Financial Accounting Syllabus rationale

(INT) (F3) June & This is a narrative explaining how the syllabus is
structured and how the main capabilities are linked.
December 2010 and The rationale also explains in further detail what the
examination intends to assess and why.
June 2011
Detailed syllabus
This syllabus and study guide is designed to help
with planning study and to provide detailed This shows the breakdown of the main capabilities
information on what could be assessed in (sections) of the syllabus into subject areas. This is
any examination session. the blueprint for the detailed study guide.

THE STRUCTURE OF THE SYLLABUS AND Approach to examining the syllabus

STUDY GUIDE
This section briefly explains the structure of the
Relational diagram of paper with other papers examination and how it is assessed.

This diagram shows direct and indirect links Study Guide

between this paper and other papers preceding or
following it. Some papers are directly underpinned This is the main document that students, tuition
by other papers such as Advanced Performance providers and publishers should use as the basis of
Management by Performance Management. These their studies, instruction and materials.
links are shown as solid line arrows. Other papers Examinations will be based on the detail of the
only have indirect relationships with each other study guide which comprehensively identifies what
such as links existing between the accounting and could be assessed in any examination session.
auditing papers. The links between these are shown The study guide is a precise reflection and
as dotted line arrows. This diagram indicates where breakdown of the syllabus. It is divided into sections
you are expected to have underpinning knowledge based on the main capabilities identified in the
and where it would be useful to review previous syllabus. These sections are divided into subject
learning before undertaking study. areas which relate to the sub-capabilities included
in the detailed syllabus. Subject areas are broken
Overall aim of the syllabus down into sub-headings which describe the detailed
outcomes that could be assessed in examinations.
This explains briefly the overall objective of the These outcomes are described using verbs
paper and indicates in the broadest sense the indicating what exams may require students to
capabilities to be developed within the paper. demonstrate, and the broad intellectual level at
which these may need to be demonstrated
Main capabilities (*see intellectual levels below).

This paper’s aim is broken down into several main Learning Materials
capabilities which divide the syllabus and study
guide into discrete sections. ACCA's Approved Learning Partner - content (ALP-
c) is the programme through which ACCA approves
Relational diagram of the main capabilities learning materials from high quality content
providers designed to support study towards ACCA’s
This diagram illustrates the flows and links between qualifications.
the main capabilities (sections) of the syllabus and
should be used as an aid to planning teaching and ACCA has one Platinum Approved Learning Partner
learning in a structured way. content which is BPP Learning Media. In addition,
there are a number of Gold Approved Learning
Partners - content.

1
 For information about ACCA's some higher level capabilities may be assessed at
Approved Learning Partners - content, please go lower levels.
ACCA's Content Provider Directory.
LEARNING HOURS
The Directory also lists materials by Subscribers,
these materials have not been quality assured by The ACCA qualification does not prescribe or
ACCA but they may be useful reading. You will also recommend any particular number of learning hours
find details here of Additional Reading which the for examinations because study and learning
Examiner has suggested may be useful patterns and styles vary greatly between people and
supplementary reading for students. organisations. This also recognises the wide
diversity of personal, professional and educational
ACCA's Content Provider Directory can be found circumstances in which ACCA students find
here – themselves.
http://www.accaglobal.com/learningproviders/alpc/c
ontent_provider_directory/search/. Each syllabus contains between 23 and 35 main
subject area headings depending on the nature of
Relevant articles will also be published in Student the subject and how these areas have been broken
Accountant. down.

