study guide

certified accounting technician scheme

JUNE AND DECEMBER 2006
 Contents

PAGE 300 Objectives of the Study Guide

PAGE 600 Introductory Level

PAGE 700 Paper 1 (INT) – Recording Financial Transactions

PAGE 130 Paper 1 (GBR) – Recording Financial Transactions

PAGE 190 Paper 2 – Information for Management Control

PAGE 230 Intermediate Level

PAGE 240 Paper 3 (INT) – Maintaining Financial Records

PAGE 300 Paper 3 (GBR) – Maintaining Financial Records

PAGE 360 Paper 4 – Accounting for Costs

PAGE 410 Advanced Level

PAGE 430 Paper 5 – Managing People and Systems

PAGE 500 Paper 6 (INT) – Drafting Financial Statements

PAGE 560 Paper 6 (GBR) – Drafting Financial Statements

PAGE 620 Paper 7 – Planning, Control and Performance Management

PAGE 720 Paper 8 (INT) – Implementing Audit Procedures

PAGE 770 Paper 8 (GBR) – Implementing Audit Procedures

PAGE 820 Paper 9 (GBR) – Preparing Taxation Computations

PAGE 920 Paper 10 – Managing Finances

PAGE 2
Objectives of the Study Guide

This study guide contains the overall rationale for the SYLLABUSES AND STUDY SESSIONS
Certified Accounting Technician (CAT) examination The syllabus outlines, aims and objectives and the broad
scheme at each level. The study guide contains overall content of each paper and how that content is examined.
objectives for each level, the skills and attributes required The study sessions expand the syllabus into discrete
of someone studying at each level, and the exit study sessions of similar length which are organised into
capabilities of a candidate successfully completing each a logical sequence for teaching purposes.
level. It also contains guidance on the total learning hours
related to each subject and to each level broken down These sessions indicate what the examiner expects of
into taught hours and directed and self-study hours. More candidates for each part of the syllabus, and therefore
specifically the guide contains syllabuses for each gives guidance in the skills or outcomes to be
examination paper and a detailed breakdown and demonstrated in the examinations. The time taken to
sequence of individual study sessions related to each complete each session will vary according to learning
paper. capabilities and the time available or made available for
study. However, repeat coverage of the material is vital to
While tuition providers and teachers are not obliged to ensure proper understanding of the subject. Completing
strictly follow the guidance, the study guide does at least practice questions from study texts, past examinations,
give the teacher clear indication of how to structure their or pilot papers helps to gauge the candidate’s speed and
teaching plan for a particular CAT paper and some level of knowledge.
guidance on the appropriate intellectual level to base
instruction in each subject at any specific level of the The structure of the CAT Scheme is shown below:
scheme.
Introductory level:
The specific objectives of the Study Guide are to: Paper number: Paper name: Assessment:
• give clear guidance to teachers on the breadth and Paper 1 Recording Financial 2hr paper or
depth of each topic included in the syllabus Transactions computer based
• indicate the assessment methods which will be used to Paper 2 Information for 2hr paper or
examine topics Management Control computer based
• state the pre-requisite knowledge and the development
of the subject matter in preceding and subsequent Intermediate level:
papers and levels Paper number: Paper name: Assessment:
• indicate the skills and outcomes required to Paper 3 Maintaining Financial 2hr paper or
successfully complete each paper and each complete Records computer based
level
• specify the general output characteristics of a Paper 4 Accounting for 2hr paper or
candidate successfully completing each level. Costs computer based

PAGE 3
 Objectives of the Study Guide

Advanced level: Definition of guided learning hours

Paper number: Paper name: Assessment: “Guided learning hours are defined as all times when a
Paper 5 Managing People 2hr examination member of staff is present to give guidance towards the
and Systems learning aim being studied on a programme. This
Paper 6 Drafting Financial 3hr examination includes lectures, tutorials and any form of supervised
Statements study or in open learning situations and workshops. It
Paper 7 Planning, Control 3hr examination can also include time spent by staff assessing learners’
and Performance achievements, for example in the assessment of
Management competences. It does not however, include time spent
Plus 2 options from by staff in the day-to-day marking of assignments or
Paper 8 Implementing Audit 3hr examination homework where the learner is not present but can
Procedures include time when students are being observed or
Paper 9 Preparing Taxation 3hr examination monitored. Guided hours do not include hours where
Computations supervision or assistance is of a general nature and is
Paper 10 Managing Finances 3hr examination not specific to the study of the learners” 1

As stated above, the study guide contains syllabuses and The following table gives the guided learning hours per
study sessions and is intended to give a detailed paper at each level of the CAT scheme:
interpretation of the syllabus for each paper, set out in an
order suitable for teaching. Each paper has been covered Level Guided learning hours per paper
in a number of sessions designed to be appropriate for Introductory 24
the learning outcomes specified and to reach the required Intermediate 40
cognitive level. At a given standard of two guided learning Advanced 64 (40 hours for Paper 5)
or contact hours per session it is recommended that
students are taught for (2 x 12) 24 hours per paper at The total number of guided learning hours a candidate
the introductory level, (20 x 2) 40 hours per paper at the must spend for each complete level and for the whole
intermediate level and at Paper 5 at the advanced level. scheme is broken down below:
All other advanced level papers have 32 sessions
allocated to them giving a total taught component of (32 Level Total guided learning hours
x 2) 64 hours per paper. Introductory (2 x 24) = 048
Intermediate (2 x 40) = 080
Please note that the number of sessions and the time Advanced 40 + (4 x 64) = 296
allocations are intended as a guide only and may vary
TOTAL: 424 hours
significantly depending on the teaching and learning
methods adopted.

PAGE 4
 Objectives of the Study Guide

READING LIST
In the Study Guide for each paper, there is a list of
publications which deal with all or specific aspects of
each syllabus. While students are advised to read as
widely as possible, they are not expected to read all texts
on the reading list.

Students can obtain a series of material written

specifically for the papers in the scheme from:

BPP - ACCA's official CAT publisher

Contact number: +44 (0)20 8740 2222
Website: www.bpp.com

Students will also benefit from regularly accessing the

ACCA website on: http://www.accaglobal.com/students/

This site contains syllabuses, study guides, pilot and past

papers and selected relevant technical articles for the CAT
scheme. Students and lecturers should also refer to
student accountant for any potentially relevant published
technical articles and for study, assessment and
examination advice.

Note 1: This quote is adapted from the English Learning

Skills Council's Funding Guidance for Further Education
2003-2004 (Paragraph 56)

PAGE 5

This section contains the syllabus and study guides for
each paper within the Introductory Level of the CAT
Scheme.
Paper 1 Recording Financial Transactions
Paper 2 Information for Management Control
THE OBJECTIVE OF THE INTRODUCTORY LEVEL
This level introduces the student to the basics of
accounting concentrating on the core areas of recording,
storing and processing financial transactions from original
documents and the basic recording, storing and
processing of internal cost accounting information
including an introduction to the clerical, administrative
and information technology systems and software
associated with these areas.
The introductory level sets the scene for the further
development of an understanding of financial and cost
accounting systems and processes within a departmental
and business perspective at the intermediate level.
Specific knowledge and skills will be tested discretely in
both subjects at this level and will require the candidate
to demonstrate a particular set and appropriate level of
intellectual skills and attributes.
SKILLS AND ATTRIBUTES TO BE TESTED AND
ACHIEVED AT THE INTRODUCTORY LEVEL
Candidates should be able to demonstrate the ability to
apply knowledge with underpinning comprehension in
basic accounting, clerical and administrative areas
employing a range of skills within several contexts, some
of which may be non-routine. Candidates should also be
able to undertake directed activities using discretion and
PAGE 6
Introductory Level
exercise a degree of autonomy within set parameters and
within time constraints while working appropriately with
others as required.
These skills may be separately identified as follows:
• applying knowledge with underpinning comprehension
in a number of accounting areas
• making financial comparisons
• interpreting available financial and clerical information
• presenting and recording financial information from
readily available sources
• showing basic competence in a range of predictable
and structured accounting contexts some of which
may be non-routine
• co-operating and co-ordinating with others within the
accounting department
• exercising judgement and discretion about possible
actions with a degree of autonomy
• carrying and accepting personal responsibility for the
quantity and quality of output and for an acceptable
level of accuracy and efficiency.
Paper 1 – Recording Financial Transactions (INT)

AIMS (iii) receipts

To develop knowledge and understanding of the operational aspects (iv) payments
of maintaining accounting records and procedures relating to (v) petty cash
invoicing, receipts and payments, recording income and expenditure, (vi) payroll
the preparation of ledger accounts, and the preparation of an initial (b) Types of business documentation
trial balance. (i) quotation
(ii) sales and purchase orders
OBJECTIVES (iii) delivery note
On completion of this paper, candidates should be able to: (iv) invoice
• distinguish between types of business transactions and (v) credit note
documentation, recognising basic principles of business law and (vi) debit note
data protection (vii) statement
• prepare basic ledger accounts under the (viii) remittance advice
double entry system (ix) receipt
• record income and receipts from credit (x) internal cheque requisition
customers (xi) petty cash claim
• explain and account for irrecoverable debts (xii) payslip
• record purchases, expenditure, and payments to suppliers (c) Basic principles of regulation and business policies
• account for banking transactions (i) contract law
• maintain general cash and petty cash records (ii) regulation of sale of goods
• produce bank reconciliation statements (iii) document retention policies
• record payroll transactions (iv) data protection
• prepare and reconcile control accounts
• prepare an initial trial balance identifying and correcting errors 2 Double entry bookkeeping
using journal entries. (a) Double entry transactions
(i) nature and function of primary records
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (ii) types of ledger accounts
No prior knowledge is required before commencing study for Paper (iii) posting by means of double entry
1. This paper provides the basic techniques required to enable (iv) balancing-off ledger accounts
candidates to prepare financial statements for various enterprises at (b) Classification of expenditure
a later stage. Candidates will, therefore, need a sound knowledge of (i) capital
the methods and techniques introduced in this paper to ensure they (ii) revenue
can employ them in later papers. The methods used in this paper (c) The accounting equation
are extended in Paper 3, Maintaining Financial Records and further
developed in Paper 6, Drafting Financial Statements. 3 Banking and petty cash
(a) Sources of funds and documentation
SYLLABUS CONTENT (i) types of receipts / payments: e.g. cash, cheque,
1 Business transactions and documentation standing orders, direct debits, credit card, debit
(a) Types of business transactions card and BACs
(i) sales (ii) supporting information: e.g. invoice, credit note,
(ii) purchases remittance advice and statement

PAGE 7
Recording Financial Transactions (INT)

(iii) unusual features: e.g. wrongly completed cheques, (v) aged receivables analysis
credit and debit card limits exceeded, disagreement (vi) communication with customers (orally and in writing)
with / insufficient supporting documentation (vii) credit limits
(b) Banking monies received (viii) irrecoverable debts
(i) banking documentation: e.g. paying-in slips, credit
and debit card documentation 5 Purchases and purchase records
(ii) methods of handling and storing money, including (a) Purchases and purchase returns
security aspects (i) ordering systems: Internet, verbal, written
(c) Recording payments and monies received (ii) source documents
(i) manual cash book (iii) suppliers’ invoices and credit notes
(ii) manual general ledger and receivables ledger (iv) types of discount
(iii) computerised records (v) methods of coding data
(d) Authorising and making payments (vi) purchase day book
(i) documentation (vii) purchase returns day book
(ii) authorisation (b) Recording purchases
(e) Maintaining petty cash records (i) manual general ledger
(i) documentation (ii) manual payables ledger
(ii) authorisation (iii) computerised ledgers
(iii) security of cash (iv) statements
(iv) queries: e.g. unauthorised claims for payment, (v) aged payables analysis
insufficient supporting evidence, claims exceeding (vi) communication with suppliers: (orally and in
authorised limit writing), incorrect calculations, non-delivery of
(v) manual petty cash book goods charged, duplication of invoices, incorrect
(vi) imprest and non-imprest methods discounts
(vii) reconciliation of petty cash book to cash in hand
6 Payroll
4 Sales and sales records (a) Recording payroll transactions
(a) Sales and sales returns (i) documentation
(i) source documents (ii) authorisation
(ii) invoices and credit notes (iii) payment methods: e.g. cash, cheques, automated
(iii) general principles of a sales tax payment
(iv) types of discount (iv) queries
(v) methods of coding data (v) security and control
(vi) sales day book (vi) cash book
(vii) sales returns day book (vii) general ledger
(viii) authorisation
(b) Recording sales 7 Control accounts and the initial trial balance
(i) manual general ledger (a) Bank reconciliations
(ii) manual receivables ledger (i) general bank services and operation of bank clearing
(iii) computerised ledgers system
(iv) statements (ii) function and form of banking documentation

PAGE 8
 Recording Financial Transactions (INT)

(iii) bank reconciliation statement RELEVANT TEXTS

(b) Control accounts There are a number of sources from which you can obtain a series
(i) different types of errors of materials written for the ACCA CAT examinations. These are
(ii) correction of errors (including journals) listed below:
(iii) reconciliation of control account with ledger:
receivables ledger, payables ledger BPP – ACCA’s official CAT publisher
(c) The trial balance Contact number: +44 (0)20 8740 2222
(i) initial trial balance Website: www.bpp.com
(ii) identification of errors
(iii) suspense accounts FTC Foulks Lynch
Contact number: +44 (0)118 989 0629
EXCLUDED TOPICS Website: www.financial-training.com/new/foulkslynch
The following topics are specifically excluded from Paper 1:
• detailed knowledge of sales tax Candidates may also find the following texts useful although they
• allowances for receivables should be aware that these are based on UK accounting standards:
• foreign currency transactions
• preparation of financial statements Wood, Frank and Robinson, Sheila. Bookkeeping and Accounts
(Pitman Publishing: 4th edition) – Sections 1, 2 and 3
KEY AREAS OF THE SYLLABUS ISBN: 0273646192
The key topic areas are as follows:
• sales Cox, David and Fardon, Michael. Cash and Credit Accounting –
• purchases NVQ Level 2 Accounting (Osborne Books)
• receipts This is a tutorial and workbook.
• payments ISBN: 1872962033
• petty cash
• bank reconciliations Whitehead, Geoffrey. Bookkeeping (Made Simple Books, Butterworth
• control accounts & Heinemann) –Chapters 1 to 10
• the trial balance.
Wider reading is also desirable, especially regular study of relevant
APPROACH TO EXAMINING THE SYLLABUS articles in ACCA’s student accountant magazine.
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

PAGE 9
Recording Financial Transactions (INT)

STUDY SESSIONS (b) Recognise the duality of transactions and understand

1 Types of business transactions and types of business and apply the accounting equation
documentation (c) Explain the fundamental rules of double entry accounting
(a) Identify the main types of business transactions e.g. and debits and credits
sales, purchases, payments, receipts, cash and bank, (d) Identify the main types of ledger account
and payroll (e) Identify and classify assets, liabilities, income and
(b) Define a simple contract expenditure
(c) Identify the main provisions of a sale of goods act or (f) Distinguish between capital and revenue expenditure and
equivalent (fitness for purpose, merchantable quality, identify examples of each
description)
(d) Understand the importance of coding transactions 3 Recording business transactions in the double entry
correctly bookkeeping system
(e) Distinguish between cash and credit transactions (a) Record a complete series of basic transactions within a
(f) Identify the key personnel involved in initiating, double entry system
processing and completing transactions (b) Prepare journal entries and identify the uses of the
(g) Understand the need for effective control over journal
transactions (c) Balance off ledger accounts, recording closing balances
(h) Identify the timing of various transactions e.g. daily, (d) Understand the basic functions of a computerised
monthly, annually accounting system
(i) Understand the need to document business transactions
(j) Explain the purpose and scope of data protection, 4 Banking systems and transactions
storage and archiving policies N.B for the purpose of answering questions, please note that a
(k) Distinguish between different types of business detailed understanding of banking legislation will not be
documentation e.g. quotation, sales and purchase order, required
delivery note, invoice, statement, credit note, debit note, (a) Describe the relationship between a bank and its
remittance advice, receipt, internal payment, petty cash customer
claim and payslip (b) Outline the working of a central bank clearing system
(l) Outline the contents and purpose of each piece of (c) Recognise the obligation owed by a bank to its clients
documentation (d) Understand the content and format of a cheque
(m) Describe the documentation and the flow of (e) Prepare a cheque prior to despatch
documentation for different transactions including (f) Outline the purpose and format of paying-in documents
Internet transactions (g) Describe the procedures and documentation relating to
(n) Identify the personnel involved in preparing and the use of cash, cheques and credit and debit cards,
authorising documents receipts and payments
(o) Outline the main features of systematic recording and (h) Describe other services offered by banks e.g. inter-bank
filing of documents and data in manual and transfers, payable orders, automated credit systems,
computerised systems standing orders, direct debits, credit transfers
N.B foreign currency transactions are not examinable
2 The duality of transactions and the double entry system
(a) Understand the nature and function of books of prime
entry

PAGE 10
 Recording Financial Transactions INT)

5 Cash handling, petty cash operations and cash security (i) Record sales
(a) Identify the documentation accompanying payments and (i) maintain a manual general and receivables ledger
receipts (ii) describe a computerised receivables ledger
(b) Recognise the importance of accurately recording all (iii) prepare, reconcile and understand the purpose of
payments and receipts customer statements
(c) Identify the main ways to ensure that only authorised (j) Communicate efficiently and effectively with customers
payments are made
(d) Record payments and receipts in the cash book, general 7 Credit control and bad debts
ledger, payables and receivables ledger (manual or (a) Explain the benefits and costs of offering credit facilities
computerised) to customers
(e) Understand procedures for banking cash receipts (b) Understand the purpose of and prepare an aged
(f) Recognise the types of transaction likely to be paid out of receivables analysis
petty cash (c) Understand the purpose of credit limits
(g) Account for petty cash using imprest and non-imprest (d) Recognise the existence and impact of irrecoverable
methods debts
(h) Exercise control over petty cash and recognise how (e) Record the accounting treatment of irrecoverable debts
control can be maintained – e.g. security of cash,
authorised personnel and reconciliations 8 Purchases and purchase records
(i) Record petty cash claims (a) Identify and recognise source purchase and expenditure
(j) Describe the key procedures for ensuring safety, security documents
and, where appropriate, confidentiality over the handling (b) Complete purchase invoices and process credit notes
of cash and cheques (c) Calculate and record trade and settlement discounts
(k) Explain the correct procedure to cope with unusual (d) Record transactions in a purchase day book and a
situations: e.g. wrongly completed cheques, exceeded purchase returns day book
credit limits on debit or credit cards, or discrepancies (e) Code purchases and supplier records and data
between receipts and supporting documents, (f) Record purchases
unauthorised claims for payment, insufficient supporting (i) maintain a manual general and payables ledger
evidence, or claims exceeding authorised limits (ii) describe a computerised payables ledger
(iii) understand the purpose of and prepare an aged
6 Sales and sales records payables analysis
(a) Identify and recognise source sales documents (iv) prepare, reconcile and understand the purpose of
(b) Complete sales invoices and process credit notes / debit supplier statements
notes (g) Communicate efficiently and effectively with suppliers
(c) Understand the general principles of a sales tax
(d) Calculate sales tax on transactions 9 Bank reconciliation statements
(e) Calculate and record trade and settlement discounts (a) Recognise the need to reconcile the cash book with the
(f) Record transactions in a sales day book and a sales bank statement periodically
returns day book (b) Identify the main reasons for any discrepancies between
(g) Code sales and customer records and data the cash book and the bank statement, such as errors,
(h) Recognise and describe authorisation procedures unanticipated receipts and payments and timing
differences

PAGE 11
Recording Financial Transactions (INT)

(c) Correct cash book errors and/or omissions (e) Perform a basic control account reconciliation
(d) Perform reconciliations between the cash book and the (f) Identify errors which would be highlighted by performing
bank statement a control account reconciliation

10 Payroll 12 Preparing an initial trial balance and recognising and

(a) Understand payroll systems correcting errors
(b) Understand the duties of employers in relation to taxes, (a) Compile an initial trial balance
state benefit contributions and other deductions (b) Identify errors which would be highlighted by the
(c) Record hours worked; e.g. time sheets, clock cards extraction of a trial balance
(d) Calculate gross wages for employees paid by hour, by (c) Identify and explain different types of errors:
output (piecework) and salaried workers (i) errors of commission
(e) Define and calculate bonuses, overtime, and commission (ii) errors of principle
given the details of each scheme (iii) errors of omission
(f) Describe the documentation required for recording (iv) single entry
various elements of wages and salaries (v) transposition errors
(g) Recognise the need for payroll to be authorised and (vi) casting errors
identify appropriate authorisation, security and control (d) Distinguish between compensating and non-
procedures compensating errors
(h) Make other deductions from wages - e.g. trade union (e) Prepare and explain the function of a suspense account
subscriptions, payroll saving, pension contributions and (f) Correct errors using journal entries
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 books of prime entry
(c) Understand the need for individual receivables and
payables accounts and understand the link to books of
prime entry
(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 books of prime entry
(iv) as an internal check; the control account should be
administered by someone other than the person
who completes the day books

PAGE 12
Paper 1 – Recording Financial Transactions (GBR)

AIMS (vi) payroll

To develop knowledge and understanding of the operational aspects (b) Types of business documentation
of maintaining accounting records and procedures relating to (i) quotation
invoicing, receipts and payments, recording income and expenditure, (ii) sales and purchase orders
the preparation of ledger accounts and the preparation of an initial (iii) delivery note
trial balance. (iv) invoice
(v) credit note
OBJECTIVES (vi) debit note
On completion of this paper, candidates should be able to: (vii) statement
• distinguish between types of business transactions and (viii) remittance advice
documentation, recognising relevant basic business law and data (ix) receipt
protection legislation (x) internal cheque requisition
• prepare basic ledger accounts under the double entry system (xi) petty cash claim
• record income and receipts from credit customers (xii) payslip
• explain and account for irrecoverable debts (c) Basic law and business policies
• record purchases, expenditure, and payments to suppliers (i) contract law
• account for banking transactions (ii) Sale of Goods Act
• maintain general cash and petty cash records (iii) document retention policies
• produce bank reconciliation statements (iv) data protection law
• record payroll transactions
• prepare and reconcile control accounts 2 Double entry bookkeeping
• prepare an initial trial balance identifying and correcting errors (a) Double entry transactions
using journal entries. (i) nature and function of primary records
(ii) types of ledger accounts
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (iii) posting by means of double entry
No prior knowledge is required before commencing study for Paper (iv) balancing-off ledger accounts
1. This paper provides the basic techniques required to enable (b) Classification of expenditure
candidates to prepare financial statements for various enterprises at (i) capital
a later stage. Candidates will, therefore, need a sound knowledge of (ii) revenue
the methods and techniques introduced in this paper to ensure they (c) The accounting equation
can employ them in later papers. The methods used in this paper
are extended in Paper 3, Maintaining Financial Records and further 3 Banking and petty cash
developed in Paper 6, Drafting Financial Statements. (a) Sources of funds and documentation
(i) types of receipts / payments: e.g. cash, cheque,
SYLLABUS CONTENT standing orders and direct debits, credit card, debit
1 Business transactions and documentation card and BACS
(a) Types of business transactions (ii) supporting information: e.g. invoice, credit note,
(i) sales remittance advice and statement
(ii) purchases (iii) unusual features: e.g. wrongly completed cheques,
(iii) receipts credit and debit card limits exceeded and disagreement
(iv) payments with / insufficient supporting documentation
(v) petty cash

PAGE 13
Recording Financial Transactions (GBR)

(b) Banking monies received 5 Purchases and purchase records

(i) banking documentation: e.g. paying-in slips, credit (a) Purchases and purchase returns
and debit card documentation (i) ordering systems: Internet, verbal, written
(ii) methods of handling and storing money, including (ii) source documents
security aspects (iii) suppliers’ invoices and credit notes
(c) Recording payments and monies received (iv) types of discount
(i) manual cash book (v) methods of coding data
(ii) manual nominal ledger and sales ledger (vi) purchase day book
(iii) computerised records (vii) purchase returns day book
(d) Authorising and making payments (b) Recording purchases
(i) documentation (i) manual general ledger
(ii) authorisation (ii) manual purchase ledger
(e) Maintaining petty cash records (iii) computerised ledgers
(i) documentation (iv) statements
(ii) authorisation (v) aged creditor analysis
(iii) security of cash (vi) communication with suppliers: (orally and in
(iv) queries: e.g. unauthorised claims for payment, writing), incorrect calculations, non-delivery of
insufficient supporting evidence, claims exceeding goods charged, duplication of invoices and
authorised limit incorrect discounts
(v) manual petty cash book
(vi) imprest and non-imprest methods 6 Payroll
(vii) reconciliation of petty cash book to cash in hand (a) Recording payroll transactions
(i) documentation
4 Sales and sales records (ii) authorisation
(a) Sales and sales returns (iii) payment methods: e.g. cash, cheques, automated
(i) source documents payments
(ii) invoices and credit notes (iv) queries
(iii) general principles of VAT (v) security and control
(iv) types of discount (vi) cash book
(v) methods of coding data (vii) nominal ledger
(vi) sales day book
(vii) sales returns day book 7 Control accounts and the initial trial balance
(viii) authorisation (a) Bank reconciliations
(b) Recording sales (i) general bank services and operation of bank
(i) manual general ledger clearing system
(ii) manual sales ledger (ii) function and form of banking documentation
(iii) computerised ledgers (iii) bank reconciliation statement
(iv) statements (b) Control accounts
(v) aged debtors analysis (i) different types of errors
(vi) communication with customers (orally and in writing) (ii) correction of errors (including journals)
(vii) credit limits (iii) reconciliation of control account with ledger: sales
(viii) irrecoverable debts ledger, purchase ledger

