Higher Accounting

Mr Arthur

Aims of the Lesson

1. Why do we create Accounts?

2. What does Accounting Involve?

3. Who is Interested in the Accounts of a Business?

4. Financial V Management Accounting

Why do we Create Accounts??

1. To calculate profit or loss2. To try and cut expenses3. For the tax man!!4. To work out overall value of the business5. To work out partnership’s share6. To check if figures are correct7. Legal requirement8. To budget for future planning9. To attract shareholders10. To work out which areas are suffering and which

are prospering

What does Accounting Involve?

1. Identifying and recording information

2. Classifying and measuring – grouping sales, costs etc

3. Communicating and explaining

Who is Interested in Accounting Information??

Potential Investors Shareholders Bankers Owners Taxman Members Employees

Financial Accounting

1. These accounts present a historical record of the company and are backward looking

Trading Profit and Loss Balance Sheet Income and Expenditure Account Receipts and Payment Account

2. Accounts are for external purposes – shareholders, employees etc

3. Financial accounts are a legal requirement4. These accounts are unsuitable for planning,

control and decision making

Management Accounting

1. Management Accounts are not for publication

2. Accounts provide recent, current and future estimates of performance

3. Useful for Management to develop business strategies

4. Not legally required

Aims of the Lesson

Last Lesson Why do we create

Accounts? What does

Accounting Involve? Who is Interested in

the Accounts of a Business?

Financial V Management Accounting

Today’s Lesson1. Documents of trade2. The document trail3. Research of

accounting terms

Documents of Trade

A business transaction occurs when goods or services are provided.

Cash transaction = goods are purchased and paid immediately

Credit transaction = goods are purchased and paid for at a later date

The Document Trail

Accounting Terms to Research

Invoice Trade Discount Cash Discount Value Added Tax Credit Note Statement of Account Receipts Credit/Debit card Dishonoured Cheque Bad debt

Structure of the Course Role of Financial Accounting in business Introduction to accounting standards — SSAPs and FRSs Characteristics of business organisations Preparation of manufacturing accounts Features of ownership, funding, management, liability and

control for an organisation Preparation of final accounts of business organisations; sole

traders; partnerships and plcs Correction of errors and updating of final account figures Analysis and interpretation of accounting information Preparation of not-for profit final accounts

Final Accounts – Key Terms Prepayments

An amount paid during this financial year for the next financial year, e.g. paying in advance

Accruals An expense which you have not managed to pay this

financial year, which will spill into next year Depreciation

This is the amount you are setting aside due to Assets reducing in value

Bad Debts This is the amount of money you write of as you debtor is

unable to pay you Provision for doubtful debts

This is usually a percentage of your debtors for the year, Incase they cannot pay you back