INTRODUCTION TO FINANCIAL ACCOUNTING
ATD LEVEL 1
STUDY NOTES
SYLLABUS
PAPER NO 1: INTRODUCTION TO FINANCIAL ACCOUNTING
GENERAL OBJECTIVE
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to prepare financial statements for different entities
LEARNING OUTCOMES
A candidate who passes this paper should be able to:
- Prepare books of original entry and basic ledger accounts under double entry system
- Prepare basic financial statements of sole traders. Partnerships and companies
- Account for assets and liabilities
CONTENT
- Introduction to Accounting
- The nature and purpose of accounting
- Objectives of accounting
- Users of accounting information and their respective needs
- The accounting equation
- Accounting standards (IAS/IFRS), (Importance and limitations)
- Accounting concepts/principles
- Qualities of useful accounting information
2 Recording transactions
- Source documents (quotations_ purchases order, statement of account. remittance advice, receipts, petty cash vouchers_ sales arid purchase invoices, credit notes and debit notes, bank statements)
- Books of original entry: sales journal, purchases journal, returns inward, returns outward journal, cashbook, petty cashbook and general journal
- Double entry and the ledger; general ledger, sales ledger, purchases ledger
- The trial balance
- Computerised accounting systems- Role of computers, application and accounting softwares in the accounting process, benefits and challenges of operating computerised accounting systems
3. Accounting for assets and liabilities
- Property, plant and equipment — recognition, capital and revenue expenditure, measurement (depreciation and revaluation), disposal and disclosures — property, plant and equipment schedule
- Inventory – recognition, measurement and valuation using specific. cost method (FIFO and weighted average cost)
- Trade receivables – bad debts and allowance for doubtful debts and receivables control accounts
- Accrued income and prepaid expenses
- Cash at bank — cashbook and bank reconciliation statement
- Cash in hand – cash book and petty cashbook
- Trade payables – payables control accounts
4. Correction of accounting errors and suspense account
5. Financial statements of a sole trader
- Income statement
- Statement of financial position
6. Partnership accounts
- Contents of a partnership agreement
- Distinction between current and fixed capital
- Income statement
- Statement of financial position
- Changes in partnership – Admission of a new partner, retirement and change in profit sharing ratio
7. Company accounts
- Types of share capital – ordinary shares and preference shares
- Issue of shares (exclude issue by instalment and forfeiture)
- Types of reserves share premium, revaluation reserve, general reserves and retained profits
- Income tax -Accounting treatment and presentation (exclude computation)
- Financial statements – Income statement and statement of financial position
- Published financial statements (describe a complete set of published financial statements but not preparation)
8. Emerging issues and trends
CONTENT PAGE
Topic 1: Introduction to Accounting…………………………………….. 6
Topic 2:Recording transactions……………………………………………. 36
Topic 3: Accounting for assets and liabilities………………………….. 91
Topic 4: Correction of accounting errors and suspense account… 148
Topic 5: Financial statements of a sole trader…………………………..161
Topic 6: Partnership accounts………………………………………………199
Topic 7: Company accounts ………………………………………………….. 228
Revised on: January 2019
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