Course Overview:
The Cambridge AS and A Levels
Accounting 9706 course offers an in-depth and progressive exploration of both
financial and management accounting. Designed for students seeking a strong
foundation in accounting principles, this course provides the essential knowledge,
and skills required for further education and professional careers in
accounting, finance, and business management. The course is divided into two
stages: the AS Level, which serves as an introduction to key accounting
concepts, and the A Level, which builds on this foundation with more advanced
topics and analytical techniques.
Course Objectives:
- Foundational Knowledge (AS Level):
- Develop a solid understanding of basic accounting
principles, including the double-entry system, accounting equation, and
the preparation of financial statements such as balance sheets, income
statements, and cash flow statements.
- Learn the importance of accounting in business, how
it supports decision-making, and the role of financial information in
assessing business performance.
- Advanced Understanding (A Level):
- Build on the foundational knowledge by exploring
advanced topics such as partnerships, company accounts, and the
preparation of consolidated financial statements.
- Delve into complex management accounting
techniques, including costing, budgeting, and variance analysis, to
support strategic planning and control within an organization.
- Practical Application and Analysis:
- Apply accounting principles to real-world
scenarios, learning how to record, analyze, and interpret financial data.
- Develop strong analytical skills, enabling students
to assess business performance using financial ratios, trend analysis,
and other evaluation methods.
- Explore the ethical dimensions of accounting,
understanding the importance of integrity, transparency, and professional
conduct in financial reporting.
- Preparation for Higher Education and Careers:
- Equip students with the knowledge and skills
necessary for success in higher education, particularly in accounting,
finance, or business-related degree programs.
- Foster critical thinking, problem-solving, and
decision-making abilities, which are essential for professional careers
in accounting, financial management, auditing, and consulting.
Course Content:
<!--[if !supportLists]-->1.
<!--[endif]-->Financial accounting
<!--[if !supportLists]-->1.1
<!--[endif]-->Types of business entity
<!--[if !supportLists]-->o
<!--[endif]-->the different types of business entity:
– sole trader
– partnership
– limited company (including public limited company (plc))
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of these types
of business entity
<!--[if !supportLists]-->o
<!--[endif]-->sources of finance and methods of funding for
these types of business entity including:
– loans (secured and unsecured)
– bank overdrafts
– payment by instalments
– rental/leasing as an alternative to purchase
– trade credit
– sources of finance
for limited companies
1.2. The accounting system
<!--[if !supportLists]-->o
<!--[endif]-->the principles of the double entry system to
record business transactions
<!--[if !supportLists]-->o
<!--[endif]-->the accounting equation
<!--[if !supportLists]-->o
<!--[endif]-->the role of books of prime entry in the
recording of business transactions
– sales journal
– sales returns journal
– purchases journal
– purchases returns journal
– cash book
– general journal
<!--[if !supportLists]-->o
<!--[endif]-->preparation of ledger accounts
<!--[if !supportLists]-->o
<!--[endif]-->the purpose of a trial balance
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of maintaining
full accounting records
<!--[if !supportLists]-->o
<!--[endif]-->the accounting concepts underpinning the
preparation of accounts: business entity, historic cost, money measurement,
going concern, consistency, prudence, realization, duality, materiality,
objectivity, matching / accruals and substance over form
<!--[if !supportLists]-->o
<!--[endif]-->the use of computerized accounting systems in
recording financial transactions
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of introducing
a computerized accounting system
<!--[if !supportLists]-->o <!--[endif]-->the
ways in which the security of data can be ensured within a computerized
accounting system
1.3. Capital and revenue income and
expenditure
<!--[if !supportLists]-->o
<!--[endif]-->the difference between the treatment of capital
and revenue income and capital and revenue expenditure
<!--[if !supportLists]-->o <!--[endif]-->the
effect on profit/loss and asset value of the incorrect treatment of capital and
revenue expenditure
1.4. Changing asset values
<!--[if !supportLists]-->o
<!--[endif]-->factors that cause the value of non-current
assets to depreciate
<!--[if !supportLists]-->o
<!--[endif]-->the purpose of accounting for depreciation of
non-current assets and the associated application of relevant accounting
concepts
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate depreciation using the reducing
balance and straight-line methods
<!--[if !supportLists]-->o
<!--[endif]-->the most appropriate method of calculating
depreciation
<!--[if !supportLists]-->o
<!--[endif]-->how to measure the value of non-current assets
by the cost model or the revaluation model
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare ledger accounts and journal
entries for:
– non-current assets (acquisition and revaluation)
– depreciation and disposal (including entries for part exchange)
