Poa Lessons Notes
Poa Lessons Notes
Poa Lessons Notes
Paper One
1 hour 30 minutes
60 marks
A multiple-choice test of 60 items, testing the profile dimensions,
knowledge/comprehension, application, interpretation, and analysis. The paper
will sample proportionately, all sections of the syllabus as outlined below
Paper 02
3 hours
100 marks
A problem-solving paper which will test the profile dimensions of
knowledge/comprehension, application (of accounting principles and skills) and
interpretation of data in the ratio 1:2:1
Paper 02 consists of five compulsory questions drawn from the entire syllabus.
Each question will be worth 20 marks
Paper 031
SBA
40 marks
A school-based assignment component covering the non-profile dimensions of
the syllabus.
Paper 032
1 hour 30 minutes
40 marks
A set of compulsory short answer questions based on case studies
Distribution of Items for Paper 01
section title no of
items
1 Accounting as a profession 4
2 Accounting as a system 4
6 Accounting adjustments 8
7 Control systems 4
60 marks
Knowledge / comprehension 15 25 10 50 25
Application 30 50 20 100 50
Importance of accounting
To keep systematic records
To protect business properties
To analyze the operational profit or loss
To analyze the financial position of business
Types of accounting
Bookkeeping - process of recording in the books of accounts, processing
transactions and managing records
Financial accounting - process of recording, classifying, summarizing and
communicating economic information to users of this data, allowing them to make
informed
Managerial accounting - purpose for insiders or organizations, a branch of
accounting that is concerned identification, measurement, analysis of information
that helps companies make necessary decisions,
Tax accounts - a method focused on accounting rather than the financial
statements. This method is governed by internal revenue code (preparations of
standards for tax returns)
Customers management
Creditors employee
Government stockholders
Academe
Purpose of accounting
To provide financial information about a business or other economic entity. This
information is need by the management, creditors, investors and by the public
To accumulate and report financial information
To analyze the amount of cash received or paid
To help investors or creditors make investments and credit decisions
To provide proof a business transaction occurred
To keep track of the profit and losses of the organization
To create budgets and to maintain a financial control
To maintain records for tax purposes
Business ethics
What is business ethics
Ethics in the disciple dealing with what is good and bad and with moral duty and
obligation
A system of morals principles
Professional behavior Comply with relevant laws and regulations and avoid any
action that may bring the profession into dispute
Accounting concepts/conventions
Accounting concepts - include the assumptions and conditions on which the
science accounting is based. They are also known as accounting standards
Accounting conventions - include the customs and traditions assist the
accountants in preparing accounting statements
Basis for Accounting concept Accounting convention
comparison
Business entity - this concept states that the transactions associated with a
business must be separately recorded from those of its owners or other
businesses. (It becomes difficult and impossible to audit records of a business if
they are intermingled with those of different entities/individuals. The concept
ensures that each and every business entity is taxes separately)
Monetary unit - the money measurement concept underlines the fact that in
accounting and economics, generally every recorded event or transaction is
measured in terms of money, the local currency monetary unit of measure.
Going concern - is a company that has the resources needed to continue
operating indefinitely until it provides evidence to the contrary. This term also
refers to a company's ability to make enough money to stay afloat to avoid
bankruptcy.
Historical cost - its important because market valued change so often that
allowing reporting of assets and liabilities at current values would distort the
whole fabric of accounting, impair comparability and makes accounting
information unreliable
Prudence/conservatism - in accounting ensures that the financial statements
present the realistic and fair picture of a company's revenue and liabilities. It
helps in the action of losses. It helps in not overestimating as well as not
underestimating the financial risk of a company
The dual aspect concept - two aspects of accounting. One represented by the
assets of a business and others by the claims against them. The concept
confirms that these two aspects are always equal to each other. Double entry is
the name given to the method of recording the transaction for the dual aspect
concept
Assets - these are the items that a business or individual owns, which has
monetary value
Capital - also known as 'owners’ equity' and it refers to the money of Amy assets
that is invested in a business by the owner
Liabilities - amounts owed by the business to outside parties. They are legal
debts
Realization - the concept holds the view that the profit can only be taken into
account when the realization occurs (until it is reasonably certain to be earned)
The income statement - the first financial statement that every investor should
look at is the income statement. In the income statement, the first item is sales
and the cost of sales and other operating expenses are deducted from the sales
to a certain operating profit. Other expenses when deducted from the operating
profit, it computes the net profit of the year
Balance sheet - the next financial statement of the list is the balance sheets. In
the balance sheet, we record the assets and liabilities. And we see whether the
balance of assets is harmony with the balance of liabilities
Shareholder’s equity statement - this is the next financial statement that is
prepared. In this share capital and retained earnings are taken into account.
Retained earnings is the percentage of earnings reinvested by the company
Cash flow statements - finally the cash flow statement is prepared. In the cash
flow statements, the accountant needs to find the cash flow from three kinds of
activities; operating activities, financial activities and investing activities. The two
ways of preparing cash flow operating activities are; the direct and indirect cash
flow from operations
Step eight: closing the books
This step is the penultimate step in the accounting cycle
Closing the books means that all financial statements are prepared and all
transactions have been recorded, analyzed, summarized and recorded
After closing the books, a new accounting period would start, and accountant
would need to start repeating the above steps once again
Financial Statement
A financial statement is a statement at the end of the accounting period. It shows you
where a company’s money came from, where it went and where it is now.
