Unit 8: Accounting Systems

Unit code: F/502/5421

QCF Level 3: BTEC National
Credit value: 10
Guided learning hours: 60

Aim and purpose

The aim of this unit is to enable learners to understand that recording year-end financial information accurately
is vital to any business. This information can be recorded using manual or computerised packages, whichever
is more suitable for business resources and needs.

Unit introduction
One essential requirement in running and managing of an organisation is the need for clear, relevant
and accurate information. In particular, an organisation needs accounting information that gives a complete
picture of all financial transactions that have taken place and the current financial position of the organisation.
Accounting information is vital to the owners and managers of business organisations, and there are often
other stakeholders who have an interest in the financial performance and position of the business.
At an organisation’s financial year-end, the accountant will prepare financial statements including a trading and
profit and loss account and a balance sheet. The system that provides all the information for these final accounts
is known as the accounting system.
The quality and accuracy of the information presented in the final accounts depends entirely on using an
effective accounting system correctly. Beginning with the source documents that show financial transactions,
accounting staff will need to classify and encode the information before inputting the details into the system.
Manual accounting procedures, using double-entry bookkeeping, have been in operation for over 500
years. The system is still effective in providing managers with an analysis of income, profits, expenses, losses,
assets and liabilities. However, organisations need information quickly and manual systems can be slow.
Computerised accounting packages are based on double-entry principles and will give informative reports
in a matter of seconds.
Organisations will adopt the most suitable accounting system for their resources and needs. System users will
need training and, if the computerised option is chosen, hardware and software are essential requirements.
Whichever system is chosen, the year-end task of preparing the final accounts remains the same. Organisations
rely on effective control of resources including cash. Most organisations depend on making a profit. The
accounting system is an integral part of managing money so survival of an organisation depends on that system.

Learning outcomes
On completion of this unit a learner should:
1 Know the use of financial documents in recording business transactions
2 Be able to record and monitor financial information in accounting systems
3 Be able to extract a trial balance from accounting records
4 Be able to prepare a trading and profit and loss account and balance sheet.

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Unit content

1 Know the use of financial documents in recording business transactions

Documents: cash receipts; cheques; debit and credit cards; purchase orders; delivery notes; goods
received notes; sales and purchase invoices (trade discount, cash discount and value added tax); credit
notes; statements of account; remittance advice
Transactions: cash; bank; credit

2 Be able to record and monitor financial information in accounting systems

Manual accounting systems: day books; cash book; petty cash book; general ledger (sales, purchases,
returns in, returns out accounts); sales ledger; purchase ledger; double-entry bookkeeping; balancing
ledger accounts
Computerised accounting systems: specialist accounting packages; spreadsheets; software features;
benefits (cost, speed, ease of use, appropriateness)

3 Be able to extract a trial balance from accounting records

Trial balance: definition; application (accuracy of double-entry bookkeeping, detecting bookkeeping errors,
preparation for trading and profit and loss account and balance sheet); errors causing imbalance; format;
total debit balances equal total credit balances; period end; year end; extended trial balance (preparation,
additional columns, adjustments, calculation of net profit or loss, effects of adjustments on profit or loss,
assets and liabilities)
Accounting records: general ledger accounts; cash and bank accounts
Impact of International Accounting Standards: changes to reporting requirements under the International
Accounting Standards (IAS), eg statement of comprehensive income, statement of financial position.

4 Be able to prepare a trading and profit and loss account and balance sheet
Sources: trial balance; list of ledger balances
Trading and profit and loss account: sales; cost of goods sold; gross profit; other income and profits;
overheads; net profit
Balance sheet: fixed assets; current assets (stock, debtors, bank, cash); long-term liabilities; current
liabilities (trade creditors, bank overdraft, other creditors, debts to be paid within one year); working
capital; net assets; capital; profit; drawings
International Equivalents: changes to reporting requirements under the International Accounting Standards
(IAS), eg statement of comprehensive income, statement of financial position.

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Assessment and grading criteria
In order to pass this unit, the evidence that the learner presents for assessment needs to demonstrate that
they can meet all the learning outcomes for the unit. The assessment criteria for a pass grade describe the
level of achievement required to pass this unit.

