lOMoAR cPSD| 8392297
FAC1601
Exam pack
, lOMoAR cPSD| 8392297
1
CHAPTER 1: INTRODUCTION
This study guide provides brief notes on the topics covered in FAC1601. The topics covered
include the following:
Preparation of Financial Statements of Partnerships;
Changes in the ownership structure of Partnerships;
Liquidation of Partnerships;
Financial Statements of Close Corporations;
Introduction to Company Accounts;
Statement of Cash Flows;
Analysis and Interpretation of Financial Statements;
Branches;
Time value of money.
Financial Accounting
This course mainly covers the Financial Accounting side of broad Accounting. The two main
branches of Accounting are Financial Accounting and Management Accounting. Management
Accounting is mainly used for internal purposes whilst Financial Accounting is mainly produced
for external purposes.
Users of Financial Statements
In this course, focus will mainly be based on the preparation of Financial Statements. These are
supposed to be prepared in terms of International Financial Reporting Standards (IFRSs) as set
out by the International Accounting Standards Board (IASB), of which the South African
Institute of Chartered Accountancy is a member. IFRs are the generally accepted accounting
practices by Accountants throughout the whole world. The final accounts which shall be the
main focus are prepared in terms of International Accounting Standards (IAS) 1.
These accounts are prepared for various users who have differing needs. Examples of users and
their needs are as follows:
1. Investors: to assess the profitability of the entity in order to make a decision on whether to
invest or divest from the entity.
2. Management: to evaluate their performance as guardians of the owners wealth and
sometimes to measure their rewards where there are performance based bonuses.
3. Employees: to gauge the security of their jobs and assess the ability of the entity to pay. The
profitability of the firm can also be used as a basis for collective bargaining.
4. Government: to assess tax and the general economy and to compile national statistics.
5. Financial analysts: to make informed conclusions on their analysis.
6. Banks: to assess the ability to repay loans and overdrafts and to measure their likely liquidity
positions as businesses are the major providers of money to banks through their deposits.
FAC1601
Exam pack
, lOMoAR cPSD| 8392297
1
CHAPTER 1: INTRODUCTION
This study guide provides brief notes on the topics covered in FAC1601. The topics covered
include the following:
Preparation of Financial Statements of Partnerships;
Changes in the ownership structure of Partnerships;
Liquidation of Partnerships;
Financial Statements of Close Corporations;
Introduction to Company Accounts;
Statement of Cash Flows;
Analysis and Interpretation of Financial Statements;
Branches;
Time value of money.
Financial Accounting
This course mainly covers the Financial Accounting side of broad Accounting. The two main
branches of Accounting are Financial Accounting and Management Accounting. Management
Accounting is mainly used for internal purposes whilst Financial Accounting is mainly produced
for external purposes.
Users of Financial Statements
In this course, focus will mainly be based on the preparation of Financial Statements. These are
supposed to be prepared in terms of International Financial Reporting Standards (IFRSs) as set
out by the International Accounting Standards Board (IASB), of which the South African
Institute of Chartered Accountancy is a member. IFRs are the generally accepted accounting
practices by Accountants throughout the whole world. The final accounts which shall be the
main focus are prepared in terms of International Accounting Standards (IAS) 1.
These accounts are prepared for various users who have differing needs. Examples of users and
their needs are as follows:
1. Investors: to assess the profitability of the entity in order to make a decision on whether to
invest or divest from the entity.
2. Management: to evaluate their performance as guardians of the owners wealth and
sometimes to measure their rewards where there are performance based bonuses.
3. Employees: to gauge the security of their jobs and assess the ability of the entity to pay. The
profitability of the firm can also be used as a basis for collective bargaining.
4. Government: to assess tax and the general economy and to compile national statistics.
5. Financial analysts: to make informed conclusions on their analysis.
6. Banks: to assess the ability to repay loans and overdrafts and to measure their likely liquidity
positions as businesses are the major providers of money to banks through their deposits.
