Preparing Financial Statements phần 5 pps

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Study Period 16 continued

Were you awake?

If you've been concentrating, you should be able to answer some key questions

What is the role of an accounting package?

Name three advantages and three disadvantages of using computer packages?

What is a database?

What is a spreadsheet?

Any problems?

Email (accaqueries @bpp.com) fax (020 8740 2293) or phone us (020 8740 2242/2245)

Learning Resource Centre

Learn interactively BPP i-Learn/BPP Virtual Campus Module 10

Improve your study skills BPP's Learning to Learn

Accountancy book *

* Included within your Home Study course

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Common Pitfall

• Ignoring this chapter – just remember all you need is a broad understanding of the terminology, so you can apply common sense not detailed technical knowledge

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Study Period 17 Accounting conventions and standards

Date due:

Exam Guidance

This is a key area for discussion questions and has been examined in the pilot paper and both

full exams Be prepared to discuss the ideas behind the standards Reading three chapters

together makes this a longer session than usual, but enables you to tie in the standards to the

underlying concepts and conventions

Guidance through the Study Text

These topics are covered in Chapters 10 Accounting conventions, 15 Intangible non-current assets

and 16 Events after the balance sheet date and contingencies

Chapter 10 Read through carefully IAS 1, other important concepts and

conventions Chapter 15 Read through carefully Definition of goodwill;

criteria for capitalisation of development costs under IAS 38 Chapter 16 Pay particular attention to this chapter Definition of events after the

balance sheet date (IAS 10) Learn the decision table for IAS 37

Try Questions 13, 21, 22 and 36 in the Exam Question Bank of your

Study Text

Exam focus point

IAS 8, IAS 10 and IAS 37 were tested in an 8 mark question in the June 2005 exam

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Were you awake?

Define going concern

What are the criteria for capitalisation of development expenditure?

Distinguish between adjusting and non-adjusting events according to IAS 10

How do you account for a contingent liability?

Any problems?

provisions

Accountancy book *

Common Pitfalls

• Ignoring the underlying concepts, remember these form the basis on which standards are built – if you do not understand the theory, then you will find it difficult to understand what the standards are for

• Confusion between provisions and contingencies

• Not learning practical examples of adjusting and non-adjusting events

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Study Period 18 Incomplete records

Date due:

Exam Guidance

This is a very difficult topic as it tests much of the accounting theory and practice from ledger

accounting to control accounts It is likely to be examined in conjunction with a preparation of

final accounts, for a sole trader, limited liability company or partnership You would only

realise once reading through the question that an incomplete records element is involved

Watch out for clues in the wording of the question, eg 'limited records were kept'

These topics are covered in Chapter 17 Incomplete records

1 Incomplete records

questions

Skim through quickly

2 The opening balance

sheet

Read through quickly

3 – 6 Pay particular attention to these

sections

Learn the techniques for calculating missing figures

7 The cash book Read through quickly

8 Accruals and

prepayments

Work through this carefully Make sure you know how to

treat accruals and prepayments

9 Drawings Skim through quickly

10 Dealing with

incomplete records problems in the examination

Work through this section carefully Pay particular attention to the business equation

Learn the six step procedure for dealing with incomplete records

Try Questions 23 and 24 in the Exam Question Bank of your Study Text

The June 2005 exam had 3 MCQs on incomplete records

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Were you awake?

How would you calculate the figure for opening capital?

How do control accounts help in incomplete records?

List the suggested six steps for dealing with questions in the exam

How can the business equation help in incomplete records?

Any problems?

Test your knowledge BPP i-Pass * Session 7: Incomplete records and sales tax

Improve your study skills BPP's Learning to Learn Accountancy book *

Common Pitfalls

• Confusion between margin and mark-up (notice which item is 100% in the example below):

Cost of sales 75% Cost of sales 100%

Gross profit 25% Gross profit 25%

• Lack of methodical approach to questions

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Study Period 19 Limited liability companies

Date due:

Exam Guidance

Limited liability companies are likely to be examined as a long accounts preparation question

There may be discursive parts as well

The contents of Chapter 19 are very important There have been revisions to IAS 1 and IAS 8

and a new standard IFRS 5 All of these are examinable from December 2004

These topics are covered in Chapter 19 Limited liability companies

All Pay particular attention to all sections

Limited liability companies always come

up in the exam

Definition of a limited liability company, types of shareholders' equity, treatment of dividends, accounts pro-forma

Try Question 37 in the Exam Question Bank of your Study Text

The June 2005 exam had a 12 mark limited liability company balance sheet and 2 MCQs

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Were you awake?

