Accounting Unit 3: Financial Accounting for a Trading Business

Prerequisites

Students are strongly advised to complete Units 1 and 2 before undertaking Unit 3.

Course Description

This unit focusses on financial accounting for a trading business owned by a sole proprietor, and highlights the role of accounting as an information system. Students use the double entry system of recording financial data and prepare reports using the accrual basis of accounting and the perpetual method of inventory recording.

Students develop their understanding of the accounting processes for recording and reporting, and consider the effects of decisions made on the performance of the business. They interpret reports and information presented in a variety of formats and suggest strategies to the owner to improve the performance of the business. 

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

Areas of Study

Recording and analysing financial data

Students focus on identifying and recording financial data for a business. They use double entry accounting to record data and generate accounting information in the form of accounting reports and graphical representations. This information is used to assist the owner in making informed decisions about the operation of the business. Students should also consider strategies to improve the performance of the business, taking into account the relevant ethical considerations. 

Preparing and interpreting accounting reports

The preparation of financial reports at the end of the reporting period provides information to be used as a basis for planning and decision-making by the business owner. Students develop their understanding of the accounting processes and complete those processes that are applicable to the end of a reporting period for a trading business. They apply the accrual method of accounting to the preparation of accounting reports and draw a distinction between cash and profit, considering the implications of these differences when using reports to make decisions. Students undertake an analysis of accounting reports and interpret the information, taking into account relevant ethical considerations, in order to evaluate the performance of the business. 

Assessment

Outcomes	Assessment Tasks	Marks Allocated
	(school-assessed coursework)
Record financial data using a double entry system; explain the role of the General Journal, General Ledger and inventory cards in the recording process; and describe, discuss and analyse various aspects of accounting reports and the accounting system, including ethical considerations.	Structured questions or tests (manual and/or ICT).	60
Record transactions and prepare, interpret and analyse accounting reports for a trading business.	Structured questions or tests (manual and/or ICT).	40
Total Marks		100

Overall Final Assessment

Graded Assessment	Title	Assessment	Exam Duration	Contribution to Study Score (%)
1	Unit 3 Coursework	School-assessed		25
2	Unit 4 Coursework	School-assessed		25
3	Written Examination	November	2 hours	50