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Financial Accounting Fundamentals (FA1) Examination Blueprint

2014/2015
Purpose
The Financial Accounting Fundamentals (FA1) examination has been constructed using an examination blueprint. The blueprint, also referred to as the
test specifications, outlines the content areas covered on the examination and the weighting allotted to each content area. This document also lists the
topics, the level of competence for each topic, and the related learning objectives. In addition, information is provided on the proportion of each question
type presented in the examination (that is, multiple choice, quantitative problems, and so on).
Use
Students should use the examination blueprint to prepare for the course examination. The blueprint may not include all the topics listed in the course
materials; however, students are still responsible for acquiring a broad-based knowledge of all topics not listed in the blueprint since these topics will be
tested in assignment and review questions. The topics not listed in the blueprint will also provide students with a greater depth of understanding of the
concepts.
Examination Objectives
The objectives of this three-hour, comprehensive examination are to test CGA students on the prerequisite knowledge required for advancement into
Financial Accounting: Assets (FA2), Management Accounting Fundamentals (MA1), and Corporate Finance Fundamentals (FN1), as well as to ensure
that students have the broad-based knowledge in financial accounting needed to function properly in upper-level education and certification courses.
Examination Guidelines for Questions
i)

Question Type
The following are guidelines on the type of questions and their approximate weightings:

Question Item
Multiple-choice questions
Short-answer questions,
including quantitative problems.

Description
Questions may take a conceptual form or they may require analytical skills to derive
the correct solution.
Questions may focus on technical or analytical aspects of the material. Short,
integrative cases may be used to pull together related issues. For example, a problem
may require students to outline alternatives, supporting their recommendations with
numerical analysis. Several questions will also be decision oriented, where the student
is asked to take the role of creditor, investor, manager, or auditor and make a
recommendation or a decision based on analysis performed.

Percentage
Weighting
20%-30%
70%-80%

ii) Question Content


The following table is organized according to content area and provides information on topics, learning objectives, weighting, and levels of
competence.

Examination sessions: December 2014; March 2015; June 2015;

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Financial Accounting Fundamentals (FA1) Examination Blueprint


Content
Topics
Area
1. Introduction to accounting concepts

Learning Objectives

Weighting
(%)
4% to 7%

Levels of
Competence

1.1

What is accounting?

Describe the function of accounting and the nature and


purpose of the information it provides, and identify users
of accounting information.

Level 1

1.2

Forms of organization

Distinguish between sole proprietorships, partnerships,


and corporations.

Level 2

1.3

Ethics in accounting

Explain the importance of ethics in accounting and outline


the key ethical standards expected of professional
accountants.

Level 1

1.4

Types of accountants and fields of accounting

Compare the fields of accounting and the kinds of work


performed in each field.

Level 2

1.5

Generally accepted accounting principles (GAAP)

Explain the purpose of GAAP and describe each of the


principles introduced.

Level 2

1.6

Financial statements

Differentiate among the different kinds of financial


statements.

Level 1

1.7

The accounting equation

Analyze business transactions to determine their effects


on the accounting equation.

Level 1

1.8

The conceptual framework of accounting

Describe the major areas of the conceptual framework of


accounting.

Level 2

1.9

The objective of general purpose financial reporting

Describe the objective of general purpose financial


reporting.

Level 2

Describe the qualitative characteristics of useful financial


information.

Level 2

Describe the cost constraints on useful financial reporting.

Level 2

Describe the assumptions of accounting.

Describe the elements of financial statements.

1.10 Qualitative characteristics of useful financial


information

1.11 Cost constraints on useful financial reporting


1.12 Accounting assumptions

1.13 Elements of financial statements

Examination sessions: December 2014; March 2015; June 2015;

Level 2

Level 2

Page 2 of 13

1. (Continued...) Introduction to accounting concepts


1.14 Recognition of the elements of financial statements

List the two criteria that determine when to recognize


a transaction as an element of the financial statements.

Level 2

1.15 Measurement of the elements of financial statements

List the methods of measuring the elements of


financial statements.

