Learning Outcomes

At the end of this unit students will be able to

Capital and revenue expenditure and receipts

• distinguish between and account for capital expenditure and revenue expenditure
• 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.

Accounting for depreciation and disposal of fixed assets

• define depreciation
• explain the reasons for accounting for depreciatio
• name and describe the straight line (equal instalment), reducing (diminishing) 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 fixed assets, including the use of disposal accounts.

Other payables (Accruals) and Other receivables (Prepayments)

• recognise the importance of matching costs and revenues
• prepare ledger accounts and journal entries to record accrued and prepaid expenses
• prepare ledger accounts and journal entries to record accrued and prepaid incomes.

Bad debts and provision for doubtful debts

• understand the meaning of bad debts and bad debts recovered
• prepare ledger accounts and journal entries to record bad debts written off
• prepare ledger accounts and journal entries to record bad debts recovered
• 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.

Valuation of inventory (Stock valuation)

• understand the basis of the valuation of inventory (stock) at the lower of cost and net realisable value
• prepare simple inventory (stock) valuation statements.