Learning Unit 2 $3

Financial accounting is a process that involves 3 key activities:

1. Identification: Identifying those events that are evidence of the economic activities (transactions)
relevant to an entity.

This is very important for you even as an accounting student to be able to identify transactions and know
which accounts are affected. Remember there will always be two or more accounts affected whenever a
transaction takes place.

2. Recording: The monetary values of the economic events (transactions) of the entity.

As an accounting student, you need to be able to correctly measure transactions and correctly record them
in subsidiary journals and post them to General ledger accounts.

3. Reporting: The results of these transactions by a way of the preparation and presentation of financial
statementsto enable the users to use the information obtained in these financial statements as a basis for
decision-making.

This is the output stages of the financial accounting cycle and you need to know how to prepare financial
statements in accordance with the IFRSs. we will look at this in learning 11.

The financial statements consist of Statement of financial position, Statement of profit or loss and other
comprehensive income, Statement of changes in equity, Statement of cash flow and Notes.

Learning Unit 4
I am certain that you did not find learning unit 4 too difficult because it is fairly a straight forward
read.

The learning unit mainly introduce to us the concept of cash transactions, the internal and external
source documents and the principles of VAT and its calculation.

The part that students do struggle with or make mistakes on is the calculation of VAT

 when VAT inclusive amount is given: VAT amount = VAT inclusive amount x 14/114
 when VAT exclusive amount is given: VAT amount = VAT exclusive amount x 14/100
NB: You must use a VAT percentage you are given in the question

FORMAT OF ASSESSMENT

Take note that the content of the learning unit will be assessed in the examination by means of
questions in the format of practical application type questions or MCQs.

LET’S DISCUSS

Yes, the learning unit may be straight forward but some of you may still find some areas difficult
to understand or may need some clarity on certain areas, I therefore opened this discussion topic
for us to point out such areas and discuss them. Lets do that !!!

Learning unit 5

is a practical learning unit, you must study and do practical questions to master it.

In this learning unit, we are learning how to do the following:

o prepare a Cash Receipts Journal (CRJ), Cash Payments Journal (CPJ) and Petty Cash
Journal (PCJ); and
o posting the totals of these journals to the appropriate accounts in General Ledger (GL)

Activity for the group

For our discussion on this learning unit, I would like you to do the following:

1. First attempt this quick activity that I have attached

2. Then compare your answers to the solution that I have attached.
3. Then post your comments or questions you may have under the discussion topic.
Learning Unit 6

ow, in learning unit 6 we focus on recording the credit transactions and posting them to
general ledger.

It is important to be able to:

 Identify credit transactions from other business transactions;
 know which source documents are relevant to each credit transaction;
 Record the credit transaction in the correct subsidiary journals;
 And post them to General ledger;

Examination focus
The content of learning unit 6 will be hugely tested as a practical question in your examination
at the end of the semester.

Task for the group

I would like us to attempt the attached activity for our discussion,
Attempt the activity under exam condition and immediately post the following:
 What is the area that you struggled with?
 Did you manage to complete the task within the given time?

Feedback to assessment

I will provide feedback to your comments as they come in and I will post the solution of this activity later
this week.

This discussion topic will expiry on the 26 August 2018.

Learning Unit 7
Now let’s look at Learning Unit 7. Here we focus on Inventory and
understanding different concepts that are relevant to Inventory.
Important areas that you should understand:

 To define a perpetual inventory control system;

 To define a periodic inventory control system;
 Explain the difference between a periodic and a perpetual inventory control system;
 To define the different valuation methods, such as first-in, first-out (FIFO) and the weighted average
methods;

How will the content of this learning unit 7 be tested?

 In the examination, students can be assessed on this learning unit by means of questions in the
format of practical application type questions or multiple choice questions.

Because of the practicality of this learning unit I have attached some comments based on a
practical scenario. Look at it and share your thoughts, lets move!!!!

Learning Unit 10

hope all is going well and we are pushing hard.

For us to be on track with the study plan, let’s look at learning unit
9 as well this week and have our discussions on Trial Balance.
I have attached a summary that shows where the Trial
Balance fits in the whole accounting flow, please look at it.

