ZNOTES.ORGUPDATED TO 2021 SYLLABUSCAIE A2 LEVELACCOUNTING(97o6)SUMMARIZED NOTES ON THE THEORY SYLLABUSCAIE A2 LEVEL ACCOUNTING (9706)Benefits of manufacturing account1.Preparation of FinancialSeparates office and factory costsStatementsHelps in setting prices o Shows total manufacturingcostReasons to provide for unrealized profit:1.1.Manufacturing businessesIAS 2-inventory valued at lower costFollows the prudence concept-provisions created forManufacturing account:shows the costs of running thepotential lossesfactory where a final product is madeFollows realization concept -only'realized'profits areTransfer price:production cost+mark-uprecordedFactory profit:transfer price-production costAvoids overstating profit and current assetsProvision for unrealized profit accountManufacturing accountBalance b/d-unrealized profit for op.inventoryOpening inventoryBalance c/d-unrealized profit for clos.inventoryPurchasesMissing figure-provision for unrealized profit in l/SDr-add to gross profitCarriage inwards$Cr-deduct from gross profitClosing inventory($)Cost of raw materials consumed1.2.Not for profit organizationsDirect costs$Prime cost$Changes in terminologyOverheadsIncome statementIncome and expenditure a/cOpening work in progressBank/CashbookReceipts and payments a/cClosing work in progressProfitSurplus of income over expenditureProduction costLossDeficit of income over expenditureFactory profitEquityAccumulated fundTransfer priceAccrued subs.feesSubscription in arrearsPrepaid subs.feesSubscription in advanceTrading account$RevenueIncome and expenditure a/c$-Cost of SalesIncomeOpening InventoryShop profit$Transfer price from manufacturing accountSubscriptions$-Closing inventoryEvents less their costsGROSS PROFITLife membershipFactory profitExpenditureOffice Overheads$Surplus/Deficit for the year$Provision for unrealised profit increasePROFIT/LOSS FOR THE YEARSubscriptions a/cDr.Cr.SOFP EXTRACTBalance b/d(op.arrears)Balance b/d (op.advanced)Current assetsIncome expenditure a/cReceipts payments a/cInventory:(missing figure)(subs.paid)Raw materialsBalance c/d(dos.advanced)Balance c/d(clos.arrears)Work in ProgressFinished goods◆Life membershipProvision for unrealised profit($)Lump sum paid once by members and no furtherpayment for the rest of their lifeDr-receipts and payments a/cUnrealized profit:profit on inventory of finished goodsCr-life membership a/cthat hasn't been earned yet.Inventory at cost +profit %/100+profit %*100Shown as non-current liability in SOFPWWW.ZNOTES.ORGCAIE A2 LEVEL ACCOUNTING (9706)Life membership fund a/c balance credited to incomeStatement of cash flowsand expenditure a/c in equal amounts over a periodNet cash from operating activitiesof time-as income but no effect on cash flowNew members'entrance feesCash flows from investing activities:Fee charged to new members during their first year ofDisposal proceeds of non-current assets$membership,different from the regular annual-Purchases of non-current assetssubscription feeNet cash from investing activities$If considered revenue income,Cr income andCash flows from financing activitiesexpenditure accountIf considered capital income,Cr to accumulated fundsNet cash from financing activities·DonationsNet increase/decrease in cash/cash equivalentsSmall donations-revenue incomeOpening cash and cash equivalentsLarge donations-capital receiptsClosing cash and cash equivalents·Cr-special trust fundDr-trust fund a/c annually with expenses relatedNon-current assets scheduleto itOpening costPurchases$1.3.Limited CompaniesDisposalsClosing costFollows International Accounting Standards andOpening accumulated depreciationadhere to their selected methodsDepreciation for the yearDisplay all of the company's transactionsDepreciation eliminated on disposalShow a true and fair view.Complete set of FS(IAS 1):Closing accumulated depreciation·Income statementClosing NBVStatement of financial positionOpening NBVStatement of cash flowsStatement of changes in equity1.4.International Accounting StandardsNotes on accounting policiesChairman's statementIAS 1 -Presentation of financial statements·Auditor's reportBasis for presenting financial statements·Director's reportAllows for comparisons throughout periods andStates the main activities of the companybetween companiesReview of previous years'performanceFS should contain a statement of complianceReview of future development plansFS should be in accordance with accounting conceptsDirectors names and shareholdingsCompany name and time period covered by theDividends detailsstatements should be providedDifference between net book values and market·lAS2-Inventoriesvalues of land buildingsInventories include:Policies for payments to suppliersGoods purchased for resaleStatement of cash flows usesRaw materials purchased for productsCash flows are an objective measure·Work in progressAllows for liquidity analyzation-only cash recorded·Finished goodsShows efficient use of cash and cash equivalentsValued at lower of cost and net realisable valueReveals information not disclosed in incomeDeduct repair costs from recoverable amount forstatement-explains differencesdamaged goodsUsed for budgeting future cash flows.Accepts FIFO and AVCO,not LIFOStatement of cash flowsIAS 7-Statement of Cash flowsOperating activitiesCash flows from operating activities:Cash flows from the regular trading activities of aProfit from operationsbusinessAdjustments forProfit/Loss needs to be adjusted to only includeCash from operations$cash transactionsInterest paid during the yearCash inflowsCash outflowsIncome tax paidProfitsLossesWWW.ZNOTES.ORG