| The CIMA Learning System |
|
xi | |
| How to use your CIMA Learning System |
|
xi | |
| Guide to the Icons used within this text |
|
xii | |
| Study technique |
|
xii | |
| Planning |
|
xiii | |
| Tips for effective studying |
|
xiv | |
| Computer-Based Assessments |
|
xiv | |
| The Fundamentals of Financial Accounting Syllabus |
|
xv | |
| CIMA Certificate in Business Accounting |
|
xvii | |
| Syllabus Outline |
|
xvii | |
| Learning Aims |
|
xvii | |
| Assessment Strategy |
|
xviii | |
|
|
|
1 | (14) |
|
|
|
3 | (1) |
|
|
|
3 | (1) |
|
|
|
3 | (2) |
|
The objectives of accounting |
|
|
4 | (1) |
|
Who uses financial statements? |
|
|
5 | (1) |
|
The qualitative characteristics of financial statements |
|
|
6 | (1) |
|
|
|
7 | (1) |
|
|
|
7 | (1) |
|
|
|
7 | (1) |
|
|
|
7 | (1) |
|
The differences between external and internal information |
|
|
8 | (1) |
|
What is a business organisation? |
|
|
8 | (2) |
|
Profit-making organisations |
|
|
9 | (1) |
|
Non-profit-making organisations |
|
|
9 | (1) |
|
|
|
10 | (5) |
|
|
|
11 | (2) |
|
Solutions to Revision Questions |
|
|
13 | (2) |
|
The Framework of Financial Statements |
|
|
15 | (24) |
|
|
|
17 | (1) |
|
|
|
17 | (1) |
|
The separate entity convention |
|
|
17 | (1) |
|
|
|
18 | (4) |
|
The accounting equation in action |
|
|
19 | (3) |
|
The accounting equation and the statement of financial position |
|
|
22 | (3) |
|
The contents of a statement of financial position |
|
|
22 | (2) |
|
Vertical presentation of a statement of financial position |
|
|
24 | (1) |
|
|
|
25 | (4) |
|
|
|
27 | (2) |
|
|
|
29 | (1) |
|
|
|
30 | (1) |
|
|
|
30 | (1) |
|
|
|
30 | (1) |
|
|
|
30 | (9) |
|
|
|
31 | (4) |
|
Solutions to Revision Questions |
|
|
35 | (4) |
|
The Accounting System in Action |
|
|
39 | (28) |
|
|
|
41 | (1) |
|
|
|
41 | (1) |
|
What is a ledger account? |
|
|
41 | (1) |
|
What is double-entry bookkeeping? |
|
|
42 | (4) |
|
Bookkeeping entries for expenses and revenue |
|
|
46 | (4) |
|
Bookkeeping entries for purchases and sales |
|
|
46 | (4) |
|
|
|
50 | (1) |
|
|
|
50 | (2) |
|
Calculating the balance on the account |
|
|
51 | (1) |
|
|
|
52 | (15) |
|
|
|
53 | (8) |
|
Solutions to Revision Questions |
|
|
61 | (6) |
|
Summarising the Ledger Accounts |
|
|
67 | (30) |
|
|
|
69 | (1) |
|
|
|
69 | (1) |
|
Preparing the trial balance |
|
|
69 | (3) |
|
Does the trial balance prove the accuracy of the ledger accounts? |
|
|
70 | (2) |
|
Preparing a statement of profit |
|
|
72 | (7) |
|
|
|
72 | (4) |
|
|
|
76 | (2) |
|
The balance on the income statement |
|
|
78 | (1) |
|
|
|
79 | (1) |
|
Preparing the statement of financial position |
|
|
79 | (1) |
|
Balancing off the ledger accounts |
|
|
80 | (5) |
|
|
|
85 | (1) |
|
|
|
85 | (12) |
|
|
|
87 | (6) |
|
Solutions to Revision Questions |
|
|
93 | (4) |
|
Further Aspects of Ledger Accounting |
|
|
97 | (44) |
|
|
|
99 | (1) |
|
|
|
99 | (1) |
|
Accounting for specialised transactions |
|
|
99 | (3) |
|
|
|
99 | (1) |
|
|
|
100 | (2) |
|
|
|
102 | (5) |
|
Sales tax on non-current assets and expenses |
|
|
106 | (1) |
|
Sales tax in separate ledger accounts |
|
|
106 | (1) |
|
