Financial Accounting N6 www.futuremanagers.com

Transcript:Financial Accounting N6 www.futuremanagers.com:
Financial Accounting N6 www.futuremanagers.com INTRODUCTION The Conceptual Framework for Financial Reporting forms the foundation or basis of all International Financial Reporting Standards. The purpose of the conceptual framework is to set out the various concepts underlying financial reporting in order to assist the International Accounting Standards Board to develop and evaluate new forms of IFRSs. Module 1: Conceptual framework www.futuremanagers.com Module 1: Conceptual framework (continued) QUALITATIVE CHARACTERISTICS In order for a set of financial statements to be useful to its users, it must have certain qualitative characteristics. These include: Relevance; Faithful representation; Comparability; Verifiability; Timeliness; and Understandability. www.futuremanagers.com Module 1: Conceptual framework (continued) UNDERLYING ASSUMPTIONS It is very important that users may assume that the financial statements relate to a going concern that plans to continue operating for the foreseeable future. A going concern means that the entity’s assets exceed its liabilities. www.futuremanagers.com Module 1: Conceptual framework (continued) ELEMENTS OF FINANCIAL STATEMENTS There are five elements that make up the entire double-entry accounting system: Assets; Liabilities; Equity; Income; and Expenses. www.futuremanagers.com Module 1: Conceptual framework (continued) RECOGNITION CRITERIA A transaction can only be recorded (journalised in the ledger) if it meets the definition of an element first and secondly meets the recognition criteria. The recognition criteria are: The flow of future economic benefits caused by this element must be probable, and The element must have a cost/value that can be reliably measured. www.futuremanagers.com INTRODUCTION VAT is taxation on the rendering of goods or services which is borne by the consumer in the final stage of supply, but which is collected during each stage of production and marketing. The rate at which VAT is levied is determined by legislation. Module 2: Value-added tax www.futuremanagers.com Module 2: Value-added tax (continued) THE WORKING OF VAT During each stage of the production and services process the supplier’s profit is determined and taxed. This is attained by the supplier paying VAT on every input, which he uses to supply goods and services to his clients. The VAT paid by the supplier is his input tax. The supplier charges VAT on goods and services supplied to his clients. The VAT charged by the supplier is his output tax. www.futuremanagers.com Module 2: Value-added tax (continued) THE BASIS OF VAT VAT is levied on: The supply of goods or services delivered by the dealer, on or after the inception date, during the normal course of business; The importing