ACCOUNTING AND FINANCE Higher

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1 ACCOUNTING AND FINANCE Higher Fourth edition - published November 1999

2 NOTE OF CHANGES TO ARRANGEMENTS FOURTH EDITION PUBLISHED ON CD-ROM NOVEMBER 1999 COURSE TITLE: Accounting and Finance (Higher) COURSE NUMBER: C National Course Specification: Course Details Core skills statements expanded Course Details Course Content Page 11 Insert text (see Appendix 1) Course Details Details of the Page 11 Extra paragraph added to clarify External assessment what can be assessed in each section of the external paper National Unit Specification: D Financial Accounting (H) General information Core skills statements expanded Statement of Outcome 4 Page 18 PC (c) wording changed from Standards cash and bank to net debt. Range wording clarified to agree with FRS1 (revised) D Management Accounting (H) General information Core skills statements expanded D Using Accounting Information (H) General information Core skills statements expanded Support Notes Guidance on approaches Page 34 Insert a new paragraph referring to assessment to Appendix 1 Appendix 1 Pages 35-6 Appendix provided with ratio formulae sheet Accounting and Finance: Higher Course 1

3 National Course Specification ACCOUNTING AND FINANCE (HIGHER) COURSE NUMBER C STRUCTURE This course comprises three mandatory units: D Financial Accounting (H) 1 credit (40 hours) D Management Accounting (H) 1 credit (40 hours) D Using Accounting Information (H) 1 credit (40 hours) In common with all courses, this course includes 40 hours over and above the 120 hours for the component units. This is for induction, extending the range of learning and teaching approaches, support, consolidation, integration of learning and preparation for external assessment. This time is an important element of the course and advice on its use is included in the course details. RECOMMENDED ENTRY While entry is at the discretion of the centre, candidates would normally be expected to have achieved one of the following: Standard Grade Accounting and Finance at Credit Intermediate 2 Accounting and Finance the component units of Intermediate 2 Accounting and Finance - Financial Accounting (Int 2), Management Accounting (Int 2) and Using Accounting Information (Int 2) Administrative Information Publication date: November 1999 Source: Scottish Qualifications Authority Version: 04 Scottish Qualifications Authority 1999 This publication may be reproduced in whole or in part for educational purposes provided that no profit is derived from reproduction and that, if reproduced in part, the source is acknowledged. Additional copies of this course specification (including unit specifications) can be purchased from the Scottish Qualifications Authority for Note: Unit specifications can be purchased individually for 2.50 (minimum order 5). 2

4 National Course Specification (cont) COURSE Accounting and Finance (Higher) CORE SKILLS This course gives automatic certification of the following: Complete core skills for the course None Core skills components for the course Critical Thinking H Using Number Int 2 For information about the automatic certification of core skills for any individual unit in this course, please refer to the general information section at the beginning of the unit. Additional information about core skills is published in Automatic Certification of Core Skills in National Qualifications (SQA, 1999). Accounting and Finance: Higher Course 3

5 National Course Specification: course details COURSE Accounting and Finance (higher) RATIONALE Business and enterprise are at the heart of national growth and development and this is reflected in the important place that business education assumes in the post-16 curriculum. The provision offers opportunities for individuals to develop the crucial skills and knowledge which allow them to access, understand and contribute to the dynamic and complex business and information environment. Whatever the career pathway or progression route, business education can provide a valuable context which enhances individual effectiveness. The study of accounting and finance aims to identify, measure and communicate financial and other relevant information to permit informed judgements and decisions. The use of a variety of contexts, concentrating on the aspects of input, processing and output, helps develop skills not only in the handling of information but also in interpretation, analysis and evaluation. This will involve a wide range of accounting contexts and the use of complex data. The course methodology encourages candidates to think logically and to apply accounting principles in a consistent and effective manner, thus developing their problem-solving and decision-making skills. The increasing use of business concepts in a range of organisations has necessitated a greater awareness and understanding of financial information among a wide range of users. This not only includes creditors, shareholders and management, but also the wider community, including consumers of local authority services, employees, and those involved in not-for-profit organisations. The study of accounting at this level will enable candidates to consider and make informed comment on a range of published accounting information. While the course might seem to concentrate on the accounts of manufacturing concerns, the skills and knowledge acquired can be easily transferred to firms in the service sector. The processes of accounting are being facilitated by the developments which are taking place in information technology with consequent implications for the role of accounting. These developments provide greater opportunities for the analysis and interpretation of information. The aims of the course build on the knowledge, understanding, information-handling skills and practical abilities gained in Standard Grade Accounting and Finance and Intermediate 2 Accounting and Finance and are to: develop an understanding of the principles and practice of finance and of financial and management accounting by studying these areas in a range of contexts integrate within this study the uses and applications of information technology and accounting packages promote an understanding of accounting as a means of presenting and communicating information to interested parties, both external and internal prepare, use and interpret accounting information in relation to exercising control, analysing performance, making decisions and solving problems develop further an understanding of aspects of finance and financial management develop an understanding of the rationale for, and application of, various accounting practices and conventions Accounting and Finance: Higher Course 4

