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LCCI International QualificationsLevel 4 Certificate in FinancialAccountingSyllabusEffective for examinations to be held after 1 January 2008For furtherinformationcontact us:Tel. 44 (0) 8707 202909Email. [email protected]

INTRODUCTIONEDI is a leading international awarding body that was formed through the merger of theLondon Chamber of Commerce and Industry Examinations Board (LCCI) and GOAL aleading online assessment provider. EDI now delivers LCCI International Qualifications(LCCI IQ) through a network of over 5000 registered centres in more than 120 countriesworldwide. Our range of business-related qualifications are trusted and valued by employersworldwide and recognised by universities and professional bodies.Level 4 Financial AccountingAimsThe aims of this qualification are to enable candidates to develop: an understanding of the basic principles underlying the recording of businesstransactions the ability to prepare and interpret accounts for sole traders, partnerships, non-tradingorganisations, limited companies and groups of companies in accordance with basicaccounting conventions and current accounting practice the ability to prepare accounting statements in accordance with accounting standardsand the accounting framework the ability to apply the principles of decision making the ability to analyse businesses and their performance an understanding of the conceptual aspects of financial accounts an understanding of basic auditingTarget Audience and Candidate ProgressionThis qualification is suitable for candidates who have successfully completed LCCI IQ Level3 Certificate in Accounting or equivalent.Level of English RequiredCandidates should have a standard of English equivalent to LCCI IQ Level 3 English forBusiness.3

Structure of the qualificationSyllabus Topics1. Levels 1, 2 and 3 revisited2. Valuations of stocks and long term contracts3. Companies4. Accounting for groups of companies and complex issues in company accounting5. Cash flow statements (FRS 1 revisited)6. Budgetary control7. Concepts and accounting frameworks8. Analysis of business and opportunities, involving non-numerical techniques9. Users of accounts10. Investment accounts11. AuditingGuided Learning HoursEDI recommends that 140 - 160 Guided Learning Hours (GLHs) provide a suitable courseduration for an ‘average’ candidate at this level. This figure includes direct contact hours aswell as other time when candidates’ work is being supervised by teachers. Ultimately,however, it is the responsibility of training centres to determine the appropriate courseduration based on their candidates’ ability and level of existing knowledge. EDI experienceindicates that the number of GLHs can vary significantly from one training centre to another.4

ASSESSMENTAssessment ObjectivesThe examination will assess the candidate’s ability to: demonstrate an understanding of the more advanced aspects of the LCCI IQ Level 1Certificate in Book-keeping, Level 2 Certificate in Book-keeping and Accounts andLevel 3 Certificate in Accounting demonstrate an understanding of long term contracts prepare the statutory accounts of limited companies demonstrate an understanding of basic accounting standards (FRS 18, SSAP 4, FRS21,FRS 12) demonstrate an understanding of company amalgamations and reconstructions demonstrate an understanding of practical and behavioural aspects of budgetarycontrol account for changing prices analyse businesses by means of techniques such as SWOT and PEST demonstrate an understanding of users of accounts and their interests demonstrate an understanding of investment accounts demonstrate an understanding of general principles and simple procedures of auditingNotes1Full knowledge is expected of all topics included in the syllabi for the LCCI IQ Level 1Certificate in Book-keeping, Level 2 Certificate in Book-keeping and Accounts andLevel 3 Certificate in Accounting examinations.2If questions are set covering topics from these earlier syllabi they will be set at a levelof difficulty appropriate to a Level 4 examination (see Candidate Answer Guidance).Examination Format The time allowance for the examination is 3 hours. The examination paper will comprise 5 questions. Candidates are required to answer 4 questions i.e. no questions will be compulsory Any question can relate to more than one topic area from the syllabus All syllabus topics are considered to be of equal importance5

Answer FormatQuestions will be both computational and narrative, some being primarily computational andsome entirely narrative.The examiner is well aware that English is not the first language of a majority of candidates,and this is taken into account when marking.Mark AllocationA positive marking approach is adopted; candidates will not be penalised for the use of ‘ownfigures’ as long as they have demonstrated the correct use of accounting methods.CertificationSuccessful candidates will be awarded the Level 4 Certificate in Financial Accounting basedon the achievement of the percentages and grades below:PassMeritDistinction50%60%75%Recommended Reading List and Support MaterialReading ListTitleAuthors(s)PublisherISBN CodeFrank Wood’s BusinessAccounting Volume 2 (12Edition)Alan Sangster, FrankWoodFinancial TimesPress9780273767794Support MaterialModel Answers and past question papers are available from the LCCI website,www.lcci.org.uk . A Solutions Booklet to support the Passport to Success book is alsoavailable from the website.A specimen paper with answers is available from the LCCI IQ website.How to offer this qualificationTo offer this qualification you must be an LCCI IQ registered examination centre. To gaincentre approval please contact Customer Support on 08700 818008 between the hours of830 and 1700 (GMT) Monday to Friday or by email on [email protected] you may contact your Regional LCCI Office or Co-ordinating Authority.6

