Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 1.

Unit Code: ACCT

Demonstrate an understanding of the framework of financial accounting

Indicative Content: 1.1 The scope and objectives of financial accounting, i.e. the provision of useful figures for people about their resources, e.g. cost of assets, loans outstanding, income received, expenses consumed 1.2 The main users of accounting information and their needs

Consider the scope, objectives and range of users of financial

statements and how objectives and user needs will vary depending on the type of organisation. Organisations will include sole trader, partnership, private company, public company

1.3 Identify the main characteristics of useful information understandable, relevant, reliable and comparable Candidates, in small groups, should be asked to discuss the range of users of financial statements. Emphasis should be placed on the concept of maximisation of shareholder wealth and the conflicts which exist between various stakeholder groups 1.4 The twelve traditional accounting concepts Consider the concepts and conventions underpinning financial statements and relate these to the accounting treatment of various transactions. For example, the matching principle requires expenses not consumed in the generation of revenue to be treated as prepayments Examiners Tips: The underpinning concepts and principles of accounting are fundamental to all topics in the syllabus and the examination reflects this importance by inclusion of questions in every session.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 1.

Unit Code: ACCT

Demonstrate an understanding of the framework of financial accounting

Indicative Content: 1.5 The distinction between capital and revenue Explain the difference between capital and revenue expenditure Distinguish between expenditure of a long-term and a short-term nature Give examples of how these two types of expenditure differ Using case studies identify the problems of determining whether expenditure is long-term or short-term in nature 1.6 The role and scope of auditing in business (both external and internal auditing) Explain the role of auditing in securing reliability in reporting financial results Examiners Tips: The role and scope of auditing appears for the first time in the new syllabus. The importance of good auditing has surfaced as an important issue in the wake of the collapse of large multinational corporations, for example Enron and WorldCom.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 2.

Unit Code: ACCT

Prepare and present the financial statements of limited companies

Indicative Content: 2.1 External publication of companies financial statements Balance Sheet Consider the main classifications contained within the balance sheet under assets, liabilities, capital and reserves Consider the nature and characteristics of fixed assets, current assets, current liabilities, capital and reserves Income Statement Consider the main classifications and structure of the income statement Examine the accruals concept and matching of costs to periods of account Statement of Changes in Equity The changes in capital of the company over the period should be disclosed in the statement of changes in equity. This statement forms an integral part of the financial reports published by companies. Examiners Tips: The statement of changes in equity is a new statement and now forms an integral part of the financial statements found in financial reports. The three major financial statements, balance sheet, income statement and the statement of changes in equity will feature as a regular requirement on the financial accounting examination.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 2.

Unit Code: ACCT

Prepare and present the financial statements of limited companies

Indicative Content: 2.1 contd. Consider the nature of cash and the nature of profit 2.2 An understanding of the elements that make up the external financial reports, including the principal financial statements, the directors report, the corporate governance report and the auditors report Explain and analyse the content of the directors report, corporate governance report and the auditors report Examiners Tips: The difference between profit and cash is critical to an understanding of accounting.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 2.

Unit Code: ACCT

Prepare and present the financial statements of limited companies

Indicative Content: 2.3 Explain the rules contained in International Generally Accepted Accounting Principles in relation to assets, liabilities, income and expenses Consider the differences between cash flow and profit Assess the impact of principles on the financial statements Consider the various methods of valuing stock including FIFO, LIFO and AVCO Prepare stock valuation working sheets for each of the valuation methods Prepare trading accounts to illustrate the impact of various methods of stock valuation on profit Analyse and consider the impact of inflation on stock valuation and profit Candidates, in pairs or small groups, should be asked to prepare stock valuation working sheets Examiners Tips: The impact of different methods of stock valuation on profit, as well as the calculation of stock, is essential in understanding the accounting treatment of stock.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 2.

Unit Code: ACCT

Prepare and present the financial statements of limited companies

Indicative Content: 2.3 contd. Consider fixed assets and depreciation Calculate a range of different methods of depreciation, prepare depreciation calculations showing the impact of depreciation on the balance sheet and income statement Candidates, in small groups, should be asked to prepare depreciation calculations together with income statement and balance sheet extracts Candidates should be able to explain and apply IGAAP when preparing financial statements of limited companies. IFRSs in relation to foreign currency, retirement benefits, financial instruments will not be examined 2.4 Prepare income statements, balance sheets, cashflows and statements of changes in equity for limited companies from a given set of information in accordance with IGAAP Candidates, either individually or in small groups, should be asked to practise the preparation of income statements and balance sheets from either a list of accounting data or a trial balance. Application of relevant principles and appropriate formats in accordance with IGAAP should be used Prepare a cash flow statement using the opening and closing balance sheets, the income statement for the period and relevant cash data Candidates, either individually or in small groups, should be asked to prepare a cash flow statement both from balance sheets and income statements and from cash data Analyse the changes in cash over the period and provide a rational explanation for the changes Candidates, either individually or in small groups, should prepare statements of changes in equity

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Examiners Tips: Preparation of balance sheets and/or income statements from a trial balance or other relevant data will be a compulsory question on all assessments. Candidates may also be asked to take account of additional information requiring knowledge and application of IGAAP when preparing these financial statements. Candidates should be familiar with a number of methods of calculating depreciation and how these methods impact on profit and fixed asset values. Candidates should also be familiar with movements in the fixed asset cost account, accumulated depreciation account and the disposal account.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 3. Analyse and interpret financial statements