6 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) analyse and discuss problems of an accounting or financial nature and communicate viewpoints in an effective manner understand and make informed comment upon financial information published by a variety of organisations provide a basis upon which further academic study and vocational training can be built. Units at Intermediate 2 and Higher levels contain common outcomes. However, it is important to distinguish between the two levels. This has been achieved in two ways: at Higher, the greater breadth and depth of content is reflected in the additional outcomes and performance criteria compared to the Intermediate 2 course at Higher there is also a more extensive range and more demanding evidence requirements compared to Intermediate 2 at Higher there is an increased emphasis on applying decision-making in more complex contexts. COURSE CONTENT Candidates wishing to succeed in the course, as distinct from achieving the individual units, must be aware that the course will impose additional demands over and above those of the units. These additional demands will require candidates to: combine the theoretical and practical aspects of the course content integrate, where appropriate, the course content apply decision-making in a greater variety of contexts apply decision-making in more complex contexts retain knowledge and understanding over a longer time period. The purpose of the additional 40 hours is to enable these additional demands to be met and to allow course providers to employ a wider variety of learning and teaching strategies in the delivery of the course. The course content has been organised in three units: Financial Accounting, Management Accounting and Using Accounting Information. The last unit contains aspects of both financial and management accounting. All of the course content will be subject to sampling in the external assessment. Accounting and Finance: Higher Course 5

7 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) Where candidates undertake the course without previous accounting experience (see recommended entry statement), a preliminary or induction course would be beneficial. Financial Accounting (H) Manufacturing account Cost of direct materials consumed. Factory direct costs. Prime cost. Factory indirect costs/overheads. Work-in-progress adjustment (valued at total cost). Factory cost of finished goods produced. Transfer to trading account at factory cost and at market price. Manufacturing profit. Characteristics of sole traders, partnerships and public limited companies Sole traders Features of ownership and liability, management and control. Identification of appropriate forms of ownership structure for given situations. Sources of finance and justification of appropriate sources of finance for given situations. Revenue and capital expenditure. Final accounts: preparation of revenue accounts to show profit and its distribution. Trading and profit and loss account(s) to include adjustments for depreciation (straight line and reducing balance methods), profit and loss on sale of a fixed asset, expenses and incomes prepaid and accrued and provision for doubtful debts preparation of balance sheets which distinguish between fixed assets and net current assets and show how the business is financed, including updating of capital Accounting and Finance: Higher Course 6

8 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) Partnerships Partnership agreement, sources of finance, the inclusion of a new partner (revaluation of assets and goodwill), additional capital from existing partners and partnership loans. Final accounts: partnership division of profit and losses to include partnership salary, interest on capital, interest on drawings, transfer to general reserve and share of residual profit or loss the balance sheet should include the partners updated current account balances Public limited companies Types of shares (restricted to ordinary and preference). Include cumulative and participating share issues at par and at a premium (ledger entries not required). Awareness of key documents (restricted to the main features of Memorandum of Association and Articles of Association). Main provisions of Companies Acts as regards limited company formation and registration. Sources of finance, for example, shares, debentures, retained profits, loans, leasing, factoring. Final accounts: accounts in detailed form as for internal use appropriation of profits to include interim and final dividends, transfers to reserves and unappropriated profits balance sheet to include: - long-term financing restricted to ordinary and preference shares (fully paid), debentures, retained profits (general reserve, unappropriated profit and share premium) - capital reserves and property revaluation - intangible assets, investments, provisions for tax * (corporation and VAT) and dividends * While an understanding of the treatment of these items in company accounts is expected, a detailed knowledge is not required. Accounting and Finance: Higher Course 7

9 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) Private limited companies Awareness of main characteristics and distinction from public limited companies. Cash-flow statements Cash-flow from operating activities. Cash-flow statement (layout as current FRS1). Financial accounting regulations Financial accounting concepts and conventions. Management Accounting (H) Awareness of the role of SSAPs and FRSs. Classification of costs Fixed, variable, semi-variable, direct, indirect. Cost elements Materials: types of stock, stock valuation (cost, net realisable value). Valuation of stock issue: FIFO, LIFO, AVCO. Stock record cards (ledger entries not required). Labour: recording, calculation of wages (time, piece rate, bonus, overtime). Overheads: types of overhead, cost centres, allocation, apportionment. Apportionment of costs from service cost centres to production cost centres. Bases of apportionment: floor area, number of employees, value of fixed assets, labour hours, machine hours. Absorption: bases of absorption, absorption rates. Pre-determined overhead absorption rates, under- and over-absorption. Accounting and Finance: Higher Course 8