Non-registered businesses |
|
|
106 | (1) |
|
Zero-rated and exempt supplies |
|
|
107 | (1) |
|
Accounting for wages and salaries |
|
|
107 | (3) |
|
|
|
107 | (2) |
|
|
|
109 | (1) |
|
|
|
110 | (1) |
|
|
|
110 | (3) |
|
Recording accruals and prepayments in the ledger accounts |
|
|
112 | (1) |
|
Bad debts and allowance for receivables |
|
|
113 | (7) |
|
|
|
114 | (1) |
|
|
|
115 | (1) |
|
Allowance for receivables |
|
|
116 | (4) |
|
|
|
120 | (2) |
|
|
|
122 | (19) |
|
|
|
123 | (10) |
|
Solutions to Revision Questions |
|
|
133 | (8) |
|
Accounting for Non-current Assets |
|
|
141 | (48) |
|
|
|
143 | (1) |
|
|
|
143 | (1) |
|
Capital and revenue expenditure |
|
|
143 | (2) |
|
|
|
145 | (1) |
|
|
|
146 | (4) |
|
|
|
147 | (1) |
|
The reducing-balance method |
|
|
148 | (1) |
|
The machine-hour method/units of production method |
|
|
149 | (1) |
|
|
|
149 | (1) |
|
Depreciation in the year of acquisition and disposal |
|
|
150 | (1) |
|
Accounting for the disposal of a non-current asset |
|
|
150 | (2) |
|
|
|
152 | (2) |
|
Controlling tangible non-current assets |
|
|
154 | (1) |
|
Accounting for intangible non-current assets |
|
|
155 | (2) |
|
|
|
156 | (1) |
|
|
|
157 | (32) |
|
|
|
159 | (18) |
|
Solutions to Revision Questions |
|
|
177 | (12) |
|
Preparation of Financial Statements with Adjustments |
|
|
189 | (40) |
|
|
|
191 | (1) |
|
|
|
191 | (1) |
|
|
|
191 | (1) |
|
|
|
192 | (1) |
|
Step 1: Labelling the trial balance |
|
|
193 | (1) |
|
Step 2: Preparing workings |
|
|
194 | (2) |
|
Step 3: Preparing the financial statements |
|
|
196 | (9) |
|
|
|
205 | (24) |
|
|
|
207 | (12) |
|
Solutions to Revision Questions |
|
|
219 | (10) |
|
Organising the Bookkeeping System |
|
|
229 | (48) |
|
|
|
231 | (1) |
|
|
|
231 | (1) |
|
Organising the ledger accounts |
|
|
232 | (1) |
|
Advantages of dividing the ledger |
|
|
232 | (1) |
|
Supporting books and records |
|
|
232 | (1) |
|
|
|
233 | (1) |
|
Sales, purchases and returns daybooks |
|
|
233 | (8) |
|
Recording transactions in the daybooks |
|
|
234 | (1) |
|
Making the ledger entries |
|
|
235 | (5) |
|
Extending the use of daybooks |
|
|
240 | (1) |
|
|
|
241 | (5) |
|
|
|
241 | (1) |
|
|
|
242 | (3) |
|
|
|
245 | (1) |
|
|
|
246 | (3) |
|
The layout of the journal |
|
|
247 | (1) |
|
Using the journal for miscellaneous transactions |
|
|
247 | (1) |
|
Using the journal for end-of-year transactions |
|
|
248 | (1) |
|
Inventory records and methods of inventory measurement |
|
|
249 | (8) |
|
The process of inventories measurement |
|
|
251 | (1) |
|
Application of methods of inventory measurement (also known as cost formulas) |
|
|
252 | (3) |
|
|
|
255 | (2) |
|
|
|
257 | (20) |
|
|
|
259 | (10) |
|
Solutions to Revision Questions |
|
|
269 | (8) |
|
Controlling the Bookkeeping System |
|
|
277 | (50) |
|
|
|
279 | (1) |
|
|
|
279 | (1) |
|
|
|
279 | (2) |
|
|
|
280 | (1) |
|
|
|
280 | (1) |
|
|
|
280 | (1) |
|
|
|
281 | (1) |
|
|
|
281 | (1) |
|
|
|
281 | (1) |
|
Comparison with external evidence |
|
|
281 | (1) |
|
|
|
281 | (1) |
|
|
|
282 | (1) |
|
Bank reconciliation statements |
|
|
282 | (3) |
|
