Level 1 - Access - Workbook

AAT
LEVEL 1 AWARD IN ACCOUNTING

AAT ACCESS
Workbook
2017 Edition
For assessments until September 2018
This is a licenced copy of BPP Material, intended solely for the use of the agreed licence holder.
ii Introduction
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Introduction iii
Contents
Page
Learning outcomes v
Assessment summary xvi
1 Essential accounting procedures 1
2 Essential accounting procedures: Test your learning 25
3 Mathematics for accounting 33
4 Mathematics for accounting: Test your learning 51
5 Accounting in a professional environment 55
6 Accounting in a professional environment: Test your learning 73
7 Creating business documents 77
8 Creating business documents: Test your learning 99
Chapter tasks: answers 109
Test your learning: answers 121
AAT sample assessment 1 137
AAT sample assessment 1: answers 153
BPP practice assessment 1 187
BPP practice assessment 1: answers 203
Index 241
iv Introduction
How to use this Workbook

This Workbook for Level 1 has been written specifically to ensure comprehensive yet
concise coverage of the assessment criteria. It is fully up to date as at June 2017 and
reflects both the AAT's study guide and the sample assessments provided by the AAT.
This Workbook contains odd-numbered chapters containing the learning you need to do
to prepare yourself for the assessment, and even-numbered chapters giving you
assessment practice in the form of assessment style tasks.
You should work through the book taking each chapter in turn, working through the
information presented to you and then attempting the tasks given. You can compare your
answers with the answers given towards the back of the Workbook. If you have struggled
with any tasks, look back at the learning chapter to see where you have gone wrong. At
the end of the Workbook there are the two sample assessments provided by the AAT
plus two assessment-standard practice assessments prepared by BPP for you to work
through. You should not attempt these until you have tried all the tasks in the even-
numbered chapters. These sample and practice assessments have answers so that you
can judge how you are doing once you have completed them.
If you have any comments about this book, please email nisarahmed@bpp.com or write
to Nisar Ahmed, AAT Head of Programme, BPP Learning Media Ltd, BPP House, Aldine
Place, London W12 8AA.
Introduction v
Learning outcomes
This assessment relates to four units.
Each of the units has a number of learning outcomes with assessment criteria in which
learners will need to demonstrate competence to complete this assessment.
Each chapter in this workbook relates to the learning outcomes and assessment criteria
below. Note that even-numbered chapters are assessment practice relating to the
preceding chapter.
Essential accounting procedures
The Purpose of the Unit

This unit enables learners to understand and apply basic accounting terminology and
procedures.
Learning Objectives
This unit introduces the learner to some basic general accounting procedures.
Learning Outcomes
This unit consists of six learning outcomes, the learner will:
1. Understand basic accounting terminology [Chapter 1, section 1]
2. Understand the use of business documents [Chapter 1, section 2]
3. Prepare to record business transactions in the books of prime entry [Chapter 1,
section 2]
4. Understand types of coding and batch control [Chapter 1, sections 3 and 4]
5. Be able to prepare documents to process receipts and payments [Chapter 1,
section 2]
6. Be able to prepare a basic profit statement [Chapter 1, section 1]
Delivery guidance
Learners must be able to complete tasks on the topics and procedures specified below.
General
 The learner will not be expected to understand or use the double entry bookkeeping
system.
 The learner will not be expected to understand or calculate VAT but VAT will be
shown on invoices and credit notes.
 It is expected that learners are able to use a standard calculator.
vi Introduction
Learning outcome 1 – Understand basic accounting

terminology
Assessment criteria
1.1 Explain the terms assets, liabilities, income and expenditure. [Chapter 1, section 1]
1.2 Identify examples of assets, liabilities, income and expenditure.
[Chapter 1, section 1]
The learner should be able to explain these terms in their simplest form. The learner
will not be expected to provide definitions in accordance with accounting standards.
The learner should be able to classify items as assets, liabilities, income or
expenditure but will not be asked to differentiate between fixed and current assets
or long term and current liabilities.
1.3 Explain the terminology associated with the sale and purchase of goods for cash
and on credit. [Chapter 1, section 1]
The learner should understand and be able to explain, in basic terms, the meaning
of sales, cash sales, credit sales, purchases, cash purchases, credit purchases,
customer, supplier, receipt, payment, debtor (receivable) and creditor (payable).
1.4 Identify examples of cash transactions and credit transactions. [Chapter 1, section 1]
The learner should understand that cash transactions involve immediate payment
and credit transactions are when payment is delayed. The use of credit cards will
not be tested.
1.5 Explain the terms profit and loss. [Chapter 1, section 1]
The learner should understand that when income exceeds expenditure there is a
profit but if expenditure exceeds income there is a loss. The learner should
understand that gross profit is sales less cost of sales and net profit is gross profit
less expenses. Learners are not expected to understand the constituent parts of cost
of sales. Understanding of cost of sales is limited to the fact that cost of sales are
the cost to the business of the items sold.
Learning outcome 2 – Understand the use of business

documents
Assessment criteria
2.1 Identify documents used in the process of buying and selling goods on credit and
when they are used. [Chapter 1, section 2]
2.2 Identify documents used to process cash sales and cash purchases. [Chapter 1,
section 2]
The learner should recognise and understand the use of invoices, credit notes, a
purchases order, a statement of account, a remittance advice and receipts. The
learner will not be asked to prepare any of these documents but they are expected
to understand the information contained in each.
Introduction vii
Learning outcome 3 – Prepare to record business transactions

in the books of prime entry
Assessment criteria
3.1 Select appropriate documents to record transactions in the books of prime entry.
3.2 Select the appropriate book of prime entry to record transactions relating to credit
sales and credit purchases. [Chapter 1, section 3]
3.3 Select the appropriate book of prime entry to record payments made and monies
received. [Chapter 1, section 3]
The learner should recognise invoices (sales and purchase) and credit notes and
understand that they are entered as appropriate into the sales, purchases or returns
day books. The learner should recognise cheques, paying in slips, cheques paid and
received listings, cash paid and received listings and understand that they are
entered as appropriate into the cash receipts or cash payments book. The learner
should be able to match a document to the appropriate book of prime entry. The
learner will not be required to make entries into the books of prime entry.
Learning outcome 4 – Understand types of coding and batch

control
Assessment criteria
4.1 Identify types of codes used when recording financial transactions. [Chapter 1,
section 4]
The learner should understand the difference between numerical codes,
alphabetical codes and alphanumerical codes.
4.2 Explain what is meant by a batch control system. [Chapter 1, section 3]
The learner should be aware that purchases and sales invoices and credit notes can
be entered in the accounting system individually or in batches as a time saving
measure.
Learning outcome 5 – Be able to prepare documents to

process receipts and payments
Assessment criteria
5.1 Complete a bank paying-in slip for notes, coins and cheques. [Chapter 1, section
2]
The learner should be able to enter notes, coins and cheques for banking on the
front of a paying in slip. The learner should be able to total the amounts as
required. The learner should also be aware of the need to sign and date the paying
in slip.
viii Introduction
5.2 Complete a cheque. [Chapter 1, section 2]

The learner should be able to prepare a cheque ready for an authorised signature.
The learner should be aware of the need for the words and figures to match. The
learner must be able to date the cheque in full and understand the need for the
date to be correct. Learners should be able to insert the name of the payee and
understand that the payee is the person or business to whom the amount on the
cheque is being paid.
Learning outcome 6 – Be able to prepare a basic profit

statement
Assessment criteria
6.1 Calculate gross profit. [Chapter 1, section 1]
6.2 Calculate net profit. [Chapter 1, section 1]
The learner should be able to calculate gross profit from sales and cost of sales
figures. The learner should be able to total up to five expense figures and deduct
the result from gross profit to arrive at net profit.
Mathematics for accounting
The purpose of the unit

Learners should be able to perform a range of basic mathematical functions using
financial data.
Learning objectives
This unit is about gaining a range of numerical skills required by a financial professional.
Learning outcome
This unit consists of one learning outcome; the learner will be able to apply basic
mathematical concepts to financial data. [Chapter 3, sections 2 to 8]
Delivery guidance
General
It is expected that learners are able to use a standard calculator.
Introduction ix
Learning outcome – Be able to apply basic mathematical

concepts to financial data
Assessment criteria
1.1 Add and subtract whole numbers and numbers up to two decimal places.
The learner should be able to add and subtract up to five numbers which may be a
mixture of whole numbers, numbers to one decimal place and numbers to two
decimal places.
1.2 Multiply and divide whole numbers and numbers up to two decimal places.
The learner should be able to multiply and divide any two numbers which may be a
mixture of whole numbers, numbers to one decimal place and numbers to two
decimal places.
1.3 Calculate the ratio or proportion of two numbers. [Chapter 3, sections 4 and 5]
The learner should be able to calculate the ratio or proportion of one whole number
to another whole number. The resultant answer can be a fraction, for example ½,
or a ratio. In the case of a ratio the answer will always be in the format of one
number to a base figure of one, for example 3:1.
1.4 Calculate the percentage of one number in relation to another number. [Chapter 3,
section 6]
The learner should be able to calculate what percentage one whole number is of
another whole number. The resultant answer may be a whole number, a number to
one decimal place or a number to two decimal places.
1.5 Find a percentage of a whole number. [Chapter 3, section 6]
Learners should be able to calculate a given percentage figure of a whole number.
The resultant answer may be a whole number, a number to one decimal place or a
number to two decimal places.
1.6 Apply a fraction to whole numbers. [Chapter 3, section 7]
Learners should be able to calculate a given fraction of a whole number. The
resultant answer may be a whole number, a number to one decimal place or a
number to two decimal places.
1.7 Calculate the average of a range of numbers. [Chapter 3, section 8]
Learners should be able to calculate the average value of a range of up to five
numbers. The resultant answer may be a whole number, a number to one decimal
place or a number to two decimal places.
x Introduction
Accounting in a professional environment

Learners will be able to understand the role of a finance professional in any organisation
and apply ethical behaviour and professionalism within an accounting environment.
Learning objectives
This unit is about gaining a range of transferable skills with regard to working practices
and appropriate behaviours expected of a finance professional.
Learning outcomes
This unit consists of four learning outcomes, the learner will:
1. Understand basic organisations and how the finance professional contributes to the
organisation [Chapter 5, sections 1 and 2]
2. Understand the need to apply appropriate ethical behaviour and professionalism
within an accounting environment [Chapter 5, sections 3 to 5]
3. Understand that there is a legal framework within which organisations must operate
[Chapter 5, sections 3 and 6]
4. Understand how efficient working practices and personal development contribute to
achievement [Chapter 5, sections 7 to 9]
Delivery guidance
Learning outcome 1 – Understand basic organisations and

how the finance professional contributes to the organisation
Assessment criteria
1.1 Identify different types of business organisation. [Chapter 5, section 1]
The learner should be aware of the different types of organisation in the private
sector (limited companies, partnerships and sole traders), public sector (councils,
NHS, Police, Fire and Ambulance Services) and also Charitable organisations.
Knowledge of these organisations is limited to knowing which sector different types
of organisation fall into. Learners should understand that organisations in the
private sector exist to make a profit as compared to those in the public and
charitable sectors where profit is not a primary purpose.
1.2 Identify the 'customers' of the accounting function. [Chapter 5, section 2]
The learner should understand that any user of information produced by the finance
function could be considered to be a customer of the service. The learner should
appreciate that it is important to meet the needs of the 'customer' in order that the
information provided by the finance professional is fit for purpose. Learners'
Introduction xi
understanding of the term 'customers' should be restricted to other departments

within the organisation, suppliers and trade customers.
1.3 Explain how the accounting function can support an organisation. [Chapter 5,
section 2]
The learner should understand that the finance function produces information
which enables managers to run the organisation effectively and efficiently. The
types of information learners are expected to understand is limited to information
about whether a business is making a profit or loss, information about actual
income and expenditure and how it compares with what the business had planned.
The importance of complete, accurate and timely information should be
appreciated.
Learning outcome 2 – Understand the need to apply

appropriate ethical behaviour and professionalism within an
accounting environment
Assessment criteria
2.1 Explain how to maintain confidentiality of information. [Chapter 5, section 3]
The learner should be able to understand that financial information is sensitive and
why the information should be kept confidential. They are expected to identify ways
of keeping information confidential. Examples include, but are not restricted to,
ensuring all documents are in secure storage and not left on desks or in unlocked
cupboards as well as ensuring information stored electronically is password
protected and not left visible on unattended workstations.
2.2 Explain the importance of ethical and professional behaviour to the role of those in
the accounting function. [Chapter 5, section 4]
The learner should understand the meaning of ethics in the context of the role of a
finance professional, with particular reference to the importance of having up to
date technical knowledge and acting with honesty and integrity. Learners will not
be expected to provide an explanation of any of the fundamental principles of
professional ethics.
2.3 Identify the importance of an organisation adopting environmentally and socially
responsible policies. [Chapter 5, section 5]
The learner should understand that the behaviour of organisations will impact upon
the environment. Examples include but are not restricted to organisations having
paper saving and fuel saving policies to reduce the negative environmental impact
of an organisation.
xii Introduction
Learning outcome 3 – Understand that there is a legal

framework within which organisations must operate
Assessment criteria
3.1 Identify the responsibility an organisation has to the health and safety of its
employees and of visitors to its premises. [Chapter 5, section 6]
Learners should know that organisations have a duty of care to all employees,
customers, visitors and anyone on their premises. Learners also need to know that
the employee has a duty to behave in a safe manner to ensure they do not put
themselves or colleagues in danger. The learner does not need to know any specific
legislative details or the content of the statute.
3.2 Explain the role of an employee in the accounting function in maintaining safe and
effective working practices. [Chapter 5, section 6]
The learner should understand that if they see unsafe practice they have a duty to
report it to a superior. They should understand the importance of keeping a tidy
work area both in respect of safety but also in respect of efficient working practice.
3.3 Identify how an employee in the accounting function can ensure that personal
information is protected and not disclosed without authority. [Chapter 5, section 3]
Learners must understand why personal information cannot be passed to
unauthorised people. They should understand that paper based information should
be stored securely and not left on desks or in unlocked cupboards. In addition when
the information is stored electronically the computer should be locked when the
employee is away from their workstation and sensitive files should be password
protected.
Learning outcome 4 – Understand how efficient working

practices and personal development contribute to
achievement
Assessment criteria
4.1 Identify efficient working practices which contribute to the achievement of own and
team goals. [Chapter 5, section 7]
The learner should understand that working as a team will achieve far more than
each individual working independently. They should appreciate that during busy
times individuals within a department/team should help each other in order to
complete tasks within deadlines. Learners should understand that they ought to
have some form of work plan to help analyse work tasks and ensure they are
achieved on time. Examples include, but are not restricted to, a 'to do' list, an in
tray, a diary and a schedule.
Introduction xiii
4.2 Explain how communication within the team contributes to its overall efficiency.
The learner should understand that an individual within a team does not work in
isolation and there are others within the team who are relying on information
produced by the individual in order to complete their work within deadlines.
Consequently when individual deadlines are not going to be met there must be
communication with others affected by this in order that contingency planning can
take place. Similarly this applies to teams within an organisation.
4.3 Identify the personal skills required to work in the accounting function. [Chapter 5,
section 8]
The learner should be able to identify the skills, attributes and behaviours required
of someone working in an accounting environment. These include (but are not
restricted to) being reliable, numerate, punctual, showing willingness to learn,
having good communication skills and being honest, straightforward and organised.
4.4 Identify ways in which new skills and knowledge can be acquired. [Chapter 5,
section 8]
The learner should understand that formal training is a way of acquiring new skills
and knowledge but there are other ways of acquiring knowledge and skills. These
include self study of professional journals, books and the internet, job rotation, on
the job training and job shadowing.
4.5 Explain how the acquisition of new skills can be agreed and subsequently reviewed
with the line manager. [Chapter 5, section 9]
Learners should understand that having a mentor/manager who works closely with
them to support their development is beneficial. They should understand that the
acquisition of new skills should be discussed and agreed prior to acquiring the skills
and afterwards there should be a process of review and evaluation to gain the
maximum benefit from such development opportunities.
Creating business documents

This unit introduces learners to a range of business documents used within the
accounting function and other areas of a business.
Learning objectives
This unit introduces the learner to the importance of good quality communication by
raising awareness of the documents used by a business for formal and informal written
communication, both within and outside the business.
xiv Introduction
Learning outcomes
This unit consists of three learning outcomes, the learner will:
1. Know that there are different types of business documents
[Chapter 7, sections 1 and 2]
2. Know why it is important to use the right communication style in business
documents [Chapter 7, sections 2 and 3]
3. Be able to produce routine business documents [Chapter 7, section 3]
Delivery guidance
Learning outcome 1 – Know that there are different types of

business document
Assessment criteria
1.1 Identify different types of business document and when they might be used.
The learner should be able to identify letters, emails, memos and reports and
understand the circumstances in which each document is used as an appropriate
form of communication. Learners should understand that some other business
documents are also a form of communication.
These include, but are not restricted to, sales invoices, purchase invoices, credit
notes, statements of account and remittance advices.
1.2 State why templates are used for some business documents. [Chapter 7, section 2]
The learner should understand the reason why organisations use templates. The
learner should understand that consistency of documentation is important both
within the organisation but also in presenting a consistent, positive message to
customers which also supports the organisation's core goals and ethos.
Learning outcome 2 – Know why it is important to use the right

communication style in business documents
Assessment criteria
2.1 State why some businesses adopt a 'house style' for certain documents.
The learner should understand the reason why organisations adopt house styles.
The learner should understand that consistency of documentation is important both
within the organisation but also in presenting a consistent, positive message to
customers which also supports the organisation's core goals and ethos.
Introduction xv
2.2 Give examples of when to use a formal or informal communication style.

The learner should understand that communications to stakeholders (including
customers and suppliers) must present a positive, professional image. The
importance of communicating using acceptable business English and not using
slang, text or other abbreviated language should be clearly understood by learners.
They must be able to decide when it is appropriate to communicate in a formal
manner and when it is more effective to use an informal communication style, for
example when to send a letter and when to send an email.
Learning outcome 3 – Be able to produce routine business

documents
Assessment criteria
3.1 Produce routine business documents using the appropriate communication style.
3.2 Check documents for accuracy. [Chapter 7, section 3]
The learner should be able to structure and select appropriate content for inclusion
in letters, memos, emails and reports. Learners should understand that letters must
be dated, addressed to the recipient, include a suitable heading and a greeting with
an appropriate salutation. Learners should be aware that memos, emails and
reports must be dated, show who they are 'To' and 'From' and show the subject
matter. Learners should understand that all of these forms of communication
should contain an introduction followed by the main content and finally a short
sentence or two in conclusion. Learners will not be expected to differentiate
between formal and informal reports.
Learners should be able to check letters, emails and memos and identify any errors.
xvi Introduction
Assessment summary
Assessment name AAT Access – Level 1 Award in accounting

Level 1
Duration One and a half hours (90 minutes)
Competency For the purpose of assessment the competency level for AAT assessment is
set at 70 per cent. The level descriptor below describes the ability and skills students at
this level must successfully demonstrate to achieve competence.
QCF Level descriptor Summary
Achievement at Level 1 reflects the ability to use relevant knowledge, skills and
procedures to complete routine tasks. It includes responsibility for completing tasks and
procedures subject to direction or guidance.
Knowledge and understanding
 Use knowledge of facts, procedures and ideas to complete well defined, routine
tasks.
 Be aware of information relevant to the area of study or work.
Application and action
 Complete well defined routine tasks.
 Use relevant skills and procedures.
 Select and use relevant information.
 Identify whether actions have been effective.
Autonomy and accountability
 Take responsibility for completing tasks and procedures subject to direction or
guidance as needed.
The purpose of the assessment is to allow the learner to demonstrate skills and
knowledge commensurate with the accounting and business environment at Level 1.
The assessment should not present any surprises to well prepared students. Please read
this guidance in conjunction with the standards for the unit.
The assessment is designed to allow the learners to perform a series of short tasks that
cover basic business Maths and English, communication skills and knowledge of the
accounting environment and related procedures. The assessment consists of 22 tasks –
12 in section one and 10 in section two. The learner must prove competence in each
section to be successful.
Essential accounting
procedures
This chapter covers the unit Essential Accounting Section number

Chapter coverage
Procedures and therefore introduces the essential

accounting procedures you need to understand for your Terminology 1
assessment. Documents 2
Books of prime entry 3
Codes 4
1 Terminology
Organisations exist to do something; usually this is providing goods or services, often to
make a profit. In doing this many organisations buy and sell things (carry out
transactions). If they buy things, they may own things (assets).
Organisation A buys a building Organisation A owns a building
Sometimes, in order to buy something, organisations need to borrow money. If they

borrow, they owe other parties money (have liabilities).
Organisation A borrows from the bank to buy a building Organisation A owes the bank
money
1
2 1: Essential accounting procedures
KEYWORDS
An asset is something the organisation owns.

A liability is something the organisation owes.
Expenditure is when the organisation spends to purchase goods or services for the
organisation or to resell.
Income is what the organisation earns when it makes sales of goods or services to
other parties.
You need to learn these definitions. Knowing what these terms mean is crucial in your
assessment.
How it works
The following are examples of assets, liabilities, expenditure and income.
Item Classification Further definition

Premises Asset The building the organisation operates from.
Motor vehicles Asset The vehicles the organisation uses.
Plant/equipment Asset The machines the organisation uses to
operate.
Inventory (stock) Asset The goods produced or bought for resale by
the organisation.
Bank account Asset (but see The cash owned by an organisation.
overdraft below)
Overdraft Liability The cash owed to the bank by the
organisation if it has a negative (red)
balance with the bank.
Bank loan Liability The amount owed by an organisation to the
bank if the bank has lent it money for any
reason.
Other loan Liability Other parties may lend money to a
organisation, in which case the organisation
owes them money.
Sales Income Earnings resulting from selling items to
customers.
Bank interest received Income Earnings resulting from having money saved
in the bank.
Purchases (raw materials Expenditure Expenditure on items to produce or sell to
or goods for resale) customers.
1: Essential accounting procedures 3
Item Classification Further definition

Payments to staff Expenditure Wages and salaries paid to staff working in
the business.
Insurance Expenditure Payments to insure assets against loss or
damage.
Advertising Expenditure Payments made to advertise an
organisation's products.
Road tax/fuel/motor Expenditure Payments made to use the organisation's
expenses vehicles.
Note about expenditure: there could be a large number of examples of different services
an organisation spends money on. Only a small number have been given here to
illustrate – try to think of some more in an organisation with which you are familiar.
TASK 1 Place the items listed below into the appropriate box.
Premises, advertising cost, sale, bank loan, insurance, fuel costs, interest received,
inventory, bank overdraft, salaries
Assets Liabilities
Income Expenditure
Credit transactions
Liabilities are made when an organisation borrows, or does not pay immediately for
something it has bought. An organisation may not pay for its purchases straightaway
because it has been extended credit by another organisation.
KEYWORDS
A customer is a person who buys goods or services.