Syllabus Topic1Levels 1, 2 and 3 revisitedItems CoveredCandidates must be able to:1.12Valuation of stocks and longterm contracts2.2Undertake more advanced examples ofany syllabus topic contained in the syllabiat Levels 1, 2 and 3Candidates must be able to:2.1Undertake more advanced examplesof the Level 2 and 3 syllabi for thistopic2.2.1Define a long term contract2.2.2Calculate attributable profits andforeseeable losses on long termcontracts2.2.3Understand how profit is taken onlong-term contracts2.2.4Understand how to allocate overheadsbetween accounting periods2.2.5Understand how to allocate overheadsbetween contracts2.2.6Understand the relationship betweenaccounting for long term contracts andthe fundamental accounting conceptsLong term contractsExclusions:No knowledge of the legal requirements underthe Companies Act 1985 will be required.3Companies3.2Statutory accounts oflimited companiesCandidates must be able to:3.1Undertake more advanced examples ofthe Level 2 and 3 syllabi for this topicarea3.2.1Prepare accounts which comply withthe Companies Act 1985 in relation topresenting: 7the balance sheet in verticalformat

the profit and loss account usingformat 1the profit and loss account usingformat 2Exclusions:No knowledge will be required of detaileddisclosure requirements of the Companies Act1985 unless specifically mentioned in this, orearlier syllabi. of sharesAccounting Policies(FRS 18)Accounting forgovernment grants3.3.1Record the forfeiture of shares andtheir reissue.3.4.1Distinguish accounting policies,estimation techniques andmeasurement bases3.4.2Discuss the adoption of accountingpolicies within financial statements3.4.3Explain the going concern assumption3.4.4Explain the accruals concept3.4.5Explain the objectives and constraints inselecting accounting policies3.4.6Discuss reviewing, and changingaccounting policies and estimationtechniques3.5.1Understand the relationship betweenthe accounting treatment of governmentgrants and the fundamental accountingconcepts3.5.2Account for government grants in theprofit and loss account3.5.3Account for government grants in thebalance sheet3.5.4Explain and be able to demonstrate anunderstanding of the disclosurerequirements of SSAP 4Exclusions:No knowledge will be required of the legalrequirements under the Companies Act 1985,and no knowledge will be expected of the systemand rules relating to Government grants in theUnited Kingdom or elsewhere8

3.6Accounting for Researchand Development(SSAP 13)3.6.1Differentiate between pure (basic)research, applied research anddevelopment expenditure3.6.2Determine research anddevelopment activities3.6.3Account for research anddevelopment expenditure3.6.4Understand the relationship betweenaccounting for research anddevelopment expenditure and thefundamental accounting concepts3.6.5Explain and demonstrate anunderstanding of the disclosurerequirements of SSAP 13Exclusions:No knowledge of the legal requirements underthe Companies Act 1985 is required3.73.8Events after the balancesheet date (FRS 21)Provisions, ContingentLiabilities and ContingentAssets (FRS 12)3.7.1Distinguish adjusting and nonadjusting events after thebalance sheet date3.7.2Explain the significance of thedate financial statements areauthorized for issue by the board ofdirectors3.7.3Account for adjusting and nonadjusting events in financial statements3.8.1Define provisions, contingentliabilities and contingent assets3.8.2Explain the relationship betweenprovisions and contingent liabilities3.8.3Account for provisions and nonrecognition of contingent liabilities andcontingent assets3.8.4Measure provisions3.8.5Discuss the issues regardingrecognising an asset when recognisinga provision9