What are the differences between ordinary and preferred shares?

Give examples of two types each of statutory and non-statutory reserves

How are proposed dividends accounted for?

What is the correct treatment of prior period errors under IAS 8?

Any problems?

Test your knowledge BPP i-Pass * Session 6: Limited liability companies and partnerships

Accountancy book *

Common Pitfall

• Failure to learn the pro-forma layouts – these are suitable for company accounts

'for publication'

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Study Period 20 Progress Test 2 Priority = High

Date due:

In order to reinforce what you have learnt in Study Periods 13 – 19, answer the following multiple choice questions without referring to your Study Text or notes You should then revise any areas with which you had difficulty

1 A company's bank statement shows an overdraft of $3,204 at 31 March 20X0 The statement includes bank charges of $46 which have not yet been recorded in the company's cash book The statement does not include cheques for $780 paid to suppliers, nor an amount of $370 received from a customer; both of these amounts appear in the bank statement for April 20X0

If the company prepares a balance sheet at 31 March 20X0, the figure for the bank overdraft should be:

A $2,748

B $2,794

C $3,614

D $3,660

Data for Questions 2 & 3

Womble & Sons have an accounting year ended 31 December 19X9 At that date the balance on the receivables ledger control account was $65,000, but the total of the individual accounts in the receivables ledger came to $63,620

Upon investigation the following facts were discovered:

• The sales day book total for week 49 had been overcast by $300

• A credit balance of $210 on Orinocco's account in the receivables ledger had been incorrectly treated as a debit entry, when balancing off his account

• A payables ledger contra of $1,500 has been entered in Bungo's account in the receivables ledger but no other entry had been made

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2 The adjusted balance on the receivables ledger control account is:

A $62,780

B $63,200

C $63,620

D $64,700

3 The adjusted balance on the receivables ledger is:

A $62,780

B $63,200

C $63,620

D $64,700

4 Deer Co had 200 units in inventory at 30 November 19X9 valued at $800 During December it made the following purchases and sales

12/12 Purchased 800 @ $6.20 each

15/12 Purchased 300 @ $6.60 each

Which of the following combinations is correct?

AVCO FIFO

A 4,095 3,220

B 4,095 4,460

C 2,740 3,220

D 2,740 4,460

5 If a shareholder in a limited liability company sells his shares to another private investor, for less than he paid for them, the share capital of the company will:

A Remain unchanged

B Increase by the nominal value of the shares

C Increase by the amount received for the shares

D Decrease by the nominal value of the shares

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6 A company issued 100 ordinary shares of 25c each at a premium of 10c per share In the absence of the chief accountant, his assistant posted the cash side of the transaction to a suspense account The entry required to correct this is:

A Dr Suspense $35 Cr Share capital $35

B Dr Suspense $110 Cr Share capital $100 Cr Share premium $10

C Dr Suspense $35 Cr Share capital $25 Cr Share premium $10

D Dr Share capital $25 Cr Suspense $25

7 Which of the following is not an essential feature of a database?

A The database file data must be held on a direct-access file medium

B Relationships between data on file must be in clearly defined structures

C A database management system must be used to operate the database

D A database must be able to support several users, each capable of accessing the

data on file to use for their own particular applications

8 Rose and Crown Inc has an authorised share capital of $100,000 made up of 25c ordinary shares It has issued 40% of these shares

During the year ended 31.12.19X9 Rose and Crown Inc make the following transactions and announcements:

(i) Pays a dividend of 5c per share on 2.2.X9 in respect of year ended 31.12.X8

(ii) Pays an interim dividend of 2c per share on 3.7.X9

(iii) Proposes a final dividend of 6c per share in respect of year ended 31.12.X9 on 13.12.X9 The cash will be paid on 5.4.2000

The charge to retained earnings for dividends in 19X9 is:

A $11,200

B $12,800

C $17,600

D $20,800

9 A trader has budgeted sales for the coming year of $300,000 He achieves a constant mark-up of 25% on cost He plans to reduce his inventory level by $14,000 over the year His purchases for the year will be:

A $211,000

B $239,000

C $226,000

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