WELCOME TO ACN102N

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WELCOME TO ACN102-N

• Wayne Wides
• wayne_at_commentary.co.za
• 082-977-1837

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THE COURSE AHEAD

• Aspects of accounting reporting
• Partnerships (3 weeks)
• Close corporations
• Companies
• Cash Flow Statements (2 weeks)
• Manufacturing
• Branch accounting

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ABOUT THE CLASSES

• Discipline and respect (two way street)
• Consideration for others
• Intensive study
• Interaction
• No such thing as a stupid question
• Einstein The way forward is not by asking big
  questions, but by asking lots of little ones.

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STUDYING AND EXAM TECHNIQUE

• Reasons for failure
• Stress and burnout
• Exam technique
• Motivation why are you here?
• Effort made and work done
• Lack of planning
• Your tertiary studies are about more than just
  learning and rote repeating information
• How can one address these areas?

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ACTUAL STUDYING

• Passive versus active studying
• Your studying and work environment
• Clutter free desk, soft background music,
  liquids, no distractions
• Plan your studies
• Power sessions
• Memory mnemonics
• No conducive environment at home? - Libraries
• Group sessions are friends a help or a
  hindrance?
• Lectures alone are not enough
• Why do questions?
• Knowledge and comprehension versus application
• Prioritise between sections
• DONT MERELY SPOT CERTAIN SECTIONS HIGH RISK
• DONT LEAVE IT ALL UNTIL THE LAST MONTH TOO LATE

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GENERAL ASPECTS OF ACCOUNTING REPORTING

• Is accounting a science or an art?
• Understand
• Financial reporting
• Qualitative characteristics
• Underlying assumptions
• Quantitative restrictions
• Equity
• Form, layout and structure of the financials
• Inflation accounting (Zimbabwe)
• Note GAAP or Generally Accepted Accounting
  Practice no longer exists. It is now known as
  IFRS or International Financial Reporting
  Standards.

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FINANCIAL REPORTING

• Why do we do accounting/what are we trying to
  achieve?
• Who is it all meant for?
• Who are the decision makers and why or what is it
  that is useful to them?
• What are the components of financials statements
  and what do they prove?
• Balance Sheet
• Income Statement
• Statement of Changes in Equity
• Cash Flow Statements
• Notes to the financials
• Value Added Statements (not in course)

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QUALITATIVE CHARACTERISTICS, UNDERLYING
ASSUMPTIONS AND QUANTITATIVE RESTRICTIONS

• Qualitative characteristics
• Understandability
• Relevance
• Reliability
• Comparability and consistency
• Underlying assumptions
• Going concern
• Accruals concepts
• Quantitative restrictions
• Cost versus benefit
• Materiality

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EQUITY AND LAYOUT

• Remember your basic accounting equation
• A-LOE
• OEIncome Expenses Capital invested
  withdrawals
• Layouts
• Balance Sheets Assets versus Equity and
  Liabilities
• Current
• Non-current
• What goes where?
• Income Statements
• Nature versus function
• Statement of Changes in Equity
• Cash Flow Statement (later)
• Notes to the financials

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• http//www.netcareinvestor.co.za/

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INFLATIONARY ACCOUNTING

• Time value of money
• A Rand today is worth more than a Rand tomorrow
• Impact on comparison of financial values
• Hyperinflationary economies
• Zimbabwe

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QUESTIONS

• Question 1) Describe the users of financial
  statements, and list two of the qualitative
  aspects that theyre concerned about with
  financial statements. (4)
• Question 2) Clarify what type of asset you think
  work in progress, in a construction company
  that builds skyscrapers and that take several
  years to complete, are? Why? (2)

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QUESTIONS AND SUMMARY

• Summarise what you thought were the most
  important aspects from the lecture in your own
  words. Write it down for yourself now!
• Questions for the lecturer?

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PARTNERSHIPS

• What are they?
• Legal entity but not a juristic person
  Companies Act
• 2 20 persons
• Why would people enter into them?
• Unite capital
• Eliminate competition
• Unite capital and skill together
• Other?
• What makes up a partnership agreement and why do
  we need it?
• Obvious items e.g. name and profit share
• The concept of Goodwill

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PARTNERSHIPS HOW AND WHY?

• How do you establish a partnership?
• By action
• By agreement
• By registration
• Limited partnership for specialised practices
• How does a partnership end?
• Mutual agreement
• Time passes or partnership fulfills its purpose
• A partner dies, leaves or is admitted
• Violations illegalities, technical
• Bankruptcy
• Remember When a partner leaves or joins the
  partnership the old entity is regarded as having
  ceased to exist

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PARTNERSHIPS ACCOUNTING

• Important components of the partnerships
• Capital accounts
• Current accounts
• Loan accounts
• Each partner will have their own individual
  general ledger account for each of these aspects
• Where does loan interest come in the sequence
  when sharing profits? Why?
• What about drawings?

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PERFORMING THE FINANCIALS

• Before we begin with examples, consider
• Drawings
• The two methods for paying salaries
• Profit and loss sharing ratios
• Sequence of doing the accounting?
• Elements to watch out for
• Salaries, bonuses and commissions
• Interest on loan
• Interest on drawings
• Interest on capital
• Interest on current account
• Profit share

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TECHNIQUE TO DOING LARGE CONVENTIONAL
PARTNERSHIPS QUESTIONS

• Read the required
• Start reading the actual question
• Split the Trial Balance into its Income Statement
  and Balance Sheet items
• Note the date of the partnerships year end
• Read the rest of the question
• Do rough T accounts workings for each aspect
• Read the required again
• Start doing your workings while concurrently
  doing the obvious elements of the Balance Sheet
  and Income Statement first.
• Begin the Current Account if required to
• Start doing the financial notes when you have
  done the workings for the current years
  depreciation
• Start the obvious elements for the Statement of
  Changes in Equity
• Complete the Income Statement and do the workings
  for the profit/loss split to partners
• Complete the Current Account
• Complete the Notes
• Complete the Statement of Changes in Equity
• Complete the difficult parts of the Balance Sheet

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CURVEBALLS IN PARTNERSHIPS

• Drawings Its not an Income Statement item
• Stock and year end dates watch out, it can
  potentially be opening stock
• One of the partners has a debit balance in their
  current account
• The entity records a loss
• Take the bad debts amount off the debtors before
  calculating the provision
• They like to use Gross Profit or Margin
  percentages to force you to work out the gross
  profit and sales
• Stationery on hand at year end is not stock
• But it can be a prepayment
• Prepayment and accrual splits and their effect on
  the Income Statement
• Final stock that has to be raised entry goes
  into the Income Statement and the Balance Sheet
  Dr Stock (B/S), Cr Closing Stock (I/S)
• The presentation of interest on capital and
  interest on current account. The first goes to
  the finance costs section in the Income Statement
  and the second goes under operating expenses
• Commission you likely have to calculate the net
  profit before doing it
• Note This list is not inclusive of all aspects