GCSE Accounting
GCSE Accounting D. E. Turner P. H. Turner M MACMILLAN
D. E. Turner and P. H. Turner 1991 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agent, 33-4 Alfred Place, London WCIE IDP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1991 Published by MACMILLAN EDUCATION LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Turner, D. E.. (Daphne E.) GCSE accounting. 1. Accounting I. Title II. Turner, P. H. 657 ISBN 978-0-333-52979-9 ISBN 978-1-349-11734-5 (ebook) DOI 10.1007/978-1-349-11734-5
( Asterisked (*) units or sections cover the more difficult concepts, which may be omitted from an initial or basic course.) About this Book xi Acknowledgements xi Part One Unit 1 A BIRD'S EYE VIEW Accountancy: What it.is all about 3 la. The first questions 3 lb. Structure of the accounting system 4 1 C. Accounting conventions 5 ld. Help from machines 6 Part Two Unit 2 SUMMARISING THE NET WORTH Balance sheets: what they try to show 11 2A. Personal worth 11 2B. Clubs and commercial firms: what they are worth 13 Unit 3 Keeping track of the changes: 1 19 3A. The changing pattern 19 3B. Types of records 20 3C. Bank accounts 22 3D. Cash and security 23 Unit 4 Keeping track of the changes: Z 28 4A. The fuller picture 28 4B. The trial balance 32 4C. The accounting cycle 34 Unit 5 Reading meaning into balance sheets 39 SA. Balance sheet subgroups 39 * 5B. Interpretation 41 * 5C. Understanding the ratios 43 * 5D. The ratios and change 44 Part Two Multiple-choice test 49 v
Part Three Unit 6 CALCULATING THE PROFIT Earning a living: I. The profit and loss account 55 6A. What is profit? 55 6B. Tracking the profit 56 6C. The nature of ledger accounts 59 Unit 7 Earning a living: Z. The accounts of traders 65 7 A. The idea of gross profit 65 7B. Accounting for 'goods' 65 7C. Some more conventions 73 7D. The accounting cycle 74 Unit 8 Complications in traders' accounts 11 SA. Returns and allowances 77 8B. Transportation costs 80 8C. Discounts 81 8D. Wages and salaries 85 Unit 9 A closer look at trading: the use of day books 81 9A. The need for day books 87 9B. Day books of commercial concerns 88 9C. The journal 90 9D. Cycle of operations-updated 92 Part Three Multiple-choice test 97 Part Four Unit 10 MORE ABOUT PROFIT Calculating profit: some complications 103 loa. Accrued charges 103 lob. Pre-payments 106 IOC. Accruals and pre-payments, and examination questions 107 IOD. The 'matching' convention 107 Unit 11 Calculating profit: further complications 111 lla. Bad debts 111 lib. Bringing home the bacon 114 *Unit 12 Stock and its complications 118 12A. Valuation of closing stock 118 12B. Delayed stock-taking calculations 121 *Unit 13 Understanding profit 1 Z5 13A. Profit and capital 125 13B. Profit and turnover 128 13C. Rate of stock turnover 129 vi
13D. Turnover of debtors and creditors 130 13E. Use of the ratios 131 13F. The problem of inflation 131 Part Four Multiple-choice test 135 Part Five Unit 14 BEING REALISTIC Accounting for wear and tear 141 14A. The nature of depreciation 141 14B. Accounting methods 141 14C. Calculating the depreciation 143 * 14D. Sale of a depreciated asset 144 14E. Examination questions 145 Unit 15 Providing for bad debts 150 15A. Potential bad debts 1 SO 15B. Bad-debts provision and the trial balance 152 *Unit 16 A further look at business transactions: capital and revenue transactions 158 16A. Types of transactions 158 16B. Capital gains and losses 161 16C. Materiality 162 Unit 17 A look back at ledger posting 166 17A. Ledger posting: the background 166 17B. The posting of transactions 167 Part Five Multiple-choice test 115 Part Si:x: Unit 18 SOME ROUTINE APPLICATIONS Looking after the pounds: another look atcash 119 18A. Specialised cash books 179 * 18B. Cash flows 184 18C. Looking after the pence: petty-cash accounting 185 Unit 19 Reconciling the bank balance 190 19A. Bank statements 190 19B. Further complications 193 *Unit 20 Paying the wages 198 20A. The wages system 198 20B. Ledger postings 201 20C. Wage payment procedures 201 vii
*Unit 21 Paying tax 205 21A. Tax and the business organisation 205 21 B. VAT : the general idea 206 21C. Book-keeping procedures 207 21D. Complications 208 Part Six Multiple-choice test 213 Part Seven *Unit 22 ACCOUNTS OF PARTICULAR Accounting for clubs and societies 219 ORGANISATIONS 22A. Receipts and payments accounts 219 22B. Income and expenditure accounts 221 22C. Other final accounts of clubs and societies 223 *Unit 23 Accounting for partnerships 230 23A. General considerations 230 23B. Accounting procedures 231 23C. Goodwill in partnership accounts 234 Unit 24 Accounting for companies: 1. The background 239 24A. General considerations 239 24B. When not to form a company 241 *Unit 25 Accounting for companies: 2. Accounting procedures 244 25A. Ledger procedures 244 25B. Company final accounts 247 *Unit 26 The accounts of manufacturers 256 26A. The problem 256 26B. Form and content of manufacturers' accounts 257 26C. Alternative structure 260 Part Seven Multiple-choice test 265 Part Eight CHECKING UP, SUMMING UP AND SELLING UP Unit 27 Getting the books right: 1. The correction of errors 27A. Errors and their effect 271 27B. The correction of errors 272 * 27C. Correction through a suspense account 273 * 27D. Errors and examination questions 274 27E. Other uses of suspense accounts 276 211 viii
*Unit 28 Getting the books right: 2. Control accounts 219 28A. General principles 279 28B. Complications 283 *Unit 29 Incomplete records: putting the pieces together 288 29A. Statements of affairs 288 29B. Preparation of conventional final accounts 289 29C. Conversion to double entry 292 *Unit 30 Selling up the business 296 30A. Winding up 296 30B. Sale of an existing firm 297 Part Eight Multiple-choice test 303 General revision: multiple-choice test 301 Appendix A. Coping with percentages 311 Appendix B. Using graphs and charts 316 Appendix C. Balancing accounts-the rules 319 Index 321 ix
About this book This book gives a wide introduction to modern accounting, and emphasises the logic and reason behind the procedures involved. We have designed the book to be used in a number of different ways. It may be used as an intensive one-year course, or as a 'straight-through' two-year course-an appropriate aim for the end of the first year would be unit 17. Alternatively, it is possible to choose some of the units to form a basic and balanced course, with the possibility of suitable students proceeding later to a course comprising the more difficult units (those marked with an asterisk in the Contents). The book attempts to involve the student as the course proceeds, and to develop a questioning and intelligent approach to the issues involved. Students are recommended to keep a record of the activity work suggested in each unit, together with their answers to other practical assignments. Acknowledgements The authors wish to thank Mrs Judith Johnson and Miss Helen Turner for their considerable help in preparing this book. xi