A supplier is a person who sells goods and services to a customer.
A cash sale is a transaction to sell goods or services when payment is made
immediately.
A credit sale is a transaction to sell goods or services when payment is made at a
later date than the delivery of goods or provision of the service.
A cash purchase is a transaction to purchase goods or services when payment is
made immediately.
A credit purchase is a transaction to purchase goods or services when payment is
made at a later date than the delivery of goods or provision of the service.
A receivable is an asset. It is the amount that a customer (known as a debtor) owes
to the organisation (which is its supplier) in respect of credit sales, to be received at a
later date.
A payable is a liability. It is the amount the organisation, acting as a customer,
(known as a creditor) owes to a supplier in respect of a credit purchases, to be paid
at a later date.
How it works
Paper Products is an organisation which makes printed boxes and other items. It has a
customer, Applebys, and a supplier, Pearmans. It has credit transactions with both of
them.
PAPER
PRODUCTS
Buys goods from Sells goods to

Pearmans Applebys
PEARMANS APPLEBYS
Pays later than when Pays later than when

goods are delivered goods are delivered
Creditor/payable Debtor/receivable
of Paper Products of Paper Products
Wood Works is an organisation which makes wooden items. It has a customer,

Cherryton, and a supplier, Banarama. It has cash transactions with both of them.
BANARAMA WOOD WORKS CHERRYTON
Buys goods from Sells goods to

Banarama Cherryton
Pays when goods Pays when goods

are delivered are delivered
TASK 2 Place the items listed below into the appropriate box.
Sale of goods when payment is made at a date later than delivery

Sale of goods when cash is paid on delivery
Sale of services when cash is paid at a date later than the service was provided
Sale of services when cash is paid on delivery of the service
Purchase of goods when payment is made at the same time as delivery of the goods
Purchase of services when payment is made at the same time as the service is provided
Purchase of goods when payment is made at a date later than delivery
Purchase of a service when payment is made at a later date than the service is provided
Cash sale Credit sale
Cash purchase Credit purchase
How much an organisation spends and how much it sells at a given price level
determines whether it is successful, and able to continue in business.
KEYWORDS
Profit is what an organisation makes if income is greater than expenditure in a

financial period.
A loss is what an organisation makes if income is less than expenditure in a financial
period.
How it works
Organisation A Organisation B
£ £
Income 100,000 Income 50,000
Expenditure 80,000 Expenditure 75,000
Profit 20,000 Loss (25,000)
In these examples:
Organisation A has spent £20,000 less than it earned in the financial period. This is
therefore a profit for that period.
Organisation B has spent £25,000 more than it earned in the financial period. This is
therefore a loss for that period.
Note that expenditure is sometimes shown in brackets to show that it is being subtracted
from income.
A loss is often shown in brackets to show that it is a negative number, rather than being
shown as –£25,000.
Often in financial information, profit is divided into different elements so that users can
see the impact of different parts of an organisation's expenditure.
KEYWORDS
Gross profit is income less direct cost of sales.

Cost of sales is the cost to the organisation of the items sold.
Net profit is gross profit less other expenses.
In other words, the total expenditure is divided up into two kinds of expenditure: direct
cost of sales, and other expenditure (expenses).
How it works
Organisation A Organisation A's total expenditure

£
Income 100,000
Cost of sales 40,000 40,000
Gross profit 60,000
Expenses 40,000 40,000
Net profit 20,000 80,000
TASK 3 Profit and loss
1 The balance of an organisation's income and expenditure results in profit or loss.

Which ONE of the following statements is true?
When income exceeds profit, an organisation has made a loss
When income exceeds expenditure, an organisation has made a profit
When income exceeds expenditure, an organisation has made a loss
2 The balance of an organisation's income and expenditure results in profit or loss.

Which ONE of the following statements is true?
When expenditure exceeds profit, an organisation has made a loss
When expenditure exceeds income, an organisation has made a profit
When expenditure exceeds income, an organisation has made a loss
3 Profit is classified as gross profit or net profit.

Which ONE of the following statements is untrue?
Income less total expenditure equals net profit
Income less cost of sales equals gross profit
Income less expenses only equals net profit
4 Profit is classified as gross profit or net profit.

Which ONE of the following statements is untrue?
Gross profit less expenses equals net profit
Cost of sales plus expenses equals total expenditure
Income less cost of sales equals net profit
5 Using the information in the first two tables, place a tick in the appropriate
column of the third table below to show whether each of the organisations has
made a profit or a loss. You should not place more than one tick () against each
organisation.
£ £
Expenditure 70,000 Expenditure 120,000
Organisation Profit Loss

Organisation A
Organisation B
You must be able to calculate gross profit and net profit. This means that you must:
1 Remember what makes up both gross profit and net profit
2 Do the calculation
The best way to be able to do these calculations is to practise them over and over
again. There are questions for you to practise in the next chapter and the practice
assessments at the end of the Workbook, but you should also run through the
following practice questions in Task 4.
TASK 4
£ £
Cost of sales 45,000 Cost of sales 149,400
Expenses 45,000 Expenses 55,780
1 Calculate gross profit for Organisation A and Organisation B

2 Calculate net profit for Organisation A and Organisation B
2 Documents
In Section 1 we discussed how and when trading organisations buy and sell (transact).
Organisations usually provide documents to accompany transactions.
Documents used in credit sales
Customer Supplier
Purchase order
Invoice
Credit note
Payment/remittance advice
Statement of account
Documents used in cash sales
Customer Supplier
Receipt
KEYWORDS
An invoice is the document a supplier gives a customer when it makes a credit sale
to the customer. It shows the customer what amount it owes and when that debt is
due to be paid.
A credit note is the document a supplier gives a customer when a customer returns
items sold on credit. It confirms what goods have been returned, and how much
money has been refunded or no longer needs to be paid.
A purchase order is the document a customer gives to a supplier requesting that the
supplier sells the organisation the goods stated on the order.
A statement of account is the document a supplier sends to a customer who it has
made credit sales to. It shows the invoices which the customer has paid in the period,
and the total of the invoices which the customer still owes to the supplier.
A remittance advice is the document a customer sends to a supplier when paying
some of its balance with the supplier, so that the supplier can see exactly which
invoices are being paid in that payment.
A receipt is the document given to a customer for a cash sale, showing the amount
of money the customer paid, and what it related to. You are almost certainly familiar
with receipts, as you are usually given one by a shop every time you go shopping.
Note. An organisation is both a customer and a supplier – so, for example, it
will send remittance advices to its own suppliers, as well as receiving them
from its customers.
How it works
Here are examples of all the documents listed above:
INVOICE Invoice number 56314
Haywood Distributors
Supplier Industrial Estate
Haywood HY4 2SK
Tel: 01234 563939
VAT registration: 0274 2694 49
Invoice date
Date/tax point: 7 September 20XX
Order number: 32011
Customer: Freeway Superstores
28 Liberty Park
Customer
Haywood HY4 5TR
Account number (customer code) HD 35
Description/product code Quantity Unit Total
amount
£ £
Sondy Flat Screen TVs 6 300.00 1,800.00
Items /3200IST25
being sold
Net total 1,800.00

VAT at 20% 360.00
Tax
Invoice total 2,160.00
Terms 30 days net
Period after
which payment
is due
CREDIT NOTE Credit note

number 08641
Industrial Estate
Haywood HY4 2SK
Tel: 01234 563939
Date/tax point: 12 September 20XX
Invoice number: 56314
28 Liberty Park
Haywood HY4 5TR
Account number HD 35
(customer code)
Description/product code Quantity Unit Total
amount
£ £
Sondy Flat Screen TVs 1 300.00 300.00
/3200IST25
Reason for credit note:
Delivered damaged
Net total 300.00

VAT at 20% 60.00
Credit note total 360.00
Items being sold

previously and
reason for credit
ORDER Customer
FREEWAY SUPERSTORES
28 Liberty Park
Haywood HY4 5TR
Tel 0303446 Fax 0303447
To: Haywood Distributors Number: 32011

Industrial Estate
Haywood Date: 5 Sept 20XX
HY4 2SK
Delivery address: Freeway Superstores
28 Liberty Park
Haywood HY4 5TR
Product Quantity Description Unit list price

code £
4425 6 Sondy Flat Screen TVs 300

(excluding VAT)
Items to be
bought
Authorised by: P. Winterbottom Date: 5 Sept 20XX
STATEMENT OF ACCOUNT
Supplier
Industrial Estate
Haywood HY4 2SK
Tel: 01234 563939
Date: 30 September 20XX
28 Liberty Park Customer
Haywood HY4 5TR
Account number (customer code) HD 35
Date Details Debit Credit Balance
£ £ £
21.08.XX Inv56019 316.40 316.40
28.08.XX CN08613 47.46 268.94
07.09.XX Inv56314 2,160.00 2,428.94
12.09.XX CN08641 360.00 2,068.94
20.09.XX Payment received – 268.94 1,800.00
thank you
Amount now due 1,800.00
Transactions on the credit

account – invoices, credit
Amount owed at date of
notes and payments
statement
REMITTANCE ADVICE NOTE Remittance advice note number

Customer 0937498
Freeway Superstores
28 Liberty Park
Haywood HY4 5TR
Supplier
Supplier: Haywood Distributors
Industrial Estate
Haywood HY4 2SK
Tel: 01234 563939
Account number (supplier code) PL 352
Date Transaction reference Amount
List of £
transactions
21/08/XX Invoice 56019 316.40
28/08/XX Credit note 08613 (47.46)
20/09/XX Payment made – cheque enclosed 268.94
Payment being
made
RECEIPT
20/08/XX Haywood Distributors
Date of sale Supplier
£3,000
Sale of 300 parts @ £100
Cash payment
Payment for cash and credit transactions

As outlined above, in some organisations payment may be made at the time the goods
are traded, for example, when buying a newspaper (a cash transaction). Other
transactions, particularly those between organisations, are made on credit where the
selling organisation allows its customers to pay later (a credit transaction).
Ultimately, both types of transaction may be settled in physical cash or by cheque.
Paying by cheque results in a slightly more complicated banking procedure than paying
in physical cash or payment by bank transfer.
How it works
The customer writes a cheque and gives or sends it to the supplier. The supplier gives
the cheque to the bank, which then draws money from the customer's bank account and
places that money in the supplier's bank account.
Although there is a delay in the cash reaching the supplier's bank account, a cheque
payment at the time of exchange of goods is known as a cash transaction. A cheque is
considered to be the same as cash. It is the timing of the payment of the cash or the
cheque which is important.
Customer's bank
Customer's bank account details
Supplier's name
(written in by
customer staff)
Amount being paid to

supplier (written in by
customer staff)
Amount being paid

to supplier in
words (written in Signature by authorised
by customer staff) Cheque number unique to person on customer's
this cheque staff, on behalf of the
organisation
As stated above, when suppliers receive cheques, they must pay them in to the bank.
Cash payments may be paid into the bank too. A paying-in slip is used when money is
paid in to the bank.
How it works
£50 notes by amount

(ie 2 × £50 notes)
Date: 16.3.XX Date: MIDWEST £50 notes £100.00

BANK
A/C 3958229 24 September £20 notes £40.00
20XX
£10 notes
Cash: £145.00 Account name £5 notes £5.00
Haywood £2 coins
Distributors
Cheques, POs £1 coins
£308.40 Paid in by Other coin
Total: £453.40 A Student Total cash £145.00
26-33-20 Cheques, POs £308.40
000894 3958229 Total £ £453.40
000894
Section retained Cheque being paid in

by company Paying-in slip
number, unique to
this paying-in slip Section given to Account details
the bank
You are required to know how to fill in a cheque and a paying-in slip. Key things to
remember are:
1 Use full names and dates.
2 On a cheque, write out the amount in words and in numbers in the relevant
sections.
3 On a paying-in slip, total cash by note/coin: for example, 2 × £50 notes is £100,
so write £100 in the appropriate place.
The best way to learn this skill is to practise it. Try Task 5.
TASK 5 On 21 August 20XX you have been asked to pay the following items into Haywood
Distributors' bank account.
Three £50 notes
Six £20 notes
Two £10 notes
Two £5 notes
Twenty 50 pence coins
Twelve 20 pence coins
Six 5 pence coins
Two 2 pence coins
Cheque £253.89
(a) Complete the paying-in slip below
Date: Date: MIDWEST £50 notes

A/C BANK £20 notes
£10 notes
Cash: Account name £5 notes
£2 coins
Paid in by Other coin
Total: Total cash
26-33-20 Cheques, POs
006924 3958229 Total £
On 21 August 20XX you have also been asked to prepare a cheque to send to
Haywood Distributors' supplier, Allison Traders. The payment amount is £506.33.
(b) Complete the cheque below
26 - 33 - 20
MIDWEST BANK 002948 3958229
36 Pinehurst Place, Brighton B25 3AA Date
Pay
£
Payee
Account
Cheque No. Sort Code Account No.
002948 26-33-20 3958229 Haywood Distributors
3 Books of prime entry

When an organisation receives documents relating to sales or purchases (cash or credit)
it records them in 'books of prime entry'. These are simply the initial records recording
certain types of transaction.
How it works
Transaction document received Details entered into book of prime entry
The key books of prime entry for your purposes are:
Documents you have been introduced to
Sales day book Sales invoices
Purchases day book Purchase invoices
Sales returns day book Sales credit notes
Purchases returns day book Purchase credit notes
Cheques sent out

Cash payments book
Cheques received
Cash receipts book
You do not need to know anything more about books of prime entry in your assessment
other than which documents are entered into each book. Every time you come across a
document in this Workbook, think to yourself: which book of prime entry does this go
into? This will help prepare you for such a task in the assessment.
Batching
An organisation can receive a great number of documents in a day. It would take an
employee in the accounts department a great deal of time to enter each document
separately into the accounts system.
Instead, it is possible to group documents together in a batch, and process them that
way. Documents should be batched in like groups (that is, purchase invoices in one
batch, sales credit notes in another).
TASK 6 1 Which of the following documents is entered into the sales day book?
Purchase invoice
Cheque received
Cheque sent out
Sales invoice
2 An organisation will enter a cheque sent to a supplier into which of the following
day books?
Sales day book
Purchases day book
Cash payments book
Cash receipts book
4 Codes
Look back at the documents you were shown above. In many cases, they had codes on
them. Some codes were unique to the document. Some codes were unique to the
customer or supplier. Codes help organisations to manage the vast numbers of
documents they deal with in the course of business, and be able to refer to specific
documents quickly and easily.
There are three main types of code, two of which were shown on the above documents.
KEYWORDS
A numerical code is a code consisting of numbers only.

An alphabetical code is a code consisting of letters only.
An alphanumerical code is a code consisting of numbers and letters, in any order.
How it works
An example of a numerical code is: 00295824

An example of an alphabetical code is: ABCGEDD
An example of an alphanumerical code is: AB2942
Numerical codes usually follow sequentially, so a company might start with its first sales
invoice as 00001, then 00002, 00003, 00004 etc. The same might be true of an
alphanumerical sequence, for example, if a company coded their invoices SI0001,
SI0002, SI0003 and so on.
Customer codes might be alphanumerical, and consist of a combination of the first
letters of their name and then a number depending on whether other customers also had
those initials. So, for example, Northfield Plumbing might be NP001, and another
customer, Northern Pumps Ltd, might be NP002.
All you need to know about codes is which type they are and to be able to identify them.
Look back to the documents given in Section 2 and identify the codes on them, noting
what type of code each is.
Chapter overview
Organisations usually exist to do something. Many organisations buy and sell things. If
they buy things, they may own things (assets).
Sometimes, in order to buy something, organisations need to borrow money. If they
borrow, they owe others that money (have liabilities).
You must learn the definitions of assets, liabilities, expenditure and income, profit, loss,
gross profit and net profit (see list of keywords) and understand them well enough to do
simple calculations of gross profit and net profit.
Organisations make both cash and credit transactions. A credit transaction is when
payment is delayed over a prearranged period.
An organisation will send and receive a large number of documents relating to its
transactions. The key documents are:
 Invoices
 Credit notes
 Purchase orders
 Statements of account
 Remittance advices
 Receipts
Payments may be made in cash or by cheque. Money will be banked using a paying-in
slip. You must be able to fill in such documents appropriately.
When a transaction occurs, an organisation will record the details from the initial
document into books of prime entry. The books of prime entry are:
 Sales day book
 Purchases day book
 Sales returns day book
 Purchases returns day book
 Cash payments book
 Cash receipts book
You must know which documents are recorded in which books of prime entry.
In order to process large numbers of documents quickly, an organisation may batch
documents into groups and process them together.
Organisations use codes to distinguish individual documents. Codes can be numerical,
alphabetical and alphanumerical.
Keywords
An ASSET is something the organisation owns.
A LIABILITY is something the organisation owes.
EXPENDITURE is when the organisation spends to purchase goods or services for the
organisation.
INCOME is what the organisation earns when it makes sales of goods or services to
other parties.
A CUSTOMER is a person who buys goods or services.
A SUPPLIER is a person who sells goods and services to a customer.
A CASH SALE is a transaction to sell goods or services when payment is made
immediately.
A CREDIT SALE is a transaction to sell goods or services when payment is made at a
later date than the delivery of goods or provision of the service.
A CASH PURCHASE is a transaction to purchase goods or services when payment is
made immediately.
A CREDIT PURCHASE is a transaction to purchase goods or services when payment is
made at a later date than the delivery of goods or provision of the service.
A RECEIVABLE is an asset. It is the amount that a customer (known as a debtor) owes
to the organisation (which is its supplier) in respect of credit sales, to be received at a
later date.
A PAYABLE is a liability. It is the amount the organisation, acting as a customer, (known
as a creditor) owes to a supplier in respect of credit purchases, to be paid at a later date.
PROFIT is what an organisation makes if income is greater than expenditure in a
financial period.
A LOSS is what an organisation makes if income is less than expenditure in a financial
period.
GROSS PROFIT is income less direct cost of sales.
COST OF SALES is the cost to the organisation of the items sold.
NET PROFIT is gross profit less other expenses.
An INVOICE is the document a supplier gives a customer when it makes a credit sale to
the customer. It shows the customer what amount it owes and when that debt is due to
be paid.
A CREDIT NOTE is the document a supplier gives a customer when a customer returns
items sold on credit. It confirms what goods have been returned, and how much money
has been refunded or no longer needs to be paid.
A PURCHASE ORDER is the document a customer gives to a supplier requesting that
the supplier sells the customer the goods stated on the order.
A STATEMENT OF ACCOUNT is the document a supplier sends to a customer who it

has made credit sales to. It shows the invoices which the customer has paid in the
period, and the total of the invoices which the customer still owes to the supplier.
A REMITTANCE ADVICE is the document a customer sends to a supplier when it pays
some of its balance with the supplier, so that the supplier can see exactly which invoices
are being paid in that payment.
A RECEIPT is the document given to a customer in a cash sale, showing the amount of
money the customer paid, and what it related to. You are almost certainly familiar with
receipts, as you are usually given one by a shop every time you go shopping.
A NUMERICAL CODE is a code consisting of numbers only.
An ALPHABETICAL CODE is a code consisting of letters only.
An ALPHANUMERICAL CODE is a code consisting of numbers and letters, in any order.
Essential accounting procedures:
Test your learning
This chapter gives you question practice on the topics you covered in the
previous chapter. The questions are in the same style you can expect in
your assessment. You can find the answers at the back of this Workbook.
1 Organisations have assets, liabilities, income and expenditure.

(a) Select the appropriate word from the list of terms below to match the
description.
Description Term described

An item spent by the organisation.
An item earned by the organisation.
List of terms
Income
Liability
Expenditure
(b) Select the appropriate word from the list of terms below to match the
description.

An amount paid to purchase motor
insurance.
A cash sale.
List of terms
Expenditure
Income
Asset
25
26 2: Essential accounting procedures: Test your learning
2 Organisations often make sales and purchases for cash or for credit.
Complete the following sentences by selecting the most appropriate option from
the list of terms below.
When an organisation sells goods to a customer and the customer pays for the
goods three weeks after the goods are delivered, this is known as a
When an organisation buys services from a person and pays that person on the day
the service is carried out, this is known as a
List of terms
Credit sale
Cash sale
Credit purchase
Cash purchase
3 Organisations issue and receive different documents when buying and selling goods.
An organisation gives to a customer for goods bought
for cash.
An organisation receives from a supplier listing items
returned to the supplier and showing the amount refunded.
An organisation receives from a customer requesting
that the goods specified in the document be sold to the customer.
List of terms
An invoice
A receipt
A purchase order
A credit note
2: Essential accounting procedures: Test your learning 27
4 You work for Weaver Traders. You are preparing to record some documents in the
books of prime entry.
(a) Select which ONE of the documents below will be entered in the cash
receipts book.
An invoice received from a supplier
A cheque received from a customer
A credit note received from a supplier
(b) Select which ONE of the documents below will be entered in the purchases
day book.
Invoice number 34922 sent to Landy Traders
Invoice number SI9933 sent by AB Supplies
A cheque received from XYZ Traders Ltd
(c) Insert an item from the following list into the bottom right-hand box of each
document below to show which book of prime entry that document will be
entered into, in Weaver Traders' books. You will not need to use all of the
items.
 Sales day book
Weaver Traders
Unit 12, Industrial Park, Beeding, OS17 9DP
Invoice number: WT00943 24 March 20XX
To: Tharango Ltd
£
8 items of product SS2 @ £3.60 each 28.80
VAT @ 20% 5.76
TOTAL 34.56
Book of prime entry
Gillespie Enterprises
35 High Road, Steeding ST2 9RT
VAT Registration No: 123 4433 00
INVOICE NUMBER: 3546

INVOICE DATE: 6 March 20XX
To: Weaver Traders, Unit 12, Industrial Park, Beeding
£
4 items of product XX @ £0.99 each 3.96
VAT @ 20% 0.79
Total 4.75
Book of prime entry
National Bank
High Street, Beeding 14-24-19
10534433
Date 14 March 20XX
Pay Gillespie Enterprises only

£456.24
Four hundred and fifty six pounds and twenty four pence
for Weaver Traders
400592 142419 10534433
Book of prime entry
5 Some organisations use coding within the accounting records.

Show whether the following statement is true or false.
In an alphanumerical coding system the code must consist of numbers followed by
letters.
True
False
6 Your organisation uses a batch processing system to enter purchase invoices into
the accounting records.
Show whether the following statement is true or false.
Purchase invoices can be entered into the system together.
True
False
7 It is important to ensure that paying-in slips are completed properly.

On 17 April 20XX you are completing a paying-in slip to take to the bank.
(a) Which ONE of the following options shows the date as it should be written
on the paying-in slip?
17 April 20XX
17 March 20XX
17.2.XX
(b) Which ONE of the following options shows how the three £50 notes you are
banking should be shown on the paying-in slip?
£150
£300
3 × £50
(c) Which ONE of the following options shows how the following cheque should
be shown on the paying-in slip: Cheque from DS Supplies, £309.35?
£309.35
£309
£30935
(d) Show whether the following statement is true or false.

