Unit 10: Recording Financial Transactions

Unit code L/618/5053

Unit level 4

Credit value 15

Introduction
Balancing the books is at the heart of all business management. Financial accountants
are concerned with the recording, summarising and interpreting of financial
information and accounts. They must keep accurate and up-to-date records for
different types of businesses.
The overall aim of this unit is to introduce students to the essential principles of
recording and organising business and financial transactions to which every
organisation will need to adhere. Students will identify sources of accounting
information and how it is then gathered and organised, using the dual entry
bookkeeping system, in order to produce a trial balance.
On successful completion of this unit, students will be able to contribute effectively to
the accounting and bookkeeping function of an organisation and understand how this
is then the basis for producing financial statements. Students will be equipped with
the knowledge and skills required to progress to a higher level of study.

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Learning Outcomes
By the end of this unit a student will be able to:
LO1 Record business transactions using double entry bookkeeping, books of prime
entry, journals and ledger accounts
LO2 Prepare a trial balance for a given organisation from data provided
LO3 Perform bank reconciliations to ensure organisation and bank records are
correct
LO4 Perform control account reconciliations for accounts receivable and accounts
payable.

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Essential Content

LO1 Record business transactions using double entry bookkeeping, books of

prime entry, journals and ledger accounts

Business transactions:
Importance of recording business transactions.
The job role and responsibilities of the bookkeeper, e.g. posting transactions and
maintaining ledgers, filing source documents, bank reconciliations, preparation
of trial balance.
Skills and competences, e.g. attention to detail, IT literacy, data-entry skills,
accuracy, integrity.
Different types of business transactions, e.g. sales, purchases, receipts and
payments.
The different types of documentation for business transactions, e.g. invoices,
purchase orders, receipts, statements.
Cash vs credit transactions.
The importance of accurate and timely recording of business transactions.

Accounting systems and double entry bookkeeping:

Types of accounting system, including single entry, double entry, manual,
computerised.
The need for provision of accurate accounting information across an
organisation to support decision making.
Understanding and applying the accounting equation.
Applying the concept of double entry accounting and the duality concept.
Identify the division of the ledger and books of prime entry and record sales,
purchase and cash transactions.
Manual vs electronic accounting and bookkeeping systems, e.g. Sage, Xero,
QuickBooks, cloud based.

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LO2 Prepare a trial balance for a given organisation from data provided

Trial balance:
The purpose of a trial balance.
The steps taken to prepare a trial balance.
The benefits and limitations of the trial balance.
Extracting ledger balances into a trial balance.
Recording adjustments, including inventory, accruals and prepayments.

Trial balance and highlighting accounting errors:

The different types of errors that can be highlighted through the extraction of a
trial balance.

Trial balance and link to financial statements:

The link between the trial balance and construction of business final accounts.

LO3 Perform bank reconciliations to ensure organisation and bank records

are correct

Bank reconciliation:
The purpose of bank reconciliations and the main reasons for differences
between the cashbook and the bank statement.

The process of reconciliation:

The use of the ledger to support the preparation of the bank reconciliation
statement, including ensuring that all entries relating to specified periods are
correctly entered to support the preparation of financial statements.
The steps to be taken in preparing bank reconciliation statements from data and
identifying the correct bank balance to be reported in the final accounts.
Identifying variances through a bank reconciliation.

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LO4 Perform control account reconciliations for accounts receivable and
accounts payable

Control accounts:
The purpose of control accounts for accounts receivable and accounts payable.
The link between control accounts and the double entry system.
Control account reconciliations for accounts receivable and accounts payable.
Different ways in which control accounts support effective financial management
within the organisation.

Suspense accounts:
The purpose of suspense accounts and how they differ from control accounts.
Identification of errors leading to the creation of a suspense account.
Recording entries in a suspense account and making journal entries to clear a
suspense account.

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Learning Outcomes and Assessment Criteria

Pass Merit Distinction

LO1 Record business transactions using double entry
bookkeeping, books of prime entry, journals and
ledger accounts
P1 Record double entry M1 Analyse a range of D1 Conduct systematic
bookkeeping transactions business transactions gathering, summarising
in a timely and accurate using double entry, books and recording of business
way. of prime entry, journals transactions for accurate
and ledgers in order to reporting of
P2 Apply a range of
provide accurate and organisational efficiency
business transactions
timely accounting and performance.
using double entry
information.
bookkeeping, books of
prime entry, journals and
ledgers.
LO2 Prepare a trial balance for an organisation from
data provided
P3 Using data provided, M2 Interpret, identify and D2 Produce a trial
extract ledger balances correct accounting errors balance that is timely,
into a trial balance for an through the production of accurate and fully
organisation to accurately a trial balance to ensure compliant for an
record transactions. accurate accounting organisation to meet its
records. objectives.

LO3 Perform bank reconciliations to ensure

organisation and bank records are correct
P4 Prepare a bank M3 Appraise the bank D3 Producing bank
reconciliation statement reconciliation process reconciliations that are
from given data for an identifying errors and timely, accurate and fully
organisation. omissions from a bank compliant for an
statement and cashbook. organisation to meet its
objectives.
LO4 Perform control account reconciliations for
accounts receivable and accounts payable.
P5 Explain the role and M4 Evaluate the different D4 Critically evaluate the
differences between types of control accounts role and purpose of
control and suspense in the context of the control and suspense
accounts. double entry accounts in supporting
bookkeeping system. effective financial
P6 Perform control
management in the
account reconciliations
organisation.
for accounts receivable
and payable from given
data.

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Recommended Resources

Textbooks
ATRILL, P. and McLANEY, E. (2018) Accounting and Finance for Non-Specialists. 9th Ed.
Harlow: Pearson.
BRYNE, A. (2016) Practical Accounts & Bookkeeping in easy steps. 2nd Ed. In Easy Steps.
DYSON, J. R. (2015) Accounting for Non-Accounting Students. 9th Ed. London:
Prentice Hall.
McLANEY, E. and ATRILL, P. (2018) Accounting: An introduction. 9th Ed Harlow: Pearson.

Websites
www.accaglobal.com Association of Chartered Certified Accountants
(General reference)
www.accountingcoach.com Accounting Coach
Online free courses
(General reference)
www.cimaglobal.com Chartered Institute of Management
Accountants
Tutor Resource Hub

Links
This unit links to the following related units:
Unit 5: Accounting Principles
Unit 21: Financial Reporting
Unit 22: Management Accounting
Unit 23: Financial Management
Unit 29: Managing and Running a Small Business

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144 Specification – Issue 1 – November 2020 © Pearson Education Limited 2020