Income statement
The income statement is one of the company’s core financial statements that
shows their profit and loss over a period of time. The profit or loss is determined
by taking all revenues and subtraction all expenses from both operating and non-
operating activities
The statement displays the company’s revenue, costs, gross profit, selling and
administrative expenses, other expenses and income taxes paid and net profit in
a coherent and logical manner
Balance sheet
Is a financial statement that reports a company’s assets, liabilities and
shareholder’s equity. It displays the company’s total assets and how these assets are
financed, through either debt or equity. It can also be referred to as a statement on net
worth or a statement of financial position. The balance sheet is based on the
fundamental equation: Assets = Liabilities + Equity
Fresh books
Quick books online
Plooto
Free agents
Invoiced
Zoho books
Zoho expense
Sage business cloud accounting
Advantages of using technology in accounting
Increased Productivity - Computers are renowned for efficiency, and accounting
is no exception to this rule. The use of computerized accounting eliminates
duplicating entries, hand-written ledgers and notes and manual calculations,
saving staff time and allowing the same staff to handle larger numbers of
transactions and reports.
Automated Report Generation - Rather than being forced to create standard
financial reports by hand each time they’re needed, computerized accounting
provides for nearly instantaneous creation of standard reports such as account
balances, trial balances, general ledgers, profit and loss statements and other
typical reporting requirements.
Enhanced Accuracy - Because so many calculations are required for accurate
accounting, computers are an ideal solution to human error. While errors may still
be made in data entry, the computer’s calculations will increase the accuracy and
reliability of the company’s reports.
Ease of Data Protection - In the event that data is corrupted or reports are
damaged or lost, computerized accounting provides instant restoration from
backup, ensuring that critical information isn’t lost. Digital backups may be
maintained on- or off-site for additional protection of vital information.
Staff Training - Computerized accounting systems also require specific software
training for staff, incurring additional training expenses to the business and
extending the time it takes to deploy the system before it can be utilized.
Reliability - Computerized accounting systems are by nature vulnerable to issues
such as computer viruses, power failures and hardware failures which may
impact the reliability and availability of the system. Correcting computer problems
will incur lost time and productivity.
Balance sheet
A balance sheet is a financial statement that reports a company's assets,
liabilities and shareholder’s equity at a specific point in time, and provides a basis
for computing rates of return and evaluating its capital structure
A balance sheet is also called a ‘statement of financial position’ because it
provides a snapshot of your assets and liabilities (and therefore your net worth) at
a single point in time unlike other financial statements, such as a profit and loss
reports, which give you information about your business over a period of time.
The purpose of a balance sheet is to report how the resources to run the
operations of the business was acquired. The balance sheet helps to assess the
financial risk of a business and the simplest way to describe it given by the
accounting equation
Assets = liability + equity
They are long lasting or permanent They last for a short period of
time
They are bought to use in the business and they are not sold to customers They are bought to sell to
customers
Land, building, premises, plant, machinery, equipment, motor vehicles, Stock, accounts (receivables
fixtures, fittings, furniture /debtors)
prepayments, bank/ cash
Liabilities
The amount owed by the business to outside parties. They are legal debts
Types of assets
Long term loan, mortgage Bank overdraft, accounts payable / creditors, accruals, short term loan
Identify your liabilities - similarly you will need to identify your liabilities. Again,
they should be organized into both line items and totals as below
If you've found that the balance sheet doesn't balance, there is a likely problem with
some of the accounting data you've replied on. Double check that all of your entries are
in fact, correct and accurate. You may have omitted or duplicated assets, liabilities or
equity or miscalculated your totals
The introduction of capital - on 1 May, 2007 B. Blake started a business and put
$50,000 into a bank account for the business. The balance sheet would appear
B. BLAKE
Capital
50,000.00
The purchase of an asset by cheque - when Blake has a bank account, he can
use cheques as payment. On 3 May 2007 Blake bought shop premises for
$30,000, paying by cheque. The effect of this transaction is that the cash at bank
is reduced and a new asset, shop premises appears
B. Blake
$50,000.00 $50,000.00
The purchase of an asset and the incurring of a liability - on 6 May 2007 Blake
buys some goods for $5000 from D. Smith agrees to pay for them sometime
within the following two weeks. The effect of this is that a new asset, the stock of
goods, is acquired, and a liability for the goods is created. A person to whom
money is owed for goods in accounting language is known as a creditor
B. Blake
Balance sheet as at 6 May 2007
Assets $ Liabilities $
55,000.00 55,000.00
Sale of an asset on credit - on 10 May 2007 goods that had cost $1,000 were
sold to J. Brown for the same amount, to be paid at a later date. The effect is a
reduction in stock of goods and the creation of a new asset. A person who owes
the firm money is known in accounting terms as a debtor. The balance is:
B. Blake
Assets $ Liabilities $
Debtor 1,000.00
55,000.00 55,000.00
Sale of an asset for immediate payment - on 13 May 2007 goods that had cost
$2000 were sold to D. Daley for the same amount, Daley paying for them
immediately by cheque. Here one asset, stock of goods, while another asset,
cash at bank is increased. The balance sheet now appears
B. Blake
Assets $ Liabilities $
Debtor 1,000.00
55,000.00 55,000.00
The payment of a liability - on 15 May 2007 Blake pays a cheque for $3000 to D.
Smith in payment of the amount owing. The asset bank is therefore reduced, and
the liability of the creditor is also reduced. The balance sheet appears as:
B. Blake
Assets $ Liabilities $
Debtor 1,000.00
52,000.00 52,000.00
Collection of an asset - on 31 May 2007 J Brown who owes Blake $1000 made a
part payment of $750 by cheque. The effect is to reduce one asset, debtor and to
increase another asset, the bank. The balance sheet after these transactions are:
B. Blake
Assets $ Liabilities $
Debtor 250.00
52,000.00 52,000.00