Hurtwood House School

It may surprise some to see Accounting offered as an A-Level subject. You can, of course, qualify as an Accountant without taking A-Level, but students who are not sure of their future careers, although they have an inkling that they want to do something in business or commerce, find that Accounting gives a practical perspective to their studies and enables them to get to taste the sharply realistic techniques of financial and management accounting which are the foundation upon which all businesses are run. Accounting is also a subject that helps students to organise their everyday life in a logical and precise manner. At Hurtwood House Accountancy is a popular and highly successful A-Level subject, one that is recognised as being truly ‘hands-on’ for the student because it deals with the practicalities of business analysis and decision-making that is essential to any company.

Students receive a good deal of individual attention, for here is a subject that often demands the one-to-one approach rather than a group effort. Teaching is highly structured, based around the introduction of a topic by a tutor, with students then working on assignments (usually past exam questions). Students have their own ledgers in which they put into practice what they have been taught when the topic was introduced. This practice is when a student’s ability is developed with the tutor explaining, either individually or to the group as a whole, the correct solution to the assignment. At the end of their course, students have an impressive record of work in their ledgers which will not only help them to revise for their A-Level examination, but will also be useful when studying for a degree.

AS Examinations
Unit 1 – ACCN1
Introduction to Financial Accounting
50% of AS, 25% of A-Level
1 hour 30 minutes written examination
80 raw marks (100 UMS)
Four compulsory questions – each carrying a variable number of marks, each with a variable number of sub-questions.
Available January and June

Unit 2 – ACCN2
Financial and Management Accounting
50% of AS, 25% of A Level
1 hour 30 minutes written examination
80 raw marks (100 UMS)
Four compulsory questions – each carrying a variable number of marks, each with a variable number of sub-questions.
Available January and June
AS Award 1121

A2 Examinations
Unit 3 – ACCN3
Further Aspects of Financial Accounting
25% of A Level
2 hours written examination
90 raw marks (100 UMS)
Four compulsory questions – each carrying a variable number of marks, each with a variable number of sub-questions. This unit is synoptic.
Available January and June

Unit 4 – ACCN4
Further Aspects of Management Accounting
25% of A Level
2 hours written examination
90 raw marks (100 UMS)
Four compulsory questions – each carrying a variable number of marks, each with a variable number of sub-questions. This unit is synoptic.
Available January and June
A-Level Award 2121
 
There are four equally-weighted units, each assessed externally by a written paper.
AS + A2 = A-Level
 
Students taking this specification should:

• develop knowledge and understanding of the purposes of accounting, its concepts, techniques and procedures
• apply this knowledge and understanding to a variety of accounting problems
• develop an appreciation of the role and limitations of accounting in decision-making
• analyse, interpret and evaluate accounting information, assess alternative courses of action and make reasoned judgments, taking into consideration economic, legal, technological and social factors.

The specification also encourages candidates to acquire a range of important and transferable skills:

• data skills: candidates will be expected to manipulate data in a variety of forms and to interpret their results
• presenting arguments and making judgments and justified recommendations on the basis of the available evidence
• recognising the nature of problems, solving problems and making decisions using appropriate accounting tools and methods
• planning work, taking into account the demands of the task and the time available to complete it.
   

AS Unit 1 ACCN1
Introduction to Financial Accounting
 
This unit is designed as a foundation for the course and covers double-entry procedures as applied to the accounting systems of sole traders.

Students will develop an understanding of how the double-entry system operates and develop skills in keeping accurate accounting records which will include transferring relevant accounts to the trading and profit and loss accounts, balancing accounts and preparing a balance sheet set out in good form. They will be able to record a variety of transactions, working from original documents and using the appropriate books of original entry.

They will also be able to verify the accuracy of accounting records, explain the purpose and limitations of verification techniques and be able to assess the consequences of errors on profit calculations and balance sheets.

Making straightforward adjustments to expenses in the final accounts, including the recording of depreciation based on the straight-line method will also be covered by the students.

They will also learn and understand the reasons for keeping accounting records and the benefits that arise for the owner of a business and other stakeholders.

AS Unit 2 ACCN2
Financial and Management Accounting
 
This unit provides students with the opportunity to develop their knowledge and understanding of financial accounting and introduces them to some of the ways in which financial accounting can provide valuable information for measuring and monitoring business performance and for planning future business operations.

