Learner Guide

Revision checklists
In the next part of this guide we have provided some revision checklists. These include information from the syllabus that you should revise. They don’t contain all the detailed knowledge
you need to know, just an overview. For more detail see the syllabus and talk to your teacher.
The table headings are explained below:

Topic You should be able to R A G Comments

These are the topics in the This is what you should be able to do or You can use the tick boxes to show when you have revised You can use the Comments column to:
syllabus know for each part of the syllabus an item and how confident you feel about it.
• add more information about the details for
R = RED means you are really unsure and lack confidence; each point
you might want to focus your revision here and possibly • include a reference to a useful resource
talk to your teacher for help
• add further information of your own
A = AMBER means you are reasonably confident but need • add learning aids, such as rhymes, poems or
some extra practice word play
G = GREEN means you are very confident. • pinpoint areas of difficulty you need to
check further with your teacher.
As your revision progresses, you can concentrate on the
RED and AMBER items in order to turn them into GREEN
items. You might find it helpful to highlight each topic in
red, orange or green to help you prioritise.
Note: the tables below cannot contain absolutely everything you need to know, but it does use examples wherever it can.

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 Self-Reflection on Learning
Student Name:__________ GCE O levels Accounting 7707 Learner Guide

Grade:__________ Required: Tick the correct column as per your learning needs
Topic 1: The fundamentals of accounting

Topic You should be able to R A G Comments

1.1 The purpose of • understand and explain the difference between book-keeping and accounting
accounting
• state the purposes of measuring business profit and loss

• explain the role of accounting in providing information for monitoring progress and
decision-making

1.2 The accounting • explain the meaning of assets, liabilities and owner’s equity
equation
• explain and apply the accounting equation

Topic 2: Sources and recording of data

Topic You should be able to R A G Comments

2.1 The double entry • outline the double entry system of book-keeping
system of book-
keeping • process accounting data using the double entry system

• prepare ledger accounts

• post transactions to the ledger accounts

• balance ledger accounts as required and make transfers to financial statements

• interpret ledger accounts and their balances

• recognise the division of the ledger into the sales ledger, the purchases ledger and the
nominal (general) ledger.
2.2 Business • recognise and understand the following business documents: invoice, debit note,
documents credit note, statement of account, cheque, receipt

• complete pro-forma business documents

• understand the use of business documents as sources of information: invoice, credit

note, cheque counterfoil, paying in slip, receipt, bank statement.
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Topic You should be able to R A G Comments

2.3 Books of prime • explain the advantage of using various books of prime entry
entry
• explain the use of and process accounting data in the books of prime entry: cash book,
petty cash book, sales journal, purchases journal, sales returns journey, purchases
returns journal and the general journal

• post the ledger entries from the books of prime entry

• distinguish between and account for trade discount and cash discounts

• explain the dual function of the cash book as a book of prime entry and as a ledger
account for bank and cash

• explain the use of and record payments and receipts made by bank transfers and
other electronic means

• explain and apply the imprest system of petty cash.

Topic 3: Verification of accounting records

Topic You should be able to R A G Comments

3.1 The trial balance • understand that a trial balance is a statement of ledger balances on a particular date

• outline the uses and limitations of a trial balance

• prepare a trial balance from a given list of balances and amend a trial balance which
contains errors

• identify and explain those error which do not affect the trial balance: commission,
compensating, complete reversal, omission, original entry, principle.
3.2 Correction of • correct errors by means of journal entries
errors
• explain the use of a suspense account as a temporary measure to balance the trial
balance

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Topic You should be able to R A G Comments

• correct errors by means of suspense accounts

• adjust a profit or loss for an accounting period after the correction of errors

• understand the effect of correction of errors on a statement of financial position.

3.3 Bank • understand the use and purpose of a bank statement

reconciliation
• update the cash book for bank charges, bank interest paid and received, correction of
errors, credit transfers, direct debits, dividends, and standing orders

• understand the purpose of and prepare a bank reconciliation statement to include

bank errors, uncredited deposits and unpresented cheques.
3.4 Control accounts • understand the purposes of purchases ledger and sales ledger control accounts

• Identify the books of prime entry as sources of information for the control account
entries

• Prepare purchases ledger and sales ledger control accounts to include credit
purchases and sales, receipts and payments, cash discounts, returns, irrecoverable
debts, dishonoured cheques, interest on overdue accounts, contra entries, refunds,
opening and closing balances (debit and credit within each account).

Topic 4: Accounting procedures

Topic You should be able to R A G Comments

4.1 Capital and • distinguish between and account for capital expenditure and revenue expenditure
revenue expenditure
and receipts • distinguish between and account for capital receipts and revenue receipts

• calculate and comment on the effect on profit of incorrect treatment

• calculate and comment on the effect on asset valuations of incorrect treatment.

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Topic You should be able to R A G Comments

4.2 Accounting for • define depreciation
depreciation and
disposal of non- • explain the reasons for accounting for depreciation
current assets
• name and describe the straight-line, reducing balance and revaluation methods of
depreciation

• prepare ledger accounts and journal entries for the provision of depreciation

• prepare ledger accounts and journal entries to record the sale of non-current assets,
including the use of disposal accounts
4.3 Other payables • recognise the importance of matching costs and revenues
and other receivables
• prepare ledger accounts and journal entries to record accrued and prepaid expenses

• prepare ledger accounts and journal entries to record accrued and prepaid incomes.

