1

The syllabus is assessed by a 2-hour computer-based examination.

Questions will assess all parts of the syllabus and will test knowledge and some
comprehension or application of this knowledge.
The examination will consist of 2 sections
Section A will contain 35 (2-mark) objective questions
Section B will contain 2 (15-mark) multi-task questions
These will a test consolidations and accounts preparation. The consolidation question
could include a small amount of interpretation and the accounts preparation question
could be set in the context of a sole trader or a limited company

Page 1 of 25
 SESSION 1: HOW TO RECORD A TRANSACTION

STATEMENT OF FINANCIAL POSITION

Business entry concept
DEBIT
BUSINESS CREDIT

ASSETS = EQUITY + LIABILITIES

CAPTAL PROFIT DRAWING

INTRODUCED
NON-CURRENT ASSET CURRENT ASSETS CURRENT NON- CURRENT
LIABILITIES LIABILITIES
INCOME
STATEMENT
 SESSION 2: SOURCE, RECORD
3 & BOOK OF PRIME ENTRY

Debit = Credit
Sale Credit Receive or pay Receive or pay
money into bank money into note Credit Purchas
RECORDING return sale and coin Others
a/c transactions purchas e return
ERRORS e
Source documents

Sales Sales Cheques Petty Journal Purchase Purchase

credit invoices received cash vouchers invoices credit
notes and paid vouchers notes
SUMMARISING

Books Totals Totals

Sales and sales Cash Petty Journal Purchase and purchase
of
returned day book cash returned day book
prime book book
entry
POSTING

Ledger Receivables General ledger Payables

accounts ledger ledger
(memorandu 1 Bank account (memorandu
m) m)
2 Receivables ledger control account
List of
List of 3 Payables ledger control account balances
balances
4 Sales tax control account SUSPENSE
ACCOUNT
5 Other accounts
Trial
balances
Trial balance ERRORS
PRESENTING
Financial Debit # Credit
Income statement Statement of financial position
Page 3 of 25
statements

Posting of individual amounts in memorandum personal

accounts
 SESSION 3: SALE TAX

Exempt sale tax product

Zero sale tax product

Others product

BUSINESS
Supplier Customer
(Register for sale tax)
Purchase Sale

INPUT SALE TAX OUPUT SALE TAX

SALE TAX

Due from = Opening balance Opening balance Due to =

asset Liability

Purchase Sale

Tax paid

BUSINESS Not clarify between

purchase/sale price &
(Not register for sale tax) sale tax
 5

SESSION 4: CONTROL ACCOUNT

RECEIVABLE Reconciliation MEMORANDUM LEDGER PAYABLE CONTROL

Reconciliation
CONTROL ACCOUNT Compare with LIST OF ACCOUNT
BALANCE

RECEIVABLE CONTROL ACCOUNT PAYABLE CONTROL ACCOUNT

DEBIT CREDIT Miscasted DEBIT CREDIT
OB OB OB OB
Credit sale Cash received Cash paid Purchases and other
Dishonoured cheque Returned inward Post wrong amount Discount received expenses
Cash refund Irrecoverable debt Returned outward Cash received
Irrecoverable debt Contra Contra clearing debit
recoverd CB Not recorded CB balance
CB CB

Page 5 of 25
 SESSION 5: BANK RECONCILIATION

BANK STATEMENT CASH BOOK

Overdrawn – Debit balance ≠ Overdrawn – Credit balance
Positive balance – Credit balance Positive balance – Debit balance

+/- - - + - -

Error by Standing Direct debit Bank Bank Dishonored

TIMING DIFFERENCE accountant order interest charge cheque
supplier
customer

Outstanding lodgement/ Unpresented cheque/

Deposit credited after Outstanding cheque
date

Errors by bank

CORRECTED BANK STATEMENT CORRECTED CASH BOOK

=
 7

Page 7 of 25
 SESSION 6: CORRECT THE ERRORS

ERRORS OF ERRORS OF ERRORS ERRORS OF COMPENSATING ERROR

TRANSPOSITION OMISSION OF COMMISSION Debit equal credit
PRINCIPLE
Record wrong
Wrongly in
amount in one
classified
side
revenue
e.g 1023 -> 1032 Debit/ Error of Reversal
and
Credit casting debit and
capital
transactions
Omission of