10 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) Cost systems Preparation of job cost statements: direct expenses, calculation of direct labour cost, direct materials cost, absorption of overheads, profit or loss. Process costing: construction of process accounts, normal and abnormal loss through wastage and spoilage, abnormal gain, work in progress, transfer of completed goods output to another process and/or stock. Absorption and marginal costing Construction of costing/profit statements: valuing stock in absorption costing by application of normal activity. The identification of contribution. Budgets The preparation of sales budgets, production budgets, cash budgets. Using Accounting Information (H) Budgeted profit statements. Planning for budgeted cash shortfalls/surpluses. Decisions based on budgets. Break-even analysis Unit contribution: break-even point, margin of safety, profit/volume ratio. Projected profits at different levels of output. Output required for projected profits. Uses and limitations of break-even analysis. Decisions based on break-even analysis. Decision-making Profit maximisation under varying constraints of: limiting factor, make or buy, accept/reject special orders, retain/close plant or department. Opportunity cost. Accounting and Finance: Higher Course 9

11 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) Interpretation of accounting information (see Appendix 1) Profitability ratios: return on capital employed percentage, gross profit percentage, mark-up ratio, net profit percentage. Liquidity ratios: current ratio, acid test ratio. Efficiency ratios: expense ratio (either single expense or total expenses), rate of stock turnover, debtor collection period, creditor payment period, turnover to fixed assets. Inter-firm and intra-firm comparison. Using accounting information by Proprietors, shareholders/potential shareholders, creditors or lenders, Inland Revenue, employee representatives/trades unions, potential purchasers of the organisation. ASSESSMENT To gain the award of the course, the candidate must pass all the unit assessments as well as the external assessment. External assessment will provide the basis for grading attainment in the course award. When units are taken as component parts of a course, candidates will have the opportunity to demonstrate achievement beyond that required to attain each of the unit outcomes. This attainment may, where appropriate, be recorded and used to contribute towards course estimates and to provide evidence for appeals. Additional details are provided, where appropriate, with the exemplar assessment materials. Further information on the key principles of assessment is provided in the paper Assessment (HSDU, 1996) and in Managing Assessment (HSDU, 1998). DETAILS OF THE INSTRUMENTS FOR EXTERNAL ASSESSMENT External assessment will be based on a written paper of 2 hours 30 minutes duration. This paper will be set out in three sections as follows: Section A Financial 45 marks Section B Management 40 marks Section C Financial and Management 15 marks The content of the course area Using Accounting Information contains both financial and management accounting. The financial accounting content will be assessed in section A. The management accounting content will be assessed in section B. Section C may contain content drawn from any of the three component of the course. Accounting and Finance: Higher Course 10

12 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) Section A - Financial Candidates will be required to answer two mainly computationally-based questions drawn from the financial accounting area of the course content. The first question, worth 25 marks, will be compulsory and will relate to company final accounts. A further question, worth 20 marks, will require to be attempted from a choice of three. Section B - Management Candidates will be required to answer two mainly computationally-based questions drawn from the management accounting area of the course content. The first question, worth 20 marks, will be compulsory and will relate to decision-making. A further question, worth 20 marks, will require to be attempted from a choice of three. Section C - Financial and Management Candidates will be required to produce an extended answer to one question worth 15 marks from a choice of four drawn from any part of the course content. The choice will include questions drawn equally from the financial and management accounting areas. GRADE DESCRIPTIONS The descriptions below are of expected performances at Grade C and at Grade A. They are intended to assist candidates, teachers/lecturers and users of the certificate and to help establish standards when question papers are being set. The grade of the award will be based on the total score obtained in the examination. Grade C In order to obtain a Grade C for Higher Accounting and Finance, a candidate must: demonstrate knowledge and understanding of financial and management accounting theory apply knowledge and understanding to a range of different contexts demonstrate some ability to integrate material drawn from the course content produce accounting statements with a reasonable degree of accuracy demonstrate an ability to draw conclusions and make recommendations based on accounting problems. Accounting and Finance: Higher Course 11

13 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) Grade A In order to obtain a Grade A for Higher Accounting and Finance, a candidate must in addition: demonstrate a detailed knowledge of financial and management accounting theory consistently apply knowledge and understanding to a range of different contexts, some of which may be complex demonstrate a high degree of ability to integrate material drawn from the course content produce accounting statements with a higher degree of accuracy demonstrate the ability to draw conclusions and make recommendations based on complex accounting problems. Accounting and Finance: Higher Course 12