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate profit or loss on disposal of a
non-current asset
<!--[if !supportLists]-->o <!--[endif]-->how
to record the effect of a charge for depreciation in the statement of profit or
loss and statement of financial position
1.5. Reconciliation and verification
<!--[if !supportLists]-->o
<!--[endif]-->the need to reconcile and verify ledger accounts
using documentation from internal and external sources
<!--[if !supportLists]-->o <!--[endif]-->the
benefits and limitations of reconciliation and verification procedures
1.6. Trial balance
<!--[if !supportLists]-->o
<!--[endif]-->errors which affect the trial balance
<!--[if !supportLists]-->o
<!--[endif]-->errors which do not affect the trial balance:
– omission
– commission
– principle
– original entry
– reversal
– compensating
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare ledger accounts and journal
entries to correct errors using a suspense account
<!--[if !supportLists]-->o
<!--[endif]-->the effect on the financial statements of the
correction of errors
<!--[if !supportLists]-->o <!--[endif]-->the
benefits and limitations of a trial balance
1.7. Bank reconciliation statements
<!--[if !supportLists]-->o
<!--[endif]-->updating of cash books
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare bank reconciliation statements
<!--[if !supportLists]-->o <!--[endif]-->the
benefits and limitations of preparing a bank reconciliation statement
1.8. Control accounts
<!--[if !supportLists]-->o
<!--[endif]-->entries in control accounts
<!--[if !supportLists]-->o
<!--[endif]-->sales ledger control accounts and purchases
ledger control accounts
<!--[if !supportLists]-->o
<!--[endif]-->reconciliation statements between control
account balances and ledger balances
<!--[if !supportLists]-->o
<!--[endif]-->the effects on financial statements of the
correction of errors
<!--[if !supportLists]-->o <!--[endif]-->the
benefits and limitations of control accounts
1.9. Adjustments to draft financial
statements
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate and record the adjustments
needed and the effect on financial statements in respect of:
– accruals and prepayments of income and expenses
– irrecoverable debts, irrecoverable debts recovered and allowance for
irrecoverable debts
– depreciation
– inventory valuation
– correction of errors
1.10. Sole traders-Preparation of Financial Statements
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a statement of profit or loss and
statement of financial position for a sole trader from full or incomplete
accounting records. The business may be a trading or a service business
1.11. Partnerships-Preparation of Financial Statements
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a statement of profit or loss,
appropriation account and statement of financial position for a
<!--[if !supportLists]-->o
<!--[endif]-->partnership from full or incomplete accounting
records. The business may be a trading or a service business
<!--[if !supportLists]-->o
<!--[endif]-->why partners may maintain separate capital
accounts and current accounts
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare partners’ capital and current
accounts
<!--[if !supportLists]-->o
<!--[endif]-->the contents of a partnership agreement
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages to partners of
maintaining a partnership agreement
<!--[if !supportLists]-->o
<!--[endif]-->the provisions of the Partnership Act 1890 in
respect of partners’ salaries, division of profit or loss, interest on
partners’ loans, interest on capital and interest on drawings
<!--[if !supportLists]-->o
<!--[endif]-->goodwill and the difference between purchased
goodwill and inherent goodwill
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare partners’ capital and current
accounts to record changes required in respect of goodwill and revaluation of
assets on:
– a change in the partners’ profit-sharing ratio
– the introduction of a new partner
– the retirement of an existing partner
– the dissolution of a partnership
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare the partnership appropriation
account, statement of profit or loss and statement of financial position
including changes in a partnership occurring part-way through an accounting
year
<!--[if !supportLists]-->o <!--[endif]-->how
to prepare a realization account and a revaluation account
1.12. Limited companies-Preparation of Financial
Statements
<!--[if !supportLists]-->o
<!--[endif]-->the features and accounting treatment of
ordinary shares, bonus issues, rights issues, debentures, dividends and
reserves
Note: Questions will not be set on preference shares.
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages to the company
and to the shareholders of a company making a bonus issue of shares and a
rights issue of shares
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages to the company
and to the shareholders of a company issuing shares and issuing debentures
<!--[if !supportLists]-->o
<!--[endif]-->the distinction between capital reserves (share
premium and revaluation reserve) and revenue reserves (retained earnings and
general reserve)
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare ledger accounts to record:
– an issue of ordinary shares at par or at a premium
– a rights issue of shares at par or at a premium
– a bonus issue of shares
Note: For the purpose of a bonus issue of shares, the revaluation
reserve is not to be used.