Omission of

wrong credit
balance

expense account

E.g: purchase E.g: undercast E.g: cash

goods purchase sale
transaction account by recorded as
recorded as Dr $200 Dr Sale
EXPENSE Cr Cash

FIND OUT BY
SUSPENSE ACCOUNT TRIAL BALANCE
 9

SESSION 7: INCOMPLETE RECORD

DETERMINE
DETERMINE DETERMINE DETERMINE DETERMINE
OPENING
ITEMS IN ITEMS IN PURCHASE, INVENTORY
BALANCE
TRADE TRADE SALE AND LOSS OR
RECEIVABLE PAYABLE COS DESTROYED

Asset = Captial + COST OF SALE =

Base on Base on Opening COST OF GOOD
Liability or
structure of structure of inventory + SALE =
Change in net trade receivable trade payable Purchase + Opening
asset = Captial carriage inward inventory +
introduced + – closing Purchase -
Profit/Loss – inventory (closing
Drawing or
SALE – COS = inventory
Total debit = PROFIT remained +
total credit in Profit/sale=margin inventory loss)
trial balance Profit/COS=mark up

RECEIVABLE CONTROL PAYABLE CONTROL

ACCOUNT ACCOUNT

Opening balance Opening balance Opening balance Opening balance

Credit sale Cash paid Cash paid Credit purchase
Dishonored Bad debt Discount received Closing balance
cheque Returned inward Returned outward
Closing balance Contra Contra
Closing balance Closing balance Closing balance

Page 9 of 25
 SESSION 8: ACCOUNTING CONCEPTS

GOING CONCERN ACCURAL MATERIALITY SUBSTANCE OVER

PRUDENCE REALISATION
CONCEPT FORM

Continue in Recognized when Asset and income Must be prepare recognize Record a
operation for the occur, not depend not overstated MATERIAL ITEMS in transactions and transactions not
foreseeable future on time of Liability and financial statement any profits arising depend on legal
receiving or paying expense not Material items – if from it at the substance, record a
cash understated omission or point of sale or transaction based
misstatement would transfer of legal on economic
HISTORICAL influence the ownership substance
CONCEPT decision of user-
MATCHING
should be
CONSISTENCY presented
Stated at value separately
when occurred
expenses are
recognized in the Similar items –
same accounting similar accounting
period as the treatment
related revenues ar
e recognized.
 11

IFRS advisory IASB (International accounting standards board) IFRS Interpretation

council committees

IFRS (high quality, enforceable and global)

Objectives: provide useful information to existing & future investors, lenders and other creditors

ACCOUNTING POLICIES CONCEPTUAL FRAMEWORK

SPECIFIC principles, bases, conventions,
Fundamental RELEVANCE: capable of making difference to the FAITHFUL PRESENTATION: financial reports
rules and practices adopted by an entity decisions made by user represent economic phenomena in words and
in preparing and presenting financial Must be characteristic number
statements disclosure

PREDICTIVE VALUE: use to predict future outcome COMPLETENESS: include all information necessary for
a user to understand the phenomenon being
depicted

When Need
applied judgement CONFIRMATORY VALUE: confirms or changes
COMPARABILITY: enable user to identify and
NEUTRALITY: not weighted, emphasized, de-
VERIFIABILITY: different knowledgeable and
Enhancing previous evaluations
understand similarities and differences among items
emphasized to increase profitability that financial
independent observes could reach a consensus
characteristic information will be received favourably or
uhfavourably by users
e.g: depreciation
method, rate of ACCOUNTING ENTITY-SPECIFIC MATERIALITY: naturetoordecision
magnitude FREE FROM ERROR:classifying,
no error orcharacterizing
omission being
allowance for TIMELINESS: information is available – UNDERSTANDABILITY: and
ESTIMATE makersinformation related
in time to be to entity
capable report their
of influencing depicted or in the selection
presenting or application
it clearly and concisely of the
receivables, useful life of (omitted/misstated could influence decision of user) process used to produce reported information
decisions
non-current asset…