14 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) APPROACHES TO LEARNING AND TEACHING One possible approach would be to deliver the course on a unit-by-unit basis. Using this approach, the units could be delivered in any order, although it would be more appropriate if Using Accounting Information unit was delivered after the other two units. Where the units are being offered as part of a course, however, it is recommended that an integrated approach be adopted wherever possible. For example, it would seem logical that company accounts and cash flow from the Financial Accounting unit be followed by ratio analysis from Using Accounting Information unit. In this way, candidates would benefit by seeing the holistic nature of the subject rather than merely its component parts. The nature of the subject offers opportunities throughout for candidate-centred, active learning which can be enhanced by the appropriate use of information technology. Learning and teaching approaches which incorporate the use of information technology help to emphasise the vocational relevance of the subject and further increase candidate motivation and performance. The use of spreadsheets is mandatory in order to complete certain unit outcomes, for example, budgets and overhead analysis sheets. However, the use of spreadsheets should not be restricted to these topics nor solely to providing assessment evidence. Teachers and lecturers should seek opportunities to integrate the use of spreadsheets throughout the learning and teaching process. Within this general structure, candidates will be required to input data and formulae into pre-prepared spreadsheets and, where appropriate, candidates could create their own. Learning and teaching strategies could include the use of accounting packages. This will not only help candidates to appreciate the ways in which accounting is carried out in business and commerce, but also enable integration of information technology into the study of accounting. It should be noted, however, that the use of accounting packages is not permitted for internal or external assessment purposes. While the majority of the course is computationally based, any learning and teaching approach used should, particularly at this level, also develop knowledge and understanding. Candidates should be encouraged, and be given opportunities, to develop their extended writing skills and to appreciate the links between the theoretical and practical aspects of the course. Although the additional 40 hours could be a discrete block of time taken in entirety after completion of the three units, this is not the recommended approach. While some of the time may be used in this way, it would seem more appropriate for this time to be used in a variety of ways throughout the course, for example, for remediation, greater use of information technology or the introduction to a greater range of accounting and business contexts. Where appropriate, arrangements should be made to ensure that there will be no artificial barriers to learning and assessment. The nature of a candidate s special needs should be taken into account when planning learning experiences. Accounting and Finance: Higher Course 13

15 National Course Specification: course details (cont) COURSE Accounting and Finance (Higher) SPECIAL NEEDS This course specification is intended to ensure that there are no artificial barriers to learning or assessment. Special needs of individual candidates should be taken into account when planning learning experiences, selecting assessment instruments or considering alternative outcomes for units. For information on these, please refer to the SQA document Guidance on Special Assessment and Certification Arrangements for Candidates with Special Needs/Candidates whose First Language is not English (SQA, 1998). SUBJECT GUIDES A Subject Guide to accompany the Arrangements document has been produced by the Higher Still Development Unit (HSDU) in partnership with the Scottish Consultative Council on the Curriculum (SCCC) and Scottish Further Education Unit (SFEU). The Guide provides further advice and information about: support materials for each course learning and teaching approaches in addition to the information provided in the Arrangements document assessment ensuring appropriate access for candidates with special educational needs The Subject Guide is intended to support the information contained in the Arrangements document. The SQA Arrangements documents contain the standards against which candidates are assessed. Accounting and Finance: Higher Course 14

16 National Unit Specification: general information Financial Accounting (Higher) NUMBER D COURSE Accounting and Finance (Higher) SUMMARY This unit seeks to enable candidates to prepare cash-flow statements, extended manufacturing accounts and detailed final accounts of sole traders, partnerships and limited companies. OUTCOMES 1 Prepare a manufacturing, trading and profit and loss account. 2 Prepare the profit and loss appropriation section and the balance sheet of a partnership. 3 Prepare the profit and loss appropriation section and the balance sheet of a public limited company for internal use. 4 Prepare a cash-flow statement for a public limited company. RECOMMENDED ENTRY While entry is at the discretion of the centre, candidates would normally be expected to have achieved one of the following: Standard Grade Accounting and Finance at Credit level Intermediate 2 Accounting and Finance the component units of Intermediate 2 Accounting and Finance - Financial Accounting (Int 2), Management Accounting (Int 2) and Using Accounting Information (Int 2) Administrative Information Superclass: AK Publication date: November 1999 Source: Scottish Qualifications Authority Version: 04 Scottish Qualifications Authority 1999 This publication may be reproduced in whole or in part for educational purposes provided that no profit is derived from reproduction and that, if reproduced in part, the source is acknowledged. Additional copies of this unit specification can be purchased from the Scottish Qualifications Authority. The cost for each unit specification is 2.50 (minimum order 5). 15

17 National Unit Specification: general information (cont) Financial Accounting (Higher) CREDIT VALUE 1 credit at Higher. CORE SKILLS There is no automatic certification of core skills or core skills components in this unit. Additional information about core skills is published in Automatic Certification of Core Skills in National Qualifications (SQA, 1999). Accounting and Finance: Unit Specification Financial Accounting (H) 16

