ICAEW ACA ACCOUNTING STUDY GUIDE
Accounting - Answer -A way of recording, analysing and summarising transactions of
an entity.
Statement of Profit and Loss - Answer -It reflects the performance of a business over a
period of time.
Statement of Financial Position - Answer -It reflects the position of a business at a point
in time.
Users of Accounting - Answer -Any organisation/business/individual who needs to keep
track of their income, expenses, assets and liabilities.
Types of Business Entity - Answer -• Sole trader
• Partnership
• Limited Liability Companies
SOFP - Answer -A list of assets and liabilities of the business.
SPL - Answer -The revenue and expense of a business for the accounting period.
Purpose of SOFP - Answer -To show the total value of the net assets of the business at
the end of a period.
Purpose of SPL - Answer -To show the amount of profit and loss that the business has
made during that period.
Stakeholders for financial information - Answer -• Managers/Directors
• Owners of the company
• Trade contracts
• Finance providers
•HMRC
Capital Expenditure - Answer -Expenditure which results in the acquisition of non-
current assets or an improvement or enhancement of their earning capacity (>1yr)
(NCA)
Revenue Expenditure - Answer -Expenditure which is incurred either for trade purposes
(e.g. items for resale) or to maintain the existing earning capacity of non-current assets
(e.g repairing)
Code of Ethics (IFAC) - Answer -• Professional Behaviour
• Objectivity
, • Professional Competence & due care
• Confidentiality
• Integrity
Business entity concept - Answer -A business is a separate entity from its owner.
Capital - Answer -How much the business owes back to the owner.
Year-end capital Equation - Answer -Bal. at start of year + net profit + capital inj. -
drawings
Share capital Equation - Answer -Bal. at start of year + Further investment in shares by
new stakeholders
Retained Earnings Equation - Answer -Bal. at start of year + Profit - dividends
Accounting equation - Answer -Assets = Liability + Capital
Cost of Sales/Inventory Equation - Answer -Opening inv. + Purchases - Closing
inventory
Types of discounts - Answer -• Trade (Bulk Buy)
• Early settlement (Prompt)
Total Staff Costs Equation - Answer -Gross salaries + Employer's NICs
Components of Gross Salary - Answer -• Net Salary
• Income tax (PAYE)
• National Insurance
Conceptual Framework - Answer -Sets out the concepts that underline the preparation
& presentation of financial statements.
Objective of Financial Statements - Answer -To provide information about the reporting
entity, that is useful to a wide variety of users in making economic decisions about an
entity.
Qualitative characteristics of Conceptual Framework - Answer -• Relevance
• Faithful Representation
Ways of enhancing Qualitative characteristics - Answer -• Comparability
• Verifiability
• Timelines
• Understandability
Accounting - Answer -A way of recording, analysing and summarising transactions of
an entity.
Statement of Profit and Loss - Answer -It reflects the performance of a business over a
period of time.
Statement of Financial Position - Answer -It reflects the position of a business at a point
in time.
Users of Accounting - Answer -Any organisation/business/individual who needs to keep
track of their income, expenses, assets and liabilities.
Types of Business Entity - Answer -• Sole trader
• Partnership
• Limited Liability Companies
SOFP - Answer -A list of assets and liabilities of the business.
SPL - Answer -The revenue and expense of a business for the accounting period.
Purpose of SOFP - Answer -To show the total value of the net assets of the business at
the end of a period.
Purpose of SPL - Answer -To show the amount of profit and loss that the business has
made during that period.
Stakeholders for financial information - Answer -• Managers/Directors
• Owners of the company
• Trade contracts
• Finance providers
•HMRC
Capital Expenditure - Answer -Expenditure which results in the acquisition of non-
current assets or an improvement or enhancement of their earning capacity (>1yr)
(NCA)
Revenue Expenditure - Answer -Expenditure which is incurred either for trade purposes
(e.g. items for resale) or to maintain the existing earning capacity of non-current assets
(e.g repairing)
Code of Ethics (IFAC) - Answer -• Professional Behaviour
• Objectivity
, • Professional Competence & due care
• Confidentiality
• Integrity
Business entity concept - Answer -A business is a separate entity from its owner.
Capital - Answer -How much the business owes back to the owner.
Year-end capital Equation - Answer -Bal. at start of year + net profit + capital inj. -
drawings
Share capital Equation - Answer -Bal. at start of year + Further investment in shares by
new stakeholders
Retained Earnings Equation - Answer -Bal. at start of year + Profit - dividends
Accounting equation - Answer -Assets = Liability + Capital
Cost of Sales/Inventory Equation - Answer -Opening inv. + Purchases - Closing
inventory
Types of discounts - Answer -• Trade (Bulk Buy)
• Early settlement (Prompt)
Total Staff Costs Equation - Answer -Gross salaries + Employer's NICs
Components of Gross Salary - Answer -• Net Salary
• Income tax (PAYE)
• National Insurance
Conceptual Framework - Answer -Sets out the concepts that underline the preparation
& presentation of financial statements.
Objective of Financial Statements - Answer -To provide information about the reporting
entity, that is useful to a wide variety of users in making economic decisions about an
entity.
Qualitative characteristics of Conceptual Framework - Answer -• Relevance
• Faithful Representation
Ways of enhancing Qualitative characteristics - Answer -• Comparability
• Verifiability
• Timelines
• Understandability