A paying-in slip should be signed and dated by the person who is paying in
the money.
True
False
8 It is 16 April 20XY. You work for Hollands Traders. You have been asked to prepare
two cheques for the chief accountant to sign. The cheques will be paying the
following balances:
DK Traders £64.87
SG Company £464.82
Complete the TWO cheques below, ready for the chief accountant's signature.
National Bank
National Bank Business Centre, Main Road 14-88-51
44830113
Date
Pay
only
for Hollands Traders
100346 148851 44830113
National Bank
44830113
Date
Pay
only
100347 148851 44830113
9 At the end of every year your organisation calculates the profit or loss for the year.
(a) Show whether the following statement is true or false.
Income less cost of sales equals gross profit.
True
False
Last year your organisation recorded income and expenditure as shown in the
table below.
Income and expenditure £

Sales 377,800
Cost of sales 184,900
Other expenses 94,500
(b) Use the income and expenditure figures to complete the following
calculations:
(i) Calculate gross profit.
(ii) Calculate net profit.
Mathematics for
accounting
This chapter covers the unit Mathematics for Accounting Section number
Chapter coverage
and therefore introduces the mathematics you will need to

Using a calculator 1
be able to carry out for the purposes of your assessment.
Addition and subtraction 2
This chapter assumes that you will take a calculator to
your assessment, which you are expected to do. Multiplication and division 3
Ratios 4
Proportions resulting in fractions 5
Percentages 6
Fractions 7
Averages 8
1 Using a calculator
Working in an accounting environment, it is important for you to be familiar with a
calculator and how it works. Calculators can be simple or complicated, but the basic
functions that you will use in this assessment will be the same.
Addition (+)
Subtraction (–)
Multiplication ()
Division ( ÷ or /)
Decimal point
33
34 3: Mathematics for accounting
2 Addition and subtraction

In your assessment, you will be required to add numbers, both whole numbers and
numbers with one or two decimal places.
Money is usually shown to two decimal places, as the numbers before the decimal point
indicate the pounds and the numbers after the decimal point indicate the pence.
You may be presented with numbers in columns and have to total them.
How it works
20,001.20
10,020.10
5,200.05
2,005.02
Total 37,226.37
To add the figures together to come to the total in the shaded box, you should:
1 Enter the first figure carefully into your calculator
Ensure you enter figures
2 Press the + button
carefully into your calculator,
3 Enter the second figure including the decimal point,
4 Press the + button or you may make an error.
5 Enter the third figure
6 Press the + button
7 Enter the fourth figure
8 Press the = button
Try this on the sum above and see if your answer matches ours.
In your assessment, you will be required to subtract or 'take away' numbers, both whole
numbers and numbers with one or two decimal places.
How it works
You may be required to take away (subtract) one number from another; for example, as
you learnt in the previous chapters, income take away cost of sales is gross profit. To
determine net profit, you would then have to subtract a further number (total other
expenditure).
3: Mathematics for accounting 35
£
Income 100,000
Other expenditure 15,000
Gross profit = Income – Cost of sales: 100,000 – 20,000 = 80,000

Net profit = Income – Cost of sales – Other expenditure: 100,000 – 20,000 – 15,000 = 65,000
To do this sum on your calculator, you should:

1 Enter the first figure, which is 100,000
2 Press the – button
3 Enter the second figure, which is 20,000
4 Press the – button
5 (The screen may currently show the gross profit figure)
6 Enter the third figure, which is 15,000
7 Press the = button (this will give the net profit figure)
In the assessment, tasks will often ask you to 'calculate', so you must decide if addition
or subtraction is required. Often a task will require both functions to be performed, such
as when completing missing records (see the 'How it works' example below).
How it works
In the first example below you need to add all the figures to come to the total for parts
expenditure at the bottom, which is £182,000. This is adding the column of figures, as
seen above.
List of parts £
Part A 25,000
Part B 54,000
Part C 36,000
Part D 67,000
Total (all parts)
In the next example, below, you need to subtract the three given wages and salaries
figures from the total figure given, to arrive at the missing administration salaries cost,
which is £65,000. The easiest way is to do this in two steps, as shown in the working
below the table.
List of wages/salaries costs £

Factory 1 wages 120,000
Administration salaries
Directors' salaries 125,000
Total 450,000
Working
Step one – add the three wages and salaries costs you have been given.
£
Directors' salaries 125,000
Total of costs itemised 385,000
Step two – subtract this figure from the total given in the original table.
£
Total cost 450,000
Total of costs itemised (385,000)
Administration salaries 65,000
TASK 1 1 Your organisation keeps detailed records of expenses. Motor fuel expenses for each
of four delivery vehicles are shown in the table below.
Complete the table to show the total expense for motor fuel.
Delivery vehicles Motor fuel

expense
£
Vehicle 1 128.42
Vehicle 2 196.55
Vehicle 3 86.09
Vehicle 4 112.42
Total
2 Complete the table to show the expense for envelopes. (Tutorial note. You may
need to do this in two steps in a separate working, as shown above.)
Stationery items Expense

£
Ink tanks 37.50
Printer paper 18.39
Envelopes
Pens 7.23
Total 104.03
3 Last year your organisation recorded income and expenditure as shown in the table
below:

Sales 220,000
Wages 26,800
Office expenses 14,600
Selling expenses 19,100
Use the income and expenditure figures to complete the following calculations:
(a) Calculate gross profit.
(b) Calculate net profit.
4 Last year your organisation recorded income and expenditure as shown in the
table below:

Sales 534,000
Wages 116,300
Use the income and expenditure figures to complete the following calculations:
(a) Calculate gross profit.
(b) Calculate net profit.
3 Multiplication and division

In your assessment you could be required to multiply or divide any two numbers, which
could be a mixture of whole numbers or numbers with one or two decimal places.
If your answer comes to more than two decimal places, you will need to do what is
called 'rounding', to two decimal places. This essentially means leaving off all the
numbers after the second decimal place in your answer. All you have to remember is
that, if the number in the third decimal place in your calculation is 5 or higher, you
should increase the number in the second decimal place by 1.
How it works
For example, if your answer is 25.52384, you would present this as 25.52.
If your answer is 25.52684, you would present this as 25.53.
You are likely to be told that an organisation has bought a number of items at a unit
price, and to work out the total price. To do this, you must multiply the price by the
number of items purchased.
How it works
Your organisation purchased 5 ink cartridges at £24.95 per cartridge from Combes
Stationers. What is the total cost of the ink cartridges?
To calculate this sum on your calculator, you should:
1 Enter the cost figure, which is 24.95
2 Press the  button
3 Enter the number of cartridges purchased, which is 5
5 The screen will now show the total cost of the ink cartridges
Alternatively, you could be told that an organisation has bought a number of items at a
total price, and be asked to work out the unit price. To do this, you must divide the total
price by the number of items purchased.
How it works
Your organisation purchased 30 reams of paper from Office Suppliers, for a total cost of
£74.40. What is the unit price of one ream of paper?
To calculate this sum on your calculator, you should:
1 Enter the total cost figure, which is 74.4
2 Press the ÷ button
3 Enter the number of reams purchased, which is 30
5 The screen will now show the unit price of a ream of paper
TASK 2 Your organisation purchased 12 bottles of hand soap at £1.25 per bottle from Discount
Suppliers.
(a) What is the total cost of the hand soap?
Your organisation purchased 12 towels from Discount Suppliers, with a total cost of
£52.56.
(b) What is the unit price of a towel?
4 Ratios
In your assessment, you may have to calculate the ratio of one whole number to another
whole number. A ratio will be presented as 'a whole number : a whole number', for
example, 3 : 1. This is a way of expressing mathematically that the first number is three
times bigger than the second number.
How it works
You are likely to be given a list of costs (for example, stationery items, below), and asked
what the ratio of one item to the total or another item is. You may be given a range of
ratios and asked which the correct one is, as shown below.

£
Ink tanks 25.00
Printer paper 13.29
Envelopes 15.11
Pens 21.60
Total 75.00
Which of the following is the ratio of the total expense for stationery items to the
expense for ink tanks?
 2:1
 3:1
 4:1
To calculate this, divide the total expense by the expense of ink tanks. On your
calculator, you should:
1 Enter the total expense figure, which is 75
3 Enter the figure for ink tanks, which is 25
5 This gives the answer 3, so the ratio is 3:1. In other words, the total expense is
three times bigger than the cost of ink tanks.
TASK 3 Your organisation has the following costs relating to light and heat.
£
Light 200,000
Heat 100,000
Total 300,000
Which of the following is the ratio of the total cost for light and heat to the cost for
heat?
Options
2:1
3:1
4:1
5 Proportions resulting in fractions

In your assessment you might be required to calculate the proportion of one whole
number to another whole number and the answer might result in a fraction. This is an
expression of the relationship between the two numbers, for example, that directors'
salaries equal half of total salary costs for an organisation.
How it works
You could be given the same list of costs as you were given above and asked what
proportion of total stationery costs the ink tanks are.

£
Ink tanks 25.00
Printer paper 13.29
Envelopes 15.11
Pens 21.60
Total stationery costs 75.00
As the amount for ink tanks is smaller than the total stationery costs, the answer is going
to be a fraction. This fraction would be presented initially as 25 . However, fractions
75
should always be presented in the smallest numbers possible.
To do this, you need to find a number that both numbers in the fraction can be divided
by. In simple cases, the bottom number will be divisible by the top number (which
means you will be able to divide the bottom number by the top number and the answer
will be a whole number). You should take the following steps:
1 Take the initial fraction 25

75
2 Determine whether the bottom number can be divided by the top number
3 Enter 75 into the calculator
5 Enter 25 into the calculator
7 The calculator displays 3
So in this instance, the bottom number is divisible by the top number. This can be
presented as follows:
25 25 1
 
75 25 3
1
The answer is therefore
3
There may be occasions when the bottom number cannot be divided by the top number
so as to give a whole number. In such cases, you need to find a number that divides into
both numbers, to give whole numbers for the fraction. Calculations will be fairly simple
in your assessment.
How it works
4
Say the initial fraction was 10 . 10 does not divide by 4 to give a whole number, so try
and find another number that both 4 and 10 divide by, for example, 2. (The division of 4
and 10 by 2 can be done on a calculator if required.)
4 2 2 Remember simple rules, such as even numbers are always

 
10 2 5 divisible by 2. Numbers ending in 5 or 0 are divisible by 5.
You need to continue this process until the numbers cannot be further divided into whole
numbers.
How it works
Say the initial fraction was 18
30 . 30 does not divide by 18 to give a whole number, so try
and find another number that both 18 and 30 divide by, for example, 3.
18 3 6 Remember that you must always divide the top

 
30 3 10 and bottom by the SAME number.
However, 6 and 10 are still both divisible by 2, so the fraction is not being presented in
the smallest numbers. Go through the steps again.
6 2 3
 
10 2 5
Now you have reached the point where the numbers will not divide by the same number
and remain whole numbers. (Note. This could have been done in one step if you had
originally chosen to divide 18 and 30 by 6.)
TASK 4 Your organisation has the following costs for catering supplies.
£
Tea 150
Coffee 250
Milk 350
Total 750
What proportion of the total cost is made up by tea?
6 Percentages
In your assessment, you may be required to calculate what percentage one figure is of
another. The answer may be a whole number, or a number to one or two decimal places.
A simple example of a percentage is that '75% of the population drinks tea'. What this
means is that out of every 100 people in the population, 75 of them drink tea.
Accordingly, 25 of them don't, so you could also say that 25% of the population does
not drink tea.
Calculating a percentage in this way can give more user-friendly information than if you
were told that the population is 61,792,000, of which 46,344,000 drink tea.
In the same way, it might be more useful for directors of an organisation to be told that,
for every £100 earned, £25 is gross profit (25%) – rather than just being told that for
total income of £37,794,584, gross profit is £9,448,646.
How it works
You might be given figures for sales, cost of sales and gross profit (or previously have
been asked to calculate gross profit), for example:
£
Sales 120,000
Gross profit 30,000
You may then be asked to calculate gross profit as a percentage of sales. To calculate
this on your calculator, you should:
1 Enter the gross profit figure, which is 30,000
3 Enter the sales figure, which is 120,000
5 The screen should show a figure after the decimal place, 0.25
6 Press the × button
7 Enter 100
9 The screen will show the percentage figure (in this case, 25%). In other words, for
every £100 earned, the organisation makes £25 gross profit.
Alternatively, you may be given a figure (for example, a sales price) and be told that it is
going to increase by a certain percentage. You may be asked what the amount of the
increase is.
How it works
You might be told that the sales price for Part AB23 is £4.80 and that it is going to
increase by 5%. You could be required to calculate the amount of the rise.
The best way to understand this is to say that £4.80 is 100%. You can calculate what
1% is by dividing the price by 100. You can then find 5% by multiplying by 5. To
calculate the figure, you therefore need to:
1 Enter the existing price, which is 4.80
3 Enter 100
5 The screen shows 1%, which is 0.048
6 Press the × button
7 Enter 5
9 The screen shows 5%, which is 0.24
The increase is 24 pence (you would show this in the assessment as £0.24).
TASK 5 (a) Your organisation has produced the following figures for the year.
£
Sales 253,700
Gross profit 63,425
Calculate gross profit as a percentage of sales.
(b) The current selling price of part DC45IT is £569. This is going to increase by 3%.
Calculate the increase in the selling price.
7 Fractions
Similarly in your assessment, you might be asked to apply a fraction to a whole number.
This may give an answer which is a whole number, or a number to one or two decimal
places.
How it works
You might be told the current selling price of an item and be told that it is going to rise
by a fraction. For example, the current selling price of part AX345 is £36. It is going to
rise by 1 . What is the increase in selling price for part AX345?
6
To calculate this figure on your calculator, you need to:
Steps 2 and 3 are NOT absolutely
1 Enter the existing price, which is 36 necessary when the top number of
2 Press the  button the fraction is 1, but are necessary
3 Enter the top number in the fraction, which is 1 if the top number is higher than 1,
4 Press the ÷ button for example where the fraction is
2/3.
5 Enter the bottom number in the fraction, which is 6
7 The screen shows the increase in the selling price, which is 6
TASK 6 (a) The current selling price of part XZ20 is £49. This is going to increase by 1 .
7
(b) The current selling price of part CVB34 is £25. This is going to increase by 2 .
5
8 Averages
In your assessment, you may have to calculate the average value of a range of numbers
up to five numbers. The answer may be a whole number or a number with one or two
decimal places. The average cost of five units, for instance, is the total cost divided by
the number of elements making up that cost (5); that is what the individual unit cost
would be if they were all the same. It is critical therefore to work out how many elements
make up the total, in order to do the calculation.
How it works
You may be given a range of costs, with a total, and asked what the average cost is. For
example, the following are the costs of wages per department in your organisation. There
are four elements (departments) making up the total cost.
£
Department 1 253,049
Total 1,436,778
To calculate the average cost per department on your calculator, you need to:
1 Enter the total cost, which is 1,436,778
3 Enter the total number of departments being averaged (in this case 4)
5 The screen should show the average cost per department, which is 359,194.50
The key thing to remember when calculating an average is that the number you divide by
is the number of things being averaged. This will never be more than 5 in your
assessment, but could be 2, 3 or 4.
TASK 7 The following table shows the number of miles driven by the three delivery vehicles
belonging to your organisation during the year:
Delivery vehicles Mileage

£
Vehicle 1 2,645
Vehicle 2 1,035
Vehicle 3 895
Total 4,575
Calculate the average number of miles driven by the delivery vehicles.
miles
Chapter overview
Working in an accounting environment, it is important for you to be familiar with a
calculator and how it works.
In your assessment, you will be required to add numbers, both whole numbers and
numbers with up to two decimal places.
Money is usually shown to two decimal places, as the numbers before the decimal point
indicate the pounds and the numbers after the decimal point indicate the pence.
Ensure you enter figures carefully into your calculator, including the decimal point, or you
may make an error.
In your assessment, you will be required to subtract numbers, both whole numbers and
those with up to two decimal places.
Tasks will often ask you to 'calculate', so you must determine if addition or subtraction is
required.
In your assessment, you could be required to multiply or divide any two numbers, which
could be a mixture of whole numbers or numbers with one or two decimal places.
If your answer comes to more than two decimal places, you will need to do what is
called 'rounding' to two decimal places.
In your assessment, you may have to calculate the ratio of one whole number to another
whole number. A ratio will be presented as 'a whole number : a whole number' (for
example, 3:1). This is a way of expressing mathematically that the first number is three
times bigger than the second number.
In your assessment, you might be required to calculate the proportion of one whole
number to another whole number and the answer might result in a fraction.
This is an expression of the relationship between the two numbers, for example, that
directors' salaries equal half of total salary costs at an organisation.
Fractions should always be presented in the smallest numbers possible.
In your assessment, you will be required to calculate what percentage one figure is of
another. The answer may be a whole number, or a number with one or two decimal
places.
Alternatively, you may be given a figure (for example, a sales price) and be told that it is
going to increase by a certain percentage.
In your assessment, you might be asked to apply a fraction to a whole number. This may
give an answer which is a whole number, or a number with one or two decimal places.
In your assessment, you may have to calculate the average value of a range of numbers
up to five numbers. The answer may be a whole number or a number with one or two
decimal places.
Mathematics for accounting:
Test your learning
1 Your organisation sold 2 cars for £958.30 in total to Super Car Traders.
(a) What is the average price of each car?
Super Car Traders paid for the cars when they collected them.
(b) Is the sale of the cars a cash transaction or a credit transaction?
2 Last year your organisation recorded income and expenditure as shown in the table
below.

Sales 577,500
Other expenses 197,583
(a) Use the income and expenditure figures to complete the following calculations:
51
52 4: Mathematics for accounting: Test your learning
(b) Using your answer from (a)(ii), calculate net profit as a percentage of sales.
If your answer is not a whole number make sure you give your answer to two
decimal places.
3 An organisation is reviewing the selling price of some of its products.

The current selling price of product number 52 is £17.00. This is to be increased
1
by (one fifth).
5
(a) Calculate the increase in selling price for product number 52.

by 6%.
(b) Calculate the increase in selling price for product number 12.
4 An organisation is reviewing the selling price of some of its products.

The current selling price of product number 104 is £62. This is to be increased by
1
.
8
The current selling price of product number AZ25 is £9. This is to be increased by
6%.
(b) Calculate the increase in selling price for product number AZ25.
4: Mathematics for accounting: Test your learning 53
5 Your organisation keeps detailed records of sales.

Sales at each of four outlets are shown in the table below.
(a) Complete the table to show the sales at Outlet 4.
Sales per outlet £
Outlet 1 250,368.25
Outlet 2 199,473.79
Outlet 3 302,699.39
Outlet 4
Total 1,127,751.60
(b) Calculate the average sales per outlet.
Analysed sales at Outlet 1 are shown in the table below.

(c) Complete the table to show the sales from menswear.
Item £
Menswear
Ladieswear 61,506
Childrenswear 62,595
Household fabrics 50,076
Total 250,380
(d) Which of the following is the ratio of total sales at Outlet 1 to sales of
childrenswear at Outlet 1?
 4:1
 5:1
 6:1
54 4: Mathematics for accounting: Test your learning
(e) Which of the following is the proportion of the total sales at Outlet 1 made
up by household fabrics?
 1
5
 1
6
 1
7
6 Your organisation keeps detailed records of costs.

Costs at each of two premises are shown in the table below.
(a) Complete the table to show the costs at Premises 2.
Costs per premises £
Premises 1 50,924.72
Premises 2
Total 102,049.94
(b) Calculate the average cost of each premises.
Analysed costs at Premises 1 are shown in the table below.
Item £
Distribution costs 6,372
Administration costs 10,185
Total 50,925
(c) Which of the following is the ratio of total costs to administration costs?
 4:1
 5:1
 6:1
Accounting in a
professional environment
Section number
This chapter introduces the unit Accounting in a
Chapter coverage
Professional Environment. It introduces the key issues Types of organisation 1

you need to know for your assessment. The accounting function 2
Confidentiality 3
Ethics and professional behaviour 4
Social and environmental behaviour 5
Health and safety 6
Efficient working practices 7
Personal skills and development 8
Managers and mentors 9
1 Types of organisation
So far in this Workbook you have considered a very simple business model – an
organisation that buys and sells items, trying to make profit.
There are many organisations that exist to make a profit, but there are also organisations
with different aims. Organisations fall into what are called different sectors.
KEYWORDS
Organisations in the private sector aim to make a profit.

Organisations in the public sector and the charitable sector have different aims,
and making a profit may not be the most important of them.
55
56 5: Accounting in a professional environment
How it works
The table below shows the types of organisations that fall into each of these sectors:
Private sector Limited companies

Partnerships
Sole traders
Public sector Councils (local government)
National Health Service (NHS)
Fire and Ambulance Service
Police Service
Charitable sector Charities – for example, Oxfam, Save the Children
At this stage of your studies, you do not need to know anything more about these types
of organisation, only the sectors they are in and the main purpose of organisations in
those sectors.
TASK 1 Fill in the gaps in the sentences below, using words given in the options. You may have
to use the same word more than once.
Limited companies aim to make a .
The National Health Service does not exist to make a .
Options
profit
cost saving
2 The accounting function
KEYWORD
The accounting function is one of the departments in an organisation.
5: Accounting in a professional environment 57
The accounting function may be a large department with many staff, or it may be one
individual – the organisation's accountant. It exists to support the organisation, by
recording transactions and providing information to its customers.
KEYWORD
The customers of the accounting function are other departments of the

organisation (for example, production, sales), external trade customers of the
organisation and suppliers of the organisation.
How it works
Customers of the accounting function of ABC Traders
Accounting function
Trade customers Suppliers
Eg EZ Ltd Eg Special Suppliers

Other departments
Broomfield Co XYZ Trading Ltd
ABC Traders
The accounting function of ABC Traders serves these parties (customers):

 It sends invoices and statements of account to trade customers
 It sends payments and remittance advice to suppliers
 It sends information to other departments of ABC Traders
The accounting function also holds the following information, which it may supply to
other departments:
 Information about whether the organisation is making a profit or loss
 Information about actual income (also compared with expected income)
 Information about actual expenditure (also compared with expected expenditure)
Managers in the organisation use the information given to them by the accounting
function to make better business decisions and to enable them to run their departments.
When an accounting function provides information to another department in the
organisation, it is important that it is complete, timely and accurate, to enable managers
to use it to run the organisation effectively and efficiently.
TASK 2 1 Give three examples of customers of the accounting function.

