Accounting0452

Course Content

The fundamentals of accounting

understand and explain the difference between book-keeping and accounting
state the purposes of measuring business profit and loss
explain the role of accounting in providing information for monitoring progress and decision-making
explain the meaning of assets, liabilities and owner’s equity
explain and apply the accounting equation.

Sources and recording of data

outline the double entry system of book-keeping
process accounting data using the double entry system
prepare ledger accounts
post transactions to the ledger accounts
balance ledger accounts as required and make transfers to financial statements
interpret ledger accounts and their balances
recognise the division of the ledger into the sales ledger, the purchases ledger and the nominal (general) ledger.
recognise and understand the following business documents: invoice, debit note, credit note, statement of account, cheque, receipt
complete pro-forma business documents
understand the use of business documents as sources of information: invoice, credit note, cheque counterfoil, paying-in slip, receipt, bank statement.
explain the advantage of using various books of prime entry
explain the use of and process accounting data in the books of prime entry: cash book, petty cash book, sales journal, purchases journal, sales returns journal, purchases returns journal and the general journal
post the ledger entries from the books of prime entry
distinguish between and account for trade discount and cash discounts
explain the dual function of the cash book as a book of prime entry and as a ledger account for bank and cash
explain the use of and record payments and receipts made by bank transfers and other electronic means
explain and apply the imprest system of petty cash.

Verification of accounting records

understand that a trial balance is a statement of ledger balances on a particular date
outline the uses and limitations of a trial balance
prepare a trial balance from a given list of balances and amend a trial balance which contains errors
identify and explain those errors which do not affect the trial balance: commission, compensating, complete reversal, omission, original entry, principle
correct errors by means of journal entries
explain the use of a suspense account as a temporary measure to balance the trial balance
correct errors by means of suspense accounts
adjust a profit or loss for an accounting period after the correction of errors • understand the effect of correction of errors on a statement of financial position
understand the use and purpose of a bank statement
update the cash book for bank charges, bank interest paid and received, correction of errors, credit transfers, direct debits, dividends, and standing orders
understand the purpose of and prepare a bank reconciliation statement to include bank errors, uncredited deposits and unpresented cheques.
understand the purposes of purchases ledger and sales ledger control accounts
identify the books of prime entry as sources of information for the control account entries
prepare purchases ledger and sales ledger control accounts to include credit purchases and sales, receipts and payments, cash discounts, returns, irrecoverable debts, dishonoured cheques, interest on overdue accounts.

Accounting procedures

distinguish between and account for capital expenditure and revenue expenditure
distinguish between and account for capital receipts and revenue receipts
calculate and comment on the effect on profit of incorrect treatment
calculate and comment on the effect on asset valuations of incorrect treatment.
define depreciation
explain the reasons for accounting for depreciation
name and describe the straight-line, reducing balance and revaluation methods of depreciation
prepare ledger accounts and journal entries for the provision of depreciation
prepare ledger accounts and journal entries to record the sale of non-current assets, including the use of disposal accounts.
recognise the importance of matching costs and revenues
prepare ledger accounts and journal entries to record accrued and prepaid expenses
prepare ledger accounts and journal entries to record accrued and prepaid incomes.
understand the meaning of irrecoverable debts and recovery of debts written of
prepare ledger accounts and journal entries to record irrecoverable debts
prepare ledger accounts and journal entries to record recovery of debts written of
explain the reasons for maintaining a provision for doubtful debt
prepare ledger accounts and journal entries to record the creation of, and adjustments to, a provision for doubtful debts
understand the basis of the valuation of inventory at the lower of cost and net realisable value
prepare simple inventory valuation statements • recognise the importance of valuation of inventory and the effect of an incorrect valuation of inventory on gross profit, profit for the year, equity and asset valuation.

