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Accounting A2 Level Textbook Series Theory and Practice Book Art #116
Subject Code : 9706
Author : M. Nauman Malik
Edition : 6th Edition
₨ 1,750
₨ 1,575
Availability: 10 in stock
Accounting A Level Theory And Practice Book
The globalized frame work of Cambridge International Advanced Level, in practice over 125 countries, has led to the introduction of an international format and layout for all its syllabuses. With a thorough discussion of the basic double entry principles for the beginners, the ‘A2 Accounting – Theory & Practice’ is also useful for those who have some knowledge.
The strengths and weaknesses of accounting practices are reinforced by a set of Review Questions at the end of each chapter, enabling the students to put, what is learnt, into practice. These Questions have been developed by the author and are not taken from past exam papers and Accounting A2 Level Theory and Practice Books.
This book is completely revised and updated to fully comply with the new CIE Advanced Level Accounting syllabus for 2016-18. Five new chapters have been included in the book in view of the new syllabus.
These topics include ’Auditing and stewardship of limited companies’, ‘Consignment Accounting, Joint Ventures’, ‘Activity based costing’ and ‘Computerized accounts’.
In addition, topics like ‘manufacturing accounts’, ‘non-profit organization have been shifted from ‘AS Accounting – theory and practice’ to this book. New material on overhead costing is also added to the topic ‘standard costing’. As syllabus contents relating to topics like ‘ratios’ and ‘Accounting standards’ have been reduced in new syllabus so these topics have been rewritten accordingly. Solutions to odd numbered questions are given in the appendix at the end of the book.
In addition solutions to even numbered questions are available in a separate manual. Teachers using “A2 Accounting – Theory & Practice” as a text book, may get the manual by applying officially on a school letterhead. Providing the students with a solid foundation in the “Why” as well as the “How” of accounting concepts, the emphasis is put on understanding rather than mere cramming.
A brief list of learning objectives at the beginning of each chapter will assist the readers to determine the things they should understand while going through the chapter.
Hence, checking back may help them to identify weak areas which still need thorough review. Constructive criticism and suggestions to make the subsequent editions more useful would be appreciated and thankfully acknowledged.
