Advanced bookkeeping – common mistakes and tips for success

If you are studying for your Advanced bookkeeping assessment read on to find out how best to prepare and what to expect in the assessment.

What is the Advanced Bookkeeping Assessment?

Advanced Bookkeeping (AVBK) is a unit within the AAT Advanced Diploma in Accounting and Advanced Certificate in Bookkeeping. The purpose of the assessment is to test advanced bookkeeping skills to the extended trial balance (ETB) stage in readiness for learning how to prepare final accounts for various types of organisation.

What does it teach me?

On successful completion of this assessment, students will be able to control and account for non-current assets, and fully understand how to make period end adjustments using the journal, ledger accounts and the extended trial balance. Background knowledge and ethical issues relevant to these processes are also included.

What is involved in the assessment?

The chart below provides a visual summary of how students performed in the tasks that formed the assessment. There are five tasks, and students find some tasks more challenging than others.

Task 4 is the part of the assessment which students have previously found the most challenging, with fewer than 60% of those who took the assessment exceeding or meeting the criteria for success. Here we look at each task, what is involved, and suggest ways in which students could improve their performance in future assessments. Tips for success include using all the time available to read the questions carefully and make sure you have answered them fully.

Task 1

This task tests the use and purpose of the non-current assets register, including accounting for depreciation and understanding the distinction between capital and revenue expenditure. It also assesses knowledge associated with non-current assets.

Time allowed: 25 minutes

Average time taken: 15 minutes

Competency level: 89% of students achieved the required competency level.

Feedback from the examiner: This is the strongest performing task, indicating that students find the content straightforward.

What students found hard:

• not following the given accounting policies for depreciation, particularly for items acquired or disposed of during the period

• incorrect calculation of the cost of an acquisition; more often omitting costs for integral parts of capital items, but sometimes incorrectly including revenue items (however this was often correctly done in task 2 where the information is presented differently)

• recording a carrying amount other than zero for a non-current asset that is no longer owned.

Task 2

This task tests ledger accounting for non-current assets, including the use of the journal as the book of prime entry for depreciation and disposals. Part-exchange transactions may be involved.

Time allowed: 20 minutes

Average time taken: 15 minutes

Competency level: 70% of students achieved the required competency level.

Feedback from the examiner: Students should practise using ledger accounts and journals until they are confident with all aspects of accounting for non-current assets.

What students found hard:

  • Part-exchanges and disposals must be included in this practice.
  • Evidence from the live assessments suggests that there is sufficient spare time to write down all the entries required as ledger accounts and then make the entries required in the task into the extracts of the ledgers or journals, which may help.
  • Writing out the ledger accounts in order to extract the gain or loss on disposal may help when only the calculation is required in the task.

Task 3

This task tests ledger accounting for opening and closing accruals and prepayments of both income and expenses. It also explores understanding of ethical principles.

Time allowed: 23 minutes

Average time taken: 17 minutes

Competency level: 70% of students achieved the required competency level.

Feedback from the examiner: Approximately 15% fell into the borderline range on this task, so students would benefit from more thorough study and practise before attempting the assessment.

What students found hard:

• not identifying the correct pro rata adjustment required for an accrual or prepayment

• not being able to perform a numerical calculation of the balance on a ledger account after taking into account opening and closing adjustments

• identifying the correct dates for adjustments and their reversing entries

• managing prepaid and accrued income, including placing these balances in the correct column of the trial balance

• weaker students could not complete ledger accounts, sometimes even omitting the bank entry, labelling it incorrectly or putting it on the wrong side.

Task 4

This task tests period end accounting adjustments and routines, and ethical principles in relation to year end.

Time allowed: 27 minutes

Average time taken: 15 minutes

Competency level: only 57% of students met or exceeded the requirements, and this task had the biggest proportion of students in the borderline range.

Feedback from the examiner: Task performance statistics indicate that students found Task 4 more difficult than any other.

What students found hard:

• calculating the value of inventory from selling price

• making simple percentage calculations such as loan interest, or an allowance for doubtful debts

• adjustments, either on the extended trial balance or the journals, being to the wrong accounts, on the wrong side, or not in balance

• not clearing the suspense account; not using it for corrections when required or using it inappropriately; entries the wrong way round.

Task 5

This task tests bank reconciliations, understanding how accounting records relate to each other, and period end routines including extending and completing the extended trial balance (ETB).

Time allowed: 24 minutes

Average time taken: 20 minutes

Competency level: 80% of students achieved the required competency level.

Feedback from the examiner: Some students failed to check the bank adjustments by reconciling the two figures from the bank statement and the cash book in this task.

What students found hard:

• placing a correct adjustment on the wrong side

• not knowing when to double a figure, or not, to get the correct adjustment

• omitting the balancing profit figure on the ETB, failing to label it or labelling it incorrectly

• not knowing where to place balances in the ETB; the accounts causing the most confusion being bank/cash, opening inventory, accumulated depreciation, drawings, receivables and payables.

Tips for success:

  •  Students should understand that their reconciliation adjustments should result in the cash book and bank statement balances being in agreement.
  • Students should use all available time to check this.

What are the overall key areas for improvement?

Make sure you feel secure in your knowledge of the following as these were areas of weakness for many students:

• accounting for accruals and prepayments and reversals, particularly for income as well as expenses, and how these affect the years either side of the adjustment

• using the journal to make adjustments

• check responses by using the suspense account balance, reconciliations and whether the figure is reasonable in the context of the scenario

Further reading:

Marianne Curphey is an award-winning financial writer and columnist, and author of the book How Money Works. She worked as City Editor at The Guardian, deputy editor of Guardian online, and has worked for The Times, Telegraph and BBC.

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