Assessment and grading criteria

To achieve a pass grade the To achieve a merit grade the To achieve a distinction grade
evidence must show that the evidence must show that, in the evidence must show that,
learner is able to: addition to the pass criteria, in addition to the pass and
the learner is able to: merit criteria, the learner is
able to:
P1 identify the documents M1 compare the benefits of using
used to record business manual and computerised
transactions accounting systems to record
[IE] business transactions
[TW]
P2 use manual or computerised
accounting systems to record
business transactions [SM]
P3 explain the benefits of using D1 analyse the circumstances
a computerised accounting under which a business
system would adopt a computerised
[IE] accounting system instead
of a manual one
P4 extract a trial balance from M2 explain the purpose of a trial
a set of accounting records balance
[CT]
P5 prepare a trading and profit M3 explain why the extended D2 evaluate the value of a set
and loss account and a balance trial balance is used to make of final accounts to a business.
sheet from a trial balance or adjustments to accounts.
list of ledger balances. [RL]
[SM]

PLTS: This summary references where applicable, in the square brackets, the elements of the personal,
learning and thinking skills applicable in the pass criteria. It identifies opportunities for learners to demonstrate
effective application of the referenced elements of the skills.

Key IE – independent enquirers RL – reflective learners SM – self-managers

CT – creative thinkers TW – team workers EP – effective participators

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Essential guidance for tutors

Delivery
Every financial transaction can be evidenced through some form of business document. A credit sale,
for example, is recorded on a sales invoice issued by the seller to the buyer. Cash sales are recorded
on a receipt or till roll. When expenses are paid the evidence is usually found on an invoice or a receipt.
For all organisations, financial documents provide evidence of transactions and information about them.
The financial value of each transaction can be recorded in the accounting system. Documents detail the
nature and total value of transactions.
For learning outcome 1, learners will examine a range of financial documents, discussing their use, their
effectiveness and the calculations performed on them. Learners will use real documents and will be able
to find good examples on the internet. Greater familiarisation will be achieved if learners are able to recognise
and select the appropriate documents for any given transaction. Learners should gain experience in preparing,
and checking the accuracy, of business documents. Learners should appreciate the reasons for giving discounts
and verify the accuracy of discount and value added tax calculations.
For an organisation, accounting is about the system that provides quantitative information about financial
transactions. It is not just keeping records. The system should allow financial information to be presented
to the organisation’s stakeholders. Learners will consider the information that might be needed and examine
the manual and computerised systems that can be used to generate this information. Familiarisation with the
function and use of manually-produced ledgers and books of original entry is essential before computerised
systems are discussed and tried. Double-entry bookkeeping underpins computerised accounting systems
and has been an established method of manual accounting for over 500 years. Learners will need to have
a good understanding of how the principles of double-entry bookkeeping are applied to financial transactions.
Learners will undertake some double-entry book-keeping to record transactions before calculating the
balances of the accounts. They will not be expected to carry out full double-entry for assessment purposes.
Learners will have the opportunity to observe and use computerised accounting packages such as Sage Line
50. They will be given experience of entering cash, bank and credit transactions, including the use of the sales
ledger and purchase ledger. They will produce reports such as invoices, statements of account, aged debtors
list, trial balance, profit and loss account and balance sheet. It is recommended that learners are supplied
with data files containing a number of transactions that have been entered previously.
Learners will also gain experience of using computerised spreadsheets to record transactions. Preparing day
books, or an analytical cash book, will provide a good understanding of the ease of recording data digitally.
Computerised accounting is not necessary or even suitable for all organisations. Learners will discuss the factors
involved in selecting the most appropriate accounting system for an organisation, considering the volume
of transactions, the nature and size of the organisation, staffing, and the availability of computer equipment.
Learners will also consider the relative merits and drawbacks of manual and computerised systems. A visiting
speaker, who might be a member of staff from the accounts department of the school or college, will be able
to the learners’ understanding.
Whenever a system of double-entry bookkeeping is used, a trial balance can be extracted, as required, to
show the balance of all ledger accounts. One important feature of a trial balance is that the total of all debit
balances should be equal to the total of the credit balances. It provides evidence of accuracy in the double-
entry and so organisations can use the trial balance to detect errors. More importantly for the accountant,
the trial balance provides all the necessary figures to prepare the final accounts at the financial year end. In
practice, not all organisations use double-entry bookkeeping and learners will need to appreciate preparing
final accounts is more difficult where a full, double-entry system has not been followed.
Learners will be able to extract ledger balances, placing them on the correct side of a trial balance. Cash
and bank balances may be located in a cash book rather than the general ledger. Personal accounts in the