TABLE OF CONTENTS
PREFACE
CHAPTER 1 CHANGES IN PARTNERSHIPS
1.1 Admission of a new partner
1.2 Retirement or Death of an Existing Partner
1.2.1 Final Settlement of Retired or Deceased Partner's Capital
1.3 Changes in Profit-Sharing Arrangements
1.4 Apportionment of Profits
1.5 Adjustments for Goodwill
1.5.1 Factors Affecting the Value of Goodwill
1.5.2 Types of Goodwill 0
1.5.3 Valuation of Inherent Goodwill
1.5.4 Why is goodwill accounted for in a partnership?
1.5.5 Accounting Treatment of Goodwill
1.5.6 Why is Goodwill written off immediately?
1.6 Revaluation of Assets and Liabilities
1.6.1 Opening of a Revaluation Account
1.6.2 Profit or Loss on Revaluation
1.6.3 Revaluation of Non-Current Assets with Accumulated Depreciation
1.6.4 Values to Remain Unaltered in Books
1.7 CAPITAL IN PROFIT AND LOSS-SHARING RATIOS
REVIEW QUESTIONS
CHAPTER 2 BUSINESS MERGERS
2.1 Merger of Businesses
2.2 Reasons (Advantages) of Mergers
2.3 Disadvantages of Mergers
2.4 Accounting Treatment of Merger of Businesses
2.4.1 Valuation of Goodwill
2.4.2 Revaluation of Assets and Liabilities
2.4.3 Adjustments to Capital Accounts
2.4.4 Statement of Financial Position After the Merger
2.4.5 Evaluating Business Performance Post-Merger
REVIEW QUESTIONS
CHAPTER 3 DISSOLUTION AND SALE OF PARTNERSHIPS
3.1 Reasons for Dissolving a Business
3.2 Realisation Account
3.3 Accounting Treatment on Dissolution
3.3.1 Assets on Dissolution
3.3.2 Goodwill on Dissolution
3.3.3 Liabilities on Dissolution
3.3.4 Expenses on Dissolution
3.3.5 Profit (loss) on Realisation Account
3.3.6 Partners'Loans Accounts on Dissolution
3.3.7 Current Account Balances on Dissolution
3.3.8 Cash or Bank Balance on Dissolution
3.3.9 Partners' Capital Accounts on Dissolution
3.4 DIFFERENCE BETWEEN DISSOLUTION AND SALE OF BUSINESS
3.5 Accounting Procedure on Sale of Business
REVIEW QUESTIONS
CHAPTER 4 BUSINESS ACQUISITIONS
4.1 REA50NS FOR PURCHASE OF BUSINESS
4.2 Advantages of Acquisitions
4.3 Disadvantages of Acquisitions
4.4 Goodwill
4.4.1 Why does Goodwill arise?
4.5 Internally Developed Goodwill
4.6 Negative Goodwill
4.7 Difference between the Purchase of a Business and the purchase of assets
4.8 Components of purchase consideration
4.8.1 Assets Taken Over
4.8.2 Liabilities Taken Over
4.9 Dissolution Expenses
4.10 Purchase of a Sole Trader Business by a Company
4.11 Purchase of a Partnership's Business by a Company
4.12 Entries to Record the Purchase of Business
4.13 Cash and Bank Balances of Partnerships on Purchase
4.14 Return on Investment
REVIEW QUESTIONS
CHAPTER 5 LIMITED COMPANIES - SHARES & DEBENTURES
5.1 THE NEED FOR COMPANIES
5.2 CAPITAL FOR A COMPANY
5.2.1 Ordinary Shares
5.3 Prices of a Share
5.3.1 Face Value
5.3.2 Issue Price
5.3.3 Book Value
5.3.4 Market Value
5.4 Selling Shares to the General Public
5.4.1 Issue of Shares at Par
5.4.2 Issue of Shares at Premium (at a price more than face value)
5.5 Rights Issue
5.5.1 Advantages of Rights Issue
5.5.2 Disadvantages of Rights Issue
5.5.3 Advantages of Rights Issue for Shareholders
5.6 Reserves
5.6.1 Capital Reserves
5.6.2 Revenue Reserves
5.7 BonusorScrip Issue
5.7.1 Reasons for Bonus Issue
5.5.2 Effect on Earnings per Share (EPS)
5.7.3 Advantages of Bonus Issue
5.7.4 Disadvantages of Bonus Issue
5.8 Difference between Rights and Bonus issue
5.9 Debentures
5.10 Issue of Loans and Debentures
REVIEW QUESTIONS
CHAPTER 6 LIMITED COMPANIED-FINANCIAL STATEMENTS
6.1 Financial Statements of Limited Companies
6.2 Published Accounts of Limited Companies
6.2.1 Role of IAS 1 in Preparation of Accounts
6.2.2 Accounting Concepts Applied in Preparation of Accounts
6.2.3 Structure and Content of Financial Statements
Reporting Period
Statement of profit or loss
Statement of Financial Position
Statement of Changes in Equity
Dividends on Ordinary Shares
Transfer to General Reserve
Why Company Accounts are Published?
Limitations of Published Company Accounts
Non-Current Assets Schedule
Components of a Non-Current Assets Schedule
Directors' Report
REVIEW QUESTIONS
CHAPTER 7 STATEMENT OF CASH FLOWS
Classifications of Cash Flows - An example
Cash and Cash Equivalents
Cash
Cash Equivalents
Bank Overdrafts
Preparation of a Statement of Cash Flows
Cash Flow from Operating Activities
Importance of Cash Flow from Operating Activities
Calculation of Cash Flow from Operating Activities
Cash from Operating Activities in Direct Method
Cash from Operating Activities in Indirect Method
Calculation of Profit from Operations
Investing Activities
Financing Activities
Cash Flow at a Glance
Uses of a Statement of Cash Flows
Limitations of a Statement of Cash Flows
Users of Statement of Cash Flows
Disclosure of Non-Cash Activities
REVIEW QUESTIONS
CHAPTER 8 INTERNATIONAL ACCOUNTING STANDARDS
IAS 1: Presentation of Financial Statements
IAS 2: Inventories
Inventory Valuation
Inventory Valuation Methods
IAS 7: STATEMENT OF CASH FLOWS
IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors
Accounting Policies
Accounting Principles
Accounting Bases
Consistency of Accounting Policies
Prior Period Errors
IAS 10: Events after the Reporting Period
Adjusting Events
Non-Adjusting Events
IAS 16: Property, Plant, and Equipment
Recognition of the Assets
Measurement of the Assets
Depreciation
Disclosure in the financial statements
IAS 36: IMPAIRMENT OF ASSETS
Impairment Loss
Carrying Value
Recoverable Value
Cash Generating Unit
Indications of Impairment
IAS 37: PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provision
Difference between Provisions and Reserves
Contingent Liability
Contingent Asset
IAS 38: INTANGIBLE ASSETS
Research and Development Costs
Recognition of Intangible Assets
Initial Measurement of Intangible Assets
Subsequent Measurement of Intangible Assets
REVIEW QUESTIONS
CHAPTER 9 AUDITING AND STEWARDSHIP
Stewardship
Role of Directors as Stewards
Purpose of an end of year Audit
Who needs an end-of-year Audit?
