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This unit focuses on advanced principles of accounting including analyzing financial statements, key ratios, inventory valuation, and underlying accounting concepts. It examines the tools to evaluate business performance and financial position over time and between organizations. The unit also explores the conceptual foundations of accounting and considerations of ethics. Students learn to calculate and interpret important ratios, understand the impact of inventory valuation on profits and financial reports, and recognize the application of accounting principles like materiality, consistency and conservatism. International efforts towards convergence are also addressed.
This unit focuses on advanced principles of accounting including analyzing financial statements, key ratios, inventory valuation, and underlying accounting concepts. It examines the tools to evaluate business performance and financial position over time and between organizations. The unit also explores the conceptual foundations of accounting and considerations of ethics. Students learn to calculate and interpret important ratios, understand the impact of inventory valuation on profits and financial reports, and recognize the application of accounting principles like materiality, consistency and conservatism. International efforts towards convergence are also addressed.
This unit focuses on advanced principles of accounting including analyzing financial statements, key ratios, inventory valuation, and underlying accounting concepts. It examines the tools to evaluate business performance and financial position over time and between organizations. The unit also explores the conceptual foundations of accounting and considerations of ethics. Students learn to calculate and interpret important ratios, understand the impact of inventory valuation on profits and financial reports, and recognize the application of accounting principles like materiality, consistency and conservatism. International efforts towards convergence are also addressed.
Recommended Prior Knowledge Students should only work on this unit after a thorough course of study during which they have become fully acquainted with the contents and details of financial statements of various organisations.
Context The unit looks at financial statements as a source of information about the performance and position of organisations over time and from one organisation to another. It ends by looking at some of the conceptual underpinning of bookkeeping and accounting. It also considers the idea of ethics in accounting.
Outline The unit provides the tools to enable students to analyse financial statements and the performance of businesses. It then moves on to provide the concepts on which accounting bases and methods are built, providing the theory against which those bases and methods can be evaluated and criticised. The conceptual part of the unit could be studied in conjunction with or as a revision of Unit 3.
AO Learning outcomes Suggested Teaching activities Learning resources
1.1 Candidates should be able to:
compute and explain the importance of rate of inventory turnover, gross profit/sales, net profit/sales, net profit/capital, working capital ratio (current ratio) and quick ratio (acid test) explain the relationship of gross and net profits to the valuation of inventory, rate of inventory turnover, turnover, expenses, and capital recognise the importance of inventory valuation and the effect of an incorrect inventory valuation on gross profit, net profit, capital, and asset valuation Explain the purposes of the various ratios and how and why they are calculated. Students should remember the formulae for calculating the ratios and practice their calculation.
Students should be able to explain the ratios and the interrelationships between them.
Students should be able to compare ratios with figures from previous years and between two businesses. The students should be encouraged to use figures to support comments.
Earlier, students learnt that inventory is valued at the lower of cost and net realisable value. They should build on this to understand the implications of inventory valuation on profit, capital and assets and any ratios relying on the accuracy of those figures. http://www.staffs.ac.uk/schools/busines s/bsadmin/staff/s5/accsys/wfive.htm#l1
http://www.bized.ac.uk/compfact/ratios/
http://accounting10.tripod.com/Slides27 .1.ppt
Past question papers available from CIE, e.g.
J un 2003 Paper 1 Q39 Specimen Paper 1 Q27, 28 Nov 2003 Paper 2 Q5 1 AO Learning outcomes Suggested Teaching activities Learning resources
6.2 Candidates should be able to:
explain and recognise the application of the following principles/concepts in the compilation of final accounts going concern historical cost accounting entity money measurement accounting period matching/accruals prudence (conservatism) materiality consistency dual aspect
recognise the influence of international accounting narrowing the areas of difference and variety of accounting practices improving comparability improving reliability; and understandability of accounting information
Questions will not be set on specific international accounting standards. Accounting principles and concepts can be a dry subject if looked at in isolation. More lively approaches are to relate specific accounting bases and methods to the relevant concepts as and when they arise during the course or to present students with actual sets of financial statements and ask them to find and think about examples of the application of the various concepts throughout the accounts.
They should be able to name, explain and give examples of all the accounting principles and concepts.
Students can discuss general differences between one country and another, say in products, language, etc. as an appreciation that it is likely that accounting practices also differ. Then consider the benefits of a similar approach. http://accounting10.tripod.com/Slides1. 1.ppt
J un 2003 Paper 1 Q40 Nov 2003 Paper 1 Q40 Specimen Paper 1 Q29 Specimen Paper 1 Q30 Specimen Paper 2 Q5(e)
6.2 Candidates should be able to:
explain the importance of professional ethics in accounting Students normally have a good appreciation of right and wrong although may be less certain about some grey areas.
Discussion and debate of particular examples of ethical consideration will help students appreciate the types of issues which are important in http://www.saralee.com/ourcompany/gb s/taking_action.html
Past question papers available from CIE, e.g. 2 3 AO Learning outcomes Suggested Teaching activities Learning resources Accounting.
Ask students to consider several dilemmas using the Mirror Test.
Erika Kuijpers (Ed.), Judith Pollman (Ed.), Johannes Müller (Ed.), Jasper Van Der Steen (Ed.) - Memory Before Modernity - Practices of Memory in Early