Page 11 of 25
 The IFRS Conceptual Framework
OBJECTIVE OF FINANCIAL REPORTING MEASUREMENT OF THE ELEMENTS ELEMENTS OF FINANCIAL STATEMENTS

The users need information about:

HISTORICAL COST (BASED ON PAST TRANSACTION) ELEMENTS OF FINANCIAL STATEMENTS
- The economic resources of the entity Asset – a resource controlled by the entity as a result of past
- The claims against the entity Assets are recorded at the amount of cash or cash equivalents events & from which future economic benefits are expected to
- Changes in the entity’s economic resources and claims. paid or the fair value of the consideration given to acquire flow to the entity.
them at the time of their acquisition. Liability – a present obligation of the entity arising from past
Liabilities are recorded at the amount of proceeds received in events, the settlement of which is expected to result in an
UNDERLYING ASSUMPTION exchange for the obligation, or in some circumstances, at the outflow from the entity of resources embodying economic
The IFRS Framework states that the GOING CONCERN assumption is amounts of cash or cash equivalents expected to be paid to benefits.
an underlying assumption. satisfy the liability in the normal course of business.. Equity – the residual interest in the assets of the entity after
deducting all its liabilities.
Income – increases in economic benefits during the accounting
QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFO period in the form of inflows or enhancements of assets or
CURRENT COST: Assets are carried at the amount of cash or decreases of liabilities that result in increases in equity, other
cash equivalents that would have to be paid if the same or an than those relating to contributions from equity participants.
equivalent asset was acquired currently. Expense – decreases in economic benefits during the
accounting period in the form of outflows or depletions of
FUNDAMENTAL QUALITATIVE CHARACTERISTICS
Liabilities are carried at the undiscounted amount of cash or assets or incurrences of liabilities that result in decreases in
1. Relevance – predictive & confirmative value. Relevant financial information is cash equivalents that would be required to settle the equity, other than those relating to distributions to equity
capable of making a difference in the decisions made by users. obligation currently.
RECOGNITION OF THE ELEMENTS OF FINANCIAL STATEMENTS
• Materiality is an entity-specific aspect of relevance based on the nature or
magnitude (or both) of the items to which the information relates in the
context of an individual entity’s financial report.
NET REALISABLE (SETTLEMENT) VALUE
2. Faithful representation – seeks to maximise the underlying characteristics of
completeness, neutrality, freedom from error) Assets are carried at the amount of cash or cash equivalents that RECOGNITION OF THE ELEMENTS OF FINANCIAL STATEMENTS
could currently be obtained by selling the asset in an orderly • Firstly, it should meet the definition criteria
disposal. • Secondly, satisfies the following criteria :
ENHANCING QUALITATIVE CHARACTERISTICS o Probable that any future economic benefit
Liabilities are carried at their settlement values; that is, the
undiscounted amounts of cash or cash equivalents expected to associated with the item will flow to or from the
Comparability – information about a reporting entity is more useful if it can be
be paid to satisfy the liabilities in the normal course of entity
compared with a similar information about other entities & with similar information
business. o The item has cost or value that can be
about the same entity for another period or another date.
measured reliably
Verifiability – helps to assure users that information represents faithfully the
economic phenomena it purports to represent. Verifiability means that different
knowledgeable & independent observers could reach consensus, although not
necessarily complete agreement, that a particular depiction is a faithful PRESENT VALUE (DISCOUNTED)
representation. Assets are carried at the present discounted value of the future
Timeliness – means that information is available to decision-makers in time to be net cash inflows that the item is expected to generate in the
capable of influencing their decisions. normal course of business.
Understandability – classifying, characterising & presenting information clearly &
consicely makes it understandable. While some phenomena are inherently complex & Liabilities are carried at the present discounted value of the
cannot be made easy to understand, to exclude such information would make future net cash outflows that are expected to be required to
financial reports incomplete & potentially misleading. settle the liabilities in the normal course of business.
 IAS 1 PRESENTATION OF FINANCIAL STATEMENTS
13

