Recognition and presentation – transactions & events

Chapter 5

Lesson 1
Lecturer detail

Prof Gideon Els

D-Ring 634, APK

[email protected]

2
 Steps in the accounting process

Identification Recording Communicating

 The accounting process
*Transaction/ AFS (Annual financial
event statements)
- Statement of Profit or Loss
Journal (P&L)
(primary entry) - Statement of Financial
Position (SFP)
- Statement of Changes in
General ledger Equity (SCE)
(accounts) - Statement of Cash flows
(CFS)
- Notes & policies
Trial balance & 4

adjustments
 Transactions and events
TRANSACTIONS EVENTS
Also see Chapter 2,
paragraphs 49 – 53
• The exchange of • The subsequent
goods and services measurement of
• with third parties assets and
• at an agreed liabilities after initial
amount recognition
• (i.e. a contract) • No exchange of
goods or services
for cash –
INTERNAL in
nature

5
 Apply the Conceptual
Framework to the elements

Definition

Recognition criteria

6
 Source documents

Goods
Purchase Sales Delivery Bank
Requisition Order received
invoice invoice note Statement
note

7
 Where do the accounts fit in
the annual financial statements?
Statement of Profit or Loss (P/L)

• Income and expenses

• Profit/(Loss)

Statement of Changes in Equity (SCE)

• Share capital
• Retained earnings (Profit/(Loss))

Statement of Financial Position (SFP)

• Non-current and current assets

• Non-current and current liabilities
• Equity

8
 Statement of profit or loss
20.7 20.6
Notes
R R
Revenue
See Chapter 3, page 52

Cost of sales
Gross profit
Other operating income
Distribution costs
Administrative expenses
Other operating expenses
Operating profit(/Loss)
Income and expenses from subsidiary
Income and expenses from other financial investments
Income and expenses from investment property
Profit(/Loss) before financing and income taxes
Interest expenses
Profit(/Loss) before income taxes
Income tax expense
Profit(/Loss)
Earnings per share  Chapter 15
See Chapter 3, page 63 Statement of changes in equity
x%
Ordinary
Preference Retained
share Total
share earnings
capital
capital
Balance at 1 January 20.6 XX XX XX XX
Changes in equity for 20.6
Issue of share capital XX XX XX
Share issue costs XX XX XX
Dividends – preference XX XX
Dividends – ordinary XX XX
Profit(/Loss) XX XX
Balance at 31 December 20.6 XX XX XX XX
 Statement of financial position
20.7 20.6
Notes
R R
ASSETS
See Chapter 3, page 64-65

Non-current assets
Property, plant and equipment
Right-of-use assets (leases)
Investment property
Investment in subsidiary
Intangible assets
Other financial investments
Total non-current assets
Current assets
Inventories
Trade receivables
Other current assets
Other financial investments
Amount due by subsidiary
Cash and cash equivalents
Total current assets
Total assets
 Statement of financial position
20.7 20.6
Notes
R R
EQUITY AND LIABILITIES
See Chapter 3, page 64-65

Equity
Share capital
Share premium
Retained earnings
Total equity
Non-current liabilities
Long-term borrowings
Lease liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Current portion of long-term borrowings
Current portion of lease liabilities
Other short-term borrowings
 Statement of financial position
20.7 20.6
Notes
R R
Current tax payable
See Chapter 3, page 64-65

Shareholders for dividend

Short-term provisions
Bank overdraft
Total current liabilities
Total liabilities
Total equity and liabilities