1. LO2 - Be able to use the Accounting Equation
Cambridge TECHNICALS- LEVEL 3
Unit 11 – Accounting Concepts 2016 Specification - H/507/8158
LO2 - Be able to use the Accounting Equation

2. Calculating the Points
The number of points available for each unit depends on the unit grade achieved. Units 1 and 22 in the Cambridge Technicals in Business are 120 GLH; all other units are 60 GLH. The table below shows the number of points issued for each grade.
To calculate the learner’s qualification grade you will need to add up all the points for the units the learner has achieved, making sure they’ve covered the appropriate mandatory content, taken sufficient externally assessed units, and any units required for the chosen pathway.
Unit GLH
Points table for units based on GLH
Pass
Merit
Distinction
Unclassified 60 14 16 18
120 28 32 36

3. Qualification Grade Table - Diploma
Having calculated the total number of points based on the unit grades you would check this figure in the qualification grade table, for the relevant qualification, to identify the overall qualification grade. If a learner doesn’t achieve the lowest points score required for the qualification, we issue an unclassified result.
Example A
Learner A has taken the units required for the Foundation Diploma:
In this example, Learner A has an overall qualification grade of a Merit Merit.
Unit
GLH
Grade
Number of Points 1
120
Pass
= 28 points 2 60
Merit
= 16 points 3
= 14 points 4 11
Distinction
= 18 points 16 17 20
Total GLH
540
Total no. of points
= 138 points

4. Qualification Grade Table – Foundation Diploma
Qualification grade table OCR Level 3 Cambridge Technical Foundation Diploma (540 GLH)
The table below shows the points ranges and the grades that those ranges achieve.
Points range
Grade
156 and above
Distinction* Distinction*
D*D*
153 – 155
Distinction* Distinction
D*D
150 – 152
Distinction Distinction DD
144 – 149
Distinction Merit DM
138 – 143
Merit Merit MM
132 – 137
Merit Pass MP
126 – 131
Pass Pass PP
Below 126
Unclassified U

5. Qualification Grade Table – Technical Diploma
Qualification grade table OCR Level 3 Cambridge Technical Diploma (720 GLH)
The table below shows the points ranges and the grades that those ranges achieve.
Points range
Grade
208 and above
Distinction* Distinction*
D*D*
Distinction* Distinction
D*D
200 – 203
Distinction Distinction DD
192 – 199
Distinction Merit DM
184 – 191
Merit Merit MM
176 – 183
Merit Pass MP
Pass Pass PP
Below 168
Unclassified U

6. Unit 01 – Learning Outcome (LO) Weightings
Assessment Guidance
All Learning Outcomes are assessed through an externally set written examination paper, worth a maximum of 60 marks and 1 hour 30 minutes in duration.
The assessment comprises short answer questions and questions requiring more extended responses, some will be based on in tray exercises testing skills and underpinning knowledge.
It is important for learners to have the opportunity to learn and apply the knowledge and skills in order to successfully achieve the unit.
Synoptic Learning And Assessment
Ten per cent of the marks in the examination for this unit will be allocated to synoptic application of knowledge. There’ll be questions that draw on knowledge and understanding from Unit 1 The business environment that then has to be applied in the context of this unit.
It will be possible for learners to make connections between other units over and above the unit containing the key tasks for synoptic assessment, please see section 6 of the centre handbook for more detail.

7. Assessment Criteria LO Pass Merit Distinction
1. Understand why businesses keep accurate accounting records
P1 - Explain the reasons for keeping accounting records in business organisations
P2 - Describe the accounting record requirements of at least 3 different stakeholders for a specific organisation
M1 - Explain how the failure to keep accurate accounting records could impact on stakeholders with reference to a specific business
D1 - Assess how a specific business applies an accounting concept or policy to their accounting records
2. Be able to use the accounting equation
P3 - Calculate the value of assets, liabilities and capital from given data
3. Be able to prepare the principal documents in business transactions
P4 - Prepare principal source documents for given business transactions
M2 - Compare the accounting procedures for cash and trade discounts
D2 - Evaluate the use of cash and trade discounts in more than one business organisation
P5 - Produce a three column cash book from given financial information
4. Be able to use basic double entry bookkeeping to prepare a trial balance
P6 - Explain the need for subdivisions of the ledger
P7 - Explain the difference between capital and revenue items of expenditure and income
P8 - Prepare ledger accounts and accompanying trial balances for business transactions
5. Be able to reconcile a cash book with a bank statement
P9 - Update a completed cash book from given data
P10 - Produce a bank reconciliation statement
P11 - Describe payment methods for business transactions
P12 - Explain the purpose of a bank statement and the need for a bank reconciliation statement

8. P3.1 – Capital, Equity, Assets and Liabilities
For this section you will need to be able to define and use a small range of Accounting definitions within a given Cash Book Statement. For GCSE Business you will have learnt the following terms:
Capital – This can refer to funds raised to support a particular business or project. Capital can also represent the accumulated wealth of a business, represented by its assets less liabilities. Capital can also mean stock or ownership in a company.
Equity - Invested money that, in contrast to debt capital, is not repaid to the investors in the normal course of business. It represents the risk capital staked by the owners through purchase of a company's common stock (ordinary shares).
The value of equity capital is computed by estimating the current market value of everything owned by the company from which the total of all liabilities is subtracted. On the balance sheet of the company, equity capital is listed as stockholders' equity or owners' equity. Also called equity financing or share capital.