2 Fill in the gaps in the following statement.
The accounting function provides to other
departments in the organisation. This should be ,
and timely to ensure that managers in the
organisation can make better business decisions.
3 Confidentiality
The type of information produced by an accounting function for other departments is very
often sensitive; the organisation could be harmed if it was made public. The organisation
needs to keep that information private, in other words secret, within the organisation.
Another word for this privacy is confidentiality.
KEYWORD
Confidentiality is the concept of keeping sensitive information private.
Why might a business want to keep information confidential?
Customers might not be happy at the Suppliers might not be happy at the
amount of profit that the organisation amount of profit that the organisation
makes on sales to them, and buy them makes on items that the suppliers sell
from someone else… to the organisation, so they may raise
their prices, or attempt to cut out the
organisation and sell direct to its
customers…
If sensitive information becomes public knowledge, it can be very damaging to the

organisation and even affect whether it can continue trading.
There is even information produced by an organisation that it might not want its own
staff to know:
Business plans Business plans

involving involving
Business plans Business plans
redundancy relocation
involving involving
Future pay redundancy relocation
rises
The accounting function might have access to such information, but have to keep it
confidential until top management want it to be public in the organisation.
So, how does an organisation keep information confidential?
How it works
Small practical issues are extremely important. For example:
Keeping sensitive files locked up
Not leaving work on your desk when you leave

your desk, even for a few moments
Password-protecting computer files
Locking your computer screen when you leave

your desk, even for a few moments
Careful disposal of documentation once it is no

longer required to be kept
Giving staff working on sensitive issues private

offices
Many accounts departments are open plan, but people with certain key roles are likely to
have private space to work in:
 The finance controller (likely to have access to confidential, director-level
information)
 The wages clerk (access to confidential personnel information)
There are laws governing disclosure of personal information (for example, the type of
information an employee might have on a personnel file) and therefore this sort of
information must be kept confidential too. People working in an accounting function
might have access to such personal information and so must take care to keep it
confidential, by keeping files private and safe as outlined above.
TASK 3 List three ways that someone dealing with confidential information can keep that
information secret.
1 ……………………………………………………………………………..
2 ……………………………………………………………………………..
3 ……………………………………………………………………………..
4 Ethics and professional behaviour
KEYWORD
Ethics is another word for rules of behaviour.
Accountants and people who work in an accounting function are expected to conform to
particular rules of behaviour, because organisations and individuals rely on the
information they produce to make important decisions.
The key aspects of these rules for people working in an accounting function are that
those people should be:
 Honest (sometimes called having integrity or being straightforward)
 Up to date in the technical knowledge they need to do their job (for example,
knowing about the most recent accounting standards)
Keeping sensitive information confidential is another important rule of behaviour for
those working in an accounting function.
TASK 4 Accountants must keep training throughout their careers, to keep up to date with
changes in accounting during their career.
True
False
5 Social and environmental behaviour

It is not just people who need to behave in a responsible manner. Organisations
themselves have an important role in society, and their production processes and
business operations may have a large impact on the environment.
The managers of organisations want people to have a good impression of them. This is
unlikely to be the case if an organisation has just caused an environmental disaster.
Most organisations do not deal in products that are likely to cause a major environmental
disaster, but all organisations can take small steps to reduce what impact they do have
on the environment.
How it works
Positive environmental policies
Don't waste heat Don't leave lights on

Organisation
Recycle waste Use recycled paper
Buy eco vehicles Don't waste paper
TASK 5 Place a tick () in the boxes to indicate which THREE of the following are sensible
social and environmental policies for an organisation to adopt.
 Don't use paper
 Don't waste electricity
 Don't use unleaded fuel
 Don't buy fuel-inefficient vehicles
 Don't pay employees
 Don't leave lights on in unoccupied premises
6 Health and safety

Organisations are required by law to ensure that people are safe in their premises.
This is known as a duty This includes:

of care. Employees of the organisation
Customers
Visitors Anyone
KEYWORD
A duty of care is a legal responsibility. Organisations are required to have made an

effort to ensure anyone on their premises is not at risk.
For example, if building work was taking place and a large hole had been dug in the floor
to be left overnight, the organisation has a duty to fence it to protect anybody who goes
into the premises while the hole is there, even if the people are not supposed to be there.
The duty extends to employees of the organisation, who are required to:
behave in a safe manner
…so they don't put …so they don't put the people they
themselves in danger. work with (colleagues) or anyone
else in danger.
How it works
Examples of what would be unsafe behaviour:
Trailing wires from a workstation across

corridors or walkways
Smoking near flammable items
Being careless with liquids near computer or

other electrical equipment
Overloading an electric socket with electric

plugs
Leaving piles of paper and files on the floor for

colleagues to trip over
This could also lead to inefficient

working practices. See below.
An employee in the accounting function has a duty to support the organisation by

reporting any unsafe practices to a supervisor. Such employees should also set an
example in keeping their work areas tidy. This also contributes to efficient working
practices; see below.
TASK 6 Select the appropriate words in each of the following sentences.
John has seen Rashid smoking in the stationery cupboard. He should should not
report this to his supervisor.
Karen is visiting Total Traders. Total Traders does does not have a duty to
ensure Karen is safe during her visit.
Amandeep has asked maintenance to increase the number of electric points at her desk.
They have not yet done so. Amandeep should should not use an adaptor
brought in from home to enable her to use all her electronic equipment at the same time.
7 Efficient working practices

As noted above, keeping a tidy workstation contributes to efficient working practices.
This is because time is wasted if files or documents take a long time to find because they
are not filed properly, or there is not space on the desk for the person in the accounting
function to actually do any work!
KEYWORD
Efficiency is functioning in the best possible manner with the least waste of time and
effort.
How it works
Efficient working is affected by different things:
KEYWORD
A work plan, in simple terms, is a list or a record of work that an individual or group
intends to do, often ordered in terms of priority that each element of that work is
given.
How it works
Work plans take many forms, for example:
 To-do lists
 Diaries
 In-trays – a place to collect incoming documents that require your attention
 Schedules
Work plans are important in their own right because they help individuals work
efficiently. However, they also tie into communication within the team, because if work
is planned and that plan is written down, team members can access the plan if needed.
For example, if a team member is ill, members can re-assign work to continue to work
efficiently as a team.
It is rare in an accounting function for someone to work in isolation. Usually one person
depends on work being done by another person if they are to carry out their own work.
How it works
For example, if the sales clerk does not process the invoices, the credit controller does
not have an up-to-date record of who owes money, and when. As another example, if the
purchases clerk does not process the invoices, the payments clerk does not know who to
pay, or when.
This is why communication is vital: if one person is going to miss a deadline, it might
mean that everyone in the team goes on to miss their deadlines, and the work of the
whole function becomes inefficient.
If individuals who are having problems meeting deadlines communicate with the rest of
their team, contingency plans (back-up plans) can be made and other members of the
team can contribute to enable that deadline to be met. The same is true if a team of
people in the accounting function is not going to meet a deadline required by another
department.
It may be important that an individual in a team assists another team member with work
that the first individual would not usually do, in order to keep the whole team efficient.
This would not be the case if confidentiality were affected but a team member might be
able to assist a struggling team member by answering the phone, taking over
administration tasks, or proof-reading a non-confidential letter or report.
How it works
A junior clerk is not likely to help the payroll clerk to produce the payroll as they might
not have the skills to do so, and confidentiality could be affected. However, if the payroll
clerk is experiencing difficulty meeting deadlines, the junior clerk could take over any
non-confidential tasks, such as answering the phone or printing out documents.
TASK 7 Which THREE of the following statements are true?
 A member of the accounting function should keep a tidy desk to ensure efficient
working practices.
 A member of the accounting function should communicate with the team about
meeting deadlines.
 A member of the accounting function should keep his or her work diary confidential.
 A member of the accounting function should communicate with the team to
contribute to their work efficiency.
TASK 8 It is important to work effectively.
Answer the following questions by selecting the most appropriate option.

It is Tuesday lunchtime and you have a normal workload remaining for the week. Your
colleague needs to go to an important meeting in 30 minutes, but is also working on a
key report which needs to be processed before the end of the day.
Which ONE of the following actions should you take?
Continue with your work to ensure that you meet your deadlines and leave early if
you have the opportunity.
Go to your colleague and ask her if there is anything you could do to help her
meet her deadline.
Recommend the colleague just submits the report without further checking, so
she meets the deadline.
8 Personal skills and development

We have already touched on certain skills that someone working in the accounting
function needs, namely honesty, integrity, technical knowledge and organisation. There
are various other skills required too:
 Reliability
 Being numerate (having ability with numbers)
 Punctuality
 Willingness to learn (and continue learning)
 Good communication skills (as discussed above)
A person working in an accounting function is likely to have these skills in order to have
got the job, but it is also important to continually improve these skills and, as discussed
before, continue learning.
Personal development can be achieved through formal training – for example gaining
qualifications and attending training courses. It can also be achieved through more
informal ways, for example by reading relevant literature (accountancy magazines) or by
watching how more senior members of staff do their job.
How it works
Development method
AAT qualification This is formal training, involving passing assessments
in order to obtain the qualification.
Training courses This is formal training, involving being taught the
information required to pass the assessments referred
to above. This may be in a classroom, or by use of a
home learning package.
On-the-job training This is formal training (it tends to be more practical
than the two other examples of formal training given
above).
Job rotation This can be formal training. Many apprentices or
trainees are required to work in more than one area
in an accounts department or business during their
training period, to help them gain an overview of the
processes of the organisation (by 'rotating' between
areas).
Development method
Job shadowing This can be formal or informal. It involves watching
another member of staff do their job to learn how it
is done. This may be done as a formal part of
training or simply informally as a junior clerk learns
from those around him or her.
Self-study: for example, This is informal learning that a person can do to
reading journals or books or improve their own knowledge and abilities and to
researching something on the complement formal training undertaken as outlined
internet. above.
9 Managers and mentors

Both methods of acquiring learning outlined above can be improved by the involvement
of a supervisor and/or mentor.
KEYWORDS
A supervisor is a junior manager who oversees a process, such as the training of a

junior staff member. A mentor is a trusted advisor and guide who adds value to the
training process, either by undertaking teaching personally or by directing the trainee
to the best training options for that trainee.
Training should be discussed with a supervisor before being carried out, and also
afterwards, in the form of an appraisal, so that the supervisor can ensure the training
was understood. In addition, a supervisor will ensure that the training is relevant to, and
used in, the organisation. Ideally a supervisor will arrange that a person's practical work
and their formal training are in harmony – so that what is being learnt is being used in
practice. Then, by monitoring the person's work, a supervisor can further identify whether
the training is being understood.
A mentor can:
 Discuss training needs and make recommendations
 Carry out or arrange relevant training (in conjunction with the supervisor)
It is possible that one person could undertake both supervisor and mentoring roles for
someone. It could also be the case that an individual has a supervisor at work, and a
mentor connected with the formal classroom learning side of training.
TASK 9 Select the appropriate word in each of the following sentences.
A person training in an accounting function should should not discuss training
needs with their supervisor.
A person who wants a job in an accounting function should be punctual pleasant .
Chapter overview
There are many organisations that exist to make a profit, but there are also organisations
with different aims.
Organisations fall into different sectors (private, public and charitable).
The accounting function is one of the departments in an organisation.
The customers of the accounting function are other departments of the organisation (for
example, production, sales), external trade customers of the organisation and suppliers of
the organisation.
The accounting function provides information to its customers.
Information should be complete, accurate and timely to be useful to users.
Managers use the information given to them by the accounting function to make better
business decisions and work effectively and efficiently.
Some information must be kept private, that is, confidential.
Practical steps, such as password-protecting documents and keeping files locked up, will
help keep information confidential.
Some personal information must be kept private and people working in the accounting
function must ensure this is done, by using the same practical methods of, for instance,
locking files and using passwords.
Members of the accounting function must abide by certain rules of conduct.
In particular, they should be honest and keep up to date with technical knowledge.
Organisations should take steps to reduce their impact on the environment.
Organisations are required by law to ensure that people are safe in their premises.
The duty extends to employees of the organisation, who are required to behave in a safe
manner.
An employee in the accounting function has a duty to support the organisation by
reporting any unsafe practices to a supervisor.
Efficiency is affected by teamwork, communication and work plans.
Someone working in the accounting function needs integrity, technical knowledge and
organisation, reliability, punctuality, willingness to learn (and continue learning), good
communication skills and to be numerate.
Continuing training can be formal or informal.
Training should be arranged and reviewed in consultation with a supervisor.
The supervisor can ensure that training is used to the benefit of the individual and the
organisation and that training is understood, by supervising the ongoing work of that individual.
A mentor can add value to training by tailoring it to the individual's needs.
Keywords
Organisations in the PRIVATE SECTOR aim to make a profit.
Organisations in the PUBLIC SECTOR and the CHARITABLE SECTOR have different
aims, and making a profit may not be the most important of them.
The ACCOUNTING FUNCTION is one of the departments in an organisation.
The CUSTOMERS OF THE ACCOUNTING FUNCTION are other departments of the
organisation (for example, production, sales), external trade customers of the
organisation and suppliers of the organisation.
CONFIDENTIALITY is the concept of keeping sensitive information private.
ETHICS is another word for rules of behaviour.
A DUTY OF CARE is a legal responsibility. Organisations are required to have made an
effort to ensure anyone on their premises is not at risk.
EFFICIENCY is functioning in the best possible manner with the least waste of time and
effort.
A WORK PLAN, in simple terms, is a list or a record of work that an individual or group
intends to do, possibly ordered in terms of the priority that each element of that work is
given.
A SUPERVISOR is a junior manager who oversees a process, such as the training of a
junior staff member.
A MENTOR is a trusted advisor and guide who adds value to the training process, either
by undertaking teaching personally or by directing the trainee to the best training options
for that trainee.
Accounting in a professional environment:
Test your learning
1 There are different types of organisation.

the list of items below each sentence.
(a) A sole trader is a organisation.
 private sector
 public sector
 charitable
(b) The police service aim to make a

profit.
 does
 does not
2 It is important to understand the role of the accounting department within an
organisation.
Show whether the following statements are true or false.
(a) Detailed expenditure analysis provided by the accounting department is used
by the general public to make business decisions.
True
False
73
74 6: Accounting in a professional environment: Test your learning
(b) An example of a customer of the accounting department is the organisation's

suppliers.
True
False
3 It is important to observe confidentiality.

Complete the following sentences by inserting the most appropriate option from
the list below each sentence.
Information about pay increases held on a computer should be kept
in an area to which all employees have access.

in a password-protected file with access restricted to those who need the
information.
A supplier of the organisation where you work asks you who the main customers of
the organisation are. You reply:
'I am sorry but I cannot give you any information, as it is confidential.'

'As you are a supplier I can tell you that it is Matlins and Swindells.'
4 Finance professionals and organisations have a duty to behave in a professional and

socially responsible manner.
Show whether the following statements are true or false.
Accountants should behave with integrity in all circumstances.
True
False
Organisations can behave in a socially irresponsible manner because they have no

responsibility to the general public.
True
False
6: Accounting in a professional environment: Test your learning 75
5 Organisations should observe health and safety guidelines.

(a) Complete this sentence by inserting the most appropriate option from the list
below each box.
An organisation provide a safe environment for .
must staff and customers only

does not have to anyone on the premises
(b) Show whether the following statements are true or false.

An employee has a duty not to put him or herself in danger at work.
True
False
It is important to keep a tidy desk to ensure you work efficiently.
True
False
6 It is important to understand the skills and attributes needed by a finance

professional.
below each box.
A finance professional should and be .
communicate well reactionary

communicate rarely reliable
(b) Show whether the following statements are true or false.

Training for the AAT qualification is the only appropriate method of formal
training for a finance professional.
True
False
One reason somebody training to be a finance professional discusses training

needs with their supervisor is so that the supervisor can make
recommendations.
True
False
76 6: Accounting in a professional environment: Test your learning
7 It is important to work effectively.

(a) Answer the following questions by selecting the most appropriate option.
It is Wednesday lunchtime and you have a report that needs to be processed
by the end of the day. You are well behind with the report and it is unlikely
that you will complete it in time. You have a colleague who has an ordinary
workload for the rest of the week.
Tell no one, as you don't want to appear inefficient
Ask your colleague if she is able to spare any time to help you meet
the deadline
Tell your supervisor that you will definitely meet the deadline.
Planning is very important to help you meet your deadlines.

(b) Which ONE of the following documents is a planning aid?
Schedule
Purchase order
Paying-in slip
Creating business
documents
This chapter introduces the unit Creating Business Section number

Chapter coverage
Documents. It introduces the key issues you need to know

Business documents 1
for your assessment.
Templates and house style 2
Creating business documents 3
1 Business documents
You were introduced to some business documents in Chapter 1:
 Invoices
 Credit notes
 Statements of account
 Remittance advice
These documents are the main way that organisations communicate with their
customers and suppliers.
Routine business documents (such as invoices or remittances) will be sent to customers
and suppliers. Other business documents may be sent to stakeholders (other parties
associated with the business).
77
78 7: Creating business documents
KEYWORD
Stakeholders are people or groups who have an interest in the organisation.
How it works
Examples of such interested parties are:
Other common forms of business communication
KEYWORDS
An email is an electronic form of communication which may be sent both within and
outside of the organisation.
A letter is a written form of communication, usually sent outside of the organisation.
A memo is a relatively informal written form of communication, sent from one
employee to another within the same organisation.
A report is a relatively formal written form of communication, which can be sent from
one employee to another within the same organisation or outside of the organisation.
7: Creating business documents 79
How it works
Letters Emails Reports Memos
Some examples of these types of communication from a company called Haywood

Distributors are given below. Do not worry about the content of these communications;
they are only to illustrate what each looks like. Key elements of each communication
have been pointed out. These will be looked at in further detail in the section about
creating business documents.
Headed paper
including the company
Letter name and address
HAYWOOD DISTRIBUTORS
Industrial Estate
Haywood
Indication letter is for addressee only HY4 2SK
CONFIDENTIAL
J M Jones
Addressee and his address Date
Administrator
Pursel Retail Ltd
Pear Tree Lane Industrial Estate
Sussex BN1 4PW 3 September 20X0
Uses polite form of his
name as letter is formal
Dear Mr Jones, Introductory sentence outlining
what letter is about
Account No 0139742
Thank you for your letter of 28 August 20X0 regarding credit payments owing to
your account as a result of product returns.
I have looked into the matter that you raised and I am afraid that your earlier letter
of 26 July was indeed overlooked, due to the temporary absence of the member of
Body of letter
staff to whom you addressed it. dealing with
I apologise for the delay in processing your credit payment. I have arranged for your the issues
account to be credited with the sum of £346.99, and I enclose a printout of your
account status confirming the balance.
If you have any further queries, please do not hesitate to contact me.
Yours sincerely,
Courteous closing
Your Name Signature sentence
Assistant Financial Accountant
Appropriate sign off for Title of person sending the

use with person's name letter (the signatory)
at outset of letter
Email
EMAIL
Sender
cfrancis@haywooddistributors.co.uk
ksaltmarsh@haywooddistributors.co.uk Recipient
8 July 20X8 Date

Sales variances – June Subject matter
In response to your query, the following sales variances by product type were
incurred in June:
Simple introduction
Product Variance
MP3 players £14,300 adverse

Portable DVD players £2,700 favourable
Information required
DVD/VHS combo players £21,600 adverse
Digital TVs £18,600 favourable
If you require further detail, please let me know. Courteous sign off
Clare
'Signature'
Report
Headed paper
Title of report
REPORT: COMPLIANCE WITH POLICY & PROCEDURE
TO: Department Heads Recipients

Report writer (including
FROM: Jenny Faulkner, Financial Accountant their position)
DATE: 3 September 20X0 Date
1 Introduction Introduction
This report was compiled by Your Name, Accounts Clerk, at the request of Jenny
Faulkner, Financial Accountant, and submitted on 3rd September 20X0.
2 Non-compliance with policy and procedure Main issue in report
In recent months, I have witnessed several cases in which staff members failed to
comply with formal policies and procedures.
 Cheque requisition forms have had to be returned to the originators because
they were incorrectly completed or authorised. (See copies attached:
Appendix 1.)
 There is an apparent lack of respect for the confidentiality of other staff
members' personal details, in verbal and written communication with third
parties.
 Staff members fail to take part in fire evacuation drills, and when they do
take part, fail to comply with proper procedures (eg by taking lifts and
leaving fire doors open). (See the Safety Officer's report on the most recent
drill: Appendix 2.)
3 Reasons for concern Implications of main issue in report
I believe these 'lapses' in compliance are of concern, for several reasons.

Policies and procedures, such as the ones mentioned, have been put in place to
ensure the efficiency of operations such as cheque requisition; the confidentiality
of information which may be used to the detriment of the organisation and/or its
staff; and the safety of staff and visitors in the event of an emergency.
Non-compliance in such areas jeopardises efficiency (by necessitating re-work),
data security and personal safety.
By themselves these may be small things, but I believe they may reflect a culture
of 'corner cutting' which may eventually result in more serious consequences.
Recommendations for improvements
4 How Haywood can improve compliance

I would like to make the following recommendations for management's
consideration.
 All staff should be reminded of their responsibility to comply with
organisational policies and procedures.
 Where necessary, training should be given to reinforce awareness and
competence in relevant procedures.
 Managers at all levels should seek to monitor and enforce compliance more
strictly, and to model compliance in their own conduct.
I hope this information is helpful, and I would be willing to discuss it further – and to
present more detailed evidence of my observations – at your convenience.
Courteous sign off
Appendix 1: Incorrectly completed cheque requisition forms (attached)
Appendix 2: Safety Officer's Report for August 20X0 (attached)
List of appendices (appendices

themselves not given here)
Memo
Recipient
MEMO
To: [Recipient's name, designation] Reference: [File reference]
From: [Sender's name, designation] Date: [In full] Date
Subject: [Concise statement of main theme or topic of message]
Subject matter
Sender _________________________________________________________________
The main text of the memo is set out in correct, concise, readily understandable
English, in spaced paragraphs following a clear, logical structure. Note that no inside
address, salutation or complimentary close are required.
Signature or initials [optional]
Using the right form of communication

So when is it appropriate to use each form of communication?
The answer depends on the relationship between the two parties communicating and the
nature of the business being carried out.
In general terms, the formality of these forms of communication goes from informal to
formal as follows:
Note also whether the documents are used inside the organisation or outside. It is these
details which will help you decide when each form of communication is appropriate.
How it works
Tracey has been asked to send a product sample to a customer. You need to determine
the most appropriate form of communication to send with this sample. You can take a
number of steps to work this out.
1 Eliminate obviously wrong options
In this case, an email would be inappropriate, as the sample needs to be physically
sent by traditional mail.
2 Determine if the communication is internal or external
In this case, the communication is external, so a memo would be inappropriate.
3 Consider the purpose of the communication
In this case, the purpose of the communication is to be polite. The customer does
not need any additional information other than the price list. Therefore, a formal
report would be inappropriate.
In this case, by process of elimination, we have determined that the appropriate method
of communication is a letter.
TASK 1 1 A written form of communication usually sent outside of the organisation is:
A memo
An email
A letter
2 John has been asked to check that everyone in the sales department is able to
attend an important meeting on 25 February 20XX. It is 23 February now. The
most appropriate method of communication for him to use is:
A memo
An email
A letter
A report
2 Templates and house style
KEYWORD
A template is a standard for business documents, such as invoices and credit notes,
so that all such documents issued by a business look the same, and are instantly
recognisable for what they are.
Organisations use templates to benefit themselves and their customers and suppliers. If
the receiving party knows exactly what a document is and who it is from, they can
process it quickly and easily. This should mean that the organisation receives what it
wants promptly too (for example, payment, in the case of a sales invoice, or goods, in
the case of an order).
KEYWORD
'House style' is an expression of how the organisation wants to present itself in its
communications.
It may include:
 The use of standardised letterheads and memo pads
 How letters and memos are laid out
 What headings and formats are used for reports
 The logos, typefaces and colours used as part of the corporate identity (the image
the organisation presents)
How it works
For example, at Haywood Distributors, there is a house style manual for all
communications sent to external parties.
Standardised stationery is available for handwritten and word-processed documents –
and also for email messages. The corporate letterhead appears as follows:
Industrial Estate
Haywood
HY4 2SK
Every email must be 'signed off' with a standard block of text called a 'signature block',
which is inserted automatically by the email software:
[Sender's Name]
[Sender's Position]
Industrial Estate, Haywood, HY4 2SK
Tel: +44 (0)20x xxx xxxx Fax: +44 (0)20x xxx xxxx
Web: www.haywooddistributors.co.uk
This message and any attachments are confidential and may contain information
that is subject to copyright. If you are not the intended recipient, please notify us
immediately by replying to this message and then delete it from your system. While
we take reasonable precautions to prevent computer viruses, we cannot accept
responsibility for viruses transmitted to your computer and it is your responsibility
to make all necessary checks. We may monitor email traffic data and the content
of emails to ensure efficient operation of our business, for security, for staff training
and for other administrative purposes.
Using templates and house style benefits the organisation both internally and externally.
Internal benefits
Templates make it easier for staff to do their job, as they produce standard documents
routinely which is easier than creating them separately.
House style reinforces the organisation's ethos and core values.
External benefits
Templates make standard business documents recognisable and therefore they can be
processed easily.
House style makes less standard business documents identifiable with a particular
organisation, which also helps them to be processed easily.
House style reinforces the organisation's ethos and core values, which helps to remind
customers and suppliers why they trade with that organisation and feel confident that
they are right to do so.
TASK 2 1 Organisations use templates because they support the corporate image.
True
False
2 Organisations use a 'house style' for documents because companies are required to
do so by law.
True
False
3 Creating business documents

When communicating with stakeholders, it is important that the organisation presents a
positive, professional image.
A key way of presenting that image is by using acceptable business English.
Not slang Not 'text speak' Not abbreviated language
How it works
The following is a message you might send a friend via a text message:
RU busy tomoro?
This is not acceptable business English. It uses abbreviations and misspelling, and could
be misunderstood. In acceptable business English, the sentence would read:
Are you busy tomorrow?
As you can see, the abbreviations have been changed to full words.
KEYWORD
Slang is very informal language, that is acceptable in some daily speech and informal
written communication – but not in business communication.
How it works
Examples of common slang that would be inappropriate in business communication are:
Slang Preferable formal English
Hi Hello
Cheers Thank you
There are also some rules about each specific type of communication that you must
learn.
For example, for letter writing you must learn the correct forms, ie, the beginning and
end of the letter.
Salutation Complimentary close Context

Dear Sir/Madam/Sirs Yours faithfully Formal situations
(name not used) Recipients not known
Dear Dr/Mr/Mrs/Ms Bloggs Yours sincerely Established relationships
(formal name used) Friendly but respectful (eg with
superiors, customers, suppliers)
Dear Joe/Josephine Yours sincerely More personal, informal
Kind regards relationships, usually people with
whom you have a long-standing
relationship (eg with colleagues
or in some cases with clients)
Check that for any letter you put together, you have included:
 The name and address of the recipient
 Date
 Greeting (or 'salutation' as shown above)
 Subject heading (a brief, helpful 'cue' to what the letter is about)
 The main body of the letter
 Sign-off
 Complimentary close
 Signature. If an assistant is signing a letter on behalf of the writer, the writer's name
must be preceded by 'For' (or its equivalent from legal terminology 'pp')
For emails, memos and reports, you must ensure they show who they are 'To' and
'From', that they contain the date, and that they have a subject in the subject line.
All forms of communication should include an introduction, the main content, and then
a short conclusion.
In the assessment, you will be given a number of options to drag and drop to create a
business communication. You will have to choose how many to use and where to put
them. The best way to learn this is to see an example and then practise as many
questions as you can.
How it works
 You work for ABC Suppliers.
 You have been asked to write a letter to a customer, Linda Thomson, at Greenleys,
21 Hythe Road, Kinsington, KT2 4DR.
 You are to return a cheque received this morning, 26 April 20XX.
 The cheque is in payment of invoice 705 for £195.00.
 Your organisation's name was completed incorrectly on the cheque, so it has to be

returned for a new one to be issued.
 You have a good relationship with Linda Thomson as she always pays on time.
Using the items below, compose an appropriate letter. You will not need to use all of
the items.
There are various options given below. You will need to analyse these to decide which
are the right ones to use in the letter. The options have been annotated below to
illustrate that process of analysis.
You know the contact's

name so use it. This is Dear Linda Dear Madam Yours sincerely
someone you are in regular
contact with who you have a
good relationship with. If it
was your first contact with
her, you would call her As you used the
26 April 20XX name, use this one. Yours faithfully
Ms Thomson
Date the letter

Cheque for £195.00 for invoice 705 We received a cheque from you
Use this polite language as you

Use this to AAT student
Subject header believe it is a genuine mistake
sign off Accounts Assistant
Many thanks for your cheque which we received this morning. Greenleys
This version is more polite than

the blunter version below it.
Unfortunately the cheque was completed incorrectly and therefore we would ask that you send a
new cheque as soon as possible.
You wrote our name wrong and so we need another cheque. L Thomson
Greenleys
21 Hythe Rd
Kinsington
Use the recipient's KT2 4DR
address on the letter
Many thanks for your co-operation
This is an appropriate sign off
When you have analysed all the options, compile the letter using the appropriate
options:
L Thomson
Greenleys
21 Hythe Rd
Kinsington
KT2 4DR
Dear Linda 26 April 20XX
Cheque for £195.00 for invoice 705
Many thanks for your cheque which we received this morning.
Unfortunately the cheque was addressed incorrectly and therefore we would ask
that you send a new cheque as soon as possible.
Many thanks for your co-operation.
Yours sincerely,
AAT student
Accounts Assistant
TASK 3  You work for Martin Motor Supplies.

