FINANCIAL ACCOUNTING 1

About this Course

This course introduces the student to financial accounting and assumes that the student has no prior
knowledge of the subject. It deals with the recording of accounting transactions and events using the
double entry system and the preparation of financial statements of a sole trader for merchandising and
service enterprise. The course will expose the student to the fundamental accounting principles,
accounting techniques, the underlying records used in recording, preparing financial statements and
developing basic entrepreneurial skills. This course aims to provide students with the basic accounting
knowledge and skills in the recording process and the preparation of financial statements for sole
proprietors.

Course Learning Outcomes

1) Describe the terms and the activities associated with financial accounting
2) Prepare accounting records and the financial statements of a sole-proprietorship business
3) Demonstrate entrepreneurial skills in task related to financial accounting simulation package for a
sole-proprietorship business.

Course Syllabus

Introduction to Accounting
Definition of accounting
Three basic activities
Objective of financial reporting
Users and uses of accounting information
Qualitative characteristic of accounting information
The building blocks of accounting
Business Entity

Accounting Cycle and Accounting Equation

Accounting cycle
Accounting equation

Double Entry System

Double entry principle
The relationship between accounting equation and double entry rule

Journal, Ledger and Trial Balance

Journal - all specialise journals (including petty cash journal) and the imprest system
3 Column Ledger
General ledger.
Trial Balance: Trial balance format, purpose of a trial balance (introduction of SOPL and SOFP format)

Accounting Errors
Error versus fraud
Types of accounting errors
Correction of errors
Methods to correct errors
The suspense account
Calculation of revised profit

Accounting Adjustments: Accruals, prepayments and depreciation

Accruals and prepayments
Accounting implications for accruals and prepayments
The recording and reporting of accruals
The recording and reporting of prepayments
The causes of depreciation
The recording and reporting of depreciation
Method of depreciation - SLM, RBM
Factors to consider in depreciation calculation

Completing the Accounting Cycle and Financial Statements

Preparing the adjusted trial balance.
Preparing the adjusted financial statements

Accounting Ratio
Purpose and the explanation of accounting ratio
Types of ratios
Usefulness of accounting ratios
Limitations of accounting ratios

Bank Reconciliation
Cash and bank transactions.
Bank statement.
Bank reconciliation and its purpose.
Transactions recorded by the business but not by the bank.
Transactions recorded by the bank but not by the business.
Error.
The bank reconciliation techniques

Incomplete Records
Single entry and double entry system
Disadvantages of a single entry system
Comparison and analysis methods
Preparation of the statement of profit or loss and statement of financial position