PAGE 14
 Recording Financial Transactions (GBR)

(c) The trial balance RELEVANT TEXTS

(i) initial trial balance There are a number of sources from which you can obtain a series
(ii) identification of errors of materials written for the ACCA CAT examinations. These are
(iii) suspense accounts listed below:

EXCLUDED TOPICS BPP – ACCA’s official CAT publisher

The following topics are specifically excluded from Paper 1: Contact number: +44 (0)20 8740 2222
• detailed knowledge of VAT Website: www.bpp.com
• allowances for debtors
• foreign currency transactions FTC Foulks Lynch
• use of PAYE tax and NIC tables. Contact number: +44 (0)118 989 0629
• preparation of financial statements Website: www.financial-training.com/new/foulkslynch

KEY AREAS OF THE SYLLABUS Candidates may also find the following texts useful:
The key topic areas are as follows:
• sales Wood, Frank and Robinson, Sheila. Bookkeeping and Accounts
• purchases (Pitman Publishing: 4th edition) – Sections 1, 2 and 3
• receipts ISBN: 0273646192
• payments
• petty cash Cox, David and Fardon, Michael. Cash and Credit Accounting –
• bank reconciliations NVQ Level 2 Accounting (Osborne Books) – This is a tutorial and
• control accounts workbook. ISBN: 1872962033
• the trial balance.
Whitehead, Geoffrey. Bookkeeping (Made Simple Books, Butterworth
APPROACH TO EXAMINING THE SYLLABUS & Heinemann) – Chapters 1-10
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 Wider reading is also desirable, especially regular study of relevant
multiple choice questions covering the breadth of the syllabus, articles in ACCA’s student accountant magazine.
testing that candidates have acquired the necessary knowledge of the
areas identified above.
No. of marks
50 multiple choice questions: 100

PAGE 15
Recording Financial Transactions (GBR)

STUDY SESSIONS 2 The duality of transactions and the double entry system
1 Types of business transactions and types of business (a) Understand the nature and function of books of prime
documentation entry
(a) Identify the main types of business transactions e.g. (b) Recognise the duality of transactions and understand
sales, purchases, payments, receipts, cash and bank, and apply the accounting equation
and payroll (c) Explain the fundamental rules of double entry accounting
(b) Define a simple contract in accordance with contract law and debits and credits
(c) Identify the main provisions of a Sale of Goods Act or (d) Identify the main types of ledger account
equivalent (fitness for purpose, merchantable quality, (e) Identify and classify assets, liabilities, income and
description) expenditure
(d) Understand the importance of coding transactions (f) Distinguish between capital and revenue expenditure and
correctly identify examples of each
(e) Distinguish between cash and credit transactions
(f) Identify the key personnel involved in initiating, 3 Recording business transactions in the double entry
processing and completing transactions bookkeeping system
(g) Understand the need for effective control over (a) Record a complete series of basic transactions within a
transactions double entry system
(h) Identify the timing of various transactions e.g. daily, (b) Prepare journal entries and identify the uses of the
monthly, annually journal
(i) Understand the need to document business transactions (c) Balance off ledger accounts, recording closing balances
(j) Explain the purpose and scope of data protection law, (d) Understand the basic functions of a computerised
storage and archiving policies accounting system
(k) Distinguish between different types of business
documentation e.g. quotation, sales and purchase order, 4 Banking systems and transactions
delivery note, invoice, statement, credit note, debit note, N.B for the purpose of answering questions, please note that a
remittance advice, receipt, internal payment, petty cash detailed understanding of UK banking legislation will not be
claim and payslip required
(l) Outline the contents and purpose of each piece of (a) Describe the relationship between a bank and its
documentation customer
(m) Describe the documentation and the flow of (b) Outline the working of a central bank clearing system
documentation for different transactions including (c) Recognise the obligation owed by a bank to its clients
Internet transactions (d) Understand the content and format of a cheque
(n) Identify the personnel involved in preparing and (e) Prepare a cheque prior to despatch
authorising documents (f) Outline the purpose and format of paying-in documents
(o) Outline the main features of systematic recording and (g) Describe the procedures and documentation relating to
filing of documents and data in manual and the use of cash, cheques, credit and debit cards, receipts
computerised systems and payments
(h) Describe other services offered by banks – e.g. inter-bank
transfers, payable orders, automated credit systems,
standing orders, direct debits, credit transfers
N.B foreign currency transactions are not examinable

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 Recording Financial Transactions (GBR)

5 Cash handling, petty cash operations and cash security (i) maintain a manual nominal and sales ledger
(a) Identify the documentation accompanying payments and (ii) describe a computerised sales ledger
receipts (iii) prepare, reconcile and understand the purpose of
(b) Recognise the importance of accurately recording all customer statements
payments and receipts (j) Communicate efficiently and effectively with customers
(c) Identify the main ways to ensure that only authorised
payments are made 7 Credit control and bad debts
(d) Record payments and receipts in the cash book, nominal (a) Explain the benefits and costs of offering credit facilities
ledger, purchase and sales ledger (manual or to customers
computerised) (b) Understand the purpose of and prepare an aged debt
(e) Understand procedures for banking cash receipts analysis
(f) Recognise the types of transaction likely to be paid out of (c) Understand the purpose of credit limits
petty cash (d) Recognise the existence and impact of irrecoverable
(g) Account for petty cash using imprest and non-imprest debts
methods (e) Record the accounting treatment of irrecoverable debts
(h) Exercise control over petty cash and recognise how
control can be maintained – e.g. security of cash, 8 Purchases and purchase records
authorised personnel and reconciliations (a) Identify and recognise source purchase and expenditure
(i) Record petty cash claims documents
(j) Describe the key procedures for ensuring safety, security (b) Complete purchase invoices and process credit notes
and, where appropriate, confidentiality over the handling (c) Calculate and record trade and settlement discounts
of cash and cheques (d) Record transactions in a purchase day book and a
(k) Explain the correct procedure to cope with unusual purchase returns day book
situations: e.g. wrongly completed cheques, exceeded (e) Code purchases and supplier records and data
credit limits on debit or credit cards, or discrepancies (f) Record purchases
between receipts and supporting documents, (i) maintain a manual nominal and purchase ledger
unauthorised claims for payment, insufficient supporting (ii) describe a computerised purchase ledger
evidence, or claims exceeding authorised limits (iii) understand the purpose of and prepare an aged
creditors analysis
6 Sales and sales records (iv) prepare, reconcile and understand the purpose of
(a) Identify and recognise source sales documents supplier statements
(b) Complete sales invoices and process credit notes / debit (g) Communicate efficiently and effectively with suppliers
notes
(c) Understand the general principles of VAT 9 Bank reconciliation statements
(d) Calculate VAT on transactions (a) Recognise the need to reconcile the cash book with the
(e) Calculate and record trade and settlement discounts bank statement periodically
(f) Record transactions in a sales day book and a sales (b) Identify the main reasons for any discrepancies between
returns day book the cash book and the bank statement, such as errors,
(g) Code sales and customer records and data unanticipated receipts and payments and timing
(h) Recognise and describe authorisation procedures differences
(i) Record sales

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Recording Financial Transactions (GBR)

(c) Correct cash book errors and/or omissions (f) Identify errors which would be highlighted by performing
(d) Perform reconciliations between the cash book and the a control account reconciliation
bank statement
12 Preparing an initial trial balance and recognising and
10 Payroll correcting errors
(a) Understand payroll systems (a) Compile an initial trial balance
(b) Understand the duties of employers in relation to taxes, (b) Identify errors which would be highlighted by the
state benefit contributions and other deductions extraction of a trial balance
(c) Record hours worked; e.g.time sheets, clock cards (c) Identify and explain different types of errors:
(d) Calculate gross wages for employees paid by hour, by (i) errors of commission
output (piecework) and salaried workers (ii) errors of principle
(e) Define and calculate bonuses, overtime, and commission (iii) errors of omission
given the details of each scheme (iv) single entry
(f) Describe the documentation required for recording (v) transposition errors
various elements of wages and salaries (vi) casting errors
(g) Recognise the need for payroll to be authorised and (d) Distinguish between compensating and non-
identify appropriate authorisation, security and control compensating errors
procedures (e) Prepare and explain the function of a suspense account
(h) Make other deductions from wages - e.g. trade union (f) Correct errors using journal entries
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 books of prime entry
(c) Understand the need for individual debtors and creditors
accounts and understand the link to books of prime entry
(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 debtors and creditors at any
time
(iii) to identify errors in the completion of the day book
and in posting the totals from book of prime entry
(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

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Paper 2 – Information for Management Control

AIMS more complex systems and management control problems covered

To develop the ability to use a computer system safely and effectively at subsequent levels.
and to understand the need for data and information to be kept
confidential and secure. To develop knowledge and an Some of the methods introduced in this paper are revisited and
understanding of how organisations provide basic management extended in Paper 4, Accounting for Costs.
information for decision-making, planning and control.
SYLLABUS CONTENT
OBJECTIVES 1 Use computer systems safely and effectively
On completion of this paper, candidates should be able to: (a) Visual safety checks
• carry out simple visual safety checks on hardware and follow (i) hardware components
appropriate powering up and shutting down procedures (ii) plugs and cables
• understand the purpose of passwords (b) Types of system
• access, amend, save and print documents and other files and exit (i) stand-alone PC
from the relevant software (ii) networked system
• use appropriate computer file and folder names (iii) mainframe with terminals
• follow procedures for taking back-up copies of computer files
• understand different types of risk including viruses and hacking 2 Security, confidentiality and legal issues
• understand relevant security and legal regulations covering data (a) Confidentiality
protection, copyright, health and safety and record retention (i) system access controls
• seek assistance when difficulties occur when working with (ii) individual file (document or spreadsheet) protection
computers (b) Security
• recognise the need for management information (i) back-up copies
• identify different elements of cost (ii) archiving
• identify different sources of income and expenditure (iii) secure storage
• code and extract income and expenditure correctly (iv) theft and fraud
• deal with problems / errors correctly (c) Legal regulations
• provide comparisons on costs and income (i) data protection legislation
• use relevant software applications to access, analyse, present (ii) VDU regulations
and communicate information (accounting package, spreadsheet, (iii) computer-related Health and Safety
word processing, e-mail) (iv) document and record retention
• handle confidential information in the correct manner
• present information using house style. 3 Management information
(a) Introduction to management information
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (i) the relationship between financial and
No prior knowledge is required before commencing study for Paper management accounting
2. This paper provides the basic techniques required to use a (ii) the purpose of management information: decision
computer system safely and to effectively recognise, provide and making, planning and control
maintain management information. (b) Reporting management information
(i) methods of extracting, analysing, presenting and
Candidates require a sound understanding of the methods and communicating information (including letter,
techniques covered in this paper to enable them to move on to the memo, report and e-mail message)

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Information for Management Control

(ii) handling confidential information (b) Management information

(iii) using software to perform (b)(i) and (ii) when relevant (i) extraction from relevant sources
(iv) understanding of the organisation’s accounting (ii) use in decision-making
systems and administrative procedures (iii) role in organisation

4 Income and expenditure EXCLUDED TOPICS

(a) Elements of cost The following topics are specifically excluded from Paper 2:
(i) materials • software and systems development
(ii) labour (including makeup of gross pay) • database design and database software.
(iii) expenses
(b) Responsibility centres KEY AREAS OF THE SYLLABUS
(i) cost centres All areas of the syllabus are equally important.
(ii) profit centres
(iii) investment centres APPROACH TO EXAMINING THE SYLLABUS
(c) Relevant documents / sources of information The examination is a two-hour paper. It can be taken as a written
(i) purchase orders and purchase invoices paper or as a computer based exam. Assessment will be based on
(ii) sales orders and sales invoices multiple choice questions covering the breadth of the syllabus,
(iii) policy manual testing that candidates have acquired the necessary knowledge of the
(iv) payroll areas identified above.
(v) management reports and spreadsheets No. of marks
(d) Organisational structures 50 multiple choice questions: 100
(i) coding systems
(ii) cost classification RELEVANT TEXTS
There are a number of sources from which you can obtain a series
5 Comparisons of materials written for the ACCA CAT examinations. These are
(a) Sources of information for comparison listed below:
(i) previous period data
(ii) corresponding period data BPP – ACCA’s official CAT publisher
(iii) forecast data Contact number: +44 (0)20 8740 2222
(iv) ledgers Website: www.bpp.com
(b) Variances
(i) adverse / favourable FTC Foulks Lynch
(ii) exception reporting Contact number: +44 (0)118 989 0629
(iii) controllable / non-controllable Website: www.financial-training.com/new/foulkslynch
(iv) reports
Wider reading is also desirable, especially regular study of relevant
6 Decision-making articles in ACCA’s student accountant magazine.
(a) Marginal costing
(i) contribution
(ii) break-even
(iii) margin of safety

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 Information for Management Control

STUDY SESSIONS (g) Describe the accounting technician’s role in a cost and
1 Nature, safety and use of computer systems management accounting system
(a) Describe the different types of hardware configuration:
stand-alone PC, networked system, mainframe with 4 Reporting management information
terminals (a) Discuss methods of analysing, presenting and
(b) Explain where the different types of hardware communicating information
configuration may be used (b) Describe the nature of general purpose application software
(c) Describe the hardware and software components of a packages, including word processing and spreadsheets
computer system (c) Identify suitable formats for communicating management
(d) Describe simple visual safety checks on computer information according to purpose
hardware and ancillaries (plugs and cables) and explain (d) Identify the general principles of distributing reports (e.g.
their importance procedures, timing, recipients) including the reporting of
(e) Describe the correct process for powering up and for confidential information
shutting down computer systems (e) Interpret information presented in management reports
(f) Describe how to save, transfer and print documents
(g) Outline the requirements of health and safety legislation 5 Aspects of business organisation and accounting
related to the use of computer hardware (a) Describe the organisation, and main functions, of an
office as a centre for information and administration
2 Computer system confidentiality and security (b) Describe the function and use of a manual of policies,
(a) Explain computer system access controls and procedures procedures and best practices
for individual file protection (c) Identify the main types of transactions undertaken by a
(b) Describe procedures for backing-up, archiving and business and the key personnel involved in initiating,
storing information securely processing and completing transactions
(c) Discuss the prevention of computer fraud and data (d) Discuss the need for effective control over transactions
corruption, and of hardware/software problems and (e) Explain and illustrate the principles and practice of
failure double-entry book-keeping
(d) Discuss security issues related to the location of (f) Describe and illustrate the use of ledgers and prime entry
hardware and software records in both integrated and interlocking accounting
(e) Outline the requirements of data protection legislation systems
relating to computer software/information (g) Identify the key features, functions and benefits of a
computerised accounting system
3 Introduction to management information
(a) Discuss the purpose of management information: 6 Management responsibility and performance measurement
planning, control and decision-making (a) Explain and illustrate the concept of cost centres
(b) Distinguish between data and information (b) Explain and illustrate the concept of profit centres
(c) Describe the features of useful management information (c) Explain and illustrate the concept of investment centres
(d) Describe and identify sources and categories of information (d) Describe performance measures appropriate to cost,
(e) Compare cost and management accounting with external profit and investment centres (cost / profit per unit / % of
financial reporting sales; efficiency, capacity utilisation and production
(f) Explain the limitations of cost and management volume ratios; ROCE / RI, asset turnover)
accounting information (e) Apply performance measures appropriate to cost, profit
and investment centres

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Information for Management Control
7 Cost units, cost classification and profit reporting
(a) Explain and illustrate the concept of cost units
(b) Describe the variety of cost classifications used for
different purposes in a cost accounting system, including
by responsibility, function, behaviour, direct/indirect
(c) Describe and illustrate the nature of variable, fixed and
mixed (semi-variable, stepped-fixed) costs
(d) Describe and illustrate the classification of material and
labour costs
(e) Prepare, and explain the nature and purpose of, profit
statements in absorption and marginal costing formats
(f) Calculate the cost of a product or service
8 Elements of cost
(a) Describe and illustrate the accounting for material costs
(NB stock issue pricing is excluded)
(b) Calculate material requirements, making allowance for
sales and product/material stock changes (NB control
levels and EOQ are excluded)
(c) Describe and illustrate the accounting for labour costs
(including overtime premiums and idle time)
(d) Prepare an analysis of gross earnings
(e) Explain and illustrate labour remuneration methods
(f) Calculate the effect of remuneration methods and
changes in productivity on unit labour costs
(g) Explain and illustrate the process of cost apportionment
and absorption for indirect costs (excluding reciprocal
services)
9 Source documents and coding
(a) Explain the use of codes in categorising and processing
transactions and the importance of correct coding
(b) Describe the material control cycle (including the concept
of ‘free’ stock, but excluding control levels and EOQ) and
the documentation necessary to order, receive, store and
issue materials
(c) Describe the procedures required to ensure the correct
authorisation, coding, analysis and recording of direct
and indirect material costs
(d) Describe the procedures and documentation required to
ensure the correct coding, analysis and recording of
PAGE 22
direct and indirect labour costs
(e) Describe the procedures and documentation required to
ensure the correct authorisation, coding, analysis and
recording of direct and indirect expenses
(f) Describe the procedures and documentation to ensure
the correct coding, analysis and recording of sales
10 Information for comparison
(a) Explain the purpose of making comparisons
(b) Identify relevant bases for comparison: previous period
data, corresponding period data, forecast/budget data
(c) Explain the forecasting/budgeting process and the
concept of feedforward and feedback control
(d) Explain the concept of flexible budgets
(e) Use appropriate income and expenditure data for
comparison
11 Variances
(a) Explain the concept of exception reporting
(b) Calculate variances between current actual and
historical/forecast data (N.B. standard costing is
excluded)
(c) Identify whether variances are favourable or adverse
(d) Identify possible causes of variances
(e) Explain factors affecting the decision whether to
investigate variances
12 Marginal costing and decision-making
(a) Explain and illustrate the concept of contribution
(b) Calculate and utilise contribution per unit, per £ of sales
and per unit of limiting factor
(c) Explain and calculate the break-even point and the
margin of safety
(d) Analyse the effect on break-even point and margin of
safety of changes in selling price and cost
(e) Describe the assumptions, uses and limitations of
marginal costing and break-even analysis

This section contains the syllabus and study sessions for
each paper within the Intermediate Level of the new CAT
Scheme.
Paper 3 Maintaining Financial Records
Paper 4 Accounting for Costs
THE OBJECTIVE OF THE INTERMEDIATE LEVEL
This level develops upon the basics of the core
accounting activities of recording financial and cost
accounting transactions, as introduced at the introductory
level and requires the candidate to process, compile and
present information in a systematic and organised
fashion and to provide some basic decision support for
management.
The intermediate level sets the scene for widening and
deepening the candidates knowledge in the main
accounting areas but also prepares the candidate for
developing technical knowledge in the reporting aspects of
financial and management accounting, and for
introducing other specialist support areas such as
auditing, taxation, financial management and the
management of people and systems at the Advanced
Level.
The requisite knowledge and skills will be tested discretely
in both subjects at this level and requires the candidate to
demonstrate a particular set and level of intellectual skills
and attributes.
Intermediate Level
SKILLS AND ATTRIBUTES TO BE TESTED AND
ACHIEVED AT THE INTERMEDIATE LEVEL
Candidates should be able to demonstrate the ability to
apply knowledge and skills in more complex and varied
financial and cost accounting areas, demonstrating
comprehension of relevant theories and applying these in
several contexts making qualified and reasoned
recommendations.
Candidates should also be able to exercise judgement in
selecting techniques or theories appropriate to the context
for which they are needed and should be able to work
independently and take some limited responsibility for the
output of others.
These skills may be separately identified as follows:
• applying knowledge in a range of fairly complex
financial procedures
• accessing and evaluating information independently
• analysing information and make reasoned judgements
• employing a range of responses to well defined but
unfamiliar or possibly unpredictable situations
• selecting appropriate procedures, techniques or
theories to analyse information meaningfully to
support decisions
• engaging in self directed activity with guidance and
feedback
• accepting responsibility for the quantity and quality of
personal output and possibly for some of the output of
other colleagues.
PAGE 23
 Paper 9
Paper 3 – Maintaining Financial Records (INT)

AIMS 2 Accounting standards, principles and policies

To develop knowledge and understanding of the techniques used to (a) Accounting standards (IASs and IFRSs)
maintain accounting records and prepare final accounts of (b) Accounting principles
unincorporated entities. (i) going concern
(ii) accruals
OBJECTIVES (iii) consistency
On completion of this paper candidates should be able to: (iv) prudence
• understand, describe and apply relevant accounting concepts, (c) Accounting policies
policies and standards (i) relevance
• maintain records relating to capital acquisition and disposal (ii) reliability
• prepare reconciliations for the preparation of final accounts (iii) comparability
• identify, calculate and record appropriate adjustments (iv) understandability
• prepare and complete the extended trial balance
• prepare final accounts for a sole trader 3 Non-current assets and depreciation
• prepare final accounts for a partnership. (a) Non-current assets
(i) acquisition
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (ii) asset register
Before commencing this paper, a thorough knowledge of Paper 1, (iii) accounting treatment
Recording Financial Transactions, is required. Paper 3 builds on the (iv) disposal
knowledge acquired in Paper 1, enabling students to prepare final (v) part exchange
accounts for a sole trader and for partnerships. This knowledge is (vi) authorisation
further developed in Paper 6, Drafting Financial Statements which (vii) maintenance of capital records
will enable students to prepare final accounts for limited liability (b) Depreciation
companies. (i) straight line
(ii) reducing balance
SYLLABUS CONTENT
1 Basic bookkeeping 4 Control accounts, reconciliations and errors
(a) The nature and confidentiality of business transactions (a) Reconciliations
(b) Double entry bookkeeping (i) payables ledger reconciliation
(c) Capital and revenue expenditure (ii) receivables ledger reconciliation
(d) Assets, liabilities, revenue and expenses (iii) bank reconciliation
(e) Initial trial balance (b) Identification of errors
(f) Format of simple final accounts (i) incorrect double entry
(i) income statement (ii) missing entries
(ii) balance sheet (iii) numerical errors
(g) The organisation’s policies, regulations and timescales (iv) insufficient information
in the preparation of final accounts (c) Correction of errors
(i) suspense account
(ii) journal entries

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Maintaining Financial Records (INT)

5 Adjustments to the trial balance APPROACH TO EXAMINING THE SYLLABUS

(a) Accruals and prepayments The examination is a two-hour paper. It can be taken as a written
(b) Depreciation paper or as a computer based exam. The questions in the computer
(c) Irrecoverable debts and allowances for receivables based exam are objective test questions – multiple choice, number
(d) Closing inventory (and inventory valuation) entry and multiple response.
(e) Extended trial balance
(f) Provisions The written exam consists of two sections structured as follows:
No. of marks
6 Final accounts Section A – 20 compulsory 40
(a) Incomplete records multiple choice questions of two marks each
(b) Sole trader accounts
(i) income statement Section B – four compulsory questions of 15 60
(ii) balance sheet marks each (Question 1 of Section B will
(c) Partnership accounts comprise a number of short form questions
(i) income statement of between two and five marks each)
(ii) appropriation of profit
(iii) balance sheet
Total 100
(iv) partners’ capital and current accounts

ADDITIONAL INFORMATION
EXCLUDED TOPICS
Accounting standards will not be examined until six months after
The following topics are specifically excluded from Paper 3:
they have been issued. The cut off date for the June examination is
• club accounts
30 November preceding the June examination. The cut off date for
• manufacturing accounts
the December examination is 31 May preceding the December
• detailed knowledge of sales tax
examination.
• tax computations
• foreign currency transactions
RELEVANT TEXTS
• goodwill arising on admission of a new partner
There are a number of sources from which you can obtain a series
• cash flow statements.
of materials written for the ACCA CAT examination. These are listed
below:
KEY AREAS OF THE SYLLABUS
The key topic areas are as follows:
BPP – ACCA’s official CAT publisher
• accounting concepts, policies and standards
Contact number: +44 (0)20 8740 2222
• non-current assets and depreciation
Website: www.bpp.com
• control accounts and bank reconciliations
• correction of errors
FTC Foulks Lynch
• post trial balance adjustments
Contact number: +44 (0)118 989 0629
• incomplete records
Website: www.financial-training.com/new/foulkslynch
• final accounts for sole traders and partnerships.

