This foundation level unit covers the knowledge of fundamental accounting concepts for different types of business entities, including the purpose of accounting, the users of accounting information and an introduction to recording transactional accounting data in the double entry bookkeeping system.

It also covers the acquisition and disposal of assets and the production of financial statements.

Topics:

1. Introduction to accounting

1.1 Explain the role and purpose of accounting
1.2 Explain the meaning of generally accepted accounting principles
1.3 Define and apply accounting concepts

1.3.1 Cost principle
1.3.2 Monetary unit assumption
1.3.3 Economic entity assumption
1.3.4 Time period assumption - recognition of income and expenses
1.3.5 Accrual basis of accounting
1.3.6 Going concern assumption
1.3.7 Fair presentation
1.3.8 Substance over form

1.4 Identify and explain the basic accounting equation

1.4.1 Prepare an accounting equation from given data
1.4.2 Define and identify assets, liabilities and owners' equity
1.4.3 Define and identify revenue and expenses

1.5 Identify the purpose of the Statement of Financial Position
1.6 Identify the purpose of the Statement of Profit or Loss and other Comprehensive Income
1.7 Identify the purpose of the statement of Changes in Equity

2. Types of business entities - sole trader, partnerships, companies
2.1 Identify and define a service entity and a retail entity
2.2 Compare and contrast a service entity and a retail entity
2.3 Identify and define types of business entities  - sole trader, partnership, limited liability company
2.4 Identify the characteristics of a sole trader, a partnership and a company
2.5 Identify the advantages and disadvantages of operating as a sole trader, partnership and limited liability company
2.6 Identify the users of accounting information
2.7 Identify and differentiate the information needs of different users of financial statements

3. Double entry bookkeeping
3.1
Identify main data sources

3.1.1 Cash transactions and credit transactions
3.1.2 Sales orders
3.1.3 Purchase orders
3.1.4 Goods received note
3.1.5 Goods despatched note
3.1.6 Invoice
3.1.7 Statement
3.1.8 Credit note
3.1.9 Debit note
3.1.10 Remittance advice
3.1.11 Receipt
3.1.12 Bank statement

3.2 Identify the main types of business transactions

3.2.1 Sales
3.2.2 Purchases
3.2.3 Payments
3.2.4 Receipts

3.3 Apply the accounting equation

3.3.1 Sales
3.3.2 Purchases
3.3.3 Payments
3.3.4 Receipts

3.4 Illustrate the use of journals

3.4.1 Sales
3.4.2 Purchases
3.4.3 Payments
3.4.4 Receipts

3.5 Illustrate the use of ledgers

3.5.1 Sales
3.5.2 Purchases
3.5.3 Payments
3.5.4 Receipts

4. Trial balance

4.1 Illustrate how to balance and close a ledger
4.2 Identify the purpose of a trial balance
4.3 Extract ledger account balances into a trial balance
4.4 Explain the nature and purpose of an adjusted trial balance

5. Cash books, ledgers and subsidiary ledgers
5.1
Record sales and purchases in the books of prime entry (day books)
5.2 Record sales tax in the books of prime entry
5.3 Explain the nature and purpose of subsidiary ledgers for receivables and payables
5.4 Post the sales and purchase to the general ledger and any subsidiary accounts
5.5 Explain the nature and purpose of the cash receipts and cash payments book
5.6 Explain the difference between trade discounts and settlement discounts

5.6.1 Record settlement discounts received in the relevant cash book
5.6.2 Record settlement discounts allowed in the relevant cash books

5.7 Post the cash books to the general ledger accounts and subsidiary ledger accounts

6. Sales tax
6.1 Understand the general principles of the operation of a general sales tax
6.2 Calculate sales tax on transactions
6.3 Record sales tax in the books of prime entry, the ledger and subsidiary ledger

7. Accruals and prepayments

7.1 Explain how the matching concept applies to accruals and prepayments
7.2 Identify the adjustments needed for accruals and prepayments

7.2.1 Accruals
7.2.2 Prepayments

7.3 Calculate the amount of the adjustments required for accruals and prepayments
7.4 Prepare adjusting journal entries
7.5 Explain the purpose of adjusting entries for accruals and prepayments
7.6 Post the accruals and prepayments to the relevant ledger accounts

8. Receivables and payables
8.1 Apply the principles of revenue recognition
8.2 Explain the meaning of an irrecoverable debt
8.3 Prepare a journal entry for an irrecoverable debt
8.4 Explain the meaning of a provision for irrecoverable debts
8.5 Prepare a journal entry to create or to adjust an allowance for receivables
8.6 Prepare a journal entry to account for adjustments between receivables and payables
8.7 Prepare journal entries to record settlement discounts allowed and received
8.8 Post the journal entries to the general ledger accounts and subsidiary ledger accounts
8.9 Prepare journal entries to account for annual leave entitlement of employees

