This unit focuses on accounting and financial management of a small business. The unit introduces the fundamental processes of gathering, recording, reporting, analysing, interpreting and evaluating financial information for use by the individual in a small business. It is expected that students will be introduced to the use of information technology in undertaking accounting procedures.
The unit introduces the role of accounting in financial decision making. It uses single entry recording of financial information for sole-proprietor service businesses. Reporting is restricted to the cash basis.
Accounting procedures developed in each area of study will focus on the application of accounting concepts, constraints and principles, where appropriate.
AREAS OF STUDY
1. Sources and processing of financial data
This area of study covers the `input' and `processing' of financial data into an appropriate system.
Students should gain an understanding of the needs of the users of accounting information.
This area of study will include:
• factors relevant to establishing a small business;
• the distinction between financial data and financial information;
• identification of the type of financial and non-financial information required;
• identification of the sources of data for that information;
• techniques for gathering and classifying data to produce useful information; design
and use of an appropriate recording system;
• classifying, recording and verifying data;
• distinction between cash and credit transactions;
• flowcharts for recording systems;
• critical analysis of the recording system;
• techniques for reconciling and verifying cash balances;
• methods of recording movements of cash;
• recording required for sources of available finance, investments, taxation.

2. Financial outcomes
This area of study covers the generation of useful information in the form of reports from the financial data which has been recorded. The reports must include profit generation, cash position and statements of financial position. This will also involve consideration of cash control.
The formats for the various reports would be directed by the needs of the users. A critical analysis of the reports and an understanding of the extent to which the preparation of the reports is affected by the accounting concepts, constraints and principles should be included.
This area of study will include:
• identifying and reporting for cash receipts and payments, revenue and expense, proprietorship, assets and liabilities;
• the need for effective control over cash resources;
• preparation and use of budgets as a means of controlling cash and identifying deficit or excess cash situations;
• critical analysis of formats of reports and an understanding that the needs of the users drive these formats.
3. Financial planning and decision making
This area of study covers the decisions based on the information generated by the system.
This area of study will include:
• critical analysis of financial and non-financial information and problem-solving approaches;
• decision making based on records and reports, including an introduction to major indicators and the evaluation of performance where appropriate.
These should be studied in the context of any three of the following:
• budgeting, as an aid to decision making;
• price-setting strategies, including cost/volume/profit (break-even) analysis;
• sources and uses of available credit, distinguished by type, terms, interest, applications for loans, benefits of internal and external financing;
• taxation: A close application of the Taxation Act is not required; the focus should be on the general principles of taxation, concepts such as substantiation, and the necessary records and reports from the business perspective (not personal);
• investment opportunities including superannuation, evaluation of performance related to investment decisions distinguished by type, terms, return, security.
OUTCOMES
For this unit students are required to demonstrate achievement three outcomes. As a set these outcomes encompass all areas of study for the unit.
Outcome I
On completion of this unit the student should be able to identify and explain the financial needs of sole-proprietor service businesses, including the individuals involved, and how these needs influence the development of an accounting system.

Key knowledge
In achieving this outcome the student will draw on knowledge described in area of study 1.
To achieve this outcome the student should demonstrate knowledge of
• factors relevant to establishing a small business;
• the distinction between financial data and financial information;
• the type of financial and non-financial information required;
• the sources of data for that information.
Key skills
To achieve this outcome the student should demonstrate the ability to
• undertake techniques to gather and classify data to produce useful information;
• identify the sources of the data which provides the basis for translation into financial information;
• design and operate an accounting system to meet the needs of users;
• implement control procedures for cash.
Outcome 2
On completion of this unit the student should be able to record, report and analyse financial information.
Key knowledge
In achieving this outcome the student will draw on knowledge described in areas of study 1 and 2.
To achieve this outcome the student should demonstrate knowledge of:
• the distinction between cash and credit transactions;
• critical analysis of the recording system;
• cash receipts and payments, revenue and expense, proprietorship, assets and liabilities;
• the need for effective control over cash resources;
• critical analysis of formats of reports and an understanding that the needs of the users drive
• these formats.
Key skills and verify data; demonstrate techniques for reconciling and verifying cash balances; record for cash receipts and payments, cash movements, revenue and expense, proprietorship, assets and liabilities, available finance and investments; report on the business through the preparation of - statements of receipts and payments - statements of profit and loss (cash basis) - statements of assets and liabilities (cash basis).

