AIMS
To
develop knowledge and understanding of the operational
aspects of maintaining accounting systems and
procedures relating to invoicing,
receipts and payments, recording income and expenditure,
the preparation of ledger accounts, and the preparation
of an initial trial
balance.
OBJECTIVES
On
completion of this paper, candidates should be
able to:
- distinguish
between types of business transactions and
documentation, recognising basic principles
of business law and data protection
- prepare
basic ledger accounts under the double entry
system
- record
income and receipts from credit customers
- explain
and account for bad debts
- record
purchases, expenditure, and payments to suppliers
- account
for banking transactions
- maintain
general cash and petty cash records
- produce
bank reconciliation statements
- record
payroll transactions
- prepare
and reconcile control accounts
- prepare
an initial trial balance identifying and correcting
errors using journal entries.
POSITION
OF THE PAPER IN THE OVERALL SYLLABUS
No
prior knowledge is required before commencing
study for Paper
1.
This paper provides the basic techniques required
to enable candidates to prepare financial statements
for various enterprises at a later stage. Candidates
will, therefore, need a sound knowledge of the
methods and techniques introduced in this paper
to ensure they can employ them in later papers.
The methods used in this paper are extended in
Paper 3, Maintaining Financial Records and
further developed in Paper 6, Drafting Financial
Statements.
SYLLABUS
CONTENT
1
Business transactions and documentation
(a)
Types of business transactions
(i)
sales
(ii)
purchases
(iii)
receipts
(iv)
payments
(v)
petty cash
(vi)
payroll
(b)
Types of business documentation
(i)
quotation
(ii)
sales and purchase orders
(iii)
delivery note
(iv)
invoice
(v)
credit note
(vi)
debit note
(vii)
statement
(viii)
remittance advice
(ix)
receipt
(x)
internal cheque requisition
(xi)
petty cash claim
(xii)
payslip
(c)
Basic principles of regulation and business policies
(i)
contract law
(ii)
regulation of sale of goods
(iii)
document retention policies
(iv)
data protection
Double
entry bookkeeping
(a)
Double entry transactions
(i
) nature and function of primary records
(ii)
types of ledger accounts
(iii)
posting by means of double entry
(iv)
balancing-off ledger accounts
(b)
Classification of expenditure
(i)
capital
(ii)
revenue
(c)
The accounting equation
Banking
and petty cash
(a)
Sources of funds and documentation
(i
) types of receipts / payments: cash, cheque,
automated payments, credit card, debit card, bank
automated credits
(ii)
supporting information: invoice, credit note,
remittance advice, statement
(iii)
unusual features: wrongly completed cheques, out-of-date
cheques, credit and debit card limits exceeded,
disagreement with / insufficient supporting documentation
(b)
Banking monies received
(i
) banking documentation: paying-in slips, credit
and debit card documentation
(ii)
methods of handling and storing money, including
security aspects
(c)
Recording payments and monies received (i) manual
cash book
(ii)
manual general ledger and receivables ledger
(iii)
computerised records
(d)
Authorising and making payments
(i)
documentation: cheque requisitions
(ii)
authorisation
(e)
Maintaining petty cash records
(i
) documentation: petty cash claims
(ii)
authorisation
(iii)
security of cash
(iv)
queries: unauthorised claims for payment, insufficient
supporting evidence, claims exceeding authorised
limit
(v)
manual petty cash book
(vi)
imprest and non-imprest methods
(vii)
reconciliation of petty cash book to cash in hand
4
Sales and sales records
(a)
Sales and sales returns
(i)
source documents
(ii)
invoices and credit notes
(iii)
general principles of a sales tax
(iv)
types of discount
(v)
methods of coding data
(vi)
sales day book
(vii)
sales returns day book
(viii)
authorisation
(b)
Recording sales
(i)
manual general ledger
(ii)
manual receivables ledger
(iii)
computerised ledgers
(iv)
statements
(v)
aged receivables analysis
(vi)
communication with customers (orally and in writing)
(vii)
credit limits
(viii)
bad debts
5
Purchases and purchase records
(a)
Purchases and purchase returns
(i
) ordering systems: Internet, verbal, written
(ii)
source documents
(iii)
suppliers’ invoices and credit notes
(iv)
types of discount
(v)
methods of coding data
(vi)
purchase day book
(vii)
purchase returns day book
(b)
Recording purchases
(i)
manual general ledger
(ii)
manual payables ledger
(iii)
computerised ledgers
(iv)
statements
(v)
aged payables analysis
(vi)
communication with suppliers: (orally and in writing),
incorrect calculations, non-delivery of goods
charged, duplication of invoices, incorrect discounts
6
Payroll
(a)
Recording payroll transactions
(i)
documentation: payslips
(ii)
authorisation
(iii)
payment methods: cash, cheques, automated payment
(iv)
queries
(v)
security and control
(vi)
cash book
(vii)
general ledger
7
Control accounts and the initial trial balance
(a)
Bank reconciliations
(i
) general bank services and operation of bank
clearing system
(ii)
function and form of banking documentation
(iii)
bank reconciliation statement
(b)
Control accounts
(i
) different types of errors
(ii)
correction of errors (including journals)
(iii)
reconciliation of control account with ledger:
receivables ledger, payables ledger
(c)
The trial balance
(i)
initial trial balance
(ii)
identification of errors
(iii)
suspense accounts
EXCLUDED
TOPICS
The
following topics are specifically excluded from
Paper 1:
- detailed
knowledge of sales tax
- specific
and general allowances for doubtful debts
- foreign
currency transactions.