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 Maintaining Financial Records (INT)

Candidates may also find the following texts useful, although they 1 Recording transactions
should be aware that these are based on UK accounting standards: (a) Understand the nature of business transactions,
including the need to maintain confidentiality
Cox, D. Business Accounts (Osborne Books) (b) Explain the basis of double entry bookkeeping
(c) Explain and illustrate the dual aspect convention
Giles, R. A Complete Course in Business Accounting (Stanley Thornes) (d) Apply the accounting equation (and derivatives thereof)
ISBN: 0748761594 (e) Distinguish between assets, liabilities, revenue and
expenses
Wood, F and Sangster, A. Business Accounting 1 (Pitman Publishing) (f) Prepare journal entries to record transactions
(g) Prepare ledger accounts
Wider reading is also desirable, especially regular study of relevant (h) Understand how the structure of accounting records
articles in ACCA’s student accountant magazine. contributes to providing useful accounting information
STUDY SESSIONS and complies with organisational policies and deadlines

2 The trial balance

(a) Initial trial balance
(i) explain the purpose of the trial balance
(ii) identify the limitations of the trial balance
(iii) extract the ledger balances to form a trial balance

3 Introduction to final accounts

(a) Explain the format and purpose of the income statement
(b) Explain the format and purpose of the balance sheet
(c) Explain the influence of organisational structure on
accounting systems
(d) Identify the users of final accounts and their needs

4 Basic framework of accounting

(a) Principles of accounting
(i) explain and apply the basic principles of
accounting:
– business entity
– double entry
– historic cost
– materiality
– going concern
– accruals
– prudence
– consistency

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Maintaining Financial Records (INT)

(ii) discuss the overriding need for the fair presentation acquisition, disposal and part exchange of non-
of financial information current assets
(b) Accounting policies
(i) distinguish between accounting policies, 7 Non-current assets II
accounting estimates and measurement bases (a) Depreciation
(ii) explain and discuss accounting policies and their (i) define depreciation
objectives: (ii) explain the purpose of depreciation
– relevance (iii) calculate the charge for depreciation using the
– reliability straight line and reducing balance methods
– comparability (iv) account for depreciation
– understandability (b) Changes in non-current assets
(c) Regulation (i) account for the disposal or scrapping of a non-
(i) explain the role of International Accounting current asset
Standards and International Financial Reporting (ii) account for the part exchange of a non-current
Standards asset
(iii) calculate the profit or loss arising on the disposal,
5 Assets scrapping or part exchange of a non-current asset
(a) Capital and revenue expenditure
(i) distinguish between capital expenditure and 8 Errors
revenue expenditure (a) Distinguish between errors which will be detected by
(ii) calculate and explain the effect of incorrectly extracting a trial balance and those which will not
classifying capital expenditure as revenue (b) Identify and explain the action required to correct errors
expenditure, and vice versa, on the final accounts (c) Prepare correcting journal entries
(b) Current assets (d) Record correcting entries in the ledgers
(i) define current assets (e) Demonstrate how the income statement and balance
(ii) report current assets in the final accounts sheet are affected by the correction of errors

6 Non-current assets I 9 Control and suspense accounts

(a) Non-current assets (a) Explain the purpose of a suspense account
(i) define non-current assets (b) Record entries in a suspense account
(ii) account for the acquisition of non-current assets (c) Make entries to clear a suspense account
(iii) report non-current assets in the final accounts (d) Explain the nature and purpose of control accounts
(b) Non-current asset records (e) Explain how control accounts relate to the double entry
(i) explain the purpose and function of an asset register system
(ii) record data in an asset register
(iii) explain the purpose of data recorded in an asset 10 Payables ledger reconciliation
register (a) Explain the purpose of a payables ledger reconciliation
(iv) explain how to identify and resolve any (b) Identify errors in the ledger accounts and list of balances
discrepancy between the asset register and the (c) Make correcting entries in the ledger accounts
physical presence of assets (d) Prepare a reconciliation between the list of balances and
(v) explain the need for authorisation of the

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 Maintaining Financial Records (INT)

the corrected ledger balance 14 Irrecoverable debts and allowances for receivables
(e) Identify the payables ledger balance to be reported in the (a) Calculate the allowance for receivables
final accounts (b) Account for the write off of irrecoverable debts
(f) Report the payables ledger balance in the final accounts (c) Report the write off of debts in the final accounts
(d) Account for the allowance for receivables
11 Receivables ledger reconciliation (e) Account for the movement in the allowance for
(a) Explain the purpose of a receivables ledger reconciliation receivables
(b) Identify errors in the ledger accounts and list of balances (f) Report the movement in the allowance for receivables
(c) Make correcting entries in the ledger accounts in the final accounts
(d) Prepare a reconciliation between the list of balances and (g) Report the allowance for receivables in the final
the corrected ledger balance accounts
(e) Identify the receivables ledger balance to be reported in
the final accounts 15 Closing inventory
(f) Report the receivables ledger balance in the final (a) Explain the application of accounting concepts to the
accounts valuation of inventory
(b) Explain the methods of valuing inventory when items
12 Bank reconciliation have been purchased at different prices (FIFO – first in
(a) Explain the purpose of a bank reconciliation first out; Periodic weighted average and Continuous
(b) Identify errors and omissions in the ledger account and weighted average)
bank statement (c) Explain the impact of inventory valuation methods on
(c) Identify timing differences profit and assets
(d) Make correcting entries in the ledger account (d) Calculate the value of closing inventory
(e) Prepare a reconciliation between the statement balance (e) Report closing inventory in the final accounts
and the corrected ledger balance
(f) Identify the bank balance to be reported in the final 16 Provisions and liabilities
accounts (a) Explain the nature of provisions and liabilities
(g) Report the bank balance in the final accounts (b) Distinguish between a current liability and a non-current
liability
13 Accruals and prepayments (c) Calculate provisions and liabilities
(a) Describe the nature and purpose of accruals (d) Account for provisions and liabilities
(b) Describe the nature and purpose of prepayments (e) Account for movements in provisions and liabilities
(c) Calculate accruals (f) Report provisions, non-current liabilities and current
(d) Calculate prepayments liabilities in the final accounts
(e) Account for accruals
(f) Account for prepayments 17 Extended trial balance (etb)
(g) Report accruals in the final accounts (a) Record the correction of errors on the etb
(h) Report prepayments in the final accounts (b) Record post trial balance adjustments on the etb

PAGE 28
Maintaining Financial Records (INT)

(i) accruals and prepayments trader who has incomplete records

(ii) depreciation (c) Prepare and complete ledger accounts to derive missing
(iii) provisions figures
(iv) closing inventory (d) Calculate missing figures using margin or mark up
(v) allowances for receivables percentages
(vi) irrecoverable debts written off (e) Construct final accounts for a sole trader who has
(c) Extension and completion of the etb incomplete records.
(i) extend and complete the etb
(ii) calculate and record the net profit or loss for the
period

18 Sole trader accounts

(a) Prepare the final accounts (income statement and
balance sheet) for a sole trader
(b) Record the profit or loss for the period and drawings in
the capital account
(c) Prepare the opening trial balance for the next accounting
period

19 Partnerships
(a) Define a partnership
(b) Explain the purpose and the main content of a
partnership agreement
(c) Explain and account for appropriations of profit
– salaries of partners
– interest on capital
– interest on drawings
– share of residual profit
(d) Explain the difference between partners’ capital accounts
and partners’ current accounts
(e) Prepare the final accounts (income statement,
appropriation account and balance sheet) for a
partnership
(f) Prepare the partners’ capital and current accounts
(g) Prepare the opening trial balance for the next accounting
period

20 Incomplete records
(a) Describe the circumstances which lead to incomplete
records
(b) Calculate the net assets and profit or loss for a sole

PAGE 29
 Paper 9
Paper 3 – Maintaining Financial Records (GBR)

AIMS 2 Accounting standards, principles and policies

To develop knowledge and understanding of the techniques used to (a) Regulation
maintain accounting records and prepare final accounts of (b) Accounting standards (SSAPs and FRSs)
unincorporated entities. (c) Accounting principles
(i) going concern
OBJECTIVES (ii) accruals
On completion of this paper, candidates should be able to: (iii) consistency
• understand, describe and apply relevant accounting concepts, (iv) prudence
policies and standards (d) Accounting policies
• maintain records relating to capital acquisition and disposal (i) relevance
• prepare reconciliations for the preparation of final accounts (ii) reliability
• identify, calculate and record appropriate adjustments (iii) comparability
• prepare and complete the extended trial balance (iv) understandability
• prepare final accounts for a sole trader
• prepare final accounts for a partnership. 3 Fixed assets and depreciation
(a) Fixed assets
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (i) acquisition
Before commencing this paper, a thorough knowledge of Paper 1, (ii) asset register
Recording Financial Transactions, is required. Paper 3 builds on the (iii) accounting treatment
knowledge acquired in Paper 1, enabling students to prepare final (iv) disposal
accounts for a sole trader and for partnerships. This knowledge will (v) part exchange
be further developed in Paper 6, Drafting Financial Statements (vi) authorisation
which will enable students to prepare final accounts for limited (vii) maintenance of capital records
companies. (b) Depreciation
(i) straight line
SYLLABUS CONTENT (ii) reducing balance
1 Basic bookkeeping
(a) The nature and confidentiality of business transactions 4 Control accounts, reconciliations and errors
(b) Double entry bookkeeping (a) Reconciliations
(c) Capital and revenue expenditure (i) purchase ledger reconciliation
(d) Assets, liabilities, revenue and expenses (ii) sales ledger reconciliation
(e) Initial trial balance (iii) bank reconciliation
(f) Format of simple final accounts (b) Identification of errors
(i) trading account (i) incorrect double entry
(ii) profit and loss account (ii) missing entries
(iii) balance sheet (iii) numerical errors
(g) The organisation’s policies, regulations and timescales (iv) insufficient information
in the preparation of final accounts (c) Correction of errors
(i) suspense account
(ii) journal entries

PAGE 30
Maintaining Financial Records (GBR)

5 Adjustments to the trial balance APPROACH TO EXAMINING THE SYLLABUS

(a) Accruals and prepayments The examination is a two-hour paper. It can be taken as a written
(b) Depreciation paper or as a computer based exam.
(c) Irrecoverable debts and allowances for debtors
(d) Closing stock (and stock valuation) The questions in the computer based exam are objective test
(e) Extended trial balance questions – multiple choice, number entry and multiple response.
(f) Provisions
The written exam consists of two sections structured as follows:
6 Final accounts
(a) Incomplete records No. of marks
(b) Sole trader accounts Section A – 20 compulsory 40
(i) profit and loss account multiple choice questions of two marks each
(ii) balance sheet
(c) Partnership accounts Section B – four compulsory questions 60
(i) profit and loss account of 15 marks each (Question 1 of
(ii) appropriation of profit Section B will comprise a number of
(iii) balance sheet short form questions of between two
(iv) partners’ capital and current accounts and five marks each)

EXCLUDED TOPICS
Total 100
The following topics are specifically excluded from Paper 3:
• club accounts
ADDITIONAL INFORMATION
• manufacturing accounts
Accounting standards will not be examined until six months after
• detailed knowledge of VAT
they have been issued. The cut off date for the June examination is
• tax computations
30 November preceding the June examination. The cut off date for
• foreign currency transactions
the December examination is 31 May preceding the December
• goodwill arising on admission of a new partner
examination.
• cash flow statements.

RELEVANT TEXTS
KEY AREAS OF THE SYLLABUS
There are a number of sources from which you can obtain a series
The key topic areas are as follows:
of materials written for the ACCA CAT examination. These are listed
• accounting concepts, policies and standards
below:
• fixed assets and depreciation
• control accounts and bank reconciliations
BPP – ACCA’s official CAT publisher
• correction of errors
Contact number: +44 (0)20 8740 2222
• post trial balance adjustments
Website: www.bpp.com
• incomplete records
• final accounts for sole traders and partnerships.
FTC Foulks Lynch
Contact number: +44 (0)118 989 0629
Website: www.financial-training.com/new/foulkslynch

PAGE 31
 Maintaining Financial Records (GBR)

Candidates may also find the following texts useful: STUDY SESSIONS
1 Recording transactions
Cox, D. Business Accounts (Osborne Books) (a) Understand the nature of business transactions,
including the need to maintain confidentiality
Giles, R. A Complete Course in Business Accounting (Stanley (b) Explain the basis of double entry bookkeeping
Thornes) (c) Explain and illustrate the dual aspect convention
ISBN: 0748761594 (d) Apply the accounting equation (and derivatives thereof)
(e) Distinguish between assets, liabilities, revenue and expenses
Woods, F & Sangster, A. Business Accounting 1 (Pitman (f) Prepare journal entries to record transactions
Publishing) (g) Prepare ledger accounts
(h) Understand how the structure of accounting records
Wider reading is also desirable, especially regular study of relevant contributes to providing useful accounting information
articles in ACCA’s student accountant magazine. and complies with organisational policies and deadlines

2 The trial balance

(a) Initial trial balance
(i) explain the purpose of the trial balance
(ii) identify the limitations of the trial balance
(iii) extract the ledger balances to form a trial balance

3 Introduction to final accounts

(a) Explain the format and purpose of the trading and profit
and loss account
(b) Explain the format and purpose of the balance sheet
(c) Explain the influence of organisational structure on
accounting systems
(d) Identify the users of final accounts and their needs

4 Basic framework of accounting

(a) Principles of accounting
(i) explain and apply the basic principles of
accounting:
– business entity
– double entry
– historic cost
– materiality
– going concern
– accruals
– prudence
– consistency
(ii) discuss the overriding need to provide a true and

PAGE 32
Maintaining Financial Records (GBR)

fair view physical presence of assets

(b) Accounting policies (v) explain the need for authorisation of the
(i) distinguish between accounting policies, estimation acquisition, disposal and part exchange of fixed
techniques and measurement bases assets
(ii) explain and discuss accounting policies and their
objectives: 7 Fixed assets II
– relevance (a) Depreciation
– reliability (i) define depreciation
– comparability (ii) explain the purpose of depreciation
– understandability (iii) calculate the charge for depreciation using the
(c) Regulation straight line and reducing balance methods
(i) explain the role of accounting standards and (iv) account for depreciation
legislation (b) Changes in fixed assets
– Statements of Standard Accounting Practice (i) account for the disposal or scrapping of a fixed asset
– Financial Reporting Standards (ii) account for the part exchange of a fixed asset
– Companies Acts (iii) calculate the profit or loss arising on the disposal,
scrapping or part exchange of a fixed asset
5 Assets
(a) Capital and revenue expenditure 8 Errors
(i) distinguish between capital expenditure and (a) Distinguish between errors which will be detected by
revenue expenditure extracting a trial balance and those which will not
(ii) calculate and explain the effect of incorrectly (b) Identify and explain the action required to correct errors
classifying capital expenditure as revenue (c) Prepare correcting journal entries
expenditure, and vice versa, on the final accounts (d) Record correcting entries in the ledgers
(b) Current assets (e) Demonstrate how the profit and loss account and
(i) define current assets balance sheet are affected by the correction of errors
(ii) report current assets in the final accounts
9 Control and suspense accounts
6 Fixed assets I (a) Explain the purpose of a suspense account
(a) Fixed assets (b) Record entries in a suspense account
(i) define fixed assets (c) Make entries to clear a suspense account
(ii) account for the acquisition of fixed assets (d) Explain the nature and purpose of control accounts
(iii) report fixed assets in the final accounts (e) Explain how control accounts relate to the double entry
(b) Fixed asset records system
(i) explain the purpose and function of a fixed asset
register 10 Purchase ledger reconciliation
(ii) record data in a fixed asset register (a) Explain the purpose of a purchase ledger reconciliation
(iii) explain the purpose of data recorded in a fixed (b) Identify errors in the ledger accounts and list of balances
asset register (c) Make correcting entries in the ledger accounts
(iv) explain how to identify and resolve any (d) Prepare a reconciliation between the list of balances and
discrepancy between the fixed asset register and the the corrected ledger balance

PAGE 33
 Maintaining Financial Records (GBR)

(e) Identify the purchase ledger balance to be reported in the (c) Report the write off of debts in the final accounts
final accounts (d) Account for the allowance for debtors
(f) Report the purchase ledger balance in the final accounts (e) Account for the movement in the allowance for
debtors
11 Sales ledger reconciliation (f) Report the movement in the allowance for debtors in the
(a) Explain the purpose of a sales ledger reconciliation final accounts
(b) Identify errors in the ledger accounts and list of balances (g) Report the allowance for debtors in the final accounts
(c) Make correcting entries in the ledger accounts
(d) Prepare a reconciliation between the list of balances and 15 Closing stock
the corrected ledger balance (a) Explain the application of accounting concepts to stock
(e) Identify the sales ledger balance to be reported in the valuation
final accounts (b) Explain the methods of valuing stock when items have
(f) Report the sales ledger balance in the final accounts been purchased at different prices (FIFO – first in first
out; Periodic weighted average and Continuous weighted
12 Bank reconciliation average)
(a) Explain the purpose of a bank reconciliation (c) Explain the impact of stock valuation methods on profit
(b) Identify errors and omissions in the ledger account and and net assets
bank statement (d) Calculate the value of closing stock
(c) Identify timing differences (e) Report closing stock in the final accounts
(d) Make correcting entries in the ledger account
(e) Prepare a reconciliation between the statement balance 16 Provisions and liabilities
and the corrected ledger balance (a) Explain the nature of provisions and liabilities
(f) Identify the bank balance to be reported in the final (b) Distinguish between a current liability and a long term
accounts liability
(g) Report the bank balance in the final accounts (c) Calculate provisions and liabilities
(d) Account for provisions and liabilities
13 Accruals and prepayments (e) Account for movements in provisions and liabilities
(a) Describe the nature and purpose of accruals (f) Report provisions, current liabilities and long term
(b) Describe the nature and purpose of prepayments liabilities in the final accounts
(c) Calculate accruals
(d) Calculate prepayments 17 Extended trial balance (etb)
(e) Account for accruals (a) Record the correction of errors on the etb
(f) Account for prepayments (b) Record post trial balance adjustments on the etb
(g) Report accruals in the final accounts (i) accruals and prepayments
(h) Report prepayments in the final accounts (ii) depreciation
(iii) provisions
14 Irrecoverable debts and allowances for debtors (iv) closing stock
(a) Calculate the allowance for debtors (v) allowances for debtors
(b) Account for the write off of irrecoverable debts (vi) irrecoverable debts written off

PAGE 34
Maintaining Financial Records (GBR)

(c) Extension and completion of the etb

(i) extend and complete the etb
(ii) calculate and record the net profit or loss for the
period

18 Sole trader accounts

(a) Prepare the final accounts (trading account, profit and
loss account and balance sheet) for a sole trader
(b) Record the profit or loss for the period and drawings in
the capital account
(c) Prepare the opening trial balance for the next accounting
period

19 Partnerships
(a) Define a partnership
(b) Explain the purpose, and the main content of a
partnership agreement
(c) Explain and account for appropriations of profit
– salaries of partners
– interest on capital
– interest on drawings
– share of residual profit
(d) Explain the difference between partners’ capital accounts
and partners’ current accounts
(e) Prepare the final accounts (trading account, profit and
loss account, appropriation account and balance sheet)
for a partnership
(f) Prepare the partners' capital and current accounts
(g) Prepare the opening trial balance for the next accounting
period

20 Incomplete records
(a) Describe the circumstances which lead to incomplete
records
(b) Calculate the net assets and profit or loss for a sole
trader who has incomplete records
(c) Prepare and complete ledger accounts to derive missing
figures
(d) Calculate missing figures using margin or mark up
percentages
(e) Construct final accounts for a sole trader who has
incomplete records

PAGE 35
Paper 4 – Accounting For Costs

AIMS (ii) presentation of information

To develop knowledge and understanding of how organisations (iii) role of accounting technicians and
record, analyse and report current and future costs and revenue accounting information
data for use within the organisation. (iv) role of information technology
(c) Maintaining an appropriate cost accounting system
OBJECTIVES (i) cost units and responsibility centres
On completion of this paper, candidates should be able to: (ii) sources of relevant information
• explain the role of management accounting within an (iii) methods for recording, processing and storing
organisation and the requirement for management information relevant information
• describe costs by classification and behaviour (iv) analysis and dissemination of output information
• identify appropriate material, labour and overhead costs
• understand and be able to apply the principles of marginal 2 Cost classification and cost behaviour
costing and absorption costing (a) Cost classification
• understand and be able to calculate product and service costs (i) classifications used in cost accounting according to
• understand and be able to apply methods of estimating costs and purpose
revenues. (b) Cost behaviour
(i) cost behaviour patterns
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (ii) identification of fixed, variable and semi-variable
Knowledge of Paper 2, Information for Management Control, is costs
required before commencing study for Paper 4. (iii) use of fixed, variable and semi-variable costs in
cost analysis
This paper provides the basic techniques required to enable (iv) analysis of the effect of changing activity levels on
candidates to develop the various methods for recording and unit costs
evaluating costs into more complex problems at the Advanced Level.
3 Elements of cost
Candidates will need a sound understanding of the methods and (a) Materials
techniques introduced in this paper to ensure that they can take (i) direct and indirect material costs
them further in subsequent papers. The methods introduced in this (ii) methods of stock control and valuation including
paper are revisited and extended in Paper 7, Planning, Control and First In First Out, Last In First Out and weighted
Performance Management. average cost
(iii) relationship between the materials costing system
SYLLABUS CONTENT and the stock control system
1 Management information (b) Labour
(a) Nature and purpose of internal reporting (i) direct and indirect labour costs
(i) financial and non-financial information for (ii) methods of payment for and calculation of
managers payments for labour
(ii) cost centres, profit centres and (iii) relationship between the labour costing system and
investment centres and the impact of these on the payroll accounting system
management information and appraisal (c) Overheads
(b) Management information requirements (i) direct and indirect expenses
(i) definition and importance of good information (ii) procedures and documentation relating to expenses

PAGE 36
Accounting for Costs

(iii) relationship between the accounting system and the (iii) discounted cash flow
expenses costing system (iv) annuities and perpetuities
(v) payback period.
4 Marginal costing and absorption costing
(a) Marginal costing EXCLUDED TOPICS
(b) Absorption costing The following topics are specifically excluded from Paper 4:
(i) bases of allocating and apportioning indirect costs • activity based costing
(overheads) to responsibility centres • process costing – opening work in progress
(ii) bases of absorption • process costing – losses and work in progress in same process
(iii) over and under absorption of overheads • multi-product cost / volume / profit analysis
(c) Marginal versus absorption costing for costing and • linear programming.
reporting purposes
KEY AREAS OF THE SYLLABUS
5 Product and service costs All areas of the syllabus are equally important.
(a) Job and batch costing
(i) characteristics APPROACH TO EXAMINING THE SYLLABUS
(ii) direct and indirect costs Paper 4 is a two-hour paper. It can be taken as a written paper or a
(b) Process costing computer based examination. The questions in the computer based
(i) characteristics examination are objective test questions – multiple choice, number
(ii) normal losses and abnormal losses and gains entry and multiple response. The written examination consists of
(iii) accounting for scrap two sections, structured as follows:
(iv) closing work in progress and equivalent units No. of marks
(v) joint products and by-products Section A – 20 compulsory 40
(c) Service costing multiple choice questions of two marks each
(i) characteristics
(ii) cost units Section B – four compulsory written 60
questions of between 10 and 20 marks each
6 Estimating costs and revenues
Total 100
(a) CVP analysis
(i) break-even analysis
RELEVANT TEXTS
(ii) margin of safety
There are a number of sources from which you can obtain a series
(iii) target profit
of materials written for the ACCA CAT examinations. These are
(iv) contribution / sales ratio
listed below:
(v) simple break-even chart and profit/volume graph
(b) Decision-making
BPP – ACCA’s official CAT publisher
(i) concept of relevant costs
Contact number: +44 (0)20 8740 2222
(ii) short-term decisions
Website: www.bpp.com
(iii) optimal production plan given a scarce resource
(c) Discounted cash flow techniques
FTC Foulks Lynch
(i) simple and compound interest
Contact number: +44 (0)118 989 0629
(ii) nominal and effective interest
Website: www.financial-training.com/new/foulkslynch

PAGE 37

Wider reading is also desirable, especially regular study of relevant
articles in ACCA’s student accountant magazine.
STUDY SESSIONS
1 Management information
(a) Discuss the purpose of management information:
planning, control and decision-making
(b) Describe the features of useful management information
(c) Discuss the nature, source and importance of both 4 Costing of materials
financial and non-financial information for managers
(d) Describe management responsibilities (for cost, profit
and investment) and their effect on management
information and performance measurement
(e) Discuss the role of information technology in
management information
(f) Discuss the role of the accounting technician
(g) Present management information in suitable formats
according to purpose
2 Maintaining an appropriate cost accounting system
(a) Explain the relationship between the cost/management 5 Material stock control
accounting system and the financial accounting/
management information systems (including interlocking
and integrated bookkeeping systems)
(b) Describe the process of accounting for input costs and
relating them to work done
(c) Identify the documentation required, and the flow of
documentation, for different cost accounting transactions
(d) Explain the use of codes in categorising and processing
transactions, and the importance of correct coding
(e) Explain and illustrate the concept of cost units
(f) Describe the different methods of costing final outputs 6 Costing of labour
and their appropriateness to different types of business
organisation
(g) Describe methods of capturing, processing, storing and
outputting cost and management accounting data by
computer
3 Cost classification and cost behaviour
(a) Describe the variety of cost classifications used for
different purposes in a cost accounting system, including
PAGE 38
Accounting for Costs
by responsibility, function, direct/indirect, behaviour
(b) Explain and illustrate the nature of variable, fixed and
mixed (semi-variable, stepped-fixed) costs
(c) Use the high-low method to separate semi-variable costs
(d) Use variable, fixed and semi-variable costs in cost
analysis
(e) Analyse the effect of changing activity levels on unit costs
(a) Describe the main types of material classification
(b) Describe the procedures and documentation required to
ensure the correct authorisation, coding, analysis and
recording of direct and indirect material costs
(c) Explain, illustrate and evaluate the FIFO, LIFO and
weighted average methods used to price materials issued
from stock
(d) Describe and illustrate the accounting for material costs
(e) Calculate material input requirements, and control
measures, where wastage occurs
(a) Describe the procedures required to monitor stock and to
minimise stock discrepancies and losses
(b) Explain and illustrate the costs of stockholding and
stockouts
(c) Explain, illustrate and evaluate stock control levels
(minimum, maximum, re-order)
(d) Calculate and interpret optimal order quantities
(e) Discuss the relationship between the materials costing
system and the stock control system
(a) Explain, illustrate and evaluate labour remuneration
methods
(b) Describe the operation of a payroll accounting system
(c) Distinguish between direct and indirect labour costs
(d) Describe the procedures and documentation required to
ensure the correct coding, analysis and recording of
direct and indirect labour
(e) Describe and illustrate the accounting for labour costs
(f) Discuss the relationship between the labour costing
system and the payroll accounting system
Accounting for Costs

