AAT Level 3
Accounts Preparation
AAT Level 3
Accounts Preparation - Summary
ACPR is the first of the two Level 3 financial accounting
units. Covering accounting principles and concepts,
accounting for non-current assets and advanced
bookkeeping, it takes the student from Level 2 foundation
knowledge and skills and prepares them for further
development in FSTP where
they will be preparing financial statements for sole
traders and partnerships.
Session 1 - Objectives
Learning objectives:
At the end of this sesson you will be able to:
• Understand the basic principles of accounting
including the accounting equation.
• Account for transactions in ledger accounts as
part of the general ledger.
• Balance off ledger accounts in order to
prepare an initial trial balance.
Accounting Equation
Assets = Capital + Liabilities
Accounting Equation
Assets = Capital + Liabilities
1. Purchase of a Delivery Van
for £10,000 funded by 20%
personal capital invested and a
bank loan for the balance
Accounting Equation
Assets =
Capital + Liabilities
Van
Owner + Loan
=
Accounting Equation
Assets = Capital + Liabilities
Van
= Owner + Loan
£10,000 = £2000 + £8000
Continuing
from previous
slide
A production machine bought for £10,000
on credit
1
2
Assets
10,000
= Capital + Liabilities
= 2,000 + 8,000
2. A production machine bought for
£10,000 on credit
1
2
Van
Machine
Assets
10,000
20,000
10,000
10,000
= Capital + Liabilities
= 2,000 + 8,000
=
+
2. A production machine bought for
£10,000 on credit
1
2
Assets
10,000
20,000
= Capital + Liabilities
= 2,000 + 8,000
= 2,000 +
2. A production machine bought for
£10,000 on credit
1
2
Assets
10,000
20,000
= Capital + Liabilities
= 2,000 + 8,000
= 2,000 + 18,000
3. Stock is bought for £1,000 on credit
1
2
Assets
10,000
20,000
= Capital + Liabilities
= 2,000 + 8,000
= 2,000 + 18,000
3. Stock is bought for £1,000 on credit
1
2
3
Assets
10,000
20,000
21,000
= Capital + Liabilities
= 2,000 + 8,000
= 2,000 + 18,000
=
+
3. Stock is bought for £1,000 on credit
1
2
3
Assets
10,000
20,000
21,000
= Capital + Liabilities
= 2,000 + 8,000
= 2,000 + 18,000
= 2,000 +
3. Stock is bought for £1,000 on credit
1
2
3
Assets
10,000
20,000
21,000
= Capital + Liabilities
= 2,000 + 8,000
= 2,000 + 18,000
= 2,000 + 19,000
Accountng Equation
Question 1
State the ‘accounting equation’ and
explain the meaning of each of the
terms used in the equation.
The Ledger Accounts
Question 2 – Vera
Entering transactions into the ledgers
Balancing off the accounts
(You will need to draw 10 ‘T’ accounts)
Calculating VAT
Question 3 & 4
Complete Question 5
Post to the ledgers
Balance off accounts
Prepare a Trial Balance
The Trial Balance & the Journal
Dealing with Errors
Errors!
Which errors would
affect the trial balance?
Error of Commission
Correct type of account has been used
BUT
the wrong account in that ledger
Example
A sales invoice for customer A is debited
to customer B account in the Sales
Ledger
Omission?
Error of Omission
The transactions has been omitted from
the accounts completely
Example
A payment for cash purchases has not
been entered in the Cash book OR the
Purchases account
Error of Principle
The transactions has been posted to the
wrong TYPE of account
Example
A payment for a new computer has been
posted to the computer maintenance
account rather than the Computer asset
account.
Reversal?
Error of Reversal
Debits and Credits are the wrong way round
Example
A payment for telephone costs has been
credited to the Telephone account.
Error of Original Entry
Transaction amount is entered incorrectly
Example
A payment for the telephone costs of
£750 have been posted as £570
Compensating Error
The errors cancel each other out
Six Types of Error
Error of Commission
Error of Omission
Error of Principle
Compensating Error
Error of Original Entry
Complete Reversal of Entries
The Journal
Error
Correction
Bad Debt
Write Off
Opening
Balances
Payroll
The Journal - Layout
Date
Ref
Details
Dr
Cr
£
£
Question 6
Kelly 1
Question 7
Now your turn
Question 8
Errors and the Suspense Account
Question 9
Errors and the Suspense Account