Level 2

Examination sessions: December 2014; March 2015; June 2015;

Page 3 of 13

Content area

Topics

Learning objectives

2. Recording transactions

Weighting
(%)
4% to 8%

Levels of
competence

2.1

Business transactions and source documents

Explain the transactions recorded in accounting systems


and the importance of source documents in these
systems.

Level 1

2.2

Accounts

Record the effects of transactions in accounts, and


explain the chart of accounts and ledger.

Levels 1and 2

2.3

Analyzing transactions

Analyze transactions using debits and credits, and record


their effects in accounts.

Level 1

2.4

Journalizing and posting transactions

Record transactions in a general journal, and post entries


from the journal to the ledger using the balance column
format.

Level 1

2.5

Preparing a trial balance

Prepare a trial balance and explain its usefulness.

Level 1

Examination sessions: December 2014; March 2015; June 2015;

Page 4 of 13

Content
Topics
Learning Objectives
Area
3. Adjusting the accounts, preparing the statements, and completing the accounting cycle

Weighting
(%)
4% to 8%

Levels of
Competence

3.1

GAAP and the need for adjustments

Explain the need for financial statements and how account


adjustments at the end of regular accounting periods
contribute to the quality of financial information.

Level 1

3.2

Adjusting the accounts

Prepare adjusting entries for prepaid expenses,


depreciation, unearned revenues, accrued expenses, and
accrued revenues.

Level 1

3.3

Adjusted trial balance and preparation of financial


statements

Prepare an adjusted trial balance and use it to prepare


financial statements.

Level 1

3.4

The work sheet

Prepare financial statements for a service business using


the information in a work sheet.

Level 2

3.5

Closing entries

Prepare closing entries for a service business.

Level 1

3.6

Post-closing trial balance

Prepare a post-closing trial balance.

Level 1

3.7

The accounting cycle

Explain the steps in the accounting cycle.

Level 1

3.8

Classification of balance sheet items

Prepare a classified balance sheet.

Level 1

3.9

Using the information Current ratio

Calculate the current ratio, and interpret and apply this


ratio in decision-making scenarios.

Level 2

Examination sessions: December 2014; March 2015; June 2015;

Page 5 of 13

Content
Topics
Area
4. Accounting for merchandising activities

Learning Objectives

Weighting
(%)
9% to 13%

Levels of
Competence

4.1

Merchandising companies

Explain merchandising activities and analyze their effects


on financial statements.

Level 2

4.2

Merchandise purchases Perpetual inventory


systems

Determine the cost of merchandise inventory purchases


using a perpetual inventory accounting system.

Level 1

4.3

An ethics application Cash discounts

Explain the ethical issues related to cash discounts.

4.4

Revenue from sales and cost of goods sold


Perpetual inventory system

Record the revenue from merchandise sales, the collection


of payment, and the accompanying cost of goods sold.

4.5

Additional merchandising issues

Record adjustments for a merchandiser.

4.6

Alternative income statement formats, work sheet,


and closing entries

Prepare income statements in alternative formats, and


prepare closing entries for a merchandising company.

Periodic and perpetual inventory systems

Level 1
Level 1

Levels 1 and 2

4.7

4.8

Using the information Gross profit ratio

Examination sessions: December 2014; March 2015; June 2015;

Determine the ending merchandise inventory and cost of


goods sold using both a periodic and a perpetual inventory
accounting system.
Calculate the gross profit ratio, and interpret and apply this
ratio in decision-making scenarios including using the ratio
to determine a merchandisers profitability before
operating expenses.

Levels 1and 2

Level 2

Level 2

Page 6 of 13

Content
Topics
Area
5. Inventories Additional considerations

Learning Objectives

Weighting
(%)
11% to
15%

Levels of
Competence

5.1

Assigning costs to inventory items

Calculate the cost of an inventory under a perpetual


inventory system based on (a) FIFO, (b) moving weighted
average cost, and (c) specific identification, and explain the
financial statement effects of choosing one method over
another.

Level 1

5.2

Lower of cost and net realizable value

Calculate the lower of cost and net realizable value of


inventory.

Level 1

5.3

Inventory errors

Explain the effect of an inventory error on the income


statements of the current and succeeding years.

