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
$
X
Cos
Opening inventory
X
Purchases
X
Closing inventory
(X)
(X)
Gross profit
X
Less expenses:
Rent & rates
(X)
Heat & light
(X)
Wages
(X)
(X)
Net profit
X
STATEMENT OF FINANCIAL
POSITION
$
$
Non-current assets
Intangible
X
PPE
X
X
Current assets
Inventory
X
Receivables
X
Bank
X
X
X
Equity
Capital
X
Profit
X
Less drawings
(X)
Non-current liabilities
Bank loan
X
Current Liabilities
X
Payables
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
Electricity
Date
Details
1 Jan
Bank
Debit
Date
$ Date
Credit
Details
500
Bank
Details
$
$ Date
1 Jan
Credit
Details
Electricity
$
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
Single sided entry
Error of commission
Debit ≠ credit
Error of principle
Same sided entry
Error of original entry
Incorrect addition of ledger
Compensating errors
Extraction error
Reversal of entries
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.
Purchased
Capitalised at cost
2 TYPES
Internally Generated
Capitalise if market value exists
Exception:
Research & Development
• Research
= expense
• Development = Capitalise
(if criteria are met).
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
Non-Adjusting Events
Provide additional evidence of
conditions that existed at the
reporting date.
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
Liability
Asset
Probable
Provide*
Contingent asset
(Disclose)
Possible
Contingent liability
(Disclose)
Do Nothing
Remote
Do nothing
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