NATIONAL 5 Accounting

Transcription

1 MADRAS COLLEGE FACULTY OF TECHNOLOGIES DEPARTMENT OF BUSINESS AND COMPUTING NATIONAL 5 Accounting Course Information

2 ACCOUNTING NATIONAL 5 COURSE AIMS AND STRUCTURE The course aims to enable learners to: develop an awareness of the important function accounting performs in industry and society; develop accuracy in the preparation, presentation, interpretation and analysis of accounting information and apply a systematic approach to solving financial problems; apply relevant accounting concepts and techniques when preparing financial information; develop an awareness of a range of sources of finance available to organisations and when to use the most appropriate ones; apply information technology in accounting-related tasks. This course is split into 3 units: Preparing Financial Accounting Information Preparing Management Accounting Information Analysing Accounting Information PREPARING FINANCIAL ACCOUNTING INFORMATION In this unit, you will be required to provide evidence of your: Ability to record straightforward financial accounting transactions and prepare period end financial statements; Understanding of key financial accounting terms relating to the preparation of financial accounts, and knowledge of their application in straightforward contexts. The following topics are assessed across the unit and the course: Role of the Financial Accountant Features, advantages and disadvantages of being a sole trader Preparation of final accounts for a sole trader that include period end adjustments: o Trading Account o Profit and Loss Account o Balance Sheet Ledger Accounts (double entry book-keeping) and preparation of Business Documents Preparation of a Trial Balance Correction of Ledger Account Errors and their effect on gross and net profit Sources of Finance 2

3 PREPARING MANAGEMENT ACCOUNTING INFORMATION In this unit, you will be required to provide evidence of your: Ability to prepare straightforward cash budgets and a range of straightforward cost statements; Understanding of key management accounting terms, and knowledge of their application in straightforward contexts. The following topics are assessed across the unit and the course: Role of the Management Accountant Classification and Calculation of Costs o Identify fixed, variable, direct and indirect costs Costing Methods o Job Costing calculate the cost and selling price of jobs using a profit mark-up o Materials calculate stock issues using FIFO and LIFO o Labour record and calculate wages using time/piece/flat rate methods Overhead Analysis o Production of an overhead analysis statement showing allocation and apportionment of overheads to cost centres Break-even Analysis o Use of break-even analysis techniques including use of formulae and charts Budgeting o Preparation of cash budgets and benefits of budgeting ANALYSING ACCOUNTING INFORMATION In this unit, you will be required to provide evidence of your: Ability to interpret, analyse and evaluate a range of straightforward accounting information to assess the current financial position of an organisation; Understanding of a range of straightforward analytical concepts used to assist financial decision making, and knowledge of their application in familiar contexts. The following topics are assessed across the unit and the course: Accounting Ratios (Financial Analysis) o Calculate specified profitability, liquidity and efficiency ratios o Compare performance o Limitations of accounting ratios Decision Making o Analysis of impact on break-even point of changes to sales/costs o Profit maximisation where there is a limiting factor Budgeting o Management of cash shortfalls and surpluses A self-assessment checklist is attached providing a more in-depth description of the course content. 3

4 UNIT ASSESSMENTS Preparing Financial Accounting Information Outcome 1 Record transactions from ledger accounts, collecting relevant information from a range of business documents. Prepare a trial balance from the ledger account balances. Outcome 2 Explain why businesses need to account for period-end adjustments. Calculate period-end adjustments. Describe the effect of period-end adjustments on the net profit and balance sheet. Outcome 3 Select the correct information from a trial balance and period-end adjustments to prepare a trading, profit and loss account and balance sheet for a sole trader. Preparing Management Accounting Information Outcome 1 Describe direct and indirect costs and give examples of each. Describe fixed and variable costs and give examples of each. Define a cash budget and describe why it is prepared. Outcome 2 Prepare 2 accounting statements (eg stock record card and job cost statement). Calculate break-even information. Prepare a cash budget. Analysing Accounting Information Outcome 1 Calculate and assess the effect of a change in costs and selling price on the break-even point and profit. Calculate and assess the impact that a limiting factor has on profit maximisation. Interpret a cash budget and outline possible courses of action. Outcome 2 Calculate accounting ratios that assess the profitability, liquidity and efficiency of an organisation. Compare ratios based on given yardsticks of comparison to evaluate and report on the organisation s performance. 4

