AccountingQ&A by dot point

The fundamental accounting concepts (going concern, accruals, consistency, prudence, materiality, business entity, money measurement, historic cost and realisation), the qualitative characteristics of useful information, and the role of accounting standards.

The accruals concept applied to expenses and income, the calculation and recording of accrued and prepaid expenses and income, and their treatment in the income statement and statement of financial position.

The write-off of irrecoverable (bad) debts, the creation and adjustment of a provision for doubtful debts, the recovery of debts previously written off, and the effect of each on the income statement and statement of financial position.

The purpose and preparation of sales ledger and purchases ledger control accounts, the sources of the entries, the bank reconciliation statement, and how each acts as a check on the accuracy of the ledgers.

The purpose of depreciation, the straight-line and reducing-balance methods, the calculation and recording of depreciation and accumulated depreciation, and the accounting for the disposal of non-current assets.

The accounting equation, the dual aspect of every transaction, the rules of double entry for assets, liabilities, capital, income and expenses, and how to record transactions in ledger accounts and balance them off.

The preparation of the income statement and statement of financial position for a sole trader, the calculation of gross profit and profit for the year, and the classification of assets, liabilities and capital.

Accounting for organisations with incomplete records and for not-for-profit organisations: the statement of affairs and capital comparison method, the reconstruction of missing figures from control accounts and the cash and bank accounts, and the preparation of receipts and payments and income and expenditure accounts for clubs and societies.

The features of limited companies, ordinary and preference share capital, the difference between issued and authorised capital, reserves (share premium, revaluation and retained earnings), debentures, dividends, and the preparation of company financial statements.

The features of a partnership, the appropriation account, interest on capital and drawings, partners' salaries, profit-sharing ratios, and the use of capital and current accounts.

The calculation and interpretation of profitability, liquidity and efficiency ratios, the comparison of results over time and between businesses, and the limitations of ratio analysis.

The impact of ethical considerations on accounting: the fundamental principles of professional ethics, the threats and safeguards facing accountants, the temptation to manipulate financial information through window dressing or earnings management, and the social and environmental responsibilities a business owes its stakeholders.

The role and purpose of the accountant, the distinction between bookkeeping and accounting, the different internal and external users of accounting information, and the qualities expected of the accounting profession.

The purpose and preparation of the trial balance, the errors that a trial balance will and will not reveal, the use of a suspense account, and the correction of errors through journal entries.

The main types of business organisation - sole trader, partnership, limited company and not-for-profit - and how their ownership, control, liability and capital structure affect the accounting and financial reporting required of each.

Absorption and activity based costing: the allocation, apportionment and reapportionment of overheads, the calculation of overhead absorption rates and their use to cost a unit, the identification of cost pools and cost drivers in activity based costing, and the comparison of the two approaches.

The calculation of the break-even point in units and revenue, the contribution per unit and contribution to sales ratio, the margin of safety, target-profit output, and the construction and limitations of break-even charts.

The purpose and benefits of budgeting, the preparation of cash, sales and production budgets, budgetary control through comparison with actual results, and the behavioural effects of budgets.

The methods of capital investment appraisal (payback period, accounting rate of return and net present value), how to calculate and interpret each, the time value of money, and the quantitative and qualitative factors in an investment decision.

The purpose and preparation of a cash flow forecast, the difference between cash and profit, the identification of cash surpluses and deficits, and the methods of improving cash flow.

The distinction between fixed and variable costs, the meaning of contribution, marginal costing and its use in short-term decisions, absorption costing and overhead absorption, and the difference in reported profit between the two methods.

The purpose of standard costing, the calculation and interpretation of material, labour and sales variances, the split into price and usage (or rate and efficiency) variances, and the investigation of variances.