This document provides guidance for a unit on demonstrating understanding of accounting concepts for small entities. It outlines three levels of achievement - achieved, merit, and excellence. It describes what needs to be covered, including the nature of accounting, purpose of financial statements, key concepts, elements, and the accounting equation. Examples are provided for how to demonstrate understanding, in-depth understanding, and comprehensive understanding of concepts like accrual basis of accounting and going concern assumption. Contexts include sole proprietorships and community organizations.

1. 1.1 Demonstrate understanding of accounting
concepts for small entities 3 credits EXTERNAL
Achievement Merit Excellence
Demonstrate
understanding of
accounting concepts
for small entities.
Demonstrate in-depth
understanding of
accounting concepts
for small entities.
Demonstrate
comprehensive
understanding of
accounting concepts for
small entities.
Demonstrate understanding means describing accounting concepts for small
entities
Demonstrate in-depth understanding means explaining accounting
concepts for small entities
Demonstrate comprehensive understanding means applying accounting
concepts, showing a clear relationship to the small entity.

2. 1.1 Demonstrate understanding of accounting
concepts for small entities 3 credits EXTERNAL
Context: small entity
• service sole proprietor registered for GST
• trading sole proprietor registered for GST
• incorporated community organisation
• unincorporated community organisation
Limited to
nature of
accounting

3. 1.1 Demonstrate understanding of accounting
concepts for small entities 3 credits
What needs to be covered?
• Nature of accounting
• Purpose of financial statements
• Concepts
• Elements
• Equation
These four for
sole proprietor
only

4. Content
Nature
of
Accounting
What is
accounting?
uses
users
Specialised
areas
Types of
entities

5. Content
Purpose of
Financial
Statements
Income
Statement
Statement of
Financial
Position
Policies
Cash
Budget

6. Content
Concepts
capital and
revenue
expenditure
monetary
period
reporting
going
concern
historical
cost
entity
accrual

7. Content
Elements
asset
expense
liabilities
owner’s
equity
income

8. Content
Accounting
equation
numbers
sentences

9. Concepts example
Exemplar – qn 2 (d)
The Balance Sheet of 31 March 2010 shows there was
a prepayment of $300 for insurance.
Fully explain how the reporting of prepaid insurance in
the financial statements illustrates the accrual basis of
accounting for Simply Sports.

10. Concepts example
Achieved
Simply Sports must report their transactions in the period to which
they relate
Merit
Simply Sports must report the insurance in the period to which it
relates so they decrease the insurance expense in this accounting
period
Excellence
Simply Sports must report the insurance in the period to which it
relates so they decrease the insurance expense to be reported in
the Income Statement by $300 because $300 has been prepaid
so that expense relates to the next accounting period

11. Concepts example
Exemplar – qn 3 (d)
Fully explain how Simply Sports would demonstrate the concept
of going concern
Achieved:
Merit:
Excellence:

12. Concepts example
Achieved
Simply Sports will continue into the foreseeable future
Merit
Simply Sports will prepare financial statements assuming that they
will continue into the foreseeable future
Excellence
Simply Sports prepares their financial statements based on the
assumption that they will continue into the foreseeable future so
when they prepare their Statement of Financial Position they
classify their assets as current and non-current.
Unit Plan
CETA resource 1.1