F3 20-21 完整版讲义 PDF

2020‐12‐04
ACCA F3 Financial Accounting(FA)
By Julius
精品基础课
For the exam
Sept 2020 ‐‐‐ Aug 2021
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考试形式
The exam lasts two hours and is divided into two sections.
Section A consists of 35 Questions.

35 x 2 mark objective test questions
Section B consists of 2 Questions

2 x 15 mark each
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Content
Chapter 1 The scope and purpose of financial statements for external reporting
Chapter 2 Users’ and stakeholders’ needs
Chapter 3 The main elements of financial reports
Chapter 4 The regulatory framework
Chapter 5 The qualitative characteristics of financial information
Chapter 6 The use of double entry and accounting systems
Chapter 7 Double entry bookkeeping principles
Chapter 8 Sales and Purchases
Chapter 9 Inventory
Chapter 10 Tangible non-current assets
Chapter 11 Intangible assets
Chapter 12 Accruals and prepayments
Chapter 13 Irrecoverable debts and allowances
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Content
Chapter 14 Provisions and contingencies
Chapter 15 Capital structure and finance costs
Chapter 16 Control accounts
Chapter 17 Bank reconciliation
Chapter 18 Correction of errors
Chapter 19 Suspense Account
Chapter 20 Incomplete records
Chapter 21 Financial Statements
Chapter 22 Notes disclosure and Event after reporting periods
Chapter 23 Cash flow statement
Chapter 24 Prepare financial statements
Chapter 25 Consolidation
Chapter 26 Interpretation of financial statements
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01 The scope and purpose of, financial

statements for external reporting
02
Users’ and stakeholders’ needs
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Framework-Guide your mind
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Define financial reporting

 Financial reporting is a way of recording, analysing and summarising financial data.
• First, transactions are recorded in books of prime entry(原始账簿）
• Then, analyzed in the books of prime entry and the totals are posted to the ledger
accounts（分类账户）
• Finally, summarized in the financial statements
 Statement of financial position 资产负债表
 Statement of profit or loss 损益表
 Statement of cash flow 现金流量表
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Business entity
 Types of business entity
• Sole traders（个体户） is a business owned and run by one individual, perhaps
employing one or two assistants and controlling their work.
• Partnerships（合伙关系） These are arrangements between individuals to carry on
business
• Limited liability companies（有限责任公司）the business's debts and the personal
debts of the business's owners (shareholders) are legally separate.
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Business entity (各自优缺点，区别)

 Advantages and of being a sole trader
• Limited paperwork
• Owner has complete control over the business
• Owner is entitled to profits and the ownership of assets
• No requirement to make financial accounts publicly, no audit requirement
• Can be highly flexible
 Disadvantages of being a sole trader
• Owner is personally liable for all debts (unlimited liability)
• Leading to reliance on overdrafts and personal savings (difficult to rise money)
• May be issues of continuity of business in the event of death or illness of the owner
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Business entity (各自优缺点，区别) 录制

 Advantages of partnerships
• No requirement to make financial accounts publicly available
• Additional capital can be raised because more people are investing in the business
• Division of roles and responsibilities (角色责任更加细分）
• Sharing of risk and losses between more people
• No company tax on the business
 Disadvantages of partnerships
• Partners are jointly personally liable for all debts (unlimited liability) unless they
have formed an LLP (Limited Liability Partnerships有限责任合伙关系)
• There may be issues of continuity of business in the event of death or illness of the
partners
• Slower decision making due to the need for consensus（一致） between partners
• When one partner leaves, the partnership is automatically dissolved and another
agreement is required between existing partners
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 Limited liability companies are incorporated to take advantage of 'limited
liability' for their owners (shareholders).
 There is a clear distinction among shareholders and directors of limited companies.
• Shareholders（股东） are the owners and they provide capital and receive a return
（不参与公司日常运营，能在股东大会上选举投票）
• The board of directors（董事会） are appointed to run the company on behalf of
shareholders.（负责监管，管理公司，制定长期策略，为所有股东创造价值，
作为公司的代理人）
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 Advantages and of being a limited liability company
• Limited liability company makes raising finance easier and there is no limit on the number
of shareholders（可以发行证券进行融资，组织架构更加方便融资）
• A limited liability company has a separate legal identity from its shareholders. So a
company continues to exist regardless of the identity of its owners
• 股东只承担购买股票的责任（Limited liability），公司有义务承担公司所有责任
• There are tax advantages to being a limited liability company. The company is taxed as a
separate entity from its owners（税务筹划，公司的税率一般低于个人，只要不从公司
中取出，可以延后征个人所得税。一旦从公司中取出个人层面可能会被再次征税，所
以可能会有double taxation）
• It is relatively easy to transfer shares from one owner to another
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 Disadvantages and of being a limited liability company
• Limited liability companies have to publish annual financial statements.
• Limited liability company financial statements have to comply with legal and
accounting requirements.
• The financial statements of larger limited liability companies have to be audited.
This can be inconvenient, time consuming and expensive.
• Share issues are regulated by law.
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Understand the nature, principles and scope of financial reporting

