and loss account and ratios with comments.
Calculation and explanation of lifecycle costs (including discounted lifecycle) and/or target costs and/or value analysis

Unit 9: PCR
Preparation of sales budget, production budget, materials usage budget, materials purchases budget, labour utilisation budget, cost of production budget.
Revised budgets considering restrictions which have been introduced.
How to overcome restrictions (e.g. subcontracting/alternatives).
Calculating costs per unit and selling price per unit (budgeted and actual) in order to initially draw up a flexed budget statement (including using the high-low technique for splitting mixed costs and flexing stepped costs).
Statement comparing actual and flexed budgeted costs and identification of total variances.
Report on reasons for total variances and action required to investigate variances.
Explain purposes of budgets (including capital budgets).
Explain steps required to motivate managers to achieve budgets.
Explain rolling and incremental budgets, ZBB, capital budgets purpose

Unit 18: BTC
The first half of the exam will be about an unincorporated business. The second half will address companies. You should expect to see the following key workings:
Adjustment of trading profit for a sole trader/partner or company.
Calculation of capital allowances for plant and machinery and industrial buildings for a sole trader/partner or company.
Calculation of Class 2 and Class 4 NIC for a self-employed trader.
Calculation of chargeable gains, most probably for a company. A disposal of shares with rights and/or bonus issues will probably feature here.
Calculation of profits chargeable to corporation tax.
Calculation of corporation tax, most probably for an accounting period straddling a financial year where rates have changed. Calculation may involve marginal relief, short periods of account and associates.

A number of the following will also appear:
Pages from the income tax or corporation tax return (corporation tax return has not featured for several sittings).
Discussion or calculation of capital gains reliefs (gift relief, replacement of business assets relief, entrepreneur’s relief). Entrepreneurs’ relief is new this year and topical but this was examined in the June exam.
Administration of tax and/or practice ethics – penalties for errors are new this year.
Opening year rules or closing year rules for a self-employed business – neither have been examined in detail for several years.
Other topics that could be examined are:
Discussion/application of the badges of trades.
Corporation tax losses.
Income tax losses.
Allocation of profit between partners.
Long periods of account for companies.

Unit 19: PTC
The examiner has commented that this unit is compact so you should expect to see virtually all of it examined at every sitting. Key workings are:
Calculation of employment income including benefits. Expect a wider range of benefits than have been examined in previous years. Cars and fuel normally feature, accommodation often appears.
Calculation of property income for more than one property. Expect furnished and unfurnished property and properties let for only part of the year.
Production of a taxable income working showing clearly non-savings, savings and dividend income. Savings and dividends should be grossed up at the appropriate rates and personal allowance deducted.
Calculation of income tax payable, usually for a higher rate payer.
Calculation of capital gains on disposal of a number of assets – shares will normally feature here. Expect matching rules, bonuses or rights.
Utilisation of capital losses of the current year and the prior year. Interaction of losses with annual exemption.
Capital gains tax payable.

A number of the following may also appear:
Pages from the tax return (employment, property, capital gains tax – this is the first year that the capital gains tax pages have been examinable and these were not tested in June so these could appear).
Administration of tax and/or practice ethics – penalties for errors is a new topical subject but this was tested in June.
Explanation of the tax calculation of other benefits, capital gains or property income rules.
Calculation/explanation of principal private residence relief.
Calculation/explanation of relief available for charitable giving and/or investing in a pension.

Unit 30: IAC
Section1: Double Entry Bookkeeping and Trial Balance
Write down the entries to record information in the purchase day book, purchase returns days book, sales day book and/ or the sales return day book in the subsidiary (sales or purchases ledger) and the main ledger
Perform calculations in relation to VAT when recording the above information
Write down the entries to record information in the cash book in the subsidiary (sales or purchases ledger) and the main ledger
Produce journal entries to correct errors and clear a suspense account
Draw up a trial balance from given information ensuring that debit and credit balances are placed on the appropriate side of the trial balance
Section 2: Tasks and Questions
Perform a petty cash reconciliation, suggesting reasons for any differences between the ledger balance and the actual cash count
Calculation of VAT amounts, potentially involving discounts
Explanation of documents used in the sales or purchase process and different methods of placing orders or making or receiving payment
Recording entries in the wages and salaries control account
Reconciliation of purchase or sales ledger balance to the balance per the purchase or sales ledger control account, suggesting reasons for any differences
Perform a bank reconciliation
Check documentation such as an invoice for accuracy
Produce a letter to a customer or supplier requesting payment or disputing an invoice

Unit 33: MAC
Preparation of sales budget, production budget, materials usage budget, materials purchases budget, labour utilisation budget and cost of production budget (including calculation of OAR and absorbed overheads).
Revised budgets considering restrictions which have been introduced.
How to overcome restrictions (e.g. subcontracting/alternatives).
Explanation of the purposes of budgets (including capital budgets).
Explain steps required to motivate managers to achieve budgets.
Explanation of rolling and incremental budgets.
Calculating percentage changes in costs and price index.
Calculation of standard and actual costs.
Calculation and interpretation of materials, labour and fixed overhead variances (expenditure and volume, broken further into efficiency and capacity) including interdependence of variances.
Operating statement reconciling standard to actual costs.
Explain the difference between absorption costing and marginal costing variances.
Calculation of revised variances dealing with a change in a price index.
Forecast using time series analysis and explanation of trend and seasonal variations.
Ratio analysis – calculate and report on gross profit margin, operating profit margin, asset turnover, return on net assets, stock turnover in days, debtors days, current ratio, gearing, interest cover and labour utilisation rates.
Preparation of a revised profit and loss account and ratios with comments.
Calculation and explanation of lifecycle costs (including discounted lifecycle) and/or target costs.
Explain value analysis/breakeven analysis

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