ABE Level 6 Diploma Unit Title: Financial Accounting Learning Outcome: 1. Understand the framework of financial accounting. Please note that the content of this Lecture Guide is listed in its recommended teaching order, rather than in numerical order.
Assessment Criteria/Indicative Content: 1.1 Describe the scope, objectives and main users of financial accounting information in accordance with the international framework of the International Accounting Standards Board: • Describe the scope and objectives, i.e. the provision of useful information for people about their resources. This could include cost of assets, loans outstanding, income received, expenses consumed, etc. Identify the main users of accounting information in accordance with the IASB’s framework document. The needs of users will vary depending on the type of organisation and therefore students should consider the following organisations: sole trader, partnership, private and public company.
Identify the main and sub-characteristics of useful information to users: • • • Identify and explain the four main characteristics of useful information to users, namely; relevance, reliability, ‘understandability’ and comparability. Identify and explain the sub-characteristics of the four main characteristics. Explain the twelve traditional accounting concepts and their relationship to the framework characteristics – going concern, accruals or matching, realisation, consistency, prudence, business entity, duality, monetary measurement, objectivity, historical cost, materiality, and separate valuation. Be able to give an example of the use of each, for example the matching principle requires expenses not consumed in the generation of revenue to be treated as prepayments. Distinguish between capital income and expenditure and revenue income and expenditure. Give examples of each of the above and state how they should be treated in financial statements, e.g. as assets, liabilities, expenses or revenues.
Examiner’s tips: The underpinning concepts and principles of accounting are fundamental to all topics that follow, so make sure you understand these before moving on.
ABE Level 6 Diploma Unit Title: Financial Accounting Learning Outcome: 1. Understand the framework of financial accounting. Assessment Criteria/Indicative Content: 1.3 Describe the role and scope of external auditing and internal auditing in business: • • • • • • Describe the role and scope of external auditing in business. Describe the role and scope of internal auditing in business. Describe the relationship between external and internal auditing in the context of business. Identify and explain the differences between external and internal auditing in business. Identify the contents of an external audit report published in the annual report of a business. Identify the modifications that might be made to an external audit report and the circumstances that give rise to them.
Examiner’s tips: The importance of good auditing has surfaced as an important issue in the wake of the collapse of large multinational corporations such as Enron and Worldcom and the economic crisis of 2008. Obtain several annual reports of companies – these are generally freely available on the Internet for such companies as Nestle, Shell, British Airways etc. or indeed any large company with which you are familiar - and read the external audit report contained in them.
ABE Level 6 Diploma Unit Title: Financial Accounting Learning Outcome: 2. Know how to prepare and present the financial statements of companies in accordance with internationally generally accepted accounting practice (IGAAP) under International Financial Reporting Standards. Assessment Criteria/Indicative Content: 2.1 Describe the external publication and the elements that make up the external financial statements of a company: • • • • • • Describe and know the format for the statement of comprehensive income (trading and profit and...
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