 You have been asked to write a letter to a potential supplier, Pristine Parts Ltd, at
Unit 12, Hurst Industrial Park, Hurst, HU2 4PY.
 You are to ask if they are able to supply 200 units of part XD before 31 May 20XX.
 You have not dealt with Pristine Parts Ltd before, but heard of them at a trade fair.
 The date today is 1 May 20XX.
Using the items below, compose an appropriate letter in the box that follows. You will
not need to use all of the items.
1 May 20XX Dear Pristine Parts Dear Sir Yours faithfully Yours sincerely
AAT student Head of sales

Availability of part XD
Accounts Assistant Pristine Parts Ltd
Unit 12
Hurst Industrial Park
We are looking for a supplier of the above-named part. Hurst HU2 4PY
Do you have any XDs? We need 200 by 31 May. Pristine Ltd
Your company was recommended to us at the Hurst Trade Fair in April.
We need to source 200 before 31 May. Would you be able to supply them to us?
Many thanks for your co-operation
If you have the part available we can provide references and would very much like to
discuss terms with you.
Solution
You might have to put together or correct other forms of communication. Key things to
look for:
 Use of the wrong name
 Spelling errors
 Use of slang
 Blank required elements (such as the subject line in an email, or a lack of
recipient's address in a letter)
How it works
Below is an email which has been sent to Clare Short, at Bellfield (bellfield.co.uk). The
purpose of the email is to request an annual price list because your organisation, Healy
Traders, has not received one as it is accustomed to doing. Errors in the email have been
highlighted to illustrate the kind of analysis you need to carry out.
EMAIL
student@healytraders.co.uk
Clare's name has been misspelt,
claireshort@bellfield.co.uk meaning it is possible that the email
won't even arrive.
8 January 20X8
Anual price list
The email contains other spelling mistakes
Dear Clare,
(anual and recieved) which is unprofessional.
I just wanted to enquire if there has been a delay with the price list, as we have
not yet recieved it.
Please let me know if we are going to receive a new price list, and when it will
arrive if so.
'Cheers' is slang, and even in a relatively informal email is

unacceptable. 'Many thanks' would be a better
complimentary close here, or 'kind regards', which is a
Cheers, complimentary close often used in emails.
Student
As practising putting together appropriate business communications is the best way to

learn this skill, here is another task for you to try.
TASK 4 You work for Brown Brothers and have been asked to send an email to David Dunn, your
manager, confirming your attendance at annual staff training on 14 and 15 May and
requesting overnight accommodation on 14 May.
Using the items at the bottom of the next page, compose an appropriate email in the
template provided.
You will not need to use all of the items.
From: AATstudent@brownbrothers.com
To:
Subject:
daviddunn@brownbrothers.com Confirmation
Annual Staff Training: Confirmation of attendance Hi David
Please accept this email as confirmation of my

attendance at the staff training on 14 and 15 May. Kind regards
As it is over two days I request overnight AAT student
accommodation on 14 May.
Hello David
danieldune@brownbrother.com
I am confirming I want to attend in May and need to Cheers

stay overnight. AAT student
Chapter overview
Sometimes organisations might have to communicate with their customers, suppliers or
other parties, using communication methods other than invoices and statements.
In addition, organisations communicate internally.
Examples of such communications include emails, letters, memos and reports.
Routine business documents (such as invoices, remittance advices) will be sent to
customers and suppliers. Other business documents (the letters, emails and reports
discussed above) may be sent to other parties associated with the business, known as
stakeholders.
Using templates and a house style benefits the organisation both internally and
externally. Templates make it easier for staff to do their job, as they produce standard
documents routinely which is easier than creating each one separately.
House style reinforces the organisation's ethos and core values.
Templates make standard business documents recognisable and therefore they can be
processed easily.
House style makes less standard business documents identifiable with a particular
organisation, which also helps them to be processed easily.
House style reinforces the organisation's ethos and core values which helps to remind
customers and suppliers why they trade with that organisation and feel confident that
they are right to do so.
A key way of presenting a positive, professional image is by using acceptable business
English and not slang, text speak or abbreviated language.
You need to learn the forms that govern opening and signing off letters, and also the
standard contents of letters, emails, memos and reports.
Practising questions designed around putting together business communications is the
best way to learn these skills.
Keywords
STAKEHOLDERS are people or groups who have an interest in the organisation.
An EMAIL is an electronic form of communication, which may be sent both within and
outside of the organisation.
A LETTER is a written form of communication, usually sent outside of the organisation.
A MEMO is a relatively informal written form of communication, sent from one employee
to another within the same organisation.
A REPORT is a relatively formal written form of communication, which can be sent from
one employee to another within the same organisation or outside of the organisation.
A TEMPLATE is a standard for business documents, such as invoices and credit notes,
so that all such documents issued by a business look the same, and are instantly
recognisable for what they are.
'HOUSE STYLE' is an expression of how the organisation wants to present itself in its
communications.
SLANG is very informal language that is acceptable in some daily speech and informal
written communication, but not in business communication.
Creating business documents:
Test your learning
1 Organisations communicate using different styles and formats.

(a) Show whether the following statements are true or false.
Organisations use templates to present a positive, consistent view of the
organisation.
True
False
Organisations use a house style for documents because it helps customers

understand their core values.
True
False
You have been asked to circulate the monthly results to department heads.
(b) Select the most appropriate form of communication to accompany the
monthly results.
Letter
Memo
Email
99
100 8: Creating business documents: Test your learning
2 Link the description to the appropriate form of communication by drawing a line

from each left-hand box to the appropriate right-hand box.
A written form of communication sent from one employee to

Email
another within the same organisation.
A written form of communication usually sent outside of the

organisation. Letter
An electronic form of communication which may be sent

both within and outside of the organisation. Report
3 You work for ABC Company and have been asked to send an email to Ben Seales,
the managing director, enquiring whether the budgets for the year you sent to him
were received.
Using the items provided, compose an appropriate email in the template below.
From: AATstudent@abccompany.com
To:
Subject:
8: Creating business documents: Test your learning 101
benseals@abcompany.com Bundle of documents
Hi Ben
Budgets
Kind regards
AAT student
Please could you confirm whether you received the
budgets I sent to you yesterday?
Hello Ben
Cheers
benseales@abccompany.com AAT student
Thank you
Did you get the budgets? AAT student
4 You work for Total Traders. You have been asked to write a letter to a customer,
Tom Parker, at Lyme Ltd, High Road, Thwaite, YK2 6PY. You are to inform them
that payment of an invoice is extremely overdue and the organisation is going to
have to hand it over to their debt collectors. The related invoice is 16360 for
£13,535. The letter is to confirm what you have discussed with Tom over the
phone. If payment is received within seven days of today's date (6 July 20XX), no
further action will be taken.
Using the items provided, compose an appropriate letter in the box on the
following page. You will not need to use all of the items.
6 July 20XX Dear Mr Parker Dear Sir Yours faithfully Yours sincerely
AAT student T Parker

Availability of part XD Accounts Assistant Lyme Ltd
High Road
Thwaite
Overdue payment for invoice 16360 YK2 6PY
As discussed previously with you on the telephone, the above debt is seriously
overdue.
Unfortunately if payment is not received by us within seven days of the date of this
letter, we shall have to hand this matter over to our debt collectors, ABC Collection Ltd.
If payment is received within seven days You need to pay the above invoice
of the date of this letter, no further action now or we'll send in the debt
will be taken. collectors.
You still haven't paid us for this invoice.
Total Traders
Stiring Street, Castlebury, DY4 2RC
5 You work for Hamlyn Traders. You have been asked to send a copy of the new
internal control handbook to all department heads. You have been asked to send a
memo with the handbook, pointing out that the procedures set out in the handbook
are binding from 1 April 20XX, and the major changes from the previous edition,
which are set out on page 4 of the handbook. The date today is 24 March 20XX.
Using the items below, compose an appropriate memo in the box on the following
page. You will not need to use all of the items but may need to use some more
than once.
24 March 20XX Department Heads Dear Sir Cheers Thank you
AAT student
Accounts Assistant
New internal control manual
The new handbook is binding from 1 April 20XX.
I draw your attention to the changes from the previous edition, which are set out on
page 4 of the handbook.
Please find the new internal control This is the new internal control
manual accompanying this memo. handbook.
Make sure you have read the changes from the previous edition.
Kind regards Everybody
MEMO
To: _________________________________________________
From: _________________________________________________
Date: _________________________________________________
Subject: _________________________________________________
6 You work for Westfield Traders. You have been asked to send a report to James
Fox, head of the sales department, outlining the sales results for the last six months
compared to budget. The overall sales were higher than anticipated, but with some
variances from what was expected on a month-by-month basis.
The date today is 5 July 20XX, and the results are for the six months up to 30 June
20XX.
The results are as follows:
Month Actual sales Budgeted sales

£ £
January 20XX 500,093 500,000
February 20XX 560,943 550,000
March 20XX 650,792 600,000
April 20XX 206,933 250,000
May 20XX 240,044 275,000
June 20XX 350,699 300,000
TOTAL SALES IN PERIOD 2,509,504 2,475,000
Using the items below, compose an appropriate report in the box below. You will
5 July 20XX
Head of Sales Department AAT Student
Hi Jamie Kind regards
RESULTS: The overall sales are £34,504 higher than anticipated for the period,
but there are significant variances on the month-by-month budget, significantly
in March and April (which may indicate an error in cut off between those months)
and June, when sales are significantly more than was predicted.
Conclusion: Overall sales for the period are higher than were budgeted,
however, the pattern of those sales was not as was expected.
Recommendations: I would recommend that some further investigations into
market factors is undertaken to explore the reasons behind the high level of
sales in June and whether we can expect this trend to continue.
Conclusion: Overall sales for the period are lower than were budgeted,
REPORT: SALES IN 6 MONTHS TO 30 JUNE 20XX COMPARED TO BUDGET

£ £
January 20XX 500,093 500,000
February 20XX 560,943 550,000
March 20XX 650,792 600,000
April 20XX 206,933 250,000
May 20XX 240,044 275,000
June 20XX 350,699 300,000

£ £
January 20XX 500,093 500,000
February 20XX 560,943 550,000
March 20XX 650,923 580,000
April 20XX 206,933 250,000
May 20XX 240,044 275,000
June 20XX 350,699 300,000
INTRODUCTION: The sales for the period show a better result than was
budgeted, but there were some surprises in the month-by-month analysis.
WESTFIELD TRADERS
TO:
FROM:
DATE:
Chapter tasks:
answers
107
108 This is a licenced copy of BPP Material, intended solely for the use of the agreed licence holder.
Chapter tasks: answers
Chapter 1
Task 1
Assets Liabilities
Premises Bank loan
Inventory Bank overdraft
Income Expenditure
Sale Advertising cost
Interest received Insurance
Fuel costs
Salaries
Task 2
Cash sale Credit sale

Sale of goods when cash is paid on Sale of goods when payment is made
delivery at a date later than delivery
Sale of services when cash is paid on Sale of services when cash is paid at
delivery of the service a date later than the service was
provided
Cash purchase Credit purchase

Purchase of goods when payment is Purchase of goods when payment is
made at the same time as delivery of made at a date later than delivery
the goods
Purchase of a service when payment
Purchase of services when payment is is made at a later date than the
made at the same time as the service service is provided
is provided
109
110 Chapter tasks: answers
Task 3
1 When income exceeds expenditure, an organisation has made a profit 

2 When expenditure exceeds income, an organisation has made a loss 
3 Income less expenses only equals net profit 
4 Income less cost of sales equals net profit 
5
Organisation Profit Loss
Organisation A 
Organisation B 
Task 4
1 Gross profit for Organisation A and Organisation B
Organisation A: £120,000 – £45,000 = £75,000
Organisation B: £364,600 – £149,400 = £215,200
2 Net profit for Organisation A and Organisation B
Organisation A: £75,000 – £45,000 = £30,000
Organisation B: £215,200 – £55,780 = £159,420
Task 5
(a)
Date: Date: MIDWEST £50 notes 150.00

21.08.XX
BANK
A/C £20 notes 120.00
3958229 £10 notes 20.00
Cash: Account name £5 notes 10.00

Haywood
£312.74 £2 coins
Distributors
£253.89 Paid in by Other coin 12.74
Total: Student Total cash 312.74
£566.63 26-33-20 Cheques, POs 253.89
006924 3958229 Total £ 566.63
(b)
Task 6
1 The following document is entered into the sales day book:
Sales invoice 
2 An organisation will enter a cheque sent to a supplier into:
Cash payments book 
Chapter 3
Task 1
1
Delivery vehicles Motor fuel

expense
£
Vehicle 1 128.42
Vehicle 2 196.55
Vehicle 3 86.09
Vehicle 4 112.42
Total 523.48
2
£
Ink tanks 37.50
Printer paper 18.39
Envelopes 40.91
Pens 7.23
Total 104.03
3 (a) Gross profit = £220,000 – £149,000
£ 71,000
(b) Net profit = £71,000 – £26,800 – £14,600 – £19,100
£ 10,500
4 (a) Gross profit = £534,000 – £302,000
£ 232,000
(b) Net profit = £232,000 – £116,300 – £52,700 – £25,620
£ 37,380
Task 2
(a) The total cost of the hand soap = 12 × £1.25
£ 15
(b) The unit price of a towel = £52.56 ÷ 12
£ 4.38
Task 3
The ratio of the total cost for light and heat to the cost for heat
3:1
Task 4
150 150
The proportion of the total cost made up by tea is ÷
750 150
1
5
Task 5
(a) Gross profit as a percentage of sales = £63,425 ÷ £253,700 × 100
25 %
(b) The increase in the selling price = £569 ÷ 100 × 3
£ 17.07
Task 6
(a) The increase in the selling price = £49 × 1 ÷ 7
£ 7
(b) The increase in the selling price = £25 × 2 ÷ 5
£ 10
Task 7
The average number of miles driven by the delivery vehicles = 4,575 ÷ 3
1,525 miles
Chapter 5
Task 1
Limited companies aim to make a profit
The National Health Service does not exist to make a profit
Task 2
1 Customers of the organisation
Suppliers of the organisation
Other departments of the organisation
2 The accounting function provides information to other departments in the
organisation. This should be complete, accurate and timely to ensure that
managers in the organisation can make better business decisions.
Task 3
THREE from:
 Keeping confidential files locked up
 Not leaving work on your desk when you leave your desk, even for a few moments
 Password-protecting computer files
 Locking your computer screen when you leave your desk, even for a few moments
 Careful disposal of documentation once it is no longer required to be kept
 Giving staff working on sensitive issues private offices
Task 4
Accountants must keep training throughout their careers, to keep up to date with
changes in accounting during their career.
True 
Task 5
The following are sensible social and environmental policies for an organisation to adopt:
 Don't waste electricity 

 Don't buy fuel-inefficient vehicles 
 Don't leave lights on in unoccupied premises 
Task 6
John has seen Rashid smoking in the stationery cupboard. He should report this to
his supervisor.
Karen is visiting Total Traders. Total Traders does have a duty to ensure Karen is
safe during her visit.
Amandeep has asked maintenance to increase the number of electric points at her desk.
They have not yet done so. Amandeep should not use an adaptor brought in from
home to enable her to use all her electronic equipment at the same time.
Task 7
The following three statements are true:
 A member of the accounting function should keep a tidy desk to ensure efficient
working practices.
 A member of the accounting function should communicate with the team about
meeting deadlines.
 A member of the accounting function should communicate with the team to
contribute to their work efficiency.
Task 8
 Go to your colleague and ask her if there is anything you could do to help her
meet her deadline.
Task 9
A person training in an accounting function should discuss training needs with their
supervisor.
A person who wants a job in an accounting function should be punctual .
Chapter 7
Task 1
1 A written form of communication usually sent outside of the organisation is:
A letter 
2 John has been asked to check that everyone in the sales department is able to
attend an important meeting on 25 February 20XX. It is 23 February now. The
most appropriate method of communication for him to use is:
An email 
Task 2
1 Organisations use templates because they support the corporate image.
True 
2 Organisations use a 'house style' for documents because companies are required to
do so by law.
False 
Task 3
Head of sales
Pristine Parts Ltd
Unit 12
Hurst Industrial Park
Hurst HU2 4PY 1 May 20XX
Dear Sir
Availability of part XD
Your company was recommended to us at the Hurst Trade Fair in April.
We are looking for a supplier of the above-named part.
We need to source 200 before 31 May. Would you be able to supply them to
us?
If you have the part available we can provide references and would very much
like to discuss terms with you.
Yours faithfully
AAT student
Accounts Assistant
Task 4
From: AATstudent@brownbrothers.com
To: daviddunn@brownbrothers.com
Subject: Annual Staff Training: Confirmation of attendance
Hello David
Please accept this email as confirmation of my attendance at the staff

training on 14 and 15 May. As it is over two days I request overnight
accommodation on 14 May.
Kind regards
AAT student
Test your learning:
answers
119
Test your learning: answers
Chapter 2
1 Organisations have assets, liabilities, income and expenditure.
(a)

An item spent by the company. Expenditure
An item earned by the company. Income
(b)

An amount paid to purchase motor Expenditure
insurance.
A cash sale. Income
2 When an organisation sells goods to a customer and the customer pays for the goods
three weeks after the goods are delivered, this is known as a credit sale.
When an organisation buys services from a person and pays that person on the day
the service is carried out, this is known as a cash purchase.
3 An organisation gives a receipt to a customer for goods bought for cash.
An organisation receives a credit note from a supplier listing items returned to
the supplier and showing the amount refunded.
An organisation receives a purchase order from a customer requesting that
the goods specified in the document be sold to the customer.
121
122 Test your learning: answers
4 (a) A cheque received from a customer 
(b) Invoice number SI9933 sent by AB Supplies 
(c)
Weaver Traders
Unit 12, Industrial Park, Beeding, OS17 9DP
Invoice number: WT00943 24 March 20XX
To: Tharango Ltd
£
8 items of product SS2 @ £3.60 each 28.80
VAT @ 20% 5.76
TOTAL 34.56
Book of prime entry Sales day book
Gillespie Enterprises
35 High Road, Steeding ST2 9RT
INVOICE NUMBER: 3546

To: Weaver Traders, Unit 12, Industrial Park, Beeding
£
4 items of product XX @ £0.99 each 3.96
VAT @ 20% 0.79
Total 4.75
Book of prime entry Purchases day book
National Bank
High Street, Beeding 14-24-19
10534433
Date 14 March 20XX
Pay Gillespie Enterprises only

£456.24
Four hundred and fifty six pounds and twenty four pence
for Weaver Traders
400592 142419 10534433
Book of prime entry Cash payments book
5 In an alphanumerical coding system the code must consist of numbers followed by

letters.
False  The code can be letters followed by numbers.
6 Purchase invoices can be entered into the system together.
True 
7 (a) 17 April 20XX 

(b) £150 
(c) £309.35 
(d) A paying-in slip should be signed and dated by the person who is paying in
the money.
True 
National Bank
44830113
Date 16 April 20XY
Pay DK Traders
£64.87
Sixty four pounds and eighty seven pence only
100346 148851 44830113
National Bank
44830113
Date 16 April 20XY
Pay SG Company
£464.82
Four hundred and sixty four pounds and
eighty two pence only
100347 148851 44830113
9 (a) Income less cost of sales equals gross profit.
True 
(b) (i) Gross profit = £377,800 – £184,900
£ 192,900
(ii) Net profit = £192,900 – £94,500
£ 98,400
Chapter 4
1 (a) The average price of each car = £958.30 ÷ 2
£ 479.15
(b) Cash transaction
2 (a) (i) Gross profit = £577,500 – £285,900
£ 291,600
(ii) Net profit = £291,600 – £197,583
£ 94,017
(b) Net profit as a percentage of sales = £94,017 ÷ £577,500 × 100
16.28 %
3 (a) The increase in selling price for product number 52 = £17 × 1 ÷ 5
£ 3.40
(b) The increase in selling price for product number 12 = £18 ÷ 100 × 6
£ 1.08
4 (a) The increase in selling price for product number 104 = £62 × 1 ÷ 8
£ 7.75
(b) The increase in selling price for product number AZ25 = £9 ÷ 100 × 6
£ 0.54
5 (a) Sales at Outlet 4
Sales per outlet £
Outlet 1 250,368.25
Outlet 2 199,473.79
Outlet 3 302,699.39
Outlet 4
375,210.17
Total 1,127,751.60
(b) Average sales per outlet = 1,127,751.60 ÷ 4
£ 281,937.90
(c) Sales from menswear
Item £
Menswear
76,203
Ladieswear 61,506
Childrenswear 62,595
Household fabrics 50,076
Total 250,380
(d) The ratio of total sales at Outlet 1 to sales of childrenswear at Outlet 1
4:1
(e) The proportion that household fabrics is of the total sales at Outlet 1
1
5
Working
50,076 50,076 1
÷ =
250,380 50,076 5
6 (a) The costs at Premises 2
Costs per premises £
Premises 1 50,924.72
Premises 2
51,125.22
Total 102,049.94
(b) Average cost per premises = 102,049.94 ÷ 2
£ 51,024.97
(c) The ratio of total costs to administration costs
5:1
Chapter 6
1 (a) A sole trader is a private sector organisation.
(b) The police service does not aim to make a

profit.
2 (a) Detailed expenditure analysis provided by the accounting department is used

by the general public to make business decisions.
False 
(b) An example of a customer of the accounting department is the organisation's

suppliers.
True 
3 Information about pay increases held on the computer should be kept
in a password-protected file with access restricted to those who need

the information .
A supplier of the organisation where you work asks you who the main customers of
the organisation are. You reply:
'I am sorry but I cannot give you any information as it is confidential' .
4 Accountants should behave with integrity in all circumstances.
True 
Organisations can behave in a socially irresponsible manner because they have no

responsibility to the general public.
False 
5 Organisations should observe health and safety guidelines.
(a) An organisation must provide a safe environment for
anyone on the premises .
(b) An employee has a duty not to put him or herself in danger at work.
True 
It is important to keep a tidy desk to ensure you work efficiently.
True 
6 It is important to understand the skills and attributes needed by a finance

professional.
(a) A finance professional should communicate well and be reliable .
(b) Training for the AAT qualification is the only appropriate method of formal
training for a finance professional.
False 
One reason somebody training to be a finance professional discusses training
needs with their supervisor is so that the supervisor can make
recommendations.
True 
7 It is important to work effectively. You should take the following action.
(a)  Ask your colleague if she is able to spare any time to help you meet
the deadline.
(b) Planning is very important to help you meet your deadlines. The following
document is a planning aid.
 Schedule
Chapter 8
1 (a) Organisations use templates to present a positive, consistent view of the
organisation.
True 
Organisations use a house style for documents because it helps customers
understand their core values.
True 
(b) The most appropriate form of communication to accompany the monthly

results is:
 Memo

Email
A written form of communication usually sent outside of the

Letter
organisation.

both within and outside of the organisation. Report
From: AATstudent@abccompany.com
To: benseales@abccompany.com
Subject: Budgets
Hello Ben
Please could you confirm whether you received the

budgets I sent to you yesterday?
Kind regards
AAT student
Total Traders
Stiring Street, Castlebury, DY4 2RC
T Parker
Lyme Ltd
High Road
Thwaite
YK2 6PY
6 July 20XX
Dear Mr Parker
Overdue payment for invoice 16360
As discussed previously with you on the telephone, the above debt is seriously
overdue.
Unfortunately if payment is not received by us within seven days of the date of

this letter, we shall have to hand this matter over to our debt collectors, ABC
Collection Ltd.
If payment is received within seven days of the date of this letter, no further
action will be taken.
Yours sincerely
AAT student
Accounts Assistant
MEMO
To: Department Heads
From: AAT student, Accounts Assistant
Date: 24 March 20XX
Subject: New internal control manual
Please find the new internal control manual accompanying this memo.
I draw your attention to the changes from the previous edition, which are set
out on page 4 of the handbook.
The new handbook is binding from 1 April 20XX.
Thank you
6 Tutorial note. When answering the question it was important that you selected the
sales table from the options provided which matched the table in the question
scenario. You should have noticed that of the two tables provided, only the first one
had the correct figures for total budgeted sales in the period.
WESTFIELD TRADERS
REPORT: SALES IN 6 MONTHS TO 30 JUNE 20XX COMPARED TO BUDGET
TO: Head of Sales Department
FROM: AAT Student
DATE: 5 July 20XX
INTRODUCTION: The sales for the period show a better result than was
budgeted, but there were some surprises in the month-by-month analysis.
RESULTS: The overall sales are £34,504 higher than anticipated for the
period, but there are significant variances on the month-by-month budget,
significantly in March and April (which may indicate an error in cut-off
between those months) and June, when sales are significantly more than was
predicted.

