Study tips for AAT Level 4 Financial Statements – part 1

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If you’re struggling with Financial Statements (FSTM) at AAT Level 4, BPP tutor Catherine Rutter is here to help. In the first of a two-part blog, she outlines what to watch out for – from overcoming typing gremlins to being mindful of your positive and negative numbers.


Studying AAT Level 4 Financial Statements series


When I first heard that AAT’s Level 4 Financial Statements paper was going to be a computer based assessment (CBA), I thought: ‘This is great! Everyone knows CBA’s are a doddle.’ I was wrong.

AAT has done a great job of producing a CBA that is still technically challenging and a fair test of your understanding and ability to apply your knowledge.  In other words, it is a tough paper.

It is not time to panic though. Like all tough papers, there are key things to remember and key approaches to follow to help you and make your solution a true reflection of your knowledge and ability.  Here are my tips for getting to grips with the Financial statements paper:

1. Overcome the typing gremlins

Having recently worked through one of the practice papers online, there are a few gremlins to watch out for that have nothing to do with your ability.  Be aware of the following and do not let these rob you of marks:

WORKINGS – Several tasks have workings that automatically cast, but do not automatically transfer, into the given proforma.  Ensure you remember to copy the working totals into the proforma carefully.

NEGATIVES – Remember to make your negative numbers negative.  I know that this sounds obvious, but in a statement of profit or loss and other comprehensive income, you will lose a lot of marks if all your expenses are positive.

This includes the finance costs and taxation expenses.  The same holds true for the statement of cash flows, the statement of changes in equity and the goodwill working in the consolidated statement of financial position.

2. Numerical questions

Be aware of the layout of the accounts preparation questions for both single companies and groups.  The scenario information is in pop-up boxes that can be moved around the screen.  This can be off-putting if you have not seen it before, so work through the practice papers on the AAT website to familiarise yourself with the layout.

Being an online exam, it is hard to ‘tick off’ adjustments as you go, so a logical approach is required more than ever.  You should work through all the adjustments in the given order to ensure you do not miss an opportunity to show the assessor how well you can do it.

Finally, make use of any workings that have been given to you – the chief assessor is trying to help you. Also remember that if a working has not been given to you, it does not mean you have to do it all in your head – use your scrap paper to help you get the answer right.

3. Accounts preparation question for a single company

This should be your area of highest competency in the exam as it is similar to what you have done in the Level 3 accounting papers, just with more adjustments.  Ensure you know your basics from the Accounts Preparation course such as accruals, prepayments and depreciation – it would be a shame to lose marks on the easy stuff.

The lead assessor also aims to examine some of your financial reporting standards in this question, so look out for adjustments such as revaluations, inventory, provisions, impairments and events after the reporting period.  If there is an adjustment you can’t do, don’t panic, just miss it out and complete the rest of the question well.

A good approach would be to:

  1. Transfer the trial balance into your proformas and the proforma workings (where applicable), starting at the top and working your way down the list. You can then close this box and have more space on your screen.
  2. Work through the additional information one point at a time.
  3. Check that you have transferred the totals from any workings into the proforma, correctly.

4. Accounts preparation question for a single company – statement of cash flows

The key to an excellent result in a statement of cash flows is knowing your proforma well, so that you know where each piece of information must go and having a good, logical approach:

  1. Go through the given statement of financial position and statement of profit or loss and other comprehensive income and very carefully, starting at PPE and working your way down each line item, inserting the balance, or the movement in the balance, into either the given workings or into the proforma.  Once you have reached the last line on the statement of profit or loss and other comprehensive income, close the box to give yourself more room on the screen.
  2. Work through any additional information one point at a time
  3. Check that you have transferred the totals from any workings into the proforma, correctly.

Beware of distracters in the various drop-down boxes and be VERY careful with your positive and negative numbers, especially in the reconciliation.  Cash inflows are always POSITIVE and cash outflows are always NEGATIVE.

Further support for the Financial Statements (FSTM) unit can be accessed by using the study support search facility on the AAT website (MyAAT login required) or reading Steve Collings’s post from last year.

In the second part of Catherine’s blog on AAT’s Level 4 Financial Statements unit, she looks at the consolidated accounts preparation question, ratio calculations, short form questions and written questions.

Catherine Rutter is a tutor at BPP.

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