KEY
AREAS OF THE SYLLABUS
The
key topic areas are as follows:
sales
purchases
receipts
payments
petty
cash
bank
reconciliations
control
accounts
the
trial balance.
APPROACH
TO EXAMINING THE SYLLABUS
The
examination is a two-hour paper. It can be taken
as a written paper or as a computer based exam.
Assessment will be based on multiple choice questions
covering the breadth of the syllabus, testing
that candidates have acquired the necessary knowledge
of the areas identified above.
No.
of marks
50
multiple choice questions: 100
ADDITIONAL
INFORMATION
Accounting
standards will not be examined until six months
after they have been published. The cut off date
for the June examination is 30 November preceding
the June examination. The cut off date for the
December examination is 31 May preceding the December
examination.
RELEVANT
TEXTS
There
are a number of sources from which you can obtain
a series of materials written for the ACCA CAT
examinations. These are listed below:
Candidates
may also find the following texts useful although
they should be aware that these are based on UK
accounting standards:
Wood,
Frank and Robinson, Sheila. Bookkeeping and
Accounts (Pitman Publishing: 4th edition)
– Sections 1, 2 and 3 ISBN: 0273646192
Cox,
David and Fardon, Michael. Cash and Credit
Accounting – NVQ
Level 2 Accounting (Osborne
Books) This is a tutorial and workbook. ISBN:
1872962033
Whitehead,
Geoffrey. Bookkeeping (Made Simple Books,
Butterworth & Heinemann) –Chapters 1 to 10
STUDY
SESSIONS
1
Types of business transactions and types of business
documentation
(a)
Identify the main types of transactions that a
business is likely to undertake e.g. sales, purchases,
payments, receipts, cash and bank, and payroll
(b)
Explain the main principles of contract law in
relation to transactions
(c)
Understand the importance of coding transactions
correctly
(d)
Distinguish between cash and credit transactions
(e)
Identify the key personnel involved in initiating,
processing and completing transactions
(f)
Understand the need for effective control over
transactions
(g)
Identify the timing of various transactions e.g.
daily, monthly, annually
(h)
Understand the need to document business transactions
(i
) Explain the purpose and scope of data protection,
storage and archiving policies
(j
) Distinguish between different types of business
documentation e.g. quotation, sales and purchase
order, delivery note, invoice, statement, credit
note, debit note, remittance advice, receipt,
internal payment, petty cash claim and payslip
(k)
Identify the main provisions of a sale of goods
act or equivalent
(l
) Outline the contents and purpose of each piece
of documentation
(m)
Describe the documentation and the flow of documentation
for different transactions including Internet
transactions
(n)
Identify the personnel involved in preparing and
authorising documents
(o)
Outline the main features of systematic recording
and filing of documents and data in manual and
computerised systems
2
The duality of transactions and the double entry
system
(a)
Understand the nature and function of primary
financial records
(b)
Recognise the duality of transactions and understand
and apply the accounting equation
(c)
Explain the fundamental rules of double entry
accounting and debits and credits
(d)
Identify the main types of ledger account
(e)
Identify and classify assets, liabilities, income
and expenditure
(f)
Distinguish between capital and revenue expenditure
and identify examples of each
3
Recording business transactions in the double
entry bookkeeping
system
(a)
Record a complete series of basic transactions
within a double entry system
(b)
Prepare journal entries and identify the uses
of the journal
(c)
Balance off ledger accounts, recording closing
balances
(d)
Understand the basic functions of a computerised
accounting package
4
Banking systems and transactions
N.B
for the purpose of answering questions, please
note that a detailed understanding of banking
legislation will not be required.
