Accounting Unit 2: Accounting and Decision Making for a Trading Business

Prerequisites

Students are strongly advised to complete Unit 1 before undertaking Unit 2.

Course Description

In this unit, students develop their knowledge of the accounting process for sole proprietors operating a trading business, with a focus on inventory, accounts receivable, accounts payable and non-current assets. Students use manual processes and ICT, including spreadsheets, to prepare historical and budgeted accounting reports.

Students analyse and evaluate the performance of the business relating to inventory, accounts receivable, accounts payable and non-current assets. They use relevant financial and other information to predict, budget and compare the potential effects of alternative strategies on the performance of the business. Using these evaluations, students develop and suggest to the owner strategies to improve business performance.

Where appropriate, the accounting procedures developed in each area of study should incorporate application of the Conceptual Framework, financial indicators and the ethical considerations faced by business owners, including financial, social and environmental considerations, when making business decisions.

Areas of Study

Accounting for and managing inventory

The strategic management of inventory is a key factor in determining the success or failure of a trading business. In this area of study, students investigate use of both the First-In, First-Out (FIFO) and Identified Cost inventory cost assignment methods to record and report the movement of inventory through the business. Using both methods, students discuss the effects of relevant financial and non-financial factors, including ethical considerations, on decisions made in relation to inventory.

Accounting for and managing accounts receivable and accounts payable

Managing accounts receivable and accounts payable successfully is essential to maintaining an adequate cash flow for a business. In this area of study students record and report transactions relating to accounts receivable and accounts payable. They examine strategies for managing credit transactions and use indicators, such as accounts receivable turnover and accounts payable
turnover, to analyse decisions related to these areas. Students also take account of ethical considerations involved in managing accounts receivable and accounts payable and the effects of these on business performance.

Accounting for and managing non-current assets

Students develop an understanding of the accounting processes for non-current assets and the issues that can arise when determining a valuation for a non-current asset. Students calculate and apply depreciation using the straight-line method and undertake recording and reporting of depreciation.

Assessment

Outcomes	Assessment Tasks
Outcomes	(school-assessed coursework)
Record and report for inventory and discuss the effects of relevant financial and non-financial factors, and ethical considerations, on the results of business decisions.	Selected from tests, exercises and case studies (manual and/or ICT based).
Record and report for accounts receivable and accounts payable, and analyse and discuss the effects of relevant decisions, including the influence of ethical considerations, on the performance of the business.	Selected from tests, exercises and case studies (manual and/or ICT based).
Record and report for non-current assets and depreciation.	Selected from tests, exercises and case studies (manual and/or ICT based).

Overall Final Assessment

End of Semester Examination – 1.5 hours.