Reconciliation of suppliers' statements |
|
|
285 | (2) |
|
|
|
287 | (9) |
|
The status of the control account |
|
|
290 | (3) |
|
|
|
293 | (1) |
|
Credit balances in the sales ledger; debit balances in the purchase ledger |
|
|
294 | (1) |
|
The control account and allowance for receivables |
|
|
295 | (1) |
|
Advantages of control accounts |
|
|
295 | (1) |
|
Reconciling control accounts and ledger accounts |
|
|
295 | (1) |
|
Suspense accounts and the correction of errors |
|
|
296 | (3) |
|
|
|
299 | (1) |
|
Aspects of computerised accounting systems |
|
|
300 | (1) |
|
Accounting coding systems |
|
|
300 | (2) |
|
|
|
302 | (25) |
|
|
|
303 | (14) |
|
Solutions to Revision Questions |
|
|
317 | (10) |
|
The Regulatory Framework of Accounting |
|
|
327 | (34) |
|
|
|
329 | (1) |
|
|
|
329 | (1) |
|
|
|
330 | (5) |
|
The business entity convention |
|
|
330 | (1) |
|
The money measurement convention |
|
|
330 | (1) |
|
The historical cost convention |
|
|
331 | (1) |
|
The objectivity convention |
|
|
331 | (1) |
|
The dual aspect convention |
|
|
331 | (1) |
|
The realisation convention |
|
|
331 | (1) |
|
The periodicity convention |
|
|
332 | (1) |
|
The accruals and matching conventions |
|
|
332 | (1) |
|
The materiality convention |
|
|
333 | (1) |
|
The stable monetary unit convention |
|
|
334 | (1) |
|
The going concern convention |
|
|
334 | (1) |
|
The consistency convention |
|
|
334 | (1) |
|
|
|
334 | (1) |
|
Accounting policies and estimation techniques |
|
|
335 | (1) |
|
The historical cost convention and its alternatives |
|
|
336 | (6) |
|
The theory of capital maintenance |
|
|
337 | (1) |
|
Current purchasing power (CPP) accounting |
|
|
337 | (1) |
|
|
|
338 | (1) |
|
|
|
338 | (1) |
|
Value to the business (or deprival value) |
|
|
338 | (1) |
|
The valuation of intangible assets |
|
|
339 | (3) |
|
Regulations in accounting |
|
|
342 | (2) |
|
|
|
342 | (1) |
|
The accountancy profession |
|
|
342 | (1) |
|
International accounting standards |
|
|
342 | (2) |
|
The IASB Framework for the Preparation and Presentation of Financial Statements (the `Framework') |
|
|
344 | (1) |
|
|
|
344 | (3) |
|
Fair presentation or true and fair |
|
|
345 | (1) |
|
The role of the external auditor |
|
|
346 | (1) |
|
The role of the internal auditor |
|
|
347 | (1) |
|
The value-for-money audit |
|
|
347 | (1) |
|
|
|
347 | (1) |
|
|
|
348 | (13) |
|
|
|
349 | (8) |
|
Solutions to Revision Questions |
|
|
357 | (4) |
|
Incomplete Records; Income and Expenditure Statements |
|
|
361 | (50) |
|
|
|
363 | (1) |
|
|
|
363 | (1) |
|
Calculating `missing figures' |
|
|
364 | (9) |
|
|
|
364 | (1) |
|
|
|
365 | (1) |
|
|
|
365 | (1) |
|
|
|
366 | (1) |
|
|
|
366 | (7) |
|
Financial statements of non-profit-making bodies |
|
|
373 | (8) |
|
Accounting terminology for non-profit-making bodies |
|
|
373 | (1) |
|
Accounting for membership fees and subscriptions |
|
|
374 | (2) |
|
The financial statements of non-trading organisations |
|
|
376 | (5) |
|
|
|
381 | (30) |
|
|
|
383 | (16) |
|
Solutions to Revision Questions |
|
|
399 | (12) |
|
The Manufacturing Account |
|
|
411 | (18) |
|
|
|
413 | (1) |
|
|