9. P3.1 – Capital, Equity, Assets and Liabilities
Assets – Something that an entity has acquired or purchased, and that has money value (its cost, book value, market value, or residual value). An asset can be:
Something physical, such as cash, machinery, inventory, land and building,
An enforceable claim against others, such as accounts receivable
Right, such as copyright, patent, trademark
An assumption, such as goodwill. Assets shown on their owner's balance sheet are usually classified according to the ease with which they can be converted into cash.
Intangible assets – Assets that cannot be sold easily in order to gain capital.
Tangible assets – Assets that can be sold easily to improve cash-flow.
Liabilities - Accounts and wages payable, accrued rent and taxes, trade debt, and short and long-term loans. Owners' equity is also termed a liability because it is an obligation of the company to its owners. Liabilities are entered on the right-hand of the page in a double-entry bookkeeping system.
P3.1 – Task 01 – Describe with company examples, what Capital, Equity, Assets and Liabilities are to the manager of Northern Car Repairs.

10. P3.2 – Principle of the Accounting Equation
The basic principle of the accounting equation is:
Assets = Capital + Liabilities
The equation that is the foundation of double entry accounting. The accounting equation displays that all assets are either financed by borrowing money or paying with the money of the company's shareholders. Thus, the accounting equation is: Assets = Capital + Liabilities. The balance sheet is a complex display of this equation, showing that the total assets of a company are equal to the total of liabilities and shareholder equity.
Breaking it Down
Any purchase or sale by an accounting equity has an equal effect on both sides of the equation, or offsetting effects on the same side of the equation. The accounting equation could also be written as Liabilities = Assets – Shareholder Equity and Shareholder Equity = Assets – Liabilities.
Total Liabilities – this indicates the amount of money a company owes to its short-term and long-term creditors. The total liabilities are divided into short-term liabilities, also known as current liabilities, and long-term liabilities. Short-term liabilities are expected to be paid off within one year, while long-term liabilities include debts that are expected to be paid off over one year from the balance sheet recording date. E,g., assume a hypothetical company has total current liabilities of $5m and total long-term liabilities of $20m. Therefore, the company has total liabilities of $25m, or $5m + $20m.

11. P3.2 – Principle of the Accounting Equation
Equity including shareholders
The shareholders' equity portion of the accounting equation could be calculated by summing the amount of share capital and retained earnings and subtracting the amount in treasury shares from the sum. The equation could be written as: Share Capital + Retained Earnings - Amount in Treasury Shares. For example, assume hypothetical company Rocket has share capital of $10 million, retained earnings of $25m and treasury shares worth $5m. Therefore, Rocket has total shareholders' equity of $3m , or $10m + $25m - $m .
Real World Example
E.g., Apple Inc. reported its annual balance sheet in September Apple had total current liabilities of $80.61bn and total long-term liabilities of $90.51bn. Therefore, it had total liabilities of $171.12bn, or $80.61bn + $90.51bn. Apple had total common stock worth $27.42bn, retained earnings of $92.28bn and other stock holder equity of -$345m. Therefore, it had total shareholders' equity of $ billion, or $27.42bn + $92.28bn - $345 million. Consequently, it had total assets of $290.48bn, or $171.12bn + $ billion.
P3.2 – Task 02 – Describe with examples the Principle of Accounting Equation, using Northern Car Repairs resources to help describe.

12. P3.2 – Principle of the Accounting Equation - Example
Heidi provides the following balances extracted from her general ledger:
Premises £65,000, mortgage on premises £35000, vehicle £12,000, amount owing to bank for vehicle purchase £4000, bank balance £1200.
Question
Classify the information given into assets and Liabilities.
Calculate the value of Heidi’s Capital.

13. P3.2 – Principle of the Accounting Equation - Example
Answer
Assets, Premises, Vehicle and bank balance (£65,000 + £12,000 + £1200 = £78,200) Liabilities: Mortgage on premises and amount owing to bank for vehicle purchase (£55,000 + £4000 = £39,000)
Capital = Value of assets less value of Liabilities = £ £39,000 = £39,200

14. P3.3 – Calculations using the Accounting Equation
P3.3 – Task 03 - Complete the grey shaded boxes of the following table showing the value of assets, liabilities and capital.
Month
Capital
Assets
Liabilities
April
50,000
120,000
May
60,000
35,000
June
70,000
40,000
July
150,000
220,000
August
90,000
45,000
September
170,000
30,000
October
55,000
25,000
P3.3 – Task 04 – From the figures above, comment on the Capital, Assets and current liabilities of the Northern Car Repairs. Draw conclusions on your comments on why this might be.

15. P3 – Assessment Tasks
P3.1 – Task 01 – Describe with company examples, what Capital, Equity, Assets and Liabilities are to the manager of Northern Car Repairs.
P3.2 – Task 02 – Describe with examples the Principle of Accounting Equation, using Northern Car Repairs resources to help describe.
P3.3 – Task 03 - Complete the grey shaded boxes of the following table showing the value of assets, liabilities and capital.
P3.3 – Task 04 – From the figures above, comment on the Capital, Assets and current liabilities of the Northern Car Repairs. Draw conclusions on your comments on why this might be.