(g) Explain the causes and costs of, and calculate, labour (e) Calculate product costs using the absorption costing
turnover method
(h) Describe and illustrate measures of labour efficiency and
utilisation (efficiency, capacity utilisation, production 10 Absorption and marginal costing
volume and idle time ratios) (a) Prepare profit statements using the absorption costing
7 Costing of other expenses method
(a) Describe the nature of expenses by function (b) Explain and illustrate the concept of contribution
(b) Describe the procedures and documentation required to (c) Prepare profit statements using the marginal costing
ensure the correct authorisation, coding, analysis and method
recording of direct and indirect expenses (d) Compare and contrast the use of absorption and
(c) Describe capital and revenue expenditure and the marginal costing for period profit reporting and stock
relevant accounting treatment valuation
(d) Calculate and explain depreciation charges using (e) Reconcile the profits reported by absorption and
straight-line, reducing balance and machine hour marginal costing
methods (f) Discuss the usefulness of profit and contribution
(e) Discuss the relationship between the expenses costing information respectively
system and the expense accounting system
11 Job and batch costing
8 Overhead allocation and apportionment (a) Describe the characteristics of job and batch costing
(a) Explain the rationale for absorption costing respectively
(b) Describe the nature of production and service cost (b) Identify situations where the use of job or batch costing
centres and their significance for production overhead is appropriate
allocation, apportionment and absorption (c) Calculate unit costs using job and batch costing
(c) Describe the process of allocating, apportioning and (d) Discuss the control of costs in job and batch costing
absorbing production overheads to establish product (e) Apply cost plus pricing in job costing
costs
(d) Apportion overheads to cost centres using appropriate 12 Process costing - losses
bases (a) Describe the characteristics of process costing
(e) Re-apportion service cost centre overheads to production (b) Identify situations where the use of process costing is
cost centres using direct and step down methods appropriate
(c) Calculate unit costs and prepare process accounts where
9 Overhead absorption losses occur in process
(a) Justify, calculate and apply production cost centre (d) Explain and illustrate the nature of normal and
overhead absorption rates using labour hour and abnormal losses/gains
machine hour methods (e) Calculate unit costs where losses are separated into
(b) Explain the relative merits of actual and pre-determined normal and abnormal
absorption rates (f) Prepare process accounts where losses are separated
(c) Describe and illustrate the accounting for production into normal and abnormal
overhead costs, including the analysis and interpretation (g) Account for scrap
of over/under absorption
(d) Describe and apply methods of attributing non-
production overheads to cost units

PAGE 39
 Accounting for Costs

13 Process costing - work-in-progress 17 Decision-making

(a) Describe and illustrate the concept of equivalent units (a) Explain the importance of the limiting factor concept
(b) Calculate unit costs where there is closing work-in- (b) Identify the limiting factor in given situations
progress in a process (c) Formulate and determine the optimal production
(c) Allocate process costs between finished output and solution when there is a single resource constraint
work-in-progress (d) Solve make/buy-in problems when there is a single
(d) Prepare process accounts where there is closing work-in- resource constraint
progress (e) Explain the concept of relevant costs
(f) Apply the concept of relevant costs in business decisions
14 Process costing - joint products and by-products
(a) Distinguish between joint products and by-products 18 & 19 Discounted cash flow
(b) Explain the treatment of joint products and by-products (a) Explain and illustrate the difference between simple and
at the point of separation compound interest, and between nominal and effective
(c) Apportion joint process costs using net realisable values interest rates
and weight/volume of output respectively (b) Explain and illustrate compounding and discounting
(d) Discuss the usefulness of product cost/profit data from a (c) Explain the distinction between cash flow and profit and
joint process the relevance of cash flow to capital investment
(e) Evaluate the benefit of further processing appraisal
(d) Explain and illustrate the net present value (NPV) and
15 Service costing internal rate of return (IRR) methods of discounted cash
(a) Describe the characteristics of service costing flow
(b) Describe the practical problems relating to the costing of (e) Calculate present value using annuity and perpetuity
services formulae
(c) Identify situations (cost centres and industries) where the (f) Calculate payback (discounted and non-discounted)
use of service costing is appropriate (g) Interpret the results of NPV, IRR and payback
(d) Illustrate suitable cost units that may be used for a calculations of investment viability
variety of services
(e) Calculate service unit costs in a variety of situations 20 Revision

16 Cost / volume / profit (CVP) analysis

(a) Calculate contribution per unit and the contribution/sales
ratio
(b) Explain the concept of break-even and margin of safety
(c) Use contribution per unit and contribution/sales ratio to
calculate break-even point and margin of safety
(d) Analyse the effect on break-even point and margin of
safety of changes in selling price and costs
(e) Use contribution per unit and contribution/sales ratio to
calculate the sales required to achieve a target profit
(f) Construct break-even and profit/volume charts for a
single product or business

PAGE 40

This section contains the syllabus and study sessions for
each paper within the advanced level of the new CAT
Scheme.
Core Papers:
Paper 5 Managing People and Systems
Paper 6 Drafting Financial Statements
Paper 7 Planning, Control and Performance
Management
Option Papers: (2 from 3)
Paper 8 Implementing Audit Procedures
Paper 9 Preparing Taxation Computations
Paper 10 Managing Finance
THE OBJECTIVE OF THE ADVANCED LEVEL
This final level of the scheme develops upon core
technical knowledge and skills acquired at the
intermediate level in accounting for unincorporated
businesses requiring analysis and application of relevant
theories and techniques to internal information for
decision support. The advanced level also requires the
candidate to develop their financial accounting knowledge
to the area of company accounting and to more
advanced reporting and decision-making aspects of
financial and management accounting, introducing other
specialist support areas such as auditing, taxation,
financial management and the management of people
and systems.
The advanced level gives the successful candidate the
required skill and attribute set in order to undertake a
wide range of roles within the accounting department but
also gives the candidate the broader capability to formally
manage and control the output of others in a supervisory
capacity.
Advanced Level
The requisite knowledge and skills set will be tested
discretely in three core subjects at the advanced level and
candidates must also supplement this core knowledge
with additional technical knowledge within two from three
specialist options.
SKILLS AND ATTRIBUTES TO BE TESTED AND
ACHIEVED AT THE ADVANCED LEVEL
Candidates should be able to demonstrate a rigorous
approach to utilising a broad set of specialist skills
including accountancy and supervisory skills to evaluate
information and use it appropriately to prepare external
financial corporate reports in accordance with generally
accepted accounting standards and prevailing company
law. The successful candidate should also be able to
select and use a wide range of internal financial data and
information and apply it with judgement to a variety of
unpredictable problems or opportunities, making
appropriate decisions in a supervisory capacity and/or
providing relevant decision support to senior
management.
Finally the candidate at this level will have also developed
appropriate management skills to be able to work
effectively with systems and to positively influence the
behaviour and output of other people within the
accounting department for whom they may be
responsible.
PAGE 41
Advanced Level

These output skills may be separately identified as

follows:
• employing a rigorous approach to applying techniques
and using generally accepted principles to prepare
financial reports for publication and for providing
useful internal management information
• determining solutions to problems in the preparation of
reports, opinions and computations sometimes within
loosely defined parameters
• evaluating information and using it to plan and make
valid accounting related decisions or to support
decisions at higher levels
• operating effectively in a range of varied and specific
accounting situations and roles including auditing,
taxation or financial management and credit control
• exercising appropriate judgement in planning, selecting,
analysing or presenting financial information or reports
for internal or external use
• undertaking self-directed and directive activity taking
responsibility for the accuracy, timeliness and reliability
of personal output and for the output of others within
acceptable qualitative parameters.

PAGE 42
 Paper 5 – Managing People and Systems

AIMS (b) The organisation

To develop knowledge and understanding of the role of a manager in (i) the structure of business functions
an effective, efficient, safe and secure accounting environment. This (ii) sources of management information
includes the coordination of work activities, the maintenance of an (iii) the nature of policies, systems and procedures
effective accounting system, people management, personal (iv) types of business transactions
effectiveness, health and safety and security issues within the (v) methods of planning and control
workplace. – business planning and control
– information management and control
OBJECTIVES – human resources planning and control
On completion of this paper, candidates should be able to: (c) The accounting function
• develop an overview of the overall business organisation and its (i) purpose
critical external relationships and identify the key external (ii) structure
regulations and influences affecting accounting and business (iii) position within the organisation
• understand how accounting systems are affected by (iv) types of accounting system
organisational structure and the overall management information – manual
system – computerised
• describe methods for resource planning and coordinating work
• explain the purpose, structure and organisation of the accounting 2 Effective management of business and accounting systems
function and its relationships with other organisational functions (a) Monitoring business and accounting systems
• identify systems and procedures for effective functional (i) the role of internal auditors
management (ii) the role of external auditors
• describe principles of management leadership, delegation, (iii) the role of management
motivation and communication (b) Recognising potential weaknesses in the accounting
• explain principles of effective working relationships and teamwork system
• understand the need for effective performance appraisal, (i) weaknesses of controls
development and training to enhance personal and (ii) potential areas for error and fraud
organisational effectiveness (c) Fraud
• understand the importance of a safe and secure working environment. (i) common types of fraud
(ii) the implications of fraud
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (iii) detecting fraud in the accounting system
No prior knowledge is required before commencing study for Paper (iv) preventing fraud
5. This paper provides the basic techniques required to fulfil the role (d) Internal controls
of a manager in the accounting environment. (i) the importance of internal controls
(ii) the control mechanisms in the accounting system
SYLLABUS CONTENT (e) Management information and reporting systems
1 The business and accounting environment (i) features of a management information system
(a) Environmental influences on the organisation (ii) information flows within an accounting system
(i) political, economic, social and technological (iii) processing and storage of data and transactions
(ii) external regulations affecting accounting and
business practice
(iii) external relationships (stakeholder interests)

PAGE 43
Managing People and Systems

3 Management theory, principles and techniques (c) Improving individual performance

(a) Managing people for effective working relationships (i) personal performance and appraisal
(i) principles of leadership, management supervision – setting objectives
and delegation, including consideration of: – assessing progress
– communication (ii) identifying areas for individual learning
– resolving problems and queries
(ii) principles of authority 5 Health, safety and security in the working environment
– differing styles of management (a) The importance of health and safety
– taking corrective action (i) health and safety in the working environment
(b) Individual and group behaviour – legislation
(i) organisational culture – regulations
(ii) contribution of individuals and groups to – record keeping
organisational success – keeping up-to-date with requirements
(c) Team management (ii) common hazards and how to deal with them
(i) team formation (iii) using equipment and behaving safely at work
(ii) team development (iv) emergency procedures
(iii) team evaluation and rewards – illness
(d) Motivation – accidents
(i) key theories of motivation – fires
(ii) the function of sanctions and rewards in motivation – security breaches
(v) recommending improvements to health and safety
4 Individual effectiveness at work (b) Recognising security risks
(a) Planning and organising personal work (i) physical breaches of security
(i) understanding roles and responsibilities – unauthorised physical intrusion
– effective work methods and practices in the – security of hardware and equipment
organisation – security of systems data and software
– reporting procedures (ii) methods of reducing or avoiding security risks.
(ii) work planning and planning aids (diaries,
schedules, action plans) EXCLUDED TOPICS
(iii) prioritising and time management, including The syllabus does not require knowledge of specific computing
unforeseen situations hardware systems or their specifications, or how software systems
(b) Constructive relationships are designed, developed, tested and implemented.
(i) methods of communication
(ii) influencing, negotiating and coordinating KEY AREAS OF THE SYLLABUS
(iii) procedures for dealing with disagreement and All areas of the syllabus are equally important.
conflict arising from:
– personality APPROACH TO EXAMINING THE SYLLABUS
– working style The paper is constructed in such a way that it provides a broad
– status assessment of the main issues involved in managing systems and
– work demands people. In general terms, the paper is divided into five parts:

PAGE 44
 Managing People and Systems

1 The business and accounting environment Candidates may also find the following texts useful:
2 Effective management of business and accounting systems
3 Management theory, principles and techniques Mullins, L., J. Management and Organisational Behaviour (7th
4 Individual effectiveness at work edition, Prentice Hall:2004) ISBN: 0273651471
5 Health, safety and security in the working environment
Child, J. Organisation: A Guide to Problems and Practice (2nd
Note that although the syllabus is sub-divided into five main parts, edition, Chapman: 1988)
each part has a different number of teaching and learning sessions
allocated to it. The number of sessions in each area reflects the Handy, Charles. Understanding Organisations (3rd edition,
number of learning outcomes identified within that area and this in Penguin: 1997)
turn determines the associated teaching and learning time required. ISBN: 0140456038
For example, although health, safety and security in the working
environment contains only two teaching and learning sessions it is Wider reading is also desirable, especially regular study of relevant
still considered to be as important as any other area within the articles in ACCA’s student accountant magazine.
syllabus in terms of assessment. It should also be noted that
although the syllabus follows this structure, the nature of the
syllabus means that there will often be some overlap between the
individual topics.

Structure of the examination:

The examination is a two-hour written paper.
No. of marks
5 compulsory questions (20 marks each) 100

As indicated above, a question will normally be set in each of the

five syllabus areas detailed in the approach to examining the
syllabus. Candidates therefore need to ensure that they have a broad
knowledge of all aspects of the five key areas of the syllabus.

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:

BPP – ACCA’s official CAT publisher

Contact number: +44 (0)20 8740 2222
Website: www.bpp.com

FTC Foulks Lynch

Contact number: +44 (0)118 989 0629
Website: www.financial-training.com/new/foulkslynch

PAGE 45
 Managing People and Systems

STUDY SESSIONS 3 Business and resource planning and co-ordination

THE BUSINESS AND ACCOUNTING ENVIRONMENT (a) Outline the purpose of an overall business plan
(i) identify the objectives of long-range planning
1 The organisation’s environment and external relationships (ii) outline the role of short-range planning
(a) Define an organisation and its environment (b) Identify elements of resource planning and control
(b) Identify the main stakeholders within and outside the (i) describe the elements of the organisational plan
organisation (ii) describe the elements of the human resource plan
(c) Describe general political, economic, social and (c) Explain the need for co-ordination in the planning process
technological factors affecting the organisation and its
stakeholders 4 General systems and clerical procedures in business
(d) Identify the authorities to whom businesses are (a) Explain the purpose of systems, policies and procedures
accountable in financial terms in a general business context
(e) Identify what financial information businesses need to (b) Describe the principles of effective systems and procedures
provide for government agencies (c) Identify and explain general office procedures and
(f) Describe the role of external auditors systems using flowcharting techniques
(g) Outline the role of accounting standards setting bodies (d) Review the effectiveness of office procedures and identify
(h) Outline the role of corporate governance with respect to weaknesses
accountability (e) Review the effectiveness of financial control procedures
(i) Describe the overall role and purpose of employment, and identify potential weaknesses
health and safety and data protection legislation within
the business 5 Accounting systems and procedures
(a) Outline the function and purpose of the accounting
2 Organisational structure system within an organisation
(a) Identify the purpose and objectives of an organisation (b) Identify key elements of the accounting system and
(b) Recognise the stages needed to establish an organisation procedures and how they are structured
(c) Explain what influences the structure of an organisation, (c) Explain how the accounting department integrates and
with reference to the work of Fayol co-ordinates with other functional areas
(d) Describe the business as a system with clearly defined (d) Explain the difference between manual and computerised
functional areas accounting systems
(i) explain the role of production or direct service
provision EFFECTIVE MANAGEMENT OF BUSINESS AND ACCOUNTING
(ii) explain the roles of sales and marketing SYSTEMS
(iii) explain the role of accounting and finance
(iv) explain the role of human resource planning 6 Internal control and auditing
(e) Identify organisational levels and spans of control (a) Explain the importance of internal controls in an
(f) Recognise how departments within an organisation are organisation
structured (b) Describe the responsibilities of management with respect
(i) describe the hierarchical structure and functional to internal control
divisionalisation (c) Describe the different roles of the internal and external
(ii) describe the matrix or task based structure of business auditors
(iii) explain geographical divisionalisation (d) Recognise the weaknesses of controls and the features of
(iv) explain product or service divisionalisation effective control procedures

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Managing People and Systems

7 Identifying and preventing fraud in an accounting system (c) Explain the role of management, with reference to the
(a) Describe the three prerequisites for fraud, eg dishonesty, work of Drucker, Kanter, Ouchi and Peters
opportunity and motivation (d) Explain the role of the supervisor in achieving tasks,
(b) Identify common types of fraud building the team and developing individuals
(c) Explain the implications of fraud for an organisation (e) Describe the principles of effective delegation
(d) Identify the scope for fraud using manual as against (f) Compare and contrast the terms ‘leadership’,
computer systems ‘management’, ‘supervision’ and delegation
(e) Describe systems and procedures to discover and prevent
fraud 11 Individual and group behaviour
(f) Understand the role of the auditor in dealing with fraud (a) Explain the concept of organisational culture and discuss
(g) Identify the duty and responsibilities of management in its limitations, with reference to the work of Anthony and
the prevention and detection of fraud Handy
(b) Discuss the differences between individual and group
8 Improving control procedures within the accounting system behaviour
(a) Describe the payroll system and appropriate controls (c) Outline the contribution of individuals and teams to
(b) Describe the main stages of the purchases cycle and organisational success
appropriate controls (d) Identify work that benefits from either an individual or
(c) Describe the main stages of the sales cycle and team approach
appropriate controls (e) Recognise behaviour that facilitates and inhibits
(d) Describe the cash system and appropriate controls organisational success
(e) Explain how controls are more effective if systems are
integrated 12 Team Management
(a) Define the purpose of a team
9 Management information and reporting systems (b) Outline the composition of successful teams, with
(a) Describe the main features of a management information reference to the work of Belbin, Peters and Waterman
system (c) Explain the stages in the development of a team using
(b) Describe the information flows within the accounting system Tuckman’s “Forming, Storming, Norming, Performing
(c) Draft examples of relevant management reports from an and Dorming”
accounting system (d) Identify and explain key team building blocks and
(d) Understand how data and transactions are processed blockages, with reference to the work of Woodcock
and stored within the accounting system (e) Describe the main ways of rewarding a team
(f) Identify appropriate methods to evaluate team
MANAGEMENT THEORY, PRINCIPLES AND TECHNIQUES performance

10 Effective leadership, management and supervision

(a) Describe the process of determining authority and 13 Motivation, concepts and models
responsibility with reference to Contingency Theory, and (a) Outline the key theories of motivation: Maslow, Herzberg,
the work of Woodward, Burns and Stalker, Fayol, Handy, Equity Theory, Argyris, McLelland, Vroom,
Mintzberg and Weber McGregor’s Theories X and Y and Ouchi’s Theory Z
(b) Describe the skills, traits and characteristics of a leader, (b) Outline the difference between content and process
with reference to Blake and Mouton, Handy, Hersey, theories of motivation
Blanchard and Likert (c) Describe ways in which management can motivate staff

PAGE 47
 Managing People and Systems

(d) Explain the importance of the reward system in the (f) Compare and contrast the various methods used to
process of motivation develop individuals in the workplace
(e) Explain the importance of feedback (g) Describe methods of staff evaluation and follow-up

INDIVIDUAL EFFECTIVENESS 17 Appraisal of competence and individual development

(a) Explain the process of competence assessment
14 Work effectiveness (b) Outline the purpose and benefits of the staff appraisal
(a) Explain the benefits of planning and organising personal process
work in the context of: (c) Describe the barriers to effective staff appraisal
(i) understanding roles and responsibilities (d) Identify the management skills involved in the appraisal
(ii) using effective work methods and practices in the process
organisation (e) Describe the roles of the appraisor and appraisee in the
(iii) identifying appropriate reporting procedures appraisal process
(iv) using work planning and planning aids (diaries, (f) Explain the preparation process for an appraisal
schedules, action plans) interview, including location of interview and pre-
(v) prioritising work and time management, including interview correspondence
unforeseen situations (g) Recognise the importance of feedback from the appraisal
interview
15 Effective communication and interpersonal skills (h) Explain the link between the appraisal process and
(a) Recognise the importance of good communication, both effective employee development
formal and informal, in the workplace
(b) Identify and describe the main methods and attributes of 18 The individual learning process
effective personal communication and the effects of poor (a) Explain the process of learning in the workplace
communication (b) Describe the ways in which individuals learn
(c) Distinguish between verbal and non-verbal forms of (c) Explain the effect of individual differences on learning
personal communication (d) Identify the barriers to learning
(d) Define the term ‘interpersonal skills’ in the context of (e) Describe the role of management in the learning process
effective management practice (f) Suggest appropriate ways in which the organisation can
(e) Explain the importance of developing effective personal motivate individuals to learn
working relationships
(f) Identify appropriate ways of gaining commitment from HEALTH, SAFETY AND SECURITY IN THE WORKING
individual staff members ENVIRONMENT
(g) Describe appropriate methods for dealing with conflict in
a work environment 19 Health and safety in the workplace
(a) Outline the main provisions of relevant legislation on
16 Effective training and development health and safety
(a) Distinguish between training and development (b) Identify possible sources of danger to health and safety
(b) Explain the importance of training and development to of individuals within the workplace
the organisation and the individual (c) Suggest appropriate preventative and protective
(c) Explain the roles and responsibilities of a training manager measures
(d) Explain the methods used to analyse training needs (d) Discuss the role of training in raising awareness of
(e) Suggest ways in which training needs can be met safety issues

PAGE 48
Managing People and Systems

(e) Describe safe working conditions

(f) Outline the role and responsibility of management in
promoting health and safety

20 Security in the workplace

(a) Describe possible sources of security breaches within the
workplace
(i) identify means of physical intrusion
(ii) describe threats related to hardware and
equipment security
(iii) explain hazards from internal and external
software security breaches
(b) Outline measures for preventing security breaches
(i) describe methods of preventing physical intrusion
(ii) explain measures of protecting hardware and
equipment
(iii) identify strategies for reducing the risk of software
security breaches

PAGE 49
 Paper 9
Paper 6 – Drafting Financial Statements (INT)

AIMS (i) assets

To understand and apply the techniques used to prepare year-end (ii) liabilities
financial statements of partnerships and companies which comply (iii) equity, contributions from owners and distributions
with International Accounting Standards, and to interpret financial to owners
statements and the relationships between their elements using ratio (iv) income
analysis. (v) expenses
(d) Conceptual framework
OBJECTIVES (i) framework for the preparation and presentation of
On completion of this paper, candidates should be able to: financial statements
• draft partnership and company financial statements to comply (ii) accounting concepts, principles and policies
with International Financial Reporting Standards / International (e) Regulatory framework
Accounting Standards (i) standard-setting process
• correctly identify and implement adjustments, referring any (ii) relevant International Financial Reporting
issues and unresolved discrepancies to an appropriate person Standards / International Accounting Standards
• understand the importance of an organisation’s procedures and (iii) format of accounts and disclosure requirements
policies, including confidentiality procedures (f) Notes to the financial statements.
• prepare and interpret a company cash flow statement Only the following notes to the financial statements will
• identify the general purpose of company financial statements be examinable:
• identify the elements of company financial statements and the – non current assets
relationship between them – events after the balance sheet date
• interpret the relationship between the elements of financial – contingent liabilities and contingent assets
statements using ratio analysis drawing valid conclusions and – statement of changes in equity
presenting interpretations and conclusions to the appropriate – research and development expenditure
people. (g) Business organisation
(i) structure
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (ii) procedures and policies
A thorough knowledge of Paper 1, Recording Financial Transactions
and Paper 3, Maintaining Financial Records, is required for Paper 2 Preparing financial statements
6. (a) Preparation of partnership and company financial
statements from a trial balance, including adjustments
SYLLABUS CONTENT where appropriate for:
1 General framework (i) accruals and prepayments
(a) General purpose of financial statements, users and their (ii) income tax
needs (iii) dividends
(b) Financial statements (iv) depreciation
(i) income statement (v) irrecoverable debts and allowances for receivables
(ii) balance sheet (vi) closing inventory
(iii) interaction of the income statement and balance (vii) issue of share capital
sheet (viii) revaluation of assets
(c) Elements of financial statements and their interaction (ix) provisions
(x) admission and retirement of partners

PAGE 50
Drafting Financial Statements (INT)

(b) Taxation consolidated financial statements for a simple group

(i) presentation of income tax (i) consolidated balance sheet
(c) Non current assets (ii) consolidated income statement
(i) distinction between capital and revenue (b) Overview of distinction between a subsidiary and an
expenditure associate
(ii) accounting for the acquisition and disposal of
assets EXCLUDED TOPICS
(iii) depreciation – definition, reasons for and methods, The following topics are specifically excluded from Paper 6:
including straight line, reducing balance and sum • detailed or computational questions on deferred tax or
of digits discounting of provisions
(iv) research and development • group cash flow statements
(v) elementary treatment of goodwill • joint ventures
(d) Current assets • long-term contracts
(i) inventory • foreign currency, segmental reporting, impairment of assets,
(ii) receivables, including accounting for irrecoverable retirement benefits, derivatives and capital instruments.
debts and allowances for receivables
(iii) cash KEY AREAS OF THE SYLLABUS
(e) Current liabilities and accruals The two main skills required for Paper 6, Drafting Financial
(f) Shareholders’ equity Statements are:
(g) Events after the balance sheet date • the ability to prepare basic financial statements and the
(h) Contingencies underlying accounting records on which they are based
(i) Presentation of financial statements • an understanding of the principles on which accounting is based.