Level 1

5.4

Estimating inventory

Estimate ending inventory using the gross profit and retail


inventory methods.

Level 2

5.5
Inventory costing methodsPeriodic inventory
system

Calculate the cost of inventory using the various methods


under a periodic inventory system.

Level 2

5.6
Using the information Merchandise turnover and
days sales in inventory

Calculate merchandise turnover and days sales in


inventory, and interpret and apply these ratios in decisionmaking scenarios.

Level 2

5.7

Explain the usefulness of accounts receivable and accounts


payable subledgers for the management of receivables and
payables

Level 2

Using subledger accounts

Examination sessions: December 2014; March 2015; June 2015;

Page 7 of 13

Content Area

Topics

Learning Objectives

6. Internal control and accounting for cash, investments held for the short term, and receivables

Weighting (%)

Levels of
Competence

11% to 16%

6.1

Internal control

State the purposes and broad principles of internal


control.

Level 2

6.2

Cash defined and internal control for cash

Explain the concept of liquidity and distinguish


between cash and cash equivalents.

Level 1

6.3

Petty cash fund

Explain the operation of a petty cash fund and


prepare journal entries to record petty cash fund
transactions.

Level 1

6.4

An ethical issue Petty cash fund

Explain the ethical issues related to the operation of


a petty cash fund.

Level 1

6.5

Reconciling the bank balance

Prepare a bank reconciliation and explain its


purpose.

Level 1

6.6

Using the information Acid-test ratio

Calculate the acid-test ratio and interpret and apply


this ratio in decision-making scenarios.

Level 2

6.7

Classification of investments

Describe and identify debt and equity investments


and their classification.

Level 1

6.8

Accounting for non-strategic investments

Journalize entries to account for non-strategic


investments, including their purchase, the collection
of interest and/or dividends, the sale and resulting
gain/loss, and appropriate valuation adjustment on
the balance sheet date.

Level 1

6.9

Credit customers and bad debts

Prepare entries to account for transactions with


credit customers including accounting for bad debts
under the allowance method and the direct write-off
method.

Level 1

6.10 Promissory notes

Calculate the interest on promissory notes and, and


prepare entries to record the receipt of promissory
notes and their payment or dishonour, along with the
end-of-period adjustments.

Level 1

6.11 Converting receivables into cash before maturity

Explain how receivables can be converted to cash


before maturity.

Level 2

6.12 Using the information Accounts receivable


turnover and days sales uncollected

Calculate the accounts receivable turnover and days


sales uncollected ratios, and interpret and apply this
ratio in decision-making scenarios including using
the ratios to analyze a companys credit policy.

Level 2

Examination sessions: December 2014; March 2015; June 2015;

Page 8 of 13

Content Area

Topics

Learning Objectives

7. Property, plant, and equipment, and intangibles

Weighting
(%)
9% to
14%

Levels of
Competence

7.1

Property, plant, and equipment

Describe the differences between property, plant, and


equipment and other kinds of assets, and calculate their
cost.

Level 1

7.2

Costs subsequent to acquisition of property,


plant, and equipment

Describe the difference between revenue expenditures and


capital expenditures, and account for costs such as repairs
and replacements incurred after the original purchase of
property, plant, and equipment.

Level 2

7.3

Depreciation

Calculate and record the amount of depreciation using


various methods.

Level 1

7.4

Impairment of property, plant, and


equipment assets

Explain and record impairment losses

Level 1

7.5

An ethics application Depreciation

Analyze the ethical issues involved in the manipulation of


depreciation to manage earnings.

Level 1

7.6

Property, plant, and equipment disposals

Prepare journal entries to record the disposal of property,


plant, and equipment.

Level 2

7.7

Intangible assets

Identify assets that should be classified as intangible


assets, and prepare entries to account for them, including
entries to record amortization.

Level 2

7.8

Using the information Total asset turnover


and return on total assets

Calculate total asset turnover and return on total assets,


and interpret and apply these ratios in decision-making
scenarios including evaluating a companys efficiency in
using its assets.

