33 Study Period 16 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. What is the role of an accounting package? Name three advantages and three disadvantages of using computer packages? What is a database? What is a spreadsheet? Any problems? Email (accaqueries @bpp.com) fax (020 8740 2293) or phone us (020 8740 2242/2245) Learning Resource Centre What do you want to do? How to do it! Reference Learn interactively BPP i-Learn/BPP Virtual Campus Module 10 Improve your study skills BPP's Learning to Learn Accountancy book * * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca Common Pitfall • Ignoring this chapter – just remember all you need is a broad understanding of the terminology, so you can apply common sense not detailed technical knowledge 34 Study Period 17 Accounting conventions and standards Priority = High Examined: 6/05 Date due: Exam Guidance This is a key area for discussion questions and has been examined in the pilot paper and both full exams. Be prepared to discuss the ideas behind the standards. Reading three chapters together makes this a longer session than usual, but enables you to tie in the standards to the underlying concepts and conventions. Guidance through the Study Text These topics are covered in Chapters 10 Accounting conventions, 15 Intangible non-current assets and 16 Events after the balance sheet date and contingencies. Section Approach Essential points Chapter 10 Read through carefully. IAS 1, other important concepts and conventions Chapter 15 Read through carefully. Definition of goodwill; criteria for capitalisation of development costs under IAS 38 Chapter 16 Pay particular attention to this chapter. Definition of events after the balance sheet date (IAS 10) Learn the decision table for IAS 37 Try Questions 13, 21, 22 and 36 in the Exam Question Bank of your Study Text Exam focus point IAS 8, IAS 10 and IAS 37 were tested in an 8 mark question in the June 2005 exam. 35 Study Period 17 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. Define going concern. What are the criteria for capitalisation of development expenditure? Distinguish between adjusting and non-adjusting events according to IAS 10. How do you account for a contingent liability? Any problems? Email (accaqueries @bpp.com) fax (020 8740 2293) or phone us (020 8740 2242/2245) Learning Resource Centre What do you want to do? How to do it! Reference Test your knowledge BPP i-Pass * Session 3: Balance sheet provisions Learn interactively BPP i-Learn/BPP Virtual Campus Module 13 Improve your study skills BPP's Learning to Learn Accountancy book * * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca Common Pitfalls • Ignoring the underlying concepts, remember these form the basis on which standards are built – if you do not understand the theory, then you will find it difficult to understand what the standards are for • Confusion between provisions and contingencies • Not learning practical examples of adjusting and non-adjusting events 36 Study Period 18 Incomplete records Priority = High Examined: 6/05 Date due: Exam Guidance This is a very difficult topic as it tests much of the accounting theory and practice from ledger accounting to control accounts. It is likely to be examined in conjunction with a preparation of final accounts, for a sole trader, limited liability company or partnership. You would only realise once reading through the question that an incomplete records element is involved. Watch out for clues in the wording of the question, eg 'limited records were kept'. Guidance through the Study Text These topics are covered in Chapter 17 Incomplete records. Section Approach Essential points 1 Incomplete records questions Skim through quickly. 2 The opening balance sheet Read through quickly. 3 – 6 Pay particular attention to these sections. Learn the techniques for calculating missing figures 7 The cash book Read through quickly. 8 Accruals and prepayments Work through this carefully. Make sure you know how to treat accruals and prepayments 9 Drawings Skim through quickly. 10 Dealing with incomplete records problems in the examination Work through this section carefully. Pay particular attention to the business equation. Learn the six step procedure for dealing with incomplete records Try Questions 23 and 24 in the Exam Question Bank of your Study Text Exam focus point The June 2005 exam had 3 MCQs on incomplete records. 37 Study Period 18 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. How would you calculate the figure for opening capital? How do control accounts help in incomplete records? List the suggested six steps for dealing with questions in the exam. How can the business equation help in incomplete records? Any problems? Email (accaqueries @bpp.com) fax (020 8740 2293) or phone us (020 8740 2242/2245) Learning Resource Centre What do you want to do? How to do it! Reference Test your knowledge BPP i-Pass * Session 7: Incomplete records and sales tax Learn interactively BPP i-Learn/BPP Virtual Campus Module 9 Improve your study skills BPP's Learning to Learn Accountancy book * * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca Common Pitfalls • Confusion between margin and mark-up (notice which item is 100% in the example below): 25% 25% MARGIN MARK UP Sales 100% Sales 125% Cost of sales 75% Cost of sales 100% Gross profit 25% Gross profit 25% • Lack of methodical approach to questions 38 Study Period 19 Limited liability companies Priority = High Examined: 6/05 Date due: Exam Guidance Limited liability companies are likely to be examined as a long accounts preparation question. There may be discursive parts as well. The contents of Chapter 19 are very important. There have been revisions to IAS 1 and IAS 8 and a new standard IFRS 5. All of these are examinable from December 2004. Guidance through the Study Text These topics are covered in Chapter 19 Limited liability companies. Section Approach Essential points All Pay particular attention to all