3 Cash flow statements The key topic areas are as follows:

(a) Preparation of a single company cash flow statement • preparation of financial statements for partnerships and
(b) Notes to the cash flow statement companies
(c) Interpretation of a cash flow statement • basic group accounts – consolidated balance sheet and income
statement for a simple group
4 Interpretation of financial statements • elements of financial statements and the interaction between the
(a) Ratio analysis elements
(i) profitability • accounting conventions and concepts
(ii) liquidity • interpretation of financial statements
(iii) efficient use of resources • cash flow statements.
(iv) investor
(v) financial position APPROACH TO EXAMINING THE SYLLABUS
(b) Identification of unusual issues or trends The examination is a three-hour written paper. The examination
(c) Presentation of reports targeted at the user and drawing consists of four compulsory questions.
appropriate conclusions Question 1 30 to 40 marks
Question 2 25 to 30 marks
5 Consolidated accounts Question 3 15 to 20 marks
(a) Groups of companies – preparation of basic Question 4 15 to 20 marks
Total 100 marks

PAGE 51
 Drafting Financial Statements (INT)

ADDITIONAL INFORMATION STUDY SESSIONS

Accounting standards will not be examined until six months after 1 Framework of financial reporting
they have been published. The cut off date for the June examination (a) Explain the need for, and objectives of, financial
is 30 November preceding the June examination. The cut off date for statements
the December examination is 31 May preceding the December (b) Identify the users of financial statements and their
examination. particular interests in the statements
(c) Discuss how the accounting systems of an organisation
RELEVANT TEXTS are affected by its organisational structure, its
There are a number of sources from which you can obtain a series administrative systems and procedures and the nature of
of materials written for ACCA CAT examinations. its business transactions
(d) Describe and explain the following elements of the
BPP – ACCA’s official CAT publisher financial statements and their interaction:
Contact number: +44 (0)20 8740 2222 (i) assets
Website: www.bpp.com (ii) liabilities
(iii) equity
FTC Foulks Lynch (iv) income
Contact number: +44 (0)118 989 0629 (v) expenses
Website: www.financial-training.com/new/foulkslynch (vi) contributions from owners
(vii) distributions to owners
Candidates may also find the following texts useful, although they (e) Recognition of elements for inclusion in financial
should be aware that these are based on UK accounting standards: statements

Wood, Frank and Sangster, Alan. Business Accounting 2 (10th 2 Conceptual framework
edition, FT Pitman Publishing, ISBN: 0-273-693107) (This covers (a) Discuss the nature and purpose of a conceptual
more than is required for this syllabus, but has a useful approach to framework
consolidation.) (b) Explain the potential benefits and drawbacks of an
agreed conceptual framework
(c) Explain the role and general issues covered by the
Wider reading is also desirable, especially regular study of relevant Framework for the Preparation and Presentation of
articles in ACCA’s student accountant magazine. Financial Statements
(d) Identify and explain the qualitative characteristics of
financial information
(e) Define, discuss and apply accounting concepts,
principles and policies
(f) Discuss the shortcomings of historical cost accounting
and how they might be overcome

3 The regulatory framework

(a) Understand the structure and role of the:
(i) International Accounting Standards Committee
Foundation (Trustees)
(ii) International Accounting Standards Boards (IASB)

PAGE 52
Drafting Financial Statements (INT)

(iii) Standards Advisory Council (SAC) (ii) depreciation

(iv) International Financial Reporting Interpretations (iii) irrecoverable debts and allowances for receivables
Committee (IFRIC) (iv) closing inventory
(b) Explain the standard setting process (i) Explain why a revaluation is required after an
(c) Explain the advantages and disadvantages of accounting admission, a change in the profit sharing ratio or a
standards retirement
(j) Revalue a partnership and calculate goodwill
4 & 5 Non-current assets (k) Make appropriate entries in the ledger accounts
(a) Distinguish between capital and revenue expenditure (l) Draft the partnership financial statements after a change
(b) Explain, calculate and demonstrate the inclusion of the in the partnership
profit or loss on disposal of non-current assets in the (m) Draft the partnership financial statements after a uniting
income statement of two sole traders
(c) Account for the revaluation of non-current assets (n) Account for the dissolution of a partnership
(d) Account for gains and losses on the disposal of revalued (o) Prepare final accounts from incomplete records
assets
(e) Account for depreciation – definition, reasons and 9,10 & 11 Company financial statements
methods, including straight line, reducing balance and (a) Prepare the financial statements for a company,
sum of digits including adjustments for items including:
(f) Account for changes in the useful economic life or (i) income tax
residual value of assets (ii) dividends
(g) Explain and demonstrate how non-current asset (iii) depreciation
balances and movements are disclosed in the financial (iv) irrecoverable debts and allowances for receivables
statements (v) closing inventory
(vi) share capital
6, 7 & 8 Partnership accounts (vii) accruals and prepayments
(a) Identify the key features of a partnership (viii) revaluation of assets
(b) Outline the advantages and disadvantages of operating (ix) provisions
as a partnership, compared with operating as a sole (b) Prepare a statement of changes in equity
trader or company (c) Prepare the following notes to the financial statements:
(c) Outline the conventional methods of dividing profit and (i) non-current assets
maintaining equity between partners (ii) events after the balance sheet date
(d) Draft an appropriation account for a partnership (iii) contingent liabilities and contingent assets
(e) Distinguish between partners' capital and current (iv) research and development expenditure
accounts (d) Derive missing figures from incomplete records
(f) Record the partners' share of profits and losses and their
drawings in the ledger accounts 12 Accounts and disclosure requirements
(g) Record introductions and withdrawals of capital in the (a) Prepare the financial statements of companies in
ledger accounts accordance with prescribed formats and relevant
(h) Draft the income statement, appropriation account and accounting standards
the balance sheet for a partnership incorporating period (b) Discuss relevant accounting standards and be able to
end adjustments including: apply them
(i) accruals and prepayments

PAGE 53
 Drafting Financial Statements (INT)

13 Taxation (e) Understand and apply the general recognition principle

(a) Define current tax (f) Account for provisions, contingent liabilities and
(b) Account for current tax on the profits of companies (a contingent assets
detailed knowledge of deferred tax is not required)
(c) Present current tax in the published statements. 19, 20 & 21 Cash flow statements
(a) Explain the need for a cash flow statement
14 Goodwill and intangible assets (b) Prepare a cash flow statement including relevant notes
(a) Define and calculate goodwill for a single company in accordance with accounting
(b) Distinguish between purchased and internally generated standards
goodwill (c) Appraise the usefulness of, and interpret the information
(c) Explain and apply the accounting treatment for both in a cash flow statement
types of goodwill
(d) Explain and apply the requirements of International 22, 23, 24 & 25 Consolidated accounts
Accounting Standards for intangible assets (a) Describe and be able to identify the general
characteristics of a parent company, investment,
15 & 16 Share and loan notes subsidiary and associated undertaking
(a) Distinguish between issued and authorised share capital (b) Describe the concept of a group and the objective of
and between called in and paid in share capital consolidated financial statements
(b) Distinguish between ordinary and preference shares (c) Describe the circumstances and reasoning for
(c) Account for a share issue subsidiaries to be excluded from consolidated financial
(d) Explain the share premium account statements
(e) Define and account for a bonus issue (d) Prepare a consolidated income statement and balance
(f) Define and account for a rights issue sheet for a simple group including adjustments for pre
(g) Outline the advantages and disadvantages of a rights and post acquisition profits, minority interests and
issue and a bonus issue consolidated goodwill
(h) Distinguish between the market value and nominal value (e) Explain why intra-group transactions should be
of a share eliminated on consolidation
(i) Explain why companies will be concerned with the value (f) Account for the effects (in the income statement and
of their shares balance sheet) of intra-group trading and other
(j) Define and account for loan notes transactions including:
(k) Explain the advantages and disadvantages of raising (i) Unrealised profits in inventory and non-current
finance by issuing loan notes rather than issuing shares assets
(ii) Intra-group loans and interest and other intra-
17 &18 Events after the balance sheet date, contingent group charges
liabilities and contingent assets
(a) Define an event after the balance sheet date 26, 27, 28, 29 Interpretation of financial statements
(b) Distinguish between adjusting and non-adjusting events (a) Calculate the following ratios:
(c) Account for each category of event in the financial (i) profitability
statements (ii) liquidity
(d) Define a provision, contingent liability and contingent (iii) efficiency
asset (iv) investor
(v) financial

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Drafting Financial Statements (INT)

(b) Analyse the interpret the ratios to give an assessment of

a company's performace in comparison with:
(i) a company's previous period's financial statements
(ii) another similar company for the same period
(iii) industry average ratios
(c) Identify and discuss the limitations of ratio analysis
(d) Prepare a financial analysis report of a company in a
suitable format
30, 31 & 32 Revision

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 Paper 9
Paper 6 – Drafting Financial Statements (GBR)

AIMS (ii) liabilities

To understand and apply the techniques used to prepare year-end (iii) ownership interest
financial statements of partnerships and limited companies which (iv) gains
comply with legislation and accounting standards, and to interpret (v) losses
financial statements and the relationships between their elements (vi) contributions from owners
using ratio analysis. (vii) distributions to owners
(d) Conceptual framework
OBJECTIVES (i) Statement of Principles
On completion of this paper, candidates should be able to: (ii) accounting concepts, principles and policies
• draft partnership and limited company financial statements to (e) Regulatory framework
comply with relevant legislation and accounting standards (i) standard-setting process
• correctly identify and implement adjustments, referring any (ii) relevant accounting standards
issues and unresolved discrepancies to an appropriate person (iii) legal framework and obligations of directors
• understand the importance of an organisation’s procedures and (iv) statutory format of accounts and disclosure
policies, including confidentiality procedures requirements
• prepare and interpret a limited company cash flow statement (f) Notes to the financial statements.
• identify the general purpose of limited company financial Only the following notes to the financial statements will
statements be examinable:
• identify the elements of limited company financial statements and – statement of movements in reserves
the relationship between them – fixed assets
• interpret the relationship between the elements of financial – disclosure of exceptional items
statements using ratio analysis drawing valid conclusions and – events after the balance sheet date
presenting interpretations and conclusions to the appropriate – contingent liabilities and contingent assets
people. – research and development expenditure
(g) Business organisation
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (i) structure
A thorough knowledge of Paper 1, Recording Financial Transactions (ii) procedures and policies
and Paper 3, Maintaining Financial Records, is required for Paper
6. 2 Preparing financial statements
(a) Preparation of partnership and limited company
SYLLABUS CONTENT financial statements from a trial balance, including
1 General framework adjustments where appropriate for:
(a) General purpose of financial statements, users and their (i) accruals and prepayments
needs (ii) corporation tax
(b) Financial statements (iii) dividends
(i) profit and loss account (iv) depreciation
(ii) balance sheet (v) irrecoverable debts and allowances for debtors
(iii) interaction of the profit and loss account and (vi) closing stock
balance sheet (vii) issue of share capital
(c) Elements of financial statements and their interaction (viii) revaluation of assets
(i) assets (ix) provisions

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Drafting Financial Statements (GBR)

(x) admission and retirement of partners (a) Groups of companies – preparation of basic
(b) Taxation consolidated financial statements for a simple group
(i) presentation of corporation tax (i) consolidated balance sheet
(c) Fixed assets (ii) consolidated profit and loss account
(i) distinction between capital and revenue (b) Overview of distinction between a subsidiary and an
expenditure associate
(ii) accounting for the acquisition and disposal of
assets EXCLUDED TOPICS
(iii) depreciation – definition, reasons for and methods, The following topics are specifically excluded from Paper 6:
including straight line, reducing balance and sum • detailed or computational questions on deferred tax or
of digits discounting of provisions
(iv) research and development • group cash flow statements
(v) elementary treatment of goodwill • joint ventures
(d) Current assets • long-term contracts
(i) stock • foreign currency, segmental reporting, impairment of assets,
(ii) debtors, including accounting for irrecoverable retirement benefits, derivatives and capital instruments.
debts and allowances for debtors
(iii) cash KEY AREAS OF THE SYLLABUS
(e) Current liabilities and accruals The two main skills required for Paper 6, Drafting Financial
(f) Shareholders’ equity Statements are:
(g) Events after the balance sheet date • the ability to prepare basic financial statements and the
(h) Contingencies underlying accounting records on which they are based
(i) Reporting financial performance, including the statement • an understanding of the principles on which accounting is based.
of total recognised gains and losses
The key topic areas are as follows:
3 Cash flow statements • preparation of financial statements for partnerships and limited
(a) Preparation of a single company cash flow statement companies
(b) Notes to the cash flow statement • basic group accounts – consolidated balance sheet and profit
(c) Interpretation of a cash flow statement and loss account for a simple group
• elements of financial statements and the interaction between the
4 Interpretation of financial statements elements
(a) Ratio analysis • accounting conventions and concepts
(i) profitability • interpretation of financial statements
(ii) liquidity • cash flow statements.
(iii) efficient use of resources
(iv) investor APPROACH TO EXAMINING THE SYLLABUS
(v) financial position The examination is a three-hour written paper. The paper consists of
(b) Identification of unusual issues or trends
(c) Presentation of reports targeted at the user and drawing
appropriate conclusions

5 Consolidated accounts

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 Drafting Financial Statements (GBR)

four compulsory questions. STUDY SESSIONS

1 Framework of financial reporting
Question 1 30 to 40 marks (a) Explain the need for, and objectives of, financial
Question 2 25 to 30 marks statements
Question 3 15 to 20 marks (b) Identify the users of financial statements and their
Question 4 15 to 20 marks particular interests in the statements
Total 100 marks (c) Discuss how the accounting systems of an organisation
are affected by its organisational structure, its
ADDITIONAL INFORMATION administrative systems and procedures and the nature of
Accounting standards will not be examined until six months after its business transactions
they have been published. The cut off date for the June examination (d) Describe and explain the following elements of the
is 30 November preceding the June examination. The cut off date for financial statements and their interaction:
the December examination is 31 May preceding the December (i) assets
examination. (ii) liabilities
(iii) ownership interest
RELEVANT TEXTS (iv) gains
There are a number of sources from which you can obtain a series (v) losses
of materials written for ACCA CAT examinations. (vi) contributions from owners
(vii) distributions to owners
BPP – ACCA’s official CAT publisher (e) Recognition of elements for inclusion in financial
Contact number: +44 (0)20 8740 2222 statements
Website: www.bpp.com
2 Conceptual framework
FTC Foulks Lynch (a) Discuss the nature and purpose of a conceptual
Contact number: +44 (0)118 989 0629 framework
Website: www.financial-training.com/new/foulkslynch (b) Explain the potential benefits and drawbacks of an
agreed conceptual framework
Candidates may also find the following texts useful: (c) Explain the role and general issues covered by the
Statement of Principles
Wood, Frank and Sangster, Alan. Business Accounting 2 (10th (d) Identify and explain the qualitative characteristics of
edition, FT Pitman Publishing, ISBN: 0-273-693107) financial information
(This covers much more than is required for this syllabus, but has a (e) Define, discuss and apply accounting concepts,
useful approach to consolidation.) principles and policies
(f) Discuss the shortcomings of historical cost accounting
and how they might be overcome

Wider reading is also desirable, especially regular study of relevant 3 The UK regulatory framework
articles in ACCA’s student accountant magazine. (a) Explain the legal framework and obligations of directors
(b) Explain the standard setting process and the role of the:

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Drafting Financial Statements (GBR)

(i) Financial Reporting Council (i) accruals and prepayments

(ii) Accounting Standards Board (ii) depreciation
(iii) Urgent Issues Task Force (iii) irrecoverable debts and allowances for debtors
(iv) Financial Reporting Review Panel (iv) closing stock
(c) Explain the advantages and disadvantages of accounting (i) Explain why a revaluation is required after an
standards admission, a change in the profit sharing ratio or a
retirement
4 & 5 Fixed assets (j) Revalue a partnership and calculate goodwill
(a) Distinguish between capital and revenue expenditure (k) Make appropriate entries in the ledger accounts
(b) Explain, calculate and demonstrate the inclusion of the (l) Draft the partnership financial statements after a change
profit or loss on disposal of fixed assets in the profit and in the partnership
loss account (m) Draft the partnership financial statements after a merger
(c) Account for the revaluation of fixed assets of two sole traders
(d) Account for gains and losses on the disposal of revalued (n) Account for the dissolution of a partnership
assets (o) Prepare final accounts from incomplete records
(e) Account for depreciation – definition, reasons and
methods, including straight line, reducing balance and 9,10 & 11 Limited company financial statements
sum of digits (a) Prepare the financial statements for a limited company
(f) Account for changes in the useful economic life or including adjustments for items including:
residual value of assets (i) corporation tax
(g) Explain and demonstrate how fixed asset balances and (ii) dividends
movements are disclosed in the financial statements (iii) depreciation
(iv) irrecoverable debts and allowances for debtors
6, 7 & 8 Partnership accounts (v) closing stock
(a) Identify the key features of a partnership (vi) share capital
(b) Outline the advantages and disadvantages of operating (vii) accruals and prepayments
as a partnership, compared with operating as a sole (viii) revaluation of assets
trader or limited company (ix) provisions
(c) Outline the conventional methods of dividing profit and (b) Prepare a statement of total recognised gains and losses
maintaining equity between partners (c) Prepare the following notes to the financial statements:
(d) Draft an appropriation account for a partnership (i) statement of movements in reserves
(e) Distinguish between partners' capital and current (ii) fixed assets
accounts (iii) exceptional items
(f) Record the partners' share of profits and losses and their (iv) events after the balance sheet date
drawings in the ledger accounts (v) contingent liabilities and contingent assets
(g) Record introductions and withdrawals of capital in the (vi) research and development expenditure
ledger accounts (d) Distinguish between extraordinary and exceptional items,
(h) Draft the trading and profit and loss account, including their accounting treatment and disclosure
appropriation account and the balance sheet for a requirements
partnership incorporating period end adjustments (e) Derive missing figures from incomplete records
including:

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 Drafting Financial Statements (GBR)

12 Statutory format of accounts and disclosure requirements ordinary or preference shares

(a) State the requirements of the Companies Act regarding
the duty to prepare annual accounts 17 &18 Events after the balance sheet date, contingent liabilities
(b) Prepare the financial statements of limited companies in and contingent assets
accordance with the prescribed formats and relevant (a) Define an event after the balance sheet date
accounting standards. (b) Distinguish between adjusting and non-adjusting events
(c) Discuss relevant accounting standards and be able to (c) Account for each category of event in the financial
apply them statements
(d) Define a provision, contingent liability and contingent
13 Taxation asset
(a) Define current tax (e) Understand and apply the general recognition principle
(b) Account for current tax on the profits of companies (a (f) Account for provisions, contingent liabilities and
detailed knowledge of deferred tax is not required) contingent assets
(c) Draft appropriate disclosure in the published statements.
19, 20 & 21 Cash flow statements
14 Goodwill and intangible assets (a) Explain the need for a cash flow statement
(a) Define and calculate goodwill (b) Prepare a cash flow statement including relevant notes
(b) Distinguish between purchased and internally generated for a single company in accordance with accounting
goodwill standards
(c) Explain and apply the accounting treatment for both (c) Appraise the usefulness of, and interpret the information
types of goodwill in a cash flow statement
(d) Explain and apply the requirements of Accounting
Standards for Research and Development 22, 23, 24 & 25 Consolidated accounts
(a) Describe and be able to identify the general
15 & 16 Share and loan capital characteristics of a parent company, investment,
(a) Distinguish between issued and authorised share capital subsidiary and associated undertaking
and between called up and paid up share capital (b) Describe the concept of a group and the objective of
(b) Distinguish between ordinary and preference shares consolidated financial statements
(c) Account for a share issue (c) Describe the circumstances and reasoning for
(d) Explain the share premium account subsidiaries to be excluded from consolidated financial
(e) Define and account for a bonus issue statements
(f) Define and account for a rights issue (d) Prepare a consolidated profit and loss account and
(g) Outline the advantages and disadvantages of a rights balance sheet for a simple group including adjustments
issue and a bonus issue for pre and post acquisition profits, minority interests
(h) Distinguish between the market value and nominal value and consolidated goodwill
of a share (e) Explain why intra-group transactions should be
(i) Explain why companies will be concerned with the value eliminated on consolidation
of their shares (f) Account for the effects (in the profit and loss account and
(j) Define and account for debentures balance sheet) of intra-group trading and other
(k) Explain the advantages and disadvantages of raising transactions including:
finance by issuing debentures rather than issuing (i) Unrealised profits in stock and fixed assets

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Drafting Financial Statements (GBR)

(ii) Intra-group loans and interest and other intra-

group charges

26, 27, 28, 29 Interpretation of financial statements

(a) Calculate the following ratios:
(i) profitability
(ii) liquidity
(iii) efficiency
(iv) investor
(v) financial
(b) Analyse and interpret the ratios to give an assessment of
a company’s performance in comparison with:
(i) a company’s previous period’s financial statements
(ii) another similar company for the same period
(ii) industry average ratios
(c) Identify and discuss the limitations of ratio analysis
(d) Prepare a financial analysis report of a company in a
suitable format

30, 31 & 32 Revision

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Paper 7 – Planning, Control and Performance
Management

AIMS (b) External information

To develop knowledge and understanding of the application of (i) on costs, prices, demand and availability of
management accounting techniques to support the management resources (from suppliers, providers of services,
processes of planning, decision-making, control and performance competitors, customers and markets), market
measurement. research
(ii) government statistics, trade associations, financial
OBJECTIVES press
On completion of this paper, candidates should be able to: (iii) uses and limitations of published statistics
• identify valid, relevant data from internal and external sources (iv) impact of the general economic environment /
• present cost information using appropriate methods general economic information
• prepare forecasts of income and expenditure (c) Sampling techniques
• monitor and analyse actual costs against forecasts and trends (i) random, systematic, stratified, multistage, cluster,
• compare actual costs with standard costs and analyse and quota
explain any variances (ii) choice of appropriate method, advantages and
• prepare draft budget proposals disadvantages
• prepare and present reports comparing actual performance with
planned performance for the organisation or for responsibility 3 Analysis of information
centres and analyse any variances for management control (a) Methods of presenting information
purposes (i) written reports
• prepare and monitor relevant performance indicators, interpret (ii) graphs
the results and recommend how to reduce costs and enhance (iii) diagrams
value (iv) tables
• make short-term decisions to enhance business performance. (b) Index numbers to allow for price and volume changes

POSITION OF THE PAPER IN THE OVERALL SYLLABUS 4 Forecasting

A thorough knowledge of the costing elements of Paper 2, (a) Cost forecasting
Information for Management Control, and all of Paper 4, (i) high-low method
Accounting for Costs, is required before commencing study for Paper (ii) linear regression analysis
7. (b) Time series analysis
(i) moving averages to determine a trend
SYLLABUS CONTENT (ii) linear regression analysis to determine a trend
1 Principles of cost accounting (iii) seasonal variations for both additive and
(a) Absorption costing multiplicative models
(b) Marginal costing (c) Advantages and disadvantages of forecasting techniques
(c) Activity based costing (d) Impact of product lifecycle
(e) Usefulness of computer packages and forecasting
2 Collection of information
(a) Internal information 5 Variance analysis
(i) accounting information (a) Standard costing systems
(ii) wage and salary information (b) Calculation of variances
(iii) strategic plans (i) material price and usage

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Planning, Control and Performance Management

(ii) labour rate and efficiency 7 Budgetary control

(iii) variable overhead expenditure and efficiency (a) Responsibility accounting
(iv) fixed overhead expenditure, volume, capacity and (i) link between the design of cost collection and
efficiency reporting and the control structure of the
(v) sales margin volume and sales price variances organisation
(c) Reconciliation between budgeted, standard and actual (ii) controllable and uncontrollable costs
costs and profits (iii) cost centres, revenue centres, profit centres,
(i) absorption costing system investment centres
(ii) marginal costing system (b) Flexible budgets
(d) Analysis of variances (i) fixed versus flexible budgets
(i) subdivision of variances (ii) preparation of flexible budgets
(ii) factors to consider before investigation (iii) impact of capacity variations
(iii) significance and identification of possible reasons (iv) calculation and analysis of variances
for variances (v) presentation of budgetary control reports for
(iv) recommended control actions management
(vi) recommendation of appropriate control action
6 Budgetary planning (vii) use of relevant computer packages
(a) Different types of budget (c) Budgets and behaviour of managers and other employees
(i) for demand (i) motivational factors
(ii) for income (ii) participation in the budgetary process
(iii) for resource usage (materials, labour and overheads) (iii) goal congruence and dysfunctional decision-making
(iv) for cost of resources usage
(v) for capital 8 Performance measurement
(b) Functions of a system of budgetary planning and control (a) Use of performance indicators to measure:
(c) Budget development and review process (i) perspectives of the balanced scorecard
(i) link between planning cycles, budgets and forecasts (ii) economy, effectiveness and efficiency
(ii) principal budget factors (demand, capacity and (iii) unit costs
resource) (iv) resource utilisation
(iii) order of budget preparation (v) profitability
(iv) coordination of sub-budgets (vi) quality of service
(v) revisions for limiting factors (b) Control ratios
(d) Alternative approaches to budgeting (i) efficiency
(i) incremental (ii) capacity
(ii) zero based (iii) activity
(iii) rolling (c) Scenario planning (‘what-if’ analysis)
(e) Usefulness of computer packages in budgeting (d) Cost reduction and value enhancement recommendations
(i) efficiencies
(ii) modifications to work processes
(iii) benchmarking

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 Planning, Control and Performance Management

9 Decision-making RECOMMENDED TEXTS

(a) Cost behaviour and cost volume profit analysis There are a number of sources from which you can obtain a series
(b) Break-even charts of materials written for the ACCA CAT examinations.
(c) Make or buy decisions
(d) Opportunity costs and relevant costs BPP – ACCA’s official CAT publisher
(e) Pricing policies and procedures Contact number: +44 (0)20 8740 2222
Website: www.bpp.com
10 Cost management
(a) Life cycle costing FTC Foulks Lynch
(b) Target costing (including value engineering) Contact number: +44 (0)118 989 0629
(c) Activity based costing Website: www.financial-training.com/new/foulkslynch
(d) Total Quality Management
(i) basic principles Candidates may also find the following texts useful:
(ii) costs of quality
Weetman, P. Management Accounting – An Introduction (Prentice
EXCLUDED TOPICS Hall)
The following topics are specifically excluded from Paper 7:
• derivation of random samples Dodge, R. Foundations of Cost and Management Accounting
• derivation of coefficients of linear regression equation using (International Thomson Business Press)
formulae. ISBN: 041258820X

KEY AREAS OF THE SYLLABUS Lucey, T. Costing (DP Publications: 5th Edition) ISBN:
The key topic areas are: 0826455107
• forecasting
• budget preparation Pizzey, A. Cost and Management Accounting (Paul Chapman: 3rd
• flexible budgets Edition)
• variance computation and interpretation ISBN: 1853960497
• performance indicators
• short-term decision-making Wider reading is also desirable, especially regular study of relevant
• cost reduction and value enhancement. articles in ACCA’s student accountant magazine.