Management accounting Financial accounting
Why information • For internal use • For external use
produced
• To aid planning, controlling and • To record the financial
Purpose of decision making performance in a period and the
information financial position at the end of the
period.
• None • Limited companies must produce
Legal requirements
financial statements
• Management decide on the • Format and content of financial
Formats information that they require and the accounts must follow accounting
most useful way of presenting it standards and company law.
Nature of • Financial and non-financial • Mostly financial.
information
Time period • Historical and forward-looking • Mainly a historical record.
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Identify the users of financial statement

 Users of financial statements
• Internal users
 Management
 Employees
• External users
 Suppliers
 Shareholders
 Lenders
 Government and their agencies
 Customer
 General public
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The board of directors

 Corporate governance is the system by which companies and other entities are
directed and controlled.
 The board of directors of a company are usually the top management and are those
who are charged with governance（负责治理） of that company. The responsibilities
and duties of directors are usually laid down in law（董事的责任和义务在相关法律
当中被制定）
• A director's main aim should be to create wealth for the shareholders
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 Director’ duties
• Act within their powers
• Promote the success of the company
• Exercise independent judgment
• Exercise reasonable skill, care and diligence
• Avoid conflicts of interest
• Not accept benefits from third parties
• Declare an interest in a proposed transaction or arrangement
• Responsible for the preparation of financial statements (符合准则要求，无重大错
误)
• The prevention and detection of fraud
• Ensure that the entity complies with the relevant laws and regulations
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 Directors are responsible for producing financial statements that give a true and fair
view.
• The responsibility is delegated within the company to the Finance Director (FD) or
the Chief Financial Officer (CFO).
 An external audit is an independent review to ensure that financial statements comply
with legal requirements and accounting standards
• Companies maybe subjected to an annual audit
• External auditor 不做账，不对管理层负责, 由一般股东聘用外部审计师，对股
东负责
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03 The main elements of financial reports
04,05
The regulatory framework and the
qualitative characteristics of financial
information
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中英文词义
 Statement of financial position 和 balance sheet 是一个意思都是资产负债表，简写成 SOFP 或者 B/S
 Statement of profit or loss 和 income statement 是一个意思都是利润表或者损益表的意思。简写成
SOPL或者 I/S
 Accounts是会计科目它是报表中的一种交易类型的总结
 Asset 公司所控制的资源
 Liability 公司所欠的资源
 Equity 公司的剩余资源-股东资源-所有者权益（asset-liability）
 Income 是一个意思指利润表中收入类的科目
• Revenue or sales revenue 主营业务收入
• Credit sales 特指赊销，卖出后不立马收钱
 Expense 费用，支出类利润表科目
• COGS（Cost of good sold 有时候也叫cost of sales）是成本是一笔费用，是Expense中一类，属
于Expense
 Expenditures 花销，支出的总称
• Capital expenditure购买长期资产资产时候使用，这笔钱暂时不入费用项
• Revenue expenditure 购买一些日常短期消耗品，一般直接入利润表作为费用项
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中英文词义
 Gain Vs Revenue
• Gain 利得: 一般是公司处置长期资产的收益或者重估导致的收益，不是公司的日常收益
 Loss Vs Expense
• Loss 损失: 一般是公司处置长期资产当中的损失或者重估导致的损失，不是公司的日常费用
 Dividend Vs drawing
• Dividend 分红: 公司根据盈利状况，从Retained earning 中分出一部分钱给股东
• Drawing 抽资(在个体户和合伙关系中使用) 所有者从个体户和合伙人关系中抽出所赚或者所投
资的钱
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Financial statements
 The statement of financial position(SOFP) is simply a list of all the assets owned and
all the liabilities owed by a business as at a particular date.
• Asset=Liability + Equity
L
A
E
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 A statement of profit or loss is a record of income generated and expenditure incurred
over a given period. The statement shows whether the business has had more revenue
than expenditure(Profit or loss)
• Net profit=Revenue-Expense
 Statement of profit or loss and other comprehensive income(statement of
comprehensive income) 是对P&L的一种补充，P&L反应了实现的损益（短期内可
以变现或者已经变现的P&L），把另外一些未实现的损益放入OCI（other
comprehensive income）-权益科目
• Comprehensive income=P&L+OCI
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 Statement of cash flows(从现金角度分析公司）
Operation cash flow(经营导致的现金）
+Investment cash flow（投资导致的现金）
+Financing cash flow（融资导致的现金）
Change in cash in the period
+Beginning cash flow
Ending cash flow
现金流自带正负号
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A conceptual framework
 A conceptual framework is:
• a coherent system(清晰的系统) of interrelated objectives and fundamental
principles
• a framework which prescribes the nature, function and limits of financial accounting
and financial statements
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 The purpose of Conceptual Framework
• To assist the Board in the development of future IFRSs and in its review of existing IFRSs
• To assist the Board in promoting harmonisation of regulations, accounting standards and
procedures
• To assist national standard-setting bodies in developing national standards
• To assist preparers of financial statements in applying IFRSs
• To assist auditors in forming an opinion as to whether financial statements comply with
IFRSs
• To assist users of financial statements in interpreting the information contained in financial
statements prepared in compliance with IFRSs. And it also can determine the treatment of
items not covered in IFRS
 The Conceptual Framework is not an IFRS and so does not overrule any individual IFRS. In the (rare)
case of conflict between an IFRS and the Conceptual Framework, the IFRS will prevail (获胜)
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 Reason why have a conceptual framework
• It enables accounting standards and generally accepted accounting practice (GAAP)
to be developed in accordance with agreed principles
• It avoids ‘firefighting’
• As transactions become more complex and businesses become more sophisticated it
helps preparers and auditors of accounts to deal with transactions which are not the
subject of an accounting standard
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 The conceptual framework introduces many things:
• Purpose of financial statement
• Assumption of financial statement
• Qualitative characteristics
 Fundamental qualitative characteristics
‣ Relevance
‣ Faithful representation
 Enhancing qualitative characteristics
‣ Comparability
‣ Verifiability
‣ Timeliness
‣ Understandability
• Elements of financial statement (Asset, Liability, Equity, Income, Expense)
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The objective of financial reporting