A COMPLETE SET OF FINANCIAL STATEMENT OF FINANCIAL POSITION

STATEMENT OF COMPERHENSIVE INCOME NOTES
STATEMENTS COMPRISES

Statement of financial position; CURRENT ASSETS

Present information about the basis of
Statement of profit and loss and other Expected to be realised in the entity's normal preparation of the financial statements
comprehensive income for the period; operating cycle and the specific accounting policies used
Held for trading
Statement of changes in equity for the
period; Realised within 12 months after the
reporting period Provide information that is not presented
Statement of cash flows for the period;
Cash and cash equivalents elsewhere in the financial statements, but
THE OTHER COMPREHENSIVE INCOME
Notes, comprising a summary of significant is relevant to an understanding of any of
accounting policies and other explanatory present line items for amounts of other them.
information; comprehensive income in the period,
CURRENT LIABILITIES classified by nature in accordance with
other IFRSs: An entity shall disclose information that
settled within the entity's normal operating
cycle • will not be reclassified subsequently to enables users of its financial statements to
COMPARATIVE INFORMATION profit or loss; and evaluate the entity’s objectives, policies
Held for trading and processes for managing capital.
a statement of financial position as at the
Settled within 12 months • will be reclassified subsequently to profit
beginning of the earliest comparative
or loss when specific conditions are met.
period when an entity applies an the entity does not have an unconditional
accounting policy retrospectively or makes right to defer settlement beyond 12 months An entity shall also provide additional
a retrospective restatement of items in its disclosures on puttable financial
financial statements, or when it reclassifies An entity shall recognise all items of income instruments classified as equity
items in its financial statements and expense in a period in profit or loss instruments.
unless an IFRS requires or permits
otherwise

GENERAL REQUIREMENT WHEN PREPARING FINANCIAL STATEMENT

GOING CONCERN ACCRUAL BASIS OF ACCOUNTING SEPARATELY EACH MATERIAL CLASS OF SIMILAR
ITEMS NOT OFFSET ASSETS AND LIABILITIES OR
When preparing financial statements, IAS 1 requires that an entity prepare its financial INCOME AND EXPENSES
management shall make an assessment of an statements, except for cash flow information, An entity shall present separately each material
entity’s ability to continue as a GOING CONCERN. using the ACCRUAL BASIS OF ACCOUNTING class of similar items. An entity shall not offset assets and liabilities or
income and expenses, unless required or
An entity shall present separately items of a permitted by an IFRS.
dissimilar nature or function unless they are
immaterial. PRESENT AT LEAST ANNUALLY
Present a complete set of financial statements
(including comparative information) at least
Page 13 of 25 annually.
 IAS 08: CHANGE IN ACCOUNTING ESTIMATES, POLICY AND ERROR

CHANGE IN ACCOUNTING POLICY CHANGE IN ACCOUNTING ESTIMATE

WHAT WHEN APPLIED? HIERARCHY FOR SELECTION OF WHAT HOW APPLIED?

HOW APPLIED?
ACCOUNTING POLICIES

An adjustment of the carrying amount of an PROSPECTIVELY

asset or liability, or related expense, resulting
Specific principles, Required by RETROSPECTIVELY
from reassessing the expected future benefits
bases, conventions, standard 1. IASB standards & interpretations
and obligations associated with that asset or
rules and practices 2. The requirements in IFRSs dealing with The period of the change, if
liability
adopted by an entity similar & related issues; the change affects that
Apply as if the Adjust as early
in preparing and period only; or
new as possible 3. The Framework and
presenting financial
accounting
statements Result in more 4. The most recent pronouncements of The period of the change &
policy is
reliable information other standard setting bodies that use a future periods, if the change
applied all this similar conceptual framework to develop affects both
while accounting standards; EXAMPLE
5. Accepted industry practices. Bad debts/provision for doubtful debts
Inventory obsolescence (IAS 2)
The fair value of financial asset or financial
liabilities (IFRS 9)
The useful life of, or expected pattern of
consumption of the future economic benefits
embodied in, depreciable assets (IAS 16); and
Warranty obligations (IAS 37)
Repayment of government grant
 15

