1. F1 The relationship between accounting and other business function

2. 1. Coordination with purchasing departments The payable ledge section relies on the purchasing department to send copies of purchase orders and confirm the validity of invoices received from suppliers, inform the accounting staff of any goods received or returned. The accounting staff informs the purchasing department of all payments of invoices.

3. 2. Coordination with marketing/sales departments The receivables ledger section relies on the sales staff to send copies of sales orders or confirmations of goods delivered to customers. The accounting staff pass on information about payments received.

4. 3. Coordination with debt collection staff The accounting staff prepares monthly statements and lists of aged receivables.

5. 4. Coordination within the finance department The financial accounting staff responsible for preparing financial accounts might rely on the management accounting staff for data about inventory records so as to place a value on closing inventory

6. F1 Accounting and finance functions within business

7. 1. The purpose of accounting information What is accounting? Accounting is a way of recording, analyzing and summarizing transactions of a business. The accounting system is affected by the size, type and structure of business.

8. 1. The purpose of accounting information The users of accounting information a. Managers b. Shareholders c. Trade contacts d. The debtors e. Tax authority f. Employees g. Financial analysts and advisors h. Government i. The public

9. 1. The purpose of accounting information Example question Which of the following users groups of financial and accounting information are likely to need, and have access to, this information most? A. Managers of the company B. Shareholders of the company C. Tax authority D. Financial analysis advisiors

10. 1. The purpose of accounting information Qualities of good information a. Relevance b. Comprehensibility c. Reliability d. Completeness e. Objectivity f. Timeliness g. Comparability

11. 1. The purpose of accounting information The structure of accounting function a. Financial controller Routine accounting Providing accounting reports Cashiers’ duties and cash control

12. 1. The purpose of accounting information The structure of accounting function b. Management accounting Costing accounting Budgets and budgetary control Financial management of projects

13. 1. The purpose of accounting information The structure of accounting function c. Treasurer Raising funds by borrowing Investing surplus funds Cash flow control

14. 1. The purpose of accounting information Example question In a typical finance function, preparation of budgets and budgetary control would usually be the responsibility of which of the following roles? A. The financial controller B. The management accountant C. The treasure D. The finance director

15. 2. Nature, principles and scope of accounting Financial accounting and management accounting a. Financial accounting A method of reporting the results and financial position of a business mainly to the external users b. Management accounting A management information system which analyses data to provide information as a basis for managerial action

16. 2. Nature, principles and scope of accounting Financial management The financial management is different form financial accounting and management accounting. A financial manager is responsible for raising finance and controlling financial resources.

17. 2. Nature, principles and scope of accounting Audit If the accounts are prepared in accordance with company legislation, the auditor will issue an unqualified audit report. If the auditor disagrees with the preparation of accounts which are important and cannot persuade the management to change the accounts, then a qualified report will be issued.

18. F1 Principles of law and regulation governing accounting and audits

19. 1. Company law Limited companies are required by law to prepare and publish accounts annually. The form and content of accounts are regulated and accounting standards have to be complied. A company can be fined for failing to keep proper accounting records or failing to file financial statements after the year end

20. 2. Accounting concepts and individual judgment Financial statements are prepared on the basis of accounting concepts Different groups of people would produce different financial statements on the same data.

21. 3. UK accounting standards Accounting Standards Committee (1970-1990) Detailed accounting standard rules Financial Reporting Council and Accounting Standard Board (ASB) (1990 onwards): Accounting standard principles The Urgent Issues Task Force (UITF): An offshoot of the ASB, tackle urgent matters not covered by existing standards.

22. 3. UK accounting standards Financial Reporting Review Panel (FRRP) Concerning the examination and questioning of departures from accounting standards by large firms These provisions now have the force of law

23. 4. The European Union The companies in UK have to comply the legal requirements of EU such as International Financial Reporting Standards. (IFRSs)

24. 5. International Accounting Standards Board The objectives of IASB is to develop global accounting standards, promote the use and rigorous application of the standards, bring about convergence of national accounting standards.

25. 6. Generally Accepted Accounting Practice (GAAP) The objectives of IASB is to develop global accounting standards, promote the use and rigorous application of the standards, bring about convergence of national accounting standards.

26. 6. Generally Accepted Accounting Practice (GAAP) GAAP is a set of rules governing accounting which may derive from: Company law, accounting standards, statutory requirements in other countries, stock exchange requirements

27. 7. True and Fair view The accounting information has to reflect the exact situation and performance (give a true and fair view of the state) of the company.

28. 7. True and Fair view Example question The preparation and filing of accounts by limited companies each years is required by which of the following? A. Codes of corporate governance B. National legislation C. International Accounting Standards D. Local Accounting Standards

29. F1 The sources and purposes of internal and external financial information

30. 1. External reports The income statement (Profit and loss account) The record of income generated and expenditure incurred over a given period. The statement of financial position A list of all the assets owned by a business and all the liabilities owned by a business at a particular date The statement of cash flows Sources of cash generated during a period and how these funds have been spend

31. 2. Internal reports Cost schedule It can be produced for the wages, departmental costs, cost of sales, selling expenses, administration costs etc which enable s managers to keep a check on what the business is spending. Budgets Budgets may be prepared to show projected sales, the costs, profits or the overheads. Budgets enable the department to identify potential problems and arrange overdraft facilities with the bank in advance.

32. 2. Internal reports Variance reports The variance reports detail the differences between the actual performance and budgets and explain any material variances.