Outcome 3
On completion of this unit the student should be able to describe ways in which accounting contributes to effective decision making and financial management.
Key knowledge
In achieving this outcome the student will draw on knowledge described in area of study 2 and 3.
To achieve this outcome the student should demonstrate knowledge of
• analyses of the financial and non-financial information and problem-solving approaches;
• decision making based on records and reports including an introduction to major indicators and the evaluation of performance where appropriate;
• the role of cash management and the distinction between cash and profit;
• analysis and interpretation of:
- business performance, including the strategies required to achieve financial success
- financial planning alternatives.
Key skills
To achieve this outcome the student should demonstrate the ability to
• develop a systematic approach to problem solving: problem definition, information gathering, formulation of alternative solutions, criteria for decision making;
• represent problem-solving approaches using flowcharts.
ASSESSMENT
The award of satisfactory completion for a unit is based on a decision that the student has demonstrated achievement of the set of outcomes specified for the unit. This decision will be based on the teacher's assessment of the student's overall performance on assessment tasks designated for the unit. The Board of Studies will publish annually an assessment guide which will include advice on the scope of the assessment tasks and the criteria for assessment.
The key knowledge and skills listed for each outcome should be used as a guide to course design and the development of learning activities. The key knowledge and skills do not constitute a checklist and such an approach is not necessary or desirable for determining the achievement of outcomes. The elements of key knowledge and skills should not be assessed separately.
Assessment tasks must be a part of the regular teaching and learning program and must not unduly add to the workload associated with that program. They must be completed mainly in class and within a limited timeframe.
Demonstration of achievement of Outcomes 1, 2 and 3 must be based on the student's performance on a selection of assessment tasks. Teachers must ensure that tasks selected are of comparable scope and demand. Assessment tasks for this unit are:
• use of computer software and/or applications, such as spreadsheets, to record and analyse
data;
• test(s); assignments; folio of exercises; classroom presentations.
In the case of group work, each student's contributions and responsibilities are to be clearly defined in advance.

This unit focuses on the accounting and financial operation of a small business. The unit introduces an accounting system based on single entry recording, the cash method of revenue and expense recognition, and reporting using the modified cash approach and the accrual approach. It also examines the impact of credit transactions on recording and reporting. The system is applied to small business, in both service and trading contexts. The unit provides a detailed examination of formal accounting procedures and may include some double entry recording. Double entry recording should be treated as a development which resulted from growth in the complexity and size of a business, with the business moving from single entry records to double entry. Students are required to use information technology in the completion of accounting procedures.
In Unit 1 the need for accounting information for decision making was established. Unit 2 seeks to establish the process by which the required information about the results of operation (profit and loss), financial position (statement of assets and liabilities or balance sheet) and cash flow (statement of receipts and payments) is produced.
The systems taught should be predominantly single entry (with the use of the cash books as the main record, supplemented by subsidiary records for other information such as credit transactions and stock). The double entry system can be introduced as a development from single entry.
Students are required to use information technology to prepare information for recording (either single or double entry) and use the capacity of electronic software to present and interpret the information produced. The accounting systems should be applied to sole-proprietor service and trading businesses using the physical method of stock recording.
Accounting procedures developed in each area of study will focus on the application of accounting concepts, constraints and principles, where appropriate.
AREAS OF STUDY
1. Sources and processing of financial data
This area of study covers the introduction of the purpose of accounting, and the inputting and processing of data into the single entry system of recording (and into the double entry system, where appropriate) for small businesses.
This area of study will include:
• introduction, design and use of a single entry (and double entry where appropriate) recording system-both manually
and with computers;
• source documents for both cash and credit transactions (no returns);