INTELLECTUAL LEVELS GUIDE TO EXAM STRUCTURE

The syllabus is designed to progressively broaden The structure of examinations varies within and
and deepen the knowledge, skills and professional between modules and levels.
values demonstrated by the student on their way
through the qualification. The Fundamentals level examinations contain
100% compulsory questions to encourage
The specific capabilities within the detailed candidates to study across the breadth of each
syllabuses and study guides are assessed at one of syllabus.
three intellectual or cognitive levels:
The Knowledge module is assessed by equivalent
Level 1: Knowledge and comprehension two-hour paper based and computer based
Level 2: Application and analysis examinations.
Level 3: Synthesis and evaluation
The Skills module examinations are all paper based
Very broadly, these intellectual levels relate to the three-hour papers. The structure of papers varies
three cognitive levels at which the Knowledge from ten questions in the Corporate and Business
module, the Skills module and the Professional level Law (F4) paper to four 25 mark questions in
are assessed. Financial Management (F9). Individual questions
within all Skills module papers will attract between
Each subject area in the detailed study guide 10 and 30 marks.
included in this document is given a 1, 2, or
3 superscript, denoting intellectual level, marked at The Professional level papers are all three-hour
the end of each relevant line. This gives an paper based examinations, all containing two
indication of the intellectual depth at which an area sections. Section A is compulsory, but there will be
could be assessed within the examination. However, some choice offered in Section B.
while level 1 broadly equates with the Knowledge
module, level 2 equates to the Skills module and For all three hour examination papers, ACCA has
level 3 to the Professional level, some lower level introduced 15 minutes reading and planning time.
skills can continue to be assessed as the student
progresses through each module and level. This This additional time is allowed at the beginning of
reflects that at each stage of study there will be a each three-hour examination to allow candidates to
requirement to broaden, as well as deepen read the questions and to begin planning their
capabilities. It is also possible that occasionally answers before they start writing in their answer

2
books. This time should be used to ensure that all The term effective relates to when regulation or
the information and exam requirements are properly legislation must be applied to an entity transactions
read and understood. and business practices.

During reading and planning time candidates may The study guide offers more detailed guidance on
only annotate their question paper. They may not the depth and level at which the examinable
write anything in their answer booklets until told to documents will be examined. The study guide
do so by the invigilator. should therefore be read in conjunction with the
examinable documents list.
The Essentials module papers all have a Section A
containing a major case study question with all Computer based examinations
requirements totalling 50 marks relating to this
case. Section B gives students a choice of two from Documents listed as being examinable for the June
three 25 mark questions. examinations are also examinable for corresponding
computer based examinations between the start of
Section A of each of the Options papers contains the June examination session and the beginning of
50-70 compulsory marks from two questions, each December. Documents which are examinable for
attracting between 25 and 40 marks. Section B will the December examinations are also examinable for
offer a choice of two from three questions totalling the corresponding computer based examinations
30-50 marks, with each question attracting between the start of the December examination
between 15 and 25 marks. session and the beginning of June.

The pass mark for all ACCA Qualification

examination papers is 50%.

GUIDE TO EXAMINATION ASSESSMENT

ACCA reserves the right to examine anything

contained within the study guide at any examination
session. This includes knowledge, techniques,
principles, theories, and concepts as specified.

For the financial accounting, audit and assurance,

law and tax papers except where indicated
otherwise, ACCA will publish examinable
documents once a year to indicate exactly
what regulations and legislation could potentially be
assessed within identified examination sessions..

For paper based examinations regulation issued or

legislation passed on or before 30th September
annually, will be assessed from June 1st of the
following year to May 31st of the year after. Please
refer to the examinable documents for the paper
(where relevant) for further information.
Regulation issued or legislation passed in
accordance with the above dates may be
examinable even if the effective date is in the
future.
The term issued or passed relates to when
regulation or legislation has been formally approved.

3
 Syllabus MAIN CAPABILITIES

On successful completion of this paper, candidates

should be able to:
CR (P2)
A. Explain the context and purpose of financial
reporting

B. Define the qualitative characteristics of

FR (F7)
financial information and the fundamental
bases of accounting

AB (F1) C. Demonstrate the use of double-entry and

FA (F3) accounting systems

D. Record transactions and events

AIM
E. Prepare a trial balance (including identifying
To develop knowledge and understanding of the and correcting errors)
underlying principles and concepts relating to
financial accounting and technical proficiency in the F. Prepare basic financial statements for
use of double-entry accounting techniques including incorporated and unincorporated entities.
the preparation of basic financial statements

RELATIONAL DIAGRAM OF MAIN CAPABILITIES

The context and purpose The qualitative characteristics

of financial reporting of financial information and
(A) the fundamental bases of
accounting (B)

Recording
The use of double-entry and accounting systems (C) transactions
and events (D)

Preparing a trial balance (E)

Preparing basic financial statements (F)

4
 3. Accounting systems and the impact of
RATIONALE information technology on financial reporting

