Financial Accounting Scheme of Work for SS2 First Term
SCHEME OF WORK
WEEK 1: INCOME AND EXPENDITURE
WEEK 2: SOURCES OF INCOME FOR NON-PROFIT MAKING ORGANIZATIONS
WEEK 3: DEPRECIATION OF FIXED ASSET
WEEK 4: BAD DEBT AND PROVISION FOR BAD DEBT
WEEK 5: DEPLETION AND AMORTIZATION
WEEK 6: PRE-PAYMENT AND ACCRUALS
WEEK 7: CONTROL ACCOUNT
WEEK 8: MANUFACTURING ACCOUNT
WEEK 9: ACCOUNTING ERRORS
WEEK 10: CORRECTION OF ERRORS WITH JOURNAL PAPER
Week 12: Examination
Below are the 2022 complete SS2 Financial Accounting First Term Lesson Note
Financial Accounting Lesson Note SS2 First Term
Topic: Income and Expenditure
Preparation of income and expenditure account
In order to prepare income and expenditure account from receipt and payment account the following step must be taken
- Eliminate all capital receipt like cash receives sales of equipment and capital payment to purchase equipment and capital accounts.
- Eliminate all item of revenue nature that is item that belong to the accounting period such as subscription for previous year and subscription for the next year collected this year, this is known as subscription paid in advance and it is treated as liability under current liability in the balance sheet
- If there are members owing subscription pre-credited to the income and expenditure account left the club without paying such subscription will be written off, by debiting the income and expenditure account.
- Make necessary adjustment for outstanding or accrual of the beginning and the end period e.g subscription in arrears. To learn more, click here
Topic: Sources of income to non-profit making organizations
- Sources of income to non-profit making organizations
- Meaning of subscription
- Treatment of subscription in the ledger
Sources of income to non-profit making organizations
- Entrance fee
- Income from raffle draw, dinners, annual programme etc
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Topic: Depreciation of Fixed Asset
Meaning of Asset
An asset can be defined as an object which has a longer life span that is used in business .it is in inform of equipment, vehicles, machinery or plant and building.
An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Asst can be fixed or current
Meaning of depreciation
Depreciation is a fall or decrease in the value of an asset as a result of wear and tear in its uses. For accounting purposes, depreciation indicates how much of an asset’s value has been used up.
- Physical Factors: This Comes As Result Of Change Is Outlook, Rust, Depreciation Or change in colour Of The Asset
- Wear And Tear: When Asset Are Used Over Time, They Get Worn out And May Not Perform As When It Was New
- Obsolescence: is the state which occurs when an object, service, or practice is no longer wanted even though it may still be in good working order.When It becomes outdated i.e No Longer In use or due to change in technology.
- Inadequacy: When the asset cannot perform much task as required,i.e it is said to be ineffective
- Passage Of Time :When it is no longer working due to its life span
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Topic: Bad debt and Provision for bad debt
- Meaning of bad debt
- Causes of bad debt
- Provision for bad debt
- Bad debt recovery
Meaning of bad debt
In business, traders allow credit facilities to their customers where by traders will be the creditor while the buyer becomes the debtor. Inability to pay at the specified time makes the debt to become bad.
Bad debt therefor are debts which have become irrecoverable, this arises as a result of inability of the customer to pay back his/her debts
Cause of bad debt
- Death of a debtor: The death of the debtor automatically makes a debt bad except the family member of the diseased are willing to pay off the debt of their dead relatives
- Insolvency or bankrupt: A debt can also become bad if the debtor is not making profit and even gotten to the stage of selling his asset to run the business; he therefore finds it difficult to pay his debt.
- Poor money management: Inability to manage available resources
- Financial illiteracy: Lack of knowledge about money can make a person find it difficult to pay his/her debt
- Sickness: A sick person is weak and they have no power to work with the money borrowed, the debt becomes bad cause of the inability to pay back.
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Topic: Depletion and Amortization
- Meaning of depletion
- Meaning of Amortization
Meaning of depletion
In business there are tangible asset as well as intangible asset i.e asset that cannot be seen with physical eyes are referred to as intangible asset while tangible asset are asset that can be seen with physical eye.
Depletion is a periodic charge to expense for the use of natural resources. Thus, it is used in situations where a company has recorded an asset for such items as oil reserves, coal deposits, or gravel pits. The depletion deduction allows an owner or operator to account for the reduction of a product’s reserves.
Types of depletion
- Percentage depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year.