They will develop their ability to produce final accounts and balance sheets for sole traders as well as limited companies and will be able to make more complex adjustments to final accounts, demonstrating an understanding of the concepts that underlie the preparation of financial statements and to explain how these are applied to a variety of situations.

A2 Unit 3 ACCN3
Further Aspects of Financial Accounting
 
In this unit, students will have the opportunity to develop their understanding of financial accounting techniques which can be applied where a business does not maintain a complete accounting system.

They will have the opportunity to develop an understanding of the techniques and procedures which are relevant to partnerships, developing a greater understanding of financial accounting in relation to limited companies by developing their knowledge of the content of published accounts and their importance to various user groups. They will also extend their range of advanced techniques and knowledge of accounting by the study of cash flow statements and accounting standards.
 
Accounting standards students will be able to explain and comment on the purpose and importance of the following international accounting standards:
 
IAS 1 Presentation of financial statements
IAS 2 Inventories
IAS 7 Cash flow statements
IAS 8 Net profit or loss for the period – fundamental errors and changes in accounting procedures
IAS 10 Events after balance sheet date
IAS 16 Property, plant and equipment
IAS 18 Revenue
IAS 36 Impairment of assets
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 38 Intangible assets. 
 
A2 Unit 4 ACCN4
Further Aspects of Management Accounting
 
This unit provides an opportunity for candidates to develop further the ways in which accounting techniques can be used to aid the management of a business and contribute to effective decision-making.

Students will develop an understanding of manufacturing accounts and certain cost concepts including contribution, overhead absorption, activity-based costing, standard costing and variance analysis.

This unit provides our students with the opportunity to develop two techniques for making capital investment decisions and further develop their understanding of sources of finance.

On top of this, they will develop their understanding of budgeting and budgetary control.

They will also have to consider social accounting factors when making decisions.

Students will be able to prepare and comment on the final accounts and balance sheet of manufacturing organisations, calculate prime costs, overhead cost, factory cost of finished goods, profit on manufacture, and make provisions for unrealised profit.
 
 
4 Scheme of Assessment

4.1 Aims
AS and A-Level courses based on this specification should encourage candidates to develop:

• an understanding of the importance of effective accounting information systems and an awareness of their limitations through a critical consideration of current financial issues and modern business practices
• an understanding of the purposes, principles, concepts and techniques of accounting
• the transferable skills of numeracy, communication, ICT, application, presentation, interpretation, analysis and evaluation in an accounting context
• an appreciation of the effects of economic, legal, ethical, social, environmental and technological influences on accounting decisions
• a capacity for methodical and critical thought which would serve as an end in itself, as well as a basis for further study of accounting and other subjects. 

4.2 Assessment Objectives (AOs)
The Assessment Objectives are common to AS and A-Level. The assessment units will assess the following:
AO1 Knowledge and Understanding
Demonstrate knowledge and understanding of accounting principles, concepts and techniques.
AO2 Application
Select and apply knowledge and understanding of accounting principles, concepts and techniques to familiar and unfamiliar situations
AO3 Analysis and Evaluation
Order, interpret and analyse accounting information in an appropriate format. Evaluate accounting information taking into consideration internal and external factors to make reasoned judgments, decisions and recommendations, and assess alternative courses of action using an appropriate form and style of writing.

Quality of Written Communication (QWC)
In GCSE specifications which require candidates to produce written material in English, candidates must:

• ensure that text is legible and that spelling, punctuation and grammar are accurate so that meaning is clear
• select and use a form and style of writing appropriate to purpose and to complex subject matter
• organise information clearly and coherently, using specialist vocabulary when appropriate.

In this specification, QWC will be assessed in all units.
On each paper, two of the marks for prose answers will be allocated to ‘quality of written communication’ and two of the marks for numerical answers will be allocated to ‘quality of presentation’. The sub-questions concerned will be identified on the question papers.

Weighting of Assessment Objectives for AS
The table below shows the approximate weighting of each of the Assessment Objectives in the AS units.
Assessment Objectives Unit Weightings (%) Overall weighting of AOs (%)

Unit 1 Unit 2
AO1 Knowledge and Understanding 20 10 30
AO2 Application 25 25 50
AO3 Analysis and Evaluation 5 15 20
Overall weighting of units (%) 50 50 100 15

4.3 Prior Learning
There are no prior learning requirements. It is not necessary for candidates to have studied GCSE Accounting before commencing work on this specification and no prior knowledge of accounting is necessary.