The syllabus for Paper F3, Financial Accounting,

introduces the candidate to the fundamentals of D Recording transactions and events
financial accounting, explaining its context and
purpose with reference to qualitative characteristics 1. Sales and purchases
of useful financial information and to the
fundamental bases of accounting. The syllabus then 2. Cash
concentrates in depth on the basics of the double-
entry system and on recording, processing, and 3. Inventory
reporting business transactions and events. The
syllabus then covers the use of the trial balance and 4. Tangible non-current assets
how to identify and correct errors, and then the
preparation of financial statements for incorporated 5. Depreciation
and unincorporated entities.
6. Intangible non-current assets and amortisation
DETAILED SYLLABUS
7. Accruals and prepayments
A The context and purpose of financial reporting
8. Receivables and payables
1. The reasons for, and objectives of, financial
reporting 9. Provisions and contingencies

2. Users’ and stakeholders’ needs 10. Capital structure and finance costs

3. The main elements of financial reports E Preparing a trial balance

4. The regulatory framework 1. Trial balance

B The qualitative characteristics of financial 2. Correction of errors

information and the fundamental bases of
accounting 3. Control accounts and reconciliations

1. The qualitative characteristics of financial 4. Bank reconciliations

reporting
5. Suspense accounts
2. Alternative bases used in the preparation of
financial information F Preparing basic financial statements

C The use of double-entry and accounting 1. Statements of financial position

systems
2. Income statements and statements of
1. Double-entry book-keeping principles including comprehensive income
the maintenance of accounting records and
sources of information 3. Events after the reporting period

2. Ledger accounts, books of prime entry, and 4. Accounting for partnerships

journals

5
 5. Statements of cash flows (excluding
partnerships)

6. Incomplete records

APPROACH TO EXAMINING THE SYLLABUS

The syllabus is assessed by a two hour paper-based

or computer-based examination. Questions will
assess all parts of the syllabus and will include both
computational and non-computational elements.
The examination will consist of 40 two mark
questions, and 10 one mark questions.

6
Study Guide B THE QUALITATIVE CHARACTERISTICS OF
FINANCIAL INFORMATION AND THE
FUNDAMENTAL BASES OF ACCOUNTING
A THE CONTEXT AND PURPOSE OF
FINANCIAL REPORTING 1. The qualitative characteristics of financial
reporting
1. The reasons for and objectives of financial
reporting a) Define, understand and apply accounting
concepts and qualitative characteristics:[1]
a) Define financial reporting – recording, i) Fair presentation
analysing and summarising financial data.[1] ii) Going concern
iii) Accruals
b) Identify and define types of business entity – iv) Consistency
sole trader, partnership, limited liability v) Materiality
company.[1] vi) Relevance
vii) Reliability
c) Recognise the legal differences between a sole viii)Faithful representation
trader, partnership and a limited liability ix) Substance over form
company.[1] x) Neutrality
xi) Prudence
d) Identify the advantages and disadvantages of xii)Completeness
operating as a limited liability company, sole xiii)Comparability
trader or partnership.[1] xiv)Understandability
xv) Business entity concept
e) Understand the nature, principles and scope of
financial reporting.[1]
b) Understand the balance between qualitative
2. Users’ and stakeholders’ needs characteristics.[1]

a) Identify the users of financial statements and 2. Alternative bases used in the preparation of
state and differentiate between their financial information
information needs.[1]
a) Identify and explain the main characteristics of
3. The main elements of financial reports alternative valuation bases e.g. historical cost,
replacement cost, net realisable value,
a) Understand and identify the purpose of each of economic value.[1]
the main financial statements.[1]
b) Understand the advantages and disadvantages
b) Define and identify assets, liabilities, equity, of historical cost accounting.[1]
revenue and expenses.[1]
c) Understand the provision of International
4. The regulatory framework Financial Reporting Standards governing
financial statements regarding changes in
a) Understand the role of the regulatory system accounting policies.[1]
including the roles of the International
Accounting Standards Committee Foundation d) Identify the appropriate accounting treatment if
(IASCF), the International Accounting a company changes a material accounting
Standards Board (IASB), the Standards policy.[1]
Advisory Council (SAC) and the International
Financial Reporting Interpretations Committee
(IFRIC).[1]

b) Understand the role of International Financial

Reporting Standards.[1]