Internal and External Audit
Difference between Internal and External Audit
Advantag es and D isadvantages of Au dit
Role of Auditors
Auditors' Report
Unqualified Opinion (Unqualified Audit Report)
Qualified Opinion (Qualified Audit Report)
Adverse Opinion (Adverse Audit Report)
What is not expected from Auditors
True and Fair View
Directors' Report
Difference Between the Duties of Directors and Auditors
CHAPTER 10 ACCOUNTING RATIOS
Financial Ratios
Analysis of Ratios
Comparing One Year with Another {Trend or Inter-Year Analysis)
Comparing one Business with another Business (Inter-firm Comparison)
Demonstration of Ratios
Ratios in Advanced Level Syllabus
Working Capital Cycle
Net Working Assets to Sales (revenue)
Earnings per Share
Price-Earnings (P/E) ratio
Dividend per Share
Dividend yield ratio
Dividend Cover
Interest Cover
Gearing
Uses of Ratio Analysis
LIMITATIONS OF RATIO ANALYSIS
Users of Financial Ratios
REVIEW QUESTIONS
CHAPTER 11 CLUBS AND SOCIETIES
Comparison between profit and Non-Profit making Organisations
Incomes and Expenses of Clubs and Societies
Incomes of Clubs and Societies
Expenses of Clubs and Societies
Some Peculiar Terms of Clubs and Societies
Life Subscription
Legacy
Gift
Grants and Donations
Accounting by Clubs and Societies
Receipts and Payments Account
Income and Expenditure Account
Differences between Receipts and Payment A/c & Income and Expenditure A/c
Statement to Calculate Profit or Loss
Income and Expenses on Same Head
Calculation of Incomes/Expenses to be shown in Income and Expenditure Account
Accounting for Subscriptions
Preparation of Financial Statements
REVIEW QUESTIONS
CHAPTER 12 MANUFACTURING BUSINESSES
The Prime Cost Section
Raw Materials Cost
Direct Labour Cost
Other Direct Expenses
Factory (Indirect) Overheads
Purpose of Manufacturing Accounts
Statement of Profit or Loss
Statement of Financial Position
Factory (Manufacturing) Profit
Benefits of Transferring Goods at Production Cost plus Factory Profit.
Drawbacks of Transferring Goods at Market Price
Accounting Treatment of Factory Profit
Provision for Unrealised Profit
REVIEW QUESTIONS
CHAPTER 13 COMPUTERISED ACCOUNTING SYSTEMS
Manual Accounting
Challenges Faced in Manual Accounting
The Advent of Computerised Accounting
Use of Computerised Accounting Systems in Recording Financial Transactions
The Advantages and Disadvantages of Introducing a Computerised Accounting System
The Advantages/Uses of Introducing a Computerised Accounting System
Disadvantages/Limitations of Introducing a Computerised Accounting System
Differences between Manual and Computerised Accounting Systems
Security of Data in Computerised Accounts
Transferring Business Accounts to a Computerised Accounting System
Potential Risks and Threats to Data Integrity
INTEGRALITY OF DATA DURING TRANSFER TO AND IN COMPUTERISED ACCOUNTS
CHAPTER 14 ETHICAL CONSIDERATIONS
Ethics Relating to the Practice of Accounting
Professional ethics
What is Ethical?