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a statement of profit or loss,
statement of financial position and statement of changes in equity for a
limited company. The business may be a trading or a service business
<!--[if !supportLists]-->o
<!--[endif]-->sources of finance for specified purposes
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare for a limited company in line
with the relevant international accounting standards and legal requirements:
– statement of profit or loss
– statement of financial position
– statement of cash flows
– statement of changes in equity
– schedule of non-current assets
<!--[if !supportLists]-->1.13.
<!--[endif]-->Clubs and societies-Preparation of Financial
Statements
<!--[if !supportLists]-->o
<!--[endif]-->the distinction between a receipts and payments
account and an income and expenditure account
<!--[if !supportLists]-->o
<!--[endif]-->how to define and calculate the accumulated fund
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare, from full or incomplete
accounting records:
– a receipts and payments account
– accounts for trading and revenue-generating activities
– a subscriptions account
– an income and expenditure account
– a statement of financial position
<!--[if !supportLists]-->o
<!--[endif]-->how to account for other receipts, including
life memberships and donations
<!--[if !supportLists]-->o
<!--[endif]-->how to make adjustments to financial statements
<!--[if !supportLists]-->o <!--[endif]-->how
to evaluate possible sources of finance and methods of fundraising
1.14 Manufacturing
businesses-Preparation of Financial Statements
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a manufacturing account, to
differentiate between direct and indirect expenses and to include factory
profit
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare, for a manufacturing business, a
statement of profit or loss and a statement of financial position
<!--[if !supportLists]-->o
<!--[endif]-->how to account for manufacturing profit and the
elimination of unrealized profit from unsold inventory
<!--[if !supportLists]-->o
<!--[endif]-->the reasons why a business may account for
manufacturing profit
<!--[if !supportLists]-->1.15.
<!--[endif]-->International Accounting Standards
<!--[if !supportLists]-->o
<!--[endif]-->the main provisions of each of the following
International Accounting Standards (IAS):
– IAS 1 Presentation of financial statements
– IAS 2 Inventories
– IAS 7 Statement of cash flows
– IAS 8 Accounting policies, changes in accounting estimates and errors
– IAS 10 Events after the reporting period
– IAS 16 Property, plant and equipment
– IAS 36 Impairment of assets
– IAS 37 Provisions, contingent liabilities and contingent assets
– IAS 38 Intangible assets
<!--[if !supportLists]-->1.16.
<!--[endif]-->Ethical considerations
<!--[if !supportLists]-->o
<!--[endif]-->the need for an ethical framework in accounting
<!--[if !supportLists]-->o
<!--[endif]-->the fundamental principles of:
– integrity
– objectivity
– professional competence and due care
– confidentiality
– professional behavior
<!--[if !supportLists]-->o
<!--[endif]-->how the ethical behavior of accountants and
auditors impacts the business and other stakeholders
<!--[if !supportLists]-->o
<!--[endif]-->the social implications of decision-making
<!--[if !supportLists]-->1.17.
<!--[endif]-->Auditing and stewardship of limited
companies
<!--[if !supportLists]-->o
<!--[endif]-->the role and responsibilities of the auditor
<!--[if !supportLists]-->o
<!--[endif]-->the differences between an external audit and an
internal audit
<!--[if !supportLists]-->o
<!--[endif]-->the difference between a qualified and
unqualified audit report
<!--[if !supportLists]-->o
<!--[endif]-->stewardship and the role of directors and their
responsibilities to shareholders
<!--[if !supportLists]-->o
<!--[endif]-->the importance of a true and fair view in
respect of financial statements
<!--[if !supportLists]-->1.18.
<!--[endif]-->Business acquisition and merger
<!--[if !supportLists]-->o
<!--[endif]-->the nature and purpose of the merger of
different types of businesses to form a new business entity
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare journal entries and make entries
in the relevant ledger accounts to record the:
– merger of two or more sole trader businesses to form a partnership or a
limited company
– merger of a sole trader’s business with an existing partnership to form
a new partnership
– acquisition of a sole trader’s business or partnership by a limited
company
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate the value of goodwill on the
acquisition of a business by another entity
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare statements of profit or loss and
statements of financial position for the newly formed business entity following
the acquisition or merger, for example the limited company acquiring the partnership
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of the
acquisition or merger
<!--[if !supportLists]-->1.19.