 The objective of financial reporting is to provide financial information about the
reporting entity that is useful to existing and potential investors, lenders and other
creditors in making decisions about providing resources to the entity
 The Framework identifies that the underlying assumption governing financial
statements is the going concern concept. The going concern basis assumes that the
entity has neither the need nor the intention to liquidate or curtail materially the scale of
its operations
• If the company no longer going concern, the financial statements should be prepared
on a different basis.
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General features of financial reporting

 Accruals basis. The effects of transactions and other events are recognised when they
occur (and not as cash or its equivalent is received or paid)
• The accruals basis is not an underlying assumption
 The business entity concept: Financial statements always treat the business as a separate
entity
 Consistency
 Fair presentation
 Materiality
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Qualitative characteristics-基本特征
 Relevance: Relevant information is capable of making a difference in the decisions
made by users.（信息可以影响未来决策）
• Only relevant information can be useful. Information should be released on a timely
basis to be relevant to users.
• The relevance of information is affected by its nature and materiality
 Materiality. Information is material if omitting it or misstating it could influence
decisions（Example：资产的1%，利润的5%）
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Qualitative characteristics-基本特征
 Faithful representation. To be a faithful representation information must be complete,
neutral and free from error
• A complete depiction includes all information necessary for a user to understand the
phenomenon being depicted
• A neutral depiction is without bias in the selection or presentation of financial
information. This means that information must not be manipulated
• Free from error means there are no errors or omissions in the description of the
phenomenon.
 Substance over form实质重于形式 it is implied in faithful representation. This is not a
separate qualitative characteristic. (举例：长期租赁的本质是资产-购买使用权)
 Current value are more relevant than historical cost but may less faithful representation
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Qualitative characteristics-提升基本特征
 Comparability
• Compare the financial statements of an entity over time to identify trends in its
financial position and performance
• Compare the financial statements of different entities to evaluate their relative
financial performance and financial position.
 For this to be the case there must be:
• Consistency (e.g. restate prior period if accounting policy change) and
• Disclosure
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Qualitative characteristics-特征
 Verifiability. Verifiability helps assure users that information faithfully represents the
economic phenomena it purports to represent. It means that different knowledgeable
and independent observers could reach consensus that a particular depiction is a
faithful representation
 Timeliness. Timeliness means having information available to decision-makers in time
to be capable of influencing their decisions. Generally, the older information is the less
useful it is
• There is a balance between timeliness and the provision of reliable information
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Qualitative characteristics-特征
 Understandability. Classifying, characterizing and presenting information clearly and
concisely makes it understandable
• 不能为了简单而扭曲事实 or omit any complex issues
 Understandability depends on:
• the way in which information is presented
• the capabilities of users.
 It is assumed that users:
• have a reasonable knowledge of business and economic activities
• are willing to study the information provided with reasonable diligence.
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Elements of financial statements

