FAC1502 FINANCIAL ACCOUNTING STANDARD
EXAMS ANSWERS AND QUESTIONS SET A+
✔✔ELEMENTS OF FNANCIAL STATEMENTS - ✔✔Financial Position - Assets;
Liabilities; Equity; Financial Performance - Income; Expenses
✔✔RECOGNITION OF ELEMENTS OF FINANCIAL STATEMENTS - ✔✔1. Concept of
Profitability - Used in the recognition criteria
2. Reliability of Measure - An item must possess a cost or value that can be measured
reliably before it can be recognized.
✔✔ACCOUNTING ENTITY - ✔✔Is the organization for with financial data are to be
collected.
✔✔FINANCIAL RESULT - ✔✔Reported in the financial statements. Statemen of
Financial Position; Statement of Profit or Loss and Other Comprehensive Income;
Statement of Changes in Equity; A Statement of Cash Flows; Accounting Policies and
Notes.
✔✔FINANCIAL PERIOD - ✔✔The timeframe used to generate financial statements
during the organization's existence. Statements prepared for 6 months or less are
usually used for internal management; iplanning or control purposes. Statements
prepared annually are used for external parties and internal use.
✔✔FINANCIAL POSITION - ✔✔Assets = Equity + Liabilities
✔✔NET ASSET VALUE - ✔✔Assets - Liabilities
✔✔THE DOUBLE ENTRY SYSTEM - ✔✔BAE : Basic Accounting Equation. Each
transaction must be recorded in such a way the equation remains balanced.
✔✔THE FINANCIAL PERFORMANCE - ✔✔Income - Expenses
Profit or Loss = Income - Expenses
, ✔✔INCOME - ✔✔Revenue and Gains. Income increases in economic benefits during
the accounting period in the form of inflows or enhancements of assets or decreases of
liabilities that result in increases in equity.
✔✔EXPENDITURE - ✔✔Normal expenses and losses. Is incurred o earn income.
Expenses are decreases in economic benefits during an accounting period, in the forms
of outflows. Depletions of assets or incurrences of liabilities which results in decrease in
equity.
✔✔INFLUENCE OF PROFIT OR LOSS ON EQUITY - ✔✔Income (Profit) increases and
expenditure (Losses) decreases the owner's interest.
Equity = Capital + Income - Expenses
Equity = Capital + Net Profit
Equity = Capital - Net Profit
✔✔STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME -
✔✔Reflects the financial performance for financial period. The incoe and expenditure
accounts are called nominal accounts.
✔✔STATEMENT OF CHANGES IN EQUITY - ✔✔Reflects changes in capital
contributions; change in income and equity. The balance of the equity at the end of the
financial period is then shown in the statement of financial position. Profit (+) increases
equity; Losses (-) decrease equity.
✔✔ACCOUNTING POLICIES AND EXPLANATORY NOTES - ✔✔Prepared to give
additional information on items appearing in the financial statements. Usually shown
after the statement of cash flows.
✔✔THE EFFECT OF TRANSACTIONS ON THE BASIC ACCOUTING EQUATION
(BAE) - ✔✔A transaction is an agreed upon transfer of value from one party to another
which affects (changes) the amounnt; Nature of composition of an entity's assets,
liabilities or equity.
✔✔THE GENERAL LEDGER ACCOUNT - ✔✔An account is opened in the general
ledger for every asset; liability and equity item. Every account appears on its own on a
plage in the ledger and each account is given a number, which is known as a folio
number.
✔✔THE TRIAL BALANCE - ✔✔A summary of all the financial data in the account
ledgers that ensures the figures are correct and balanced. An account with a debit (dr)
balance is shown on the debit (dr) side of the trial balance and account with a credit (Cr)
is hown on the credit (Cr) side of the trial balance.
EXAMS ANSWERS AND QUESTIONS SET A+
✔✔ELEMENTS OF FNANCIAL STATEMENTS - ✔✔Financial Position - Assets;
Liabilities; Equity; Financial Performance - Income; Expenses
✔✔RECOGNITION OF ELEMENTS OF FINANCIAL STATEMENTS - ✔✔1. Concept of
Profitability - Used in the recognition criteria
2. Reliability of Measure - An item must possess a cost or value that can be measured
reliably before it can be recognized.
✔✔ACCOUNTING ENTITY - ✔✔Is the organization for with financial data are to be
collected.
✔✔FINANCIAL RESULT - ✔✔Reported in the financial statements. Statemen of
Financial Position; Statement of Profit or Loss and Other Comprehensive Income;
Statement of Changes in Equity; A Statement of Cash Flows; Accounting Policies and
Notes.
✔✔FINANCIAL PERIOD - ✔✔The timeframe used to generate financial statements
during the organization's existence. Statements prepared for 6 months or less are
usually used for internal management; iplanning or control purposes. Statements
prepared annually are used for external parties and internal use.
✔✔FINANCIAL POSITION - ✔✔Assets = Equity + Liabilities
✔✔NET ASSET VALUE - ✔✔Assets - Liabilities
✔✔THE DOUBLE ENTRY SYSTEM - ✔✔BAE : Basic Accounting Equation. Each
transaction must be recorded in such a way the equation remains balanced.
✔✔THE FINANCIAL PERFORMANCE - ✔✔Income - Expenses
Profit or Loss = Income - Expenses
, ✔✔INCOME - ✔✔Revenue and Gains. Income increases in economic benefits during
the accounting period in the form of inflows or enhancements of assets or decreases of
liabilities that result in increases in equity.
✔✔EXPENDITURE - ✔✔Normal expenses and losses. Is incurred o earn income.
Expenses are decreases in economic benefits during an accounting period, in the forms
of outflows. Depletions of assets or incurrences of liabilities which results in decrease in
equity.
✔✔INFLUENCE OF PROFIT OR LOSS ON EQUITY - ✔✔Income (Profit) increases and
expenditure (Losses) decreases the owner's interest.
Equity = Capital + Income - Expenses
Equity = Capital + Net Profit
Equity = Capital - Net Profit
✔✔STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME -
✔✔Reflects the financial performance for financial period. The incoe and expenditure
accounts are called nominal accounts.
✔✔STATEMENT OF CHANGES IN EQUITY - ✔✔Reflects changes in capital
contributions; change in income and equity. The balance of the equity at the end of the
financial period is then shown in the statement of financial position. Profit (+) increases
equity; Losses (-) decrease equity.
✔✔ACCOUNTING POLICIES AND EXPLANATORY NOTES - ✔✔Prepared to give
additional information on items appearing in the financial statements. Usually shown
after the statement of cash flows.
✔✔THE EFFECT OF TRANSACTIONS ON THE BASIC ACCOUTING EQUATION
(BAE) - ✔✔A transaction is an agreed upon transfer of value from one party to another
which affects (changes) the amounnt; Nature of composition of an entity's assets,
liabilities or equity.
✔✔THE GENERAL LEDGER ACCOUNT - ✔✔An account is opened in the general
ledger for every asset; liability and equity item. Every account appears on its own on a
plage in the ledger and each account is given a number, which is known as a folio
number.
✔✔THE TRIAL BALANCE - ✔✔A summary of all the financial data in the account
ledgers that ensures the figures are correct and balanced. An account with a debit (dr)
balance is shown on the debit (dr) side of the trial balance and account with a credit (Cr)
is hown on the credit (Cr) side of the trial balance.