|
413 | (1) |
|
Why is a manufacturing account needed? |
|
|
413 | (1) |
|
Inventories in manufacturing organisations |
|
|
414 | (1) |
|
Costs to include in the manufacturing account |
|
|
414 | (2) |
|
|
|
415 | (1) |
|
|
|
415 | (1) |
|
|
|
415 | (1) |
|
Factory cost of production |
|
|
415 | (1) |
|
|
|
415 | (1) |
|
Factory cost of goods completed |
|
|
416 | (1) |
|
Layout of manufacturing and trading accounts |
|
|
416 | (1) |
|
Income statement for manufacturing organisations |
|
|
417 | (1) |
|
Statements of financial position for manufacturing organisations |
|
|
417 | (1) |
|
The accounting system for manufacturing organisations |
|
|
417 | (3) |
|
|
|
420 | (9) |
|
|
|
423 | (4) |
|
Solutions to Revision Questions |
|
|
427 | (2) |
|
The Financial Statements of Limited Companies and the Statement of Cash Flows |
|
|
429 | (72) |
|
|
|
431 | (1) |
|
|
|
431 | (1) |
|
|
|
432 | (15) |
|
The financial statements of companies |
|
|
432 | (1) |
|
Presentation of company income statements |
|
|
433 | (1) |
|
Taxation in company financial statements |
|
|
433 | (1) |
|
Directors of limited companies |
|
|
434 | (1) |
|
Sources of finance for a limited company |
|
|
434 | (2) |
|
|
|
436 | (1) |
|
|
|
437 | (1) |
|
Statement of comprehensive income |
|
|
438 | (2) |
|
Statement of changes in equity |
|
|
440 | (7) |
|
|
|
447 | (7) |
|
What is a statement of cash flows? |
|
|
447 | (1) |
|
Why does the profit earned not equal the change in bank and cash balances? |
|
|
447 | (1) |
|
Cash flows from operating activities --- cash generated from operations |
|
|
448 | (2) |
|
Cash flows from operating activities --- net cash from operating activities |
|
|
450 | (1) |
|
Cash flows from investing activities |
|
|
450 | (1) |
|
Cash flows from financing activities |
|
|
450 | (3) |
|
Statement of cash flows for sole traders |
|
|
453 | (1) |
|
|
|
454 | (47) |
|
|
|
455 | (28) |
|
Solutions to Revision Questions |
|
|
483 | (18) |
|
The Interpretation of Financial Statements |
|
|
501 | (52) |
|
|
|
503 | (1) |
|
|
|
503 | (1) |
|
What is meant by `interpretation of financial statements'? |
|
|
503 | (2) |
|
|
|
505 | (1) |
|
|
|
505 | (1) |
|
|
|
505 | (1) |
|
|
|
506 | (4) |
|
|
|
507 | (1) |
|
|
|
507 | (1) |
|
|
|
508 | (1) |
|
|
|
508 | (2) |
|
|
|
510 | (1) |
|
|
|
510 | (1) |
|
|
|
510 | (1) |
|
|
|
511 | (3) |
|
|
|
511 | (1) |
|
|
|
511 | (2) |
|
|
|
513 | (1) |
|
|
|
513 | (1) |
|
Total working capital ratio |
|
|
513 | (1) |
|
|
|
514 | (1) |
|
The gearing ratio (or leverage ratio) |
|
|
514 | (1) |
|
|
|
515 | (1) |
|
Ratio analysis for sole traders |
|
|
515 | (1) |
|
|
|
515 | (38) |
|
|
|
517 | (22) |
|
Solutions to Revision Questions |
|
|
539 | (14) |
|
Preparing for the Computer-Based Assessments (CBAs) |
|
|
553 | (128) |
|
|
|
555 | (1) |
|
|
|
555 | (1) |
|
|
|
556 | (1) |
|
Tips for the final revision phase |
|
|
556 | (1) |
|
|
|
556 | (3) |
|
Structure of the assessment |
|
|
556 | (1) |
|
|
|
557 | (2) |
|
|
|
559 | (80) |
|
Solutions to Revision Questions |
|
|
639 | (42) |
| Mock Assessment 1 |
|
681 | (26) |
| Mock Assessment 2 |
|
707 | (24) |
| Index |
|
731 | |