IAS 02 - INVENTORY

TYPES
COST FORMULA
INVENTORIES ARE REQUIRED TO BE STATED AT THE LOWER OF COST AND NET REALISABLE VALUE

RAW MATERIALS
STANDARD COST & RETAIL
METHODS INVENTORY COST NET REALISABLE VALUE Materials and supplies that are
consumed in production
May be used for the measurement
of cost, provided that the results
approximate actual cost
COSTS OF PURCHASE INVENTORY COST SHOULD NOT
WORK IN PROCESS
(including taxes, transport, INCLUDE
and handling) net of trade Assets in the production process
discounts received for sale in the ordinary course of
SPECIFIC COST business
Abnormal waste Estimated selling price in the
inventory items that are not ordinary course of business
Storage costs
interchangeable, specific costs are
attributed to the specific individual 1. administrative
items of inventory overheads unrelated to
COSTS OF CONVERSION production FINISHED GOODS
(including fixed and
2. selling costs the estimated cost of completion Assets held for sale in the
variable manufacturing
ordinary course of business
overheads) 3. foreign exchange
FIFO & WEIGHTED AVERAGE differences arising
COST directly on the recent
items that are interchangeable, IAS acquisition of
2 allows the FIFO or weighted Other costs incurred in inventories invoiced in a the estimated costs necessary to
average cost formulas bringing the inventories foreign currency make the sale
to their present location
4. Interest cost when
and condition
inventories are
purchased with
deferred settlement
COST INCURRED UNTIL
THE INVENTORY IS
COMPLETE GOODS

Page 15 of 25
 IAS 16 PROPERTY, PLANT AND EQUIPMENT

KEY TERM MEASUREMENT SUBSEQUENCE RECOGNITION DERECOGNITION

Residual value INITIAL DEPRECIATION Asset should be removerd

COST MODEL REVALUATION MODEL from the SoFP on disposal or
when it is withdrawn from use
Fair value BEGIN & no future economic
Includes all costs necessary to get the asset asset is available for use Cost – FV at the date of revaluation less subsequent dep & benefits are expected from its
ready for its intended use and continues until the Depreciation impairment disposal.
Carrying value
asset is derecognised, –and
even if it is idle. impairment
Impairment loss Initial estimate of Cost directly Only if FV can be measured reliably
the cost of attributable to bringing
The gain or loss on disposal:
dismantling & the asset to the location
should be recognised in the
removing the & condition necessary BASED carried out regularly
Useful life SoCI.
item & restoring for it to be capable of Depreciation is based on
the site on which operating in the manner the carrying value in the
it is located (IAS intended by If one asset is revalued, must be whole of the rest of the
statement of financial
37) management class at the same time
position.
Held by an enterprise for use in
the production or supply of FAIR VALUE
goods or services, for rental to DEPRECIATION METHOD
Market value/ depreciated replacement cost
others, or for administrative or Dep method reflects the
maintenance purposes pattern in which the
SPECIAL CONSIDERATION
asset's future economic SURPLUS DEFICIT
Those costs to test whether the asset is benefits
functioning properly
Revaluation surplus EXPENSE
Used during more than 1 Net proceeds from selling any items produced ASSET DEPRECIATION
reporting period. when bringing the asset to its location and It must be determined
condition separately for each Income Set off SURPLUS
significant part of an item.