£ £
January 20XX 500,093 500,000
February 20XX 560,943 550,000
March 20XX 650,792 600,000
April 20XX 206,933 250,000
May 20XX 240,044 275,000
June 20XX 350,699 300,000
Conclusion: Overall sales for the period are higher than were budgeted,
Recommendations: I would recommend that some further investigations into
market factors is undertaken to explore the reasons behind the high level of
sales in June and whether we can expect this trend to continue.
Practice assessments
135
AAT sample assessment 1
1.1 Organisations have assets, liabilities, income and expenditure.

(a) Which of the following statements describes an asset? Place a tick () in the
appropriate box.
An asset is something an organisation owes.
An asset is something an organisation owns.
An asset is something an organisation earns.
(b) Place a tick () in the appropriate column of the table below to show
whether each of the items listed is an example of an asset, a liability,
income or expenditure. You should not place more than one tick against
each item.
Item Asset Liability Income Expenditure

Sales
Wages
Machinery
1.2 It is important to understand the terminology used when buying and selling goods
for cash and on credit.
Insert an item from the following list into the right-hand column of the table
below, to identify the term described. You will not need to use all of the items.
 Cash sales
 Cash purchases
 Credit sales
 Credit purchases
 A debtor
 A creditor

A transaction to purchase goods when payment is
made immediately.
Someone who owes money to an organisation for
goods sold by the organisation.
137
138 AAT sample assessment 1
1.3 Your organisation purchased 24 boxes of printer paper at £4.65 per box from
Brookes Stationers.
(a) What is the total cost of the printer paper?
Brookes Stationers agreed to issue an invoice asking your organisation to pay for the
printer paper within 30 days.
(b) Is the purchase of the printer paper:
(i) A cash transaction; or
(ii) A credit transaction?
1.4 Organisations issue and receive different documents when buying and selling goods.
Complete the sentences below by inserting the most appropriate option from the
following list:
 a purchases order
 a receipt
 an invoice
 a statement of account
An organisation sends to request payment from a customer

who has bought goods on credit.
An organisation issues to a customer who has paid for goods

in cash.
An organisation sends to a supplier detailing the goods it

wants to buy.
1.5 You work for Latif Traders. You are preparing to record some documents in the
(a) Select which ONE of the documents below will be entered in the purchases
returns day book.
An invoice sent by a supplier.
A credit note sent by a supplier.
A cheque sent to a supplier.
(b) Select which ONE of the documents below will be entered in the cash
receipts book.
A cash payments listing.
A cheque sent by a customer.
A cheque sent to a supplier.
(c) Insert an item from the following list into the bottom right-hand box of each
document to show which book of prime entry that document will be entered
into. You will not need to use all of the items.
 Sales day book
Pebbles Printing
5 Valley Road, Redport, RE7 9PP
VAT Registration No. 217 8621 00
Invoice No. 249
To: Latif Traders 21 July 20XX

24 Lower Street,
Redport, RE4 7GD
£
80 catalogues @ £1.40 each 112.00
VAT @ 20% 22.40
Total 134.40
Terms: 30 days net Book of prime entry
Latif Traders
24 Lower Street, Redport, RE4 7GD
Credit note No. 28
To: GBH Ltd 24 July 20XX

47 Bissel Street,
Redport, RE6 8FR
£
4 items of product XYZ @ £6 each 24.00
VAT @ 20% 4.80
Total 28.80
Latif Traders
Cheques to suppliers listing
25 July 20XX
£
F Adams and Co 200.00
HR Electrics 65.90
______
Total 265.90
Book of prime entry
1.6 Some organisations use coding within the accounting records.

Show whether the following statement is True or False.
In an alphabetical coding system all codes consist of letters and numbers.
True
False
1.7 Your organisation uses a batch processing system to enter purchases invoices into
In a batch processing system, purchases invoices are entered into the accounting
records as soon as they are received.
True
False
1.8 On 24 July 20XX you have been asked to pay the following items into Bond Ltd's
bank account:
 Two  £20 notes
 Five  £5 notes
 Six  £2 coins
 Eight  10p coins
 One  cheque for £350.00
(a) Complete the paying-in slip below. Make sure you enter all the figures in
pounds and pence, for example 16.00, 2.50 and 0.75.
Date: City Bank plc £50 notes

Redport £20 notes
£10 notes
Account: £5 notes
Bond Ltd £2 coins
£1 coins
Paid in by: Other coin
AAT student Total cash

10678465 Total £
(b) Show whether the following statement is True or False.

Paying-in slips should be signed by the person who pays the items into the
bank.
True
False
1.9 It is important to ensure cheques sent to suppliers are completed properly.

On 17 July 20XX you are preparing a cheque for £178.90 to send to a supplier,
Dawsons Electrics.
on the cheque?
July 20XX
17 July 20XX
17 July
(b) Which ONE of the following options shows the payee as it should be written
on the cheque?
Supplier
Dewson
Dawsons Electrics
(c) Which ONE of the following options shows the amount in words as it should
be written on the cheque?
Seventeen hundred and eight pounds and ninety pence
One hundred and seventy-eight pounds and ninety pence
Seventeen pounds and eighty-nine pence
(d) Show whether the following statement is True or False.

If the amount in words on a cheque is different from the amount in figures, the
cheque is still correct.
True
False
1.10 At the end of every year your organisation calculates the profit or loss for the year.
(a) Complete the sentence below by selecting the most appropriate option from
the following list.
 equals
 is more than
 is less than
When income expenditure this results in a profit.
Last year your organisation recorded income and expenditure as shown in the table
below:

Sales 120,000
Wages 16,200
calculations:
(c) Use your answer from (b)(i) to calculate gross profit as a percentage of sales.
If it is appropriate make sure you give your answer to 2 decimal places.
1.11 An organisation is reviewing the selling price of some of its products.

by 6%.
by 1/8 (one-eighth).
If necessary, you may use the space below for your workings.
1.12 Your organisation keeps detailed records of expenses.
Motor fuel expenses for each of four delivery vehicles are shown in the table below.
(a) Complete the table to show the total expense for motor fuel.
Delivery vehicles Motor fuel expense

£
Vehicle 1 100.68
Vehicle 2 96.45
Vehicle 3 88.76
Vehicle 4 103.83
Total
(b) Calculate the average motor fuel expense per vehicle.

£
Expenses relating to items of stationery are shown in the table below.

(c) Complete the table to show the expense for envelopes.

£
Ink tanks 25.00
Printer paper 23.90
Envelopes
Pens 11.60
Total 75.00
(d) Which of the following is the ratio of the total expense for stationery items to
the expense for ink tanks?
 2:1
 3:1
 4:1
2.1 There are different types of organisation.

The National Health Service is a

organisation.
 private sector
 public sector
 charitable
A charity aim to make a profit.
 does
 does not
2.2 It is important to understand the role of the accounting department within an
organisation.
Show whether the following statements are True or False.
Information provided by the accounting department is used by managers within the
organisation to make better business decisions.
True
False
An example of a customer of the accounting department is people living close to the
organisation.
True
False
2.3 You work for Orchard Fruits and have been asked to send an email to Sarah Clarke,
your manager, confirming your attendance at annual staff training on 10 and 11
July and requesting overnight accommodation on 10 July.
Using the items at the bottom of the page, compose an appropriate email in the
template below. You will not need to use all of the items.
From: AATstudent@orchard.com
To:
Subject:
Susieclare@orchard.com Confirmation
Annual Staff Training: Confirmation of attendance Hi Susie
Please accept this email as confirmation of my

attendance at the staff training on 10 and 11 July. As it Kind regards
is over two days I request overnight accommodation on AAT student
10 July.
Sarahclarke@orchard.com Hello Sarah
I am confirming I want to attend in July and need to stay Cheers

overnight. AAT student
2.4 Organisations communicate using different styles and formats.

(a) Show whether the following statements are True or False.
Organisations use templates because they have to be used by law.
True
False
Organisations use a 'house style' for documents because it supports the

corporate image.
True
False
You have been asked to send a price list to a customer.

(b) Select the most appropriate form of communication to accompany the price
list.
Letter
Memo
Report
2.5 It is important to observe confidentiality.

Information about staff wages held on the computer should be kept:
 in an area where all employees have access.

 in a password-protected file, with access restricted to those who need the
information.
Your sister is a customer of the organisation where you work. She asks you how
much profit the organisation is making. You reply:
 'I cannot give you any information as it is confidential.'

 'As you are a customer I can tell you that they made £1 million profit.'
2.6 Finance professionals and organisations have a duty to behave in a professional and
socially responsible manner.
Complete each sentence in the following table by inserting the most appropriate
item from the list below. You will not need to use all of the options.
Sentence Item
Once accountants are qualified…
An accountant should always…
An organisation should adopt socially

responsible practices because…
An example of an socially responsible
policy is to …
 … they do not need to complete any further training.

 … they must complete sufficient training to maintain professional competence.
 … behave with honesty and integrity.
 … have monthly staff parties.
 … it has a duty to act ethically.
 … ensure lights are switched off when the offices are closed.
2.7 Organisations should observe health and safety guidelines.
below each box.
An organisation to provide a safe environment for
has a duty staff only.

has a choice whether visitors only.
does not have staff and visitors.
(b) Show whether the following statements are True or False.
An employee has a duty to report all hazards to a manager.
True
False
A tidy desk will encourage you to work more efficiently.
True
False
2.8 It is important to understand the skills and attributes needed by a finance

professional.
next to each box.
have good communication skills.
A finance professional should have good creative skills.
professional attitude.
and be able to show a
casual attitude.

A finance professional can acquire knowledge by attending a training course.
True
False
It is important for somebody who is currently training to be a finance

professional to meet regularly with their manager to discuss their specific
training needs.
True
False
2.9 It is important to work effectively.
It is Friday lunchtime and you have completed all of your tasks for the week.
Your colleague has just received a report. The report is late and she is very
busy with other work. Consequently it is unlikely she will be able to complete
all of her tasks.
Start tidying your desk to make sure it is clear for next week.
Go to your colleague and ask her if there is anything you could do to

help her.
Go home early.

Which ONE of the following documents below is a planning aid?
Expenses sheet
To-do list
Holiday request form
It is important to use an appropriate form of communication at all times.

(b) Link the description to the appropriate form of communication by drawing a
line from each left-hand box to the appropriate right-hand box.

Letter
both within and outside of the organisation.

another within the same organisation. Email
A written form of communication usually sent outside of

the organisation. Memo
2.10
 You work for Samuel Motors.
 You have been asked to write a letter to a customer, Sandra Robinson, at
Ashdowns, Fylde Road, Mythop. FY6 2DP.
 You are to return a cheque received this morning, 6 July 20XX.
 The cheque is in payment of invoice 236 for £35.00.
 The cheque was dated incorrectly and will have to be returned for a new one
to be issued.
 You have a good relationship with Ashdowns, who always pay on time.
Using the items below, compose an appropriate letter in the box on the next page.
6 July 20XX Dear Sandra Dear Sir Yours faithfully Yours sincerely
Cheque for £35.00 for AAT student S Robinson

invoice 236 Accounts Assistant Ashdowns
Fylde Road
Mythop
Many thanks for your cheque which we received this FY6 2DP
morning.
Unfortunately the cheque was dated incorrectly and therefore we would ask that you
send a new cheque as soon as possible.
Many thanks for your co-operation. We received a check from you.
You dated the cheque wrong and so we need another cheque. Ashdowns
Mythop
Samuel Motors
Back Henry Street, Thornbury, FY7 1XY
AAT sample assessment 1: answers
1.1 (a) An asset is something an organisation owns. 

(b)
Sales 
Wages 
Machinery 
1.2
A transaction to purchase goods when payment is Cash purchase
made immediately.
Someone who owes money to an organisation for A debtor
goods sold by the organisation.
1.3 (a) The total cost of the printer paper
£ 111.60
(b) The purchase of the printer paper is a:
Credit transaction
1.4 An organisation sends an invoice to request payment from a customer

who has bought goods on credit.
An organisation issues a receipt to a customer who has paid for goods in

cash.
An organisation sends a purchases order to a supplier detailing the goods it

wants to buy.
153
154 AAT sample assessment 1: answers
1.5 (a) A credit note sent by a supplier 

(b) A cheque sent by a customer 
(c)
Pebbles Printing
5 Valley Road, Redport, RE7 9PP
Invoice No. 249
To: Latif Traders 21 July 20XX

24 Lower Street,
Redport, RE4 7GD
£
80 catalogues @ £1.40 each 112.00
VAT @ 20% 22.40
Total 134.40
Terms: 30 days net Book of prime entry: Purchases day book
Latif Traders
24 Lower Street, Redport, RE4 7GD
Credit note No. 28
To: GBH Ltd 24 July 20XX

Bissel Street,
Redport, RE6 8FR
£
4 items of product XYZ @ £6 each 24.00
VAT @ 20% 4.80
Total 28.80
Terms: 30 days net Book of prime entry: Sales returns day book
Latif Traders
Cheques to suppliers listing
25 July 20XX
£
F Adams and Co 200.00
HR Electrics 65.90
Total 265.90
Book of prime entry: Cash payments book
1.6 In an alphabetical coding system all codes consist of letters and numbers.
False 
1.7 In a batch processing system, purchases invoices are entered into the accounting
records as soon as they are received.
False 
1.8 (a)
Date: 24 July City Bank plc £50 notes

20XX £20 notes 40.00
Redport
£10 notes
Account: £5 notes 25.00

£2 coins 12.00
Bond Ltd
£1 coins
Paid in by Other coin 0.80
AAT Student Total cash 77.80
30-45-22 Cheques,
350.00
10678465 POs
Total £ 427.80
(b) Paying-in slips should be signed by the person who pays the items into the
bank.
True 
1.9 (a) 17 July 20XX 
(b) Dawsons Electrics 
(c) One hundred and seventy eight pounds and ninety pence 
(d) If the amount in words on a cheque is different from the amount in figures the
cheque is still correct.
False 
1.10 (a) When income is more than expenditure this results in a profit.
(b) (i) Gross profit
£ 48,000
(ii) Net profit
£ 7,520
(c) Gross profit as a percentage of sales
40 %
1.11 (a) The increase in selling price for product number 256:
£ 1.44
(b) The increase in selling price for product number 347:
£ 2.25
1.12 (a)
Delivery vehicles Motor fuel expense

£
Vehicle 1 100.68
Vehicle 2 96.45
Vehicle 3 88.76
Vehicle 4 103.83
Total 389.72
(b) The average motor fuel expense per vehicle:
£ 97.43
(c)

£
Ink tanks 25.00
Printer paper 23.90
Envelopes 14.50
Pens 11.60
Total 75.00
(d) Ratio of total expense for stationery items to the expense for ink tanks is:
3:1
2.1 The National Health Service is a public sector organisation.
A charity does not aim to make a profit.
2.2 Information provided by the accounting department is used by managers within the
organisation to make better business decisions.
True 
An example of a customer of the accounting department is people living close to the
organisation.
False 
2.3
From: AATstudent@orchard.com
To: Sarahclarke@orchard.com
Subject: Annual Staff Training: Confirmation of attendance
Hello Sarah
Please accept this email as confirmation of my attendance at the

staff training on 10 and 11 July. As it is over two days I request
overnight accommodation on the 10 July.
Kind regards
AAT Student
2.4 (a) Organisations use templates because they have to be used by law.
False 
Organisations use a 'house style' for documents because it supports the
corporate image.
True 
(b) The most appropriate form of communication to accompany a price list is:
Letter 
2.5 Information about staff wages held on the computer should be kept
in a password-protected file with access restricted to those who need the

information .
Your sister is a customer of the organisation where you work. She asks you how
much profit the organisation is making. You reply:
'I cannot give you any information as it is confidential' .
2.6
Sentence Item
… they must complete sufficient training
to maintain their professional competence
An accountant should always… … behave with honesty and integrity

… it has a duty to act ethically
An example of a socially responsible … ensure lights are switched off when the
policy is to … offices are closed
2.7 (a) An organisation has a duty to provide a safe environment for staff and visitors .
(b) An employee has a duty to report all hazards to a manager.
True 
A tidy desk will encourage you to work more efficiently.
True 
2.8 (a) A finance professional should have good communication skills and be
able to show a professional attitude .
(b) A finance professional can acquire knowledge by attending a training course.
True 
It is important for somebody who is currently training to be a finance
professional to meet regularly with their manager to discuss their specific
training needs.
True 
2.9 (a)  Go to your colleague and ask her if there is anything you could do to
help her
 To-do list
(b)

Letter

Email
A written form of communication usually sent outside of

Memo
the organisation.
2.10
Samuel Motors
Back Henry Street, Thornbury, FY7 1XY
S Robinson
Ashdowns
Fylde Road
Mythop
FY6 2DP
6 July 20XX
Dear Sandra
Cheque for £35.00 for Invoice 236
Many thanks for your cheque which we received this morning.
Unfortunately the cheque was dated incorrectly and therefore we would ask
that you send a new cheque as soon as possible.
Yours sincerely,
AAT student
Accounts Assistant
AAT sample assessment 2

(a) Complete the following sentences by selecting the most appropriate option.
is something an organisation owes.
is something an organisation owns.
Options
An asset
A liability
Income
Expenditure
(b) Place a tick in the appropriate column of the table to show whether each of
the items is an example of an asset, a liability, income or expenditure.

Sales
Electricity
Use the appropriate term to identify the item described.
Description Term
A transaction to sell goods when payment is made
immediately.
A transaction to purchase services when payment
is made a month later.
List of terms
Cash sales Credit purchases
Cash purchases A debtor
Credit sales A creditor
1.3 Your organisation sold 128 boxes of oranges on credit for £2.62 per box.
161
(a) What is the total selling price of the oranges?
(b) When will your organisation receive payment for the oranges?
Before the oranges are sold

At the same time as the oranges are sold
Some time after the oranges are sold
Link each document below to the appropriate description by drawing a line from
the left-hand box to the right-hand box.
Document Description
A document sent to a creditor accompanying a
Sales invoice
payment, listing items included in that payment.
Statement of A document sent to a customer listing recent

account transactions and requesting payment of the amount
owed by a customer.
A document sent to a customer listing goods sold and

Remittance advice
requesting payment.
1.5 You work for Gould Ltd. You are preparing to record some documents in the books
of prime entry.
(a) Select which ONE of the documents below will be entered in the sales day
book.
An invoice sent to a customer
A credit note sent to a customer
A cheque sent by a customer
receipts book.
A cash payments listing
A cheque sent to a supplier
(c) Place the appropriate item in each document below to show which book of
prime entry that document will be entered into. You will need not to use all
of the items.
Bateman Retail
19 White Lane, Conglefield, WA4 6TX
Invoice No. 2045
To: Gould Ltd 19 July 20XX

3 Granby Road,
Sailport SS1 2HS
£
80 panels @ £4.35 each 348.00
VAT @ 20% 69.60
Total 417.60
Gould Ltd
3 Granby Road, Sailport, SS1 2HS
Credit note No. CN620
To: Mayfield Associates 10 July 20XX

22 Lystral Lane,
Fleetbury FY5 2DT
£
20 items of product AB2 @ £5.70 each 114.00
VAT @ 20% 22.80
Total 136.80
Book of prime entry
Gould Ltd
Cash payments listing
20 July 20XX
£
LH Hallsworth – for repairs to roof 67.00
Express Cars – taxi fare 35.60
Total 102.60
Book of prime entry
List items
Cash payments book
Purchases returns day book
Cash receipts book
Sales day book
Purchases day book
Sales returns day book

An organisation has a code for one of its debtors (customers) as 100654.
Which ONE of the following options identifies the type of code used by the
organisation for its debtors?
Alphabetical
Numerical
Alphanumerical
1.7 Your organisation uses a batch processing system to enter purchases invoices into
In a batch processing system a group of purchases invoices are entered into the
accounting records at the same time.
True
False
1.8 On 24 July 20XX you have been asked to pay the following items into Fraser Ltd's
bank account.
Three £50 notes
Five £10 notes
Six £1 coins
Eleven 10p coins
One cheque for £270.00
(a) Enter these items and the date onto the paying-in slip below. Make sure you
enter all figures in pounds and pence. For example, 16.00, 2.50 and 0.75.
Date: County Bank plc £50 notes
Northport £20 notes

£10 notes
Account £5 notes
Fraser Ltd £2 coin
£1 coin
Total cash
10672348 Total £

The person who should sign the 'Paid in by' section of the paying-in slip
should be the bank cashier.
True
False

On 11 July 20XX you are preparing a cheque for £1,347.09 to send to a supplier,
Dawes Paints.
on the cheque?
July 20XX
11 July 20XX
1 July 20XX
on the cheque?
Supplier
Drawes
Dawes Paints
(c) Which ONE of the following options shows the amount in words as it should
One thousand three hundred and forty-seven pounds and ninety pence
One thousand three hundred and forty-seven pounds and nine pence
One thousand three hundred and forty-seven pounds only

The amount in words on a cheque should match exactly the amount in figures.
True
False
(a) Complete the following sentence by selecting the most appropriate option.
When income expenditure this results in a profit.
equals
is more than
is less than
below.

