ACCOUNTING Rationale Financial matters affect every member of our society. Through engagement with Accounting, Level 3, learners develop an understanding of the fundamentals on which accounting and financial management are based. In our current economic environment, where small businesses are the largest employers, many learners will find themselves self-employed or working in small business and there is a high probability that they will have to engage in some form of accounting practice. Small businesses account for almost 96 percent of the count of all actively trading businesses and 46 percent of total private sector industry employment (Department of Industry, Innovation, Science, Research and Tertiary Education (2012) Australian Small Business Key Statistics and Analysis.) Accounting, Level 3, aims to make learners financially literate by creating an understanding of the systems and processes through which financial practices and decision-making are carried out, as well as the ethical, social and regulatory issues involved. An understanding of accounting assists with the discharge of accountability and in the management of financial resources. Accounting also helps learners analyse and make informed decisions about business finance. They develop skills in critical thinking, decision-making and the use of information and communication technologies and an appreciation of active and responsible citizenship. The knowledge and skills developed in accounting also enables them to analyse their own financial position and make informed decisions based on that analysis. Many learners who study Accounting, Level 3, will go on to further study and careers in business and finance. Aims Accounting, Level 3, aims to develop learners’: • financial knowledge: learners describe the terms, concepts and principles that are fundamental to accounting and other financial procedures • financial reasoning: learners apply appropriate accounting and financial concepts and processes to record and report financial information to meet business needs • financial decision-making: learners select, use and interpret accounting and financial information to make decisions for business purposes
revenues/unearned revenue accrued revenue. revenue received in advance/prepaid revenues/unearned revenue Accrued income GST Clearing complex entries any adjustment being written in a way that may not be seen in prior learning. Statement Balance Sheet Note: Templates are provided (Refer to Appendices 5.A and 5.B). 3.5 The impact of inventories Definition of the term ‘inventories’ and their importance to a business The perpetual inventory system The significance of the stock-take in the perpetual inventory system (Note: lower of cost or net realizable value is not required). Prepare the general journal entry and post to the general ledger for an inventory adjustment (complex entry). Use a trial balance with balance day adjustment information, to prepare a fully classified and presented: Income Statement Balance Sheet Note: Templates are provided (Refer to Appendices 5.A and 5.B). 3.6 The impact of non-current assets Definition of the term ‘non-current assets’ and the types of assets included in this classification The nature of ‘property, plant and equipment’ assets The distinction between capital expenditure and revenue expenditure The purpose of Prepare a general journal entry to record the purchase of property, plant and equipment assets on credit and post to the general ledger (simple entry) Prepare a general journal entry to record depreciation and post to the general ledger Use a trial balance with balance day adjustment information, to prepare a fully classified and presented: Income Statement Balance Sheet Note: Templates are
depreciation (cost allocation) and that it does not set aside funds for replacement The concepts of original cost, scrap or residual value, accumulated depreciation and written down value (net asset or carrying value) Determining the cost of a depreciable non-current asset Identifying the more appropriate method of depreciation to apply Straight-line Reducing/diminishing balance Calculating depreciation using both the straight line and diminishing balance method (Formulae – Refer to Appendix 10) Small business depreciation pooling (basic introduction only, no practical application required) Calculating the gain or loss on disposal of non-current assets and classify the gain as revenue and the loss as an expense in the Income Statement. (Refer to Appendix 6). simple adjusting entries: depreciation of a new asset using either method depreciation of an existing asset using the straight line method complex adjusting entries: depreciation of a new asset for a part period depreciation of an existing asset using the diminishing balance method Note: Journal entries and posting to the ledger for Disposal or Gain and Loss on Disposal accounts are not required. provided (Refer to Appendices 5.A and 5.B). 3.7 The impact of accounts receivable Nature of bad and Prepare general journal Use a trial balance
business performance Make recommendations to business owners and managers about improving business performance. Financial knowledge Financial reasoning: reporting Financial decision-making 4.3 Cash flow statements Purpose of preparing a cash flow statement Definition and examples of cash flows from operating, investing and financing activities. Prepare cash flow statements for a sole trader form of organisation (without credit sales, credit purchases and credit sales of non-current assets) simple – solve problems with all data and information provided. Data and information is straightforward complex – solve problems that include data and information not previously encountered Notes to the statement of cash flows (e.g. reconciliation of operating cash flows to Draw conclusions about a simple cash flow statement (accompanied by the Income Statement and Balance Sheet) in terms of: operating activities – where cash is obtained and where it is used investing activities – where major investments in assets have been made or realised financing activities – how investments have been financed. Highlight areas of concern or strengths in the cash position and make recommendations for action.