RECOGNITION COSTS THAT ARE EXCLUDED

SUBSEQUENCE COST
1. Feasibility study costs
CRITERIA 2. Start-up costs (unless necessary for working
REVIEWED
The residual value and
condition of the asset) CAPITALIZED AS PPE RECOGNIZED AS AN
useful life of an asset, as
3. Initial operating losses before planned Improves the condition of the asset beyond its originally assessed EXPENSE
Costs can be measured well as the depreciation
operating levels standard of performance
reliably method must be reviewed
4. Abnormal wasted materials, labour or other
at least at each financial
resources
year end,
5. Interest or other costs after PPE is available for
Probable to generate future use even if not yet in use in business EXAMPLE
economic benefit 6. Staff training (IAS38) 1. Extend its useful life, including an increase in its capacity;
CEASE
2. Substantial improvement in the quality of output;
Depreciation of an item
3. Substantial reduction in previously assessed operating costs;
does not cease when it
4. Upgrading of a component of the asset that has been treated
becomes temporarily idle
separately for depreciation purposes E.g engine in an aircraft
or is retired from active
use and held for disposal
 IAS 38 INTANGIBLE
17 ASSETS

WHAT MEASUREMENT INTERNAL GENERATED IA

An identifiable non-monetary COST MODEL REVALUATION MODEL RESEARCH PHASE

asset without physical substance
Cost less any accumulated REVALUED AMOUNT being its FV at the
Original & planned investigation undertaken with the prospect of
amortization and any date of the revaluation less any
INTANGIBLE ASSETS gaining new scientific or technical knowledge & understanding
accumulated impairment subsequent accumulated amortization
E.g: search for application of research findings, search for new
losses and any subsequent accumulated
materials, products, systems…
impairment losses,

IDENTIFIABLE Only allowed IF ACTIVE MARKET exists DEVELOPMENT PHASE

Separable from the entity &
sold, transferred, licensed, MEET all the following conditions:
Application of research findings or other knowledge to a plan or
exchanged or rented either 1. The items traded within the market
design for the production of new or substantially improved
individually or combined. are homogeneous
materials, devices, products, processes, systems or services prior
2. Willing buyers and sellers can
to the commencement of commercial production or use
Arises from contractual or other normally be found at any time, and
E.g: design, testing of pre-use prototypes and models, design of
legal rights 3. Prices are available to the public tools involving new technology …

TREATMENT
CONTROL Capitalize start at time when all 5 criteria below met (if one of 5
Power to obtain the future criteria not met, do not capitalize)
SIMILAR TO IAS 16
economic benefits flowing from
the asset AND 5 CRITERIA TO BE CAPITALIZED
to restrict the access of others to
those benefits AMORTIZATION
1. The TECHNICAL FEASIBILITY of completing the intangible asset
so that it will be available for use or sale
IA with FINITE USEFUL LIFE IA with INDEFINIED USEFUL LIFE 2. Its INTENTION TO COMPLETE the intangible asset and use or
FUTURE ECONOMIC BENEFIT sell it
3. Its ABILITY TO USE OR SELL the intangible asset
Revenue from the sale of products, 4. How to intangible asset will generate FUTURE ECONOMIC
services or processes OR Amortized over useful life No amortization
BENEFITS
Checked for IMPAIRMENT (IAS 36)
Cost savings or other benefits from 5. The AVAILABILITY OF ADEQUATE TECHNICAL, financial & other
use of an asset resources to complete the development & to use or sell the
intangible asset
6. Its ability to measure the expenditure attributable to the
RECOGNITION CRITERIAS intangible asset during its development RELIABLY.

PROBABLE FUTURE ECONOMIC

BENEFIT Development cost capitalized must NOT EXCEED future economic
benefit

COST CAN MEASURED RELIABLY

Page 17 of 25
 SESSION 12: RECEIVABLE

IRRECOVERABLE DEBT/BAD DEBT/RECEIVABLE ALLOWANCE FOR RECEIVABLE

EXPENSE EXPENSE General estimate of the percentage of debt which are not
expected to be repaid
A specific debt is not expected to be paid

Net of receivable, irrecoverable debt and allowance for receovable

How to
WRITE OFF estimate
Dr Irrecoverable debit FIRST YEAR
Cr Receivable Dr Irrecoverable debit
(Total receivable – Total bad Cr Allowance for receivable
debt) x % estimated

