A level accounting

Syllabus content

7

Cambridge O

Level Principles of Accounts 7110

4. Syllabus content

4.1 Basic principles

Within the following areas, candidates should be able to:

4.1.1 Role of accounting

• explain the difference between book-keeping and accounting

• explain the role of accounting in providing information for monitoring progress and decision-making

• state the benefits of ICT (Information and Communications Technology) in book-keeping and accounting:

accuracy, speed of processing information, ability to

process high volumes of information, performing

reconciliations, ease and capacity of information storage, security

4.1.2 The Double Entry system of book-keeping

• explain the meaning of assets, liabilities and owner’s equity (capital)

• explain and calculate the effect of business transactions on the accounting equation

• explain the double entry system of book-keeping

• process accounting data using the double entry system

• explain the subdivision of the ledger into the sales ledger, the purchase ledger and the general ledger

4.1.3 Documentary records

• understand the use of business documents as sources of information

• name and state the use of an invoice, credit note, debit note, cheque, receipt and statement of account

Questions will

not

require knowledge of document details.

4.1.4 Books of prime entry

• explain the use of, and process, accounting data in

the books of prime (original) entry – cash book, sales

journal, purchases journal, sales returns journal,

purchases returns journal, and general journal

• post the ledger account entries from the books of prime entry

• explain and calculate trade discount

4.1.5 The Cash Book

• explain its dual function both as a book of prime entry and as a ledger account for bank and cash by use

of analysis columns

• explain and process transactions involving bank current accounts, bank deposit accounts, bank

overdrafts, bank loans and other loans

• explain, calculate and account for cash discount

• draw up a reconciliation of the cash book with the bank statement in respect of the following:

unpresented cheques, bank charges, bank interest paid and received, direct debits, standing orders,

credit transfers, dividends, correction of errors, and uncredited deposits.

4.1.6 The General Journal

• explain that the journal is one of the books of prime entry

• explain the use of the journal

• enter those transactions, including correction of erro

rs, that cannot be recorded in any special journal

• write relevant explanatory narrations for each entry

4.1.7 The Ledger

• prepare ledger accounts using the ‘T’ account format

• post debit and credit entries to record transactions in the ledger accounts

• balance the ledger accounts as required, make transfers to the final accounts

• interpret ledger accounts prepared in ‘T’ account form and their balances

• explain and interpret ledger accounts prepared using the running balance format

Candidates are

not

required to explain or use folio columns.

4.1.8 The Trial Balance

• recognise that it is a statement of ledger balances on a particular date

• extract a trial balance from account balances

• outline its uses and its limitations as a means

of checking the accuracy of the double entry

• identify and explain those errors which do not affect

the trial balance – omissi

on, commission, principle,

compensating, original entry, and reversals

4.1.9 Adjustments to ledger accounts

• Other payables and receivables

• make entries in the journal and ledger accounts to record accrued and prepaid expenses

• make entries in the journal and ledger accounts to record outstanding and prepaid incomes

• bad debts and the provisions for doubtful debts

• make entries in the journal and ledger accounts to write off bad debts

• make entries in the journal and ledger accounts

to make and adjust a provision for doubtful debts

4.2 Accounting procedures

Within the following areas the candidate should be able to:

4.2.1 Capital and revenue expenditure and receipts

• define the meaning of capital expenditure and revenue expenditure

• distinguish between and account for capital and revenue expenditure

• distinguish between and account for capital and revenue receipts

• calculate and comment on the effect on profit and asset valuation of the incorrect treatment of capital

and/or revenue expenditure

4.2.2 Accounting for depreciation

• define depreciation and be aware that it is no

t the putting by of cash for asset replacement

• explain the reasons for accounting for depreciation, e.g. passage of time, etc.

• name and describe the straight-line, diminishin

g (reducing) balance and revaluation methods of

depreciation

• prepare ledger accounts and journal entries for the provision of depreciation

• prepare ledger accounts and journal entries for the disposal of non-current assets and calculate the profit

or loss on the disposal of an asset

4.2.3 Correction of errors

• record journal entries supporting the correction of errors

• explain the use of the suspense account as a temporary measure to balance the trial balance

• open and post entries to a suspense account where necessary

• prepare a statement of revised profit

• prepare revised extracts of statements of financial position

4.2.4 Control accounts

• explain that control accounts are an independent check on the sales and purchases ledgers

• explain that control accounts may be used to provide totals of debtors and creditors, locate errors and

act as a deterrent against fraud

• identify and use the books of prime entry as sources of information for the control account entries

• enter the following items into the relevant control account: credit sales and purchases, receipts and

payments, discounts, returns, bad debts, dishonoured cheques, interest on overdue accounts, contra

entries, refunds, opening and closing balanc

es (debit and credit within each account)