AAT Practice Assessment question flawed?

mge

Hi. Hope you don't mind me posting on the technician forum, but I know that many of you will have completed the Cash Management unit.

Is this question flawed? :

Cash Management Practice Assessment (new standards) - question 2.1c

(Question paper and answers can be found at https://www.aat.org.uk/myaat/pa_lsb/)

The answers given for 'Changes in sales receipts' and 'Changes in purchase payments' are fine.

However, the question assumes that you can calculate the closing bank balance by adding the CHANGE in cash flow to the opening balance.

Surely this is not the case - you would have to add the TOTAL cash flow (which is not known)?

Any help is much appreciated.

Newbie

reply

in a cashflow the closing balance is normally calculated as the opening balance plus the net movement = closing balance

mge

Newbie wrote: »

in a cashflow the closing balance is normally calculated as the opening balance plus the net movement = closing balance

My issue is that they have not used net movement in their answer. They have used the change in cash flow compared to previously budgeted figures, which is surely incorrect?

Newbie

reply

Hi I have downloaded the question paper, its a table not a cashflow, designed for you to revise the bank balance in light of the specific information, a whole cashflow is outside the scope of this particular question, remember its testing an element of the unit.

mge

Newbie wrote: »

Hi I have downloaded the question paper, its a table not a cashflow, designed for you to revise the bank balance in light of the specific information, a whole cashflow is outside the scope of this particular question, remember its testing an element of the unit.

Hi Newbie. I can see what you're trying to say, but I don't think that's right.

It must be a cashflow, as there is an opening bank balance and a closing bank balance for each month. The only way to get from the opening balance to the closing balance is to add the net cashflow.

However, in the answers they have not added the net cash flow. Instead they have added the difference in cash flow between an 'old' set of budgeted figures and a 'new' set.

SandyHood

Rtq

Very often I have to write these 3 letters on the board in classes.
RTQ

Look at the question:
(c) Using your calculations from parts a. and b., complete the table to show [size=+1]the effect of the changes [/size] to sales receipts and purchase payments on the budgeted bank balance for periods 3, 4 and 5.

It doesn't ask for the actual closing bank balance. It asks how the bank balance will be changed.

It is easy to read what you think a question should ask, but you should answer what it really asks.

SandyHood

I have compared my answer with the model answer to Task 2.1 (a) (b) and (c). I agree with the model answer.

mge

Hi Sandy. I believe you are saying that where they have written 'Closing Balance' we should instead read 'Difference between originally budgeted closing balance and revised budgeted closing balance'.

However, if this is the case, the model answers are still wrong.

Take the closing bank balance for Period 3. There is no change is opening balance for this period, so the difference in closing balance will simply be the difference in cash flow ie.

Difference in closing balance = Difference in cash flow = 784 - 4,782 = (3998)

In the model answer they have also added the opening balance, 3,790, to get an answer of (208), which would be incorrect.

SandyHood

mge
I have copied the words of the question. I agree with the model answer.

mge

Hi Sandy. I'm still not convinced, but will leave this for now.

Thanks for looking at this question though.

SandyHood

I have attached the question including parts a and b

It asks for the changes to be entered on a table, but the rows on the table are only described in the context of the question.

(c) Using your calculations from parts a. and b., complete the table to show the effect of the changes to sales receipts and purchase payments on the budgeted bank balance for periods 3, 4 and 5.

mge

Hi Sandy. My issue is that even if does mean 'Change in Closing Balance', the answers are still incorrect.

Change in closing balance for period 3 = 784 - 4,782 = (3998)

SandyHood

mge
You clearly think so.
I of course do not.
There isn't anything I can add.