SUBSEQUENT PAID SEQUENENT YEAR

Dr Cash
Cr Irrecoverable debit LOWER HIGHER
Dr Allowance for receivable Dr Irrecoverable debit
Cr Irrecoverable debit Cr Allowance for receivable

INCOME STATEMENT STATEMENT OF FINANCIAL POSITION

 19

IAS 37 – PROVISION, CONTIGENCY

PROVISION CONTINGENCIES

Liability of uncertain timing ASSET LIABILITY

or amount

WHAT? RECOGNIZ DISCLOSURE DO NOTHING WHAT? RECOGNIZ DISCLOSURE DO NOTHING

E E
RECOGNIZED

Arise Arise
Present Transfer Reliable Possible Realize eco It is It is from Possible It is It is It is remote
from
obligatio economi estimate asset benefit or probable possible past liability probable possible (<10%)
past
n c benefit of the event (>=50%) (>=10%) &
event it is (>= 50%) and
to settle amount PROVISION (<50%)
involved virtually remote
(>=90%) (< 50%)

Not wholly Confirm by Not wholly Confirm by Prudence concept

Prudence concept
within uncertain within uncertain
enterprise future enterprise future
control event control event

Page 19 of 25
 SESSION 13: ACCURAL AND PREPAYMENT

ACCURAL PREPAYMENT
CURRENT LIABILITY CURRENT ASSET
Expense related to accounting ACCURAL Expense have been paid but
period but not yet been paid CONCEPT related to future accounting
period

DOUBLE ENTRY DOUBLE ENTRY

Dr Expense (income statement) 1st method 2nd method
Cr Accrual (statement of financial position) When expense arise When expense arise
Dr Expense Dr Prepayment
Cr Cash Cr Cash
At the end of accounting period At the end of accounting period
Dr Prepayment (SOFP) Dr Expense (Income statement)
When adjustment Cr Expense (income statement) Cr Prepayment (SOFP)

When adjustment
CASH ACCURAL EXPENSE CASH PREPAYMENT EXPENSE

2. Cash paid 1. Recognized 1. Cash paid 2. Recognized

expense expense

Increase profit of
Decrease profit of
current year
current year
 21

SESSION 15: IAS 10 EVENTS AFTER REPORTING REPORT

ADJUSTING NON- ADJUSTING

EVENT WHAT ? EVENT

provide additional
evidence of conditions
which do not affect the
existing at the reporting
situation at the
date, will cause
EVENT AFTER reporting date, should
adjustments to be made
the REPPORTING not be adjusted for, but
to the assets and Date FS
reporting REPORT should be disclosed in
liabilities in the financial are
date the financial statements
statements authorized
to issue

Examples
Examples
Customer bankruptcy
Issued of new share
Inventory sold after
reporting period with Fall in market value of
NRV<Cost investment

Insurance company agreed Obtain loan after year end

to pay insurance claim still
being negotiate Acquisition another
business

Discovery fraud affect FS

Physical disaster affect the
business

Page 21 of 25
 SESSION 16: CAPITAL OF LIMITED COMPANY

SHARE CAPITAL TYPES OF SHARE TYPES OF SHARE

ISSUE
Ordinary share RIGHT ISSUE ORDINARY SHARE

Share premium Issue share for cash PREFERENCE SHARE

Dr Cash
Retained earning Cr Share capital
REDEEMABLE
Cr Share premium
Buy back in future date
BONUS ISSUE therefore treated as a
Other component of
liability
equity
Issue share for share
Revaluation surplus premium IRREDEEMABLE
Dr Share premium Do not buy back in future
Cr Share capital date therefore treated as a
Statutory reserve
equity