 Asset: A resource controlled by an entity as a result of past events and from which
future economic benefits are expected to flow to the entity.
• The existence of an asset is not reliant on: Physical form (hence patents and
copyrights); nor Legal rights (hence leases).
 Liability. 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.
• Provision预计负债. A present obligation which satisfies the rest of the definition of
a liability, even if the amount of the obligation has to be estimated
 Equity. The residual interest in the assets of the entity after deducting all its liabilities
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 Income. 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, other than those relating to contributions from equity participants.
• 一般Net income等同于Net profit
• Both revenue and gains are included in the definition of income
 Revenue arises in the course of ordinary activities of an entity.
 Gains include realized gains e.g. arising on the disposal of non-current assets and
unrealized gains, eg on revaluation of marketable securities. As such they are no
different in nature from revenue.
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 Expenses. Decreases in economic benefits during the accounting period in the form of
outflows or depletions of assets or incurrences of liabilities that result in decreases in
equity, other than those relating to distributions to equity participants.
• Expenses that arise in the course of ordinary activities of an entity.
• Losses will include those arising on the disposal of non-current assets. The definition
of expenses will also include unrealised losses, eg the fall in value of an asset. As
such they are no different in nature from other expenses.
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Barriers
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Regulatory framework
 The need for a regulatory framework
• Ensuring that users of financial statements receive a minimum amount of
information that will enable them to make meaningful decisions regarding their
interest in a reporting entity
• Ensure that relevant and reliable financial reporting is achieved to meet the needs of
shareholders and other users
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 Principles based framework (UK):
• accounting standards are set on the basis of the conceptual framework (More
judgments)
• 优点：宽泛---可以自主判断在一定范围内
• 缺点：太宽泛---容易造成框架下具体准则发生冲突
 Rules based framework (USA):
• ‘Cookbook’ approach
• accounting standards are a set of rules which companies must follow
• 优点：明文规定，无需自我判断
• 缺点：无法让人自主判断，反而让人钻细则的空子
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 The main advantages of harmonization using IFRS:
• A business can present its financial statements on the same basis as its foreign
competitors, making comparison easier
• Cross-border listing跨国上市 will be facilitated, making it easier to raise capital
abroad
• Companies with foreign subsidiaries will have a common, company-wide accounting
language
• Foreign companies which are targets for takeovers or mergers can be more easily
appraised
• Multinational companies could more easily transfer accounting staff across national
borders
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 The main barriers of harmonization using IFRS:
• Difficult to introduce, apply and maintain or enforce in different countries
• Different legal systems may prevent the application of certain accounting practices
and restrict the options available
• Countries may be unwilling to accept another country's standards (i.e. nationalism);
• Different user groups. Countries have different ideas about who the relevant user
groups are and their respective importance
• Cultural differences result in objectives for accounting systems differing from
country to country.
• The lack of strong accountancy bodies to press for better standards and greater
harmonization
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Role of the regulatory system

