Bookkeeping Applications BBS203

 

BECOME A BETTER BOOKKEEPER

Better bookkeepers not only know more about bookkeeping; but they are more able to work to specification, have developed better networks within their industry and have better problem solving skills.

ACS courses offer more support, greater flexibility, uniqueness and a stronger focus on all these things that make you into a better bookkeeper.

Online Book Keeping Course

  • Improve your skills, Increase Services you can offer clients or employers
  • For people who have completed a foundation course in bookkeeping; and wish to move to the next level
  • A natural progression from Bookkeeping Foundations

It is suitable for those who wish to further develop their accounting skills and become more involved in analysing and reporting.

 

COURSE STRUCTURE

There are 10 lessons as follows:

1.Introduction - Review of Accounting Foundations (add business types)
2.Decision Making - How to Manage Your Bookkeeping
3.Managing Cash Flow, Obtaining Finance and Managing Bad Debts
4.Managing the Inventory Part 1
5.Managing the Inventory Part 2
6.Profit and Loss
7.Establishing and Managing Control Accounts
8.Budgeting Part 1
9.Budgeting Part 2
10.Financial Statement Analysis

Each lesson culminates in an assignment which is submitted to the school, marked by the school's tutors and returned to you with any relevant suggestions, comments, and if necessary, extra reading.

How Long Will the Course Take?
This is self paced study, so spread your work over as many weeks or months as you like. The average student is likely to take around 10 hours to complete each lesson (100 hours for the entire course).


COURSE AIMS

On successful completion of the course you should be able to do the following:

  • Outline of the nature of trading businesses and their bookkeeping requirements. Review bookkeeping procedures.
  • Describe the selection of bookkeeping processes to suit particular business needs and the advantages and disadvantages of each.
  • Describe: cash flow management and cash flow margins and returns on investment, business finance methods, how to manage bad debts and accounts payable procedures.
  • Describe the nature of stock and the periodic system used to record inventory.
  • Outline various control accounts and their use.
  • Outline budgeted reports used in trading businesses and their preparation methods.
  • Outline methods used in payroll systems and taxes applicable to payroll; describe a range of taxes applicable to trading businesses.
  • Analyse the financial position of a business
  •  

 

How Much Do You Understand about  Cash and Accrual Accounting?

This is only one small part of this course; but for anyone involved in a trading business, it is something that you should understand.

The payment of expenses rarely coincides neatly with the financial year. As a result, some expenses will be owing to suppliers (accruals), while others will have been paid in advance (pre-payments).

The object of a Profit and Loss Account is to show the expenses which should have been paid in the given trading period, and not to show the expenses which have actually been paid.

If accounting was just simply revenue less expenses paid = profit then this would be known as cash accounting. 

Cash Accounting
Cash accounting works on the principal that income does not exist until the cash is received and an expense is not an expense until it is paid. It is a simple way of recording transactions especially for smaller businesses that may not employ a bookkeeper; it means that there are no balance day adjustments made and it is easy to determine their profits. So if you completed a job in April but the customer did not pay you until May- you do not show it as income in April. Once the Customer pays in May it is recorded as income for that accounting period.  

In cash accounting all the transactions are entered into the accounts as they occur.

The same applies to expenses - so if you paid advertising of $1,000 in June that is recorded as an expense for June irrelevant of whether some of the actual advertising was to be run in later months. 

This method is valid for a business that deals in cash rather than on credit. 

How does this take depreciation and the value of stock into account?
In cash accounting we will still need to take into account depreciation of assets, of intangible assets, and the value of stock (even though they are not current expenses). This is done by modifying the cash accounting process used by the business to include the expenses of depreciation and amortisation and to include the value of stock in the businesses books, before the preparation of the profit and loss statement.

Modified Cash Accounting

Stock
Many businesses carry stock – even a service business will have office supplies and/or other items (such as parts) that are of value and that need to be accounted for in the books on balance day. 

Adjusting for ‘stock/supplies on hand’ is similar to adjusting for prepaid expenses because you have bought and paid for the stock in one accounting period but part of the asset still exists at the end of the period. So you need to reduce the expense account, thereby creating a temporary current asset ‘Stock on Hand’. 


Say for example a car service business bought $3,000 worth of small parts on hand during the accounting period; at the end of the accounting period (after conducting a ‘stock-take” they still have $1,000 worth on hand. 

Original entry was $3,000 debit to Parts Account as an expense, and $3,000 credit entry to Cash at Bank.

The adjusting entries on balance day:
Dr: Parts Account $2,000 (expense for the accounting period)
Cr. Stock of Parts (Temporary asset account) $1,000 (the amount left for the period)
Close off the Stock of Parts account to Profit and Loss account with the adjusting entry.
Do a reversal on the first day of the new accounting period to open with the $1,000 balance.

Depreciation
As discussed last lesson this is the decrease in value of fixed assets caused by use, wear and tear, passage of time or obsolescence.

At the end of the period, depreciation expense must be calculated (see the last lesson for ways to calculate depreciation) and the depreciation entries made.  The entry is:
Debit - Depreciation Expense                    xxxx
Credit - Accumulated Depreciation            xxxx
(Adjusting entry for depreciation)
 
The debit entry to depreciation is required because depreciation is an expense item. Therefore, the above entry increases the expense account for depreciation. The credit entry to accumulated depreciation is an increase in a negative asset account.  The accumulated depreciation account is used to accumulate or add up the total depreciation written off an asset so far.  It is known as a negative asset account as it is deducted from the related asset account.  So in the balance sheet, the asset would now look like this:

Asset (e.g. furniture)                    xxxx
Less Accumulated Depreciation  xxxx     xxxx

Accruals Accounting 
Accrual accounting takes into account those overlaps in payments (prepayments of accounts or amounts outstanding at the end of the accounting period). An example of this would be insurance a business may pay an insurance bill for the following 12 month period but in April so that only 2 months of the payment is allocated into the current financial year and 10 months needs to be accrued for the following year’s expenses. These accruals affect the profit and loss statement. 

Thus if wages of $300 are still owing at the end of the financial year, they must be added to the amount which has already been paid when listing the expenses in the Profit and Loss Account; and they should be shown as a current liability in the Balance Sheet (accruals).

Conversely, if rates of $700 have been paid in advance, they should be subtracted from the amount which was actually paid when the expenses were listed in the Profit and Loss Account, and they should be shown as a current asset in the Balance Sheet (pre-payments).

In accrual accounting if payments (income) are outstanding it still recognises this as income and the transactions are recorded as they occur, irrelevant of whether cash is received or not. Say for example a mechanic does repairs on a car – once he has finished the job he enters the outstanding amount into his books i.e. even before the customer pays. Once he has invoiced the customer it is recorded as revenue. 

Accrual accounting gives a business a more realistic picture of where it stands financially because all revenue and expenses are relevant to the accounting period in question. 

 

   

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Prices in Australian Dollars

PlanAust. PriceOverseas Price
A 1 x $748.00  1 x $680.00
B 2 x $407.00  2 x $370.00

Note: Australian prices include GST. 
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