EnglandAccounting

3.1 Financial accounting

15 dot points across 15 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

What rules and concepts make financial statements reliable and comparable?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the fundamental accounting concepts such as going concern, accruals, consistency, prudence, materiality and business entity, the qualitative characteristics of useful information, and the role of accounting standards.
10 min answer →

How do we match income and expenses to the right period when cash is paid early or late?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the accruals concept, the calculation and recording of accrued and prepaid expenses and income, and how each is shown in the income statement and statement of financial position.
10 min answer →

How do we account for customers who may never pay what they owe?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the write-off of irrecoverable debts, the creation and adjustment of a provision for doubtful debts, the recovery of debts previously written off, and their treatment in the financial statements.
10 min answer →

How do we independently check the sales and purchases ledgers and the bank balance?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the purpose and preparation of sales and purchases ledger control accounts, the bank reconciliation statement, and how each provides an independent check on the accuracy of the ledgers.
11 min answer →

How do we spread the cost of a non-current asset over the years it is used?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the purpose of depreciation, the straight-line and reducing-balance methods, the recording of depreciation and accumulated depreciation, and the accounting for the disposal of non-current assets.
11 min answer →

How does every transaction keep the accounting equation in balance?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the accounting equation, the dual aspect concept, the rules of debit and credit for assets, liabilities, capital, income and expenses, and how transactions are posted to and balanced off in ledger accounts.
10 min answer →

How do we turn a trial balance into an income statement and a statement of financial position?

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.
A focused answer to AQA A-Level Accounting 3.1, covering 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.
11 min answer →

How do we prepare financial statements when there is no full double-entry record to start from?

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.
A focused answer to AQA A-Level Accounting 3.14, covering the statement of affairs and capital comparison method of finding profit, the reconstruction of missing sales, purchases and cash figures, and the preparation of receipts and payments and income and expenditure accounts for not-for-profit clubs and societies.
12 min answer →

How do limited companies report share capital, reserves and dividends?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the features of limited companies, ordinary and preference share capital, reserves such as share premium and retained earnings, debentures, dividends, and the preparation of company financial statements.
12 min answer →

How do partners share profit, and how are their accounts kept?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the features of a partnership, the appropriation account, interest on capital and drawings, partners' salaries, profit-sharing ratios, and the difference between capital and current accounts.
11 min answer →

How do we turn financial statements into judgements about performance?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the calculation and interpretation of profitability, liquidity and efficiency ratios, comparison over time and between businesses, and the limitations of ratio analysis.
12 min answer →

How do ethical pressures shape the way accountants record, report and present financial information?

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.
A focused answer to AQA A-Level Accounting 3.18, covering the fundamental principles of professional ethics, the threats accountants face and the safeguards against them, the manipulation of financial information through window dressing and earnings management, and the social and environmental responsibilities a business owes its stakeholders.
10 min answer →

What does an accountant actually do, and who uses the information they produce?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the purpose of the accountant, the difference between bookkeeping and accounting, the internal and external users of financial information, and the professional qualities expected of accountants.
9 min answer →

How do we check the ledger is in balance, and what errors does a trial balance miss?

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.
A focused answer to AQA A-Level Accounting 3.1, covering the purpose and preparation of the trial balance, the errors it does and does not reveal, the use of a suspense account, and how errors are corrected with journal entries.
10 min answer →

How do the legal forms a business can take change the way its accounts are owned, controlled and reported?

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.
A focused answer to AQA A-Level Accounting 3.2, covering the main forms of business organisation - sole trader, partnership, limited company and not-for-profit - and how their ownership, control, liability and capital structure shape the accounting records and financial statements each must prepare.
10 min answer →