18 National Unit Specification: statement of standards Financial Accounting (Higher) Acceptable performance of this unit will be the satisfactory achievement of the standards set out in this part of the unit specification. All sections of the statement of standards are mandatory and cannot be altered without reference to the Scottish Qualifications Authority. OUTCOME 1 Prepare manufacturing, trading and profit and loss accounts. Performance criteria a) The preparation of the manufacturing account is consistent with the relevant information. b) The preparation of the trading and profit and loss accounts is consistent with the relevant information and the manufacturing account data. Note on range for this outcome PC (a) relevant information: opening and closing stocks (raw materials and work-in-progress); purchases and returns of raw materials; carriage in; direct wages; direct expenses; factory overheads; allocation between factory and administration; market value. PC (b) trading account: opening and closing stocks - finished goods; purchases of additional finished goods; sale of finished goods; gross profit. PC (b) profit and loss account: expenses, including amounts allocated to administration; provision for doubtful debts; provision for depreciation (straight line or reducing balance method); income; manufacturing profit. Evidence requirements Evidence is required in the form of a manufacturing, trading and profit and loss account. The manufacturing account should contain one example of a direct expense and a minimum of six factory overheads. The factory overheads should include one example of depreciation (straight line or reducing balance), and two allocations between factory and administration. The profit and loss account should contain a minimum of six expenses including two allocations between factory and administration, adjustment in the provision for doubtful debts and one income. A minimum of one prepayment and one accrual should be included. Accounting and Finance: Unit Specification Financial Accounting (H) 17

19 National Unit Specification: statement of standards (cont) Financial Accounting (Higher) OUTCOME 2 Prepare the profit and loss appropriation section and the balance sheet of a partnership. Performance criteria a) The preparation of the profit and loss appropriation section is consistent with the relevant information. b) The calculation of the closing current account balances is consistent with the relevant information. c) The preparation of the balance sheet is consistent with the relevant information. Note on range for this outcome PCs (a) and (b) relevant information: interest on capital; interest on drawings; partnership salary; share of residual profit or loss. PC (c) relevant information: partners capital accounts; partners updated current account balances; current liabilities; fixed assets; current assets. Evidence requirements Evidence is required in the form of a profit and loss appropriation section and balance sheet for a partnership. Partnership salary should be applicable to one partner only. The balance sheet should contain a minimum of two fixed assets, four current assets and two current liabilities. OUTCOME 3 Prepare the profit and loss appropriation section and the balance sheet of a public limited company for internal use. Performance criteria a) The preparation of the profit and loss appropriation section is consistent with the relevant information. b) The preparation of the balance sheet is consistent with the relevant information. Note on range for this outcome PC (a) relevant information: ordinary share dividends (interim and final), preference share dividend (final); unappropriated profits; transfer to general reserve. PC (b) relevant information: capital (ordinary and preference), long-term liabilities (debentures, general reserve); fixed assets; current assets; current liabilities. Evidence requirements Evidence is required in the form of a profit and loss appropriation section which covers the range and a balance sheet of a public limited company. The balance sheet should contain a minimum of three fixed assets, one long-term liability, four current assets and four current liabilities. All headings and sub-totals should be shown clearly. Accounting and Finance: Unit Specification Financial Accounting (H) 18

20 National Unit Specification: statement of standards (cont) Financial Accounting (Higher) OUTCOME 4 Prepare a cash-flow statement for a public limited company. Performance criteria a) The calculation of net cash inflows from operating activities is consistent with data supplied. b) The preparation of the cash-flow statement is consistent with the relevant information. c) The analysis of changes in net debt is consistent with data supplied. Note on the range for this outcome PC (a) data supplied: net profit for year; depreciation; profit or loss on sale of fixed asset; adjustments in provision for doubtful debts; adjustments in working capital. PC (b) data supplied: returns on investments and servicing of finance; corporation tax paid; capital expenditure and financial investment (purchase and sale of fixed assets); equity dividends paid; management of liquid resources and financing (issue and repayment of debentures, issue of shares). Evidence requirements Evidence is required in the form of a pre-prepared statement (conforming to current FRS) recording cash inflows and cash outflows. The operating activities calculation should include two non-cash adjustments from the range and four working capital adjustments. The cash-flow statement should include two examples from interest and dividends received and paid (interim and final). It should also include the purchase of a fixed asset and the sale of a fixed asset, the issue or repayment of debentures and the issue of ordinary or preference shares at a premium. Accounting and Finance: Unit Specification Financial Accounting (H) 19

