A Level Accounting

This topic will begin with understanding different types of business formation. For example, a sole trader is a business owned and managed by one person whereas a limited company is legally separate from its owners. The accounting system will explain how businesses record financial transactions along with the double-entry bookkeeping system. You will also gain an understanding of accounting for non-current assets. This focuses on assets that a business intends to use for more than one year but may lose value on over time known as depreciation.

Reconciliation and verification ensures that accounting records are accurate and reliable. The process will detect any errors before financial statements are prepared. The preparation of financial statements involve the income statement, the statement of financial position and the statement of cash flows.

Finally, we will look at how ratio analysis is used to measure performance. For example, the profit margin will show how much profit is generated from sales whilst the current ratio will measure a company’s ability to pay short-term debts.

Financial accounting overall records financial information and provides meaningful insights that support decision-making in real-world business situations.

• Types of business entity
• The accounting system
• Accounting for non-current assets
• Reconciliation and verification
• Preparation of financial statements
• Analysis and communication of accounting information

This section will focus on how managers plan, control and make decisions within a business. Financial accounting is used for external stakeholders such as investors and banks whilst cost and management accounting is used internally to improve the overall efficiency and profitability of the business.

• Costs and cost behaviour
• Traditional costing methods

For IA2, we look into financial accounting at a more advanced level. We will focus on the preparation of financial statements which will involve producing formal reports that show a company’s financial performance and position. You will gain an understanding of the regulatory and ethical considerations to ensure that financial reporting is transparent, accurate and fair. You will also cover computerised accounting systems and how they generate reports instantly reducing human error. This improves efficiency and accuracy. Finally, you will see how financial ratios are commonly used to assess profitability, liquidity, efficiency and solvency. Effective communication and analysis helps stakeholders make decisions and build on the organisations financial position.

• Preparation of financial statements
• Regulatory and ethical considerations
• Business acquisition and merger 3.4 Computerised accounting systems
• Analysis and communication of accounting information

Cost and management accounting for IA2 focuses on improving decision-making, controlling costs and evaluating long-term investments. Activity based costing (ABC), will allocate overhead costs more accurately by identifying the specific activities that drive costs. For example, a company producing both simple plastic cups and complex insulated travel mugs may find that the travel mugs require more machine setups, quality control and design work. ABC will assign costs based on these activities rather than simply dividing overhead equally. Standard costing is useful for cost control, performance evaluation and motivating employees. Using this method, a business is able to identify problems and take action quickly. Finally, investment appraisal will focus on evaluating long-term projects. It will determine whether a product is financially working. For example, a company who considers buying new equipment to increase production will use investment appraisal to determine whether the future profits justify the initial cost.

• Activity based costing (ABC)
• Standard costing
• Budgeting and budgetary control
• Investment appraisal