ACCOUNTING THEORY AND PRACTICE

Goal: This course is designed to provide the students with accounting theoretical framework so as to enable them understand and apply these theories in real
business situations.

GENERAL OBJECTIVES:

On completion of this course the student should be able to:

1.0 Know the foundation and relevance of Accounting theory.

2.0 Understand the nature and purpose of accounting.

3.0 Understand accounting model measurement and valuation of assets, liabilities, capital/equity, income and expenditure.

4.0 Understand the accounting concept of income and profit.

5.0 Know the accounting concepts, conventions bases and policies.

6.0 Understand various accounting treatments or provisions.

7.0 Understand the various reserves and their relevance to financial reporting.

8.0 Know the regulatory and statutory frame work under which accounting theory and practice operate.

9.0 Understand the application of specific accounting standards.

10.0 Understand inflation accounting concepts.

11.0 Understand the application of computer in solving specific financial accounting problems.

1.1 Define Accounting Theory

1.2 Explain evolution of accounting theory.

1.3 Explain the need for theory formulation.

1.4 Identify the problems of accounting theory formulation.

1.5 State the advantages, disadvantages and prospects of accounting theory.

1.6 Identify the areas of coverage of accounting theory.

1.7 Explain relevance of statements of accounting standards.

Explain the importance of theory formulation as means of arriving at accounting practice.

Guide the students to make observations on SAS.

2.1 State the history and development of accounting.

2.2 Explain the nature, principles and scope of accounting.

2.3 Explain the role and the core aspects of accounting in the management of an organization e.g.

- Financial Accounting.

- Cost and Management Accounting.

- Financial Management

- Auditing

- Taxation

2.4 Identify the various users of financial statements Showing types, information needs, users and adequacy in form as well as the usefulness.

Use graphic illustration to explain to students the uses and the users of financial statements.


3.1 Define Assets.

3.2 Identify the types and classifications of assets

3.3 Describe the methods of valuation of assets.

3.4 Explain in detail, each of the following

- Property, plant and equipment

- Leases

- Investments

- Inventories


- Debtors and other receivables

- Intangible and fictitious

Assets namely:

- Goodwill

- Patents, trademarks and copy rights

- Research and Development EXPENDITURE

- Preliminary Expenses and

- Discount on issue of shares.

3.5 Define liabilities

3.6 Explain the types and classifications of liabilities.

3.7 Classify balance sheet items under the following:

(a) Fixed Assets.

-Intangible

-Tangible

- Investments


(b) Current Assets.

- Stocks- Debtors.

- Call-ups share capital not paid.

- Investments

- Cash

(c) Prepayment and accrued Income.

(d) Creditors

(e) Net current assets (Liabilities)

(f) Total assets.

(g) Creditors

(h) Provisions for Liabilities

(i) Accrual and Deferred Income

(j) Capital and Reserves.

3.8 Define capital.

3.9 Compare Accounting definition of capital to that of economics.

3.10 Distinguish between capital and equity.

3.11 Distinguish between equity and reserves.

3.12 Define Income.

3.13 Compare Accounting concepts of income with that of economics.

3.14 Describe the proprietary and equity concepts of income and their implications for capital maintenance.

3.15 Define Expenditure

3.16 Describe the nature of expenditure

3.17 Identify the characteristic and accounting treatment of expenditure.

3.18 Define Borrowing cost

3.19 Explain the accounting treatment of Borrowing cost.


Use graphic illustration to show the model and explain the reasons for the model.

Give further examples on valuation methods of measurement.

Draw up a Balance sheet format and lead students to make correct classification of items.

Give gradable Assignments

4.1 Explain the various approaches to income measurement.

4.2 Identify the objective of Income measurement.

4.3 Explain the problems of Income measurement.

4.4 Define profit.

4.5 Identify various classes of profit.

4.6 Identify differences and similarities between income and profit.

4.7 Identify methods and problems of measuring profit.

4.8 Explain the application of different classes of profit.


Give appropriate illustrations and lead students to make computations to extract Gross Income, Net Income, etc.

