ACCA F3 (Int)

Course overview

Chapter 1

INTRODUCTION TO ACCOUNTING

Types of business entity

Sole trader
Partnership Company

Accounting consists of 2 elements: 1. Recording 2. Summarising - Income statement - Statement of financial position

Users of financial statements

Chapter 2

STATEMENT OF FINANCIAL POSITION & INCOME STATEMENT

INCOME STATEMENT
$ Sales Cos Opening inventory X $ X

Purchases
Closing inventory Gross profit Less expenses: Rent & rates Heat & light

X
(X) (X) X (X) (X)

Wages
Net profit

(X)
(X) X

STATEMENT OF FINANCIAL POSITION

$ Non-current assets Intangible PPE Current assets Inventory Receivables Bank Equity Capital Profit Less drawings Non-current liabilities Bank loan Current Liabilities Payables X X X X X X X (X) X X X X X X X X $

Chapter 3

DOUBLE ENTRY BOOKKEEPING

Duality concept Every transaction has at least 2 effects on the financial statements. Captured in ledger accounts.

Double entry ledger accounts

Debit Date 1 Jan Details Bank Electricity $ Date 500 Details Credit $

Debit Date Details

Bank $ Date 1 Jan Details Electricity

Credit $ 500

Chapter 4

INVENTORY

IAS 2 INVENTORY

Chapter 5

SALES TAX

Chapter 6

ACCRUALS & PREPAYMENTS

Accruals concept
Income & expenditure should be accounted for in the period in which it relates not when cash is received or paid.

Accruals Expenses charged against profits for the period even though they have not yet been paid for. Prepayments Payments made in one period but charged against profits in a later period to which they relate.

Chapter 7

IRRECOVERABLE DEBTS & ALLOWANCE FOR RECEIVABLES

Irrecoverable debts An irrecoverable debt should be written off to the income statement in accordance with the prudence concept.

Allowance for receivables

Where the recoverability of a receivable is uncertain an allowance may be set up to reflect this in accordance with prudence. The allowance will offset the receivables balance in the statement of financial position.

Chapter 8

NON-CURRENT ASSETS

Chapter 9

FROM TB TO FINANCIAL STATEMENTS

Chapter 10

BOOKS OF PRIME ENTRY & CONTROL ACCOUNTS

 A book of prime entry is used to capture data as it arises. Totals transferred to: Ledger accounts

Individual accounts

Chapter 11

CONTROL ACCOUNT RECONCILIATIONS

Control Accounts
A control account is used to represent the total of a similar asset or liability e.g. payables.
Individual accounts are also maintained.

A reconciliation between the control account and the individual accounts helps to detect errors.

Chapter 12

BANK RECONCILIATIONS

Bank Reconciliations
Bank reconciliations are required to explain differences between the cash book and the bank statement.

Differences:
Timing differences Errors Omissions

Chapter 13

CORRECTION OF ERRORS AND SUSPENSE ACCOUNTS

Suspense Accounts
A suspense account arises from errors causing the TB not to balance. Any balance on the suspense must be eliminated before the final accounts can be prepared.

Types of errors
Errors where TB still balances Errors where TB does not balance (suspense created)

Error of omission
Error of commission Error of principle Error of original entry Compensating errors Reversal of entries

Single sided entry

Debit credit Same sided entry Incorrect addition of ledger Extraction error Opening balance not brought down

Transposition errors

Chapter 14

APPLICATIONS OF INFORMATION TECHNOLOGY

Chapter 15

INCOMPLETE RECORDS

Chapter 16

PARTNERSHIPS

Chapter 17

COMPANY ACCOUNTS

Chapter 18

ACCOUNTING STANDARDS

IAS 38 Intangible Assets

An intangible asset has a value to the business but no physical form.
2 TYPES Internally Generated
Capitalise if market value exists Exception: Research & Development Research = expense Development = Capitalise (if criteria are met).

Purchased
Capitalised at cost

IAS 10 Events after the reporting period

Events that occur between the reporting date and the date the financial statements are authorised for issue.
Adjusting Events
Provide additional evidence of conditions that existed at the reporting date.

Non-Adjusting Events
Concern conditions that did not exist at the reporting date.

Adjust the financial statements

Disclose if material

IAS 37 Provisions
A provision is a liability of uncertain timing or amount.
Probability of occurrence Probable Liability
Provide*

Asset
Contingent asset (Disclose) Do Nothing

Possible

Contingent liability (Disclose) Do nothing

Remote

Do nothing

IAS 8 Changes in accounting policies, accounting estimates & errors

Changes in accounting policies Adjust opening balance on retained earnings & restate comparative

Changes in accounting estimates

Change applied in current year & disclosure note if material

Errors

Adjust opening balance on retained earnings & restate comparative

IAS 18 Revenue
Recognition occurs when it is probable that future economic benefits will flow to the entity and when these benefits can be reliably measured.
IAS 18 covers revenue from:
Sale of goods

Provision of services Interest, royalties & dividends

Chapter 19

STATEMENT OF CASH FLOWS

Chapter 20

THE REGULATORY & CONCEPTUAL FRAMEWORK

Structure of the Regulatory Framework

Conceptual Framework