Accounting: Introduction Mr. Barry A-level Accounting Year 13

Mr. Barry A-level Accounting Year 13

A change to the school day Mr. Barry A-level Accounting Year 13

Starter Activity 1 On the postit given, can you answer the following questions (use both sides) – How did you find your Year 12 accounting? Any problems with particular topics? – What activities did you find most effective in lessons? End A-level Accounting Year 13Mr. Barry

Format of this Year Unit 3- Further aspects of Financial Accounting Unit 4- Further aspects of management accounting  6 Lessons every two weeks  Mr. Barry  1 Lesson shared with Mr. Choudhury  5 Lessons every two weeks  Mr. Choudhury  1 Lesson shared with Mr. Barry Mr. Barry A-level Accounting Year 13

TopicsWeek Sources of finance1-2 Incomplete Records3-6 Partnership Accounts Introduction6-7 Assessment8 Partnership Accounts9-14 Assessment15 Published Accounts2-5 Accounting Standards (IAS’s)6-10 Assessment11 Inventory Valuation1-2 Assessment/ Revision3-6 Mr. Barry A-level Accounting Year 13

Topic 1: Sources of Finance Commonly used sources of finance for businesses, including bank loans and overdrafts, shares, debentures etc. Assess these types of finance and make appropriate recommendations Mr. Barry A-level Accounting Year 13

Topic 2: Incomplete Records Calculate the profits or losses of businesses that have not kept a full set of accounting records Use a variety of techniques that are used to find the key information required to prepare financial statements under circumstances Mr. Barry A-level Accounting Year 13

Topic 3: Partnership Accounts Techniques to share profit and loss between the partners The Partnership Act 1980 Prepare partnership accounts, record the retirement, admission and dissolution of a partnership Mr. Barry A-level Accounting Year 13

Topic 4: Published Accounts Identify the main elements of published reports The main requirements under IAS 1 for preparing published accounts e.g. SOCI, SOFP, Cash flow, changes in equity Mr. Barry A-level Accounting Year 13

Topic 5: International Accounting Standards Explore 10 of the International Accounting Standards with focus on gaining an insight into the purpose and importance of each standard Mr. Barry A-level Accounting Year 13

Topic 6: Inventory valuation Calculate inventory using two different methods Advantages and Disadvantages of each method Calculate year end inventory in situations where the valuation of the inventory has been delayed Mr. Barry A-level Accounting Year 13

Topic: Sources of finance Mr. Barry A-level Accounting Year 13

Learning Outcomes Explain the advantages and disadvantages of a number of sources of finance Apply understanding of types of finance to be chosen in a particular situation Evaluate different sources of finance and recommend the most appropriate choice to the owner(s) of a business Mr. Barry A-level Accounting Year 13

Think, Pair, Share Can you remember the different types of finance? List and explain briefly? Explain any advantages and/ disadvantages of them in relation to an organisation 1.Think for two minutes and write them individually 2.Share with the person beside you for four minutes 3.Together, share with the rest of class A-level Accounting Year 13

Individually 2 minutes End Mr. Barry A-level Accounting Year 13

In Pairs 3 minutes End A-level Accounting Year 13 Mr. Barry

CATEGORIES THREE TIME FRAMES – SHORT TERM – MEDIUM TERM – LONG TERM INTERNAL AND EXTERNAL – Generated within the business – From outside sources A-level Accounting Year 13Mr. Barry

Attitude to Risk The decision on balance between long and short term risks depend on the companies attitude to risk A-level Accounting Year 13Mr. Barry

Deciding on the mix of finance Criteria for selecting sources of finance 1.Internal resources I.How much cash is available II.Projected cashflows III.Working capital management 2.External resources I.Cost II.Duration III.Gearing IV.Size V.Security VI.Equity markets A-level Accounting Year 13Mr. Barry

Internal finance Improving Cash inflowsReducing Cash outflows Tighter credit control; offer discounts for early payment and/ or charge interest for late payment Sell non-current assets that are no longer required Minimise wastage; how could this be done? Tight Inventory control, e.g. Just In Time (JIT) Delay paying trade payables where possible Mr. Barry A-level Accounting Year 13

Internal Finance What do you think is the biggest source of internal finance? Equity and Share Capital Mr. Barry A-level Accounting Year 13

Thinking Time End Can you explain any possible advantages/ disadvantages of internal finance such as Equity? Mr. Barry A-level Accounting Year 13

EQUITY ORDINARY SHARE CAPITAL AND RESERVES No fixed rate dividend Dividends are not guaranteed Loss is limited to amount invested In the event of winding up the ordinary shareholders receive the last payout of funds – if any remain A-level Accounting Year 13Mr. Barry

Ordinary Share Capital Private Company – Difficult to acquire shares – Difficult to value Public company – PLC – Traded on Stock exchange – Easy to purchase – Easy to value Mr. Barry A-level Accounting Year 13

Preference Shares Cumulative vs. non-commulative In essence preference shares will be paid their dividend first Mr. Barry A-level Accounting Year 13 £ Profit after Taxation120,100 -Preference Dividend^^(5,000) -Ordinary Dividend(20,000) Retained Earnings95,100

Advantages of Preference Shares for the company Dividends so not to be paid if profits are poor Treated as debt when calculating the companies gearing ratio Not secured against assets – does not restrict borrowing power Mr. Barry A-level Accounting Year 13

Preference shares for the investor Not secured against assets Not an attractive investment if the dividend is low A-level Accounting Year 13Mr. Barry

DEBENTURES Debenture – written acknowledgement of a debt by a company normally containing provisions as to the payment of interest and the terms of the repayment of the principal. It may be referred to as a corporate bond or loan stock A-level Accounting Year 13Mr. Barry

RAISING SHORT TERM FINANCE CREDIT – From Suppliers – Allows the company to use goods before they are paid for A-level Accounting Year 13Mr. Barry

Pair Work Can you list and explain some possible short term means for raising finance in a business? Mr. Barry A-level Accounting Year 13

OVERDRAFTS Mr. BarryA-level Accounting Year 13 Separate account for a loan With an overdraft is a form of borrowing thru your current account Overdraft fluctuates Interest is charged at a daily rate Repayable on demand Arrangement fee

Bank Lending BANK LOANS – Up to 10 years – Flexible – select duration required – Fixed or variable rate of interest Mortgage – Obtained for purchasing property (premises) – Non-Current Liability Mr. Barry A-level Accounting Year 13

Risk TASK: Evans and Schleck have agreed to start up a new business as a private limited company. The business will require start-up funds of £250,000. They will invest a total of £100,000. They are considering raising the additional capital requited through the issuing of share capital. They believe profits will be low during the first year of trading. Assess the suitability of share issue and/ or other sources of finance available? Mr. Barry A-level Accounting Year 13