5.1 Explain Accounting concepts, conventions, bases and policies.

5.2 Describe the evolution, purpose and problems of the different concepts and conventions.

5.3 Explain the contents and applications of accounting concepts, conventions, bases and policies.

5.4 Explain the conflicts and resolutions of the above terms.

5.5 Explain Generally Accepted Accounting Principles.

5.6 Explain the prospects of the principles.

5.7 Apply the basic concepts, principles and conventions to different types of business units.

5.8 Explain various issues of statements of standard Accounting practice.

- Draw up a chart which lists the main types of business units and compare them under different headings e.g.

Sole traders

Partnerships

Limited Companies

Limited Partnership

Not-for-profit

Organizations

Local government

Bodies

Central government

departments

Points to be compared

Ownership Provision of Capital.

Control of the Organization’s business decisions 

Liability for debt.

Liability for tort.

Entitlement to profit earned etc.

- Draw up stock ledger cards and explain the contents.

6.1 Define provisions.

6.2 Identify different types of provisions.

6.3 State the reasons for provisions.

6.4 Define contingencies.

6.5 Explain the treatment and presentation of contingencies.

6.6 Explain the nature and characteristics of provisions and their relationship with income and capital measurement.

6.7 Explain the treatment of contingencies and provisions in Account.


Explain the different types of provisions and show the treatment of contingencies in the accounts.

7.1 Define Reserves.

7.2 Identify different types and characteristics of reserves.

7.3 State the origin, purpose and application of reserves.

7.4 Explain statutory reserves requirements including those of Banks and Insurance Companies.

7.5 Identify the similarities and the differences between Reserves and provisions.

7.6 Explain the Accounting treatment of Reserves.

Exposition defining the uses and purposes of reserves and their treatment in the ledgers and final accounts

8.1 Explain the structure and functions of the Nigerian Accounting Standards Board (NASB).

8.2 State the process leading to the issue of Statements of the Accounting standards.

8.3 Outline the contents and applications of operational standards (both local and international)

8.4 Compare the structure and functions of the Nigerian Accounting Standard Board with the International Accounting Standard Board.

8.5 Analyze arguments for and against Accounting Standards.

8.6 Explain Generally Accepted Accounting Principles, (GAAP).

8.7 State the legal framework on which accounting theories principles and practice operate.

8.8 Explain the accounting relevance of the various Acts and Guidelines applicable to the different companies with particular reference to:

- Companies and Allied Matters Act. 1990.

- Insurance Act

- NAICOM Guidelines.

- Prudential Guidelines

- Stock Exchange Regulations.

- Securities and Exchange guidelines.

- Banks and other Financial Institutions Act.

Explain the differences between the NASB and the Company Registry.

Explain fully the generally accepted Accounting principles.

Explain the provisions of the statutes as much as possible as they affect accounting theory and practice.


9.1 Define extra ordinary items.

9.2 Define exceptional items.

9.3 Distinguish between exceptional items and extra-ordinary items.

9.4 List examples of extra ordinary items and exceptional items.

9.5 Define prior year adjustment.

9.6 Explain the meaning of fundamental mistake.

9.7 Define “Accounting Policy” and distinguish it from “Accounting Estimates”.

9.8 State the distinctions between prior year adjustments and prior year items.

9.9 Highlight the placement of each of the above items on the financial statements.

9.10 Define the term “Deferred Taxation”.

9.11 Explain Timing Differences.

9.12 Explain the treatment of deferred taxation in Company Accounts.

9.13 Define Depreciation and its concepts.

9.14 Explain the various methods of depreciation.

9.15 State the Advantages and disadvantages of each method.

9.16 State the problems relating to depreciation and income measurement.

Obtain accounting standards and lead the students to examine the various topics.

Graphically Demonstrate the calculation of each method and show their accounting treatment.

10.1 Explain Historic cost.

10.2 Distinguish between historic cost accounting and current cost accounting.

10.3 Identify the effect of inflation on financial reporting.

10.4 Apply price index in preparing financial statements.

Give good examples and explain the effect of inflation on financial reporting.

11.1 Explain the needs for Computers in processing Accounting information.

11.2 Identify the various Computer software packages for the processing of financial data.

11.3 Explain the use of Computer software in the following areas:

o General and other ledger accounts.

o Final balance and other schedules.

o Personnel records.

o Inventory management.

o Treasury management

o Accounting ratios

o Final Accounts.

Lead students to obtain a hand-ondeck practical knowledge of computer application to these areas.