<!--[endif]-->Computerized accounting systems
<!--[if !supportLists]-->o
<!--[endif]-->the process of transferring the business
accounts to a computerized accounting system
<!--[if !supportLists]-->o
<!--[endif]-->ways in which the integrity of the accounting
data can be ensured during the transfer to a computerized accounting system
1.20.
Users of accounting information
<!--[if !supportLists]-->o
<!--[endif]-->the differing requirements for information of
stakeholders including:
– owners
– managers
– employees
– investors
– lenders
– suppliers
– customers
– government
– public and environmental bodies
<!--[if !supportLists]-->o <!--[endif]-->how
to communicate and analyses the information required by these different
stakeholders
1.21. Calculation and evaluation of ratios
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate key accounting ratios to
measure profitability, liquidity and efficiency:
– profitability ratios: gross profit margin, mark-up, profit margin,
return on capital employed, expenses to revenue ratio (operating expenses to
revenue ratio)
– liquidity ratios: current ratio, acid test ratio
– efficiency ratios: non-current asset turnover, trade receivables
turnover (days), trade payables turnover (days), inventory turnover (days),
rate of inventory turnover (times)
<!--[if !supportLists]-->o
<!--[endif]-->how to evaluate the profitability, liquidity and
efficiency of an organization by interpreting ratios
<!--[if !supportLists]-->o
<!--[endif]-->possible measures to improve the profitability,
liquidity and efficiency of an organization
<!--[if !supportLists]-->o <!--[endif]-->the
limitations of accounting information
1.22. Analysis and communication of accounting information
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate the following ratios:
– working capital cycle (in days)
– net working assets to revenue (sales)
– interest cover
– gearing ratio
– earnings per share
– price/earnings ratio
– dividend per share
– dividend yield
– dividend cover
<!--[if !supportLists]-->o
<!--[endif]-->how to analyses and evaluate the results of the
ratios and draw conclusions
<!--[if !supportLists]-->o
<!--[endif]-->how to make appropriate recommendations to
stakeholders on the basis of the analysis undertaken
<!--[if !supportLists]-->o
<!--[endif]-->the interrelationships between ratios
<!--[if !supportLists]-->2.
<!--[endif]-->Cost and Management Accounting
<!--[if !supportLists]-->2.1 Materials and labour
<!--[if !supportLists]-->o
<!--[endif]-->accounting for material and labour costs
<!--[if !supportLists]-->o
<!--[endif]-->how to identify and calculate fixed costs,
variable costs, semi-variable costs and stepped costs
<!--[if !supportLists]-->o
<!--[endif]-->how to identify and calculate the elements of
direct and indirect costs
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate the value of closing inventory
using the first in first out (FIFO) and weighted average cost (AVCO) methods
(perpetual and periodic)
<!--[if !supportLists]-->o <!--[endif]-->the
principles of just in time (JIT) management of inventory
2.2. Costing applications
<!--[if !supportLists]-->o
<!--[endif]-->how to apply traditional costing methods to
prepare costing statements using unit, job and batch costing principles in both
manufacturing and service businesses as applicable
2.3. Absorption costing
<!--[if !supportLists]-->o
<!--[endif]-->the difference between a cost center and a cost
unit
<!--[if !supportLists]-->o
<!--[endif]-->how to allocate and apportion overhead
expenditure between production and service departments
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate overhead absorption rates using
an appropriate basis
<!--[if !supportLists]-->o
<!--[endif]-->the causes and the calculation of under
absorption and over absorption of overheads
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare costing and profit statements
using absorption costing
<!--[if !supportLists]-->o
<!--[endif]-->the uses and limitations of absorption costing
<!--[if !supportLists]-->o
<!--[endif]-->the usefulness of absorption cost data as a
support for management decision-making
<!--[if !supportLists]-->o <!--[endif]-->non-financial
factors and their significance
2.4. Marginal costing
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate the contribution of a product
<!--[if !supportLists]-->o
<!--[endif]-->how to interpret a break-even chart
Note: Candidates will not be asked to prepare a break-even chart.
