TYPES OF BUSINESS TRANSACTION

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A business transaction happens when property changes hands. the main types of transactions are sales and purchases.

Sales and purchases occur in 2 different ways

a) Cash
b) credit

STUDY GUIDE

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1) TYPES OF BUSINESS TRANSACTION AND DOCUMENTATION

A) Types of business transaction

a) Outline the purpose of a range of business documents to include but not limited to:

i) Invoice
ii) Credit note
iii) Remittance Advice

b) Understand the various types of discount including where applicable the effect that trade discounts have on sales tax.

c) Identify and compare different forms of payment.

d) Describe the processing and security procedures relating to the use of:

i) Cash
ii) Cheques
iii) Credit Cards
iv) Debit cards for receipts and payments

B) Types of business documentation

a) Outline the content of a range of business documents to include but not limited to:

i) Invoice
ii) Credit note
iii) Remittance Advice

b) Prepare the financial documents to be sent to credit customers including:

i) Sales invoices
ii) Credit notes
iii) Statements of account

c) Prepare remittance advices to accompany payments to suppliers.

d) Prepare a petty cash voucher including the sales tax element of an expense when presented with an inclusive amount.

C) Process of recording business transactions within the accounting system

a) Describe the sources and characteristics of accounting data and accounting data records in meeting the business’ requirements.

b) Understand how users locate, display and check accounting data records to meet user requirements and understand how data entry errors are dealt with..

c) Outline the tools and techniques used to process accounting transactions and period-end routines and consider how errors are identified and dealt with.

d) Consider the risks to data security, data protection procedures and the storage of data.

e) Understand the principles of coding in entering accounting transactions including:

i) Describing the need for a coding system for financial transactions within a double entry book-keeping system
ii) Describe the use of a coding system within a filing system

f) Code sales invoices, supplier invoices and credit notes ready for entry into the books of prime entry.

g) Describe the accounting documents and management reports produced by computerised accounting systems and understand the link between the accounting system and other systems in the business.

2) DUALITY OF TRANSACTIONS AND THE DOUBLE ENTRY SYSTEM

A) Books of prime entry

a) Outline the purpose and content of the books of prime entry including their format.

b) Explain how transactions are entered in the books of prime entry.

c) Outline how the books of prime entry integrate with the double entry book-keeping system.

d) Enter transactions including the sales tax effect where applicable into the books of prime entry.

B) Double entry system

a) Define the accounting equation.

b) Understand and apply the accounting equation.

c) Explain how the accounting equation relates to the double entry book-keeping system.

d) Process financial transactions from the books of prime entry into the double entry bookkeeping system.

C) The journal

a) Understand the use of the journal including the reasons for, content and format of the journal.

b) Prepare journal entities directly from transactions, books of prime entry as applicable or to correct errors.

D) Elements of the financial statements

a) Define and distinguish between the elements of the financial statements.

b) Identify the content of a statement of financial position and statement of comprehensive income.

3) BANK SYSTEM AND TRANSACTIONS

A) The banking process

a) Explain the differences between the services offered by banks and banking institutions.

b) Describe how the banking clearing system works.

c) Identify and compare different forms of payment.

d) Describe the processing and security procedures relating to the use of cash, cheques, credit cards, debit cards for receipts and payments.

B) Documentation

a) Explain why it is important for an organisation to have a formal document retention policy.

b) Identify the different categories of documents that may be stored as part of a document retention policy.

4) PAYROLL

A) Process payroll transactions within the accounting system

a) Prepare and enter the journal entries in the general ledger to process payroll transactions including:

i) Calculation of gross wages for employees paid by the hour, paid by output and salaried workers
ii) Accounting for payroll costs and deductions
iii) The employers responsibilities for taxes, state benefit contributions and other deductions .

b) Identify the different payment methods in a payroll system, e.g. cash, cheques, automated payment.

c) Explain why authorisation of payroll transactions and security of payroll information is important in an organisation.

5) LEDGER ACCOUNTS

A) Prepare ledger accounts

a) Enter transactions from the books of prime entry into the ledgers.

b) Record journal entries in the ledger accounts.

c) Balance and close off ledger accounts.

6) CASH AND BANK

A) Maintaining a cash book

a) Record applicable transactions within the cashbook, including any sales tax effect where applicable.

b) Prepare the total, balance and cross cast cash book columns.

c) Identify and deal with discrepancies.