Fundamental Ethical Principles
The Problems of Poor Ethics in Accounting
The Ethical Impact of Accountants and Auditors on Business
The Ethical Impact of Accountants and Auditors on Stakeholders
Social implications of decision-making
Ethical Conflict
REVIEW QUESTIONS
CHAPTER 15 BUDGETING AND BUDGETARY CONTROL
Difference between Budgets and Budgetary Control
Difference between Standard Costs and Budgets
Advantages of Preparing Budgets from Standard Costs
Advantages of budgetary Control system
Limitations of Budgetary Control System
Advantages and Disadvantages of Preparing Budgets Using Spreadsheets
Effects of Limiting Budget Factors on the Preparation of Budgets
Behavioural Aspects of Budgetary Control System
Sales Budget
Production Budget
Purchases Budget
Purchase Budget for Manufacturing Firms
Purchase Budget for Trading Firms
Direct Labour Budget
Trade Receivables Budget
Trade Payables Budget
Cash Budget
Uses of a Cash Budget
Actions to Avoid Cash Shortages
Master Budget
Budgeted Statement of profit or loss
Budgeted Statement of Financial Position
Fixed Budget
Flexible Budget
Steps for preparing a flexible budget
Benefits of a flexible budget over a fixed Budget
The Significance of Non-Financial Factors in Budgeting
REVIEW QUESTIONS
CHAPTER 16 INVESTMENT APPRAISAL
Reasons for Making Capital Investment Decisions,
Methods for Capital Investment Appraisal
Accounting Rate of Return
Advantages of Accounting Rate of Return
Disadvantages of Accounting Rate of Return
Payback Period
Payback Period with Even Cash Flows
Payback Period with Uneven Cash Flows
Advantages of Payback
Disadvantages of Payback
Time Value of Money
Compound Interest
Present Value
Cost of Capital
Net Present Value
Selection of Project
Advantages of Net Present Value
Disadvantages of Net Present Value
Internal Rate of Return
Which Rate is Better?
Calculation of IRR
Advantages of Internal Rate of Return
Disadvantages of Internal Rate of Return
NPVAND IRR: WHICH IS BETTER?
Why is NPV preferred?
Sunk Cost
Relevant Costs
NON-FlNANCIAL FACTORS INVOLVED IN CAPITAL INVESTMENT DECISIONS
Present Value Table
REVIEW QUESTIONS
CHAPTER 17 ACTIVITY BASED COSTING
Traditional Costing in Early Business Models
Overhead Allocation in Conventional Costing
Limitations of Conventional Costing
Impact of Automation on Cost Allocation
Introduction of Activity-Based Costing (ABC)
Principles and Methodology of ABC
Costing Issues in Conventional Costing
Application of Activity Based Costing
Difference between Conventional and Activity Based Costing
Terms Frequently Used in Activity Based Costing
Activity
Cost Drivers
Hierarchy of Activities
Unit (output) Level Activities
Batch Level Activities
Product (Product Sustaining) Level Activities
Facility (Facility Sustaining) Level Costs
Customer-Level Activities
Examples of Cost Drivers
Uses of Activity Based Costing
Limitations of Activity Based Costing
Steps for Implementing Activity Based Costing
Role of Activity Based costing in the Non-manufacturing sector
REVIEW QUESTIONS
CHAPTER 18 STANDARD COSTING
Standard Costing System
Advantag es of Standard Costing
Limitations of Standard Costing
Setting Standard Costs
Variance Analysis
Total 'Direct Mate rial Cost Variance'
Material Price Variance
Material Usage Variance
Symbols Used for Calculating Direct Material Variances
Typical Causes of Material Variances
Total direct Labour Cost Variance
Labour Rate Variance
Labour Efficiency Variance
Symbols Used for Calculating Direct Labour Variances
Typical Causes of Labour Variances
Total Fixed Overhead Variance
Fixed overhead expenditure (spending) variance
Fixed Overhead Volume Variance
Fixed Overhead Efficiency Variance
Fixed Overhead Capacity Variance
Typical Causes of Fixed Overhead Variances
Sales Variances
Sales Price Variance
Sales Volume Variances
Typical Causes of Sales Variances
Fixed Budget
Flexible Budget
Steps for preparing a flexible budget
Benefits of a flexible budget over a fixed Budget
Reconciliation of Budgeted and Actual Data
Reconciliation of Budgeted and Actual Costs
Reconciliation of Budgeted and Actual Profits
REVIEW QUESTIONS
SOLUTIONS TO ODD NUMBERED QUESTIONS
KEY TO EVEN NUMBERED QUESTIONS
INDEX
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Accounting A2 Level Textbook Series Theory and Practice Book Art #116
Subject Code : 9706
Author : M. Nauman Malik
Edition : 6th Edition
₨ 1,750
₨ 1,575
Availability: 10 in stock
Accounting A Level Theory And Practice Book
The globalized frame work of Cambridge International Advanced Level, in practice over 125 countries, has led to the introduction of an international format and layout for all its syllabuses. With a thorough discussion of the basic double entry principles for the beginners, the ‘A2 Accounting – Theory & Practice’ is also useful for those who have some knowledge.