Sales 260,000
Wages 51,810
calculations:
(c) Using your answer from (b)(ii) calculate net profit as a percentage of sales.
If your answer is not a whole number make sure you give your answer to
2 decimal places.
by 15%.
The current selling price of product number 256 is £152.00. This is to be

increased by ¼ (one quarter).
1.12 Your organisation keeps detailed records of sales by region.
Sales for last month are shown in the table below.

(a) Complete the table to show the total sales for the last month.
Region Sales
£
North 5,683.68
South 25,289.02
East 3,672.70
West 2,455.00
Total
(b) Calculate the average sales per region for the last month.
Your organisation keeps detailed records of expenses by store.

Expenses relating to different stores are shown in the table below.
(c) Complete the table to show the expenses for store S214.
Store Code Expenses

£
N001 25,680.00
B010 34,210.90
S214
J967 6,420.00
Total 109,546.33
(d) Calculate the ratio of the expenses for store N001 to the expenses for store
J967.

Place a tick in the appropriate column of the table below to show whether each of
the organisations listed is in the public sector, private sector or charitable sector.
Organisation Public Private Charitable

sector sector sector
A shop selling goods specifically to
raise funds for sick children
The local police service

organisation.
Information produced by the accounting department will only be used by managers
in the accounting department.
True
False
Customers of the accounting department are always from outside of the

organisation.
True
False
2.3 You work for Parry Stores and have been asked to send an email to Mohan Singh,
your manager, confirming your verbal request for annual leave from Monday 4 July
to Friday 15 July. You are also required to state the remaining number of days you
have left of your annual leave entitlement.
Use the items below to produce an appropriate email. You will not need to use all
of the items.
From: AATstudent@parrystores.com
To:
Subject:
Further to our conversation I wish to request annual leave from Cheers

Monday 4 July to Friday 15 July. This will result in me having 4 AAT Student
further days of annual leave entitlement remaining.
I will be taking my holiday from 4 July to 15 July. Hello Mary
Hello Mohan 4 July to 15 July MNsingh@Barrys.com Kind regards

AAT Student
Msingh@parrystores.com Annual Leave Request

Organisations use templates to save time as staff only have to input the key
information.
True
False
Organisations use a 'house style' for documents because it ensures the image
of the organisation is correctly portrayed.
True
False
You have received an electronic file containing data from the production department
and have been asked to query some of the figures. This is a very urgent task as the
figures have to be agreed by the end of today.
(b) Select the most appropriate form of communication.
Letter
Report
Email

(a) Show whether the following statement is True or False.
Confidential information can be left on your desk as long as you are not going
to be away from your desk for longer than one hour.
True
False
(b) Complete the following sentence by selecting the most appropriate option.
You lock your computer when you leave your desk.
 should
 should not
2.6 Finance professionals and organisations have a duty to behave with integrity and
act in a socially responsible manner.
Complete the statements by selecting the TWO appropriate items from the lists
below. You will not need to use all of the items.
Statement Item
A finance professional could renew

job-related technical knowledge by
 attending an accountancy update course.

 attending a language course.
 reading the financial newspapers.
 reading the sports section of the newspaper.
Statement Item
Examples of environmentally
responsible policies are
 using double-sided printing to save paper.

 offering free tea and coffee to staff.
 offering flexi-time working to staff.
 asking staff to use public transport wherever possible.

(a) Complete the following sentences by selecting the most appropriate item
from the list under each box.
An organisation is legally required to provide a
warm
quiet
safe
environment
.
only for warehouse staff
only for office staff
for all staff and visitors
If an employee sees a hazard they required to report

it.
List items
are not
are always
are sometimes
Ensuring your desk is kept clean and tidy helps you to work more efficiently
and promotes a better image to visitors.
True
False
2.8 It is important to understand the skills needed by a finance professional.

(a) Complete the following sentences by selecting the most appropriate option.
have good design skills
A finance professional should
have good numeracy skills
responsible
and show a attitude.
fun-loving
(b) Complete the statement by selecting the TWO appropriate items from the
lists below. You will not need to use all of the items.
Statement Item
A trainee finance professional should
List items
 show a willingness to learn.
 not discuss their training needs with anyone.
 display a careless attitude.
 discuss their training needs with their manager.

It is Monday morning and you arrive at work to find there has been a water leak
and all of the desks in the office except yours have been covered in water. Your
colleagues are understandably upset.
(a) Which ONE of the following actions should you take?
Ignore the situation and open your mail
Carry on with your work even though it is not urgent
Offer to help your colleagues

(b) Which ONE of the following documents below is a planning aid?
A statement of profit or loss
A schedule of work
An invoice

(c) Link the description to the appropriate form of communicating by drawing a
line from the left-hand box to the right-hand box.
A non-electronic form of communication sent to a supplier

Email
requesting information about their new products.
An electronic form of communication to be sent to the whole

company advising them of the year-end accounting procedures. Letter
A non-electronic form of communication sent to the sales

department advising them of new reporting procedures. Memo
2.10
 You work for Downs Electrics.
 You have been asked to write a letter to a supplier Clare Richmond at Capers,
Maine Road, Newberry, BB6 2RP.
 You are to request a credit note for faulty goods received by Downs Electrics
on 12 July 20XX and returned to Capers on 17 July 20XX.
 The faulty goods were 25 boxes of Product AB3 and were invoiced at
£3,701.25 on invoice number 3629.
 Although it is unusual to receive faulty goods from Capers, you are keen to get
a credit note as the amount of £3,701.25 is shown as owing on the
statement just received from Capers.
 Today's date is 26 July 20XX.
Use the items below to produce an appropriate letter to Clare Richmond. You will
Downs Electrics
Bradwell Road, Darsley, SS7 1BY
Dear Clare Yours sincerely Yours faithfully
Dear Sir 26 July 20XX C Richmond

Capers
AAT Student Maine Road
Accounts Newberry
Assistant BB6 2RP
The goods we received from you were no good. Capsters

Oldberry
Return of Goods – request for credit note.
If you need to discuss the situation further do not hesitate to contact me.
We want a credit note for these so we don't have to pay the amount on the statement.
On 12 July 20XX we received 25 boxes of Product AB3 as detailed on your invoice

3629. Unfortunately the quality of these products was not acceptable and we therefore
returned them to you on 17 July 20XX.
We have just received a statement from you requesting payment of £3,701.25 for these
goods and therefore ask that a credit note is raised as soon as possible for these items.
AAT sample assessment 2: answers
1.1 (a)
A liability
is something an organisation owes.
(b)
Sales 
Electricity 
1.2
Description Term
A transaction to sell goods when payment is made Cash sales
immediately.
A transaction to purchase services when payment Credit purchases
is made a month later.
1.3 (a) The total selling price of the oranges is:
£ 335.36
(b) Your organisation will receive payment for the oranges:
Some time after the oranges are sold.
177
1.4
Sales invoice A document sent to a creditor accompanying a payment

listing items included in that payment.
Statement of A document sent to a customer listing recent transactions and

account requesting payment of the amount owed by the customer.
Remittance A document sent to a customer listing goods sold and

advice requesting payment.
1.5 (a) An invoice sent to a customer 

(c)
Bateman Retail
19 White Lane, Conglefield, WA4 6TX
Invoice No. 2045
To: Gould Ltd 19 July 20XX

3 Granby Road,
Sailport SS1 2HS
£
80 panels @ £4.35 each 348.00
VAT @ 20% 69.60
Total 417.60
Terms: 30 days net

Gould Ltd
3 Granby Road, Sailport, SS1 2HS
Credit note No. CN620
To: Mayfield Associates 10 July 20XX

22 Lystral Lane,
Fleetbury FY5 2DT
£
20 items of product AB2 @ £5.70 each 114.00
VAT @ 20% 22.80
Total 136.80
Book of prime entry Sales returns day book
Gould Ltd
Cash payments listing
20 July 20XX
£
LH Hallsworth – for repairs to roof 67.00
Express Cars – taxi fare 35.60
Total 102.60
1.6 Numerical 
1.7 In a batch processing system a group of purchases invoices are entered into the
accounting records at the same time.
True 
1.8 (a)
Date: County Bank plc £50 notes 150.00

Northport
24 July 20XX £20 notes
£10 notes 50.00
Account £5 notes
Fraser Ltd £2 coin
£1 coin 6.00
Paid in by Other coin 1.10
Total cash 207.10
40-29-67 Cheques, POs 270.00
10672348
Total £ 477.10
(b) The person who should sign the 'Paid in by' section of the paying-in slip
should be the bank cashier.
False 
1.9 (a) 11 July 20XX 

(b) Dawes Paints 
(c) One thousand three hundred and forty-seven pounds and nine pence 
(d) The amount in words on a cheque should match exactly the amount in figures.
True 
1.10 (a) When income is more than expenditure this results in a profit.
(b) (i) Gross profit is:
£ 146,000
(ii) Net profit is:
£ 67,600
(c) Net profit as a percentage of sales
26 %
1.11 (a) The increase in selling price for product number 361
£ 3.60
(b) The increase in selling price for product number 256
£ 38
1.12 (a)
Region Sales
£
North 5,683.68
South 25,289.02
East 3,672.70
West 2,455.00
Total 37,100.40
(b) The average sales per region:
£ 9,275.10
(c)
Store Code Expenses

£
N001 25,680.00
B010 34,210.90
S214 43,235.43
J967 6,420.00
Total 109,546.33
(d) Ratio of the expense for store N001 to J967:
4:1
2.1
Organisation Public Private Charitable

sector sector sector
A shop selling goods
specifically to raise funds for 
sick children
The local police service 
2.2 Information produced by the accounting department will only be used by managers
in the accounting department.
False 
Customers of the accounting department are always from outside of the
organisation.
False 
2.3
From: AATstudent@parrystores.com
To: Msingh@parrystores.com
Subject: Annual Leave Request
Hello Mohan
Further to our conversation I wish to request annual leave from Monday 4 July to
Friday 15 July. This will result in me having 4 further days of annual leave
entitlement remaining.
Kind regards
AAT Student
2.4 (a) Organisations use templates to save time, as staff only have to input the key
information.
True 
Organisations use a 'house style' for documents because it ensures the image
of the organisation is correctly portrayed.
True 
(b) The most appropriate form of communication is:
Email 
2.5 (a) Confidential information can be left on your desk as long as you are not going
to be away from your desk for longer than 1 hour.
False 
(b) You should lock your computer when you leave your desk.
2.6
Statement Item
attending an accountancy update
A finance professional could renew course.
job-related technical knowledge by
reading the financial newspapers.
Statement Item
using double-sided printing to save
Examples of environmentally paper.
responsible policies are asking staff to use public transport
wherever possible.
2.7 (a) An organisation is legally required to provide a safe
environment for all staff and visitors.
If an employee sees a hazard they are always required to report

it.
(b) Ensuring your desk is kept clean and tidy helps you to work more efficiently
and promotes a better image to visitors.
True 
2.8 (a) A finance professional should have good numeracy skills and show a
responsible attitude.
(b)
Statement Item
show a willingness to learn.

A trainee finance professional should
discuss their training needs with their
manager.
2.9 (a) Offer to help your colleagues 

(b) A schedule of work. 
(c)
A non electronic form of communication sent to a supplier

Email
requesting information about their new products.
An electronic form of communication to be sent to the whole

company advising them of the year-end accounting procedures. Letter
A non electronic form of communication sent to the sales

department advising them of new reporting procedures. Memo
2.10
Downs Electrics
Bradwell Road, Darsley, SS7 1BY
26 July 20XX
C Richmond
Capers
Maine Road
Newberry
BB6 2RP
Dear Clare
Return of Goods – request for credit note
On 12 July 20XX we received 25 boxes of Product AB3 as detailed on your

invoice 3629. Unfortunately the quality of these products was not
acceptable and we therefore returned them to you on 17 July 20XX.
We have just received a statement from you requesting payment of

£3,701.25 for these goods and therefore ask that a credit note is raised as
soon as possible for these items.
If you need to discuss the situation further do not hesitate to contact me.
Yours sincerely
AAT Student
Accounts Assistant
BPP practice assessment 1

(a) Which ONE of the following statements is FALSE?
A liability is something an organisation owes.
Income is something an organisation spends.
(b) Place a tick in the appropriate column of the table below to show whether
each of the items listed is an example of an asset, a liability, income or
expenditure. You should not place more than one tick () against each item.

Insurance
Sale
Bank loan
Choose the appropriate term from the list below to match the description.

A transaction to sell goods when payment is made
at a later date than delivery of the goods.
A transaction to buy goods when payment is
made immediately.
List of terms
Cash sale
Cash purchase
Credit sale
Credit purchase
Debtor (receivable)
Creditor (payable)
187
188 BPP practice assessment 1
1.3 Your organisation purchased 12 boxes of paper for £60.72 in total from RG Office
Supplies.
(a) What is the cost of each box of paper?
RG Office Supplies agreed to issue an invoice asking your organisation to pay for
the boxes of paper within 60 days.
(b) Is the purchase of the boxes of paper a cash transaction or a credit
transaction?
An organisation receives from a supplier
listing goods sold to the organisation and showing the amount due to be paid, and
when it is due to be paid by.
An organisation receives from a supplier
showing the total amount the organisation owes in respect of credit sales, detailing
the invoices that have not yet been paid.
An organisation sends to a supplier requesting
that the goods specified in the document be sold to the organisation.
List of terms
a purchase order
a receipt
a statement of account
an invoice
1.5 You work for Price Traders. You are preparing to record some documents in the
(a) Select which ONE of the documents below will be entered in the sales day
book.
A credit note sent by a supplier
An invoice sent to a customer
receipts book.
An invoice sent by a supplier
(c) Insert an item from the following list into the bottom right-hand box on each
document to show which book of prime entry that document will be entered
into in Price Traders' books. You will not need to use all the items.
 Sales day book
Price Traders
Unit 1, Industrial Park, Spantage, SP1 4LD.
Invoice number: 295300 4 March 20XX

To: Market Value Ltd
£
58 items of product DTF @ £5.60 each 324.80
VAT @ 20% 64.96
TOTAL 389.76
Book of prime entry
Price Traders
Credit note number: 3300 5 March 20XX

To: Auscon Ltd
£
8 items of product CX @ £2.30 each 18.40
VAT @ 20% 3.68
TOTAL 22.08
Book of prime entry
Happy Wholesalers Ltd

U
12 High Street, Dillingford, DL3 5RP.

6 March 20XX Credit note number: 89

To: Price Traders
£
1 part ETD @ £20.00 20.00
VAT @ 20% 4.00
TOTAL 24.00
Book of prime entry

In an alphabetical coding system all codes consist of letters only.
True
False
1.7 Your organisation uses a batch processing system to enter sales invoices into the
accounting records.
In the accounting system, sales invoices must be entered into the accounting
records individually.
True
False
1.8 On 16 March 20XX you have been asked to pay the following items into Tricky
Traders' bank account:
Six £50 notes
Three £20 notes
One £5 note
Twenty 50 pence coins
Twelve 20 pence coins
(a) Complete the paying-in slip below.
Date: Date: MIDWEST £50 notes

BANK
A/C £20 notes
£10 notes
£2 coins
Total: Total cash
000894 9846968 Total £

Paying-in slips should not be dated by the person paying the money into the
bank.
True
False

On 24 April 20XX you are preparing a cheque for three hundred and twenty-three
pounds and fifty-five pence to send to a supplier, Woodcutter Ltd.
on the cheque?
24 April 20XY
24.05.XX
24 April 20XX
on the cheque?
Woodcutters
Woodcutter Ltd
Woodcuter Ltd
(c) Which ONE of the following options shows the amount in figures as it should
£333.55
£323.55
£302.55

The payee of a cheque is the person to whom payment is being made.
True
False

Income less expenditure equals profit.
True
False
below:

Sales 1,000,000
Payroll costs 250,000
Electricity 20,000
Distribution costs 10,000
calculations:
(c) Using your answer from (b)(ii), calculate net profit as a percentage of sales.
If your answer is not a whole number, make sure you give your answer to
two decimal places.
1
by (one-eighth).
8
by 7%.
1.12 Your organisation keeps detailed records of costs.
Service and repair costs for each of four delivery vehicles are shown in the table
below.
(a) Complete the table to show the service and repair costs for Vehicle 2.
Delivery vehicles £
Vehicle 1 375.66
Vehicle 2
Vehicle 3 496.55
Vehicle 4 1,035.12
Total 2,408.60
(b) Calculate the average service and repair cost per vehicle.
Costs relating to advertising and marketing are shown in the table below.
(c) Complete the table to show the total advertising and marketing costs.
Item £
Marketing 200.60
Advertising 2,104.60
Consultant 526.15
Sundries 137.45
Total
(d) Which of the following is the ratio of the cost of advertising to the cost of the
consultant?
 3:1
 4:1
 5:1

(a) The Fire Service is a organisation.
 private sector
 public sector
 charitable
(b) A limited company in the private sector
aim to make a profit.

 does
 does not
organisation.
(a) Information provided by the accounting department is used by managers
within the organisation to make poorer business decisions.
True
False
(b) An example of a customer of the accounting department is the sales

department of the company.
True
False
2.3 You work for ABC Chemicals and have been asked to send an email to Andy Poole,
your manager, confirming your attendance at the annual staff conference on 1 and
2 June and requesting overnight accommodation on 1 June.
Using the items provided, compose an appropriate email in the template given.
From: AATstudent@abcchemicals.com
To:
Subject:
andypoole@abcchemicals.com Confirmation
Annual Staff Conference: Confirmation of attendance Hi Andy
Please accept this email as confirmation of my attendance

at the staff conference on 1 and 2 June. As it is over two Kind regards
days I request overnight accommodation on 1 June. AAT student
andypoole@abchemicals.com Hello Andy
I am confirming I want to attend in June and need to stay Cheers

overnight. AAT student

Organisations use templates to present a positive, consistent view of their
organisation.
True
False
Organisations use a 'house style' for documents because it helps customers

know documents are genuine.
True
False
You have been asked to send a credit note to a potential customer.

(b) Select the most appropriate form of communication to accompany the credit
note.
Letter
Memo
Report

Information about staff bonuses held on the computer should be kept
 in an area to which all employees have access.

 in a password-protected file with access restricted to those who need the
information.
A friend is a supplier of the organisation where you work. She asks you how much
profit your organisation is making on items sold on. You reply:
 'I am sorry but I cannot give you any information as it is confidential.'

 'As you are a supplier I can tell you that we add 25%.'
environmentally responsible manner.
item from the list below. You will not need to use all of the items.
Sentence Item
An accountant should always…

An example of an environmentally
responsible policy is to …
 … put personal needs above the requirements of the organisation.

 … they should complete sufficient training to maintain professional competence.
 … behave with honesty and integrity.
 … it has a duty to act ethically.
 … lobby governments on environmental issues.
 … use recycled paper.

below each box.
An organisation to provide a safe environment for
has a duty staff only.

has a choice whether visitors only.
does not have anyone.
An employee has a duty to report unsafe practice to a manager.
True
False
It is important to keep a tidy desk for health and safety reasons.
True
False

professional.
by each box.
be numerate
A finance professional should be creative
a professional attitude.
and be able to show
an unprofessional attitude.

A finance professional can acquire knowledge by shadowing a more senior
member of staff.
True
False
Somebody who is training to be a finance professional should meet regularly

with their manager to discuss their specific training needs.
True
False

It is Monday; it is nearly the end of the day and you have completed all of
your tasks for the day. Your colleague has just received a report which she
must process this evening. If the report is not processed today the whole
department will be behind for the rest of the week. She will only be able to
complete the report today by rushing the work and not doing a thorough job.
Tidy your desk to make sure it is clear for the week.
Go to your colleague and ask her if there is anything you could do to

help her.
Go home.

Credit note
Diary
Holiday request form


Report
A formal written form of communication sent from one

employee to another within and outside of the organisation. Email
An informal written form of communication usually sent

from one employee to another within the organisation. Memo
2.10 You work for Smith and Co. You have been asked to send a copy of the draft
management accounts to all the directors. You have been asked to send a memo
with the accounts, confirming that the directors should read the accounts and have
prepared their comments about them for the meeting on Friday 5 April 20XX. The
date today is 24 March 20XX.
Using the items given, compose an appropriate memo in the box provided. You
will not need to use all of the items.
24 March 20XX Directors Cheers Everybody
5 April 20XX Dear Sirs Thank you Directors
AAT student
Management accounts Meeting 5 April 20XX
Accounts Assistant
Please find the draft management accounts enclosed with AAT student
this memo. Accounts Assistant
Please ensure that you have read the accounts, and prepared your comments, in time
for the meeting on 5 April 20XX.
Please ensure that you have read the accounts, and prepared your comments, in time
for the meeting on 24 March 20XX.
Read them and have something to say in the meeting (5 April 20XX).
Yours faithfully Yours sincerely
MEMO
To: _________________________________________________
From: _________________________________________________
Date: _________________________________________________
Subject: _________________________________________________
BPP practice assessment 1: answers
1.1 (a) Income is something an organisation spends. 

(b)
Insurance 
Sale 
Bank loan 
1.2
A transaction to sell goods when payment is made Credit sale
at a later date than delivery of the goods.
A transaction to buy goods when payment is Cash purchase
made immediately.
1.3 (a) The cost of each box of paper:
£ 5.06
(b) The purchase of the boxes of paper is a:
Credit transaction
1.4 An organisation receives an invoice from a supplier listing
goods sold to the organisation and showing the amount due to be paid, and when it
is due to be paid by.
An organisation receives a statement of account from a supplier
showing the total amount the organisation owes in respect of credit sales, detailing
the invoices that have not yet been paid.
An organisation sends a purchase order to a supplier requesting
that the goods specified in the document be sold to the organisation.
203
204 BPP practice assessment 1: answers
1.5 (a) An invoice sent to a customer 
(c)
Price Traders
Invoice number: 295300 4 March 20XX

To: Market Value Ltd
£
58 items of product DTF @ £5.60 each 324.80
VAT @ 20% 64.96
TOTAL 389.76
Book of prime entry Sales day book
Price Traders
Credit note number: 3300 5 March 20XX

To: Auscon Ltd
£
8 items of product CX @ £2.30 each 18.40
VAT @ 20% 3.68
TOTAL 22.08
Book of prime entry Sales returns day book
Happy Wholesalers Ltd

12 High Street, Dillingford, DL3 5RP.
6 March 20XX Credit note number: 89

To: Price Traders
£
1 part ETD @ £20.00 20.00
VAT @ 20% 4.00
TOTAL 24.00
Book of prime entry Purchases returns day book
1.6 In an alphabetical coding system all codes consist of letters only.
True 
1.7 In the accounting system, sales invoices must be entered into the accounting
records individually.
False 
1.8 (a)
Date: 16.3.XX Date: MIDWEST £50 notes £300.00

BANK
A/C 9846968 16 March £20 notes £60.00
20XX
£10 notes
Cash: £377.40 Account name £5 notes £5.00
Tricky £2 coins
Traders
Paid in by Other coin £12.40
Total: £377.40 A Student Total cash £377.40
000894 9846968 Total £ £377.40
(b) Paying-in slips should not be dated by the person paying the money into the
bank.
False 
1.9 (a) 24 April 20XX 

(b) Woodcutter Ltd 
(c) £323.55 
(d) The payee of a cheque is the person to whom payment is being made.
True 
1.10 (a) Income less expenditure equals profit.
True 
£ 550,000
(ii) Net profit
£ 270,000
27 %
£ 4.60
£ 1.47
1.12 (a) Service and repair costs for Vehicle 2
Delivery vehicles £
Vehicle 1 375.66
Vehicle 2
501.27
Vehicle 3 496.55
Vehicle 4 1,035.12
Total 2,408.60
(b) The average service and repair cost per vehicle
£ 602.15
(c) Total advertising and marketing costs
Item £
Marketing 200.60
Advertising 2,104.60
Consultant 526.15
Sundries 137.45
Total
2,968.80
(d) The ratio of the cost of advertising to the cost of the consultant
4:1
2.1 (a) The Fire Service is a public sector organisation.
(b) A limited company in the private sector does
aim to make a profit.
2.2 (a) Information provided by the accounting department is used by managers

within the organisation to make poorer business decisions.
False 
(b) An example of a customer of the accounting department is the sales
department of the company.
True 
2.3
From: AATstudent@abcchemicals.com
To: andypoole@abcchemicals.com
Subject: Annual Staff Conference: Confirmation of attendance
Hello Andy
Please accept this email as confirmation of my attendance

at the staff conference on 1 and 2 June. As it is over two
days I request overnight accommodation on 1 June.
Kind regards
AAT student
2.4 (a) Organisations use templates to present a positive, consistent view of their
organisation.
True 
Organisations use a 'house style' for documents because it helps customers
know documents are genuine.
True 
(b) The most appropriate form of communication to accompany the credit note is:
 Letter
2.5 Information about staff bonuses held on the computer should be kept:
in a password-protected file with access restricted to those who need

the information.
A friend is a supplier of the organisation where you work. She asks you how much
profit your organisation is making on items sold on. You reply:
'I am sorry but I cannot give you any information as it is confidential.'
2.6
Sentence Item
… they should complete sufficient training
to maintain professional competence.
An accountant should always… … behave with honesty and integrity.