Preparation of financial statements

explain the advantages and disadvantages of operating as a sole trader
explain the importance of preparing income statements and statements of financial position
explain the difference between a trading business and a service business
prepare income statements for trading businesses and for service businesses
understand that statements of financial position record assets and liabilities on a specified date
recognise and define the content of a statement of financial position: non-current assets, intangible assets, current assets, current liabilities, non-current liabilities and capita
understand the inter-relationship of items in a statement of financial position
prepare statements of financial position for trading businesses and service businesses
make adjustments for provision for depreciation using the straight line, reducing balance and revaluation methods
make adjustments for accrued and prepaid expenses and accrued and prepaid income
make adjustments for irrecoverable debts and provisions for doubtful debts
make adjustments for goods taken by the owner for own use.
explain the advantages and disadvantages of forming a partnership
outline the importance and contents of a partnership agreement
explain the purpose of an appropriation account
prepare income statements, appropriation accounts and statements of financial position
record interest on partners’ loans, interest on capital, interest on drawings, partners’ salaries and the division of the balance of profit or loss
make adjustments to financial statements as detailed in 5.1 (sole traders)
explain the uses of and differences between capital and current accounts
draw up partners’ capital and current accounts in ledger account form and as part of a statement of financial position.
explain the advantages and disadvantages of operating as a limited company
understand the meaning of the term limited liability
understand the meaning of the term equity
understand the capital structure of a limited company comprising preference share capital, ordinary share capital, general reserve and retained earnings
understand and distinguish between issued, called-up and paid-up share capital
understand and distinguish between share capital (preference shares and ordinary shares) and loan capital (debentures)
prepare income statements, statements of changes in equity and statements of financial position . make adjustments to financial statements as detailed in 5.1 (sole traders).
distinguish between receipts and payments accounts and income and expenditure accounts
prepare receipts and payments accounts
prepare accounts for revenue-generating activities, e.g. refreshments, subscriptions
prepare income and expenditure accounts and statements of financial position
make adjustments to financial statements as detailed in 5.1 (sole traders)
define and calculate the accumulated fund.
understand direct material, direct labour, prime cost and factory overheads
understand and make adjustments for work in progress
calculate factory cost of production
prepare manufacturing accounts, income statements and statements of financial position
make adjustments to financial statements as detailed in 5.1 (sole traders).
explain the disadvantages of not maintaining a full set of accounting records
prepare opening and closing statements of affairs
calculate profit or loss for the year from changes in capital over time
calculate sales, purchases, gross profit, trade receivables and trade payables and other figures from incomplete information
prepare income statements and statements of financial position from incomplete records
make adjustments to financial statements as detailed in 5.1 (sole traders) . apply the techniques of mark-up, margin and inventory turnover to arrive at missing figures.

Analysis and interpretation

Candidates should be able to understand, calculate and explain the importance of the following accounting ratios:
Gross margin
Profit margin
Return on capital employed (ROCE) • Current ratio • Liquid (acid test) ratio • Rate of inventory turnover (times) • Trade receivables turnover (days) • Trade payables turnover (days)
prepare and comment on simple statements showing comparison of results for different years
make recommendations and suggestions for improving profitability and working capital
understand the significance of the difference between the gross margin and the profit margin as an indicator of a business’s efficiency
explain the relationship of gross profit and profit for the year to the valuation of inventory, rate of inventory turnover, revenue, expenses, and equity.
understand the problems of inter-firm comparison
apply accounting ratios to inter-firm comparison
Candidates should be able to explain the uses of accounting information by the following interested parties for decision-making:
owners
managers
trade payable
bank
investors
bank member
other interested parties such as governments, tax authorities, etc.
Candidates should be able to recognise the limitations of accounting statements due to such factors as:
historic cost • difficulties of definition • non-financial aspects

Accounting principles and policies

Candidates should be able to explain and recognise the application of the following accounting principles:
matching
business entity
consistency
duality
going concern
historic cost
materiality • money measurement
prudence
realisation
Candidates should be able to recognise the influence of international accounting standards and understand the following objectives in selecting accounting policies:
comparability • relevance • reliability • understandability

Student Ratings & Reviews

No Review Yet

Fee:Free
Lessons:131
Level:Intermediate
Last Updated:25/08/2025

Course Content

The fundamentals of accounting

understand and explain the difference between book-keeping and accounting

state the purposes of measuring business profit and loss

explain the role of accounting in providing information for monitoring progress and decision-making

explain the meaning of assets, liabilities and owner’s equity

explain and apply the accounting equation.