21 National Unit Specification: support notes Financial Accounting (Higher) This part of the specification is offered as a guidance. The support notes are not mandatory. While the exact time allocated to this unit is at the discretion of the centre, the notional design length is 40 hours. GUIDANCE ON THE CONTENT AND CONTEXT FOR THIS This unit deals with the accounts of partnerships and public limited companies. Candidates, in the completion of accounting statements, should be made aware of the role and operation of such organisations, for example, legislation relating to partnerships, procedures to be followed when companies are formed and the methods used to raise finance. Candidates, in the completion of this unit, should be made aware of the requirements of relevant SSAPs and FRSs. Further details are provided in the course specification. GUIDANCE ON LEARNING AND TEACHING APPROACHES FOR THIS The emphasis throughout this unit should be on a candidate-centred approach in which candidates undertake practical exercises which enable them to progress at their own speed. It is important, however, especially for those candidates undertaking this unit as part of Higher Accounting and Finance, that knowledge and understanding are developed concurrently with computational skills. Although the unit concentrates on the final accounts of partnerships and public limited companies, candidates would find it beneficial if they were introduced initially to final accounts set in the context of a sole trader. The adoption of this strategy would enable candidates to appreciate the relationship between the final accounts of different types of business organisations. There are opportunities within this unit for the use of information technology in the form of spreadsheets and accounting packages. However, where accounting packages are used, it is essential that candidates understand the underpinning accounting principles. It should also be noted that accounting packages cannot be used for assessment purposes. It may be beneficial to deliver the unit in the order of the outcomes. A thematic approach may be useful to integrate Outcomes 1 and 2, Outcomes 1 and 3, Outcomes 1, 3 and 4 or Outcomes 3 and 4. Accounting and Finance: Unit Specification Financial Accounting (H) 20

22 National Unit Specification: support notes (cont) Financial Accounting (Higher) GUIDANCE ON APPROACHES TO ASSESSMENT FOR THIS Practical assignments will be the most suitable forms of assessment instrument. One method of assessment would be to assess an outcome immediately following its delivery, with time allowed for remediation prior to any reassessment. Alternatively, it would be possible to assess more than one outcome with one assessment instrument. It would, for instance, be possible to set an assignment which combined a manufacturing account, the final accounts of a public limited company and a cashflow statement. Equally, an assignment could be set which combined a manufacturing account and the final accounts of a partnership. The recommended approach to assessment is the use of practical exercises delivered under controlled conditions. No time limit is specified for the completion of each assessment. Where an instrument assesses more than one outcome, success in one outcome and failure in another would require only the failed outcome to be reassessed. For the purposes of assessment, an error refers to any errors involving the recording of accounting information, arithmetical errors or any errors relating to the application of accounting theory and principles. It is expected that each assessment will require the application of a marking scheme articulating with specific criteria. Such criteria would include and allow for different types of errors - arithmetic, consequential, and lack of accounting knowledge. There is no specific upper limit for the allocation of marks over an assessment instrument, but ease of use, consistency and comprehensiveness should be evident. SPECIAL NEEDS This unit specification is intended to ensure that there are no artificial barriers to learning or assessment. Special needs of individual candidates should be taken into account when planning learning experiences, selecting assessment instruments or considering alternative outcomes for units. For information on these, please refer to the SQA document Guidance on Special Assessment and Certification Arrangements for Candidates with Special Needs/Candidates whose First Language is not English (SQA, 1998). Accounting and Finance: Unit Specification Financial Accounting (H) 21

23 National Unit Specification: general information Management Accounting (Higher) NUMBER D COURSE Accounting and Finance (Higher) SUMMARY This unit seeks to enable candidates to prepare cost statements and budgets and to use information technology. OUTCOMES 1 Prepare a production budget and a cash budget. 2 Prepare an overhead analysis and job cost statement. 3 Prepare process cost accounts. 4 Prepare absorption and marginal costing profit statements. RECOMMENDED ENTRY While entry is at the discretion of the centre, candidates would normally be expected to have achieved one of the following: Standard Grade Accounting and Finance at Credit level Intermediate 2 Accounting and Finance the component units of Intermediate 2 Accounting and Finance - Financial Accounting (Int 2), Management Accounting (Int 2) and Using Accounting Information (Int 2) Administrative Information Superclass: AK Publication date: November 1999 Source: Scottish Qualifications Authority Version: 04 Scottish Qualifications Authority 1999 This publication may be reproduced in whole or in part for educational purposes provided that no profit is derived from reproduction and that, if reproduced in part, the source is acknowledged. Additional copies of this unit specification can be purchased from the Scottish Qualifications Authority. The cost for each unit specification is 2.50 (minimum order 5). 22

24 National Unit Specification: general information (cont) Management Accounting (Higher) CREDIT VALUE 1 credit at Higher. CORE SKILLS There is no automatic certification of core skills or core skills components in this unit. Additional information about core skills is published in Automatic Certification of Core Skills in National Qualifications (SQA, 1999). Accounting and Finance: Unit Specification Management Accounting (H) 23