• recording of cash transactions into cash books;
• recording of credit transactions into sales and purchases records (journals);
• records for individual debtors and creditors;
• cash control: petty cash recording;
• critical evaluation of the recording system.
Financial outcomes
This area of study covers the generation of useful information (reports) from the financial data which has been recorded in the systems established.
The accrual approach in this unit is restricted to credit sales, credit purchases, adjustments for stock and depreciation.
The formats of the reports will be directed by the needs of the users of the information.
This area of study will include:
• the identification and definition of the elements of financial reporting and the illustration of the two-fold effect of transactions on reports;
• reporting for materials used in a service business using the physical method;
• reporting for trading stock using the physical method;
• reporting for depreciation of non-current assets using the straight-line method;
• reporting for assets and liabilities, receipts and payments, and revenue and expenses using the modified cash and accrual basis for profit;
• cash control: bank reconciliation;
• classification of reports: assets and liabilities, and the classification of profit and loss to show gross and net profit for a single-activity business (trading);
• the use of alternative forms of presentation of reports to facilitate understanding.
3. Financial planning and decision making
This area of study covers the decisions which are based on the information generated by the system and included in the reports.
This area of study will include:
• managing cash;
• managing stock;
• understanding and evaluation (by use of benchmarks and trends) of
- profitability (return on investment);
- financial stability: short term (working capital) and long term (gearing);
• distinction between cash and profit;
• price-setting methods including cost/volume/profit calculations;
• sources of finance for small business for operations and growth-internal and external sources;
• budgeting as an aid to decision making;
• success or failure in small business.

OUTCOMES
For this unit students are required to demonstrate achievement of three outcomes. As a set these outcomes encompass all areas of study for the unit.
Outcome 1
On completion of this unit the student should be able to identify and describe the financial needs of sole-proprietor service and trading businesses, and how these needs influence the development of an accounting system.
Key knowledge
In achieving this outcome the student will draw on knowledge described in areas of study 1 and 3.
To achieve this outcome the student should demonstrate knowledge of
• factors relevant to establishing a small business;
• definitions of asset, liability, owner's equity (proprietorship), revenue and expenses, receipts and payments;
• the distinction between financial data and financial information;
• the design and use of a single entry (and double entry, where appropriate) recording system, both manually and using information technology;
• source documents for both cash and credit transactions (no returns);
• cash management and control through
- cash
- stock
- individual debtors and creditors records.
Key skills
To achieve this outcome the student should demonstrate the ability to
• implement control procedures for
- petty cash
- bank reconciliation
- debtors and creditors
- stocktakes (physical stock method);
• identify
- the two-fold effect of transactions on the accounting equation
- factors involved in establishing a business
- factors causing success or failure of a small business
- possible approaches in setting prices for a firm's goods and/or services
- sources of finance for a small business.
Outcome 2
On completion of this unit the student should be able to record financial data and prepare reports of financial information for service and trading businesses manually and using information technology.

Key knowledge
In achieving this outcome the student will draw on knowledge described in area of study 3.
To achieve this outcome the student should demonstrate knowledge of
• cash management and control through
- cash
- stock
- individual debtors and creditors records
- procedures for the management of cash and stock;
• the application of benchmarks and trends to evaluate
- profitability (return on investment)
- financial stability: short term (working capital) and long term (gearing);
• distinction between cash and profit;
• sources of finance for small business for operations and growth (internal and external sources);
• budgeting as an aid to decision making;
• factors influencing success or failure in small business.
Key skills
To achieve this outcome the student should demonstrate the ability to:
• demonstrate price-setting methods including cost/volume/profit calculations;
• design an accounting system;
• evaluate critically the design of an accounting system;
• use alternative forms of presentations of reports.
ASSESSMENT
The award of satisfactory completion for a unit is based on a decision that the student has demonstrated achievement of the set of outcomes specified for the unit. This decision will be based on the teacher's assessment of the student's overall performance on assessment tasks designated for the unit. The Board of
Studies will publish annually an assessment guide which will include advice on the scope of the assessment tasks and the criteria for assessment.
The key knowledge and skills listed for each outcome should be used as a guide to course design and the development of learning activities. The key knowledge and skills do not constitute a checklist and such an approach is not necessary or desirable for determining the achievement of outcomes. The elements of key knowledge and skills should not be assessed separately.
Assessment tasks must be a part of the regular teaching and learning program and must not unduly add to the workload associated with that program. They must be completed mainly in class and within a limited timeframe.
Demonstration of achievement of Outcomes 1, 2 and 3 must be based on the student's performance on a selection of assessment tasks. Teachers must ensure that tasks selected are of comparable scope and demand.
Assessment tasks for this unit are:

• use of computer software and/or applications, such as spreadsheets, to record and analyse data;
• test(s);
• assignments;
• folio of exercises;
• classroom presentations.
In the case of group work, each student's contributions and responsibilities are to be clearly defined in advance.