Ch 8 - Intro to Single Entity Accounts Flashcards
IAS 1 requires “other comprehensive income” to be split between two headings?
- items that will NOT be reclassified to P&L
- items that may be reclassified subsequent to P&L
What will F1 students mainly deal with in the SOPL “Other Comprehensive Income”
gains or losses arising from REVALUATION of PPE and should be shown as “items that will NOT be reclassified to profit or loss”
What does the statement of changes in equity provide? SOCIE
summary of all changes in equity.
- This includes the EFFECT of share issues and dividends.
- This statement is useful since the total change in equity reflects the INCREASE or DECREASE in the net assets of the entity in the period and so reflects the change in the wealth of the entity in the period.
What does share capital include in SOFP?
ORDINARY/EQUITY SHARES
* own a % of the entities net assets
PREFERENCE SHARES
* own a % of the entities share capital
What are inventories valued at?
LOWER of Cost or Net Realised Value.
NRV - What you would get for the stock LESS any costs.
If stock is damaged and you get less for it and there are repair costs, what do you do?
an adjustment to closing inventory to bring it to the LOWER of :-
Cost or Net Realisable Value
What is IAS1?
Presentation of Financial Statements.
IAS1 prescribes what a set of financial statements should CONTAIN and how they should be PRESENTED.
What is the purpose of financial statements?
Provide info about the financial position, performance and cash flows of an entity in order to make economic decisions.
These statements will also show how effectively MANAGEMENT have looked after the resources of the entity and assess stewardship.
Define the complete set of financial statements for IAS1?
- Statement of Financial Position
- Statement of Profit or Loss
- Statement in changes of equity
- Statement of cash flows.
What is the minimum required info to be presented in the Statement of Profit or loss and other comprehensive income as stated by IAS 1?
a) revenue
b) finance costs
c) share of profits and losses
d) tax expense
e) a single amount for the total of discontinued operations
What is the main consideration when deciding to include an additional line in SOPL?
MATERIALITY - the nature and function of the item?
What are Net Assets?
AKA Net Worth
Value of your assets minus total of your liabilities.
What you own - what you owe.
The SOPL (Statement of Profit or Loss) is what account?
Trading Account
The SOFP (Statement of Financial Position) AKA BS is what account?
Capital Account
What does OCI stand for?
Other Comprehensive Income
What does SOCIE stand for?
Statement of Changes In Equity
What is the double entry for the ISSUE of shares?
DR - Cash / Bank
CR - Share Capital (nominal value)
CR - Share premium (excess of proceeds above nominal value)
As in a shareholder buys shares.
Preference Shares explain?
These shares usually entitle the holder to a fixed rate of dividend, subject tot eh conditions of issue and RANK ahead of ordinary shares for payment of a dividend if profits are available.
Explain Equity?
Equity is the net investment in the corporate made by shareholders. It consists of all share capital and reserves accounts.
Explain Share Capital?
The owners investment is in the form of shares. There are 2 common forms of shares, Ordinary or Preference.
Ordinary (Equity) Shares explain?
These shares entitle the holders to the remaining distributable profits at the discretion of the Directors. Shareholders will receive this in the form of a dividend.
Why is a SOCIE required?
The SOCIE represents movements in the owners interests in the company. As equity helps the shareholders value their wealth its is important to ensure that they understand any movements in these balances.
What is the double entry for the PAYMENT of Ordinary Shares?
DR - Retained earnings (SOCIE)
CR - Cash/bank
Explain the FUNCTION METHOD?
The Function Method refers to the way expenses are classified based on the primary business activities - grouping costs according to their function. An INCOME STATEMENT will display expenses grouped by their respective functions. e.g. the salary paid to a sales rep would be classified as a “selling expense” under the function method.
Other comprehensive income mainly includes any changes in????
REVALUATION SURPLUS
IAS 1 requires Other Comprehensive INCOME to be split between 2 headings???
- items that will not be reclassified to P/L and
- items that may be reclassified subsequently to P/L
Total comprehensive income is???
the profit or loss for the period plus other comprehensive income.
Other comprehensive income (OCI) ????
includes income (gains) and expenses (losses) that are not recognised in P/L - they are recorded in RESERVES rather than as an element of the profit for the period.
F1 will mainly deal with ITEMS THAT WILL NOT BE RECLASSIFIED TO P&L….
this is gains or losses arising from revaluations of Property, P&Equip in Other Comprehensive Income.
F2 will deal with ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO P&L could be …
- exchange differences on translating foreign operations
- fair value through P&L financial assets
- cash flow hedges and
- income relating to any items reclassified.
What should not be shown in the Statement of Changes in Equity SOCIE?
Dividends proposed after the reporting period - Should not be shown.
Which item would be shown in “Other Comprehensive Income” ?
Revaluation surplus
An asset should be classified as a CURRENT ASSETS when it is any of the following:-
- expected to be realised in, or intended for sale or consumption of the entity’s normal operating cycle;
- held primarily for trading purposes;
- expected to be realised within 12 months of the end of the reporting period;
- cash or cash equivalent.
Current assets are?
assets that a business holds for a short period of time, usually less than a year.
Give examples of current assets?
- Cash
- Cash equivalents
- Accounts receivable
- Inventory
- Marketable securities
- Prepaid expenses
What is the purpose of IAS 1?
Prescribes what a set of financial statements should CONTAIN and how they should be PRESENTED.
