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Master the Certificate level: the conclusion
In the final part of our series on the Certificate Level we focus on Principles of Taxation and Law. Discover the common mistakes in the Principles of Taxation exam, and find out exactly what you will be learning in law
Principles of Taxation:
Analysis of students’ actual answers in this exam highlights common mistakes that are costing students marks. This guidance will help to improve your chances of demonstrating the knowledge you have.
• Use a hyphen or brackets to input the personal allowance/deductions:
• With any adjustments to profits working, read the questions carefully. Examples include:
1. “In arriving at her taxable trading profits, Elan deducted the following amounts:”
The accountant has deducted various expenses, but for tax purposes you need to adjust the profit figure by adding back any disallowed expenditure.
2. “The following items have been added or deducted in arriving at the draft accounting profit for Knight Ltd:”
Add back any disallowed expenditure and deduct any items that increased profits that are not taxed as part of trading profits, such as a profit on disposal, any item of non-trading income or a decrease in a general provision. For these items the accountant added the amount to profits, so to do the opposite you need to deduct the amount using a minus sign or brackets.
3. “In arriving at her draft taxable trading profits, no account has been taken of the following amounts as Becky was unsure of the correct treatment:” and “In addition, the following items have not yet been included in Sigil Ltd’s accounts:”
You are not reversing what the accountant has done, because the accountant has done nothing. You need to deduct any expenses which are allowed or add in any items of revenue which should be taxed as part of trading profits. For anything that is not allowed (eg, client entertaining) you need to input a zero or a dash into the relevant box on the answer screen.
• Be careful when working out corporation tax payment dates. Double check that you have the correct year, that is nine months and one day added to a December year end cannot be the same year as the accounting year end.
You might wonder why accountants need to learn law. If it makes you feel better, trainee lawyers also wonder why they have to learn about accounts.
The reason is that as an ICAEW chartered accountant you’re not just going to be working with numbers – although these are a vital part of what we do. You are also going to gain an understanding of how a business works, so that you can work within or advise them. Part of this all-round expertise is a working knowledge of the law.
The law you’ll learn includes:
• Contract law – the legal background to every business transaction.
• Negligence – what happens when we get things wrong.
• Employment law – a brief overview of the law governing employees (of which you’ll be one, at least to start with).
• Company law – an extensive area covering starting and running a company. The majority of trainee chartered accountants are involved with auditing the accounts of companies, so this knowledge is essential.
On being issued with the study manual your first reaction is likely to be ‘how will I ever learn all this?’ Fear not – people do manage it and the pass rate in the exam is high. By all means use a highlighter pen, but don’t spend ages making copious notes. The secret to retaining the knowledge is to test yourself by using the questions at the end of each chapter and also using the question bank that you’ve been given.
Also, be sure to look at the exam resources available on ICAEW’s website for further guidance and a sample exam, so that you can get the best out of your learning materials and study time.
The exam itself consists of 50 questions in either multiple-choice format or multi-part multiple-choice format.
For more study resources, including exam webinars and sample exams, go to icaew.com/examresources.
• Thanks to the ICAEW for this article
Reproduced with the permission of ICAEW, this article was first published in Vital (October 2016).
Vital is the quarterly magazine for ACA students. © ICAEW 2017. icaew.com/vital
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