APPROACH TO EXAMINING THE SYLLABUS

The examination is a three-hour written paper. The paper consists of
four compulsory questions.

Question 1 40 marks
Questions 2 to 4 (20 marks each) 60 marks
Total 100 marks

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Planning, Control and Performance Management

STUDY SESSIONS (a) Explain the reasons for the development of activity based
1 Accounting for management costing
(a) Describe the management function within an (b) Select appropriate cost pools and cost drivers
organisation and how this may vary according to the (c) Calculate product costs using activity based costing
nature of the business (d) Apply activity based costing principles in a job, contract,
(b) Describe the objectives of management accounting batch, service, or process costing context
information in relation to short-term and long-term (e) Evaluate the use of activity based costing in specific
planning, control and performance measurement situations
(c) Describe the role of the management accountant in an (f) Compare and contrast the use of absorption, marginal
organisation and activity based costing
(d) Describe the features of useful management information
(e) Explain the limitations of management information in 5 Collection of information
providing guidance for managerial decision-making (a) Describe sources of information from within and outside
(f) Explain how cost accounting systems can be maintained the organisation
and improved (i) describe sources of information from suppliers and
customers
2 Absorption costing (ii) describe sources of information from suppliers and
(a) Demonstrate knowledge of the application of absorption customers
costing in an organisation (iii) discuss sampling techniques (random, systematic,
(b) Apply absorption costing principles in a job, contract, stratified, multistage, cluster and quota)
batch, service, or process costing context (iv) choose an appropriate sampling method in a
(c) Prepare management accounts and cost estimates using specific situation
absorption costing principles (v) describe sources of information from government,
(d) Evaluate the usefulness of absorption costing in specific trade associations and the financial press
situations (vi) describe benchmarking
(vii) discuss the advantages and disadvantages of
3 Marginal costing benchmarking
(a) Explain the use of marginal costing in an organisation (viii) select appropriate benchmarks at strategic, tactical
(b) Apply marginal costing principles in a job, contract, and operational levels in a specific situation
batch, service, or process costing context (Note: Derivation of random samples will not be
(c) Explain cost behaviour examined)
(d) Prepare management accounts and cost estimates using
marginal costing principles 6 Presentation of information and use of Indices
(e) Reconcile marginal costing and absorption costing (a) Presentation of information
profits (i) Prepare written reports representing management
(f) Evaluate the use of marginal costing in specificsituations information in suitable formats according to
(g) Compare and contrast the use of absorption and purpose
marginal costing (ii) Present information using tables, charts and
graphs (bar charts, histograms, frequency
4 Activity based costing polygons)
(iii) Interpret information (including the above tables,

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 Planning, Control and Performance Management

charts and graphs) presented in management reports 9 Budgetary planning

(b) Indices (a) Link between planning cycles, budgets and forecasts
(i) Calculate price and quantity indices on Laspeyres' (i) describe the planning and control cycle in an
and Paasche bases organisation
(ii) Discuss advantages and disadvantages of (ii) explain how the design of the planning and control
Laspeyres' and Paasche indices system will be affected by organisational structure,
(iii) Adjust raw data using appropriate indices business objectives, the organisation's
administrative procedures and the nature of the
7 Forecasting product/service market
(a) Use the high-low method to estimate the fixed and (iii) compare short-term and long-term business plans
variable elements of a cost and explain how they are related
(b) Explain the advantages and disadvantages of the high- (b) Principal budget factors (demand, capacity and
low method resource)
(c) Construct scatter diagrams and lines of best fit (i) explain the importance of the principal budget
(d) Describe the use of linear regression analysis in the factor in constructing a budget
analysis of cost data (ii) describe principal budget factors (demand,
(e) Use linear regression coefficients to make forecasts of capacity and resource)
costs and revenues (iii) identify the principal budget factor in a specific
(f) Adjust historical and forecast data for price movements situation
(g) Explain the advantages and disadvantages of linear
regression analysis 10 Budgetary planning - preparation, co-ordination and
(h) Describe the product life cycle and explain its importance revisions
in forecasting (a) Order of budget preparation
(i) describe the order of budget construction relating
8 Time series analysis to a specific limiting factor
(a) Explain the principles of time series analysis (trend, (ii) prepare functional and departmental and master
seasonal variation and random elements) budgets in an appropriate order in a given situation
(b) Calculate moving averages (b) Coordination of sub-budgets
(c) Determination of trend, including the use of regression (i) explain the budget preparation timetable
analysis (ii) describe relevant documentation produced and
(d) Use trend and seasonal variation (additive and the management accountant’s role in its production
multiplicative) to make budget forecasts (iii) describe the involvement of staff at all levels in the
(e) Explain the advantages and disadvantages of time series organisation in the budget preparation process and
analysis the effect on employee motivation of the approach
(f) Describe the concept of the product lifecycle and its adopted
implications for sales forecasting (iv) describe the sources of information required for
(Note: Derivation of regression coefficients will not be budget preparation and their likely limitations
examined) (c) Revisions for limiting factors
(i) use contribution per unit of the limiting factor to

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Planning, Control and Performance Management

allocate scarce resources (ii) prepare formulae appropriate for flexing a budget
(ii) explain how management might plan for variations (c) Impact of capacity variations
in capacity levels (i) prepare flexed budgets at various output levels
(iii) prepare budgets under varying capacity levels (ii) estimate profit at various output levels

11 Budgetary planning- different types of budgets 14 Budgetary control – calculation and analysis of budget variances
(a) Prepare sales budgets (a) Calculate simple variances between flexed budget, fixed
(b) Prepare functional budgets (production, raw materials budgets and actual results for sales, costs and profits
usage and purchases, labour, fixed overheads) (i) calculate sales price and sales margin volume
(c) Discuss the preparation of discretionary expense budgets variances
(d) Prepare capital budgets (ii) explain the meaning of budget variances
(e) Prepare cash budgets (iii) analyse the potential causes of budget variances
(f) Prepare master budgets (profit and loss account and
balance sheet) 15 Budgetary control – reports, recommendations and relevant
computer packages
12 Budgetary planning - alternative approaches and computer (a) Presentation of budgetary control reports for management
based models (i) prepare control reports suitable for presentation to
(a) Alternative approaches to budgeting management
(i) describe the main features of zero-based budgeting (ii) discuss the relative significance of variances
(ii) explain the advantages and limitations of zero- (b) Recommendation of appropriate control action
based budgets (i) explain potential actions to eliminate variances
(iii) compare the use of incremental and zero-based (ii) discuss the advantages and disadvantages of
budgeting systems particular actions
(iv) describe when zero-based budgets are commonly (c) Use of relevant computer packages
used (i) discuss the use of spreadsheets in flexing budgets
(v) describe the main features of a rolling budget (ii) prepare spreadsheet formulae for budget flexing
(b) Use of computer based models
(i) outline the role of spreadsheet models in budget 16 Budgetary control - responsibility accounting, controllable
construction and uncontrollable costs
(ii) prepare simple spreadsheet formulae for budget (a) Responsibility accounting
construction (i) define the concept of responsibility accounting
(iii) describe financial modelling software (ii) explain its significance in control
(iv) describe “what if” analysis and scenario planning (iii) evaluate the responsibility of managers in a given
situation
13 Budgetary control - fixed and flexible budgets (iv) explain the problem of joint responsibility
(a) Fixed versus flexible budgets (v) design reports appropriate to a given responsibility
(i) explain the importance of flexible budgets in control structure
(ii) explain the disadvantages of fixed budgets in control (vi) identify costs to be collected for a given
(iii) identify situations where fixed or flexible budgetary responsibility structure
control would be appropriate (b) Controllable and uncontrollable costs
(b) Preparation (i) explain the concepts of controllable and
(i) flex a budget to a given level of volume

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 Planning, Control and Performance Management

uncontrollable costs congruent behaviour

(ii) distinguish between controllable and 19 Standard costing systems
uncontrollable costs in a given situation (a) Explain the operation of a standard costing system
(b) Discuss the advantages of standard costing and variance
17 Budgetary control – cost centres, revenue centres, profit analysis
centres and investment centres (c) Evaluate the appropriateness of standard costing in a
(a) Define cost centres, revenue centres, profit centres and specific situation
investment centres (d) Discuss the value of standard costing in a modern
(b) Discuss performance measures appropriate to each type manufacturing and service environment
of responsibility centre (budget variances, contribution (e) Define standard absorption and standard marginal
measures, controllable profit, traceable profit, return on costing
investment and residual income) (f) Discuss the advantages and limitations of standard
(c) Calculate controllable profit, traceable profit, return on marginal and standard absorption costing
investment and residual income in a specific situation (g) Prepare standard cost cards (product specification) for
(d) Distinguish between managerial performance and standard marginal and standard absorption costing
business unit performance
20 Standard costing – calculation of variances
18 Budgetary control – budgets and the behaviour of managers (a) Calculate material price and usage variances (price
and other employees variances to be based upon usage or purchases)
(a) Motivation (b) Calculate labour rate and efficiency variances
(i) define motivation (c) Calculate fixed overhead expenditure, volume, capacity
(ii) explain the importance of motivation in and efficiency variances
performance management (d) Calculate variable overhead expenditure and efficiency
(iii) identify factors in a budgetary planning and control variances
system that influence motivation (e) Calculate sales margin volume and sales price variances
(iv) explain the impact of targets upon motivation (f) Undertake entries in a standard cost bookkeeping situation
(v) evaluate managerial incentive schemes
(b) Participation 21 Standard costing – reconciliation of standard to actual cost
(i) discuss the advantages and disadvantages of a (a) Prepare a reconciliation of standard to actual cost for an
participative approach to budgeting absorption costing system
(ii) explain top down, bottom up, and budget (b) Prepare a reconciliation of standard to actual cost for a
challenging approaches to budgeting marginal costing system
(c) Goal congruence and dysfunctional decision-making (c) Prepare a reconciliation of budgeted to actual profit for
(i) define goal congruence and dysfunctional decision- an absorption costing system
making (d) Prepare a reconciliation of budgeted to actual profit for a
(ii) explain the importance of goal congruent behaviour marginal costing system
(iii) discuss causes of dysfunctional decision-making (e) Prepare control reports suitable for presentation to
(iv) identify dysfunctional behaviour in a specific management
situation
(v) amend budgeting procedures to encourage goal

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Planning, Control and Performance Management

22 Standard costing – analysis of variances 25 Performance Measurement – scope

(a) Subdivide variances to reflect responsibility structures (a) Discuss and calculate measures of financial performance
(b) Calculate idle time variances – profitability, liquidity, activity and gearing
(c) Analyse variances into controllable and non-controllable (b) Discuss the importance of non-financial performance
elements measures
23 Standard costing – variance investigation (c) Discuss the relationship between short-term and long-
(a) Significance and identification of possible reasons for term performance
variances (d) Discuss the measurement of performance in service
(i) discuss the causes of variances in general industry situations
(ii) identify potential causes of variances in a specific (e) Discuss the measurement of performance in non-profit
situation seeking and public sector organisations
(iii) explain the potential interrelationships between (f) Discuss measures that may be used to assess
variances managerial performance and the practical problems
(iv) discuss the meaning and significance of variances involved
(b) Factors to consider before investigation (g) Discuss the role of benchmarking in performance
(i) explain the significance of cost of investigation, measurement
cost of correction, benefit of correction, and (h) Produce reports highlighting key areas for management
probability of successful correction in variance attention and recommendations for improvement
investigation
(ii) calculate the expected benefit of variance 26 & 27 Performance measurement – applications
investigation (a) Perspectives of the balanced scorecard
(iii) discuss the role of control charts in variance (i) discuss the advantages and limitations of the
investigation balanced scorecard
(c) Recommend control action (ii) describe performance indicators for financial
(i) explain potential courses of action to correct a success, customer satisfaction, process efficiency
variance and growth
(ii) evaluate courses of action to correct a variance in (iii) discuss critical success factors and key
specific circumstances performance indicators and their link to objectives
and mission statements
24 Performance measurement – overview (iv) establish critical success factors and key
(a) Performance hierarchy performance indicators in a specific situation
(i) discuss the purpose of mission statements and (b) Economy, efficiency and effectiveness
their role in performance measurement (i) explain the concepts of economy, efficiency and
(ii) discuss the purpose of strategic and operational effectiveness
and tactical objectives and their role in (ii) describe performance indicators for economy,
performance measurement efficiency and effectiveness
(b) External considerations (iii) establish performance indicators for economy,
(i) discuss the impact of economic and market efficiency and effectiveness in a specific situation
conditions on performance measurement (iv) discuss the meaning of each of the efficiency,
(c) Discuss the impact of government regulation on capacity and activity ratios
performance measurement

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 Planning, Control and Performance Management

(v) calculate the efficiency, capacity and activity ratios 29 Decision-making problems
in a specific situation (a) Use an opportunity cost approach to solve short-term
(c) Unit costs decisions
(i) describe performance measures which would be (b) Describe the qualitative factors which may influence
suitable in job, batch, contract and process costing short-term decisions
environments (c) Prepare reports making recommendations for
(d) Resource utilisation management action in connection with short-term
(i) describe measures of performance utilisation in decisions
service and manufacturing environments
(ii) establish measures of resource utilisation in a 30 Cost / volume / profit (CVP) relationships
specific situation (a) Calculate and explain the break-even point in single
(e) Profitability product, multiple product and mulitple process
(i) calculate return on investment and residual income situations
(ii) explain the advantages and limitations of return on (b) Analyse the effect on the break-even point of changes in
investment and residual income sales price and costs
(f) Quality of service (c) Prepare and explain break-even charts and profit
(i) distinguish performance measurement issues in volume charts
service and manufacturing industries (d) Describe the advantages and limitations of break-
(ii) describe performance measures appropriate for even analysis for management decision-making
service industries (Note: break-even analysis will only be examined in the
(g) Establish performance measures for a service business context of single product situations)
in a specific situation
(h) Costs of quality 31 Pricing and demand
(i) discuss the importance of quality in organisations (a) Describe the factors which may influence an
(ii) establish measures of quality in a specific situation organisation’s pricing policy
(b) Prepare and justify cost based approaches to pricing
28 Decision-making – cost behaviour and relevant costs using absorption costing, marginal costing and
(a) Analyse total costs into their fixed and variable elements opportunity costing approaches
using the high-low method (c) Discuss the merits and limitations of cost based
(b) Describe the relationship between fixed and variable approaches to pricing
costs and the time horizon under consideration (d) Describe the procedure for preparing cost estimates for
(c) Explain the advantages and limitations of using a fixed price quotations and tenders
marginal costing approach for decision-making
(d) Discuss the advantages and limitations of absorption 32 Cost management
costing in decision-making (a) Total Quality Management
(e) Describe the concept of relevant costs and its importance (i) explain in general terms the costs of quality
for decision-making (prevention, appraisal, internal failure and external
(f) Outline the advantages and limitations of using an failure)
opportunity cost approach for management decision- (ii) establish measures of the cost of quality in specific
making situations
(iii) calculation of the costs and benefits of quality
initiatives

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Planning, Control and Performance Management

(b) Cost reduction and value enhancement

recommendations
(i) compare cost control and cost reduction
(ii) describe and evaluate cost reduction methods
(iii) describe and evaluate value analysis

(c) Life cycle costing

(i) describe life cycle costing
(ii) discuss the benefits of life cycle costing in a specific
situation
(d) Target costing
(i) describe target costing
(ii) discuss the link between target costing and pricing
(iii) discuss the role of value engineering in target
costing

PAGE 71
 Paper 9
Paper 8 – Implementing Audit Procedures (INT)

AIMS 2 The audit framework

To develop knowledge and understanding of the audit process from (a) External audit and internal audit
the planning stage through to the reporting stage and the techniques (b) Regulatory framework of auditing
used in the conduct of internal and external audits. (i) auditing standards
(ii) requirements of professional bodies
OBJECTIVES (c) The audit engagement process
On completion of this paper, candidates should be able to:
• explain the rules of professional conduct relating to the ethics of 3 Audit personnel
integrity, objectivity, independence and confidentiality and (a) The audit team
undertake audit procedures accordingly (b) Liaison with client staff
• identify control objectives and weaknesses for an accounting (c) Liaison with third parties
system under review (i) experts
• assess audit risks, produce an audit plan and design appropriate (ii) internal audit
audit procedures
• carry out appropriate audit procedures in accordance with an 4 Audit planning
audit plan on the basis of a validly selected sample (a) The nature of an audit plan and programme
• draw valid conclusions from the results of audit tests (b) Knowledge of the business
• prepare draft reports relating to an audit assignment. (c) Risk
(d) Materiality
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (e) Documentation
Paper 8 requires the knowledge and understanding from Paper 1, (f) Audit planning meeting
Recording Financial Transactions and Paper 3, Maintaining
Financial Records, to provide a basic understanding of the nature 5 Accounting systems and controls
and objectives of an audit and general audit practice. Candidates (a) The nature of accounting systems
will also be expected to be familiar with Paper 6, Drafting Financial (b) General principles of control
Statements. (c) Techniques to record accounting systems
(i) narrative notes
SYLLABUS CONTENT (ii) flowcharts
1 The business environment (d) Techniques to evaluate accounting systems
(a) The nature of accounting records, audit and the audit (i) internal control questionnaires
report (ii) internal control evaluation questionnaires
(b) Requirements for becoming an auditor (iii) checklists
(c) Duties of an auditor (e) Major control cycles (manual and computerised)
(d) Responsibilities of auditors (i) income (sales)
(e) Fraud and error (ii) expenditure (purchases / inventory / non-current
(i) liability to clients assets / payroll / expenses)
(ii) liability to third parties (f) Tests of control
(g) Reporting control weaknesses

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Implementing Audit Procedures (INT)

6 Audit evidence and sampling KEY AREAS OF THE SYLLABUS

(a) Financial statement assertions The key topic areas are as follows:
(b) Audit evidence and procedures • controls
(c) Verification techniques – physical examination, • audit planning
reperformance, third party confirmation, documentary • practical application of audit techniques
evidence, vouching and analytical review • preparing draft reports.
(d) Audit sampling
(e) Types of testing – tests of control and substantive testing APPROACH TO EXAMINING THE SYLLABUS
(f) Computer assisted audit techniques The examination is a three-hour written paper. The paper consists of
(g) Audit of balance sheet items – existence, completeness, four compulsory questions of 25 marks each.
ownership, valuation and disclosure
ADDITIONAL INFORMATION
7 Audit completion Accounting and auditing standards will not be examined until six
(a) Audit review months after they have been published. The cut off date for the June
(i) events after the balance sheet date examination is 30 November preceding the June examination. The
(ii) going concern cut off date for the December examination is 31 May preceding the
(iii) opening balances and comparatives December examination.
(b) Analytical procedures
(c) Recording significant and material errors RELEVANT TEXTS
(d) Review by senior audit staff There are a number of sources from which you can obtain a series
(e) Report of audit points arising (report to partner) of materials written for the ACCA CAT examinations. These are
(f) Letter of representation listed below:

8 Audit report BPP – ACCA’s official CAT publisher

(a) The standard audit report Contact number: +44 (0)20 8740 2222
(b) Qualifications in audit reports Website: www.bpp.com

EXCLUDED TOPICS FTC Foulks Lynch

The following topics are specifically excluded from Paper 8: Contact number: +44 (0)118 989 0629
• group audits Website: www.financial-training.com/new/foulkslynch
• corporate governance
• detailed understanding of audit requirements relating to: Wider reading is also desirable, especially regular study of relevant
– fraud articles in ACCA’s student accountant magazine.
– laws and regulations
– quality control
– related parties
– service organisations
– reports to those charged with governance
– reporting to regulators in the financial sector.

