CM21: Foundations of Accounting

CM21: Foundations of Accounting provides learners with fundamental knowledge and practical skills in accounting principles, bookkeeping, financial record-keeping, and the preparation of basic financial statements. The course introduces the accounting cycle and develops the ability to record, classify, summarize, and interpret financial transactions while emphasizing accuracy, accountability, and ethical financial practices.

CONTEXT:

Apply accounting concepts in accounting functions

• Definition of key terms
  • Accounting
  • Accounting period
  • Accrual basis of accounting
  • Credit
  • Debit
  • Accruals
  • Closing the books

• Introduction to Accounting
  • Nature and purpose of accounting
  • Objective of financial accounting

• Elements of financial statements
  • Assets
  • Liabilities
  • Equity
  • Revenues
  • Expenses

• Accounting concepts (Principles)
  • Accrual principle
  • Conservatism principle
  • Consistency principle
  • Cost principle
  • Economic entity principle
  • Full disclosure principle
  • Going concern principle
  • Matching principle

• Types of accounts
  • Real accounts
  • Personal accounts
  • Nominal accounts

• Accounting equation

Users of accounting information

• External users
  • Creditors
  • Investors
  • Government
  • Trading partners
  • Regulatory agencies
  • International standardisation agencies
  • Journalists

Internal users

• Owners

• Directors

• Managers

Employees

Record business transactions in books of accounts

• Source documents
  • Receipts
  • Bills
  • Invoices
  • Statements
  • Cheques

• Books of prime entry/original entry

• Journals
  • Sales journal
  • Purchases Journal
  • Sales returns journal
  • Purchases returns journal
  • General journal

• Cash books
  • Single column cash book
  • Double column cash book
  • Triple column cash book

• Petty cash book

• Ledger
  • Definition of a ledger

• Types of ledgers
  • Sales ledger
  • Purchases ledger
  • General ledger

• Use of ledger

• Concept of double entry

• Trial balance
  • Definition
  • Format
  • Use

• Financial statements

• Statement of profit and loss
  • Definition
  • Format
  • Use

• Statement of financial position
  • Definition
  • Format
  • Use

Manual accounting systems Vs Computerised accounting systems

Account for assets and liabilities

• Definition of an Asset, Liabilities Incomes and Expenses

• Property, plant and equipment (depreciation, acquisition, disposal, excluding revaluations)
  • Fixed asset schedule

• Accounting for current assets
  • Inventory
  • Cash in hand
  • Cash in bank
  • Bank reconciliation statement

• Intangible assets
  • Softwares
  • Licenses

• Trade receivables
  • Definition
  • Valuation
  • Accounting for trade receivables
  • Debtors control account

• Trade payables
  • Definition
  • Accounting for trade payables
  • Creditors control account

Accrued incomes/expenses and prepaid incomes/expenses

• Definition of accrued incomes/expenses and prepaid incomes/expenses

Accounting for Accrued incomes/expenses and prepaid incomes/expenses

Correct errors arising from accounting records

• Definition of error in accounting records

• Causes of errors

• Types of errors
  • Errors affecting trial balance
    • Error of casting
    • Error of carrying forward
    • Error of balancing
    • Error of posting to correct account but wrong amount
    • Error of posting to correct account but wrong side
    • Error of posting to wrong side with wrong amount
    • Error of omitting to show an account in trial balance
  • Errors not affecting trial balance
    • Error of partial omission
    • Error of complete omission
    • Error of original entry
    • Transposition errors
    • Compensating errors
    • Errors of principle

• Correction of errors
  • Suspense account
  • Journals

Adjusted trial balance

Prepare financial statements for different entities

• Financial statements of sole trader

• Statement of Profit or Loss
  • Definition
  • Format
  • Use

• Statement of Financial Position
  • Definition
  • Format
  • Use

• Financial statements of partnership
  • Definition
  • Format
  • Use

• Partnership deed/agreement

• Statement of profit or loss and appropriation

• Partners' capital and current accounts

• Statement of financial position
  • Definition
  • Format
  • Use

Financial statements of a company

• Important concepts of a company
  • Types of share capital
  • Reserves
  • Retained profits
  • Corporation tax

• Statement of profit or loss
  • Definition
  • Format
  • Use

• Statement of changes in equity
  • Definition
  • Format
  • Use

• Statement of financial position
  • Definition
  • Format
  • Use