Tutorial Letter 501/3/2022
Elementary Financial Accounting and
Reporting
FAC1602
Semesters 1 & 2
Department of Financial Accounting
, CONTENTS
Introduction and overview of the module ......................................................... ii
LEARNING UNIT 1
Introduction to the preparation of financial statements .......................... 1
LEARNING UNIT 2
Financial statements of a sole proprietorship ........................................ 24
LEARNING UNIT 3
Establishment and financial statements of a partnership ...................... 46
LEARNING UNIT 4
Changes in the ownership structure of partnerships ............................. 69
LEARNING UNIT 5
Close corporations ................................................................................ 86
LEARNING UNIT 6
Statement of cash flows ........................................................................ 129
LEARNING UNIT 7
Branches ............................................................................................... 155
ii
, FAC1602/501/3/2022
Introduction and overview of the module
1. Word of welcome
Dear Student
We are pleased to welcome you to this module and hope that you will find the content both
interesting and rewarding. We shall do our best to assist you to master this module and we
recommend that you start studying immediately after enrolment. Accounting is a subject that
requires continued exercise by working through many examples and you will be required to
work continually throughout the semester.
First-year accounting at UNISA consists of the following modules, namely FAC1502 and
FAC1601 or FAC1602. If you aim to become a chartered accountant (CA) or plan to include
second- and third-year Financial Accounting modules in your degree, the FAC1601 module is
compulsory. The same applies to other qualifications where second- and third-year Financial
Accounting is required. Completing FAC1502 and FAC1601 successfully, will allow you to
enrol for the second-year modules FAC2601 and FAC2602. If your focus is certain diplomas
and other Bachelor of Commerce degrees where you only need first-year Financial
Accounting, we recommend that you enrol for the FAC1602 module. However, ensure that
FAC2601 and FAC2602 are not included in your degree’s curriculum as only the FAC1601
allows access to further studies in Financial Accounting.
2. Overview of FAC1602 and assumed knowledge from FAC1502
FAC1602 concerns itself with the issues of accounting reporting for different entities and builds
on the learning outcomes of FAC1502. You will remember that in FAC1502 the following topics
were covered:
iii
, Basic principles of accounting
Including the nature of accounting, financial position and performance,
double entry and the accounting process
Collecting and processing accounting data
FAC1502
Including the processing of data and adjustments, closing-off
procedures and preparing financial statements
Accounting for current and non-current assets
Including cash and cash equivalents, trade and other receivables,
inventory, property, plant and equipment, and other non-current assets
Accounting for current and non-current liabilities
Accounting reporting
Including the financial statements of a sole proprietor, non-profit entities
and incomplete records
FAC1502 taught the basic bookkeeping functions and introduced you to the concepts,
principles and procedures of accounting. It is important to realise that FAC1502 forms the
foundation for all other financial accounting modules. The knowledge that you gained in
FAC1502 forms the building block of this module and cannot be repeated. If you need to
refresh your memory on these concepts, please refer to your FAC1502 guide and other
supplementary learning material for that module.
Although the aim is not to provide an exhaustive list of concepts dealt with in FAC1502, we
provide you with a summary of the most important ones to enable you to refer with ease:
• Value-added tax (VAT) – section 5.10 in the FAC1502 guide and section 5.4 in the
textbook. Remember that the input and output VAT accounts are closed off to a VAT
control account which can be either a debtor (if VAT input is greater than VAT output for
the period) or a creditor (when VAT output is greater than VAT input for the period). In
this module, we refer to the VAT debtor account as VAT receivable and the VAT creditor
account as VAT payable.
• The recording of depreciation – section 6.3 and section 11.5 – 7 in the FAC1502 guide
and section 11.7 in the textbook. Familiarise yourself with the reason for depreciation,
the journal entries to provide for depreciation and the different methods that can be used
iv
Elementary Financial Accounting and
Reporting
FAC1602
Semesters 1 & 2
Department of Financial Accounting
, CONTENTS
Introduction and overview of the module ......................................................... ii
LEARNING UNIT 1
Introduction to the preparation of financial statements .......................... 1
LEARNING UNIT 2
Financial statements of a sole proprietorship ........................................ 24
LEARNING UNIT 3
Establishment and financial statements of a partnership ...................... 46
LEARNING UNIT 4
Changes in the ownership structure of partnerships ............................. 69
LEARNING UNIT 5
Close corporations ................................................................................ 86
LEARNING UNIT 6
Statement of cash flows ........................................................................ 129
LEARNING UNIT 7
Branches ............................................................................................... 155
ii
, FAC1602/501/3/2022
Introduction and overview of the module
1. Word of welcome
Dear Student
We are pleased to welcome you to this module and hope that you will find the content both
interesting and rewarding. We shall do our best to assist you to master this module and we
recommend that you start studying immediately after enrolment. Accounting is a subject that
requires continued exercise by working through many examples and you will be required to
work continually throughout the semester.
First-year accounting at UNISA consists of the following modules, namely FAC1502 and
FAC1601 or FAC1602. If you aim to become a chartered accountant (CA) or plan to include
second- and third-year Financial Accounting modules in your degree, the FAC1601 module is
compulsory. The same applies to other qualifications where second- and third-year Financial
Accounting is required. Completing FAC1502 and FAC1601 successfully, will allow you to
enrol for the second-year modules FAC2601 and FAC2602. If your focus is certain diplomas
and other Bachelor of Commerce degrees where you only need first-year Financial
Accounting, we recommend that you enrol for the FAC1602 module. However, ensure that
FAC2601 and FAC2602 are not included in your degree’s curriculum as only the FAC1601
allows access to further studies in Financial Accounting.
2. Overview of FAC1602 and assumed knowledge from FAC1502
FAC1602 concerns itself with the issues of accounting reporting for different entities and builds
on the learning outcomes of FAC1502. You will remember that in FAC1502 the following topics
were covered:
iii
, Basic principles of accounting
Including the nature of accounting, financial position and performance,
double entry and the accounting process
Collecting and processing accounting data
FAC1502
Including the processing of data and adjustments, closing-off
procedures and preparing financial statements
Accounting for current and non-current assets
Including cash and cash equivalents, trade and other receivables,
inventory, property, plant and equipment, and other non-current assets
Accounting for current and non-current liabilities
Accounting reporting
Including the financial statements of a sole proprietor, non-profit entities
and incomplete records
FAC1502 taught the basic bookkeeping functions and introduced you to the concepts,
principles and procedures of accounting. It is important to realise that FAC1502 forms the
foundation for all other financial accounting modules. The knowledge that you gained in
FAC1502 forms the building block of this module and cannot be repeated. If you need to
refresh your memory on these concepts, please refer to your FAC1502 guide and other
supplementary learning material for that module.
Although the aim is not to provide an exhaustive list of concepts dealt with in FAC1502, we
provide you with a summary of the most important ones to enable you to refer with ease:
• Value-added tax (VAT) – section 5.10 in the FAC1502 guide and section 5.4 in the
textbook. Remember that the input and output VAT accounts are closed off to a VAT
control account which can be either a debtor (if VAT input is greater than VAT output for
the period) or a creditor (when VAT output is greater than VAT input for the period). In
this module, we refer to the VAT debtor account as VAT receivable and the VAT creditor
account as VAT payable.
• The recording of depreciation – section 6.3 and section 11.5 – 7 in the FAC1502 guide
and section 11.7 in the textbook. Familiarise yourself with the reason for depreciation,
the journal entries to provide for depreciation and the different methods that can be used
iv