7
 C THE USE OF DOUBLE-ENTRY AND b) Understand the basic function and form of
ACCOUNTING SYSTEMS accounting records in a typical computerised
system.[1]
1. Double-entry book-keeping principles
including the maintenance of accounting c) Compare manual and computerised accounting
records and sources of information systems.[1]

a) Identify and explain the function of the main d) Identify advantages and disadvantages of
data sources in an accounting system.[1] computerised accounting systems.[1]

b) Outline the contents and purpose of different e) Understand the uses of integrated accounting
types of business documentation, including: software packages.[1]
quotation, sales order, purchase order, goods
received note, goods despatched note, invoice, D RECORDING TRANSACTIONS AND EVENTS
statement, credit note, debit note, remittance
advice, receipt.[1] 1. Sales and purchases

c) Understand and apply the concept of double- a) Record sale and purchase transactions in
entry accounting and the duality concept.[1] ledger accounts and in day books.[1]

d) Understand and apply the accounting b) Understand and record sales and purchase
equation.[1] returns.[1]

e) Understand how the accounting system c) Understand the general principles of the
contributes to providing useful accounting operation of a sales tax.[1]
information and complies with organisational
policies and deadlines.[1] d) Calculate sales tax on transactions and record
the consequent accounting entries.[1]
f) Identify the main types of business transactions
e.g. sales, purchases, payments, receipts.[1] e) Account for discounts allowed and discounts
received.[1]
2. Ledger accounts, books of prime entry and
journals 2. Cash

a) Identify the main types of ledger accounts and a) Record cash transactions in ledger accounts.[1]
books of prime entry, and understand their
nature and function.[1] b) Understand the need for a record of petty cash
transactions.[1]
b) Understand and illustrate the uses of journals
and the posting of journal entries into ledger c) Describe the features and operation of a petty
accounts.[1] cash imprest system.[1]

c) Identify correct journals from given narrative.[1] d) Account for petty cash using imprest and non-
imprest methods.[1]
d) Illustrate how to balance and close a ledger
account.[1] e) Understand the importance of, and identify
controls and security over the petty cash
3. Accounting systems and the impact of system.[1]
information technology on financial reporting
3. Inventory
a) Understand the basic function and form of
accounting records in a typical manual a) Recognise the need for adjustments for
system.[1] inventory in preparing financial statements.[1]

8
b) Record opening and closing inventory.[1] i) Illustrate how non-current asset balances and
movements are disclosed in financial
c) Identify the alternative methods of valuing statements.[1]
inventory.[1]
j) Explain the purpose and function of an asset
d) Understand and apply the IASB requirements register.[1]
for valuing inventories.[1]
5. Depreciation
e) Recognise which costs should be included in
valuing inventories.[1] a) Understand and explain the purpose of
depreciation.[1]
f) Understand the use of continuous and period
end inventory records.[1] b) Calculate the charge for depreciation using
straight line and reducing balance methods.[1]
g) Calculate the value of closing inventory using
FIFO (first in, first out) and AVCO (average c) Identify the circumstances where different
cost).[1] methods of depreciation would be
appropriate.[1]
h) Understand the impact of accounting concepts
on the valuation of inventory.[1] d) Illustrate how depreciation expense and
accumulated depreciation are recorded in
i) Identify the impact of inventory valuation ledger accounts.[1]
methods on profit and on assets.[1]
e) Calculate depreciation on a revalued non-
4. Tangible non-current assets current asset including the transfer of excess
depreciation between the revaluation reserve
a) Define non-current assets.[1] and retained earnings.[1]

b) Recognise the difference between current and f) Calculate the adjustments to depreciation
non-current assets.[1] necessary if changes are made in the estimated
useful life and/or residual value of a non-
c) Explain the difference between capital and current asset.[2]
revenue items. [1]
g) Record depreciation in the income statement
d) Classify expenditure as capital or revenue and statement of financial position.[1]
expenditure.[1]
6. Intangible non-current assets and amortisation
e) Prepare ledger entries to record the acquisition
and disposal of non-current assets.[1] a) Recognise the difference between tangible and
intangible non-current assets.[1]
f) Calculate and record profits or losses on
disposal of non-current assets in the income b) Identify types of intangible assets.[1]
statement including part exchange
transactions.[1] c) Identify the definition and treatment of
“research costs” and “development costs” in
g) Record the revaluation of a non-current asset in accordance with International Financial
ledger accounts, the statement of Reporting Standards.[1]
comprehensive income and in the statement of
financial position.[1] d) Calculate amounts to be capitalised as
development expenditure or to be expensed
h) Calculate the profit or loss on disposal of a from given information.[1]
revalued asset.[1]
e) Explain the purpose of amortisation.[1]