The strengths and weaknesses of accounting practices are reinforced by a set of Review Questions at the end of each chapter, enabling the students to put, what is learnt, into practice. These Questions have been developed by the author and are not taken from past exam papers and Accounting A2 Level Theory and Practice Books.
This book is completely revised and updated to fully comply with the new CIE Advanced Level Accounting syllabus for 2016-18. Five new chapters have been included in the book in view of the new syllabus.
These topics include ’Auditing and stewardship of limited companies’, ‘Consignment Accounting, Joint Ventures’, ‘Activity based costing’ and ‘Computerized accounts’.
In addition, topics like ‘manufacturing accounts’, ‘non-profit organization have been shifted from ‘AS Accounting – theory and practice’ to this book. New material on overhead costing is also added to the topic ‘standard costing’. As syllabus contents relating to topics like ‘ratios’ and ‘Accounting standards’ have been reduced in new syllabus so these topics have been rewritten accordingly. Solutions to odd numbered questions are given in the appendix at the end of the book.
In addition solutions to even numbered questions are available in a separate manual. Teachers using “A2 Accounting – Theory & Practice” as a text book, may get the manual by applying officially on a school letterhead. Providing the students with a solid foundation in the “Why” as well as the “How” of accounting concepts, the emphasis is put on understanding rather than mere cramming.
A brief list of learning objectives at the beginning of each chapter will assist the readers to determine the things they should understand while going through the chapter.
Hence, checking back may help them to identify weak areas which still need thorough review. Constructive criticism and suggestions to make the subsequent editions more useful would be appreciated and thankfully acknowledged.