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sales and purchase ledgers may have balances that are needed in the trial balance. Learners must be aware
that they need to look beyond the main ledger for the balances and understand how to extract a trial balance
from ledgers and cash books having planned the process. They also need to be aware that a difference in the
trial balance is an indication of bookkeeping errors and recognise different kinds of errors that affect the trial
balance. Learners will be able to prepare an extended trial balance and then calculate the net profit or loss.
They will also discuss and practise detecting and correcting of errors using the extended trial balance.
One of the chief accounting functions of an organisation is to present the results of financial transactions
in a meaningful way, allowing the user to measure the success of the business. This is known as financial
accounting and the results are presented in a trading and profit and loss account and a balance sheet. The
trading account shows the organisation’s gross profit, and the profit and loss account shows the organisation’s
net profit or net loss for the trading period. The balance sheet lists the organisation’s assets and liabilities in an
appropriate sequence so that stakeholders can see the financial position. This unit requires learners to be able
to prepare final accounts from a trial balance or a list of ledger balances. However, year-end adjustments such
as depreciation, bad debts, accruals and prepayments are not covered in this unit as they are covered in Unit 6:
Financial Accounting. Learners will construct final accounts manually and using a computerised spreadsheet.
Where a spreadsheet is used, learners may have the ledger balances already listed on a spreadsheet and
will use formulae to calculate totals and sub-totals.
Learners should understand the new requirements under IAS and be aware that although at the time of
accreditation of this specification only public companies have to comply with IAS, that this may become a
requirement in the future for all companies and firms.

Outline learning plan

The outline learning plan has been included in this unit as guidance and can be used in conjunction with the
programme of suggested assignments.
The outline learning plan demonstrates one way in planning the delivery and assessment of this unit.

Topic and suggested assignments/activities and/assessment

Introduction and outline scheme of work/programme of assignments
Formal theory input for Financial documents and their uses
Practical class exercises for application of theory
Visits and speakers from business
Assignment 1: Financial Documents and their Uses
Formal theory input for Manual accounting systems
Research
Practical class exercises for application of theory
Assignment 2: Manual Accounting Systems
Formal theory input on Computerised accounting systems
Practical class exercises for application of theory
Research
Assignment 3: Computerised Accounting Systems
Formal theory input on Final accounts
Research and group work
Visits/speakers from business
Assignment 4: Final Accounts
Supervised assignment work
Non-supervised study time and completion of assignments

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Assessment
Evidence for assessment may be generated directly from the teaching programme. Two or three assignments
may be used to cover the grading criteria and a mix of practical tasks, discussion and group talks or presentations
will make the assessment more interesting.
For P1, learners will be given a series of business transactions and will name the most appropriate document(s)
that an organisation would use in each case. Assessment may take the form of written answers, or computerised
assessment may be used in the form of a quiz or multi-choice answers which might be stored on and accessed
through a learning platform (virtual learning environment). There may be more than one document for some
transactions, such as a cheque, a statement and a remittance advice as evidence of a customer’s settlement.
(P1 and P2 can be linked.)
P2 will be assessed by presenting learners with a series of financial transactions, and possibly the related
documents. Learners will use the book of prime entry and the ledger accounts to record each transaction. The
transactions may be the same as those for P1 if the same assignment is used. Evidence might be handwritten
or entered into any computerised assessment, or verbal questioning may be used. (P1 and P2 can be linked.)
For P3, learners will research computerised accounting, using the internet and any other relevant sources.
Adding this to their experience of using or observing computerised accounting software, they will produce
a report on how a computerised accounting system is used to record financial transactions. This can be
extended to achieve M1 by learners comparing manual and computerised accounting systems. Alternatively,
this criterion could be linked with M1 and D1 and the assessment evidence gained through a group talk
or presentation. (P3, M1 and D1 can be linked.)
For P4, learners will be given a case study that includes some general ledger, sales ledger and purchase ledger
accounts and a cash book. They will show where they will obtain the information and how account balances
will be calculated and displayed in the accounts before they are extracted into a trial balance. Having a separate
cash book ensures that learners can show awareness of the requirement to obtain information from more
than one source. Learners will demonstrate the importance of placing balances on the correct side of a trial
balance. The task may be extended by linking it with P5 and learners to preparing final accounts from a trial
balance. (P4, P5, M2 and D2 can be linked.)
For P5, learners should be given a case study including a trial balance or a list of ledger balances. From this
information they will prepare a trading and profit and loss account and a balance sheet using the correct
format. Learners will be expected to include revenue income and revenue expenditure in the trading and
profit and loss account, and the balance sheet should be presented in a logical sequence, usually in order
of permanence. P5 may be linked with P4 and the same case study used. This will allow learners to prepare
the final accounts from the trial balance they prepared from ledger balances.
M1 should be carried out as a small group task using a case study. Groups will be presented with a case
study, which they will discuss before preparing and presenting a talk on comparing the benefits of accounting
systems, using appropriate images or support materials. In this talk, learners will relate the points to the
organisation in their case study.
M2 extends describing how a trial balance is extracted. One of the main purposes of preparing the trial
balance is to detect errors in the bookkeeping. In practice, organisations will locate and correct errors
before final accounts are prepared. Learners will explain clearly the importance of this aspect of accounting,
considering different kinds of error that might have caused an imbalance. The need for accurate accounting
information must be emphasised; inaccuracy can have serious implications for the accountant.

