UNIT PURPOSE UNIT INTRODUCTION

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1 BUSINESS ACCOUNTING Equivalent QCF level: Level 4 Credit Value: 15 Learning time (hours): 150 UNIT PURPOSE This unit provides the learner with an understanding of the fundamentals of business accounting principles and techniques. It equips the learner with the necessary knowledge to measure and report on information about economic activity within organisations for use in planning, performance evaluation, and operational control. UNIT INTRODUCTION This unit aims to give learners a sound grasp of the basics of financial reporting (context, purposes, and regulatory framework). It introduces the principal concepts of financial accounting and preparation of the principal financial statements. The unit is designed to introduce learners to key management accounting skills necessary to support decision-making. It will emphasise the acquisition and application of the skills and knowledge required for those who are responsible for planning and decision-making as well as control, and will provide the underpinning competencies required for more advanced study. Finally, the unit covers the fundamentals of cost data collection, analysis and allocation of costs, the costing of products and services using absorption and marginal costing techniques and short-term decision making. Cost Volume Profit analysis as well as budgeting and budgetary control will also be introduced and analysed. 1

2 LEARNING OUTCOMES, ASSESSMENT CRITERIA AND CONTENT To pass this unit, the learner must generate evidence that demonstrates all learning outcomes have been met through the achievement of all the unit s assessment criteria. Learning outcomes On completion of this unit, the learner will: 01 Understand and apply financial accounting techniques Assessment criteria On completion of this unit, the learner can: 1.1 Compare and contrast financial accounting and management accounting and consider: the need for financial records in an organisation the advantages and limitations of costing 1.2 Apply financial accounting concepts and principles to the preparation and analysis of simple company accounts Content Accounting terminology: Assets (fixed and current), balance sheet, capital, cash flow, credit, debit, liabilities, profit and loss statement, return on investment Accounting Concepts and Principles: Relevance, reliability, matching concept, timeliness, neutrality, faithful representation, prudence, completeness, single economic entity, concept, money measurement concept, comparability/consistency, materiality, going concern, accruals, business entity, substance over form, realisation concept, and duality concept Financial accounting: a primary source of information for these allocation decisions, follows generally accepted accounting principles, backward-looking Management accounting: information that managers use for decision- making, no general principles, forward-looking Costing: marginal costing, absorption costing, and introduction to activity-based costing 2

3 LEARNING OUTCOMES, ASSESSMENT CRITERIA AND CONTENT 02 Understand the key management accounting techniques and their role in a range of decision making scenarios 2.1 Identify and understand the key management accounting techniques 2.2 Apply key management accounting techniques in a range of decision making Scenarios Scope of Management Accounting: Planning, Performance evaluation, Operational control Tools and Techniques of Management Accounting: Financial Statement Analysis, Fund Flow Analysis, Cash Flow Analysis, Costing techniques, Budgetary control, Statistical and operational research techniques, Responsibility Accounting, Management Reporting Costing: marginal costing, absorption costing, and introduction to activity-based costing 03 Be able to apply appropriate planning and decision making techniques to management issues involving organisational resources 3.1 Apply relevant approaches to decision making for the following issues: Cost based pricing resource usage 3.2 Discuss break-even analysis and consider limitations of the break-even model 3.3 Discuss the need for planning tools and performance measures for projects and divisions Cost Based Pricing: Full Cost-Mark-up Pricing, Variable Cost- Mark-up Pricing Resource consumption accounting: includes Value chain integration, Flexible use of activity-based drivers, Use of fundamental operations transactions as the primary source for financial and quantitative data, etc. Break-even model: Margin of safety, Break-even analysis, limitations Budgeting: Purpose of budgetary controls, Sales budget, Production budget, Capital budget, Cash flow/cash budget, Marketing budget, Project budget, Revenue budget, and Expenditure budget 3

4 GUIDANCE FOR TUTORS DELIVERY & ASSESSMENT It is important that tutors use a range of teaching and guidance methods to ensure that their learners meet the intended learning outcomes for this unit. This would include participating or revising lectures/notes, attending webinars, workshops, individual/group assessments and draft feedback for assessments. However, learners should always be encouraged to participate in independent learning using the resources on the IMSS, e-library and Mintel reports. Learners need to use analytical thinking, participative approaches and investigative mindsets in order to be able to enhance their learning experience through reflection of theory in conjunction with their own experience. It is important to plan the delivery of the unit to ensure that learners have enough time to undertake the relevant research needed to meet the learning outcomes and to facilitate self- learning. Many organisations use accounting as one of the primary sources of information in order to make various allocation related decisions due to scarcity of resources. It is therefore important that businesses review corporate financial statements prepared in accordance with generally accepted accounting principles in to survive in the competitive corporate world, and this is emphasised to learners. Learning outcomes 1 and 3 require learners to exhibit understanding of the fundamentals of financial accounting concerned with the need for planning and control tools in accounting. Tutors need to provide adequate information on accounting concepts and principles that are accepted for businesses and also need to discuss the importance of recording day-to-day transactions in order to meet accounting standards requirements. Learners should be allowed to access financial reports from various organisations to gain a thorough understanding of this area. Tutors can provide learners with the necessary theoretical knowledge required to understand costing and break-even analysis. They can also provide budgeting tools that will help learners to solve management problems using any given corporate scenario. Learning outcome 2 requires learners to demonstrate understanding of management accounting concepts and techniques. It is expected that tutors will provide information on key management accounting terminology and techniques used by business organisations. Learners should be able to identify real-world scenarios where these concepts are put into practice. Learners should also be able to identify the differences in financial accounting and management accounting. Furthermore, learners will ultimately be able to use these tools to make real-world decisions in organisational resource planning. 4

5 LEARNING OUTCOMES, ASSESSMENT CRITERIA AND CONTENT 5

6 GUIDANCE FOR TUTORS OUTLINE LEARNING PLAN The following outlined learning plan can be used as a guidance document in conjunction with the unit. This is an exemplar in which the unit can be delivered. TOPIC AND SUGGESTED DELIVERY/ACTIVITIES Introduction to unit and programme of learning Tutor discussion on the basic financial reporting according to accepted business concepts and how beneficial they can be to various organisational functions Unit input on key management accounting techniques that are used in the decision making process of the organisation Learner research on application of budgetary controls contributing to Assignment Review of unit and programme of assignments 6

7 GUIDANCE FOR TUTORS PROGRAMME OF SUGGESTED ASSESSMENT/ASSIGNMENTS The following table illustrates the respective assessments for the unit and identifies the corresponding assessment criteria. Assessment Criteria covered Assignment title Scenario Assessment method 1.1, 1.2, 2.1, 2.2, 3.1,3.2, 3.3 Assignment Assuming that you are the Head of Accounts and Finance in an organisation of your choice, you have been asked to develop a report that encompasses the following requirements to be presented at a stakeholder meeting. Report The report should encompass: 1. The context in which financial information is prepared and made use of and an explanation of how this can be advantageous to the organisational functions 2. An explanation of the key management accounting techniques that are used in the decision making process of the organisation 3. An explanation on the advantages of effective budgetary planning and critical evaluation on how it has currently been applied to the chosen organisation 7

8 RESOURCES TEXTBOOKS Carey, M., Knowles, C. & Towers-Clark, J., 2011, Accounting - a smart approach, Oxford Wood, F. & Sangster, A., Frank Wood's 1. 11th Edition. IFRS Edition FT Prentice Hall Jones, R Causeway Press JOURNALS The Journal of Finance Journal of Economics and Finance Review of Finance The Journal of Financial Economics WEBSITES The Market Oracle Forbes Hubspot Business Case Studies