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate the break-even point,
contribution to sales ratio, level of output or sales to achieve a target profit,
and margin of safety
<!--[if !supportLists]-->o
<!--[endif]-->the use and limitations of break-even analysis
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare costing and profit statements
using marginal costing
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a statement reconciling the
reported profits using marginal costing and absorption costing
<!--[if !supportLists]-->o
<!--[endif]-->the uses and limitations of marginal costing
<!--[if !supportLists]-->o
<!--[endif]-->the usefulness of marginal costing data as a
support for management decision-making, including make-or buy, special orders,
closure of business unit, limiting factors, target profit
<!--[if !supportLists]-->o <!--[endif]-->non-financial
factors and their significance
2.5. Cost–volume–profit analysis
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and limitations of
cost–volume–profit analysis
<!--[if !supportLists]-->o
<!--[endif]-->the usefulness of cost–volume–profit data as a
support for management decision-making
<!--[if !supportLists]-->o
<!--[endif]-->how to apply costing concepts to make business
decisions and recommendations using supporting data
<!--[if !supportLists]-->o
<!--[endif]-->non-financial factors and their significance
<!--[if !supportLists]-->2.6. Activity based costing
<!--[if !supportLists]-->o
<!--[endif]-->the application of activity-based costing (ABC)
<!--[if !supportLists]-->o
<!--[endif]-->the uses and limitations of ABC
<!--[if !supportLists]-->o
<!--[endif]-->what is meant by a cost driver
<!--[if !supportLists]-->o
<!--[endif]-->how to use ABC to:
– identify the appropriate cost driver
– apportion and allocate overheads
– calculate the total cost and selling price of a unit
<!--[if !supportLists]-->o
<!--[endif]-->the effect of different methods of overhead
absorption on cost and profit
<!--[if !supportLists]-->o
<!--[endif]-->how to apply ABC costing techniques to make
business decisions and recommendations using supporting data
<!--[if !supportLists]-->2.7.
<!--[endif]-->Standard costing
<!--[if !supportLists]-->o
<!--[endif]-->the meaning of a system of standard costing in
an organisation
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of a standard
costing system
<!--[if !supportLists]-->o
<!--[endif]-->how standard costing can be used as an aid to
improve the performance of a business
<!--[if !supportLists]-->o
<!--[endif]-->how to calculate the following variances:
– direct material price and usage
– direct labour rate and efficiency
– fixed overhead expenditure and volume
– fixed overhead capacity and efficiency sub-variances
– sales price and volume
<!--[if !supportLists]-->o
<!--[endif]-->possible causes of favorable or adverse
variances and their relationship to each other
<!--[if !supportLists]-->o
<!--[endif]-->how to make business decisions and
recommendations using supporting data
<!--[if !supportLists]-->o
<!--[endif]-->the significance of non-financial factors
<!--[if !supportLists]-->2.8.
<!--[endif]-->Budgeting and budgetary control
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of a budgetary
control system to an organisation
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of preparing
budgets using spreadsheets
<!--[if !supportLists]-->o
<!--[endif]-->what is meant by a master budget
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare the following budgets:
– sales
– production
– purchases
– labour
– trade receivables
– trade payables
– cash
– budgeted statement of profit or loss
– budgeted statement of financial position
<!--[if !supportLists]-->o
<!--[endif]-->the effect of limiting factors on the
preparation of budgets
<!--[if !supportLists]-->o
<!--[endif]-->the benefits of flexible budgeting over fixed
budgeting
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a flexible budget statement
<!--[if !supportLists]-->o
<!--[endif]-->possible causes of differences between actual
and flexible budgeted data
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a statement reconciling the
flexible budgeted cost of production with the actual cost of production
<!--[if !supportLists]-->o
<!--[endif]-->how to prepare a statement reconciling the
flexible budgeted profit with the actual profit
<!--[if !supportLists]-->o
<!--[endif]-->how to make business decisions and
recommendations using supporting data
<!--[if !supportLists]-->o
<!--[endif]-->the behavioral aspects of budgeting, including
targets, incentives and motivation
<!--[if !supportLists]-->o
<!--[endif]-->the significance of non-financial factors
<!--[if !supportLists]-->2.9.
<!--[endif]-->Investment appraisal
<!--[if !supportLists]-->o
<!--[endif]-->future net cash inflows and outflows arising
from the project
<!--[if !supportLists]-->o
<!--[endif]-->how to apply the following capital investment
appraisal techniques:
– payback
– accounting rate of return (ARR = (average profit / average investment)
× 100)
– net present value (NPV)
– internal rate of return (IRR)
<!--[if !supportLists]-->o
<!--[endif]-->the advantages and disadvantages of these
capital investment appraisal techniques
<!--[if !supportLists]-->o
<!--[endif]-->how to make investment decisions and
recommendations using supporting data
<!--[if !supportLists]-->o
<!--[endif]-->the significance of non-financial factors
Lectures: 2 Topics , 31 Sub Topics
Duration:
Language: English
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