Format of assessment

In the examination students, can be assessed on this learning unit

by means of questions in the format of practical application type
questions or MCQs.

Please pay attention to the following areas:

 correctly prepare a trial balance from a given list of ledger account balances
and totals
 identify those errors that will not be revealed by a trial balance
 identify those errors that will be revealed by a trial balance
 trace errors in a trial balance
I hope all is going well and you pushing very hard and relentlessly.
In the discussion topic, I would like us to look at learning unit 10
(Final Accounts) and have our discussion about it.

This learning unit does create some problems for students. The students get
confused with the profit or loss account and the statement of profit or loss and
other comprehensive income.

Other common mistakes by students.

 When students are required to prepare the profit or loss

account, most students prepared the statement of profit or
loss and other comprehensive income instead.
 For those who prepared the profit or loss account some did not
indicate the names of the contra accounts but only showed the
amounts for those contra accounts.
 Remember, a complete general ledger account must also show
the names of the contra accounts. By providing the contra
account name, the marker will be able to see that the amount
in the general ledger account is correctly posted to the correct
general ledger account

Format of assessment

In the examination, students can expect to be assessed on this

learning unit by means of questions in the format of practical
application type questions or MCQs.

Please pay attention to the following areas:

 discuss in your own words the difference

between gross and net profit and describe how they are
calculated;
 do the closing entries at the end of a financial year for a retail
entity using the perpetual inventory system;
  do the closing entries at the end of a financial year for a retail
entity using the periodic inventory system;
 prepare a trading account and profit or loss account;
 prepare a post-closing trial balance.

I open this topic for you to give direction and lead the discussions in a form of a
questions for clarity or comment on any part of the learning unit that you are not
comfortable with.

Learning Units 11
his week let’s look at learning unit 11 the last learning unit for this
module. I believe we all have covered the module and ready to start
revision and exam preparation.
Please do mention any area that gives you challenges and we can
tackle it immediately.

Background

This part of the module creates some problems for students.

Format of assessment

The content of the learning unit will be assessed in the examination in the format of
practical application type questions or MCQs.

The following common mistakes, students are making during the examination:

 Some students did not know the formats of the financial statements. When
answering a question where it is required to prepare the financial statements,
it is of great importance to know the format and to show the format as it
appears in the study guide (MO001).
  Some students prepared the profit or loss account when it was required to
prepare the statement of profit or loss and other comprehensive income. This
is not acceptable.

 Some students copied the trial balance from the examination question paper
as an answer to the statement of profit or loss and other comprehensive
income. This is not acceptable.

 Some students wrote down the formats of the statements but swopped the
subheadings. For example: Students showed “Other Income” after
“Distribution, administrative and other expenses”. When preparing the
financial statements, the order of the formats must be maintained as it
appears in learning unit 11 of the study guide (MO001), as required by the
International Accounting Standards Board.

 Students were requested to prepare a specific component of the financial

statements (e.g. the statement of profit or loss and other comprehensive
income). They didn't know which elements (i.e. income, expenses, assets,
liabilities and equity) to use for that specific component. Some students used
all the elements in a specific component, which is not acceptable and will not
be marked. Income and expenses relate to the statement of profit or loss
and other comprehensive income and assets, liabilities and equity relate to
the statement of financial position.

 Remember that the notes for the year ended also need to be prepared for
the statement of financial position. For exam purposes, it will be clearly
stated whether you need to prepare the notes or not. If you are not required
to prepare the notes, then you must preferably show the calculations on the
face of the statement of financial position.

Please pay attention to the following:

 calculate and do adjustments at year-end regarding accrued expenses,

prepaid expenses, accrued income and income received in advance
 calculate and do adjustments regarding consumable stores
 calculate and do adjustments regarding depreciation of non-current assets
 calculate and do adjustments regarding credit losses and allowance for credit
losses
 prepare a profit or loss account after taking all possible adjustments into
consideration
  prepare a statement of profit or loss and other comprehensive income
 prepare a statement of financial position
 prepare a statement of changes in equity

Check the attachment for you reference.