Teacher Resource Bank

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1 Teacher Resource Bank GCE Accounting Other Guidance: Delivering the Specification: Guidance for New Teachers to Accounting (Updated July 2012). The Assessment and Qualifications Alliance (AQA) is a company limited by guarantee registered in England and Wales (company number ) and a registered charity (registered charity number ).Registered address: AQA, Devas Street, Manchester M15 6EX..

2 Guidance for New Teachers to Accounting Delivering the GCE AS Accounting Specification Introduction As part of your preparation to teach the AQA GCE Accounting specification, you will need to consider a number of things: the subject content and the order in which you can teach the subject the assessment the pattern and nature of the examinations planning your delivery. The Teacher Resource Bank includes a scheme of work that suggests one way of organising the delivery of the subject for both AS and A2. However, you will see from textbooks etc that there are several different approaches. For example, you can teach double-entry bookkeeping followed by trial balances and afterwards proceed to financial statements, returning to cover the remaining verification techniques; or teach double-entry bookkeeping and the verification techniques and then move on to financial statements. At AS it is recommended that you deliver ACCN1 first, as much of the content of ACCN2 relies on an understanding of the basics of double-entry and the preparation of financial statements developed in ACCN1. Another consideration is whether your centre enters candidates for the January examinations. The specification has been designed to make this practicable, as agreed by experienced teachers at the initial launch meetings of the new specification. At A2 it is possible to deliver the units in any order as they are not synoptic with each other this means that you could enter candidates for the January examination for either ACCN3 or ACCN4. Subject Content AS Accounting: Unit 1 (ACCN1) In Unit 1, students learn how to record transactions using double-entry bookkeeping and to prepare financial statements: income statements and balance sheets. You will see from the scheme of work that double-entry bookkeeping receives a great deal of emphasis and time, which may seem disproportionate when you look at the number of basic double-entry questions in the examinations. However, it is essential that students have a good understanding of double-entry as this will enable them to tackle the more technical aspects in Unit 1 such as control accounts and resolving errors using the suspense account; it will also enable them to move on to Unit 2 and Unit 3 with confidence. Many students find double-entry bookkeeping tricky and need plenty of practice. They often struggle with the verification techniques and, in particular, bank reconciliations, control accounts and correcting errors using control accounts, so it is important that these topics are given sufficient time. Students will be expected to prepare financial statements and make adjustments for accruals, prepayments, bad debts and straight-line depreciation. The emphasis is on the technical aspects of preparing the accounts and the presentation using accepted formats (which are given in the Teacher Resource Bank). Students need to learn the layout of the financial statement, and, although many find this difficult, they will be rewarded for this in the examination.

3 There are two broad approaches to questions on financial statements. Students could be required to prepare financial statements: 1) from the double-entry ledger accounts, by closing down the ledger accounts and transferring balances to the income statement in the general ledger, or 2) from a trial balance (usually with adjustments). AS Accounting: Unit 2 (ACCN2) In Unit 2, students learn how to apply accounting concepts to the preparation of financial statements for sole traders and for limited companies. They will assess the performance of businesses using ratio analysis and by preparing cash budgets. Again the emphasis is on the technical aspects of the preparation of accounts. Students are required to adjust accounts for depreciation (straight-line and reducing balance), provision for doubtful debts and for other income received in advance and arrears. They will be expected to explain the accounting concepts involved and to apply them to the preparation of accounts. In general, students can apply the concepts and make the necessary adjustments to financial statements. However, they may find it much more difficult to explain the concept and why they are making the adjustment. There are two approaches to this area: 1) to teach the adjustments and then explain the concept being applied; 2) to explain the concepts and then apply them to the preparation of the accounts. Students will be expected to prepare financial statements for limited companies. These will follow the format given in the International Accounting Standard. Students will be expected to prepare: Income statements clearly identifying profit from operations Balance sheets Statement of changes in equity. The statement of changes in equity could involve some or all of the following accounting for shares issues, right issues, bonus issues, revaluation of assets and equity dividends. Students will also be expected to evaluate alternative methods of raising finance. The nominal value of shares may require more practice to ensure understanding and application. Students must also learn the benefits of raising this type of finance from more than one point of view. In assessing business performance, students should be able to: write the formulae make the calculation and comment on the results explaining the ratio calculated, making an assessment and possibly suggesting how the ratio could be improved. Please note that formulae will not be given in the examination. Students will be expected to prepare cash budgets and these will include situations where the candidates have to calculate cash received when a proportion is received in cash and the remainder in one or two months. Students will also have to explain the benefits and limitations of budgeting.

4 The impact of ICT on accounting involves analysing the advantages and disadvantages of using computers to prepare accounts this could involve double-entry bookkeeping packages or using generally available software to prepare budgets. Students will not need in-depth knowledge of any particular software, but just need to know the general benefits/disadvantages of its use. Assessment In accounting examinations the questions are structured that is to say they take the candidate through the Assessment Objectives in a systematic way. For example, in Unit ACCN2, the question could be structured as follows: Define a ratio (formulae) - Assessment Objective 1 (Knowledge and Understanding) Calculate the ratio - Assessment Objective 2 (Application) Comment on the ratio - Assessment Objectives 2/3 (Application and Analysis) Assess the performance - Assessment Objective 3 (Analysis and Evaluation) This should mean that students know what they are required to do and the skills that are involved. At AS and A2, there will be questions that require prose answers. It is important that students structure their answers and make sure they develop each point they make by explaining it or by giving an example. For instance, if asked to explain the benefits to an investor of ordinary shares, a good answer could be: Every ordinary share will entitle the owner to a vote at the Annual General Meeting (1 mark for voting rights) this means that if they own more than 50% of the shares, they can control the company (at least 1 more mark for development). Emphasis should also be placed on the use of good spelling, punctuation and grammar and a correct presentation of financial statement, as there may well be quality of written communication and presentation marks awarded for these on some questions. In the examination, it is essential that students show their workings in numerical answers as this enables examiners to check their approach and apply the Own Figure (OF) Rule to award marks. The Own Figure Rule means that if students give an incorrect answer (figure), then provided they show their workings, they will be rewarded for what is correct. Marks are not deducted for mistakes. Planning your teaching Given the accessibility of the specification, planning and delivering the subject content will no doubt prove manageable (see scheme of work). However, further to this comes the requirement for your students to apply the subject content to a range of situations, whilst becoming familiar with the terminology in accounting. To help achieve this, you will need to build into your teaching plans a variety of teaching methods that supplement the delivery of the course. These could include: homework tasks presentations examination practice real-world examples and case studies use of textbooks/online resources etc.

5 In addition to this document, there is additional guidance within the GCE Accounting Teacher Resource Bank (on the AQA website), including: a suggested resources list scheme of work additional specimen questions and mark schemes candidate exemplar work other guidance layouts and formulae most common command words International Accounting Standards (IAS) guidance and terminology Activity Based Costing (ABC) guidance Links to AQA GCE Business Studies The following topics are common to both AS Accounting and AS Business studies: types of business organisation sources of finance cash budgets (cash flow forecasts in business studies) assessing business performance and ratio analysis: return on capital net profit margin liquidity (current (current asset) and liquid (acid test) ratios).