Section 7

Topics

Choose a topic to revise

Sample objectives

What this unit covers

• Accounting principles: Students should be able to describe and identify the use of these accounting principles: matching, historic cost, business entity, materiality, consistency, money measurement, duality, prudence, going concern, and realisation.
• Accounting policies: Students should be able to identify how international accounting standards affect the choice of accounting policies and comprehend the following key objectives when selecting these policies: comparability, relevance, reliability, and understandability. Additionally, students should be familiar with commonly used accounting ratios, including: Profitability ratios such as Gross Margin (Gross Profit divided by Revenue multiplied by 100), Mark Up (Gross Profit divided by Cost of Sales multiplied by 100), Profit Margin (Profit for the Year divided by Revenue multiplied by 100), and Return on Capital Employed (Net Profit before Interest divided by Capital Employed multiplied by 100, where Capital Employed equals Issued Shares plus Reserves plus Non-Current Liabilities). Liquidity ratios include the Current Ratio (Current Assets divided by Current Liabilities), Liquid Ratio (Current Assets minus Inventory divided by Current Liabilities), Rate of Inventory Turnover (Cost of Goods Sold divided by Average Inventory), Trade Receivables Turnover (Trade Receivables divided by Credit Sales multiplied by 365), and Trade Payables Turnover (Trade Payables divided by Credit Purchases multiplied by 365).