(a)
Describe the relationship between a bank and its
customer
(b)
Outline the working of a central bank clearing
system
(c)
Recognise the obligation owed by a bank to its
clients
(d)
Understand the content and format of a cheque
(e)
Prepare a cheque prior to despatch
(f)
Outline the purpose and format of paying-in documents
(g)
Describe the procedures and documentation relating
to the use of credit and debit cards
(h)
Describe other services offered by banks – inter-bank
transfers, payable orders, automated credit systems,
standing orders, direct debits, credit transfers
N.B
foreign currency transactions are not examinable
5
Cash handling, petty cash operations and cash
security
(a)
Describe the general procedures for dealing with
cash, cheques, credit and debit card receipts
and payments
(b)
Identify the documentation accompanying payments
and receipts
(c)
Recognise the importance of accurately recording
all payments and receipts
(d)
Identify the main ways to ensure that only authorised
payments are made
(e)
Record payments and receipts in the cash book,
general ledger, purchase and sales ledger (manual
or computerised)
(f)
Understand procedures for banking cash receipts
(g)
Recognise the types of transaction likely to be
paid out of petty cash
(h)
Account for petty cash using imprest and non-imprest
methods
(i
) Exercise control over petty cash and recognise
how control can be maintained – security of cash,
authorised personnel and reconciliations
(j
) Record petty cash claims and the petty cash
book
(j
) Describe the key procedures for ensuring safety,
security and, where appropriate, confidentiality
over the handling of cash and cheques
(k)
Explain the correct procedure to cope with unusual
situations: wrongly completed or out of date cheques,
exceeded credit limits on debit or credit cards,
or discrepancies between receipts and supporting
documents, unauthorised claims for payment, insufficient
supporting evidence, or claims exceeding authorised
limits
6
Sales and sales records
(a)
Identify and recognise source sales documents
(b)
Complete sales invoices and process credit notes
/ debit notes
(c)
Understand the general principles of a sales tax
(d)
Calculate sales tax on transactions
(e)
Calculate and record trade and settlement discounts
(f)
Record transactions in a sales day book and a
sales returns day book
(g)
Code sales and customer records and data
(h)
Recognise and describe authorisation procedures
(i)
Record sales
(i
) maintain a manual general and receivables ledger
(ii)
describe a computerised receivables ledger
(iii)
prepare, reconcile and understand the purpose
of customer statements
(j)
Communicate efficiently and effectively with customers
7
Credit control and bad debts
(a)
Explain the benefits and costs of offering credit
facilities to customers
(b)
Understand the purpose of and prepare an aged
receivables analysis
(c)
Understand the purpose of credit limits
(d)
Recognise the existence and impact of bad debts
(e)
Record the accounting treatment of bad debts
8
Purchases and purchase records
(a)
Identify and recognise source purchase and expenditure
documents
(b)
Complete purchase invoices and process credit
notes
(c)
Calculate and record trade and settlement discounts
(d)
Record transactions in a purchase day book and
a purchase returns day book
(e)
Code purchases and supplier records and data
(f)
Record purchases
(i)
maintain a manual general and payables ledger
(ii)
describe a computerised payables ledger
(iii)
understand the purpose of and prepare an aged
payables analysis
(iv)
prepare, reconcile and understand the purpose
of supplier statements
(g)
Communicate efficiently and effectively with suppliers
9
Bank reconciliation statements
(a)
Recognise the need to reconcile the cash book
with the bank statement periodically
(b)
Identify the main reasons for any discrepancies
between the cash book and the bank statement,
such as errors, unanticipated receipts and payments
and timing differences
(c)
Correct cash book errors and/or omissions
(d)
Reconcile the corrected cash book balance with
the bank statement through adjustments for uncleared
and uncredited cheques
10
Payroll
(a)
Understand payroll systems
(b)
Understand the duties of employers in relation
to taxes, state benefit contributions and other
deductions
(c)
Record hours worked; time sheets, clock cards
(d)
Calculate gross wages for employees paid by hour,
by output (piecework) and salaried workers
(e)
Define and calculate bonuses, overtime, and commission
given the details of each scheme
(f)
Describe the documentation required for recording
various elements of wages and salaries
(g)
Recognise the need for payroll to be authorised
and identify appropriate authorisation, security
and control procedures
(h)
Make other deductions from wages - trade union
subscriptions, payroll saving, pension contributions
and payroll giving
(i
) Identify various methods for making payments
to employees
(j)
Account for payroll costs and payroll deductions
11
Principles of internal checks and control accounts
(a)
Understand the need for internal checks
(b)
Complete postings to control accounts and understand
the link to primary records
(c)
Understand the need for individual receivables
and payables accounts and understand the link
to primary records
(d)
Explain the purpose of control accounts
(i)
as a check on the accuracy of entries in the individual
accounts
(ii)
to establish a total of receivables and payables
at any time
(iii)
to identify errors in the completion of the day
book and in posting the totals from primary records
(iv)
as an internal check; the control account should
be administered by someone other than the person
who completes the day books
(e)
Perform a basic control account reconciliation
(f)
Identify errors which would be highlighted by
performing a control account reconciliation
12
Preparing an initial trial balance and recognising
and correcting
errors
(a)
Compile an initial trial balance
(b)
Identify errors which would be highlighted by
the extraction of a trial balance
(c)
Identify and explain different types of errors:
(i)
errors of commission
(ii)
errors of principle
(iii)
errors of omission
(iv)
single entry
(v)
transposition errors
(vi)
casting errors
(d)
Distinguish between compensating and non-compensating
errors
(e)
Explain the function of a suspense account
(e)
Correct errors using journal entries
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