Accounting Unit 1: The Role of Accounting in Business

Prerequisites

There are no prerequisites for this unit.

Course Description

This unit explores the establishment of a business and the role of accounting in the determination of business success or failure. It considers the importance of accounting information to stakeholders. Students analyse, interpret and evaluate the performance of the business using financial and non-financial information. They use these evaluations to make recommendations regarding the suitability of a business as an investment.

Students record financial data and prepare reports for service businesses owned by sole proprietors. Where appropriate, the accounting procedures developed in each area of study should incorporate the application of the IASB’s Conceptual Framework and financial indicators to measure business performance. They should also take into account the ethical considerations, including financial, social and environmental considerations, faced by business owners when making business decisions. 

Areas of Study

The role of accounting

Individuals should consider a range of factors before committing to, or continuing in a business venture. In this area of study, students investigate the reasons for establishing a business as well as possible alternatives to operating a business. They explore types of business ownership, factors that lead to the success or failure of a business, sources of business finance, and ethical considerations. They develop an understanding of the role and importance of accounting in operating a business, and consider how accounting is used to provide information for making operational and investment decisions. 

Recording financial data and reporting accounting information for a service business

In this area of study, students investigate the role of accounting in generating financial data and accounting information. They use the accrual method for determining profit for a service business operating as a sole proprietor with cash and credit transactions.

Students use both manual methods and ICT to record financial data and report accounting information. They apply accounting assumptions and qualitative characteristics, and use business documents and indicators to measure business performance in order to evaluate the success or failure of the business.

There are many indicators to measure the performance of a business. Some are financial, such as the amount of profit earned compared with investment or total sales made in a given period; while others are based on non-financial information, such as the speed with which invoices are paid, number of customers visiting a store in a given period, or trends in consumer preferences. 

Assessment

Outcomes	Assessment Tasks
	(school-assessed coursework)
Describe the resources required to establish and operate a business, and select and use accounting reports and other information to discuss the success or otherwise of the business.	Selected from tests, exercises and case studies (manual and/or ICT based).
Identify and record financial data, report and explain accounting information for a service business, and suggest and apply appropriate financial and non-financial indicators to measure business performance.	Selected from tests, exercises and case studies (manual and/or ICT based).

Overall Final Assessment