4.4 Synoptic Assessment and Stretch and Challenge
Synoptic assessment in Accounting is included in both A2 units.
Synoptic assessment encourages candidates to see the relationship between different aspects of the subject content. It relates to all the Assessment Objectives. Synoptic assessment will be conducted by using decision-making or problem-solving situations which require candidates to draw together knowledge and understanding of concepts, procedures and techniques learned in different parts of the A-Level course to tackle a decision, problem or issue that is new to them.

In Unit 3, synoptic questions will be set on issues relating to Units 1–2.

In Unit 4, synoptic questions will be set on issues relating to Unit 2.
Even though the questions will have such a focus, candidates will be rewarded for employing in their answers relevant knowledge, understanding and skills learned in any part of the course.
The requirement that Stretch and Challenge is included at A2 is met by:

• questions which require candidates to evaluate accounting issues
• questions which require candidates to apply their knowledge, understanding and skills to complex situations.

Weighting of Assessment Objectives for A Level
The table below shows the approximate weighting of each of the Assessment Objectives in the AS and A2 units.
Assessment Objectives Unit Weightings (%) Overall weighting of AOs (%)

Unit 1 Unit 2 Unit 3 Unit 4
AO1 Knowledge and Understanding 10 5 5 5 25
AO2 Application 12½ 12½ 12½ 12½ 50
AO3 Analysis and Evaluation 2½ 7½ 7½ 7½ 25
Overall weighting of units (%) 25 25 25 25 100
 
5.7 Awarding Grades and Reporting Results
The AS qualification will be graded on a five-point scale: A, B, C, D and E. The full A-Level qualification will be graded on a six-point scale: A*, A, B, C, D and E. To be awarded an A* candidates will need to achieve a grade A on the full A-Level qualification and an A* on the aggregate of the A2 units.

For AS and A-Level, candidates who fail to reach the minimum standard for grade E will be recorded as U (unclassified) and will not receive a qualification certificate. Individual assessment unit results will be certificated.

Accounting is a subject that will appeal to students who delight in being given information on a business and from this preparing solutions - whether it be structured (as in the presentation of a balance sheet) or unstructured (as in giving a report on the performance of a business). It may involve the student having to decide which particular piece of machinery a company should buy, or indeed whether to purchase outright, lease or hire. From the information provided, the accounting student can answer questions such as ‘Should a product be discontinued?’ or ‘How much should be charged for a product?’ or ‘Which areas are causing a business to be unprofitable?’
 
Although it deals with numbers, Accounting is not a mathematical subject. The calculations involved are no more than the basics of arithmetic, such as adding and subtracting. For example, adding income and deducting costs to arrive at a profit figure. However, having arrived at a profit figure it must then be decided whether it is high enough. Questions such as ‘What do other businesses make?’ have to be answered and it may be queried as to whether it is better to have a higher profit on a low turnover, or vice versa. There is much more to the subject than just playing with numbers. There are quantitative techniques involved here that help to lead to decision-making. Accounting is also distinguished from Economics - which deals with concepts and covers the operation of the whole of the British Economy and Business Studies and which concentrates more on corporate structure and the sale and marketing of products.

‘Accounting is not about Mathematics but it is about business. It is very closely connected to the business world and the impact which finance has on various companies. If you are interested in pursuing a business-based course at university then here is a subject that you will find highly interesting and rewarding. I am leaving Hurtwood this year with a firm understanding of the structure of Accounting and a much deeper understanding of business in general. Our Head of Department, Graham Highfield, explained the subject in a clear and careful way which made it easy to follow topics and see the links between them.’
Luke Nolan – Second Year A-Level student

Accounting is often regarded as being a ‘language’ in its own right though many of its terms are used in everyday language such as credit and debit.

Transactions (for example selling goods on credit) are firstly entered in to the journal (otherwise known as the day books) and secondly transferred to the ledger (the accounting book into which all financial entries are made).  After checking that the entries are correct, a Profit and Loss Account (to calculate the net profit for the period) is drawn with a Balance Sheet to show the assets and liabilities of the business.  