B) Maintaining a petty cash book

a) Enter and analyse petty cash transactions in the petty cash book including any sales tax effect where applicable.

b) Balance off the petty cash book using imprest and non imprest systems.

c) Reconcile the petty cash book with cash in hand.

d) Prepare and account for petty cash reimbursement.

7) SALES AND CREDIT TRANSACTIONS

A) Recording Sales

a) Record sales transactions taking into account:

i) Various types of discount
ii) Sales tax
iii) The impact on the sales tax ledger account where applicable.

b) Prepare the financial documents to be sent to credit customers.

B) Customer account balances and control accounts

a) Describe the usefulness of an aged receivable analysis.

b) Produce statements of account to be sent to credit customers.

c) Explain the need to deal with discrepancies quickly and professionally.

d) Prepare the receivables control account or receivables ledgers by accounting for:

i) Sales
ii) Salesreturns
iii) Payments from customers including checking the accuracy and validity of receipts against relevant supporting information
iv) Settlement discounts
v) Irrecoverable debt and allowances for irrecoverable debts including any effect of sales tax where applicable

8) PURCHASES AND CREDIT TRANSACTIONS

A) Recording Purchases

a) Record purchase transactions taking into account:

i) Various types of discount
ii) Sales tax
iii) The impact on the sales tax ledger account where applicable

b) Enter supplier invoices and credit notes into the appropriate book of prime entry.

B) Supplier balances and reconciliations

a) Prepare the payables control account or payables ledgers by accounting for:

i) Purchases
ii) Purchase returns
iii) Payments to suppliers including checking the accuracy and validity of the payment against relevant supporting information
iv) Settlement discounts

9) RECONCILIATION

A) Purpose of control accounts and reconciliation

a) Describe the purpose of control accounts as a checking devise to aid management and help identify book-keeping errors.

b) Explain why it is important to reconcile control accounts regularly and deal with discrepancies quickly and professionally.

B) Reconcile the cash book

a) Reconcile a bank statement with the cash book.

C) Reconcile the receivables control account

a) Reconcile the balance on the receivables control account with the list of balances.

D) Reconcile the payables control account

a) Reconcile the balance on the payables control account with the list of balances.

10) PREPARING THE TRIAL BALANCE

A) Prepare the trial balance

a) Prepare ledger balances, clearly showing the balances carried down and brought down as appropriate.

b) Extract an initial trial balance.

B) Correcting errors

a) Identify types of error in a book-keeping system that are disclosed by extracting a trial balance.

b) Identify types of error in a book-keeping system that are not disclosed by extracting a trial balance.

c) Use the journal to correct errors disclosed by the trial balance.

d) use the journal to correct errors not disclosed by the trial balance.

e) Identify when a suspense account is required and clear the suspense account using the journal.

f) Redraft the trial balance following correction of all errors.

DETAILED SYLLABUS

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1) Types of business transactions and documentation

A) Types of business transaction
B)Types of business documentation
C)Process of recording business transactions within the accounting system

2) Duality of transactions and the double entry system

A) Books of prime entry
B) Double entry system
C) The journal
D) Elements of financial statements

3) Banking system and transactions

A) The banking process
B) Documentation

4) Payroll

A) Processing payroll transactions into the accounting system

5) Ledger accounts

A) Prepare ledger accounts

6) Cash and Bank

A) Maintaining a cashbook
B) Maintaining petty cashbook

7) Sales and Credit transactions

A) Recording sales
B) Customer account balances and control accounts

8) Purchases and credit transactions

A) Recording purchases
B) Supplier balances and reconciliations

9) Reconciliation

A) Purpose of control accounts and reconciliation
B) Reconcile the cashbook
C) Reconcile the receivables control account
D) Reconcile the payables control account

10) Preparing the Trial Balance

A) Prepare the trial balance
B) Correcting errors

SYLLABUS

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1) Types of business transactions and documentation

2) Duality of transactions and the double entry system

3) Banking system and transactions

4) Payroll

5) Ledger accounts

6) Cash and Bank

7) Sales and Credit transactions

8) Purchases and Credit transactions

9) Reconciliation

10) Preparing the trial balance

INTRODUTION

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The Fa1 course is the new name for the old CAT T1 course. This course is called recording financial transactions.
This course gives you the basic background that you need to know, it gives you the basics that will help you record financial transactions and how to keep a record of all your paperwork and to how to produce a ledger of accounts and take out a trail balance.

MAYS ACCA FA1

TYPES OF BUSINESS TRANSACTION

STUDY GUIDE

DETAILED SYLLABUS

SYLLABUS

INTRODUTION