TABLE OF CONTENTS
PREFACE
CHAPTER 1 CHANGES IN PARTNERSHIPS
1.1 Admission of a new partner
1.2 Retirement or Death of an Existing Partner
1.2.1 Final Settlement of Retired or Deceased Partner's Capital
1.3 Changes in Profit-Sharing Arrangements
1.4 Apportionment of Profits
1.5 Adjustments for Goodwill
1.5.1 Factors Affecting the Value of Goodwill
1.5.2 Types of Goodwill 0
1.5.3 Valuation of Inherent Goodwill
1.5.4 Why is goodwill accounted for in a partnership?
1.5.5 Accounting Treatment of Goodwill
1.5.6 Why is Goodwill written off immediately?
1.6 Revaluation of Assets and Liabilities
1.6.1 Opening of a Revaluation Account
1.6.2 Profit or Loss on Revaluation
1.6.3 Revaluation of Non-Current Assets with Accumulated Depreciation
1.6.4 Values to Remain Unaltered in Books
1.7 CAPITAL IN PROFIT AND LOSS-SHARING RATIOS
REVIEW QUESTIONS
CHAPTER 2 BUSINESS MERGERS
2.1 Merger of Businesses
2.2 Reasons (Advantages) of Mergers
2.3 Disadvantages of Mergers
2.4 Accounting Treatment of Merger of Businesses
2.4.1 Valuation of Goodwill
2.4.2 Revaluation of Assets and Liabilities
2.4.3 Adjustments to Capital Accounts
2.4.4 Statement of Financial Position After the Merger
2.4.5 Evaluating Business Performance Post-Merger
REVIEW QUESTIONS
CHAPTER 3 DISSOLUTION AND SALE OF PARTNERSHIPS
3.1 Reasons for Dissolving a Business
3.2 Realisation Account
3.3 Accounting Treatment on Dissolution
3.3.1 Assets on Dissolution
3.3.2 Goodwill on Dissolution
3.3.3 Liabilities on Dissolution
3.3.4 Expenses on Dissolution
3.3.5 Profit (loss) on Realisation Account
3.3.6 Partners'Loans Accounts on Dissolution
3.3.7 Current Account Balances on Dissolution
3.3.8 Cash or Bank Balance on Dissolution
3.3.9 Partners' Capital Accounts on Dissolution
3.4 DIFFERENCE BETWEEN DISSOLUTION AND SALE OF BUSINESS
3.5 Accounting Procedure on Sale of Business
REVIEW QUESTIONS
CHAPTER 4 BUSINESS ACQUISITIONS
4.1 REA50NS FOR PURCHASE OF BUSINESS
4.2 Advantages of Acquisitions
4.3 Disadvantages of Acquisitions
4.4 Goodwill
4.4.1 Why does Goodwill arise?
4.5 Internally Developed Goodwill
4.6 Negative Goodwill
4.7 Difference between the Purchase of a Business and the purchase of assets
4.8 Components of purchase consideration
4.8.1 Assets Taken Over
4.8.2 Liabilities Taken Over
4.9 Dissolution Expenses
4.10 Purchase of a Sole Trader Business by a Company
4.11 Purchase of a Partnership's Business by a Company
4.12 Entries to Record the Purchase of Business
4.13 Cash and Bank Balances of Partnerships on Purchase
4.14 Return on Investment
REVIEW QUESTIONS
CHAPTER 5 LIMITED COMPANIES - SHARES & DEBENTURES
5.1 THE NEED FOR COMPANIES
5.2 CAPITAL FOR A COMPANY
5.2.1 Ordinary Shares
5.3 Prices of a Share
5.3.1 Face Value
5.3.2 Issue Price
5.3.3 Book Value
5.3.4 Market Value
5.4 Selling Shares to the General Public
5.4.1 Issue of Shares at Par
5.4.2 Issue of Shares at Premium (at a price more than face value)
5.5 Rights Issue
5.5.1 Advantages of Rights Issue
5.5.2 Disadvantages of Rights Issue
5.5.3 Advantages of Rights Issue for Shareholders
5.6 Reserves
5.6.1 Capital Reserves
5.6.2 Revenue Reserves
5.7 BonusorScrip Issue
5.7.1 Reasons for Bonus Issue
5.5.2 Effect on Earnings per Share (EPS)
5.7.3 Advantages of Bonus Issue
5.7.4 Disadvantages of Bonus Issue
5.8 Difference between Rights and Bonus issue
5.9 Debentures
5.10 Issue of Loans and Debentures
REVIEW QUESTIONS
CHAPTER 6 LIMITED COMPANIED-FINANCIAL STATEMENTS
6.1 Financial Statements of Limited Companies
6.2 Published Accounts of Limited Companies
6.2.1 Role of IAS 1 in Preparation of Accounts
6.2.2 Accounting Concepts Applied in Preparation of Accounts
6.2.3 Structure and Content of Financial Statements
Reporting Period
Statement of profit or loss
Statement of Financial Position
Statement of Changes in Equity
Dividends on Ordinary Shares
Transfer to General Reserve
Why Company Accounts are Published?
Limitations of Published Company Accounts
Non-Current Assets Schedule
Components of a Non-Current Assets Schedule
Directors' Report
REVIEW QUESTIONS
CHAPTER 7 STATEMENT OF CASH FLOWS
Classifications of Cash Flows - An example
Cash and Cash Equivalents
Cash
Cash Equivalents
Bank Overdrafts
Preparation of a Statement of Cash Flows
Cash Flow from Operating Activities
Importance of Cash Flow from Operating Activities
Calculation of Cash Flow from Operating Activities
Cash from Operating Activities in Direct Method
Cash from Operating Activities in Indirect Method
Calculation of Profit from Operations
Investing Activities
Financing Activities
Cash Flow at a Glance
Uses of a Statement of Cash Flows
Limitations of a Statement of Cash Flows
Users of Statement of Cash Flows
Disclosure of Non-Cash Activities
REVIEW QUESTIONS
CHAPTER 8 INTERNATIONAL ACCOUNTING STANDARDS
IAS 1: Presentation of Financial Statements
IAS 2: Inventories
Inventory Valuation
Inventory Valuation Methods
IAS 7: STATEMENT OF CASH FLOWS
IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors
Accounting Policies
Accounting Principles
Accounting Bases
Consistency of Accounting Policies
Prior Period Errors
IAS 10: Events after the Reporting Period
Adjusting Events
Non-Adjusting Events
IAS 16: Property, Plant, and Equipment
Recognition of the Assets
Measurement of the Assets
Depreciation
Disclosure in the financial statements
IAS 36: IMPAIRMENT OF ASSETS
Impairment Loss
Carrying Value
Recoverable Value
Cash Generating Unit
Indications of Impairment
IAS 37: PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provision
Difference between Provisions and Reserves
Contingent Liability
Contingent Asset
IAS 38: INTANGIBLE ASSETS
Research and Development Costs
Recognition of Intangible Assets
Initial Measurement of Intangible Assets
Subsequent Measurement of Intangible Assets
REVIEW QUESTIONS
CHAPTER 9 AUDITING AND STEWARDSHIP
Stewardship
Role of Directors as Stewards
Purpose of an end of year Audit
Who needs an end-of-year Audit?