operating profit) are not required. Note: Templates are provided (Refer to Appendix 8). 4.4 Cash budgets The purpose of a cash budget and its role in cash control Advantages Main sources of finance further equity bank overdrafts loans mortgages Main considerations when borrowing finance: risk - credit history, employment history, collateral, guarantors, liquidity return - interest rates and future business. Prepare a cash budget: simple – solve problems with all data and information provided. Data and information is straightforward complex – solve problems requiring significant manipulation of data such as collections from accounts receivable and items which require an understanding of the interrelationship of data, e.g. depreciation, discount expense and bad and doubtful debts Note: Templates are provided (Refer to Appendices 9.A and 9.B). Draw conclusions from a cash budget in terms of its components and the expected (future) cash position of the business Make recommendations to business owners and managers about improving the cash position of the business. 5: (15
* = externally and internally assessed criteria Standards 1: *DESCRIBE ACCOUNTING AND FINANCIAL TERMS, CONCEPTS AND PRINCIPLES RATING ‘C’ RATING ‘B’ RATING ‘A’ The learner: The learner: The learner: identifies terms, concepts and principles related to the accounting landscape for a sole trader and provides an example of each describes terms, concepts and principles related to the landscape for a sole trader and provides examples of each explains terms, concepts and principles related to the landscape for a sole trader and provides a range of examples of each identifies terms, concepts and principles related to recording, controlling and risk managing financial information and provides an example of each describes terms, concepts and principles related to recording, controlling and risk managing financial information and provides examples of each explains terms, concepts and principles related to recording, controlling and risk managing financial information and provides a range of examples of each identifies terms, accounting assumptions and qualitative characteristics related to the preparation of financial reports and provides an example of each describes terms, accounting assumptions and qualitative characteristics related to the preparation of financial reports and provides examples of each explains terms, accounting assumptions and qualitative characteristics related to the preparation of financial reports and provides a range of examples of each identifies terms, concepts and describes terms, concepts and explains terms, concepts and
principles related to making financial decisions and provides an example of each principles related to making financial decisions and provides examples of each principles related to making financial decisions and provides a range of examples of each assesses the impact of a breach of accounting assumptions, qualitative characteristics, and social, regulatory and ethical influences on business behaviour analyses the impact of a breach of accounting assumptions, qualitative characteristics, and social, regulatory and ethical influences on business behaviour evaluates the impact of a breach of accounting assumptions, qualitative characteristics, and social, regulatory and ethical influences on business behaviour distinguishes between contrasting financial terms, principles and ideas distinguishes between contrasting but related financial terms, principles and ideas distinguishes between contrasting but related financial terms, principles and ideas and explains subtle differences correctly completes accounting equation problems involving simple data and information. correctly completes accounting equation problems. correctly completes accounting equation problems involving complex data and information. 2: *APPLY DOUBLE-ENTRY ACCOUNTING TERMS, CONCEPTS AND PROCESSES TO RECORD AND CONTROL FINANCIAL INFORMATION RATING ‘C’ RATING ‘B’ RATING ‘A’ The learner: The learner: The learner:
records simple transactions in the general journal. There may be some errors with the expected format records transactions in the general journal which are compliant with the expected format records complex transactions in the general journal which are compliant with the expected format posts general journal entries to the general ledger for simple transactions. There may be some errors with completeness posts general journal entries to the general ledger and correctly balances where required posts general journal entries to the general ledger for complex transactions and correctly balances where required identifies the nature of simple transactions posted to ledger accounts analyses entries in ledger accounts and determines the nature of the transactions evaluates entries in ledger accounts and determines the full double entry nature of transactions, even complex ones prepares bank reconciliation statements involving simple items. There may be some errors in categorisation and formatting. prepares bank reconciliation statements which are compliant with the required format. prepares bank reconciliation statements, which include complex items, and which are compliant with the required format. 3: *APPLY ACCRUAL ACCOUNTING TERMS, CONCEPTS AND PROCESSES TO SELECT AND ORGANISE DATA TO PREPARE FINANCIAL REPORTS RATING ‘C’ RATING ‘B’ RATING ‘A’ The learner: The learner: The learner: identifies the double entry components of assesses the double entry components of analyses the double entry components of
simple balance day adjustments simple balance day adjustments balance day adjustments, including complex ones modifies existing account balances in the trial balance and creates new accounts and balances for simple balance-day adjustments. Some errors may occur correctly and accurately modifies existing account balances in the trial balance and creates new accounts and balances for adjustments correctly and accurately modifies existing account balances in the trial balance and creates new accounts and balances for balance-day adjustments, including complex ones prepares income statements and balance sheets using manual methods from a list of simple items. There may be errors in terms of classifications of items prepares properly classified income statements and balance sheets using manual methods from a list of simple items. They are accurate and classified prepares properly classified income statements and balance sheets using manual methods from a list of items, including complex ones. They are accurate and appropriately classified prepares cash flow statements from provided financial data. They are mathematically accurate. There may be errors in terms of classifications of items prepares cash flow statements from simple financial data. They are mathematically accurate and appropriately classified prepares cash flow statements from financial data, some of which is complex. They are mathematically accurate and appropriately classified prepares cash budgets prepares cash budgets prepares cash