9
 f) Calculate and account for the charge for j) Account for contras between trade receivables
amortisation.[1] and payables.[1]

7. Accruals and prepayments k) Prepare, reconcile and understand the purpose

of supplier statements.[1]
a) Understand how the matching concept applies
to accruals and prepayments.[1] l) Classify items as current or non-current
liabilities in the statement of financial
b) Identify and calculate the adjustments needed position.[1]
for accruals and prepayments in preparing
financial statements.[1] 9. Provisions and contingencies

c) Illustrate the process of adjusting for accruals a) Understand the definition of “provision”,
and prepayments in preparing financial “contingent liability” and “contingent asset”.[1]
statements.[1]
b) Distinguish between and classify items as
d) Prepare the journal entries and ledger entries provisions, contingent liabilities or contingent
for the creation of an accrual or prepayment.[1] assets.[1]

e) Understand and identify the impact on profit c) Identify and illustrate the different methods of
and net assets of accruals and prepayments.[1] accounting for provisions, contingent liabilities
and contingent assets.[1]
8. Receivables and payables
d) Calculate provisions and changes in
a) Explain and identify examples of receivables provisions.[1]
and payables.[1]
e) Account for the movement in provisions.[1]
b) Identify the benefits and costs of offering credit
facilities to customers.[1] f) Report provisions in the final accounts.[1]

c) Understand the purpose of an aged receivables 10. Capital structure and finance costs
analysis.[1]
a) Understand the capital structure of a limited
d) Understand the purpose of credit limits.[1]] liability company including: [1]
i) Ordinary shares
e) Prepare the bookkeeping entries to write off an ii) Preference shares (redeemable and
irrecoverable debt.[1] irredeemable)
iii) Loan notes.
f) Record an irrecoverable debt recovered.[1]
b) Record movements in the share capital and
g) Identify the impact of irrecoverable debts on share premium accounts.[1]
the income statement and on the statement of
financial position.[1] c) Identify and record the other reserves which
may appear in the company statement of
h) Prepare the bookkeeping entries to create and financial position.[1]
adjust an allowance for receivables.[1]
d) Define a bonus (capitalisation) issue and its
i) Illustrate how to include movements in the advantages and disadvantages.[1]
allowance for receivables in the income
statement and how the closing balance of the e) Define a rights issue and its advantages and
allowance should appear in the statement of disadvantages.[1]
financial position.[1]

10
f) Record and show the effects of a bonus b) Understand how control accounts relate to the
(capitalisation) issue in the statement of double-entry system.[1]
financial position.[1]
c) Prepare ledger control accounts from given
g) Record and show the effects of a rights issue in information.[1]
the statement of financial position.[1]
d) Perform control account reconciliations for
h) Record dividends in ledger accounts and the accounts receivable and accounts payable.[1]
financial statements.[1]
e) Identify errors which would be highlighted by
i) Calculate and record finance costs in ledger performing a control account reconciliation.[1]
accounts and the financial statements.[1]
f) Identify and correct errors in control accounts
j) Identify the components of the statement of and ledger accounts.[1]
changes in equity.[1]
4. Bank reconciliations
E PREPARING A TRIAL BALANCE
a) Understand the purpose of bank
1. Trial balance reconciliations.[1]

a) Identify the purpose of a trial balance.[1] b) Identify the main reasons for differences
between the cash book and the bank
b) Extract ledger balances into a trial balance.[1] statement.[1]

c) Prepare extracts of an opening trial balance.[1] c) Correct cash book errors and/or omissions.[1]

d) Identify and understand the limitations of a d) Prepare bank reconciliation statements.[1]