Internal and External Audit
Difference between Internal and External Audit
Advantag es and D isadvantages of Au dit
Role of Auditors
Auditors' Report
Unqualified Opinion (Unqualified Audit Report)
Qualified Opinion (Qualified Audit Report)
Adverse Opinion (Adverse Audit Report)
What is not expected from Auditors
True and Fair View
Directors' Report
Difference Between the Duties of Directors and Auditors
CHAPTER 10 ACCOUNTING RATIOS
Financial Ratios
Analysis of Ratios
Comparing One Year with Another {Trend or Inter-Year Analysis)
Comparing one Business with another Business (Inter-firm Comparison)
Demonstration of Ratios
Ratios in Advanced Level Syllabus
Working Capital Cycle
Net Working Assets to Sales (revenue)
Earnings per Share
Price-Earnings (P/E) ratio
Dividend per Share
Dividend yield ratio
Dividend Cover
Interest Cover
Gearing
Uses of Ratio Analysis
LIMITATIONS OF RATIO ANALYSIS
Users of Financial Ratios
REVIEW QUESTIONS
CHAPTER 11 CLUBS AND SOCIETIES
Comparison between profit and Non-Profit making Organisations
Incomes and Expenses of Clubs and Societies
Incomes of Clubs and Societies
Expenses of Clubs and Societies
Some Peculiar Terms of Clubs and Societies
Life Subscription
Legacy
Gift
Grants and Donations
Accounting by Clubs and Societies
Receipts and Payments Account
Income and Expenditure Account
Differences between Receipts and Payment A/c & Income and Expenditure A/c
Statement to Calculate Profit or Loss
Income and Expenses on Same Head
Calculation of Incomes/Expenses to be shown in Income and Expenditure Account
Accounting for Subscriptions
Preparation of Financial Statements
REVIEW QUESTIONS
CHAPTER 12 MANUFACTURING BUSINESSES
The Prime Cost Section
Raw Materials Cost
Direct Labour Cost
Other Direct Expenses
Factory (Indirect) Overheads
Purpose of Manufacturing Accounts
Statement of Profit or Loss
Statement of Financial Position
Factory (Manufacturing) Profit
Benefits of Transferring Goods at Production Cost plus Factory Profit.
Drawbacks of Transferring Goods at Market Price
Accounting Treatment of Factory Profit
Provision for Unrealised Profit
REVIEW QUESTIONS
CHAPTER 13 COMPUTERISED ACCOUNTING SYSTEMS
Manual Accounting
Challenges Faced in Manual Accounting
The Advent of Computerised Accounting
Use of Computerised Accounting Systems in Recording Financial Transactions
The Advantages and Disadvantages of Introducing a Computerised Accounting System
The Advantages/Uses of Introducing a Computerised Accounting System
Disadvantages/Limitations of Introducing a Computerised Accounting System
Differences between Manual and Computerised Accounting Systems
Security of Data in Computerised Accounts
Transferring Business Accounts to a Computerised Accounting System
Potential Risks and Threats to Data Integrity
INTEGRALITY OF DATA DURING TRANSFER TO AND IN COMPUTERISED ACCOUNTS
CHAPTER 14 ETHICAL CONSIDERATIONS
Ethics Relating to the Practice of Accounting
Professional ethics
What is Ethical?