Unit Code: ACCT

Indicative Content: 3.1 Application of financial ratios, performance and financial status in order to help interpret financial statements Consider the major ratios appropriate to analysing financial statements in order to gain an understanding of the financial health of a company Candidates, either in pairs or in small groups, should be asked to analyse a number of companies and compare each companys financial performance against the relevant industry average or specific companies 3.2 Investors ratios Explain and prepare the ratios appropriate to the analysis of a company from an investors perspective Consider ratios applicable to the capital structure of a company and explain how the changes in capital structure impact on investors Candidates, either in pairs or in small groups, should be asked to analyse a number of companies and compare each companys financial performance against the stock exchange averages 3.3 Limitations of ratio analysis Consider the limitations of ratio analysis Identify further information that might aid in the analysis 3.4 The impact of changing prices on financial statements and methods of adjusting historical cost accounts to present more useful information to users Evaluate the impact of changing prices on financial statements

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Examiners Tips: Analysis of the financial health of companies is a topic which business executives encounter frequently in their everyday life and as a consequence this topic will be a regular feature in the examination. An understanding of the major drivers in the financial reports on share performance is essential in todays shareholder global economy. The examination will, from time to time, include a question on this specific aspect.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 4.

Unit Code: ACCT

Demonstrate an understanding of capital structure and gearing

Indicative Content: 4.1 Types of shares and loans available in the marketplace to businesses Types of shares, reserves and loans forming long-term finance 4.2 Issue and redemption of shares and debentures Consider the accounting treatment of ordinary share issues at both par and at a premium Consider the accounting treatment of preference share issues at both par and at a premium Consider the redemption of shares at both par and at a premium Candidates, either in pairs or in small groups, should be asked to prepare both the accounting entries and the financial statements extracts relating to the issue and redemption of shares 4.3 Prepare balance sheets after the issue and redemption of shares

4.4 The relationship between equity and debt Consider the main classification of shares, reserves and loans including: ordinary shares, preference shares, share premium account, revaluation reserve and retained profits Consider the capital gearing relationship between the constituent parts of long-term finance Consider the impact of gearing on earnings per share Candidates, whether individually or in small groups, should be asked to discuss the consequences of maintaining various gearing levels and to practise exercises involving the calculation of earnings per share following a change in capital structure Consider ratios applicable to the capital structure of a company and explain how the changes in capital structure impact on investors

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Examiners Tips: The risks and impact of gearing on the company are a major issue for many companies. The focus of this lecture should concentrate on these aspects. Candidates should be familiar with both the issue and redemption of preference and ordinary shares. The topic is likely to feature in the examination once every few years.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 5.

Unit Code: ACCT

Prepare and present consolidated accounts in accordance with IGAAP

Indicative Content: 5.1 The concept of control in relation to a subsidiary Consider the concept of control in accordance with IGAAP Demonstrate the difference between ownership and control 5.2 Principles of consolidation for a single holding structure Consider the fundamental principles underpinning Group Accounts Understand the need to value the subsidiary holding at fair value Demonstrate the preparation of basic consolidated balance sheets Demonstrate the preparation of basic consolidated income statements 5.3 Inter company items and their elimination from consolidated accounts, e.g. dividends, inter company sales, inter company loans Consider the elimination of inter group items, e.g. inventory sales, loans, asset sales, dividends Candidates, either individually or in small groups, should be asked to prepare consolidated balance sheets and consolidated income statements 5.4 Prepare consolidated accounts (balance sheets and income statements) for a holding company and its subsidiary, both at the date of acquisition and for subsequent periods Make adjustments to consolidated accounts when subsidiaries are required to be valued at fair value at date of acquisition. Note this automatically affects goodwill calculations

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5.5 Treatment of goodwill in consolidated accounts in accordance with IGAAP Consider the nature of consolidated goodwill Explain the treatment of consolidated goodwill as identified in IFRSs Prepare entries in consolidated accounts for goodwill Examiners Tips: Only single holding structures will be examined, i.e. holding company and one subsidiary. Basic inter company transfers of a non-complex nature will be examined. Candidates will be expected to prepare consolidated accounts requiring fair value adjustments at date of acquisition.

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Unit Title: Financial Accounting Level: Diploma in Business Management Learning Outcome: 6.

Unit Code: ACCT

Identify, discuss and appraise the sources of finance available to businesses

Indicative Content: 6.1 The various sources of finance available to businesses Consider the various sources of finance available to companies 6.2 Differentiation between short-term, medium-term and long-term sources of finance Consider the distinction between short-, medium- and long-term sources of finance and the circumstances when each would be appropriate 6.3 Explain working capital management Identify working capital in a business Explain how working capital can be managed to the benefit of a business 6.4 An appreciation of the differing financing needs of organisations Consider the company life cycle and the financing needs of companies in different stages in the life cycle Demonstrate the effects of differing financing methods on the financial statements of an organisation Examiners Tips: The topic of sources of finance links to a variety of other topics, both in this syllabus and in other related ABE syllabuses. An understanding of the distinction between types is fundamental.

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