FINANCIAL ACCOUNTING

 

LEVEL 2

ATD

 

 

 

STUDY NOTES

 

 

SYLLABUS

 

PAPER NO 5: FINANCIAL ACCOUNTING

OBJECTIVE

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to prepare financial statements for different entities

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

• Prepare books of original entry and basic ledger accounts under double entrysystem
• Prepare basic financial statements of sole traders. partnerships, companies and manufacturing entities and not for profit organisations
• Comply with the regulatory framework in the accounting field
• Account for assets and liabilities
• Analyse financial statements by use of ratios and statement of cashflows

CONTENT

1. Introduction to Accounting
   • Accounting framework
   • Sources of regulation (regulatory bodies such as ICPAK, IFAC,IASB, IPSAB
   • Accounting standards (IAS/IFRS), (Importance and limitations)
   • Professional ethics

2     Accounting for assets and liabilities

• Assets
  • Property, plant and equipment — recognition, capital and revenue expenditure, measurement (depreciation and revaluation), disposal and disclosures — property, plant and equipment schedule
  • Intangible assets — recognition, measurement (amortisation, impairment and revaluation), disposals and disclosures
  • Financial assets – examples and categories only

2.2 Liabilities

• Loans – accounting treatment of repayment of principal and interest

3     Financial statements of a sole trader

• Income statement
• Statement of financial position
• Preparation of financial statements under incomplete information

4     Financial statements of a partnership

• Income statement
• Statement of financial position
• Changes in partnership – Admission of a new partner, retirement and change in profit sharing ratio

5     Financial statements of a company

• Financial statements – Income statement and statement of financial position
• Published financial statements (describe a complete set of published financial statements but not preparation)

6     Financial statements of a manufacturing entity

• Features of a manufacturing entity
• Classification and apportioning costs between manufacturing and selling and administration
• Financial statements – manufacturing account, income statement and statement of financial position

7     Financial statements of a not-for-profit organisation

• Features
• Types of funds and their accounting treatment
• Income and expenditure account
• Statement of financial position

8     Analysing financial statements

• Statement of cash flows (categories of cash, methods of preparing statement of cash flows and the importance)
• Financial ratios — definition, categories, analysis and interpretation, application and limitations

9     Introduction to public sector Accounting

• Features of public sector entities (as compared to privatesector)
• Structure of the public sector (National and county governments: state corporations and other agencies)
• Regulatory structures and oversight [IPSASB, PSASB (establishment, mandate and functions), Director of Accounting Services, National Treasury, Parliamentary Committees. Accounting Officers at national and county levels]
• Objectives of public sector financial statements
• Objectives of IFSAS
• Accounting techniques in public sector (budgeting, cash, accrual: commitment and fund) (Preparation of financial statements should be excluded)

10    Emerging issues and trends

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