STATEMENT OF CHANGES IN EQUITY

Share captial Share premium Revaluation Retained Other reserves

reserve earning
Balance at 1/1/20X3

Issue of new share

Bonus issue

Revaluation of NCA

Transfer from RR to retained earning

Net profit

Dividend

Balance at 31/12/20X3
 23

SESSION 17: IAS 07 STATEMENT OF CASH FLOW

OPERATING ACTIVITIES FINANCING ACTIVITIES

INVESTING ACTIVITIES
FACTORS
ADJUSTMENTS MEANINGS
MEANINGS
MEANINGS FACTORS

Related to DIVIDEND PAID

Cash DEPRECIATION
Related to non- PURCHASE OF PPE financing/capital
flow
current assets of borrowings and
from GAIN/LOSS ON DISPOSAL
company, strategy also dividend
daily
of company PROCEED FROM DISPOSAL PROCESS SHARE
business INVESTMENT INCOME ISSUES
activitie
s AMORTIZATION OF IA
INVESTMENT INCOME
Analysis of RECEIVED REPAYMENT OF LONG-
company’s FINANCIAL COST TERM BORROWINGS
cash from
operation OPERATING PROFIT BEFORE DEVELOPMENT COST
WORKING CAPTIAL CHARGE EXPENDITURE

RECEIVABLE

INVENTORY

PAYABLE

INTEREST PAID

INCOME TAX PAID

Page 23 of 25
 SESSION 18: IFRS 3 BUSINESS COMBINATION

REQUIREMENTS MAJOR ADJUSTMENT GOODWILL CONSOLIDATED SOFP

DETERMINATION
EXEMPTION
Unrealized Less inventory PURCHASE Goodwill
profit and profit
CONSIDERATION
Subsidiary of
another company Common Cancel all (E.G
Unrealized profit
items Cash Retained (total if P sel S)
Not public/listed earning
Intransit Record for the
company Share of sub profit
company who
items do not record Deferred Present value
No intention to go consideration Non- Share of sub profit
listing Unwilling
CONSOLIDATED SOCI controlling (total if P sel S)
finance cost (total-unrealized if S
interest
sell P
CONTROL
Share for No of share x
REVENUE Less TOTAL sale fair value
of intra-group exchange
More than 50%
IAS 28 ASSOCIATES
voting right COST OF Balance FAIR VALUE OF NCI
SALE
Can exercise Include parent’s
dominate influence Total profit –
Impact on SOCI
GROSS share of
PROFIT unrealized prof PURCHASE associate PAT
Right to appoint or CONSIDERATION
Total profit – Significant 20% or more
remove directors Profit attri to but
parent attri to NCI influence
Share captial Less than 50%
Through agreement
with other Profit attri to If P sell: Pro x %
Retained earning Unrealised Parent sell to
If S sell: (Pro-unrel)x%
shareholders NCI profit associate
Cr Investment
Fair value Include all fair in associate
value on date of
adjustment
acquisition
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SESSION 19: ANALYSIS FINANCIAL STATEMENT

PROFITABILITY RATIOS FINANCIAL RISK RATIOS LIQUIDITY RATIOS LIMITATIONS

GEARING CURRENT RATIO -MANIPULATE

PROFIT MARGIN(%)
Long term loan/ Current assets/ current liabilities PAST INFORMATION
Profit/revenue (long term loan + equity) Idle: 2:1 -SOMETIME NOT
AVAILABE
-NOT COMPAREABLE
-NON FINANCIAL
ASSET TURNOVER(%) INTEREST COVER QUICK RATIO ASPECT
Profit before interest and tax/Finance (current assets – inventories)/ -DIFFERENT FORMUAL
Revenue/ capital employed
charge current liability
Idle: 1:1

RETURN ON CAPTIAL EMPLOYED DEBTOR RATIO

(ROCE) Total liabilities (current and non- ACCOUNT RECEIVABLE DAY
EBIT/capital employed current)/ (Net non-current asset + (trade receivables/ sales)*365
current assets)

RETURN ON EQUITY (ROE)

EBT/ equity ACCOUNT PAYABLE DAY
(trade payables / Cost of sale)*365

INVENTORY DAY
(average inventory/ cost of sale)*365

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