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 Implementing Audit Procedures (INT)

STUDY SESSIONS 6 The audit engagement process

1 The purpose and scope of an external audit and the audit (a) Explain the purpose and content of client acceptance
framework procedures comprising client screening, professional
(a) Explain the purpose and scope of an external audit clearance and independence checks
(b) Outline the requirements governing the appointment and (b) Explain the purpose of an audit engagement letter
removal of auditors (c) Examine and discuss the contents of an audit
(c) Outline the duties and responsibilities of auditors engagement letter
(d) Explain the scope of International Standards on Auditing
(e) Outline the fundamental principles of independent 7, 8 & 9 Planning the audit
auditing (a) Distinguish between a systems approach to an audit and
a direct verification approach
2 Rules of professional conduct and professional ethics (b) Explain the concept of audit risk, focusing in particular
(a) Discuss the fundamental principles of the Code of ethics on inherent risk and control risk
within the Rules of Professional Conduct of ACCA (c) Explain how auditors use knowledge of the business, in
(b) Discuss the detailed requirements of, and illustrate the audit planning
application of professional ethics in the context of (d) Identify sources from which auditors may obtain
auditor independence, objectivity and integrity as set out knowledge of the business
in ACCA's Code of ethics (e) Explain the role of audit programmes and summarise the
(c) Describe the auditor’s responsibility with regard to advantages/disadvantages of using standard
confidentiality as set out in ACCA's Code of ethics programmes
(f) Outline planning issues with regard to audit planning
3 Internal audit meetings, the timing of audit work, staffing, training of
(a) Explain the purpose and scope of internal audit the audit team, the use of suitable experts, and liaison
(b) Compare and contrast the roles of the internal audit with client staff including internal auditors
function and the external audit function with regard to (g) Explain how auditors may plan to use computer assisted
the detection of fraud and error audit techniques
(c) Identify the factors that external auditors should consider (h) Illustrate the use of an audit planning memorandum
when evaluating the work of internal auditors
10 Documenting the audit
4 & 5 True and fair view, materiality, the auditors’ report (a) Discuss the reasons for maintaining audit working
(a) Explain the concept of a true and fair view papers
(b) Explain the concept of materiality and discuss the factors (b) Explain the purpose of the current file and the permanent
to be considered when making a judgement on whether file
an item is material (c) Describe the contents of a current file and a permanent
(c) Provide and review an example of an auditors’ report file
with an unqualified opinion on the financial statements (d) Outline the quality control procedures that should exist
of an incorporated company over the review of audit working papers and in the
(d) Discuss the basic elements of the auditors’ report reporting of important audit points to the audit
(e) Discuss the concept of ‘reasonable assurance’ engagement partner
(e) Illustrate how information technology can be used in the
documentation of audit work

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Implementing Audit Procedures (INT)

11 Internal control I procedures

(a) Explain the following terms:

(i) internal control system 18, 19 & 20 Audit testing of accounting systems controls

(ii) control environment (a) Explain the audit approach to testing accounting system

(iii) control procedures controls over the following functional areas:

(b) Describe the objectives of an internal control system (i) purchases and trade payables

(c) Discuss the different types of internal control (ii) sales and trade receivables

(d) Describe and illustrate the inherent limitations of internal (iii) wages and salaries

control systems (iv) tangible non-current assets

(e) Discuss the importance of internal control to auditors (v) inventory

(vi) bank receipts and payments

12,13 & 14 Internal control II (vii) cash receipts and payments

(a) Describe and illustrate control procedures to meet (b) Explain the purpose of a management letter, indicating

specified objectives for each of the following functional when it should be issued

areas: (c) Provide information on an accounting system in a

(i) purchases and trade payables functional area and prepare points for inclusion in a

(ii) sales and trade receivables management letter, in the following format:

(iii) wages and salaries – description of weakness

(iv) tangible non-current assets – implication of weakness

(v) inventory – recommendation(s) to address weakness

(vi) bank receipts and payments

(vii) cash receipts and payments 21 Audit sampling
(a) Explain the relevance of sampling to the auditor

15 Internal control III (b) Outline selection methods, including random selection,
(a) Distinguish between application controls and general systematic selection and haphazard selection

controls in computer-based systems and identify the (c) Outline the main factors affecting sample size

objectives of each control type

(b) Provide examples of specific general controls and 22 Audit evidence I

application controls (a) Explain the importance of evidential material in the audit

(c) Outline the typical control problems encountered in small process

computer-based systems (b) Identify the factors that influence the reliability of audit
evidence

16 & 17 Internal control IV (c) Describe and give examples of procedures used by
(a) Describe the techniques used by auditors to record and auditors to obtain audit evidence, including the use of

evaluate manual and computer-based accounting analytical procedures and computer assisted audit

systems techniques
(b) Provide examples of, and explain the format and
contents of internal control questionnaires (ICQ’s) and 23 Audit evidence II

internal control evaluation questionnaires (ICEQ’s) (a) Explain the importance of financial statement assertions
(c) Explain the purpose of tests of control (b) For each area in the financial statements of an

(d) Distinguish between tests of control and substantive incorporated company, provide examples of the
representations made by directors

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 Implementing Audit Procedures (INT)

(d) Explain the rationale for designing audit programmes by 30 Audit report
reference to audit objectives (a) Revise the form and content of an auditors report with an
(e) Outline the factors determining the nature, timing and unqualified opinion on the financial statements of an
extent of substantive procedures to be carried out on an incorporated company (see sessions 4 & 5)
audit (b) Outline the circumstances in which an auditor should
issue a report with:
24 & 25 Audit evidence III (i) a qualified opinion
(a) Design audit programmes to meet specific audit (ii) an adverse opinion
objectives with regard to the following balance sheet (iii) a disclaimer of opinion
items:
(i) tangible non-current assets. 31 & 32 Revision
(ii) investments
(iii) trade receivables
(iv) prepayments
(v) bank and cash
(vi) trade payables
(vii) accruals
(viii) provisions

26 & 27 Audit evidence IV

(a) Explain why the audit of inventory is often an area of
high audit risk
(b) Describe the audit procedures that should be undertaken
before, during and after attending an inventroy count
(c) Discuss the extent to which an auditor can rely on a
system of perpetual inventory
(d) Design an audit programme to meet specific audit
objectives for the audit of inventory

28 & 29 Audit completion

(a) Explain the purpose and nature of carrying out an overall
review of the financial statements prior to expressing an
audit opinion and outline the purpose and nature of:
(i) the application of analytical procedures
(ii) a review of opening balances and comparatives
(iii) a review of events after the balance sheet date
(iv) an evaluation of Going Concern
(b) Explain the purpose of a letter of representation
(c) Describe the contents of a letter of representation and
provide examples of typical representations made in
such a letter

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 Paper 9
Paper 8 – Implementing Audit Procedures (GBR)

AIMS (ii) auditing standards

To develop knowledge and understanding of the audit process from (iii) requirements of professional bodies
the planning stage through to the reporting stage and the techniques (c) The audit engagement process
used in the conduct of internal and external audits.
3 Audit personnel
OBJECTIVES (a) The audit team
On completion of this paper, candidates should be able to: (b) Liaison with client staff
• explain the rules of professional conduct relating to the ethics of (c) Liaison with third parties
integrity, objectivity, independence and confidentiality and (i) experts
undertake audit procedures accordingly (ii) internal audit
• identify control objectives and weaknesses for an accounting
system under review 4 Audit planning
• assess audit risks, produce an audit plan and design appropriate (a) The nature of an audit plan and programme
audit procedures (b) Knowledge of the business
• carry out appropriate audit procedures in accordance with an (c) Risk
audit plan on the basis of a validly selected sample (d) Materiality
• draw valid conclusions from the results of audit tests (e) Documentation
• prepare draft reports relating to an audit assignment. (f) Audit planning meeting

POSITION OF THE PAPER IN THE OVERALL SYLLABUS 5 Accounting systems and controls
Paper 8 requires knowledge and understanding of Paper 1, (a) The nature of accounting systems
Recording Financial Transactions and Paper 3, Maintaining (b) General principles of control
Financial Records, to provide a basic understanding of the nature (c) Techniques to record accounting systems
and objectives of an audit and general audit practice. Candidates (i) narrative notes
will also be expected to be familiar with Paper 6, Drafting Financial (ii) flowcharts
Statements. (d) Techniques to evaluate accounting systems
(i) internal control questionnaires
SYLLABUS CONTENT (ii) internal control evaluation questionnaires
1 The business environment (iii) checklists
(a) The nature of accounting records, audit and the audit report (e) Major control cycles (manual and computerised)
(b) Legal requirements for becoming an auditor (i) income (sales)
(c) Legal duties of an auditor (ii) expenditure (purchases / stock / fixed assets /
(d) Legal responsibilities of auditors payroll / expenses)
(e) Fraud and error (f) Tests of control
(i) liability to clients (g) Reporting control weaknesses
(ii) liability to third parties
6 Audit evidence and sampling
2 The audit framework (a) Financial statement assertions
(a) External audit and internal audit (b) Audit evidence and procedures
(b) Regulatory framework of auditing (c) Verification techniques – physical examination,
(i) statutory legislation reperformance, third party confirmation, documentary
evidence, vouching and analytical review

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 Implementing Audit Procedures (GBR)

(d) Audit sampling APPROACH TO EXAMINING THE SYLLABUS

(e) Types of testing – tests of control and substantive testing The examination is a three-hour written paper. The paper consists of
(f) Computer-assisted audit techniques four compulsory questions.
(g) Audit of balance sheet items – existence, completeness,
ownership, valuation and disclosure ADDITIONAL INFORMATION
Accounting and auditing standards will not be examined until six
7 Audit completion months after they have been published. The cut off date for the June
(a) Audit review examination is 30 November preceding the June examination. The
(i) post balance sheet events cut off date for the December examination is 31 May preceding the
(ii) going concern December examination.
(iii) opening balances and comparatives
(b) Analytical procedures RELEVANT TEXTS
(c) Recording significant and material errors There are a number of sources from which you can obtain a series
(d) Review by senior audit staff of materials written for the ACCA CAT examinations. These are
(e) Report of audit points arising (report to partner) listed below:
(f) Letter of representation
BPP – ACCA’s official CAT publisher
8 Audit report Contact number: +44 (0)20 8740 2222
(a) The standard audit report Website: www.bpp.com
(b) Qualifications in audit reports
FTC Foulks Lynch
EXCLUDED TOPICS Contact number: +44 (0)118 989 0629
The following topics are specifically excluded from Paper 8: Website: www.financial-training.com/new/foulkslynch
• group audits
• corporate governance Wider reading is also desirable, especially regular study of relevant
• detailed understanding of audit requirements relating to: articles in ACCA’s student accountant magazine.
– fraud
– auditing standards on laws and regulations
– quality control
– related parties
– service organisations
– reports to those charged with governance
– reporting to regulators in the financial sector

KEY AREAS OF THE SYLLABUS

The key topic areas are as follows:
• controls
• audit planning
• practical application of audit techniques
• preparing draft reports.

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 Implementing Audit Procedures (GBR)

STUDY SESSIONS (d) Discuss the basic elements of the auditors’ report
1 The purpose and scope of an external audit and the audit (e) Discuss the concept of ‘reasonable assurance’
framework
(a) Explain the purpose and scope of an external audit 6 The audit engagement process
(b) Outline the statutory requirements governing the (a) Explain the purpose and content of client acceptance
appointment and removal of auditors procedures comprising client screening, professional
(c) Outline the statutory duties and responsibilities of clearance and independence checks
auditors (b) Explain the purpose of an audit engagement letter
(d) Explain the scope of Statements of Auditing Standards (c) Examine and discuss the contents of an audit
(International Standards on Auditing from December engagement letter
2005)
(e) Outline the fundamental principles of independent 7, 8 & 9 Planning the audit
auditing (a) Distinguish between a systems approach to an audit and
a direct verification approach
2 Rules of professional conduct and professional ethics (b) Explain the concept of audit risk, focusing in particular
(a) Discuss the fundamental principles of the Code of ethics on inherent risk and control risk
within the Rules of Professional Conduct of ACCA (c) Explain how auditors use knowledge of the business, in
(b) Discuss the detailed requirements of, and illustrate the audit planning
application of professional ethics in the context of auditor (d) Identify sources from which auditors may obtain
independence, objectivity and integrity as set out in knowledge of the business
ACCA's Code of ethics (e) Explain the role of audit programmes and summarise the
(c) Describe the auditor’s responsibility with regard to advantages/disadvantages of using standard
confidentiality as set out in ACCA's Code of ethics programmes
(f) Outline planning issues with regard to audit planning
3 Internal audit meetings, the timing of audit work, staffing, training of
(a) Explain the purpose and scope of internal audit the audit team, the use of suitable experts, and liaison
(b) Compare and contrast the roles of the internal audit with client staff including internal auditors
function and the external audit function with regard to the (g) Explain how auditors may plan to use computer assisted
detection of fraud and error audit techniques
(c) Identify the factors that external auditors should consider (h) Illustrate the use of an audit planning memorandum
when evaluating the work of internal auditors
10 Documenting the audit
4 & 5 True and fair view, materiality, the auditors’ report (a) Discuss the reasons for maintaining audit working
(a) Explain the concept of a true and fair view papers
(b) Explain the concept of materiality and discuss the factors (b) Explain the purpose of the current file and the permanent
to be considered when making a judgement on whether file
an item is material (c) Describe the contents of a current file and a permanent
(c) Provide and review an example of an auditors’ report file
with an unqualified opinion on the financial statements (d) Outline the quality control procedures that should exist
of an incorporated company over the review of audit working papers and in the
reporting of important audit points to the audit
engagement partner

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 Implementing Audit Procedures (GBR)

(e) Illustrate how information technology can be used in the (c) Explain the purpose of tests of control
documentation of audit work (d) Distinguish between tests of control and substantive
procedures
11 Internal control I
(a) Explain the following terms: 18, 19 & 20 Audit testing of accounting systems controls
(i) internal control system (a) Explain the audit approach to testing accounting system
(ii) control environment controls over the following functional areas:
(iii) control procedures (i) purchases and trade creditors
(b) Describe the objectives of an internal control system (ii) sales and trade debtors
(c) Discuss the different types of internal control (iii) wages and salaries
(d) Describe and illustrate the inherent limitations of (iv) tangible fixed assets
internal control systems (v) stock
(e) Discuss the importance of internal control to auditors (vi) bank receipts and payments
(vii) cash receipts and payments
12, 13 & 14 Internal control II (b) Explain the purpose of a management letter, indicating
(a) Describe and illustrate control procedures to meet when it should be issued
specified objectives for each of the following functional (c) Provide information on an accounting system in a
areas: functional area and prepare points for inclusion in a
(i) purchases and trade creditors management letter, in the following format:
(ii) sales and trade debtors – description of weakness
(iii) wages and salaries – implication of weakness
(iv) tangible fixed assets – recommendation(s) to address weakness
(v) stock
(vi) bank receipts and payments 21 Audit sampling
(vii) cash receipts and payments (a) Explain the relevance of sampling to the auditor
(b) Outline selection methods, including random selection,
15 Internal control III systematic selection and haphazard selection
(a) Distinguish between application controls and general (c) Outline the main factors affecting sample size
controls in computer-based systems and identify the
objectives of each control type 22 Audit evidence I
(b) Provide examples of specific general controls and (a) Explain the importance of evidential material in the audit
application controls process
(c) Outline the typical control problems encountered in small (b) Identify the factors that influence the reliability of audit
computer-based systems evidence
(c) Describe and give examples of procedures used by
16 & 17 Internal control IV auditors to obtain audit evidence, including the use of
(a) Describe the techniques used by auditors to record and analytical procedures and computer assisted audit
evaluate manual and computer-based accounting techniques
systems
(b) Provide examples of, and explain the format and 23 Audit evidence II
contents of internal control questionnaires (ICQ’s) and (a) Explain the importance of financial statement assertions
internal control evaluation questionnaires (ICEQ’s) (b) For each area in the financial statements of an

PAGE 80
 Implementing Audit Procedures (GBR)

incorporated company, provide examples of the (b) Explain the purpose of a letter of representation
representations made by directors (c) Describe the contents of a letter of representation and
(d) Explain the rationale for designing audit programmes by provide examples of typical representations made in
reference to audit objectives such a letter
(e) Outline the factors determining the nature, timing and
extent of substantive procedures to be carried out on an 30 Audit report
audit (a) Revise the form and content of an auditors report with an
unqualified opinion on the financial statements of an
24 & 25 Audit evidence III incorporated company (see sessions 4 & 5)
(a) Design audit programmes to meet specific audit (b) Outline the circumstances in which an auditor should
objectives with regard to the following balance sheet issue a report with:
items: (i) a qualified opinion
(i) tangible fixed assets (ii) an adverse opinion
(ii) investments (iii) a disclaimer of opinion
(iii) trade debtors
(iv) prepayments 31 & 32 Revision
(v) bank and cash
(vi) trade creditors
(vii) accruals
(viii) provisions

26 & 27 Audit evidence IV

(a) Explain why the audit of stock is often an area of high
audit risk
(b) Describe the audit procedures that should be undertaken
before, during and after attending a stocktake
(c) Discuss the extent to which an auditor can rely on a
system of continuous stocktaking
(d) Design an audit programme to meet specific audit
objectives for the audit of stock

28 & 29 Audit completion

(a) Explain the purpose and nature of carrying out an overall
review of the financial statements prior to expressing an
audit opinion and outline the purpose and nature of:
(i) the application of analytical procedures
(ii) a review of opening balances and comparatives
(iii) a review of post balance sheet events
(iv) an evaluation of Going Concern

PAGE 81
Paper 9 – Preparing Taxation Computations (GBR)

AIMS (v) hire purchase and leasing

To develop the ability to prepare computations of tax liability for (vi) industrial buildings
both individuals and businesses resident in the UK for the purposes (c) Assessments
of income tax, corporation tax, capital gains tax and value added (i) basis of assessment
tax. In addition, to develop knowledge and understanding of the (ii) sole traders and partnerships
manner in which dealings must be conducted with HM Revenue and (d) Relief for losses
Customs, including knowledge of the statutory timescales for the
submission of claims and returns and the due dates for the payment 2 National insurance contributions
of tax liabilities. (a) Class 2 and Class 4 National Insurance Contributions
for the self employed
OBJECTIVES (b) Class 1 and 1A National Insurance Contributions for
On completion of this paper, candidates should be able to: employees and employers
• prepare adjusted profit / loss computations for trades and
professions 3 Income from employment
• calculate an individual’s income from employment (a) Computing taxable earnings from employment
• prepare computations of property and investment income (i) basis of assessment
• prepare income tax computations (ii) employment or self-employment
• prepare computations of the chargeable gains arising on (b) Allowable deductions
disposals by both individuals and companies (c) Benefits
• prepare corporation tax computations (d) (i) contributions to occupational pension schemes
• complete and submit value added tax calculations using data (ii) charitable giving through the payroll
from the appropriate recording systems
• identify the due dates for submission of returns and the payment 4 Property and investment income
of tax liabilities (a) Profits / losses from property income
• conduct dealings with the HM Revenue & Customs and with (i) computation of property income profits / losses
clients in an appropriate manner. (ii) furnished holiday lettings
(iii) rent a room scheme
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (iv) relief for property income losses
An understanding of the format of accounts used for sole traders, (b) Other investments
partnerships and companies is assumed from Paper 3, Maintaining (i) bank, building society and other interest
Financial Records and Paper 6, Drafting Financial Statements, but (ii) dividends
no prior knowledge of taxation is required. (iii) tax exempt investments

SYLLABUS CONTENT 5 Income tax computations

1 Adjusted profit / loss computations for trades and professions (a) Computing taxable income
(a) Adjustment of trading profits / losses for tax purposes (i) the aggregation of income
(b) Capital allowances (ii) charges on income
(i) definition of plant (iii) the personal allowance for individuals under 65
(ii) allowances on plant and machinery (b) Computing income tax payable
(iii) private use assets (i) allocation of tax rates / bands to savings income,
(iv) short life assets non-savings income and dividend income

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Preparing Taxation Computations (GBR)

(ii) relief for: 9 Administration of corporation tax

– charitable donations (a) Corporation tax self-assessment
– personal pension contributions (b) The payment of corporation tax (including quarterly
payments on account)
6 Chargeable gain computations (individuals and companies) (c) Dealing with the Inland Revenue and client confidentiality
(a) Chargeable persons, disposals and assets
(b) Computing gains and losses 10 Value added tax (VAT)
(i) the basic computation (a) Scope of VAT
(ii) valuing assets (b) Basic principles of VAT
(iii) indexation allowance (i) types of supply
(iv) part disposals (ii) computing VAT due
(v) taper relief for individuals (iii) accounting for VAT
(c) Share and securities (iv) the time of supply
(i) matching rules for individuals (c) VAT invoices and records
(ii) matching rules for companies (d) Registration
(iii) FA 1985 pool (e) Administration of VAT
(iv) bonus and rights issues
(v) gilts and qualifying corporate bonds EXCLUDED TOPICS
(d) Other areas of capital gains tax (including reliefs) The following topics are specifically excluded from Paper 9:
(i) gift relief
(ii) rollover relief Adjusted profit computations for trades and professions:
(iii) principal private residence relief • badges of trade
(iv) chattels • successions
(v) relief for losses • change of accounting date
(vi) compensation and insurance proceeds • long life assets
(e) Computing capital gains tax payable • capital allowances on agricultural buildings, hotels and
intangible assets
7 Administration of income tax and capital gains tax • in respect of industrial buildings allowances: enterprise zones,
(a) Self-assessment system initial allowances and the sale of industrial buildings following a
(b) Payment of income tax (including payments on account) period of non-industrial use
and capital gains tax • notional profits / losses for partnerships
(c) Enquiries • limited liability partnerships
(d) Dealing with the Inland Revenue and client confidentiality • personal service companies
• the special rules for losses in the opening years of a trade (s.
8 Corporation tax computations 381 ICTA 1988)
(a) Company profits chargeable to corporation tax • the special rules for losses in the closing years of a trade
(b) Accounting periods (terminal losses under s. 388 ICTA 1988)
(c) Computing corporation tax • the special rules for the use of trade losses against capital gains
(d) Relief for losses (trade and non-trade) (s. 72 FA 1991).

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 Preparing Taxation Computations (GBR)

Income from employment: • partial exemption

• detailed operation of the PAYE system (including calculations of • special schemes for retailers
code numbers) • the capital goods scheme
• share incentive schemes • serious misdeclaration penalty
• termination payments. • default interest.

Property and investment income: National insurance contributions:

• the enterprise investment scheme and venture capital trusts • for Class 4: the offset of trading losses against non-trading
• trust income. income
• contracted out contributions.
Income tax computations:
• personal allowances other than the personal allowance for KEY AREAS OF THE SYLLABUS
people aged under 65 The key topic areas are as follows:
• tax reducers • computation of adjusted profits / losses for trades and
• foreign income and double tax relief. professions
• calculating an individual’s income from employment
Chargeable gains: • assessment of profits / losses from trades or professions
• calculation of the indexation allowance for individuals • basic income tax computations
• reinvestment relief • basic chargeable gains computations
• assets held at 31 March 1982 • computing profits chargeable to corporation tax
• negligible value claims • computing corporation tax payable
• substantial shareholdings • income tax and corporation tax self assessment
• wasting assets (other than chattels) and leases • basic value added tax computations.
• connected persons and transfers between spouses
• incorporation relief APPROACH TO EXAMINING THE SYLLABUS
• damaged assets. Paper 9 is a three-hour written paper.

Corporation tax: The examination will be predominantly computational and will

• close companies comprise four compulsory questions, which will add up to a total of
• non-trading deficits on loan relationships 100 marks.
• relief for intangible assets
• the corporate venturing scheme Question 1 will always relate to income
• groups and consortia tax for a minimum of 30 and no more than 35 marks.
• foreign income and double tax relief
• investment companies and companies in receivership / Questions 2 and 3 will relate to corporation tax and capital gains
liquidation tax respectively.
• completion of forms CT61.
Question 4 may include topics from any area of the syllabus not
Value added tax: examined elsewhere in the paper.
• group registration
• secondhand goods scheme

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Preparing Taxation Computations (GBR)

Value added tax (VAT) will not be examined as a full question but
will be examined as part of any of the questions involving a
business, either linked to the business scenario contained in the
remainder of the question or as a distinct and separate scenario.
ADDITIONAL INFORMATION
ACCA applies a six-month rule in that questions requiring an
understanding of new legislation will not be set until at least six
calendar months after the last day of the month in which the
legislation received Royal Assent. The same rule applies to the
effective date of the provisions of an Act introduced by Statutory
Instrument. It would, however, be considered inappropriate to
examine legislation it is proposed to substantially alter.
FTC Foulks Lynch
Contact number: +44 (0)118 989 0629
Website: www.financial-training.com/new/foulkslynch
Candidates may also find the following text useful:
Melville, A. Taxation (Prentice Hall)
ISBN 0273673130
Wider reading is also desirable, especially regular study of relevant
articles in ACCA’s student accountant magazine.

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.

Tax rates and allowance tables will be provided at the front of the
examination paper.

Calculations should be made to the nearest month and the nearest

£.

Knowledge of section numbers will not be needed to understand

questions in this paper, nor will students be expected to use them in
their answers. If students wish to refer to section numbers in their
answers they may do so and will not be penalised if old, or even
incorrect, section numbers are used.