Sources and recording of data

outline the double entry system of book-keeping

process accounting data using the double entry system

prepare ledger accounts

post transactions to the ledger accounts

balance ledger accounts as required and make transfers to financial statements

interpret ledger accounts and their balances

recognise the division of the ledger into the sales ledger, the purchases ledger and the nominal (general) ledger.

recognise and understand the following business documents: invoice, debit note, credit note, statement of account, cheque, receipt

complete pro-forma business documents

understand the use of business documents as sources of information: invoice, credit note, cheque counterfoil, paying-in slip, receipt, bank statement.

explain the advantage of using various books of prime entry

explain the use of and process accounting data in the books of prime entry: cash book, petty cash book, sales journal, purchases journal, sales returns journal, purchases returns journal and the general journal

post the ledger entries from the books of prime entry

distinguish between and account for trade discount and cash discounts

explain the dual function of the cash book as a book of prime entry and as a ledger account for bank and cash

explain the use of and record payments and receipts made by bank transfers and other electronic means

explain and apply the imprest system of petty cash.

Verification of accounting records

understand that a trial balance is a statement of ledger balances on a particular date

outline the uses and limitations of a trial balance

prepare a trial balance from a given list of balances and amend a trial balance which contains errors

identify and explain those errors which do not affect the trial balance: commission, compensating, complete reversal, omission, original entry, principle

correct errors by means of journal entries

explain the use of a suspense account as a temporary measure to balance the trial balance

correct errors by means of suspense accounts

adjust a profit or loss for an accounting period after the correction of errors • understand the effect of correction of errors on a statement of financial position

understand the use and purpose of a bank statement

update the cash book for bank charges, bank interest paid and received, correction of errors, credit transfers, direct debits, dividends, and standing orders

understand the purpose of and prepare a bank reconciliation statement to include bank errors, uncredited deposits and unpresented cheques.

understand the purposes of purchases ledger and sales ledger control accounts

identify the books of prime entry as sources of information for the control account entries

prepare purchases ledger and sales ledger control accounts to include credit purchases and sales, receipts and payments, cash discounts, returns, irrecoverable debts, dishonoured cheques, interest on overdue accounts.

Accounting procedures

distinguish between and account for capital expenditure and revenue expenditure

distinguish between and account for capital receipts and revenue receipts

calculate and comment on the effect on profit of incorrect treatment

calculate and comment on the effect on asset valuations of incorrect treatment.

define depreciation

explain the reasons for accounting for depreciation

name and describe the straight-line, reducing balance and revaluation methods of depreciation

prepare ledger accounts and journal entries for the provision of depreciation

prepare ledger accounts and journal entries to record the sale of non-current assets, including the use of disposal accounts.

recognise the importance of matching costs and revenues

prepare ledger accounts and journal entries to record accrued and prepaid expenses

prepare ledger accounts and journal entries to record accrued and prepaid incomes.

understand the meaning of irrecoverable debts and recovery of debts written of

prepare ledger accounts and journal entries to record irrecoverable debts

prepare ledger accounts and journal entries to record recovery of debts written of

explain the reasons for maintaining a provision for doubtful debt

prepare ledger accounts and journal entries to record the creation of, and adjustments to, a provision for doubtful debts

understand the basis of the valuation of inventory at the lower of cost and net realisable value

prepare simple inventory valuation statements • recognise the importance of valuation of inventory and the effect of an incorrect valuation of inventory on gross profit, profit for the year, equity and asset valuation.

Preparation of financial statements

explain the advantages and disadvantages of operating as a sole trader

explain the importance of preparing income statements and statements of financial position

explain the difference between a trading business and a service business

prepare income statements for trading businesses and for service businesses

understand that statements of financial position record assets and liabilities on a specified date

recognise and define the content of a statement of financial position: non-current assets, intangible assets, current assets, current liabilities, non-current liabilities and capita

understand the inter-relationship of items in a statement of financial position

prepare statements of financial position for trading businesses and service businesses

make adjustments for provision for depreciation using the straight line, reducing balance and revaluation methods

make adjustments for accrued and prepaid expenses and accrued and prepaid income

make adjustments for irrecoverable debts and provisions for doubtful debts

make adjustments for goods taken by the owner for own use.

explain the advantages and disadvantages of forming a partnership

outline the importance and contents of a partnership agreement

explain the purpose of an appropriation account

prepare income statements, appropriation accounts and statements of financial position

record interest on partners’ loans, interest on capital, interest on drawings, partners’ salaries and the division of the balance of profit or loss

make adjustments to financial statements as detailed in 5.1 (sole traders)