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M3 allows learners to develop their explanations on preparing the trial balance to locate and detect errors, by
considering how the extended trial balance can be used to show the original account balances and subsequent
adjustments. The adjustment columns are used to show those adjustments before the figures are entered into
the profit and loss columns or the balance sheet columns. Checking arithmetical accuracy before preparing
the final accounts, ensures the balancing of the actual balance sheet. Learners will provide further evidence
of their understanding by giving examples of errors that affect the trial balance and showing how they would
be solved. Corrections will be reviewed with the tutor.
D1 may be assessed through a group talk or presentation by linking it with M1. This would involve learners
extending their talk to include the circumstances under which the organisation in their case study would adopt
a computerised accounting system. Factors will include the size of the business, the complexity, volume and
value of its transactions, staff available to carry out the accounting and the availability of appropriate computer
equipment. The key points of this analysis will also be presented in written form, such as a report.
For D2, learners must judge the value of the information provided by the final accounts to the owner(s) and
other interested parties. Learners do not need to calculate performance indicators and ratios but should be
able to identify the benefits of obtaining a set of final accounts

Programme of suggested assignments

The table below shows a programme of suggested assignments that cover the pass, merit and distinction
criteria in the assessment and grading grid. This is for guidance and it is recommended that centres either
write their own assignments or adapt any Edexcel assignments to meet local needs and resources.

Criteria covered Assignment title Scenario Assessment method

P1 Financial Documents Examining and checking a Controlled assignment in class
and their Uses. range of business documents or group work.
for a given business.
P2 Manual Accounting Identifying accounts and Controlled assignment in class
Systems. recording transactions for a or group work.
given business.
P3, M1, D1 Computerised Report on use of Group presentation.
Accounting Systems. computerised accounting
and its advantages in a given
business.
P4, P5, M2,M3, D2 Final Accounts. Case study on final accounts, Controlled assignment in class
to include preparation of or group work for part and
accounts. group presentation for part.

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Links to National Occupational Standards, other BTEC units, other BTEC
qualifications and other relevant units and qualifications
This unit forms part of the BTEC Business sector suite. This unit has particular links with the following unit
titles in the Business suite:

Level 2 Level 3
Financial Forecasting for Business Business Resources
Bookkeeping for Business Business Accounting
Financial Accounting
Management Accounting
Computer Applications for Financial Management.

This unit should only be delivered after Business Accounting.

The unit could be delivered at the same time as the Unit, Computer Applications for Financial Management,
as that includes the use of a computerised accounting package and a computerised spreadsheet to produce
and analyse accounting information.
This unit also links to the following draft National Occupational Standards for Accounting, particularly Units
FA3, FA4, FA5

Essential resources
Learners can find information using company annual reports, journals, magazines, company websites
and newspapers.
Access to a range of information resources to complete investigative assignments and case studies will be
essential, including relevant CD ROMs and the internet, as will be access to computers for research and
preparing accounts (using a spreadsheet package). This will enhance the delivery of this unit. Also, being
able to see computerised accounting packages in operation in business would be beneficial. Learners will
also need access to relevant paper-based research material including published financial reports and books.

Employer engagement and vocational contexts

Visits to companies and from employees are useful to the delivery of this unit. The use of vocational contexts
is essential in the delivery and assessment. Sources of support to enable centres to initiate and establish links
to industry, and to networks arranging visits to industry are given below:
Work Experience/Workplace learning frameworks – Centre for Education and Industry (University of
Warwick): www.warwick.ac.uk/wie/cei
Learning and Skills Network: www.vocationallearning.org.uk