 International Financial Reporting Standards (IFRS) Foundation
• is the supervisory body for the IASB (International accounting standards board)
• is responsible for governance issues and ensuring each body is properly funded.
 The objectives of the IFRS Foundation include:
• Develop a single set of high quality, understandable, enforceable and globally
accepted IFRSs through its standard-setting body, the IASB
• Promote the use and rigorous application of those standards
• Take account of the financial reporting needs of emerging economies and small and
medium sized entities (SMEs)
• Bring about convergence of national accounting standards and IFRSs to high quality
solutions
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 International Accounting Standards Board (IASB) is solely responsible for issuing
International Financial Reporting Standards (IFRSs)
 The intentions of the IASB are:
• to develop a single set of understandable and enforceable high quality worldwide
accounting standards, however
• the IASB cannot enforce compliance with its standards, therefore
• it needs the cooperation of national standard setters.
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 IFRS Interpretations Committee (IFRS IC)
• issues rapid guidance on accounting matters where divergent interpretations of
IFRSs have arisen, and
• these must be approved by the IASB
 The interpretations cover both:
• newly identified financial reporting issues not specifically dealt with in IFRSs; or
• issues where unsatisfactory or conflicting interpretations have developed, or seem
likely to develop in the absence of authoritative guidance
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 IFRS Advisory Council used by the IASB to consult with the outside world.
• advising the Board on agenda decisions and priorities in the Board's work,
• informing the Board of the views of the organizations and individuals on the Council
on major standard setting projects, and
• giving other advice to the Board
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 The procedure for the development of an IFRS is as follows:
• The IASB identifies a subject and appoints an advisory committee to advise on the
issues.
• The IASB may issue a discussion paper to encourage comment.
• The IASB publishes an exposure draft for public comment, being a draft version of
the intended standard.
• Following the consideration of comments received on the draft, the IASB publishes
the final text of the IFRS.
 The publication of an IFRS exposure draft and requires the votes of at least eight of the
15 IASB members
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The use of double entry and accounting
systems
07
Double entry bookkeeping principles
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Simple statements for F3

Current asset: 短期资产(不足一年或者一个运营
周期的资产）
Statement of Financial position for F3
Non current asset: 长期资产
Non current asset Equity
Property Plant &Equipment X Share capital X Property Plant &Equipment：物业厂房和设备
Intangible Asset X Share premium X
Long term Investment X Retained earning X Intangible Asset：无形资产
Other comprehensive income X
Current asset Marketable securities：市场化的证券（短期投
Inventory X Non current liability 资）
Trade Receivables X Debentures (Loan) X
Marketable securities X Current liability Share capital：股票资本
Cash X Trade Payables X
Total asset X Sales tax or Income tax payable X Share premium：股本溢价
Bank Overdraft X
Total Equity + liabilities X Loans：贷款
Debentures：债或者债券
Bank Overdraft: 银行透支

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Simple statements for F3
Statement of profit or loss for F3
Revenue X
Distribution cost 渠道，经销成本
Cost of sales (X)
Gross profit X Administration expense行政费用
Distribution cost (X)
Administration expense (X) PBIT (profit before interest and tax) 利息和税前
Operation profit (PBIT) X 的利润，一般等于经营利润
Finance cost (interest) (X)
Profit before tax X
Tax expense (X)
Profit after tax X
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中英文词义
 Invoice 发票，货物卖给客户的凭证，收到invoice的客户按照发票金额付款
 Receipt 收据，对方收到钱的凭证
 Debit note 借记单，接收人应付其金额，一般客户退货后，客户发出给供应商
 Credit note 信用单，接收人应收其金额，一般客户退货后，供应商发出给客户
 Cash 现金之和, 包括了银行的现金和零用现金。一般就是指银行的现金
• Pretty cash 手头的零用现金
• Overdraft 银行透支（负债）
• Cheque（支票）等同于cash
 Voucher 凭证，交易是被授权的或者交易是有依据的证明
 Purchase Vs cost of sales
• Purchase 不是一个标准费用类科目，购买库存如果未出售则是inventory，如果购买后卖出了
则变成cost of sales
• Purchase 600存货，出售库存400 （cost of sales），剩余存货200（inventory）。Purchase 常作
为过渡科目使用
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中英文词义
 Ledger accounts：分类账（由books of prime entry原始账簿整理获得）
• General Ledger/Nominal ledger：总账
• Personal Ledger/Individual ledger ：个人分类账
 Trial Balance：由总账整理而来，叫试算平衡表
 Accounts Receivable: 简写成A/R
• Trade receivable 简写成 T/R，经常和A/R混用，特指交易应收账款
• Receivable allowance = allowance for bad debt = allowance for receivable 坏账准备，估计一下应
收中多少收不回，是应收账款的备抵科目（contra account）
 Accounts Payable:简写成 A/P
• Trade payable 写成 T/P ，经常和A/P混用，特指交易应付账款
 Capital资本，最正统的是（含息的负债和股东投资之和），但是有时候也会特指权益部分的股东
投资。需要看题目中的具体表述。
清新的泥石流
Documents
 Quotation报价单. A document sent to a customer by a company stating the fixed price
that would be charged to produce or deliver goods or services.
 Purchase order采购订单. A document of the company that details goods or services
which the company wishes to purchase from another company.
 Sales order销售订单 A document of the company that details an order placed by a
customer for goods or services.
 Goods received note收货单 A document of the company that lists the goods that a
business has received from a supplier.
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Documents
 Goods despatched note出货单. A document of the company that lists the goods that
the company has sent out to a customer.
 Invoice发票 relates to a sales order or a purchase order.
• (a) When a business sells goods or services on credit to a customer, it sends out an
invoice. The invoice is a request for the customer to pay what they owe.
• (b) When a business buys goods or services on credit it receives an invoice from the
supplier
 Statement 对账单. A document sent out by a supplier to a customer listing the
transactions on the customer's account, including all invoices and credit notes issued
and all payments received from the customer.
清新的泥石流
Documents
 Debit note借记单. A document sent by a customer to a supplier in respect of goods
returned or an overpayment made. It is a formal request for the supplier to issue a
credit note.
 Credit note信用单. A document sent by a supplier to a customer in respect of goods
returned or overpayments made by the customer. It is a 'negative' invoice.
 Remittance advice汇款通知单. A document sent to a supplier with a payment,
detailing which invoices are being paid and which credit notes offset.
 Receipt. (收据不要和invoice混淆）A document confirming confirmation that a
payment has been received. This is usually in respect of cash sale
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Books of prime entry