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:

BPP – ACCA’s official CAT publisher

Contact number: +44 (0)20 8740 2222
Website: www.bpp.com

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 Preparing Taxation Computations (GBR)

against statutory total income (STI)

STUDY SESSIONS
(i) non-savings
1 Introduction to the UK tax system
(ii) savings
(a) Identify the main sources of UK tax legislation
(iii) dividends
(b) Identify the key reference sources for UK tax legislation
(d) Explain and illustrate the difference between tax liability
(c) Describe the organisation HM Revenue & Customs and
and tax payable for:
its terms of reference including the appeals system
(i) deduction of tax credits from savings and dividend
(d) Describe the appeals process for income tax special and
income
general commissioners
(ii) deduction of PAYE
(e) Explain the system of income tax and its background
(e) Explain and illustrate charitable payments
(how the legislation does not define income but defines
(i) payroll giving
taxable sources)
(ii) gift aid and the extension of basic rate band
(f) Prepare examples of income tax computations
2 Introduction to personal taxation
(i) standard layout
(a) Identify the fiscal year
(ii) statutory total income (STI)
(b) Outline the scope of income tax: chargeable persons,
(iii) use of rates and bands
chargeable income
(iv) basic rate band extension
(c) Distinguish between income and capital profits/losses
(v) tax liability and tax payable
(d) Outline the key elements of a personal income tax
computation
5 Income tax – employment income I
(i) earned income
(a) Explain the difference between employment and self-
(ii) non-savings income
employment
(iii) savings income
(b) Identify assessable income
(iv) dividend income
(i) salaries
(v) statutory total income
(ii) commissions
(vi) taxable income
(iii) bonuses
(iv) benefits
3 Income from savings and investments
(c) Define and illustrate the basis of assessment for:
(a) Identify investments taxed at source
(i) directors
(b) Identify tax-free investments
(ii) others
(c) Identify the source documents used to complete the tax
(d) Identify the principal categories of deductions and
return
illustrate their scope (no detail on pension contributions
(d) Prepare schedules of savings income to accompany the
at this point)
tax return
(i) payroll giving
(ii) subscriptions
4 Income tax – assessments
(iii) travelling expenses
(a) Explain the entitlement to and the amount of the personal
(iv) expenses incurred wholly, exclusively and
allowance
necessarily in the performance of duties
(b) Identify and explain the use of charges on income
(i) eligible interest
(ii) patent and copyright royalties
(c) Illustrate the allocation of tax bands and tax rates

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Preparing Taxation Computations (GBR)

6 Income tax – employment income 2 (c) Calculate overlap relief, explain and demonstrate how it
(a) Define and distinguish between higher and lower paid can be used on cessation
employees
(b) Identify the information required on a P11D and a P9D 10 Capital allowances 1
(c) Identify and calculate benefits (a) Explain the principles relating to capital allowances on
(i) assessable on all employees plant and machinery
(ii) assessable on the lower paid (i) definition of plant
(iii) assessable on the higher paid (ii) cars
(d) Identify the circumstances when a general business (iii) private use assets
expenses dispensation may be available, how it works (iv) short life assets
and its implications on the employer and employee (v) hire purchase and leasing
(b) Prepare capital allowance computations for plant and
7 Income tax – employment income 3 machinery
(a) Compute aggregate income (i) writing down allowance
(i) all income (ii) first year allowance
(ii) benefits (iii) restrictions
(iii) expenses
(b) Identify source documents required to complete tax 11 Capital allowances 2
returns (a) Explain the principles relating to capital allowances on
(i) interest statements industrial buildings
(ii) receipts for expenses (i) qualifying trades
(iii) Forms P11D or P9D (ii) qualifying expenditure
(iv) Form P60 (iii) qualifying industrial use
(c) Compute basic Class 1 National Insurance (b) Explain non–industrial use and notional allowances
Contributions (c) Prepare capital allowance calculations for industrial
(i) employees buildings
(ii) employers (including class 1A) (i) new buildings
(ii) second-hand buildings
8 Income tax – income from trade and professions 1 (iii) disposals
(a) Explain the principles of deductible and non-deductible
expenditure 12 Income from trade and professions 3
(b) Prepare adjusted profit computations (pre capital (a) Prepare adjusted profit calculations (including capital
allowances) allowances)
(b) Illustrate the use of capital allowances at the
9 Income tax – income from trade and professions 2 commencement and cession of businesses
(a) Explain the basis of assessment for a continuing sole (c) Calculate National Insurance Contributions for the self-
trader’s business employed and contrast with employees
(b) Explain and demonstrate the calculations of the basis of (i) class 2
assessment for commencement and cessation of (ii) class 4
businesses

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 Preparing Taxation Computations (GBR)

13 Income from trade and professions 4 (c) Explain the maximum contributions allowed for tax relief
(a) Explain the alternative loss reliefs available to a sole (i) occupational schemes
trader (ii) personal pension plans
(i) s.380 current and prior years (iii) stakeholder plans
(ii) s.385 carried forward (iv) employee, employer and self employed
(b) Demonstrate the best use of a loss relief claim (d) Show how the relief is given
(i) save the highest amount of tax (i) deductions from salary
(ii) timing (ii) basic rate tax withheld at source
(iii) protection of personal allowances (iii) higher rate tax relief given via basic rate band
extension
14 Partnerships (e) Explain the principles of relating back private pension
(a) Explain how the trading profit rules are adapted for plan premiums to the previous year
partnerships (f) Show the tax effects of employer contributions
(b) Explain and show the effect of capital allowances on (i) on the employer
partnerships (ii) on the employee
(c) Demonstrate the effect of changes in partnerships
(i) change in profit sharing ratios 17 Income tax administration
(ii) new partners (a) Self assessment forms
(iii) departing partners (i) requirement
(d) Illustrate the loss relief claims available to individual (ii) completion dates
partners (b) Pay As You Earn (PAYE) forms and deadlines for submission
(i) P11D
15 Income from property – individuals (ii) P9D
(a) Identify property income assessable (iii) P14
(i) furnished and unfurnished property (iv) P60
(ii) premiums from short leases (v) P35
(b) Outline the deductions allowable (vi) P45
(i) revenue expenses (c) Payment dates
(ii) capital allowances (i) employees
(iii) wear and tear allowance (ii) self employed
(iv) repairs and renewals
(v) restriction for private use 18 Capital gains tax – basic principles
(c) Rent a room relief (a) Define chargeable persons, chargeable disposals and
(d) Furnished holiday lettings chargeable assets
(e) Use of losses (i) individuals and companies
(ii) exempt disposals
16 Pension contributions (iii) exempt assets
(a) Identify the schemes available (b) Outline the administrative framework for capital gains tax
(i) occupational pension schemes (i) individuals
(ii) private pension plans (iii) payment
(b) Define net relevant earnings (c) Outline the use of tax bands and rates in conjunction

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Preparing Taxation Computations (GBR)

with income tax (ii) last 9 days

(d) Outline the basic calculation including the deduction of (iii) FA 1985 pool (construction of a basic pool,
expenses of purchase and sale including the calculation of indexation allowance
(e) Explain the entitlement to the annual exemption up to the date of sale will be required)
(d) Compute gains and losses on disposals by companies
19 Capital gains tax – basic computations
(a) Explain the circumstances when market value may be
used for the transfer value 21 Capital gains tax – shares and securities 2
(i) bargains not at arms length (a) Illustrate the impact of bonus and rights issues on
(ii) gifts shareholdings
(b) Demonstrate the calculation of market value for quoted (b) Sale of rights – awareness of basic treatment (partial
shares and securities vs.small disposal) only
(c) Explain the indexation allowance for individuals as (c) Identify exempt disposals
applied in the period March 1982 to April 1998 (i) gilts
(Note: Calculation of this will not be required in the (ii) qualifying corporate bonds (individuals only)
examination as the indexed value at April 1998 will be
given) 22 Capital gains tax – chattels, part disposals, compensation
(d) Explain and calculate taper relief for individuals and insurance
(i) business assets (a) Define chattels
(ii) non-business assets (i) non-wasting
(e) Explain the differences for companies (ii) wasting
(i) calculate indexation allowance up to the date of (b) Explain and demonstrate the calculation of gains on
sale chattel disposals
(ii) no taper relief (i) exemptions
(f) Calculate disposals of post 31 March 1982 assets (ii) marginal relief
(i) include enhancement expenditure (iii) deemed proceeds for losses
(ii) purchases pre and post April 1998 (iv) awareness of the interaction with capital allowances
(g) Explain the use of capital losses (c) Calculate gains on part disposals
(i) current year (d) Compensation and insurance proceeds
(ii) brought forward
23 Capital gains tax – further reliefs
20 Capital gains tax – shares and securities I (a) Outline the rules governing principal private residence
(a) Outline the matching rules for individuals (PPR)
(i) same day (i) exemption
(ii) next 30 days (ii) relief for absences
(iii) since April 1998 (iii) letting relief
(iv) FA 1985 Pool (indexed value at April 1998 will (b) Gift Relief
be given) (i) outline availability
(b) Compute gains and losses on disposals by individuals (ii) explain and calculate the relief
(c) Outline the matching rules for companies (iii) calculate the restriction as a result of a sale at
(i) same day undervalue

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 Preparing Taxation Computations (GBR)

(c) Roll-over relief (b) Explain the loss reliefs available for both trade and non
(i) outline availability trade losses
(ii) explain and calculate the relief (c) Illustrate the use of the loss reliefs in a basic calculation
(iii) calculate the relief available on the partial (i) trade losses
reinvestment of sale proceeds and/or partial – s393A (1) current period
business use of an asset – s393A (1) carry back (including cessation)
(iv) explain the consequences of reinvestment in – s395 carry forward
depreciating or non-depreciating assets (ii) non trade losses
– Property business loss relief
24 Corporation tax – compute the profits liable to corporation tax – capital losses
(a) Identify the scope of corporation tax – explain the impact of cessation of trade on
(i) chargeable entities trade and non trade losses
(ii) chargeable income (d) Compute corporation tax repayable following a loss
(b) Identify chargeable accounting periods relief claim
(c) Identify the basis of assessment for all sources of income
(i) Trading income 27 Corporation tax – administration
(ii) Profits from loan relationships and interest (a) Outline the corporation tax self assessment rules
(iii) Property business income (i) return and filing date
(iv) capital gains (ii) amendments and enquiries
(d) Compute profits chargeable to corporation tax (PCTCT) (b) Illustrate and calculate methods of payment of tax
(i) small and medium size companies
25 Corporation tax – computation of tax liability (ii) large companies
(a) Identify the financial year(s) relevant to a chargeable
accounting period 28 Value Added Tax (VAT)
(b) Identify the rates of corporation tax to be applied (a) Explain the scope of VAT
(i) starting rate (b) Illustrate the need for registration
(ii) lower marginal rate (i) compulsory
(iii) small companies rate (ii) voluntary
(iv) higher marginal rate (iii) exemption
(v) full rate (iv) deregistration
(c) Calculate the corporation tax liability (c) Explain and contrast the types of supply
(d) Calculate the minimum amount of tax payable by small (i) standard
companies (ii) zero rated
(e) Calculate and offset any income tax on payments and (iii) exempt
receipt (d) Compute VAT liability
(f) Identify associate companies and show their effect on tax (i) input tax
calculations (ii) output tax
(iii) bad debts
26 Corporation tax – other aspects (iv) discounts
(a) Calculate the corporation tax payable for periods longer (v) irrecoverable VAT
and shorter than 12 months (e) Account for VAT

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Preparing Taxation Computations (GBR)

(i) return periods

(ii) tax point
(iii) VAT return
(f) Explain the detail required on VAT invoices
(g) Detail the basic VAT administration requirements
(i) records
(ii) late registration penalties
(h) Explain the treatment of imports and exports
(i) Describe the following schemes
(i) annual accounting scheme
(ii) cash accounting scheme
(iii) flat rate scheme

29 Revision of income tax

30 Revision of capital gains tax

31 Revision of corporation tax

32 Revision of VAT

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Paper 10 – Managing Finances

AIMS (iv) preparation of simple cleared funds forecasts

To develop knowledge and understanding of the way organisations (v) budgets and forecasts as mechanisms of
finance their operations, plan and control cash flows, optimise their monitoring and control
use of working capital and allocate resources to capital expenditure (c) Accounting for cash
projects. (i) relationship of cash flow accounting to accruals
accounting
OBJECTIVES (ii) profits and cash flow
On completion of this paper, candidates should be able to: (d) Cash management
• describe the cash flow cycle (i) role of the treasury function
• describe sources of short, medium and long-term finance (ii) cash handling procedures
• prepare cash budgets and cash flow forecasts
• explain the principles of effective working capital management 2 Cash balances
• calculate working capital requirements (a) Surplus funds
• describe credit management methods and procedures (i) types of investments
• describe cash management methods and procedures (ii) investment risk and exposure
• evaluate capital expenditure proposals. (iii) short and long-term investment management
(b) Liquidity management
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (i) optimum liquidity levels
Paper 10 will build on the knowledge of the main receipts and (ii) liquidity ratios and the working capital cycle
payments that an organisation has and the methods of recording (iii) comparison with cash budgets and forecasts
these receipts and payments, developed in the Introductory and (iv) legal relationship between bank and customer
Intermediate Level papers. (v) statutory and other regulations relating to cash
management of public sector organisations
There are also links with other Advanced Level papers, particularly:
• budgets, forecasts, time series analysis and index numbers in 3 Working capital management
Paper 7, Planning, Control and Performance Management (a) Importance of working capital management
• interpretation of limited company financial statements in Paper (b) Working capital cycle
6, Drafting Financial Statements. (c) Stock control
(i) stock ordering and storing policies
However, there will not be a presumption of any prior knowledge (ii) economic order quantity
from the other Advanced Level papers. (iii) impact of lean manufacturing and just-in-time
(d) Creditor control
SYLLABUS CONTENT (i) creditor monitoring
1 Cash receipts and payments (ii) payment procedures
(a) Types of receipts and payments (iii) risks of excess credit
(b) Cash budgets and forecasts
(i) form and structure of cash budgets and forecasts 4 Credit granting
(ii) modelling of sensitivity of elements to change (e.g. (a) Information sources
price, wage rate changes) (i) internal sources of credit information
(iii) preparation of cash budgets, including adjustments (ii) external sources of credit information
for timing (iii) interpretation of credit information

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Managing Finances

(b) Credit terms (iv) bank finance (short, medium and long-term)
(i) credit policies (v) hire purchase, finance and operating leases
(ii) individual customers (vi) trade credit
(c) Debtor records (vii) government sources
(i) content of records (viii) problems of small and medium-sized enterprise
(ii) data protection issues financing
(d) Legal issues (ix) venture capital and other financial sources
(i) basic contract particularly suited to the small and medium sized
(ii) terms and conditions of contracts relating to the enterprises
granting of credit (c) Calculations for relative gearing and EPS under different
financial structures
5 Debt collection
(a) Monitoring of debtors 7 Capital investments
(i) internal sources (a) Nature of capital investment budgeting
(ii) external sources (b) Capital investment procedures (authorisation and
(b) Collection of debts monitoring)
(i) methods of collection (c) Non-discounted cash flow methods of project appraisal
(ii) factoring arrangements (i) accounting rate of return
(iii) invoice discounting (ii) payback
(iv) debt insurance (d) Discounted cash flow techniques
(c) Dealing with slow-paying debtors (i) time value of money
(i) identification of potential problems (ii) compounding and discounting
(ii) methods of contacting debtors (iii) relevant cash flows
(iii) legal procedures for recovery of debts and breach (iv) net present value
of contract (v) internal rate of return
(iv) bankruptcy and insolvency of debtors (vi) discounted payback

6 Sources of finance EXCLUDED TOPICS

(a) Overview of the economic environment The following topics are specifically excluded from Paper 10:
(i) banking system and money market in the UK • detailed knowledge of bankruptcy and insolvency legislation
(ii) relationship between financial institutions • double entry for bad and doubtful debts
(iii) impact of government and central bank monetary • NPV calculations for tax, inflation and working capital.
policy
(b) Sources of finance KEY AREAS OF THE SYLLABUS
Discussion of the relative risks and costs of various types The key topic areas are:
of finance and their suitability to different circumstances • sources of finance
and organisations (large and small, listed and unlisted), • cash budgets
including: • working capital management
(i) balance of short / medium / long-term finance • credit management
(ii) the nature and importance of internally generated funds • capital investment appraisal.
(iii) capital markets

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 Managing Finances

APPROACH TO EXAMINING THE SYLLABUS STUDY SESSIONS

The examination is a three-hour written paper. 1 The nature of cash and cash flows
No. of marks (a) Define cash, cash flow and funds
One case study: 40 (b) Explain the importance of cash flow management and its
Three calculation and essay questions (20 marks each): 60 impact on liquidity and company survival
2 The cash flow cycle and accounting for cash
100
(a) Outline the various sources and applications of finance
(i) regular revenue receipts and payments
The case study will always consist of a mixture of calculation and
(ii) capital receipts and payments
written elements, and may cover more than one part of the syllabus.
(iii) drawings or dividends and disbursements
The case study will always include one or more key areas of the
(iv) exceptional receipts and payments
syllabus may also include areas that are not highlighted as key.
(b) Distinguish between the cash flow patterns of different
types of organisations
The shorter questions may include scenarios that are simpler than
(c) Explain the importance of cash flow for sustainable
those given in the case study question.
growth of such organisations
(d) Define “cash accounting” and “accruals accounting”
RELEVANT TEXTS
(e) Explain the difference between cash accounting and
There are a number of sources from which you can obtain a series
accruals accounting
of materials written for the ACCA CAT examinations. These are
(f) Reconcile cash flow to profit
listed below:

3 Overview of financial markets

BPP – ACCA’s official CAT publisher
(a) Explain the structure of a banking system
Contact number: +44 (0)20 8740 2222
(b) Explain the role and functions of various types of banks
Website: www.bpp.com
(including central and commercial banks)
(c) Identify the major financial intermediaries
FTC Foulks Lynch
(d) Outline the general roles of financial intermediaries
Contact number: +44 (0)118 989 0629
(e) Outline the key benefits of financial intermediation
Website: www.financial-training.com/new/foulkslynch
(f) Outline the relationships between financial institutions
(g) Explain the basic nature of a money market
Wider reading is also desirable, especially regular study of relevant
articles in ACCA’s student accountant magazine.
4 Cash in the economy
(a) Define what is meant by “money supply” in an economic
context
(b) Outline how money supply may be controlled in an
economy
(c) Outline the basic relationship between the demand for
money and interest rates
(d) Describe how the application of different monetary
policies can affect the economy (for example, effect on
inflation)

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Managing Finances

5 Types of finance and short-term finance and second tier) operates

(a) Discuss the relative merits and limitations of short/ (b) Discuss ways in which a company may obtain a stock
medium/long term finance market listing
(b) Outline the key factors that should be considered in (c) Explain the advantages and disadvantages of having a
deciding the mix of short/medium/long term finance in an stock market listing
organisation (d) Outline the features of different types of securities (equity,
(c) Discuss the nature and importance of internally preference, debt, convertible debt, warrants)
generated funds 9 Sources of finance for small and medium sized enterprises 1
(d) Outline the major sources of government funds e.g. (a) Outline the requirements for finance of SMEs (purpose,
grants, regional and national schemes how much, how long)
(e) Discuss situations where it may be appropriate to raise (b) Describe the nature of the financing problem for SMEs in
short-term finance terms of the funding gap, maturity gap and inadequate
(f) Outline the different forms of bank loans and overdrafts, security
their terms and conditions (c) Discuss the contribution of lack of information in SMEs
(g) Explain the legal relationship between bank and to help explain the problems of SME financing
customer (d) Describe and discuss the response of government agencies
(h) Explain the nature of trade credit and its use as a short- and financial institutions to the SME financing problem
term source of finance
(i) Evaluate the risks associated with increasing the amount 10 Sources of finance for small and medium sized enterprises 2
of short-term finance in an organisation (a) Describe the main features of venture capital
(b) Describe the key areas of concern to venture capitalists
6 Medium-term finance when evaluating an application for funding
(a) Discuss situations where it may be appropriate to raise (c) Explain how the use of such measures as trade creditors,
medium-term finance hire purchase, factoring and second tier listing can help
(b) Describe the main features of hire purchase, finance to ease the financial problems of SMEs
leases and operating leases (d) Outline appropriate sources of finance for SMEs
(c) Compare and contrast the main features of hire
purchase, finance leases and operating leases 11 Inflation
(NB – lease or buy decisions are not examinable) (a) Define inflation
(b) Explain the nature of inflation
7 Long-term finance 1 (c) Explain briefly the interaction between inflation and
(a) Discuss situations where it may be appropriate to raise interest rates
long-term finance (d) Evaluate and demonstrate the impact of inflation on cash
(b) Outline the key factors to be considered when deciding on flow and profits (note calculations are required)
an appropriate source of long term finance (debt or (e) Explain how organisations may protect themselves
equity) against the effects of inflation
(c) Calculate relative gearing and earnings per share under (f) Discuss the possible consequences of inflation in an economy
different financial structures (g) Discuss the effects of inflation on organisations in general

8 Long-term finance 2 12 Investing surplus funds 1

(a) Describe the way in which a stock market (both main (a) Define what is meant by “surplus funds”

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(b) Explain how surplus funds may arise (f) Outline the statutory and the other regulations relating to the
(c) Discuss the objectives to be considered in the investment management of cash balances in public sector organisations.
of surplus funds
(d) Define the risk-return trade-off 16 & 17 Cash Budgets
(e) Outline what is meant by risk of default, systematic risk (a) Explain the objectives of a cash budget
and unsystematic risk (b) Prepare a cash budget, including adjustments for timing
(f) Outline how the Baumol cash management model works of receipts and payments
(note – calculations are not required) (c) Discuss how cash budgets can be used as a mechanism
(g) Discuss the limitations of the Baumol cash management for monitoring and control
model (d) Carry out simple sensitivity analysis on a cash budget or
(h) Suggest appropriate liquidity levels for a range of forecast
different organisations (e) Prepare a simple cleared funds forecast

13 Investing surplus funds 2 18 Capital budgeting

(a) Explain the purpose and main features of: (a) Discuss the importance of capital investment planning
(i) bank deposits and control
(ii) certificates of deposit (b) Outline the issues to consider and the steps involved in
(iii) government stocks the preparation of a capital expenditure budget
(iv) local authority short term loans (c) Define and distinguish between capital and revenue
(v) bills of exchange expenditure
(b) Explain the purpose and main features of: (d) Compare and contrast investment in fixed assets and
(i) debentures investment in working capital
(ii) unsecured loan stocks (e) Describe capital investment procedures (authorisation
(iii) convertibles and monitoring)
(iv) corporate preference shares (cumulative, (f) Calculate the payback of a project and assess its
participating, convertible, redeemable) usefulness as a method of investment appraisal
(v) permanent interest bearing securities (g) Calculate the discounted payback of a project and assess
its usefulness as a method of investment appraisal
14 Review of sessions 1 – 13 (h) Calculate the accounting rate of return of a project and
assess its usefulness as a method of investment appraisal
15 Cash management
(a) Outline the basic treasury functions 19 Financing concepts
(b) Discuss the advantages and disadvantages of a (a) Explain the differences between simple and compound
centralised treasury function interest
(c) Discuss the advantages and disadvantages of centralised (b) Calculate future values
cash control (c) Discuss the concept of time value of money
(d) Describe cash handling procedures (d) Discuss the concept of discounting
(e) Outline the issues to be considered when attempting to
hold optimal cash balances

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(e) Calculate present values, making use of present value (b) Define and explain work in progress
tables to establish discount factors (c) Define economic order quantity (EOQ)
(d) Apply the EOQ model
20 Capital investment decisions 1 (e) Discuss the effects of just-in-time on stock control
(a) Discuss the concept of relevant cash flows for decision (Note: Economic Batch Quantities, where all items in a
making batch do not arrive simultaneously, will not be examined)
(b) Identify and evaluate relevant cash flows for individual
investment decisions 24 Creditor control
(c) Explain the concept of net present value and how it can (a) Explain the role of creditors in the working capital cycle
be used for project appraisal (b) Explain the need to monitor creditors
(d) Calculate net present value and interpret the results (c) Explain creditor control operations and the importance
(Note: NPV calculations will not include adjustments for of creditor management
inflation, tax or working capital) (d) Describe the various types and form of creditors
(e) Describe the various creditor payment methods and
21 Capital investment decisions 2 procedures (for example, direct debit, cheque)
(a) Outline the concept of internal rate of return and how it (f) Evaluate and demonstrate the issues involved with early
can be used for project appraisal payment and settlement discounts
(b) Calculate internal rate of return and interpret the results (g) Identify the risks of taking increased credit and buying
(c) Discuss the relative merits of NPV and IRR, including under extended credit terms
mutually exclusive projects and multiple yields
(d) Calculate payback, discounted payback and accounting 25 Debtor control 1
rate of return (a) Explain the role of debtors in the working capital cycle
(e) Explain the superiority of DCF methods over payback (b) Explain the importance of credit management, including
and accounting rate of return the level of trade credit, the role of the credit control
function and the activities of the credit control function
22 Working capital management (c) Explain the need to establish a credit policy and outline
(a) Define working capital the steps involved, including setting maximum credit
(b) Explain why working capital management is important amounts and periods and total credit levels
(c) Explain the relationship between cash flows and the (d) Explain the key categories that should be considered
working capital cycle when assessing the credit-worthiness of a customer
(d) Demonstrate the calculation of the working capital cycle (e) Outline the various internal sources of information that may
(also known as the cash operating cycle) be used in assessing the credit-worthiness of a customer
(e) Outline the possible relationships between stock levels (f) Outline the various external sources of information that may
and sales be used in assessing the credit-worthiness of a customer
(f) Define and explain over-trading and over-capitalisation (g) Define and explain credit scoring
(g) Identify and calculate over-trading and over- (h) Identify possible reasons for rejecting an application for
capitalisation financial indicators credit

23 Stock control
(a) Discuss the key considerations when developing a stock
ordering and storage policy

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26 Debtor control 2 credit period, amount of interest on late payments,

(a) Outline how the financial statements of a customer can retention of title)
be used to assess the credit-worthiness of a customer (c) Outline the basic legal procedures for the collection of
(b) Identify and apply the common ratios that may be used debts
to analyse the financial statements of a customer in
order to assess their credit-worthiness 30, 31, 32 Revision
(c) Evaluate the usefulness and limitations of ratio analysis
in assessing credit-worthiness

27 Debtor control 3
(a) Identify the main contents of debtors’ records
(b) Identify the main data protection issues that should be
considered when dealing with debtors’ records
(c) Describe the main internal sources that may be used to
monitor debtors (including aged debtor analysis, average
periods of credit, incidence of bad and doubtful debts).
Note - you may be required to prepare an aged debtor
analysis
(d) Describe the main external sources that may be used to
monitor debtors (including credit agencies, industry
sources, financial reports, press coverage)
(e) Outline ways in which debtors could be encouraged to
pay promptly

28 Collection of debts
(a) Identify the main methods used to identify potential
problems with debtors meeting their payment obligations
(b) Outline the main techniques that may be used to assist in
the collection of overdue debts
(c) Describe how factoring works and the main types of
service provided by factors
(d) Define invoice discounting and outline how this form of
factoring works
(e) Calculate the cost of factoring arrangemenrts, invoice
discounting and changes in credit policy

29 Legal issues
(a) Explain the key elements of a basic contract (offer,
acceptance, etc)
(b) Briefly outline specific terms and conditions that may be
included in contracts with credit customers (e.g. length of

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