Financial Accounting – KASNEB Sylabus

PART I SECTION 1

PAPER NO.1 FINANCIAL ACCOUNTING

GENERAL OBJECTIVE
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to prepare financial statements for different entities.

LEARNING OUTCOMES
A candidate who passes this paper should be able to:

• Prepare books of original entry and basic ledger accounts under double entry system
• Prepare basic financial statements of sole traders, partnerships, companies, manufacturing entities and not for profit organisations
• Comply with the regulatory framework in the accounting field
• Account for assets and liabilities
• Analyse financial statements by use of ratios and statement of cash flows.

CONTENT

Introduction to accounting

–              The nature and purpose of accounting
–              Objectives of accounting
–              Users of accounting information and their respective needs
–              The accounting equation
–              Regulatory framework of accounting (regulatory bodies such as ICPAK, IFAC, IASB, IPSASB, IAESB)
–              Accounting standards (IASs/IFRSs) (importance and limitations)
–              Professional ethics
–              Accounting concepts/principles
–              Qualities of useful accounting information

Recording transactions

–              Source documents: quotations, purchase orders, statement of account, remittance advice, receipts, petty cash vouchers, sales and purchase invoice, credit notes and debit notes, bank statements
–              Books of original entry: sales journal, purchases journal, returns inwards journal, returns outward journal, cash book, petty cash book and general journal
–              Double entry and the ledger; use of T- accounts and double entry aspects (debit and credit), sales ledger and purchases ledger
–              The trial balance
–              Computerised accounting systems – role of computers, application and accounting softwares in the accounting process, benefits and challenges of operating computerised accounting systems

Accounting for assets and liabilities

Assets

–              Property, plant and equipment – recognition, capital and revenue expenditure, measurement (depreciation and revaluation), disposal and disclosures, property, plant and equipment schedule
–              Intangible assets – recognition, measurement (amortisation, impairment and revaluation), disposals and disclosures
–              Financial assets – examples and risks only
–              Inventory – recognition, measurement and valuation using specific cost method, FIFO and weighted average cost only
–              Trade receivables – bad debts and allowance for doubtful debts and receivables control accounts
–              Accrued income and prepaid expenses
–              Cash at bank – cash book and bank reconciliation statement
–              Cash in hand – cash book and petty cash books

Liabilities

–              Bank overdraft – cash book and bank reconciliation statement
–              Trade payables – control accounts
–              Loans – accounting treatment of repayment of principal and interest
–              Prepaid incomes and accrued expenses

Correction of errors and suspense account            

Financial statements of a sole trader        

–              Income statement
–              Statement of financial position

Financial statements of a partnership       

–              Partnership agreement
–              Introduction to partnership accounts
–              Distinction between current and fixed capital
–              Income statement
–              Statement of financial position
–              Changes in partnership – admission of a new partner, retirement, death     and

change in profit sharing ratio

Financial statements of a company      

–              Types of share capital – ordinary shares and preference shares
–              Issue of shares (exclude issue by instalment and forfeiture)
–              Types of reserves – share premium, revaluation reserve, general reserves  and retained profits
–              Income tax – accounting treatment and presentation (exclude computation)
–              Financial statements – income statement and statement of financial position
–              Published financial statements (describe a complete set of published financial statements but not preparation)

Financial statements of a manufacturing entity

–              Features of a manufacturing entity
–              Classification and apportioning costs between manufacturing, selling and administration
–              Financial statements – manufacturing account, income statement and statement of financial position

Accounts from incomplete records

–              Features
–              Types of incomplete records(pure single entry, simple single entry, quasi single entry)
–              Ascertainment of profit by capital comparison
–              Preparation of statement of affairs and profit determination
–              Techniques of obtaining complete accounting information

Financial statements of a not for profit organisation

–              Distinction between not for profit making organisation and profit making organisation
–              Nature of receipts and payments account
–              Accounting treatment of some special items
–              Income and expenditure account
–              Statement of financial position

Analysing financial statements

–              Statement of cash flows (categories of cash, methods of preparing statement of cash flows and the importance)
–              Financial ratios – definition, categories, analysis and interpretation, application and limitations

Introduction to Public Sector Accounting

–              Features of public sector entities (as compared to private sector)
–              Structure of the public sector (National and county governments, state corporations and other agencies)
–              Regulatory structures and oversight [IPSASB, PSASB (establishment, mandate and functions), Director of Accounting Services, National Treasury, Parliamentary Committees, Accounting Officers at national and county levels]
–              Objectives of public sector financial statements
–              Objectives of IPSAS
–              Accounting techniques in public sector (budgeting, cash, accrual, commitment and fund)
(Preparation of financial statements excluded)

Emerging issues and trends