COFA - Accounting Fundamentals Module

• Define “accounting” and “profit”
• Discuss the purposes, need for and users of accounting information
• Identify the main financial statements
• Discuss the qualities of good financial information
• Distinguish between capital and revenue expenditure Distinguish between assets and liabilities
• Explain how the accounting equation and the business equation underlies the financial statements
• Construct the accounting equation in different forms
• Discuss the concept of a balance sheet and draw up a simple example
• Discuss the concept of a trading, profit-and-loss account and draw up a simple example
 

On successful completion of this subject, students will be able to:
• Explain the role of source documents and the need for books of prime entry
• Explain day books and cashbooks
• Explain the purpose of the journal
• Record transactions, adjustments and corrections in the journal
• Explain how double-entry book-keeping relies on the concept of duality
• Explain debit and Credit
• Record cash and credit transactions in a set of ledger accounts (analysed cashbook and petty cash are excluded), using either continuous balance accounts or “T” accounts
• Calculate and record the closing balance on a ledger account
• Identify ledgers commonly used and explain the nature and purpose of each ledger
• Explain the meaning of the balances in each ledger
• Explain the nature and purposes of a control account
• Explain how control accounts relate to the double-entry system
• Construct a control account from given information
• Agree the control account balance with the sum of balances on the underlying accounts
 

• Account for the closing-stock adjustment
• Describe the nature and purpose of an accrual
• Record adjustments relating to accrued expenses in ledger accounts
• Describe the nature and purpose of a prepayment
• Record adjustments relating to prepaid expenses in ledger accounts
• Define trade debtors
• Explain discounts
• Explain bad debts
• Explain doubtful debts
• Explain the difference between a bad debt written off and a doubtful debt provision
• Record bad and doubtful debts in the ledger accounts
• Define and give examples of fixed assets
• Differentiate between tangible fixed assets and intangible fixed assets
• Define and explain the purposes of depreciation
• Outline and discuss the straight-line and reducing-balance methods of depreciation and illustrate the application of each method
• Record the acquisition of a fixed asset in ledger accounts
• Record the charge for depreciation and the cumulative provision for depreciation in ledger accounts, the P&L account and the balance sheet
• Explain and record the disposal of a depreciated fixed asset
• Explain the nature and purposes of a bank reconciliation
• Explain why the bank statement and cashbook balances may not agree
• Make the cashbook entries required to update the balance for outstanding items
• Draft a bank reconciliation statement
• Explain the need for a standard presentation of financial information
• Draw up a simple balance sheet and simple profit-and-loss account, in vertical format, for sole traders engaged in trading and service businesses
• Explain the nature and purpose of FRS18
• Outline the two fundamental accounting concepts identified by FRS18
• Outline other important accounting concepts and conventions
• Distinguish between asset, liability, revenue and expense accounts
• Distinguish between capital and revenue items.