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Indicative reading for learners
Textbooks
Brammer J, Cox D, Fardon M and Penning A – Active Accounting (Osborne Books, 2002) ISBN 1872962378
Cox D and Fardon M – Accounting (Osborne Books, 1998) ISBN 1872962289
Cox D and Fardon M – Foundation Accounting Tutorial (Osborne Books, 2003) ISBN 1872962815
Fardon M – Computer Accounting (Osborne Books, 2002) ISBN 1872962270
Fardon M – Computer Accounting for SAGE (Osborne Books, 2007) ISBN 1905777116
Journals
Accountancy (CCH)
Accountancy Age (VNU Business Publications)
Accounting Technician (Centurion Publishing Group)
PQ Magazine (PQ Publishing)
Websites

www.accountancyage.com Accountancy news and information

www.accountingtechnician.co.uk Association of Accounting Technicians Online
www.accountingweb.co.uk Accounting news, information and case studies
www.bized.co.uk A business education resource site
www.bizhelp24.com/index.php Help and support for businesses
www.businesslink.gov.uk Business guidance for businesses, including accounting
www.canterbury.gov.uk An example of a specific local business support website
www.statistics.gov.uk UK Government statistics, including Retail Prices Index
news.bbc.co.uk/1/hi/business/default.stm The business pages of the BBC website
www.thetimes100.co.uk The Times 100 case studies
www.tutor2u.net Educational website for business and economics
www.wikipedia.org Community editable encyclopaedia

Broadcasts
The following programmes often feature business items:
The Money Programme, BBC2 (weekly)
Working Lunch, BBC2 (daily)

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Delivery of personal, learning and thinking skills
The table below identifies the opportunities for personal, learning and thinking skills (PLTS) that have been
included within the pass assessment criteria of this unit.

Skill When learners are …

Independent enquirers investigating business finances accounts and systems
Creative thinkers generating ideas about financial data
Self-managers organising time and resources and prioritising actions when carrying out investigations
in to finance.

Although PLTS are identified within this unit as an inherent part of the assessment criteria, there are further
opportunities to develop a range of PLTS through various approaches to teaching and learning.

Skill When learners are …

Independent enquirers planning and carrying out research into the different types of businesses
Creative thinkers looking at suitable accounting systems
examining reasons for/solutions to business change
adapting their skills as circumstances change
Reflective learners setting goals, with success criteria, for researching business finances and
frameworks
inviting feedback on their own work and dealing positively with praise, setbacks
and criticism
evaluating their experiences and learning to inform future progress
Team workers working in a group to discuss ideas and research
taking responsibility for their own role
managing activities to reach agreements and achieve results
Self-managers seeking out challenges or new responsibilities and showing flexibility when
priorities change
dealing with competing pressures, including personal and work-related demands
responding positively to change, seeking advice and support when needed.
Effective participators planning and carrying out research into budgets and monitoring

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 Functional Skills – Level 2

Skill When learners are …

ICT – Use ICT systems
Select, interact with and use ICT systems independently researching business organisations, finances and systems
for a complex task to meet a variety of needs
preparing/adjusting accounts
Use ICT to effectively plan work and evaluate the tabulating information
effectiveness of the ICT system they have used
ICT – Find and select information
Select and use a variety of sources of information finding illustrative materials for presentations and
independently for a complex task tabulations about business
creating diagrams, presentations and tabulations
Access, search for, select and use ICT-based exploring, extracting and assessing the relevance
information and evaluate its fitness for purpose of information from websites about business
looking for financial documents on the internet
ICT – Develop, present and communicate
information
Enter, develop and format information independently bringing together a variety of materials gathered
to suit its meaning and purpose including: through research
● text and tables preparing information to present to others
● images
● numbers
● records
Bring together information to suit content and purpose
Present information in ways that are fit for purpose
and audience
Evaluate the selection and use of ICT tools and facilities
used to present information
Select and use ICT to communicate and exchange communicating with other members of a group
information safely, responsibly and effectively including
storage of messages and contact lists

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Skill When learners are …
Mathematics
Understand routine and non-routine problems in using numerical data in relation to business finances
a wide range of familiar and unfamiliar contexts and
situations
Identify the situation or problem and the mathematical
methods needed to tackle it
Select and apply a range of skills to find solutions
Use appropriate checking procedures and evaluate
their effectiveness at each stage
Interpret and communicate solutions to practical
problems in familiar and unfamiliar routine contexts
and situations
Draw conclusions and provide mathematical justifications
English
Speaking and listening – make a range of contributions carrying out group work investigating business
to discussions and make effective presentations in a
attending team meetings
wide range of contexts
making presentations about business
Reading – compare, select, read and understand texts reading financial information to obtain data to compare
and use them to gather information, ideas, arguments between and examine business trends
and opinions
Writing – write documents, including extended writing writing materials to provide information about business
pieces, communicating information, ideas and opinions, change
effectively and persuasively.
producing accounts, graphs and tables, together with
reports.

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