Briefing on ACT3121 Contents: Main aspects in the syllabus Partnership Company Accounts Past Exam questions Theory section Technical/Calculation section Q & A Session

Partnership Key areas: Characteristics Advantages & Disadvantages Partnership Agreement

Cont. Key areas: Accounting for Partnership Partnership Capital Account Fixed Capital Method vs Fluctuating Capital Method Current Account Appropriation Account Accounting Treatments: Drawings Interest on drawings Interest on capital Interest on loan Salaries to partners

Comprehensive Example The net profit for the partnership between Azlan and Chong for the year ended 31 December 20X8 was RM28,500. The capital accounts and current accounts for the partnership on 1 January 20X8 were as follow: Capital accounts: Azlan RM40,000 Chong RM50,000 Current accounts: Azlan RM2,160 Chong RM1,500 In the year 20X8, Azlan has withdraws RM2,000 on 31 Mac 20X8. Azlan has been paid RM10,000 for his salary.

Cont. The contents of the partnership agreement are as follow: i. Interest on the initial capital is 5% per year ii. Azlan would be paid RM12,000 per year for his salary iii. 8% interest per year would be levied on withdrawals by the partners iv. Azlan and Chong share a profit/loss in a ratio of 2:3 Prepare: The allocation of profit-loss using Profit-Loss Separation Account or Profit-Loss Separation statement for the year ending 31 December 20X8. Capital account and current account for each partner A balance sheet (equity section) as at 31 December20X8

Cont. Key areas: Accounting for Partnership Changes in Partnership Change in Profit Sharing Ratio Admission of a new partner Retirement/death of an existing partner

Cont. If this happened, 2 issues are considered: Revaluation of assets Goodwill Amount is given Account not to be maintained

Comprehensive Example: Admission Adil and Bistari are partners sharing profits and losses ratio of 3:2 respectively. Their Balance sheet on 30th June 2009 is: Assets: Land and buildings RM40,000 Machinery RM16,000 Inventories RM10,500 Debtors RM30,000 Liabilities and Equity: Creditors RM15,000 Bank overdraft RM6,500 Capital: Adil RM45,000 Bistari RM30,000

Cont. On 1 July 2009 Adil and Bistari agreed to accept Cerdik as a new partner. Cerdik has to pay RM25,000 cash including RM5,000 as a premium on goodwill. He is to share 1/6 of the profits and losses. Adil and Bistari will share their profits as before. The following assets were revalued upon admission of Cerdik as follows: Land and buildings RM45,000 Inventories RM10,000 Machinery RM14,000 Provisions for doubtful debts is to be 1% on debtors. Prepare: Goodwill account (not to be maintained) Revaluation account Capital account and current account for each partner A balance sheet (equity section) as at 1 July 2009

Company Accounts Key areas: Types of Companies Advantages & Disadvantages Forming a company Memorandum of association (MA) Articles of association (AA) Procedures to issue shares

Cont. Key areas: Capital Equity Authorised/Nominal/Registered Capital Unissued Capital Uncalled Up Capital Paid up Capital Debentures vs Shares

Cont. Key areas: Capital Equity Authorised/Nominal/Registered Capital Unissued Capital Uncalled Up Capital Paid up Capital Debentures vs Shares

Cont. Key areas: Financial Reporting Framework Regulatory Framework Companies Act 1965 Financial Reporting Act 1997 & Accounting Standards Accountants Act 1967 Institutional Framework MASB Financial Reporting Foundation

Equity Financing Key areas: Classes of shares Ordinary share capital vs Preference share capital Types of preference shares

Cont. Key areas: Issuance of shares Directors have a number of options when issuing shares: Choose to issue ordinary shares, preference shares or both Issue shares at their par value, at a premium or at a discount

Cont. Key areas: Issuance of shares Shares may be issued Payable in full on application Paying a deposit on application and the remainder on allotment Part payment on application, part on allotment and the remainder in one or more installments (or calls)

Cont. Key areas: Issuance of shares Installment Application Allotment Call(s) Forfeiture Oversubscription Refund Pro-rata

Past Exam Questions Theory Part: Normally account to 20% Cover all topics Different level of understanding

Cont. Examples: Partnership Identify and explain two (2) advantages of a partnership. (4 marks) ‘There is really no need for a partnership agreement since all issues are covered in the Partnership Act 1961’. Do you agree with this statement, explain? (6 marks)

Cont. Examples: Company Accounting Explain the significance of minimum shares subscription threshold to company issuing equity shares to public. (4 Marks) Discuss the shareholding spread requirements for Malaysia listed incorporated companies and foreign companies in Malaysia.

Cont. Answer Scheme: Company Accounting Refer to Word File

Past Exam Questions Technical/Calculation Part: As shown in previous slides Refer to Word File

Q & A