… it has a duty to act ethically.
An example of an environmentally
… use recycled paper.
responsible policy is to …
(a) An organisation has a duty to provide a safe environment for anyone.
(b) An employee has a duty to report unsafe practice to a manager.
True 
It is important to keep a tidy desk for health and safety reasons.
True 

professional.
(a) A finance professional should be numerate and be able to show
a professional attitude.
(b) A finance professional can acquire knowledge by shadowing a more senior

member of staff.
True 
Somebody who is training to be a finance professional meets regularly with
their manager to discuss their specific training needs.
True 
2.9 (a) The most appropriate option is:
 Go to your colleague and ask her if there is anything you could do to

help her.
The following document is a planning aid.
 Diary.
(b)

Report

employee to another within and outside of the organisation. Email

from one employee to another within the organisation. Memo
2.10
MEMO
To: Directors
From: AAT student, Accounts Assistant
Date: 24 March 20XX
Subject: Management accounts
Please find the draft management accounts enclosed with this memo.
Please ensure that you have read the accounts, and prepared your comments,
in time for the meeting on 5 April 20XX.
Thank you
AAT student
Accounts Assistant
BPP practice assessment 2

(a) Which ONE of the following statements is true?
Expenditure is something an organisation owes.
A liability is something an organisation owns.
Income is something an organisation earns.
(b) Place a tick in the appropriate column of the table below to show whether
each of the items listed is an example of an asset, a liability, income or
expenditure. You should not place more than one tick () against each item.

Bank interest
received
Overdraft fee
Inventory
Choose the appropriate term from the list below to match the description.

The amount that will be paid by the organisation
to a supplier at a later date in respect of credit
purchases.
The amount that will be paid to the organisation
by a customer at a later date in respect of credit
sales.
List of terms
Cash sale
Cash purchase
Credit sale
Credit purchase
213
Receivable
Payable
1.3 Your organisation sold 8 desks for £240.40 in total to JP Fitters Company.
(a) What is the price of each desk?
Your organisation issued an invoice asking JP Fitters Company to pay for the desks
within 30 days.
(b) Is the sale of the desks a cash transaction or a credit transaction?
the list below.
An organisation sends to a customer listing
goods sold to the customer and showing the amount due to be paid, and when it is
due to be paid.
An organisation gives to a customer for goods
bought with cash.
An organisation receives from a customer
requesting that the goods specified in the document be sold to the customer.
List of terms
a purchase order
a receipt
a statement of account
an invoice
1.5 You work for Smyth Traders. You are preparing to record some documents in the
(a) Select which ONE of the documents below will be entered in the purchases
returns day book.
A credit note sent to a customer
(b) Select which ONE of the documents below will be entered in the purchases
day book.
An invoice sent by a supplier
(c) Fill in the boxes on each document given below to show which book of prime
entry that document will be entered into. Select your answer from one of the
following options.
Options
Cash payments book
Cash receipts book
Purchases day book
Purchases returns day book
Sales day book
Sales returns day book
MIDWEST BANK
Midwest Bank Business Centre, High Street 34-04-32
40599682
Date 24 March 20XX
Pay Whittaker Traders Ltd only

£320.25
Three hundred and twenty pounds and twenty-five pence
for Smyth Traders
300593 340432 40599682
Book of prime entry
Date: MIDWEST BANK £50 notes

23 March 20XX Tuddenham £20 notes
£10 notes
Account £5 notes
Smyth Traders £2 coins
£1 coins
Marion Green Total cash
34-04-32 Cheques, POs £3,592
40599682 Total £ £3,592
Book of prime entry
Khan Enterprises
Unit 7, Westford Industrial Park, WF23 6TD
INVOICE NUMBER: P3953945

To: Smyth Traders, 6 Church Street, Tuddenham

£
24 items of product DG @ £100.99 each 2,423.76
VAT @ 20% 484.75
Total 2,908.51
Book of prime entry

In an alphanumerical coding system, codes consist of a combination of letters and
numbers.
True
False
1.7 Your organisation uses a batch processing system.

Purchase invoices may be batched, and entered into the accounting system
together.
True
False
1.8 On 6 March 20XX you have been asked to pay the following items into Taylor
Trading Ltd's bank account:
Four £20 notes
Twelve £10 notes
Four £5 notes
Two £2 coins
Six £1 coins
A cheque £574.88
(a) Complete the paying-in slip below
Date: Date: GLOBAL BANK £50 notes

A/C 46898468 £20 notes
£10 notes
£2 coins
Total: Total cash
010395 46898468 Total £

A person paying money into a bank should sign the paying-in slip.
True
False

On 14 April 20XY you are preparing a cheque for five hundred and forty-five pounds
and two pence to send to a supplier, Easy Easels.
on the cheque?
14.5.XY
14 April 20XY
14 April XY
on the cheque?
Easys
Easels
Easy Easels
(c) Which ONE of the following options shows the amount in figures as it should
£545.02
£545.20
£500.45

The date on the cheque should be the day it is likely to arrive at the supplier's
premises.
True
False
If income exceeds expenditure, the organisation has made a loss.
True
False
below:

Sales 890,000
Labour 124,740
Administration 45,700
Motor costs 800
calculations:
(c) Using your answer from (b)(ii), calculate net profit as a percentage of sales.
If your answer is not a whole number make sure you give your answer up to
two decimal places.

by 1 (one quarter).
4
The current selling price of product number 36 is £8.50. This is to be increased by

2%.
1.12 Your organisation keeps detailed records of costs.
Repair costs for each of four production machines are shown in the table below.
(a) Complete the table to show the repair costs for Machine 1.
£
Machine 1
Machine 2 208.12
Machine 3 345.77
Machine 4 105.11
Total 816.20
(b) Calculate the average service and repair cost per machine.
Costs relating to Factory 1 are shown in the table below.

(c) Complete the table to show the total costs relating to Factory 1.
Item £
Electricity 1,200.50
Wages 3,450.20
Security 51.15
Insurance 153.45
Total costs
(d) Which of the following is the ratio of the cost of insurance to the cost of
security?
Options
3:1
4:1
5:1

(a) A partnership is a organisation.
 private sector
 public sector
 charitable
(b) A sole trader aim to make a profit.
 does
 does not

organisation.
(a) Information provided by the accounting department to other departments
should be complete, accurate and timely.
True
False
(b) An example of a customer of the accounting department is the general public.
True
False
2.3 You work for MK Manufacturing and have been asked to send an email to Chris
Cairns, the production manager, confirming the number of parts of XY that have
been purchased in the year to date.
Using the items on the next page, compose an appropriate email in the template
below.
From: AATstudent@MKM.com
To:
Subject:
chriscairns@MKM.com XY parts
Purchases of XY parts year to date Hi Chris
Please could you confirm the total number of XY parts that

have been purchased in the year to date. Kind regards
AAT student
chrischairns@MKM.com Hello Chris
How many XY parts have you bought this year? Cheers

AAT student

Organisations use templates to save time in preparing documents.
True
False
Organisations use a 'house style' for documents because they are required to
by law.
True
False
You have been asked to send an application pack to someone enquiring after a job
in your organisation.
(b) Select the most appropriate form of communication to accompany the
application pack.
Letter
Memo
Report

Gail is working on the payroll. She leaves her desk to make a cup of tea. She
should:
 Leave the payroll documents on her desk, as she'll only be gone five minutes.
 Lock the payroll documents in her desk drawer, because she will be away
from her desk.
A friend is a journalist, writing a story on local businesses for the local paper. She
asks you how many people your organisation employs. You reply:
 '200'.
 'I don't think it is appropriate for you to ask me; you should request a meeting
with the managing director.'
environmentally responsible manner.
item from the list below. You will not need to use all the items.
Sentence Item
A qualified accountant should…
Integrity is…

It is not environmentally responsible
for a company when staff …
 … keep up to date with technical requirements.

 … not a key requirement for an accountant.
 … an important characteristic for accountants.
 … the general public wants it to.
 … it impacts on the environment through its operations.
 … print out copies of emails that could be stored online.

below each box.
An employee to behave in a
has a duty safe manner.

has a choice whether risk-free manner.
does not have respectful manner.

Power cables to Tracy's computer trail across a corridor next to her desk. This
is appropriate.
True
False
JP Trailers is a no-smoking zone. Peter sees Zain smoking in the stationery

cupboard. Peter should report Zain to a superior.
True
False

professional.
next to each box.
be punctual
A finance professional should be practical
willingness to learn.
and be able to show a
willingness to teach.

Reading a journal is an example of undertaking formal training.
True
False
Someone who is training to be a finance professional should discuss the

training they have done with a supervisor, to ensure that the new skills can be
used in the organisation.
True
False

You are working on a project that has to be finished by the end of the week.
You have been given permission to attend a medical appointment on Friday
morning, but it is looking like you will not have time to finish your section of
the project in the time remaining on Friday. If the project runs over to Monday
morning, the whole team will be inconvenienced.
Which ONE of the following actions should you NOT take?
Tell your supervisor that you might not meet the deadline so that staff
can be allocated to help you.
Keep a record of the work you have done on the project, and the
outstanding work, so that other team members will be able to follow
what you have done.
Cancel your medical appointment.

Schedule
Statement of account
Stationery

A written form of communication usually sent from a person

Report
in one organisation to a person in another organisation.
A formal written form of communication sent both within

and outside of the organisation. Memo

from one employee to another within the organisation. Letter
2.10  You work for Weston Traders.

 You have been asked to write a letter to a potential supplier, Miss
A Singh, at AA Advertising, High Road, Colston, KC7 1WK.
 You are to confirm the appointment with her, which is due to take place in a
week's time, on 5 May 20XX, at 2pm.
 At the appointment she will be giving a presentation on behalf of her company
to try to win a contract for a large advertising campaign Weston Traders wants
to undertake.
 Weston Traders' staff attending will be Mark Sprout, Managing Director, and
Andy Singer, Financial Controller.
Using the items below, compose an appropriate letter in the box below. You will
5 May 20XX Dear Miss Singh Dear Madam Yours faithfully
Confirmation of appointment: 5 May 20XX at 2pm Yours sincerely 28 April 20XX
I am writing on behalf of the Financial Controller to confirm the above appointment at

which you are to give a presentation on behalf of your firm, AA Advertising.
I am writing on behalf of the Financial Controller to confirm the above appointment at

which you are to give a presentation on behalf of your firm, ABC Advertising.
Weston Traders' staff attending the presentation will be Marc Sprout, Managing
Controller, and Andy Singer, Financial Director
Weston Traders' staff attending the presentation will be Mark Sprout, Managing
Director, and Andy Singer, Financial Controller.
They look forward to meeting you and A Singh A Singh

learning more about what your AA Advertising ABC Advertising
company could do for our organisation. High Road High Road
Colston Colston
KC7 1WK KC7 1WK
They are not looking forward to meeting Advertising

you and do not wish to hear more about AAT student presentation
your company. Accounts Assistant
Weston Traders
Castle St, Weston, KC6 7SC
BPP practice assessment 2: answers
1.1 (a) Income is something an organisation earns. 

(b)
Bank interest 
received
Overdraft fee 
Inventory 
1.2
The amount that will be paid by the organisation Payable
to a supplier at a later date in respect of credit
purchases.
The amount that will be paid to the organisation Receivable
by a customer at a later date in respect of credit
sales.
1.3 (a) The price of each desk is:
£ 30.05
(b) The sale is a:
Credit transaction
1.4 An organisation sends an invoice to a customer listing goods sold to the

customer and showing the amount due to be paid, and when it is due to be paid.
An organisation gives a receipt to a customer for goods bought with cash.
An organisation receives a purchase order from a customer requesting that

the goods specified in the document be sold to the customer.
229
1.5 (a) A credit note sent by a supplier 
(b) An invoice sent by a supplier 
(c)
MIDWEST BANK
Midwest Bank Business Centre, High Street 34-04-32
40599682
Date 24 March 20XX
Pay Whittaker Traders Ltd only

£320.25
Three hundred and twenty pounds and twenty five pence
for Smyth Traders
300593 340432 40599682
Date: MIDWEST BANK £50 notes

23 March 20XX Tuddenham £20 notes
£10 notes
Account £5 notes
Smyth Traders £2 coins
£1 coins
Marion Green Total cash
34-04-32 Cheques, POs £3,592
40599682 Total £ £3,592
Book of prime entry Cash receipts book
Khan Enterprises
Unit 7, Westford Industrial Park, WF23 6TD
INVOICE NUMBER: P3953945

To: Smyth Traders, 6 Church Street, Tuddenham

£
24 items of product DG @ £100.99 each 2,423.76
VAT @ 20% 484.75
Total 2,908.51
1.6 In an alphanumerical coding system, all codes consist of a combination of letters

and numbers.
True 
1.7 Purchase invoices may be batched, and entered into the accounting system
together.
True 
1.8 (a)
Date: 6.3.XX Date: GLOBAL BANK £50 notes

A/C 46898468 6 March £20 notes £80
20XX
£10 notes £120
Cash: £230 Account name £5 notes £20
Taylor Trading £2 coins £4
Ltd
Cheques, Pos £1 coins £6
£574.88 Paid in by Other coin
Total: £804.88 A student Total cash £230
34-16-59 Cheques, £574.88
POs
46898468
010395 Total £ £804.88
(b) A person paying money into a bank should sign the paying-in slip.
True 
1.9 (a) 14 April 20XY 
(b) Easy Easels 
(c) £545.02 
(d) The date on the cheque should be the day it is likely to arrive at the supplier's
premises.
False 
(a) If income exceeds expenditure, the organisation has made a loss.
False 
£ 236,220
(ii) Net profit
£ 64,980
7.30 %
£ 4.15
£ 0.17
1.12 (a) Repair costs for Machine 1
£
Machine 1
157.20
Machine 2 208.12
Machine 3 345.77
Machine 4 105.11
Total 816.20
(b) The average service and repair cost per machine
£ 204.05
(c) Total key costs relating to Factory 1
Item £
Electricity 1,200.50
Wages 3,450.20
Security 51.15
Insurance 153.45
Total key costs
4,855.30
(d) The ratio of the cost of insurance to the cost of security
3:1
2.1 (a) A partnership is a private sector organisation.
(b) A sole trader does aim to make a profit.
2.2 (a) Information provided by the accounting department to other departments

should be complete, accurate and timely.
True 
(b) An example of a customer of the accounting department is the general public.
False 
2.3
From: AATstudent@MKM.com
To: chriscairns@MKM.com
Subject: Purchases of XY parts year to date
Hello Chris
Please could you confirm the total number of XY parts that

have been purchased in the year to date.
Kind regards
AAT student
2.4 (a) Organisations use templates to save time in preparing documents.
True 
Organisations use a 'house style' for documents because they are required to
by law.
False 
(b) The most appropriate form of communication to accompany the application
pack is:
 Letter
2.5 Gail is working on the payroll. She leaves her desk to make a cup of tea. She
should:
Lock the payroll documents in her desk drawer because she will be
away from her desk.
A friend is a journalist, writing a story on local businesses for the local paper. She
asks you how many people your organisation employs. You reply:
'I don't think it is appropriate for you to ask me; you should request a
meeting with the managing director.'
2.6
Sentence Item
… keep up to date with technical
A qualified accountant should…
requirements.
… an important characteristic for
Integrity is…
accountants.
An organisation should adopt socially … it impacts on the environment through
responsible practices because… its operations.
It is not environmentally responsible … print out copies of emails that could be
for a company when staff … stored online.
(a) An employee has a duty to behave in a safe manner.
(b) Power cables to Tracy's computer trail across a corridor next to her desk. This
is appropriate.
False 
JP Trailers is a no-smoking zone. Peter sees Zain smoking in the stationery
cupboard. Peter should report Zain to a superior.
True 
2.8 (a) A finance professional should be punctual
and be able to show a willingness to learn.
(b) Reading a journal is an example of undertaking formal training.
False 
Someone who is training to be a finance professional should discuss the
training they have done with a supervisor, to ensure that the new skills can be
used in the organisation.
True 
2.9 (a) The most appropriate option is:
 Cancel your medical appointment.

This question makes clear that you are working as part of a team so
the other two options are reasonable responses to the tight deadline.
It is not in your company's interest for you not to attend a medical
appointment (you are not told in the question whether it is a
significant appointment or not).
The following document is a planning aid
 Schedule
(b)
A written form of communication usually sent from a person

Report
in one organisation to a person in another organisation.

employee to another within and outside of the organisation. Memo

from one employee to another within the organisation. Letter
2.10
Weston Traders
Castle St, Weston, KC6 7SC
A Singh
AA Advertising
High Road
Colston
KC7 1WK
28 April 20XX
Dear Miss Singh
Confirmation of appointment: 5 May 20XX at 2pm
I am writing on behalf of the Financial Controller to confirm the above

appointment at which you are to give a presentation on behalf of your firm, AA
Advertising.
Weston Traders' staff attending the presentation will be Mark Sprout, Managing
Director, and Andy Singer, Financial Controller.
They look forward to meeting you and learning more about what your company
could do for our organisation.
Yours sincerely
AAT student
Accounts Assistant
Index
239
Index 241
House style, 85, 97

Accounting function, 56, 71
Addition, 34
Alphabetical code, 20, 24 Income, 2, 23
Alphanumerical code, 20, 24 Integrity, 60, 67
Asset, 2, 23 In-trays, 65
Averages, 47 Invoice, 10, 23
Business documents, 77 Job rotation, 67

Business English, 88 Job shadowing, 68
C alculator, 33 Knowledge, 60
Cash purchase, 4, 23
Cash sale, 4, 23
Charitable sector, 55, 71 Letter, 78, 97
Communication, 65 Liability, 2, 23
Confidentiality, 58, 71 Loss, 6, 23
Cost of sales, 7, 23
Credit note, 10, 23
Credit purchase, 4, 23
Memo, 78, 97
Credit sale, 4, 23 Mentor, 68, 71
Creditor, 4, 23 Multiplication, 38
Customer, 4, 23
Customers of the accounting function, Net profit, 7, 23
57, 71 Numerate, 67
Numerical code, 20, 24
D iaries, 65
Division, 38 On-the-job training, 67
Duty of care, 62, 71
Organisation, 67
E fficiency, 64, 71
Payable, 4, 23
Efficient working practices, 64
Email, 78, 97 Percentages, 44
Ethics, 60, 71 Personal skills and development, 67
Expenditure, 2, 23 Private sector, 55, 71
Professional behaviour, 60
Profit, 6, 23
Formal training, 67 Proportions, 41
Fractions, 46 Public sector, 55, 71
Punctuality, 67
Gross profit, 7, 23 Purchase order, 10, 23
Health and safety, 62 Ratios, 40

Receipt, 10, 24
Honest, 60 Receivable, 4, 23
, is a licenced copy of BPP Material, intended solely for the use of the agreed licence holder.
This
242 Index
Reliability, 67 Supervisor, 68, 71

Remittance advice, 10, 24 Supplier, 4, 23
Report, 78, 97
Rounding up, 38
Technical knowledge, 67
Template, 85, 97
Schedules, 65 To-do lists, 65
Slang, 88, 97 Training courses, 67
Social and environmental behaviour, 61
Stakeholders, 78, 97
Statement of account, 10, 24
Work plan, 64, 71
Subtraction, 34
Notes 243
This
244 Notes
Notes 245
This
246 Notes
Notes 247
This
248 Notes
Notes 249
This
250 Notes
Notes 251
This
252 Notes
Notes 253
This
254 Notes
AAT ACCESS WORKBOOK (2017/18)
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AAT

LEVEL 1 AWARD IN ACCOUNTING

For assessments until September 2018

Second edition 2017 A note about copyright

Published by Your market-leading BPP books, course materials and

Breach of copyright is a form of theft – as well as

How to use this Workbook

Essential accounting procedures

The Purpose of the Unit

Learning outcome 1 – Understand basic accounting

Learning outcome 2 – Understand the use of business

Learning outcome 3 – Prepare to record business transactions

Learning outcome 4 – Understand types of coding and batch

Learning outcome 5 – Be able to prepare documents to

5.2 Complete a cheque. [Chapter 1, section 2]

Learning outcome 6 – Be able to prepare a basic profit

Mathematics for accounting

The purpose of the unit

Learning outcome – Be able to apply basic mathematical

Accounting in a professional environment

The purpose of the unit

Learning outcome 1 – Understand basic organisations and

understanding of the term 'customers' should be restricted to other departments

Learning outcome 2 – Understand the need to apply

Learning outcome 3 – Understand that there is a legal

Learning outcome 4 – Understand how efficient working

Creating business documents

The purpose of the unit

Learning outcome 1 – Know that there are different types of

Learning outcome 2 – Know why it is important to use the right

2.2 Give examples of when to use a formal or informal communication style.

Learning outcome 3 – Be able to produce routine business

Assessment name AAT Access – Level 1 Award in accounting

This chapter covers the unit Essential Accounting Section number

Procedures and therefore introduces the essential

Organisation A buys a building Organisation A owns a building

Sometimes, in order to buy something, organisations need to borrow money. If they

An asset is something the organisation owns.

Item Classification Further definition

Item Classification Further definition

A customer is a person who buys goods or services.

Buys goods from Sells goods to

Pays later than when Pays later than when

Wood Works is an organisation which makes wooden items. It has a customer,

BANARAMA WOOD WORKS CHERRYTON

Buys goods from Sells goods to

Pays when goods Pays when goods

Sale of goods when payment is made at a date later than delivery

Cash sale Credit sale

Cash purchase Credit purchase

Profit is what an organisation makes if income is greater than expenditure in a

Profit 20,000 Loss (25,000)

Gross profit is income less direct cost of sales.

Organisation A Organisation A's total expenditure

TASK 3 Profit and loss

1 The balance of an organisation's income and expenditure results in profit or loss.

When income exceeds profit, an organisation has made a loss

When income exceeds expenditure, an organisation has made a profit

When income exceeds expenditure, an organisation has made a loss

2 The balance of an organisation's income and expenditure results in profit or loss.