Exclusions:No knowledge of onerous contractswill be required4Accounting for groups ofcompanies and complexissues in company accounting4.24.3Candidates must be able to:4.1.1Undertake more advancedexamples of the level 3 syllabus forthis topic area4.1.2Adjust for unrealized profits on fixedassets.4.1.3Account for the acquisition ofsubsidiaries with preferredshares4.1.4Discuss the general purpose ofconsolidation4.1.5Discuss the establishment ofparent/Subsidiaryrelationships4.1.6Analyse and interpretconsolidated financialstatements4.2.1Explain the objectives ofamalgamating companies4.2.2Detail the forms of companyamalgamations4.2.3Account for an amalgamation byacquisition of net assets andsubsequent liquidation of one ormore companies4.3.1Prepare a reconstructionaccount4.3.2Prepare journal entries for ascheme of reconstruction4.3.3Prepare a balance sheet after ascheme of reconstruction4.3.4Discuss the position of stakeholdersin a scheme of reconstructionCompany amalgamationsCapital reconstructions,including capitalreductions10

56Cash flow statements(FRS 1 revised)Budgetary controlCandidates must be able to:5.1Undertake more advancedexamples of the level 3 syllabusfor this topic area5.2Analyse and interpret cash flowstatementsCandidates must be able to:6.1Undertake more advanced examplesof the level 3 syllabus for this topicarea6.2Explain the concept ofresponsibility accounting6.3Analyse and interpret budgetaryreports6.4Discuss the reactions of individuals tothe budgetary control system (thebehavioural aspects of budgeting)Exclusions:No knowledge of the work of results ofacademic7Concepts and accountingframeworks7.2Accounting forchanging pricesCandidates must be able to:7.1.1Undertake more advanced examplesof the level 3 syllabus for this topicarea7.1.2Explain the true and fair view7.1.3Understand how accountingregulatory frameworks develop7.1.4Explain the case for and againsthaving accounting standards7.2.1Understand the difference betweenthe financial capital maintenanceconcept and the physical capitalmaintenance concept11

7.2.2Explain the strengths andweaknesses of historical costaccounting7.2.3Explain several alternatives tohistorical cost accounting, including: current purchasing poweraccountingreplacement cost accountingcurrent cost accountingExclusions:No detailed calculational questionswill be set on this area.8Analysis of businesses andbusiness opportunitiesinvolving non numericaltechniquesCandidates must be able to:8.1Analyse using SWOT (strengths,weaknesses, opportunities andthreats)8.2Analyse using PEST (political,economic, social and technological)8.3Analyse using risk analysisNote:Questions will be based on simplecase studies.9Users of accountsCandidates must be able to:9.1Identify the different stakeholders in acompany9.2Distinguish between shareholders anddirectors9.3Discuss the possible conflicts ofinterest between shareholders,employees and the government9.4Account for social andenvironmental factors9.5Interpret, and discuss the use of,the balance sheet, profit andloss account and cash flowstatements to the various usergroups12

1011Investment accountsAuditingCandidates must be able to:10.1Prepare investment accounts10.2Make use of a layout comprising 3columns: nominal, income and capital10.3Distinguish fixed interest investmentsfrom investments bearing variableincome10.4Distinguish between cum div and exdiv transactions10.5Calculate profit/loss on transactions10.6Calculate interest accrued at end ofaccounting period10.7Value investment at end of accountingperiod10.8Show the treatment of bonus(capitalisation) and rights issuesCandidates must be able to:11.1 General principles11.1.1Understand the objectives of anaudit11.1.2Explain the differences betweenauditing and accounting11.1.3Explain the differences betweeninternal and external auditing11.1.4Detail the reporting responsibilitiesof the external auditor11.1.5Discuss the need forindependence by the externalauditor11.1.6Discuss fraud and the externalauditor11.1.7Discuss the impact of risk onthe audit13

11.2 Practical auditing11.2.1Discuss the principles andpracticalities of auditing for: salesdebtors and prepaymentspurchasescreditors and accrualspayrollfixed assetsstockbank and cashNote:Questions will be based on simple casestudies.Exclusions: No knowledge of auditingstandards will be required Candidates will not be expectedto produce audit programs orlists of audit tests14

EDIInternational HouseSiskin Parkway EastMiddlemarch Business ParkCoventry CV3 4PEUKTel. 44 (0) 8707 202909Fax. 44 (0) 2476 516505Email. [email protected] Education Development International Plc 2008.All rights reserved. This publication in its entirety isthe copyright of Education DevelopmentInternational Plc. Reproduction either in whole orin part is forbidden without the written permissionfrom Education Development International Plc.15

Financial Times Press 9780273767794 Support Material Model Answers and past question papers are available from the LCCI website, www.lcci.org.uk . A Solutions Booklet to support the Passport to Success book is also available from the website. A specimen paper with answers is available from the LCCI IQ website. How to offer this qualification