The Accounting Module

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The Accounting Module

11 December 2013

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Curriculum Framework

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Business, Accounting and Financial Studies

Introduction to Accounting

Business Environment

Introduction to Management

Basics of Personal Financial Management

Compulsory Part 40%

Accounting Module

Business Management

Module

Financial Management

Marketing Management

Human Resources Management

60%

Elective Part

Financial Accounting

Cost Accounting

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Mode of Assessment

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Paper 1 Compulsory Part

Paper 2 Accounting Module

40% 1¼ hours

60% 2¼ hours

Component Weighting Duration

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Financial Accounting

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Books of Original Entries and types of Ledgers

• Moved from Compulsory Part, with Petty Cash Book trimmed from the curriculum

• Books of original entries include the following:

- Sales/Purchase Day Book (Journal)

- Returns Inwards/Outwards Day Book (Journal) - Two/Three-column Cash Book

- The (General) Journal

• Types of Ledgers include the following:

- Accounts Receivables Ledger - Accounts Payables Ledger - General Ledger

• Journalizing (from sources to journals) vs Posting (from journals to accounts)

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Period-end Adjustments Relating to the Preparation of Financial Statements

• to ascertain the amount of profit through period-end adjustments

• Recalling:

C = A – L – (R – E)

i.e.

Profit = A – L – C

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Period-end Adjustments Relating to the Preparation of Financial Statements

• For A (major components: fixed assets, accounts receivables, stocks)

Additions/Disposal of fixed assets? (trade-in*)

Allowance for depreciation? (straight-line, reducing-balance, actual usage)

Bad debts/Allowance for doubtful debt? (whole, specific, ageing)

Stock value determination? (LCM, sales or return;

normal/abnormal loss; weighted average*)

•

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Period-end Adjustments Relating to the Preparation of Financial Statements

• For L

Additions/ Issuance of liabilities?

Repayment of long/short-term liabilities?

• For C

Additions/Withdrawal of capital?

• For P

In arrear/In advance of revenues?

Accrual/Prepayment of expenses?

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Financial Reporting for Different Forms of Business Ownership

• Forms of Business Ownership:

– Sole proprietorship – Partnership

– Limited company

• Purpose of Financial Statements:

– Internal vs External – General vs Publishing

• Terminology:

– Profit and loss account Vs Statement of comprehensive income Vs Statement of profit and loss and other comprehensive income (effective:

1 July 2012)

– Balance sheet Vs Statement of financial position – Ref to supplementary notes

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Financial Reporting for Different Forms of Business Ownership

• Forms of Statement of profit and loss and other comprehensive income:

– by function Vs by nature

– one statement Vs two statements

• Presentation of Financial Statements:

– HKFRS – HKAS 1

– HKFRS for Private Entities – Section 3, 4 and 5 – SME FRFnFRS – Section 1

** Candidates are expected to be aware of the impact of standards issued by the Hong Kong Institute of Certified Public Accountants upon the accounting definitions and treatments covered by this

curriculum. Standards newly issued or revised before 1 September

2013 are applicable to the examination.

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Accounting for Partnership

• Implication of Appropriation Account and Current Account required

• Valuation of goodwill Vs Treatment of goodwill

2012 HKDSE Paper 2A:Q5

• Implication of Garner and Murray rule not required

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Accounting for Limited Company

• Shares issued at discount?

• Over-subscription and related refund are required

• Rights and bonus issues of shares are not required

• Appropriation account: an allocation of profit or loss / total comprehensive income for the period

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Control System

• Bank Reconciliation Statement

– Cash book / bank statement balance comes first?

• Corrections of Errors

– Narrations required?

– Corrections made to ledger a/c or P&L?

HKDSE Sample Paper Q6 ₁₃

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Generally Accepted Accounting Principles

• Explain (L2) meaning, importance and

shortcomings of principles and conventions

• Apply (L2) them into accounting situations: No common clues

• Substance over forms not required

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Financial Analysis

• Ref to supplementary notes for formulae of ratios

• Calculate (L2) and Comment (=Evaluate=L4) using ratios (In-depth application of ratios in Compulsory Part)

• Explain (L2) the functions and limitations

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Incomplete Records

• Forms of statement of affairs

• Calculate cash and inventory value

– Fire loss, cash stolen…(Normal Vs Abnormal) – No sales/purchases control account compared

with list of sales/purchases ledgers balances are required

– Lower of cost/NRV, sales or return and weighted average cost of inventory costing required

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Cost Accounting

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Cost Classification, Concepts and Terminology

– Distinguish (L3) between different cost items

HKDSE Sample Paper 2A:Q9

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The Accounting Module