25 National Unit Specification: statement of standards Management Accounting (Higher) Acceptable performance of this unit will be the satisfactory achievement of the standards set out in this part of the unit specification. All sections of the statement of standards are mandatory and cannot be altered without reference to the Scottish Qualifications Authority. OUTCOME 1 Prepare a production budget and a cash budget. Performance criteria a) The determination of production (in units) is consistent with the information supplied. b) The preparation of the cash budget is consistent with the information supplied. c) The use of spreadsheet formulae are comprehensive and consistent with the purpose. Note on range for this outcome PC (a) information supplied: opening and closing stocks and sales in units. PC (b) information supplied: sales (cash and credit); cash discount; credit purchases; expenses; changes in fixed assets; movements in long-term finance; non-cash adjustments (depreciation). Evidence requirements Evidence is required in the form of a spreadsheet print-out of a production budget and a cash budget for a three-month period. In addition, a completed worksheet showing appropriate formulae is required. The practical exercise should involve a minimum of three receipts and five payments. The credit sales should involve a maximum of two months settlement and credit purchases a maximum of two months settlement. One expense should be paid periodically. Accounting and Finance: Unit Specification Management Accounting (H) 24

26 National Unit Specification: statement of standards (cont) Management Accounting (Higher) OUTCOME 2 Prepare an overhead analysis and job cost statement. Performance criteria a) The charging of costs to cost centres is consistent with the information supplied. b) The choice of basis of apportionment is consistent with data. c) The charging of service cost centres costs to production cost centres is consistent with the information supplied. d) Direct costs are recorded consistently with information supplied. e) The application of overhead rates to a job is accurate. f) The use of spreadsheet formulae are comprehensive and consistent with purpose. Note on range for this outcome Basis of apportionment: floor area; number of employees; value of fixed assets; labour hours; machine hours. Evidence requirements Evidence is required in the form of a spreadsheet print-out of an overhead analysis and job cost statement. The evidence should also include a completed worksheet showing specific spreadsheet formulae. A minimum of seven overheads should be included with a maximum of two to be allocated. The overhead analysis statement should show the allocation and apportionment of overheads to a minimum of five cost centres (which should comprise a minimum of two service cost centres). The application of overhead rates should target all production departments in respect of one job. The job cost statement should also include global figures for direct labour, direct materials, direct expenses, overheads, the calculation of profit on the job and final selling price. OUTCOME 3 Prepare process cost accounts. Performance criteria a) The preparation of the process accounts is consistent with information supplied. b) The recording of normal and abnormal losses is consistent with the information supplied and relevant calculations. Note on range for this outcome Information supplied: inputs - materials, labour, overheads and transfers from a previous process or processes; outputs - losses (normal and abnormal), transfers of completed goods output (to next process and/or stock). Evidence requirements Evidence is required in the form of two process accounts covering the range. Accounting and Finance: Unit Specification Management Accounting (H) 25

27 National Unit Specification: statement of standards (cont) Management Accounting (Higher) OUTCOME 4 Prepare absorption and marginal costing profit statements. Performance criteria a) The preparation of both statements is consistent with the information supplied. b) The calculation and valuation of closing stock is consistent with the information supplied. c) The contribution in the marginal costing profit statement is correctly calculated. d) The treatment of under- or over-absorption of overheads in the absorption costing profit statement is consistent with the information supplied. Note on range for this outcome Information supplied: opening stocks in units; production in units; sales; variable costs; fixed costs; normal output level. Evidence requirements Evidence is required in the form of absorption and marginal costing profit statements covering the range for one accounting period. Accounting and Finance: Unit Specification Management Accounting (H) 26

28 National Unit Specification: support notes Management Accounting (Higher) This part of the specification is offered as a guidance. The support notes are not mandatory. While the exact time allocated to this unit is at the discretion of the centre, the notional design length is 40 hours. GUIDANCE ON THE CONTENT AND CONTEXT FOR THIS This unit deals with the analysis of overheads, absorption and marginal costing and the preparation of budgets. This unit provides some of the knowledge required for Using Accounting Information (H). Where candidates take both units, delivery of these may be integrated. Where this is not the case, candidates will find it beneficial to have completed this unit before embarking on Using Accounting Information (H). Candidates should be made aware of the differences between, and the respective merits of, marginal and absorption costing. They should also be made aware of the relationship of actual to absorbed overheads. Further details are provided in the course specification. GUIDANCE ON LEARNING AND TEACHING APPROACHES FOR THIS The emphasis throughout this unit should be on a candidate-centred approach in which candidates undertake practical exercises which enable them to progress at their own speed. It is important, however, especially for those candidates undertaking this unit as part of Higher Accounting and Finance, that knowledge and understanding are developed concurrently with computational skills. There are opportunities within this unit for the use of information technology in the form of spreadsheets and accounting packages, particularly in the preparation of overhead analysis statements and cash budgets. However, where accounting packages are used, it is essential that candidates understand the underpinning accounting principles. It should also be noted that accounting packages cannot be used for assessment purposes. GUIDANCE ON APPROACHES TO ASSESSMENT FOR THIS Practical exercises delivered under controlled conditions are the most suitable forms of assessment instrument. An obvious method would be to assess an outcome immediately following its delivery, with time allowed for remediation prior to any reassessment. No time limit is specified for the completion of each assessment. The use of spreadsheets is mandatory in Outcomes 1 and 2. In these outcomes candidates should be issued with spreadsheets which have been prepared with appropriate headings and text into which they are required to insert data and formulae. Accounting and Finance: Unit Specification Management Accounting (H) 27