33. F1 Financial systems, procedures and related IT applications

34. 1. Control over business transaction Office organization FunctionComment PurchasingMake necessary purchases and reach the best purchasing mix HRHiring, firing, training staff and providing welfare for staff FinanceProper management of finance and financial management Sales and marketing Taking sales orders, advertising effectively General administration Secretarial support; telephone queries; rent or properties

35. 1. Control over business transaction Control over transactions Management must have control over the following areas: a. Sales on credit made to new customers. b. Purchases of goods or non-current assets and payments for expenses. c. Payroll

36. 1. Control over business transaction Financial control procedures Purposes of financial control procedures: a. Financial transaction are properly carried out b. The assets are safeguarded c. Accurate and timely management information is produced

37. 1. Control over business transaction Financial control procedures Examples of procedures: a. Cheques over a certain amount need two signatories b. Authorization limits for purchase orders c. Authorization for petty cash and expense claims d. Effective credit control procedures e. Computer security procedures

38. 1. Control over business transaction Financial control procedures Signals of poor control procedures: a. Cash or cheques missed b. Excessive bad or doubtful debts c. Customers not paying or suppliers not being paid on time d. Unauthorized purchases e. Failure to produce accounts at the specified time

39. 2. The main business financial systems The payroll system a. Inputs to a payroll system. Clock cards or time sheets, amount of bonus b. Processing in a payroll system, Calculating and implementing the various deductions to find net pay, and them making payments by the appropriate method c. Outputs from a payroll system Payslips, payroll analysis, a floppy disk with payment details etc

40. 2. The main business financial systems The aims of control over payroll systems a. Employees are only paid for what they have done b. Gross and net pay has been calculated and recorded correctly c. The correct employees are paid and authorized d. The correct amounts are paid to tax authoeities

41. 2. The main business financial systems The measures of control over payroll systems a. Setting of wages and salaries Segregation of duties; Maintenance personnel records and regular checks; Authorization; Recording and reviewing hours worked etc b. Recording of wages and salaries Bases for compilation of payroll; Preparation, checking and approval of payroll; Dealing with non- routine matters

42. 2. The main business financial systems The measures of control over payroll systems c. Payments of wages and salaries Segregation of duties; Authorization of wage cheque; custody of cash; Comparison and reconciliation of wages and bank account d. Deductions Reconciliation of total pay and deductions; Comparison of actual pay with budget and investigation of variances; Agreement gross earning and total tax deducted

43. 2. The main business financial systems The purchase cycles a. Inputs Invoices, returns, payments b. Processing Computer updates balances outstanding to suppliers c. Outputs Payables or individual balances

44. 2. The main business financial systems The aims of control over payables and purchases a. Proper authorizations b. Purchases are only made to authorized suppliers at competitive prices c. Goods are only accepted if ordered d. Accounted correctly e Prompt payments to due claims

45. 2. The main business financial systems The measures of control over payables and purchases a. Use certain suppliers only b. Obtain authorization c. Use prenumbered forms d. Compare goods received with purchased order; Check conditions of goods received; Check supplier invoices e. Segregation of duties f. Compare supplier statements with payables ledger g. Record purchases and returns correctly

46. 2. The main business financial systems The sales cycle a. Inputs Sales transactions, credit notes, receipts b. Processing Computer updates balances outstanding form customers c. Outputs Receivables or individual balances

47. 2. The main business financial systems The aims of control over receivables and sales a. Sales are only made to customers with good credit rating b. Accounted correctly c. Identify potential doubtful debts

48. 2. The main business financial systems The measures of control over payables and purchases a. Obtain authorization b. Use prenumbered forms c. Check conditions of goods returned d. Segregation of duties e. Match sales invoices with dispatch and sales orders f. Follow up overdue accounts

49. 2. The main business financial systems Example question Which of the following is an aim of the control system relating to accounts payables and purchases? A. To ensure that all credit notes received are recorded in the general and payables ledger B. To ensure the goods and services are only supplied to customers with good credit ratings. C. To ensure that all credit notes that have been issued are to recorded in the receivables ledgers D. To ensure that potentially doubtful debts are identified

50. 2. The main business financial systems Controlling cash a. Control over receipts Receipts must be banked promptly; The record of receipts must be complete; The loss of receipts due to theft or accident must be prevented b. Control over payments Obtaining reasons and amount of the payment; Authorisation of payment; Restricting the authority to special individuals  The most important controls to detect fraud and error is reconciliation

51. 3. Manual and computerized accounting system Disadvantages of manual system a. Lower productivity b. Slower processing speed c. Risk of error d. Less accessible e. Difficult to alter f. Quality of output g. Bulky both to handle and store

52. 3. Manual and computerized accounting system Advantages of manual system A post-it note stuck on the colleague's desk with a brief message will be quicker than typing up an e- mail message

53. 3. Manual and computerized accounting system Coding and module Computers require information to be expressed in the forms of codes. A module is a program which deals with one particular part of a business accounting system. A simple accounting package might consist of only one module while more likely to consist of several modules such as inventory, receivables ledger, payables ledger.

54. 3. Manual and computerized accounting system Integrated software AdvantageDisadvantage Only need to make one entryMore computer memory required Extract required data from relevant files Fewer facilities of the program Reduce the workload of the user

55. 4. Databases and spreadsheets Objectives of a database a. It should be shared b. The integrity of the database must be preserved c. It should provide for the operational requirements of all its users d. It should be capable of evolving

56. 4. Databases and spreadsheets Contents of a database Data is the input, database management system (DBMS) software organizes it into the database. Various application forms (sales, payroll etc) are plugged into the DBMS software so that they can use the database. There is only one database so duplication is avoided.

57. 4. Databases and spreadsheets Spreadsheets A spreadsheet is essentially an electronic piece of paper divided into rows and columns with a built in pencil, eraser and calculator. Spreadsheets can be used both for accounting and other purposes.

58. The end