1. The family next door
has both girl and boy children. Each of the boys has the same number of brothers as he has sisters AND each of the girls
has twice as many
brothers as she
has sisters.
How many boys and girls are there?

2. ANSWER:
4 boys and 3 girls.

3. Lesson objectives Prepare an income statement
Calculate adjustments following a share issue
Prepare statement of financial position
Identify the elements listed in the framework

4. Which one of the following statements is the accounting equation. A
Which one of the following statements is the accounting equation? A. equity = assets + liabilities B. assets – liabilities = equity C. assets + profit = equity C. liabilities + profit = equity

5. Define the terms ‘income’, ‘expenses’ and ‘profits or losses’ in accordance with the definitions in the Conceptual Framework for Financial Reporting.
Income

6. Define the terms ‘income’, ‘expenses’ and ‘profits or losses’ in accordance with the definitions in the Conceptual Framework for Financial Reporting.
Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets, or decreases of liabilities that result in increases in equity. Not those relating from increases from shareholders.

7. Expenses
Profit or Losses

8. Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or increase of liabilities that result in decreases in equity. Not those relating to dividends paid to equity holders.
Profit or Losses
Profits are increases in equity
Losses are decreases in equity

9. The Conceptual Framework for Financial Reporting identifies two fundamental qualitative characteristics (a) State the two fundamental qualitative characteristics identified by the Conceptual Framework for Financial Reporting. 1. 2.

10. 2. Faithful representation
The Conceptual Framework for Financial Reporting identifies two fundamental qualitative characteristics (a) State the two fundamental qualitative characteristics identified by the Conceptual Framework for Financial Reporting.
1. Relevance
2. Faithful representation

11. Explain what is meant by each of these fundamental qualitative characteristics.1. 2.

12. Explain what is meant by each of these fundamental qualitative characteristics.
1. Relevance. For information to be relevant it must:
Be capable of making a difference in the decisions made by users
Help users to predict future outcomes
Help users to confirm previous evaluations.
Faithful representation -The information must
Correspond to the effect of transactions or events
As far as possible be complete, without bias, and free from error.

13. State the four enhancing qualitative characteristics identified by the Conceptual Framework for Financial Reporting

14. State the four enhancing qualitative characteristics identified by the Conceptual Framework for Financial Reporting Comparability verifiability timeliness understandability

15. Write in the accounting concept which relates to each of the statements below.
Statement Accounting concept
The financial statements do not include the
personal assets and liabilities of those who
play a part in owning or running the entity.
The statement of comprehensive income shows
the amount of expense that should have been
incurred.
The financial statements are prepared on the
basis that there is no intention to reduce
significantly the size of the entity.
Low-cost non-current assets are charged as
expenses In the statement of comprehensive
income.

16. Write in the accounting concept which relates to each of the statements below.
Statement Accounting concept
The financial statements do not include the
personal assets and liabilities of those who business entity
play a part in owning or running the entity.
The statement of comprehensive income shows
the amount of expense that should have been accruals
incurred.
The financial statements are prepared on the
basis that there is no intention to reduce going concern
significantly the size of the entity.
Low-cost non-current assets are charged as
expenses In the statement of comprehensive Materiality
income.

17. You are to fill in the missing figures for the following businesses:
Assets Liabilities Equity
£ £ £
Business A 50, , .
Business B , ,600
Business C , ,680
Business D 93, ,140

18. You are to fill in the missing figures for the following businesses:
Assets Liabilities Equity
£ £ £
Business A 50, , ,250 .
Business B , , ,600
Business C , , ,680
Business D 93, , ,140

19. Explain what each of the terms ‘assets’, ‘liabilities’ and ‘equity’ means.

20. Explain what each of the terms ‘assets’, ‘liabilities’ and ‘equity’ means.
Assets – a resource controlled by the entity as a result of a past event and from which future economic benefits are expected to flow to the entity.
Liabilities – a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

21. Explain what each of the terms ‘assets’, ‘liabilities’ and ‘equity’ means.
Equity – the residual interest in the assets of the entity after deducting all its liabilities.
Users include managers, investors, suppliers, customers, lenders, employees, competitors.

22. Share capital
The capital invested in a company by its owners, divided into individual shares.
Shares have a nominal and market value.
The nominal value is the face value, decided when the shares are issued and remains the same.

23. Share capital
Shares are stated in the balance sheet at their nominal value.
The market value is the value at which it is traded on the stock exchange. This is irrelevant to the accounts

24. Share capital
Authorised share capital is the maximum amount of share capital the company is permitted to issue.
Issued share capital is the nominal amount of share capital that has actually been issued to shareholders. (Allotted share capital is the same as issued share capital)

25. Ordinary shares
Entitle the holders to share in profits after all prior claims have been satisfied (creditors, preference shareholders).
They can vote in general meetings
Cannot be certain of the amount of their dividend.
In theory they can determine the policies of the company

26. Reserves Retained profits Share premium account (non-dist)
Revaluation Reserve (non-dist)
General reserve (set up by directors)
Other reserves (set up by directors)

27. Share Issues
Issue at par: Dr: Bank Cr: Share Capital

28. The Statement of changes in equity
(IAS 1)The Statement of changes in equity must show:
Total comprehensive income
Changes in accounting policy
Correcting prior period errors
Share issues, payment of dividends

29. The Framework In group prepare notes to brief class on given topic
Accounting standards
Duties and responsibilities of directors
Objective and users of financial reporting
Useful financial information
Elements of financial statements