Examples of some terms used in Accounting include the following: 

1. CONCEPTS/PRINCIPLES

• The going concern concept – financial statements are prepared on the basis that the company will continue to operate into the foreseeable future.
• The accruals concept – financial statements are prepared on the basis that incomes and expenses occurring in the same accounting period are matched.
• Consistency – presentation and classification of information shown in financial statements from one period to the next should remain the same.
• Materiality – some items of expenditure are so low in value that to record them separately would be inappropriate. This allows aggregation of similar items rather than showing them separately in the financial statements, eg classification of assets as non-current or current.
• Prudence – financial statements should take a conservative approach where there is any doubt in the reporting of profits or the valuation of assets.
• Business entity – financial statements should not include the personal expenses or incomes or record personal assets or liabilities for any of the personnel involved in the ownership or running of the company.
• Money measurement – only transactions that can be measured in monetary terms should be included in financial records or in financial statements.
• Historical cost – all financial transactions are to be recorded using the actual cost of purchase.
• Duality – there are always two ways of looking at every accounting transaction. One considers the assets of the company, the other considers any claims against the assets.

2. MISCELLANEOUS TERMS

• Dishonoured cheques – where there are insufficient funds in the bank account of the payer (person who has written out the cheque). 
• Debtors – individuals or businesses, who owe us money.
• Creditors – individuals or businesses to which we owe money.
• Trade Discount – is given when a customer ‘buys in bulk’ i.e. purchases a large amount of goods.  Also given to regular customers or to businesses in the same trade. Trade discount is deducted on the invoice and is not shown in the accounts. This discount tends to be a higher percentage than cash discount.
• Cash Discount – offered to encourage for prompt payment e.g. if the account is paid within 30 days a purchaser may receive a 5% cash discount. A lower percentage than trade discount.
• Discount Allowed – cash discount given to a debtor for prompt payment.
• Discount Received – cash discount received from a creditor for prompt payment.
• Bad Debts – a debt owed to the business which the business does not expect to receive; the debtor may have died or may not have sufficient funds to pay.  The bad debt is then written-off as an expense in the Profit and Loss Account.
• Current Assets – are cash or assets that will be turned into cash in the near future. The term current means within the next 12 months and they are used for the day-to-day running of the business e.g. stock and debtors.
• Fixed Assets – are those assets of a business that are held for more than a year and are used by the business to help generate profits e.g. machinery, premises, furniture and office equipment.
• Current Liabilities – are short-term debts that the business has to pay within a year e.g. trade creditors.
• Long term Liabilities – are long-term debts owed by the business that are not due to be paid within the year e.g. loan and mortgage
• Capital – represents the investment made by the owner plus any profits retained within the business. Capital injections and profits earned during the year increases capital; drawings decreases capital.
• Mortgage – a loan to the business that is secured against property i.e. land and buildings.  The mortgage is a long-term liability; mortgage interest is an expense written-off in the Profit and Loss Account.

3. METHODS OF PAYMENT

• Direct Debit – an electronic method of transferring money from a payer’s bank account to a payee’s bank account. The payer sets up the direct debit by authorising his bank to pay a payee who then requests payment. The amount debited can vary and payments can be at regular or irregular periods. 

• Standing Order – An electronic method of transferring money at regular intervals.  The payer sets up a standing order by authorising his bank to pay a fixed amount of money for goods or services supplied. The money is then directly transferred to the payee’s bank account on the set dates.

• Credit Transfer – An electronic method of transferring money; used for one-off payments. The payer needs to know the bank account details of the payee (for example bank account number, bank sort code and name of account).  The money is paid directly from the payer’s account into the payee’s account.  

4. CAPITAL AND REVENUE EXPENDITURE

• Capital Expenditure - money spent on fixed assets (or their improvement) and will benefit the business for more than one year helping generate profits e.g. machinery, computer, furniture.

• Revenue Expenditure - money spent on the day-to-day running of the business i.e. items that will be used within the year e.g. heat and light, wages, rent.

• Capital Income - money raised from selling a fixed asset or a capital injection by the owner(s)

• Revenue Income - money raised from the trading activities of the business i.e. the selling of goods or services.