trial balance.[1]
e) Derive bank statement and cash book balances
2. Correction of errors from given information.[1]

a) Identify the types of error which may occur in f) Identify the bank balance to be reported in the
bookkeeping systems.[1] final accounts.[1]

b) Identify errors which would be highlighted by 5. Suspense accounts

the extraction of a trial balance.[1]
a) Understand the purpose of a suspense
c) Understand the provision of International account.[1]
Financial Reporting Standards governing
financial statements regarding material errors b) Identify errors leading to the creation of a
which result in prior period adjustment.[1] suspense account.[1]

d) Prepare journal entries to correct errors.[1] c) Record entries in a suspense account.[1]

e) Calculate and understand the impact of errors d) Make journal entries to clear a suspense
on the income statement, statement of account.[1]
comprehensive income and statement of
financial position.[1]

3. Control accounts and reconciliations

a) Understand the purpose of control accounts for

accounts receivable and accounts payable.[1]

11
 F PREPARING BASIC FINANCIAL 3. Events after the reporting period
STATEMENTS
a) Define an event after the reporting period in
1. Statements of financial position accordance with International Financial
Reporting Standards.[1]
a) Recognise how the accounting equation and
business entity convention underlie the b) Classify events as adjusting or non-adjusting.[1]
statement of financial position.[1]
c) Distinguish between how adjusting and non-
b) Understand the nature of reserves.[1] adjusting events are reported in the financial
statements.[1]
c) Identify and report reserves in a company
statement of financial position.[1] 4. Accounting for partnerships

d) Prepare extracts of a statement of financial a) Understand and identify the typical content of
position from given information.[1] a partnership agreement, including profit-
sharing terms.[1]
e) Understand why the heading retained earnings
appears in a company statement of financial b) Understand the nature of: [1]
position.[1] i) Capital accounts
ii) Current accounts
2. Income statements and statements of iii) Division of profits
comprehensive income
c) Calculate and record the partners’ shares of
a) Prepare extracts of an income statement and profit/losses.[1]
statement of comprehensive income from given
information.[1] d) Account for guaranteed minimum profit
shares.[1]
b) Understand how accounting concepts apply to
revenue and expenses.[1] e) Calculate and record partners’ drawings.[1]

c) Calculate revenue, cost of sales, gross profit, f) Calculate and record interest on drawings.[1]
profit for the year, and total comprehensive
income from given information.[1] g) Calculate and record interest on capital.[1]

d) Disclose items of income and expenditure in h) Calculate and record partner salaries. [1]
the income statement. [1]
i) Prepare an extract of a current account.[1]
e) Record income tax in the income statement of
a company including the under and j) Prepare an extract of a capital account.[1]
overprovision of tax in the prior year.[1]
k) Prepare extracts of the income statement,
f) Understand the interrelationship between the including division of profit, and statement of
statement of financial position, income financial position of a partnership.[1]
statement and statement of comprehensive
income. [1] l) Define goodwill, in relation to partnership
accounts.[1]
g) Identify items requiring separate disclosure on
the face of the income statement.[1] m) Identify the factors leading to the creation of
goodwill in relation to partnership accounts.[1]

n) Calculate the value of goodwill from given

information.[1]

12
Note: Questions on partnerships may include the
effect of admission of new partners

5. Statements of cash flows (excluding

partnerships)

a) Differentiate between profit and cash flow.[1]

b) Understand the need for management to
control cash flow.[1]

c) Recognise the benefits and drawbacks to users

of the financial statements of a statement of
cash flows. [1]

d) Classify the effect of transactions on cash

flows.[1]

e) Calculate the figures needed for the statement

of cash flows including:[1]
i) Cash flows from operating activities
ii) Cash flows from investing activities
iii) Cash flows from financing activities

f) Calculate the cash flow from operating

activities using the indirect and direct
method.[1]

g) Prepare extracts from statements of cash flows

from given information.[1]

h) Identify the treatment of given transactions in a

company’s statement of cash flows.[1]

6. Incomplete records

a) Understand and apply techniques used in

incomplete record situations: [1]
i) Use of accounting equation
ii) Use of ledger accounts to calculate missing
figures
iii) Use of cash and/or bank summaries
iv) Use of profit percentages to calculate
missing figures.

13