5 COURSE ASSESSMENT QUESTION PAPER 2 hours 100 marks Section A 2 x 30 mark questions drawn from any area of the course. These questions will be mainly computational in nature with up to 5 marks for theory. Section B 4 x 10 mark questions drawn from any area of the course. These questions will be computational in nature. ASSIGNMENT 3 hours 50 marks The assignment will require you to work through a series of tasks to prepare accounting information and financial statements using a spreadsheet. Homework You should expect homework once a week. This could be in the form of: Completing work started in class Reading over notes from the day s work Practice questions to reinforce work covered in class Revision questions Questions similar to the external question paper Achieving Success is Your responsibility We hope that you will enjoy the National 5 Accounting course, that you will achieve the Unit Assessments and go on to be successful in the final course assessment. In order to achieve this goal we must work in partnership. You will work with up-to-date materials and will be given help and support throughout the course. We hope you will approach your work with a mature attitude and determination to succeed. Always ensure that your work is well ordered and neatly presented. Work hard, aim high and achieve success 5

6 Self-Assessment Checklist Preparing Financial Accounting Information Role of the Financial Accountant Duties, scope and responsibilities of the Financial Accountant. Business Documents Function of various business documents used in buying, selling and payment. Order form, invoice, credit note, statement of account, cheque, till roll, receipt, petty cash voucher. Completion of business documents from appropriate sources including the calculation of VAT, trade discount and cash discount. Manual and electronic methods of payment. Record transactions in ledger accounts from given information/business documents. Prepare a Trial Balance from given ledger account balances. Features of a Sole Trader Advantages and disadvantages Sources of finance available to a sole trader with associated advantages and disadvantages Final Accounts of a Sole Trader Preparation of Trading, Profit and Loss account and Balance Sheet in accordance with current accounting practice. Adjustments at year end for: provisions for straight line depreciation provision for doubtful debts prepayments and accruals of expenses Distinguish between revenue and capital expenditure. Define terms shown in the final accounts eg assets and liabilities. 6

7 Correction of Errors in Ledger Accounts Purpose and limitation of a trial balance Types of errors not disclosed by the trial balance Correction of errors and the effect on net profit and the balance sheet Preparing Management Accounting Information Role of the Management Accountant Duties, scope and responsibilities of the Management Accountant. Differentiate between the role of the Financial and Management Accountant Classification and calculation of costs Identification and significance of fixed, variable, direct and indirect costs. Direct Costs Materials Preparation of stock record cards. Valuing issue of stock at First In First Out (FIFO) and Last In First Out (LIFO). Direct Costs Labour Calculate labour hours and wages: time rate, piece rate, flat rate, bonus and overtime. Indirect Costs Overheads Distinguish between costs centres and cost units, and production and service cost centres Prepare an Overhead Analysis Statement to include: allocation of overheads. apportionment of overheads calculated using floor area, number of employees, value of fixed assets, labour hours, machine hours, metered consumption, Kilowatt (Kw) hours. re-apportionment of services cost centres to production cost centres where the basis of apportionment is given. 7

8 Preparation of Job Cost Statements Job cost statements which include: calculation of direct materials, labour and expenses calculation of overheads from given rate calculation of profit using mark-up calculation of selling price to include VAT Break-even Analysis Use of break-even analysis techniques including: Interpretation of break-even charts Calculate unit or total calculation, in units and/or monetary value, of the following: - contribution - break-even point - profit/loss for given output - output required to achieve given profit - margin of safety Budgeting Preparation of cash budgets for a period of up to 3 months taking account of: time delays in receiving from debtors or paying creditors cash/credit sales values purchase of fixed assets Purpose of a cash budget Benefits of preparing a cash budget Information Technology and Accounting Be aware of uses of information technology in accounting and the benefits of using spreadsheets for preparing accounting statements. 8

9 Use of spreadsheets Be able to use formulae for the following functions: Add/sum subtract multiply divide copy relatively copy absolutely linking between different worksheets Produce value and formula printouts with the following displayed: gridlines row and column headings Analysing Accounting Information Accounting Ratios Calculation and interpretation of the following ratios: Profitability Ratios gross profit ratio net profit ratio return on capital employed Liquidity Ratios current ratio Efficiency Ratios rate of stock turnover average stock debtors collection period creditors payment period fixed asset turnover Comment on performance: Over a number of years With similar firms/competitors Against the industry avenue Limitations of Accounting Ratios. 9

10 Management Decision Making Using break-even Analysis, calculate: effects of changes in fixed/variable costs or sales on profit and break-even point; Changes required in selling price/contribution to maintain/improve existing profit levels; maximum profits under the constraint of a limiting factor. Budgeting Possible decisions made based on cash shortfalls and surpluses. 10