Mixed Deck — All AAT L2 Topics Flashcards

Under the UK Money Laundering Regulations, what is a 'suspicious activity report' (SAR)?

Answer: A formal disclosure made to the National Crime Agency when money laundering is known or suspected

A SAR must be submitted to the National Crime Agency (NCA) when a person knows or suspects money laundering activity.

When setting up a new supplier in accounting software, which of the following details is essential?

Answer: The supplier's name, address, and default nominal code for purchases

Essential supplier setup information includes the business name, address, contact details, payment terms, default nominal code (to categorise purchases), and VAT registration status. This ensures transactions are recorded correctly and the supplier can be paid.

Unfair dismissal protection under UK employment law generally requires the employee to have:

Answer: At least two years of continuous service with the employer (with some exceptions)

Generally, employees need at least two years of continuous service to claim ordinary unfair dismissal. However, some dismissals are automatically unfair from day one (e.g., dismissal related to pregnancy, whistleblowing, or asserting a statutory right).

If a finance professional suspects money laundering, they must:

Answer: Report it to the Money Laundering Reporting Officer (MLRO) or the National Crime Agency (NCA)

Under the Proceeds of Crime Act 2002 and Money Laundering Regulations, finance professionals must report suspicions to their organisation's MLRO or directly to the NCA. Failing to report (or tipping off the suspect) is itself a criminal offence.

Which of the following is classified as an administrative overhead?

Answer: Salary of the finance team

The finance team's salary is an administrative overhead — it supports the general running of the business rather than production or selling activities. Factory depreciation is a production overhead, and delivery wages are a distribution cost.

Professional scepticism in accounting means:

Answer: Having a questioning mind and being alert to conditions that may indicate misstatement or error

Professional scepticism involves maintaining a questioning approach, being alert to inconsistencies, and critically assessing evidence. It does not mean being suspicious of everything, but rather being appropriately cautious and thorough in professional work.

The concept of 'public interest' in accounting means that accountants have a responsibility to:

Answer: Act in a way that benefits society as a whole, not solely their employer or individual clients

Accounting professionals have a duty to act in the public interest, meaning their responsibilities extend beyond satisfying the needs of individual employers or clients to benefiting society more broadly.

An email integration feature in accounting software allows you to:

Answer: Email invoices, statements, and reports directly to customers and suppliers from within the software

Email integration enables the software to send documents such as sales invoices, customer statements, credit notes, and reports directly to customers and suppliers via email. This speeds up communication and reduces printing and postage costs.

The balance on the purchases ledger control account represents:

Answer: Total amount owed to all credit suppliers

The purchases ledger control account summarises all individual supplier accounts. Its balance represents the total trade payables — the amount the business owes to all its credit suppliers at that date.

Under UK law, an employer must provide employees with a written statement of employment particulars within:

Answer: The first day of employment (principal statement) with remaining details within two months

Since April 2020, employers must provide a principal statement of key employment terms on or before the employee's first day of work, with the remaining particulars provided within two months of the start date. This is a legal requirement under the Employment Rights Act 1996.

When processing a petty cash payment in accounting software, the entry is made through:

Answer: The bank payments module using the petty cash bank account

Petty cash is treated as a separate bank account in accounting software. Payments from petty cash are processed through the bank payments function, selecting the petty cash account as the bank account and the appropriate expense nominal code.

If fixed costs per unit decrease as output increases, this demonstrates that:

Answer: Fixed costs are being spread over more units

Total fixed costs remain constant regardless of output. However, the fixed cost per unit decreases as output increases because the same total fixed cost is divided by more units. This is known as spreading fixed costs or economies of scale.

The total of the sales returns day book is posted to the:

Answer: Debit side of the sales returns account in the general ledger

The total from the sales returns day book is debited to the sales returns account in the general ledger. Sales returns reduce income and have a debit balance. Individual customer accounts in the sales ledger are credited.

What is the purpose of 'customer due diligence' (CDD) in the context of anti-money laundering regulations?

Answer: To verify a client's identity and assess the risk that they may be involved in money laundering

CDD involves verifying the identity of clients and understanding the nature of their business to assess money laundering risk.

Which of the following best describes 'objectivity' as a fundamental principle under the AAT Code of Professional Ethics?

Answer: Not allowing bias, conflicts of interest or undue influence to override professional judgements

Objectivity requires that professional judgements are not compromised by bias, conflict of interest, or undue influence from others.

A journal entry in accounting software is typically used for:

Answer: Non-routine transactions such as year-end adjustments, error corrections, and transfers

Journals are used for non-routine transactions that cannot be processed through the standard modules (sales, purchases, bank). Examples include year-end accruals and prepayments, depreciation entries, error corrections, and transfers between accounts.

The term 'limited liability' in relation to a limited company means:

Answer: The shareholders' liability is limited to the amount they have invested or guaranteed

Limited liability means that if the company fails, the shareholders can only lose the amount they invested (in a company limited by shares) or the amount they guaranteed (in a company limited by guarantee). Their personal assets are protected.

Which of the following is an example of a statutory obligation in accounting?

Answer: Filing a VAT return with HMRC by the deadline

Filing VAT returns with HMRC is a legal (statutory) obligation for VAT-registered businesses. Failure to file on time results in penalties and interest charges. Management accounts and cash flow forecasts are important but not legally required.

A private limited company (Ltd) differs from a public limited company (PLC) because:

Answer: An Ltd cannot offer its shares for sale to the general public on a stock exchange

A private limited company (Ltd) cannot offer its shares for sale to the general public or trade them on a stock exchange. A PLC can offer shares to the public and may be listed on the London Stock Exchange. A PLC must also have a minimum share capital of £50,000.

The Insolvency Act 1986 is relevant to companies because it:

Answer: Sets out the procedures for dealing with companies that cannot pay their debts, including administration, liquidation, and voluntary arrangements

The Insolvency Act 1986 provides the legal framework for dealing with insolvent companies and individuals. It covers procedures such as compulsory and voluntary liquidation, administration, company voluntary arrangements (CVAs), and wrongful and fraudulent trading.