Fundamental Ethical Principles
The Problems of Poor Ethics in Accounting
The Ethical Impact of Accountants and Auditors on Business
The Ethical Impact of Accountants and Auditors on Stakeholders
Social implications of decision-making
Ethical Conflict
REVIEW QUESTIONS
CHAPTER 15 BUDGETING AND BUDGETARY CONTROL
Difference between Budgets and Budgetary Control
Difference between Standard Costs and Budgets
Advantages of Preparing Budgets from Standard Costs
Advantages of budgetary Control system
Limitations of Budgetary Control System
Advantages and Disadvantages of Preparing Budgets Using Spreadsheets
Effects of Limiting Budget Factors on the Preparation of Budgets
Behavioural Aspects of Budgetary Control System
Sales Budget
Production Budget
Purchases Budget
Purchase Budget for Manufacturing Firms
Purchase Budget for Trading Firms
Direct Labour Budget
Trade Receivables Budget
Trade Payables Budget
Cash Budget
Uses of a Cash Budget
Actions to Avoid Cash Shortages
Master Budget
Budgeted Statement of profit or loss
Budgeted Statement of Financial Position
Fixed Budget
Flexible Budget
Steps for preparing a flexible budget
Benefits of a flexible budget over a fixed Budget
The Significance of Non-Financial Factors in Budgeting
REVIEW QUESTIONS
CHAPTER 16 INVESTMENT APPRAISAL
Reasons for Making Capital Investment Decisions,
Methods for Capital Investment Appraisal
Accounting Rate of Return
Advantages of Accounting Rate of Return
Disadvantages of Accounting Rate of Return
Payback Period
Payback Period with Even Cash Flows
Payback Period with Uneven Cash Flows
Advantages of Payback
Disadvantages of Payback
Time Value of Money
Compound Interest
Present Value
Cost of Capital
Net Present Value
Selection of Project
Advantages of Net Present Value
Disadvantages of Net Present Value
Internal Rate of Return
Which Rate is Better?
Calculation of IRR
Advantages of Internal Rate of Return
Disadvantages of Internal Rate of Return
NPVAND IRR: WHICH IS BETTER?
Why is NPV preferred?
Sunk Cost
Relevant Costs
NON-FlNANCIAL FACTORS INVOLVED IN CAPITAL INVESTMENT DECISIONS
Present Value Table
REVIEW QUESTIONS
CHAPTER 17 ACTIVITY BASED COSTING
Traditional Costing in Early Business Models
Overhead Allocation in Conventional Costing
Limitations of Conventional Costing
Impact of Automation on Cost Allocation
Introduction of Activity-Based Costing (ABC)
Principles and Methodology of ABC
Costing Issues in Conventional Costing
Application of Activity Based Costing
Difference between Conventional and Activity Based Costing
Terms Frequently Used in Activity Based Costing
Activity
Cost Drivers
Hierarchy of Activities
Unit (output) Level Activities
Batch Level Activities
Product (Product Sustaining) Level Activities
Facility (Facility Sustaining) Level Costs
Customer-Level Activities
Examples of Cost Drivers
Uses of Activity Based Costing
Limitations of Activity Based Costing
Steps for Implementing Activity Based Costing
Role of Activity Based costing in the Non-manufacturing sector
REVIEW QUESTIONS
CHAPTER 18 STANDARD COSTING
Standard Costing System
Advantag es of Standard Costing
Limitations of Standard Costing
Setting Standard Costs
Variance Analysis
Total 'Direct Mate rial Cost Variance'
Material Price Variance
Material Usage Variance
Symbols Used for Calculating Direct Material Variances
Typical Causes of Material Variances
Total direct Labour Cost Variance
Labour Rate Variance
Labour Efficiency Variance
Symbols Used for Calculating Direct Labour Variances
Typical Causes of Labour Variances
Total Fixed Overhead Variance
Fixed overhead expenditure (spending) variance
Fixed Overhead Volume Variance
Fixed Overhead Efficiency Variance
Fixed Overhead Capacity Variance
Typical Causes of Fixed Overhead Variances
Sales Variances
Sales Price Variance
Sales Volume Variances
Typical Causes of Sales Variances
Fixed Budget
Flexible Budget
Steps for preparing a flexible budget
Benefits of a flexible budget over a fixed Budget
Reconciliation of Budgeted and Actual Data
Reconciliation of Budgeted and Actual Costs
Reconciliation of Budgeted and Actual Profits
REVIEW QUESTIONS
SOLUTIONS TO ODD NUMBERED QUESTIONS
KEY TO EVEN NUMBERED QUESTIONS
INDEX
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