- Cost depletion Cost depletion is an accounting method by which costs of natural resources are allocated to depletion over the period that make up the life of the asset. Cost depletion is computed by (1) estimating the total quantity of mineral or other resources acquired and (2) assigning a proportionate amount of the total resource cost to the quantity extracted in the period. To learn more, click here
Topic: Pre- payment and Accruals
- Definition of pre-payment
- Definition of accruals
Definition of pre-payment
prepayment represent amount in advance period for a subsequent period i.e expense can be paid in advance another word for it is payment in advance
It can be divided into expenses of prepaid income recovered in advance .examples of prepaid income are rent in advance,insurance premium.
Definition of Accruals
An accrual allows an entity to record expenses and revenues for which it expects to expend cash or receive cash, respectively, in a future reporting period. It is nearly impossible to generate financial statements without using accruals, unless the cash basis of accounting is used.In double-entry bookkeeping, the offset to an accrued expense is an accrued liability account, which appears in the balance sheet. To learn more, click here
Topic: Control Account
A control account is a summary-level account in the general ledger. This account contains aggregated totals for transactions that are individually stored in subsidiary-level ledger accounts. Control accounts are most commonly used to summarize accounts receivable and account payable, since these areas contain a large volume of transactions, and so need to be separated into subsidiary ledgers
Uses of control Account
- Control account are used to locate errors
- Through control account fraud can be easily detected.
- Management control is aided by the result of the speed at which information is obtainable
- Internal check on ledger clerk
- Easy detection of missing figure
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The scope of activities of a manufacturing company is wider than that of a merchandising which is merely to sells product which are acquired in a form while a manufacturing firm produces and acquire raw materials,engage labour service and other inputs to ensure the material are changed into finished goods.Examples of such manufacturing concern are textile industries.
Analysis of cost
Cost: The cost of an article is the amount of expenditure which has been incurred on the article, the three principal elements are;
Each of these are divisible into direct(prime cost) and indirect expenditure(factory overhead)
Prime cost: these are expenditure which are charge directly to a particular unit of output like direct labor,direct expenses and direct material.
- Direct materials: these are the materials which can be traced directly to the production of a particular output, e.g tobacco for cigarette,flour for bread.they are actually things that will be part of the finish goods
- Direct labor: these refers to cost of labor which are easily and directly traceable to the production of a product e.g wages of operators
- Direct expense: these are those cost that do not relate to direct material or labor but are incurred specifically on a particular product and on every unit used e.g royalty, excise duty, franchise e.t.c To learn more, click here
What are Accounting Errors?
Accounting errors are errors that arise in the process of systematically recording, measuring and communicating information about financial transactions. Such accounting errors can include anything from discrepancies in naira figures to incorrect use of agreed accounting policy. It is important to stress that accounting errors are not the same thing as financial fraud; the latter being an intentional error in an accounting item usually to hide or alter data for personal gain.
Accounting errors can occur in double-entry bookkeeping for a number of reasons. Accounting errors are not the same as fraud, errors happen unintentionally, whereas fraud is a deliberate and intentional attempt to falsify the bookkeeping entries. Also note that an accounting error can cause the trial balance not to balance, which is easier to spot, or the error can be such that the trial balance will still balance due to compensating bookkeeping entries, which is more difficult to identify.
Errors that affect the trial balance are usually a result of a one-sided entry in the accounting records or an incorrect addition. As a temporary measure, to balance the trial balance. the difference in the trial balance is allocated to a suspense account, and a suspense account reconciliation is carried out at a later stage. To learn more, click here
Definition of Errors: Errors can be defined simply as mistakes made in the penetration of accounts. Errors can be categorized into two:
- Errors that will affect the trial balance
- Errors that do not affect the trial balance
Errors that do not affect the Agreement of the trial balance
Since the trial balance is a test of arithmetical accuracy of the ledger, then, as a matter of fact, it must be balanced i.e the debit side must be equal to the credit side . Some categories of errors occur, yet the trial balance will still be balance, the categories of errors are:
- Errors of omission: This error occurs when transactions are completely omitted from the debit and credit side of the books.It is interesting to note that the error will not affect the balance of the trial balance. It is corrected by entering the omitted amount in the journal and posting in an ordinary way To learn more, click here
Week 11: Revision
This week, we would be doing a revision of all that we learned during the term.
Week 12: Examination
Afterwards, you would write an examination, which would test your knowledge of what has
been taught so far.