Financial Accounting Study Notes

UNIVERSITY OF ZAMBIA - BAE 211 FINANCIAL ACCOUNTING (MAY 2014)

INTRODUCTION

  • Objective: Explanation of theoretical concepts, preparation of accounts, and reporting of financial information.
  • Learnings: Record transactions daily, prepare reports to determine profit and value of assets and liabilities at the end of reporting period, and analyze trading results to assess business performance.

AIM

  • Develop knowledge and technical proficiency in financial accounting principles, including double-entry accounting and preparation of financial statements for various business entities.

OBJECTIVES

  1. Explain the accounting framework for business entities.
  2. Record transactions and events.
  3. Demonstrate double-entry accounting and prepare a trial balance, including error corrections.
  4. Account for assets and liabilities.
  5. Prepare financial statements for incorporated and unincorporated entities.
  6. Evaluate financial performance through ratio analysis.
  7. Describe features of public sector accounting.

ASSESSMENT

  • Continuous assessment (50%): 2 tests (30%), 2 assignments (20%), and final examination (50%).

PRESCRIBED READING

  1. BPP (2011) Paper T1 Financial Accounting, 1st Edition.
  2. BPP (2013) FIA FFA Financial Accounting, 2nd Edition.
  3. Wood, F. and Sangster, A. (2011) Business Accounting 1, 11th Edition.

STUDY SKILLS

  • Repeat exercises from the module and follow additional practice from standard textbooks.
  • Submit assignments on time and maintain communication with the tutor for progress tracking.

TIME FRAME

  • 120 to 150 hours required for successful completion of the module, studying at least three hours per day.

WHEN YOU NEED HELP

  • Contact information for inquiries provided.

TABLE OF CONTENTS

  1. Business Transactions and Documentation
  2. Recording Transactions and Events
  3. Preparation of Journal Entries and Accounts
  4. Extracting a Trial Balance
  5. Preparing Financial Statements of a Sole Trader
  6. Control Accounts and Reconciliations
  7. Bank Reconciliation
  8. Accounting for Trade Receivables
  9. Accounting for Non-Current Assets
  10. Correction of Errors
  11. Incomplete Records
  12. Partnership Organisations
  13. Not-for-Profit Making Organisation
  14. Framework for the Preparation of Financial Statements
  15. Manufacturing Organisations
  16. Limited Liability Companies
  17. Statements of Cash Flows (IAS 7)
  18. Ratio Analysis
  19. Public Sector Organisations

1. BUSINESS TRANSACTIONS AND DOCUMENTATION

1.1 INTRODUCTION

  • Overview of business processes and accounting record-keeping typical for business entities.

1.2 AIM

  • Discuss documents used by accounting records and outline record-keeping processes.

1.3 OBJECTIVES

  • Describe negotiation processes for goods and identify documentation.
  • Explain record-keeping processes assuming a manual system.

1.4 TIME REQUIRED

  • Approx. one hour for study.

1.5 REFLECTION

  • Questioning the stage of firm order delivery in transactions; discussing the implications of contract law.

1.6 CONTENT

  • Nature of business transactions and the documents involved (inquiries, quotations, orders, invoices, credit notes, etc.).
  • Understanding the roles of various documents and their implications for accounting records.

1.7 PROCESS OF NEGOTIATION

  • Sequence of actions from inquiry to receipt of payment, including documentation created at each stage.

1.8 ACCOUNTING RECORDS

  • DAY BOOKS & LEDGER STAGE:
    1. Cash Book: Used for recording daily transactions; includes Cash Account and Bank Account.
    2. Sales Day Book: Records daily sales on credit; entries posted to ledger accounts for trade receivables and sales accounts.
    3. Purchases Day Book: Records daily purchases of goods on credit; involves invoices from suppliers.
    4. Purchase Returns Day Book: Regular transactions for goods returned.
    5. Sales Returns Day Book: Regular transactions for goods returned by customers.

2. RECORDING TRANSACTIONS AND EVENTS

2.1 INTRODUCTION

  • Overview of recording business transactions starting from source documents to journals and day books.

2.2 AIM

  • Demonstrate transaction recording in prime entry books.

2.3 OBJECTIVES

  • Prepare Cash Book and various analytical day books.

2.4 TIME REQUIRED

  • Approx. two hours for completion.

2.5 REFLECTION

  • Considerations for record-keeping in a new role as an Accounts Assistant.

2.6 CONTENT - PREPARING THE CASH BOOK

  • Cash Book: Key entries and transactions introduced through an illustrative example of cash transactions.
  • Process of preparing and closing cash books accounting for receipts by cash and cheque.

2.7 ACTIVITIES

  • Task to prepare receipts and payments record for actual transactions provided.

3. PREPARATION OF JOURNAL ENTRIES AND ACCOUNTS

3.1 INTRODUCTION

  • Discussion on the significance of the ledger as the main book of accounts and its processes.

3.2 MODULE AIM

  • Explain preparation of ledger accounts, ensuring the double-entry rule is appropriately applied.

3.3 OBJECTIVES

  • Accurate posting from day books to ledger accounts; extract trial balance correctly.

3.4 TIME REQUIRED

  • Approx. four hours for completion of the module.

3.5 REFLECTION

  • Reflection on maintaining accuracy in records and confirmations required in reporting for end periods.

Additional Units 4 to 19

  • Continue expanding on topics like financial statement preparation, accounting for various business entities, and adherence to accounting standards and practices.

  • Significant emphasis on real-world applications, theoretical principles, and rigorous academic analysis.

FINAL NOTES

  • Topics discussed include foundational principles of financial accounting, complex transaction handling, and various financial reporting requirements.

  • Preparation for examinations, continuous assessments, and practical applications through exercises will reinforce learning outcomes.