Unit 1: Financial management

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Nov 10, 2013 (3 years and 9 months ago)

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Unit 1: Financial management



This unit focuses on accounting and financial management of a small business. The unit introduces the
fundamental processes of gathering, recording, reporting, analysing, interpreting and evaluating
financial information
for use by the individual in a small business. It is expected that students will be
introduced to the use of information technology in undertaking accounting procedures.

The unit introduces the role of accounting in financial decision making. It uses singl
e entry recording
of financial information for sole
-
proprietor service businesses. Reporting is restricted to the cash basis.

Accounting procedures developed in each area of study will focus on the application of accounting
concepts, constraints and princi
ples, where appropriate.



AREAS OF STUDY


1. Sources and processing of financial data

This area of study covers the `input' and `processing' of financial data into an appropriate system.
Students should gain an understanding of the needs of the users of a
ccounting information.


This area of study will include:


• factors relevant to establishing a small business;


• the distinction between financial data and financial information;


• identification of the type of financial and non
-
financial information

required;


• identification of the sources of data for that information;


• techniques for gathering and classifying data to produce useful information; design


and use of an appropriate recording system;


• classifying, recording and verifying

data;


• distinction between cash and credit transactions;


• flowcharts for recording systems;


• critical analysis of the recording system;


• techniques for reconciling and verifying cash balances;


• methods of recording movements of cash;



• recording required for sources of available finance, investments, taxation.




2.

Financial outcomes

This area of study covers the generation of useful information in the form of reports from the financial data
which has been recorded. The reports must

include profit generation, cash position and statements of
financial position. This will also involve consideration of cash control.

The formats for the various reports would be directed by the needs of the users. A critical analysis of the
reports and an

understanding of the extent to which the preparation of the reports is affected by the
accounting concepts, constraints and principles should be included.

This area of study will include:



identifying and reporting for cash receipts and payments, revenue

and expense, proprietorship, assets and
liabilities;

• the need for effective control over cash resources;



preparation and use of budgets as a means of controlling cash and identifying deficit or excess cash
situations;



critical analysis of formats

of reports and an understanding that the needs of the users drive these
formats.


3.

Financial planning and decision making

This area of study covers the decisions based on the information generated by the system.

This area of study will include:


• c
ritical analysis of financial and non
-
financial information and problem
-
solving approaches;



decision making based on records and reports, including an introduction to major indicators and the
evaluation of performance where appropriate.


These should be
studied in the context of any three of the following:


• budgeting, as an aid to decision making;

• price
-
setting strategies, including cost/volume/profit (break
-
even) analysis;



sources and uses of available credit, distinguished by type, terms,
interest, applications for loans, benefits
of internal and external financing;



taxation: A close application of the Taxation Act is not required; the focus should be on the general
principles of taxation, concepts such as substantiation, and the necessar
y records and reports from the
business perspective (not personal);



investment opportunities including superannuation, evaluation of performance related to investment
decisions distinguished by type, terms, return, security.




OUTCOMES

For this unit stu
dents are required to demonstrate achievement three outcomes. As a set these outcomes
encompass all areas of study for the unit.



Outcome I

On completion of this unit the student should be able to identify and explain the financial needs of
sole
-
proprieto
r service businesses, including the individuals involved, and how these needs influence the
development of an accounting system.















Key knowledge


In achieving this outcome the student will draw on knowledge described in area of study 1.

To ach
ieve this outcome the student should demonstrate knowledge of




factors relevant to establishing a small business;



the distinction between financial data and financial information;



the type of financial and non
-
financial information required;



the so
urces of data for that information.


Key skills

To achieve this outcome the student should demonstrate the ability to




undertake techniques to gather and classify data to produce useful information;



identify the sources of the data which provides the b
asis for translation into financial information;



design and operate an accounting system to meet the needs of users;



implement control procedures for cash.


Outcome 2

On completion of this unit the student should be able to record, report and analyse f
inancial

information.


Key knowledge


In achieving this outcome the student will draw on knowledge described in areas of study 1 and 2.

To achieve this outcome the student should demonstrate knowledge of:

• the distinction between cash and credit trans
actions;


• critical analysis of the recording system;

• cash receipts and payments, revenue and expense, proprietorship, assets and liabilities;

• the need for effective control over cash resources;

• critical analysis of formats of reports
and an understanding that the needs of the users drive

• these formats.


Key skills

To achieve this outcome the student should demonstrate the ability to

record in a single entry system using cash books as the main record, including flowcharts; classify

and verify data; demonstrate techniques for reconciling and verifying cash balances; record for
cash receipts and payments, cash movements, revenue and expense, proprietorship, assets and
liabilities, available finance and investments; report on the busin
ess through the preparation of
-

statements of receipts and payments
-

statements of profit and loss (cash basis)
-

statements of
assets and liabilities (cash basis).


Outcome 3

On completion of this unit the student should be able to describe ways in whi
ch accounting
contributes to effective decision making and financial management.


Key knowledge

In achieving this outcome the student will draw on knowledge described in area of study 2 and 3.


To achieve this outcome the student should demonstrate knowled
ge of




analyses of the financial and non
-
financial information and problem
-
solving approaches;



decision making based on records and reports including an introduction to major indicators and
the evaluation of performance where appropriate;



the role of

cash management and the distinction between cash and profit;



analysis and interpretation of:


-

business performance, including the strategies required to achieve financial success


-

financial planning alternatives.


Key skills

To achieve this outcome
the student should demonstrate the ability to




develop a systematic approach to problem solving: problem definition, information gathering,
formulation of alternative solutions, criteria for decision making;



represent problem
-
solving approaches using f
lowcharts.


ASSESSMENT

The award of satisfactory completion for a unit is based on a decision that the student has
demonstrated achievement of the set of outcomes specified for the unit. This decision will be

based on the teacher's assessment of the studen
t's overall performance on assessment tasks designated
for the unit. The Board of Studies will publish annually an assessment guide which will include advice
on the scope of the assessment tasks and the criteria for assessment.


The key knowledge and skill
s listed for each outcome should be used as a guide to course design and
the development of learning activities. The key knowledge and skills do not constitute a checklist and
such an approach is not necessary or desirable for determining the achievement o
f outcomes. The
elements of key knowledge and skills should not be assessed separately.


Assessment tasks must be a part of the regular teaching and learning program and must not unduly add

to the workload associated with that program. They must be comple
ted mainly in class and within a
limited timeframe.


Demonstration of achievement of Outcomes 1, 2 and 3 must be based on the student's performance
on a selection of assessment tasks. Teachers must ensure that tasks selected are of comparable scope

and dem
and. Assessment tasks for this unit are:




• use of computer software and/or applications, such as spreadsheets, to record and analyse


data;


• test(s); assignments; folio of exercises; classroom presentati
ons.


In the case of group work, each student's contributions and responsibilities are to be clearly defined in
advance.