 The main books of prime entry are as follows.
• (a) Sales day book
• (b) Purchase day book
• (c) Sales returns day book
• (d) Purchase returns day book
• (e) Cash book
• (f) Petty cash book
• (g) Journal
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Sales and purchase day books

 The sales day book is the book of prime entry for credit sales
 Sales return day book记入debit note（来自客户的退货）
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Sales and purchase day books

 The purchase day book is the book of prime entry for credit purchases
 Purchase returns day book 记入 credit notes （来自供应商确认）
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Cash book
 The cash book is also a day book, used to keep a record of money received and money
paid out by the business. The cash book deals with money paid into and out of the
business bank account.
 Bank statements should be used to check that the amount shown as a balance in the
cash book agrees with the amount on the bank statement
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Petty cash book

 Petty Cash is usually kept on the business premises in order to make occasional payments for odd items
of expense.
 Petty cash and imprest system （针对petty cash的现金系统，叫定额备用金制度，把期末的金额
还原到初始定额）
• Imprest amount (定额备用金） the amount of money in petty cash is kept at an agreed sum （开始
的有一个固定的金额）
• 初始定额=期末余额+cash voucher
• 汇入资金=cash voucher
 The journal (调整日记账) is the record of prime entry for transactions which are not recorded in any of
the other books of prime entry （不在其他日记簿出现的会计调整）
• 错误的调整，折旧调整
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Accounting equation （一定要理解透彻，贯彻整个财务体系）

 Accounting equation：
• Assets = Equity + Liability
• Profit=Revenue-Expense
• Equity=Capital + Retained earning
• Retained earning=Beginning R/E + Profit – Dividends
• Assets=Beginning R/E + Revenue – Expense- Dividends+ Capital+ Liability
• Assets + Expense + Dividends=Beginning R/E + Revenue + Capital + Liability
如果是个体户或者合伙关系用 drawing 取代 dividend
如果有新增capital 那么公式中的 capital=opening capital + capital introduced
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Accrual and matching

 Accrual 权责发生制 is an accounting principle that measures the performance and
position of a company by recognizing economic events regardless of when cash
transactions occur.
• The general idea is that economic events are recognized by matching revenues to expenses (the
matching principle) at the time in which the transaction occurs rather than when payment is made (or
received)
 三个问题：
• 花10元买了一只笔，是Expense吗？
• 花100万买一个房子，是Expense吗？
• 花10000买了10台iphone，准备出售，这10000是Expense吗？如果卖出去了3台，
expense 应该是多少?
 如果费用可以和收入简单挂钩起来，那么让费用跟着收入走！
清新的泥石流
Accounting equation-Example
 When Liza Doolittle sets up her business: Capital invested $2,500
 Cash = $2,500
Assets = Equity + Liability

