To enable a convergence of national accounting standards and IFRS standards while giving examples of best practice in financial reporting for national bodies who produce requirements.

What is the role of the IFRS Advisory Council?

The IFRS forum for consulting with the outside world.

Who is "the Board"?

The IASB

What is a contingent liability?

"A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the entity's control."

What are the qualities of Faithful Representation?

- Completeness - Neutrality - Free from Error

What are the Fundamental Qualitative Characteristics of Financial Information?

- Relevance - Faithful Presentation

What are the Enhancing Qualitative Characteristics of Financial Information?

- Comparability & Consistency - Timeliness - Verifiability - Understandability

What are the Fundamental Accounting Concepts?

- Fair Presentation - Going Concern - Accruals - Consistency - Materiality - Substance over form - Business Entity Concept

What is materiality ?

"A threshold or cut-off point for information whose omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements."

What are the three characteristics of faithful representation?

It is: - Complete - Neutral - Free from error

When is understandability enhanced?

When the information is: - Classified - Characterised - Presented clearly and consistently

What are the qualities of Relevance?

Predictive value or Confirmatory value

What are the qualities of Faithful Representation?

- Completeness - Neutrality - Free from Error

What is Relevance?

Information that is capable of making a difference in the decisions made by users.

What is Faithful Representation?

Accounting information should be presented in accordance with best practice and that the commercial substance of transactions should be presented in the financial statements, rather than their strict legal form.

What is Substance Over Form?

The economic substance of a transaction should be reflected in the financial statements. Even when the legal form is in conflict.

What are the books of prime entry?

- The Cash book (For non-credit transactions) - The Purchase Day Book (for credit transactions) - The Sales Day Book (for credit sales) - The Petty Cash Book (for small cash transactions) - The Journal (For unusual transactions)

What are the basic steps in the accounting cycle?

1) Recording transactions in the T accounts using double entry. 2)Balancing the accounts

What are the books of prime entry?

What are the basic steps in the accounting cycle?

1) Recording transactions in the T accounts using double entry. 2)Balancing the accounts

What are the books of prime entry?

What are the basic steps in the accounting cycle?

1) Recording transactions in the T accounts using double entry. 2)Balancing the accounts

What are the books of prime entry?

Assets - Liabilities =

Opening Capital + Profits - Drawings

Assets =

(Capital + Profit - Drawings) + Payables

Trader's Profit =

Closing capital + Drawings - Capital introduced - Opening Capital

Increase in Net Assets =

Profit + New Capital - Drawings

What is the Imprest System of petty cash?

A system petty cash where the previous week/months expense's worth of petty cash is topped up from the bank. This keeps the petty cash at a set balance, that is low enough for there not to be a great loss if there is any theft.

What is the Journal used for?

Recording unusual movements between accounts for any double entries which don't arise from the other books of prime entry.

In what order are transactions recorded?

Books of Prime Entry -> General Ledger

What types of transactions are recorded in the sales/purchases day books?

Credit Transactions

What are ledger accounts?

The individual accounts for each item on the chart of accounts.

On a T account, what transactions are recorded on the right side?

The Cr (Credit record) Entires

On a T account, what transactions are recorded on the left side?

The Dr (Debit record) Entries.

When closing the accounts, what should be done with an item which belongs in the SFP?

The T account should be balanced, closed, and left with the closing balance.

When closing the accounts, what should be done with an item which belongs in the SPL?

The T account should be balanced, closed, and moved to the SPL account. If it is an income item, then Dr the T account and Cr the SPL account. If it is an expense item, the Cr the T account and Dr the SPL account.

What new T account must be opened when closing the books?

The Statement of Profit or Loss account.

What are the books of prime entry?

What are the basic steps in the accounting cycle?

1) Recording transactions in the T accounts using double entry. 2)Balancing and closing the ledger accounts. 3)Preparing the Trial Balance 4)Closing off the accounts and producing th financial statements.

What is a Liability?

'A present obligation of the entity to transfer economic resource as a result of past events. An obligation is a duty of responsibility that the entity has no practical ability to avoid.‘

What is an Asset?

'A present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits.‘

Gross means what?

Inclusive

Net means what?

Exclusive

What should the cost of inventory include?

