My initial response to this question used to be, do tax! Mostly because I don’t like marking auditing mocks. However, I am a firm believer that people should choose optional units based on what is going to benefit them in the long run, so if you see your future in auditing, then you should choose audit.
In this blog I am going to look at each optional unit in turn, detailing what it covers, what it is useful for, and for those who are interested in this sort of thing, how easy it is…..
AAT students need to choose two from a choice of five optional units. These are:
I couldn’t start with any other unit, I LOVE personal tax. I think it should be mandatory. Even if you get to the end of your studies and decide accountancy isn’t for you and become a flower arranger; it will still be relevant to you. The personal tax unit covers income from employment, including benefit in kind, such as company cars. It also covers pensions, property income, tax planning and national insurance; all real-world concerns. There are other circumstances which perhaps you may not realise might have a tax implication. For example, if you sell your grandfather’s clock which you inherit from your great aunt Mabel, you may find yourself with a capital gains tax bill. Finally, it also covers inheritance tax, which, given the price of houses today, is something everyone should be aware of.
If you plan to, or currently do work in an accountancy practice, this is a really good choice.
In terms of difficulty, it has traditionally had a low pass rate nationally, but I don’t think people should avoid units just because they are hard.
This unit is effectively split into two, the calculation of corporation tax for limited companies, and the taxable profits for sole traders. This links really well with personal tax. So, in this unit you will calculate a sole trader’s income and then in personal tax you will calculate the tax due on this income. It is a large unit, however, there is a lot of crossover from personal tax, so if you do personal tax first, you will have already covered share pools, and some of the capital gains elements.
This is another good unit for those wanting to work in practice.
Typically, this has been a very fair paper, so if you know the subject well, and have done plenty of question practice, you will pass the exam. The pass marks are typically much higher than PTAX.
This entire unit is about making sure that a client’s accounts are correct, and they don’t contain any serious errors (accidental or intentional). So, you will look at planning an audit; given what you know about the client. You will look at which tests you can do to make sure that the figures in the accounts are correct; for example, is all the money that the client says it is owed, genuinely owed? Then finally, making a decision on whether the accounts are correct or not.
The threshold at which a company needs an audit has risen a lot recently, and if you don’t need an audit, a company doesn’t generally voluntarily get one. So, there isn’t as much audit work available as there used to be. Clearly if you work in audit, this is the unit for you!
This is a relatively easy unit compared to the others; it has typically the highest pass rate of all the optional units. The exam is based on 37 questions, of which 34 are multiple choice.
Cash and Treasury Management
I actually like Cash Management as a unit, it is really relevant for ALL businesses. There is no point making a profit if you aren’t solvent. A major part of this unit is preparing cash budgets, for example, if you make £100,000 in sales, of which half will be paid in two months, 25% in three months, 20% in four months, and 5% will never be paid, but you have materials and staffing cost that need paying this month; what will your monthly cash balance be? You really need to read the question carefully in this type of question. It also covers what is a good source of finance, if you are a business looking to borrow money, and where to invest your money if you are a business with some spare funds.
This is a good unit for those who are looking to work in industry and typically has a relatively low pass rate nationally compared to some of the other optional units.
This is not just a unit based on how to get paid by people who owe you money. Although there is a great deal related to this, as you would expect. There is also much about how to make sure you don’t need to be chasing people for money. So, who you should grant credit to, and how much to grant is covered in detail. This unit covers the credit scoring and ratio analysis of potential customers. There is a significant amount of law in this unit, so it is quite theoretical.
Clearly this is a good unit for those who want to work in credit control. Credit control is an important area for any business, as there is no point in making all those sales if you are not actually getting paid from them.
In terms of difficulty, this is up there with auditing as having one of the highest pass rates.
The other thing to remember is that your choice of optional units may affect any possible exemptions you may get from further studies, especially if you are going on to study ACA or ATT.