29 National Unit Specification: support notes (cont) Management Accounting (Higher) For the purposes of assessment, an error refers to any errors involving the recording of accounting information, arithmetical errors or any errors relating to the application of accounting theory and principles. It is expected that each assessment will require the application of a marking scheme articulating with specific criteria. Such criteria would include and allow for different types of errors - arithmetic, consequential, and lack of accounting knowledge. There is no specific upper limit for the allocation of marks over an assessment instrument, but ease of use, consistency and comprehensiveness should be evident. SPECIAL NEEDS This unit specification is intended to ensure that there are no artificial barriers to learning or assessment. Special needs of individual candidates should be taken into account when planning learning experiences, selecting assessment instruments or considering alternative outcomes for units. For information on these, please refer to the SQA document Guidance on Special Assessment and Certification Arrangements for Candidates with Special Needs/Candidates whose First Language is not English (SQA, 1998). Accounting and Finance: Unit Specification Management Accounting (H) 28

30 National Unit Specification: general information Using Accounting Information (Higher) NUMBER D COURSE Accounting and Finance (Higher) SUMMARY This unit seeks to enable candidates to analyse financial performance, make decisions based on cost and revenue information, and use information technology. OUTCOMES 1 Use break-even analysis. 2 Prepare a profit maximisation statement for short-term decision-making. 3 Analyse business performance and financial position. 4 Prepare financial or cost projections to help decision-making. RECOMMENDED ENTRY While entry is at the discretion of the centre, candidates would normally be expected to have achieved one of the following: Standard Grade Accounting and Finance at Credit level Intermediate 2 Accounting and Finance the component units of Intermediate 2 Accounting and Finance - Financial Accounting (Int 2), Management Accounting (Int 2) and Using Accounting Information (Int 2) Administrative Information Superclass: AK Publication date: November 1999 Source: Scottish Qualifications Authority Version: 04 Scottish Qualifications Authority 1999 This publication may be reproduced in whole or in part for educational purposes provided that no profit is derived from reproduction and that, if reproduced in part, the source is acknowledged. Additional copies of this unit specification can be purchased from the Scottish Qualifications Authority. The cost for each unit specification is 2.50 (minimum order 5). 29

31 National Unit Specification: general information (cont) Using Accounting Information (Higher) CREDIT VALUE 1 credit at Higher. CORE SKILLS This unit gives automatic certification of the following: Complete core skills for the unit None Core skills components for the unit Critical Thinking H Additional information about core skills is published in Automatic Certification of Core Skills in National Qualifications (SQA, 1999). Accounting and Finance: Unit Specification Using Accounting Information (H) 30

32 National Unit Specification: statement of standards Using Accounting Information (Higher) Acceptable performance of this unit will be the satisfactory achievement of the standards set out in this part of the unit specification. All sections of the statement of standards are mandatory and cannot be altered without reference to the Scottish Qualifications Authority. OUTCOME 1 Use break-even analysis. Performance criteria a) The formula selected is appropriate to purpose. b) Calculations are consistent with the information supplied. Note on range for this outcome Formulae: break-even point; margin of safety; profit/volume ratio. Information supplied: total fixed costs; unit variable costs; selling price per unit; output levels. Evidence requirements Evidence is required in the form of practical exercises requiring the use of all break-even formulae. Evidence should include calculations of profit or loss for two different output levels. In addition, evidence should include calculations of the levels of output required to achieve two different amounts of profit. OUTCOME 2 Prepare a profit maximisation statement for short-term decision-making. Performance criteria a) Identification of contribution per unit is consistent with the information supplied. b) Identification of contribution per limiting factor is consistent with the information supplied. c) Identification of product ranking and output levels to maximise profits. d) Conclusions drawn from the application of limiting factor to decisions made are consistent and accurate. Note on range for this outcome Limiting factor: labour hours; machine hours; materials. Evidence requirements Evidence is required in the form of a profit statement which details the output level and total contribution of each of four products under one limiting factor from the range. In addition, evidence should include the calculation of any change in profit resulting from given market restrictions, for example, where output levels for certain products are specified. Accounting and Finance: Unit Specification Using Accounting Information (H) 31