The cost of purchase, cost of conversions, cost of transport of the purchases.

What are the key accounting standards examinable in this paper relating to inventory?

IAS 2

How should inventory be valued?

The lower of cost and net realisable value.

How is the Net Realisable Value (NRV) calculated?

Selling price less any extra costs that there are in order to get the goods in a sellable state.

What is Cost in terms of inventory?

The cost of getting the goods to the state that they are in.

In accordance with IAS 2, which methods of inventory valuation are acceptable?

FIFO and AVCO

How should a dishonoured check be recorded in the receivables ledger account?

It should be recorded as DR in the receivables account because it would have previously been deducted from the account.

When should a provision be recognised?

When: 1) There is a present obligation as a result of a past event 2)There is a probability of an outflow of resources to settle the obligation 3) There is a reliable estimate of the amount of obligation.

What is the difference between provisions and other liabilities?

There is an uncertain timing or amount of expenditure with provisions.

How are provisions accounted for?

Dr. Expenses (SPL) Cr. Provisions (SFP)

How should contingent liabilities be disclosed/recognised in the financial statements?

They should *not* be recognised, but rather disclosed, unless there is only a remote possibility of needed to fulfil the possible obligation. When there is only a remote chance, then it is not even disclosed.

How will profit for the year be affected by an asset prepayment?

Profit will increase.

What balance should accumulated depreciation have on the trial balance?

A credit balance

What balance should Allowance for receivables have on the trial balance?

A credit balance

Capital Balance =

Open Capital + Profits - Drawings

Depreciation Balance =

Equipment at Cost less Accumulated Depreciation less Depreciation for the Year.

How will profit for the year be affected by an expense accrual?

Profit will decrease.

How will profit for the year be affected by an asset prepayment?

Profit will increase.

What is the purpose of the Trial Balance?

A method used to test the accuracy of the double entries and therefore the accounting records.

What are the limitations of the Trial Balance?

When: - There is a complete omission of a transaction - Transactions are recorded in the wrong account but on the correct side. - There are cancelling errors - There are errors of 'principle'

How are material non-adjusting events disclosed in the financial statements?

By a note in the financial statements.

What are non-adjusting events?

Events relate to conditions that arose after the reporting period.

What are adjusting events?

Events that provide evidence of conditions that existed at the end of the reporting period.

What sorts of items are recorded in the statement of cashflows?

Cash items

What types of items are NOT recorded in the statement of cashflows?

Non-cash items, even if they relate to the capital of the company. e.g. bonus issue of shares, revaluation of non-current assets.

What IAS is relevant to cashflows?

IAS 7

What should the statement of cashflows contents be split into?

Operating activities Investing activities Financing activities

What is the indirect method of calculating cashflows from operating activities?

Start with the profit figure, then add back all the non-cash items.

What types of items are added back on the indirect method of cashflows?

Depreciation & amortisation Loss on sale of NCA Decreases in Receivables & Inventory Increases in Payables

What types of items are deducted in the indirect method of cashflows?

Profit on sale of NCA Increases in Receivables & Inventory Decreases in Payables

How are payments for the acquisition of non-current assets calculated in the statement of cash flows?

Carrying Amount - Depreciation - Disposals = X (Purchases) - Carrying amount at end of year

What items will appear under the Investing section of the cashflow statement?

- Cash spent acquiring non-current assets - Cash received from the sale of non-current assets - Income from investments

Cash =

Cash in hand + Deposits repayable upon demand - Overdrafts

What are Cash Equivalents?

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. - IAS 7, para 6

What are Cash Flows?

Inflows and outflows of cash and cash equivalents

How are Cash Equivalents treated?

They are Current Asset Investments

How are payments for the acquisition of non-current assets in the SOC calculated?

Opening/B less Depreciations less Disposals less Closing/B

How is cost of sales calculated for the consolidated statement of financial position?

P's balance + S's balance - Intra-group cost of sales + (Profit from intra-group transaction inventory held)

How is NCI for the new period calculated for the SFP?

Fair Value of NCI + X% of Post-Acquisition profits

When calculating consolidated retained earnings, what adjustment may be required?

An adjustment for unrealised profit from intra-group transactions. This will need deducting.