ACCA PAPER 1.1 Preparing Financial Statement style, developed, accounting

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Lecture 1-1: Basic Bookkeeping
Examination format
The basic financial accounting in P1.1 is developed in P2.5 Financial Reporting and P3.6 Advanced Corporate Reporting. Knowledge of P1.1 provides the background to P2.6 Audit and Internal Review.

3.1 Audit and Assurance Service

3.6 Advanced Corporate Reporting

2.6 Audit and Internal Review

2.5 Financial Reporting

1.1 Preparing Financial Statements

Section A 25 compulsory multiple questions           50

(2 marks each)

Section B 5 compulsory short form questions         50

(8 to 12 marks each)
                                                                          100


60% for computational questions and 40% for non-computational questions.
After this course, students should be able to
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prepare Financial Statements of a company, sole trader and a partnership which also includes incomplete records.
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Candidates must be able to prepare a balance sheet, profit & loss account and cash flow statement.
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Candidates must be able to demonstrate bookkeeping techniques. Students tend to be poor at the non-computational aspects of the paper, with those students who pass the paper gaining the majority of their marks from the computational questions. This problem extends to both the UK and overseas, suggesting that it is more than just a language problem.
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Candidates must possess a knowledge of IASs and FRSs. Candidates must be able to both calculate and interpret ratios. It has been noted that although candidates are able to calculate the ratios, they have difficulty interpreting their meaning.
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Candidates must be aware of the underpinnings of accountancy


For the first lesson, we will cover chapter 1 and part of basic bookkeeping.
After studying chapter1, we should have the knowledge of
Types of business entities:
Sole trader-- a biz is owned and operated by one person with or without employees.
The contributor is himself.
Partnership-- several people jointly operate the biz.
The contributors are partners.
Company-- usually are limited companies.
This means the possible liability of the s/hers for the debts of the company is limited to the amount they contribute.
The contributers are called shareholders or members of the company.
The money contributed is called capital.

Users of financial statements
(see Dec96 Q6, Dec99 Q and Pilot 97 Q)
Desirable qualities of accounting informationIASC and GAAP
The difference between capital and revenue items
The difference between financial and management account
BASIC BOOKKEEPING
In practice, most accounting records are computerised, this does not alter the principles of recording transations.
In examintation, your understanding of accounting will be tested by computational Qs, in which accounting records have to be prepared.

Bookkeeping consists of two stages:
v
Recording-introducing a transaction into the accounting system
v
Analysing-grouping similar transactions together after the initial recording

In a computerised system, the first two stages take place simultaneously.

Recording
A convenient starting point in studying the recording of transactions is the cash book.
It records all the cash received and paid.(cash transaction)
It is set up with
two sides-receipts on the left and payments on the right.
The difference between tow sides is the balance of cash at bank according to the biz records.

Example

Here is a simple cash book for a newly started biz—let’s call it A Ltd

1 Jan 2000 capital injection
$10,000


1 Jan 2000 purchase
$4,000

2 Jan 2000 cash sales
$2,000

4 Jan 2000 cash sales
$3,000

4 Jan 2000
Vehile

$ 1,500

5 Jan 2000
rent
$500

6 Jan 2000 staff wages

$300


Q1:
What is cash balance at the end of the week?
Q2:
What is the profit of the first week?

leads to the second stage of bookkeeping-analysing

every item in cash book has to be analysed according to its nature