identifies each section of the cash flow statement and the actual cash position assesses each section of the cash flow statement and the actual cash position analyses each section to the cash flow statement and the actual cash position identifies each section of a cash budget and the expected cash position assesses each section of the cash budget and the expected cash position analyses each section of the cash budget and the expected cash position interprets data and presents a reasoned conclusion about business performance, using relevant evidence interprets data and argues a reasoned conclusion about business performance, articulating links to financial and information critically analyses data and argues a reasoned conclusion about business performance, linking it to relevant financial, and qualitative information makes valid recommendations to improve business performance and assesses a potential impact on the business. makes justified recommendations to improve business performance and analyses their potential impact on the business. makes coherent and sustainable recommendations to improve business performance and evaluates their impact. 5: USE AN SOFTWARE PACKAGE AND DIGITAL TECHNOLOGIES TO RECORD, REPORT AND INTERPRET FINANCIAL RATING ‘C’ RATING ‘B’ RATING ‘A’ The learner: The learner: The learner: uses an accounting software package and uses an accounting software package to uses an accounting software package to
^accounting reports refer to income statements, balance sheets, cash flow statements and cash budgets. 6: *COMMUNICATE IDEAS AND RATING ‘C’ RATING ‘B’ RATING ‘A’ The learner: The learner: The learner: constructs and uses written, oral, and multimodal presentations as directed to produce a response that includes some relevant details and generally follows the required structure selects, constructs and uses appropriate written, oral and multimodal presentations to produce a response that conveys relevant details and follows the required structure selects, constructs and uses appropriate written, oral and multimodal presentations to accurately and precisely convey meaning, including all relevant details, and is clearly and correctly structured communicates ideas and explanations clearly, correctly using appropriate language conventions and accounting and financial terminology communicates complex ideas and coherent explanations clearly, selecting and correctly using appropriate language conventions and accounting and financial terminology for specific audiences and purposes communicates complex ideas and coherent and sustained explanations effectively, selecting and correctly using appropriate language conventions and accounting and financial terminology for specific audiences and purposes uses the required formats to produce clearly and accurately produces effectively produces accurate and fully
accounting records and reports. There may be some errors in accuracy and in compliance with the required format accounting records and reports in the required formats compliant accounting records and reports in the required formats differentiates the information, images, ideas and words of others from the learner’s own clearly identifies the information, images, ideas and words of others used in the learner’s work clearly identifies the information, images, ideas and words of others used in the learner’s work identifies the sources of information, images, ideas and words that are not the learner’s own. Referencing conventions and methodologies are generally followed correctly clearly identifies sources of the information, images, ideas and words that are not the learner’s own. Referencing conventions and methodologies are followed correctly clearly identifies sources of the information, images, ideas and words that are not the learner’s own. Referencing conventions and methodologies are followed with a high degree of accuracy creates appropriate reference lists/bibliographies. creates appropriate, structured reference lists/bibliographies. creates appropriate, well-structured reference lists/ bibliographies. 7: USE INQUIRY SKILLS TO PLAN AND UNDERTAKE A FINANCIAL INVESTIGATION RATING ‘C’ RATING ‘B’ RATING ‘A’ The learner: The learner: The learner: uses given inquiry questions, designs expresses inquiry questions, discussing composes clearly structured inquiry
inquiry, clearly stating aims and appropriate methodology their connections to observations; designs inquiry, clearly stating aims and describing appropriate methodology questions, explaining their connections to observations; designs comprehensive inquiry, clearly stating aims and explaining appropriate methodology in detail locates a limited range of primary and secondary sources related to an investigation and assesses their reliability locates a range of primary and secondary sources relevant to an investigation and analyses their reliability locates a wide range of primary and secondary sources relevant to an investigation and evaluates their reliability identifies time, resources and equipment needed to complete inquiry, and develops and employs a research plan identifies time, resources and equipment needed to complete inquiry, and develops and employs a coherent research plan identifies time, resources and equipment needed to complete activities, and develops a systematic and coherent research plan reflects – orally and in writing – on progress towards meeting goals and timelines, articulating some ways in which goals may be met in the future reflects – orally and in writing – on progress towards meeting goals and timelines; analyses progress to plan future actions reflects – orally and in writing – on progress towards meeting goals and timelines; critically evaluates progress to plan future actions meets meets meets
Appendix 4: Balancing Accounts a) Formal balancing Inventories 1 Balance b/d 20 000 Dec 2 Cost of Goods Sold 750 6 Cash 1 000 4 Cost of Goods Sold 1 550 D Austin 400 19 D Austin 100 24 Drawings 250 31 Balance c/d 18 750 $21 400 $21 400 1 Balance b/d 18 750 b) Informal or pencil/circle balancing Inventories Dec 1 Balance b/d 20 000 Dec 2 Cost of Goods Sold 750 6 Cash 1 000 4 Cost of Goods Sold 1 550 12 D Austin 400 19 D Austin 100 24 Drawings 250