Conceptual framework and Format of FS Flashcards
Chapter 1 and 2
List 3 accounting basis and the key difference
Cash basis (default)- cash impact recorded
Accruals basis- recognise as transactions occur
Break up basis- business no longer going concern, assets recorded at recoverable amount and everything becomes current.
Key difference: CB when cash exchanged and AB when they are occurred
List fundamental characteristics of conceptual framework
Relevance (influence decisions and includes predicted/confirmatory values i.e. future/past outcomes)
Faithful Representation (complete, neutral and free from error)
List enhancing characteristics of conceptual framework
Comparability
Understandability (reasonable knowledge should understand)
Timeliness
Verifiability (different knowledgeable observers could reach consensus that depiction is faithfully represented)
Define asset, liability, equity
Asset: present resource controlled by entity with right to produce economic benefit
Liability: present obligation to transfer economic resource as result of past events. It is an obligation that cannot be avoided
Equity: residual interest in assets of entity after deducting liabilities
Give 2 measurement bases in cash flow
Historic: price paid- inflation is ignored.
Current value: price needed to pay now. Broken down into
-Fair value (price received to sell asset or pay liability)
-Value in use: value to you
How to tackle ethical questions
Which ethical principles are threatened?
Describe threat including affected parties (are they accountants e.g.)
Impact to FS
Describe actions to overcome (gather facts, speak to affected individual, escalate internally (management, board, audit committee), take external advice from ICAEW, if cannot be resolved then resign)
Threats to independence
Self-interest (interest influences judgement)
Self review (not appropriately evaluate results of judgement made previously by accountant)
Advocacy (promote client position),
Familiarity (close relationship with client or employer= accepting of work)
Intimidation
Order of SPL
Revenue
(COS)
GP
(Dist cost)
(Admin cost)
OP
(Finance cost)
Finance income
PBT
Tax
PFY
Give formula for total comprehensive income
Profit + Other CI (income/expense not in PL)
Property Revaluation goes under other CI
How to perform revaluation and give double entry
Calculate increase cost to MV (revalued cost - initial cost)
Remove a. Dep
Create revaluation surplus (this is included in SFP). Carrying amount - fair value
Dr cost Dr accumulated depreciation
Cr revaluation surplus
How do you treat interim ordinary dividends and give double entry? When do you recognise?
If approved but not declared: do not recognise in SFP
If approved and declared then recognise
Dr Retained earning
Cr Cash
Only interim affects RE not final
Describe treatment of dividends on redeemable/irredeemable preference shares and give double entry for each
Dividends on redeemable preference shares or irredeemable preference shares with cumulative dividends
o Accruals basis and interest in SPL
o Dr finance cost Cr dividend payable/cash
Dividends on irredeemable preference shares without cumulative dividends
o Treated like ordinary dividends and recognise on cash basis
Dr retained earnings Cr cash
Describe format of SOCF
Operating activities- revenue producing day today
Investing activities- purchase and sale of NCA and income from investments held
Financing activities- cash flow associated with long term financing e.g. SC and loan stock
Give SOCF adjustments
Add: finance cost, depreciation, loss, decrease in inventory and trade receivables
Minus: finance income, profit, increase in trade payable