5. LIMITED COMPANIES

a)     Types of Capital

• Debentures: These are loans that must be repaid or redeemed at a set date in the future; there is therefore no capital growth, unless the debentures at issued at a discount.  There is a fixed rate of interest that must be paid each year, regardless of profit. There is no voting power. They are considered a relatively safe investment; some debentures are secured on fixed assets and are therefore more secure.

• Preference Shares: These are investments in a company and usually carry a fixed rate of dividend which is appropriated before ordinary shares and are therefore less risky than ordinary shares; they are dependent upon profits however. They are redeemable and are a safer form of investment than ordinary shares. They do not usually have voting power and have less capital growth prospects than ordinary shares.

• Ordinary Shares (also known as equity shares): These are investments in a company and earn a variable rate of dividend which is dependent on profits; although no dividend is necessary but failure to pay dividends may make further issues of shares difficult. The shares represent ownership of a company and carry voting rights. They are not redeemable; shareholders must sell their shares, perhaps at a profit or loss. They are a risky investment. .

b) Reserves and Provisions

Reserves are profits that belong to the ordinary shareholders and are part of the shareholders' funds. Reserves can be sub-divided into two categories:

• Capital Reserves – these are created as a result of a statutory requirement. They can not be created through transfers from the profit and loss account. They cannot be used for the appropriation of dividends. These reserves are non-trading profits earned by the company in some unusual way such as through issuing shares at a premium and revaluation of fixed assets. Examples of capital reserves are: Share Premium Reserve, Revaluation Reserve and Capital Redemption Reserve.
• Revenue Reserves – these are profits retained in the company. The profits are accumulated in the company rather than appropriated as dividends to the shareholders. Examples of revenue reserves are: general reserve and profit and loss balance. Revenue reserves may be used at a later stage to appropriate dividends. Revenue reserves are appropriations of profit after taxation and therefore are not allowable against taxation.

Revenue and capital reserves are part of the shareholder’s funds in the balance sheet.

A provision is an amount charged against profits and set aside to provide for a future expense, the amount of which is not certain such as provision for bad debts and provision for depreciation. A provision is an expense and therefore is allowable against taxation. Provisions are entered in the profit and loss account, before taxation and before profits are appropriated. Provisions are deducted from the appropriate asset or liability in the balance sheet.

b)     Miscellaneous

• Authorised Capital: This is the number and nominal value of shares that a company can issue and must be shown in the published accounts of a company. It can be increased but only with the approval of the shareholders and the Registrar of Companies.
• Issued Capital: This is the number and nominal value of shares that a company has issued. It can not exceed the authorised capital.
• Limited Liability: The liability is limited to what has been invested in the business. This applies to shareholders who can only lose the value of their investment should the company go bankrupt or into liquidation; their personal possessions can not be taken to pay any remaining debts of the company. This limits the risk taken by the shareholders.
• Dividends: A dividend is the reward given out of profits to shareholders for their investment in a company. Dividends are appropriated in the profit and loss appropriation account and paid from the bank account.  Dividends are appropriated at the end of the year and paid annually; there may also be an interim dividend that is paid during the year in anticipation of profits.

I studied at Hurtwood House from 2001 to 2003, having completed A-Levels in Law, Accounting and English.  I thoroughly enjoyed Hurtwood House and found that the small classes and personalised teaching resulted in a strong improvement in my grades from GCSE’s!

From Hurtwood, I went on to study Business Management at Surrey University.  Here the law and accounting I had studied strongly came in to play and I managed to leave University with a first class degree with distinction.  What I found from doing accounting at A-Level was that the basic accounting concepts were well ingrained and I had a much better understanding than other students at University, who had to learn some difficult fundamental concepts in lectures of 100s of people.  I feel that this also then stood me in good stead for my next career move.

After completing a placement with PricewaterhouseCoopers whilst at University, I landed myself a graduate job with the firm to study to become a Chartered Accountant.  PricewaterhouseCoopers is the largest professional services firm in the world, and I am really enjoying my time here.  I have since been rated well in the firm and received a prize from the Institute of Chartered Accountants for my exam results!  I feel I have a lot to thank my accounting teacher at Hurtwood House for!

Hurtwood House definitely aided me in my successes to date; it taught me life long lessons such as study skills and good exam technique.  It also taught me important social lessons, such as instilling confidence, the importance of being part of a team, living in a diverse culture and a sense of fun.  These are important factors, which I have found to be even more important that the exam results I’ve achieved!