sections. Limited liability companies always come up in the exam. Definition of a limited liability company, types of shareholders' equity, treatment of dividends, accounts pro-forma Try Question 37 in the Exam Question Bank of your Study Text Exam focus point The June 2005 exam had a 12 mark limited liability company balance sheet and 2 MCQs. 39 Study Period 19 continued Were you awake? If you've been concentrating, you should be able to answer some key questions. What are the differences between ordinary and preferred shares? Give examples of two types each of statutory and non-statutory reserves. How are proposed dividends accounted for? What is the correct treatment of prior period errors under IAS 8? Any problems? Email (accaqueries @bpp.com) fax (020 8740 2293) or phone us (020 8740 2242/2245) Learning Resource Centre What do you want to do? How to do it! Reference Test your knowledge BPP i-Pass * Session 6: Limited liability companies and partnerships Learn interactively BPP i-Learn/BPP Virtual Campus Module 8 Improve your study skills BPP's Learning to Learn Accountancy book * * Included within your Home Study course If you want any of these products, visit: www.bpp.com/acca Common Pitfall • Failure to learn the pro-forma layouts – these are suitable for company accounts 'for publication' 40 Study Period 20 Progress Test 2 Priority = High Date due: In order to reinforce what you have learnt in Study Periods 13 – 19, answer the following multiple choice questions without referring to your Study Text or notes. You should then revise any areas with which you had difficulty. 1 A company's bank statement shows an overdraft of $3,204 at 31 March 20X0. The statement includes bank charges of $46 which have not yet been recorded in the company's cash book. The statement does not include cheques for $780 paid to suppliers, nor an amount of $370 received from a customer; both of these amounts appear in the bank statement for April 20X0. If the company prepares a balance sheet at 31 March 20X0, the figure for the bank overdraft should be: A $2,748 B $2,794 C $3,614 D $3,660 Data for Questions 2 & 3 Womble & Sons have an accounting year ended 31 December 19X9. At that date the balance on the receivables ledger control account was $65,000, but the total of the individual accounts in the receivables ledger came to $63,620. Upon investigation the following facts were discovered: • The sales day book total for week 49 had been overcast by $300. • A credit balance of $210 on Orinocco's account in the receivables ledger had been incorrectly treated as a debit entry, when balancing off his account. • A payables ledger contra of $1,500 has been entered in Bungo's account in the receivables ledger but no other entry had been made. 41 Study Period 20 continued 2 The adjusted balance on the receivables ledger control account is: A $62,780 B $63,200 C $63,620 D $64,700 3 The adjusted balance on the receivables ledger is: A $62,780 B $63,200 C $63,620 D $64,700 4 Deer Co had 200 units in inventory at 30 November 19X9 valued at $800. During December it made the following purchases and sales. 2/12 Purchased 1,000 @ $5 each 5/12 Sold 700 @ $7.50 each 12/12 Purchased 800 @ $6.20 each 15/12 Purchased 300 @ $6.60 each 21/12 Sold 400 @ $8.00 each 28/12 Sold 500 @ $8.20 each Which of the following combinations is correct? AVCO FIFO A 4,095 3,220 B 4,095 4,460 C 2,740 3,220 D 2,740 4,460 5 If a shareholder in a limited liability company sells his shares to another private investor, for less than he paid for them, the share capital of the company will: A Remain unchanged B Increase by the nominal value of the shares C Increase by the amount received for the shares D Decrease by the nominal value of the shares 42 Study Period 20 continued 6 A company issued 100 ordinary shares of 25c each at a premium of 10c per share. In the absence of the chief accountant, his assistant posted the cash side of the transaction to a suspense account. The entry required to correct this is: A Dr Suspense $35 Cr Share capital $35 B Dr Suspense $110 Cr Share capital $100 Cr Share premium $10 C Dr Suspense $35 Cr Share capital $25 Cr Share premium $10 D Dr Share capital $25 Cr Suspense $25 7 Which of the following is not an essential feature of a database? A The database file data must be held on a direct-access file medium B Relationships between data on file must be in clearly defined structures C A database management system must be used to operate the database D A database must be able to support several users, each capable of accessing the data on file to use for their own particular applications 8 Rose and Crown Inc has an authorised share capital of $100,000 made up of 25c ordinary shares. It has issued 40% of these shares. During the year ended 31.12.19X9 Rose and Crown Inc make the following transactions and announcements: (i) Pays a dividend of 5c per share on 2.2.X9 in respect of year ended 31.12.X8 (ii) Pays an interim dividend of 2c per share on 3.7.X9 (iii) Proposes a final dividend of 6c per share in respect of year ended 31.12.X9 on 13.12.X9. The cash will be paid on 5.4.2000. The charge to retained earnings for dividends in 19X9 is: A $11,200 B $12,800 C $17,600 D $20,800 9 A trader has budgeted sales for the coming year of $300,000. He achieves a constant mark-up of 25% on cost. He plans to reduce his inventory level by $14,000 over the year. His purchases for the year will be: A $211,000 B $239,000 C $226,000 D $254,000 . below): 25% 25% MARGIN MARK UP Sales 100% Sales 1 25% Cost of sales 75% Cost of sales 100% Gross profit 25% Gross profit 25% • Lack of. Suspense $ 35 Cr Share capital $ 35 B Dr Suspense $110 Cr Share capital $100 Cr Share premium $10 C Dr Suspense $ 35 Cr Share capital $ 25 Cr Share premium $10 D Dr Share capital $ 25 Cr Suspense $ 25 7. 2/12 Purchased 1,000 @ $5 each 5/ 12 Sold 700 @ $7 .50 each 12/12 Purchased 800 @ $6.20 each 15/ 12 Purchased 300 @ $6.60 each 21/12 Sold 400 @ $8.00 each 28/12 Sold 50 0 @ $8.20 each Which