9. Property, plant and equipment
9.1 Define property, plant and equipment 
9.2 Identify capital expenditure and revenue expenditure
9.3 Prepare journal entries for the purchase of property, plant and equipment
9.4 Prepare journal entries for the revaluation of property, plant and equipment
9.5 Calculate the profit or loss on disposal of property, plant and equipment as a part exchange 
9.6 Calculate the profit or loss on the disposal of property, plant and equipment given as a part exchange transaction
9.7 Calculate the profit or loss on disposal of revalued property, plant and equipment
9.8 Prepare journal entries for the disposal of non-current assets

9.8.1 Explain the purpose of depreciation
9.8.2 Calculate the charge for depreciation using the straight line method and diminishing value method
9.8.3 Identify and explain the circumstances where the two different methods would be appropriate
9.8.4 Prepare journal entries for the annual depreciation expense
9.8.5 Calculate depreciation on revalued property, plant and equipment

9.8.5.1 Prepare journal entries for the transfer of excess depreciation between revaluation reserve and retained earnings
9.8.5.2 Calculate the adjustment to the depreciation charge where changes are needed to the estimated useful life or residual value

10. Inventory
10.1 Explain the reason for adjustments for opening and closing inventory
10.2 Identify the requirements for valuing inventory
10.3 Calculate the lower of cost and net realisable value
10.4 Calculate the cost of inventory using the first in first out method (FIFO) and average cost method (AVCO)
10.5 Prepare journal entries for the adjustments for opening and closing inventory

11. Closing entries
11.1 Prepare journal entries to close off income ledger accounts to the statement of comprehensive income
11.2 Prepare journal entries to close off the expense accounts to the statement of comprehensive income
11.3 Illustrate how asset accounts are carried forward to the statement of financial position
11.4 Illustrate how liability accounts are carried forward to the statement of financial position
11.5 Illustrate how capital accounts are carried forward to the statement of financial position

12. Subsidiary ledgers and reconciliations
12.1 Explain what is meant by internal control
12.2 Outline common methods of internal control used by businesses
12.3 Explain the purpose of control accounts for receivables and payables
12.4 Explain how control accounts relate to the double entry system
12.5 Prepare control accounts for receivables and payables from given information
12.6 Perform control account reconciliations for receivables and payables
12.7 Explain the need for a record of petty cash transactions and a separate petty cash book
12.8 Explain how an imprest system for petty cash operates
12.9 Enter petty cash payments and receipts into the petty cash book
12.10 Post the petty cash book to the general ledger accounts
12.11 Explain the importance of controls and security over petty cash
12.12 Identify controls over the security of petty cash

13. Bank reconciliation
13.1 Explain the purpose of a bank reconciliation
13.2 Identify the main reasons for differences between the cash book balance and the bank statement balance
13.3 Prepare a bank reconciliation
13.4 Identify and correct errors or omissions in the cash book

14. Statement of Financial Position
14.1
Show how the following items would appear in the Statement of Financial Position

14.1.1 Non-current assets
14.1.2 Current assets
14.1.3 Property, plant and equipment  
14.1.4 Inventory
14.1.5 Receivables  
14.1.6 Prepayments
14.1.7 Cash and petty cash
14.1.8 Current and non current liabilities
14.1.9 Payables including sales tax 

15. Statement of Profit or Loss and Other Comprehensive Income  
15.1 Show how the following items would appear in the Statement of Profit or Loss and other Comprehensive Income

15.1.1 Revenue net of sales tax
15.1.2 Opening and closing inventory
15.1.3 Purchases net of sales tax
15.1.4 Discounts allowed
15.1.5 Discounts received
15.1.6 Depreciation
15.1.7 Accruals
15.1.8 Prepayments
15.1.9 Irrecoverable and doubtful debts

16. Use of an accounting package
16.1
Identify and explain the advantages and disadvantages of using an accounting package to record data
16.2 Identify and explain the advantages and disadvantages of integrated accounting software packages
 

Exam topic weightings
Introduction to accounting 10%
Types of business entities - sole trader, partnerships, companies 5%
Double entry bookkeeping 10%
Trial balance 5%
Cash books, ledgers and subsidiary ledgers 10%
Sales tax 5%
Accruals and prepayments 5%
Receivables and payables 5%
Property, plant and equipment 10%
Inventory 5%
Closing entries 5%
Subsidiary ledgers and reconciliations 10%
Bank reconciliation 5%
Statement of Financial Position, Statement of Financial Performance 5%
Use of an accounting package 5%
Total 100%