Level 2

Examination sessions: December 2014; March 2015; June 2015;

Page 9 of 13

Content Area

Topics

Learning Objectives

8. Current and long-term liabilities

Weighting
(%)
9% to
12%

Levels of
Competence

8.1

Liabilities

Define liabilities, explain the difference between current


and long-term liabilities, and describe the uncertainties
related to some liabilities.

Level 1

8.2

Known (determinable) liabilities

Identify and describe known (determinable) liabilities.

Level 1

8.3

Short-term notes payable

Record and report short-term notes payable.

Level 1

8.4

Estimated and contingent liabilities

Record and report estimated liabilities such as warranties


and income taxes, and report contingent liabilities.

Level 1

8.5

Bonds payable and other long-term liabilities

Describe the characteristics of different types of bonds.

Level 2

8.6

Issuing bonds at par

Record the issue of bonds at par.

Level 1

8.7

Time value of money

Describe the time value of money.

Level 2

8.8

Issuing bonds at a discount and premium

Calculate the price of bonds issued at either a discount or a


premium, and describe their effects on the issuers
financial statements.

Level 2

8.9

Retiring bonds

Record the retirement of bonds.

Level 2

Examination sessions: December 2014; March 2015; June 2015;

Page 10 of 13

Content
Topics
Area
9. Accounting for partnerships and corporations

Content Area

Learning Objectives

Weighting
(%)
8% to 12%

Levels of
Competence

9.1

Characteristics of proprietorships and partnerships

List the characteristics of a proprietorship and a


partnership, and explain the importance of mutual
agency and unlimited liability in a partnership.

Level 2

9.2

Division of partnership earnings

Allocate partnership earnings to partners (a) on a


stated fractional basis, (b) in the partners capital
ratio, and (c) through the use of salary, interest
allowances, and a fixed ratio.

Level 1

9.3

Corporate organization

Explain the advantages, disadvantages, and


organization of corporations.

Level 2

9.4

Corporate financial statements

Explain the differences in the financial statements


for corporate and unincorporated organizations.

Level 1

9.5

Issuance of shares

Record the issuance of shares.

Level 1

9.6

Classes of shares and special features of preferred


shares

State the differences between common and


preferred shares, and allocate dividends between
common and preferred shares.

Level 2

9.7

Cash dividends and closing entries for a corporation

Record cash dividends and explain their effects on


the assets and shareholders equity of a corporation.

Level 2

9.8

Additional share transactions

Record share dividends, share splits, and retirement


of shares, and explain their effects on the assets and
shareholders' equity.

Level 2

9.9

Earnings per share

Calculate earnings per share for companies with


simple capital structures, and interpret and apply
this ratio in decision-making scenarios.

Level 2

9.10 Reporting income

Explain how the income effects of discontinued


operations are reported.

Level 2

Topics

Examination sessions: December 2014; March 2015; June 2015;

Learning Objectives

Weighting
(%)

Levels of
Competence
Page 11 of 13

Content Area

Topics

Learning Objectives

9. (Continued...) Accounting for partnerships and corporations

Weighting
(%)
8% to
12%

Levels of
Competence

9.11 Restricted retained earnings

Describe restrictions of retained earnings and


accounting changes, and the disclosure of such items in
the financial statements.

Level 2

9.12 An ethics application Insider trading

Explain the ethical issues related to management


incentive plans.

Level 1

Examination sessions: December 2014; March 2015; June 2015;

Page 12 of 13

Content Area

Topics

Learning Objectives

10. Statement of cash flows and financial statement analysis

Weighting
(%)
11% to
15%

Levels of
Competence

10.1 Cash flows and the statement of cash flows

Distinguish among the types of cash flows resulting


from operating, financing, and investing activities.

Level 1

10.2 Preparing a statement of cash flows

Prepare a statement of cash flows using the indirect


method.

Level 1

10.3 Cash flow versus reported income

Explain how cash flow income differs from accrual


income.

Level 1

10.4 Financial statement analysis using ratios and the


concept of quality of earnings

Calculate, interpret, and apply ratios in decisionmaking scenarios including the evaluation of a
companys performance.

Level 2

10.5 An illustration of accounting characteristics and


principles

Review and identify accounting characteristics and


principles.

Level 2

Examination sessions: December 2014; March 2015; June 2015;

Page 13 of 13