4.4 Irrecoverable • understand the meanign of irrecoverable debts and recovery of debts written off
debts and provision
for doubtful debts • prepare ledger accounts and journal entries to record irrecoverable debts

• prepare ledger accounts and journal entries to recored recovery of debts written off

• explain the reasons for maintaining a provision for doubtful debts

• prepare ledger accounts and journal entries to record the creation of, and adjustments
to, a provision for doubtful debts.
4.5 Valuation of • understand the basis of the valuation of inventory at the lower of cost and net
inventory realisable value

• prepare simple inventory valuation statements

• recognise the importance of valuation of inventory and the effect of an incorrect

valuation of inventory on gross profit, profit for the year, equity and asset valuation.

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Topic 5: Preparation of financial statements

Topic You should be able to R A G Comments

5.1 Sole traders • explain the advantages and disadvantages of operating as a sole trader

• explain the importance of preparing income statements and statements of financial

position

• explain the difference between a trading business and a service business

• prepare income statements for trading businesses and for service businesses

• understand that statements of financial position record assets and liabilities on a

specified date

• recognise and define the content of a statement of financial position: non-current

assets, intangible assets, current assets, current liabilities, non-current liabilities and
capital

• understand the inter-relationship of items in a statement of financial position

• prepare statements of financial position for trading businesses and service businesses

• make adjustments for provision for depreciation using the straight line, reducing
balance and revaluation methods

• make adjustments for accrued and prepaid expenses and accrued and prepaid income

• make adjustments for irrecoverable debts and provisions for doubtful debts

• make adjustments for goods taken by the owner for own use.

5.2 Partnerships • explain the advantages and disadvantages of forming a partnership

• outline the importance and contents of a partnership agreement

• explain the purpose of an appropriation account

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Topic You should be able to R A G Comments

• prepare income statements, appropriation accounts and statements of financial
position

• record interest on partner’s loans, interest on capital, interest on drawings, partners’

salaries and the division of the balance of profit or loss

• make adjustments to financial statements as detailed in 5.1 (sole traders)

• explain the used of and differences between capital and current accounts

• draw up partners’ capital and current accounts in ledger account form and as part of a
statement of financial position
5.3 Limited • explain the advantages and disadvantages of operating as a limited company
companies
• understand the meaning of the term limited liability

• understand the meaning of the term equity

• understand the capital structure of a limited company comprising preference share

capital, ordinary share capital, general reserve and retained earnings

• understand and distinguish between issued, called-up and paid-up share capital

• understand and distinguish between share capital (preference shares and ordinary
shares) and loan capital (debentures)

• prepare income statements, statements of changes in equity and statements of

financial position

• make adjustments to financial statements as detailed in 5.1 (sole traders)

5.4 Clubs and • distinguish between receipts and payments accounts and income and expenditure
societies accounts

• prepare receipts and payments accounts

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 Learner Guide

Topic You should be able to R A G Comments

5.5 Manufacturing • distinguish between direct and indirect costs
accounts
• understand direct material, direct labour, prime cost and factory overheads

• understand and make adjustments for work in progress

• calculate factory cost of production

• prepare manufacturing accounts, income statements and statements of financial

position

• make adjustment to financial statements as detailed in 5.1 (sole traders).

5.6 Incomplete • explain the disadvantages of not maintaining a full set of accounting records
records
• prepare opening and closing statements of affairs

• calculate profit or loss for the year from changes in capital over time

• calculate sales, purchases, gross profit, trade receivables and trade payables and other
figures from incomplete information

• prepare income statements and statements of financial position from incomplete

records

• make adjustments to financial statements as detailed in 5.1 (sole traders)

• apply the techniques of mark-up, margin and inventory turnover to arrive at missing
figures.

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Topic 6: Analysis and interpretation

Topic You should be able to R A G Comments

6.1 Calculation and • understand, calculate and explain the importance of the following accounting ratios
understanding of
accounting ratios • gross margin

• profit margin

• return on capital employed (ROCE)

• current ratio

• liquid (acid test) ratio

• rate of inventory turnover (times)

• trade receivables turnover (days)

• trade payable turnover (days)

6.2 Interpretation of • prepare and comment on simple statements showing comparison of results for
accounting ratios different years
• make recommendations and suggestions for improving profitability and working
capital
• understand the significance of the difference between the gross margin and the profit
margin as an indicator of a business’s efficiency
• explain the relationship of gross profit and profit for the year to the valuation of
inventory, rate of inventory turnover, revenue, expenses, and equity.
6.3 Inter-firm • understand the problems of inter-firm comparison
comparison
• apply accounting ratios to inter-firm comparison.

6.4 Interested parties Explain the uses of accounting information by the following interested parties for
decision-making:
• owners

• managers

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Topic You should be able to R A G Comments

• trade payables

• banks

• investors

• club members

• other interested parties such as governments, tax authorities, etc.

6.5 Limitations Recognise the limitations of accounting statements due to such factors as:
of accounting
• historic cost
statements
• difficulties of definition

• non-financial aspects

Topic 7: Accounting principles and policies

Topic You should be able to R A G Comments

7.1 Accounting Explain and recognise the application of the following accounting policies:
principles
• matching

• business entity

• consistency

• duality

• going concern

• historic cost

• materiality
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Topic You should be able to R A G Comments

• money measurement

• prudence

• realisation

7.2 Accounting Recognise the influence of international accounting standards and understand the
policies following objectives in selecting accounting policies:
• comparability

• relevance

• reliability

• understandability

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