Cash +2500 Capital+2500
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 Liza Doolittle purchases a market stall (货棚） from Len Turnip, who is retiring from
his fruit and vegetables business. The cost of the stall is $1,800.
 She also purchases some flowers and potted plants from a trader in the wholesale
market, at a cost of $650. This leaves $50 in cash, after paying for the stall and goods
for resale, out of the original $2,500.
Assets = Equity + Liability

Cash +50 Capital+2500
Stall +1,800
Flowers +650
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 On 3 July Liza has a very successful day. She sells all of her flowers and plants for
$900 cash. Since Liza has sold goods costing $650 to earn revenue of $900, we can say
that she has earned a profit of $250 on the day's trading.
Assets = Equity + Liability ( Profit= Revenue- Expense)

Cash +50 Capital+2500 250 900 650
Stall +1,800 R/E +250
Flowers +650-650
Cash +900
2750
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 On 5 July Liza paid herself 500 for personal use.
Assets = Equity + Liability ( Profit= Revenue- Expense)

Cash +50 Capital+2500 250 900 650
Stall +1,800 R/E +250
Flowers +650-650 Drawing -500
Cash +900
Cash -500
2250
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Accounting equation
资产 = 负债 + 权益收入 ‐ 费用
Debit
有借必有贷，借贷必相等
Credit
 Assets + Expense + Dividends(drawing)=Beginning R/E + Revenue + Capital + Liability

 Double entry
标准格式： Date Debit XXX
Credit XXX
(narrative explanation 事由）
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Double entry bookkeeping 复式记账

 Double entry bookkeeping is the method used to transfer the weekly/monthly totals
from the books of prime entry into the nominal ledger （general ledger）.
 Double entry bookkeeping is the method by which a business records financial
transactions. An account is maintained for every asset, liability, income and expense.
Every transaction is recorded twice so that every debit is balanced by a credit。（每一
笔记录都有借贷，使得资产负债表始终平衡）
 思考交易如何影响资产负债表
• 1万买了一辆车，现金下降，汽车资产上升
• 问银行借了5万，负债上升，现金上升
• 买了一只笔10元，现金下降，费用上升。费用上升导致利润下降，导致权益下降。
清新的泥石流
Ledger accounts
 Ledger accounts（分类账） summarize all the individual transactions listed in the
books of prime entry（原始账簿）
• Personal ledger （individual ledger）
• Nominal ledger (通过 double entry system)
 Examples of accounts in the nominal ledger include the following：
• (a) Plant and machinery at cost
• (b) Motor vehicles at cost
• (c) Inventories – raw materials
 在总账里面的任何一个期末值都是由期初，加上变动所得！Base 法则：
Beginning + addition – subtract =Ending
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Ledger accounts-Example
 Ledger accounts: Accounts Receivables Dec 31 20X9
A/R
b/f: 200 Cash collection: 50
Credit sales: 100

c/d : 250
300 300
b/d: 250
Debit （借方） Credit （贷方）
清新的泥石流
Ledger accounts
 a/c means Account (科目）
 c/d means carried down，c/f means carried forward （分类账中的期末数余额，是
通过计算得出，不能说明借贷意义）
 b/d means brought down，b/f means brought forward. （分类账中的余额数，是跟
c/d成斜对角，来说明借贷关系）
• 因为资产负债科目可以一期一期累计，而利润表科目是每期独立计算，所以b/d、b/f不会出现
在利润表科目T-account末端。（后面有具体例子）
 (a) Total both sides of the T account and find the larger side
 (b) Put the larger total on the larger side （大的那边算出总数）
 (c)因为借贷要相等，在小数那边计算得出 (c/d) or (c/f);
 (d)最后根据在c/d的对角，得出T-account的真正有借贷意义b/d （如果可以累计到下期）
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Double entry bookkeeping

 1月1日，股东投资2500现金到公司
 1月2日，公司花1500买了100本画册，现金支付
 1月10日，卖出画册80本，共2400元，钱未收到。
 1月12日，收到2400元，业务发展快，问银行借款5000扩容
 1月15日，又买入200本画册共3000元，未支付。
 1月20日，支付3000元货款
 1月30日，卖出150本4500元，赊销。
 按财务顺序制作1月31日的财务报表！需要掌握：
• 1.如何记账（double entry）
• 2. T-account 如何制作及它的作用（把double entry 变成ledger account （T-account））
• 3. 什么是Trial-balance （如何从T-account转化成Trial Balance)
• 4. 如何从Trial Balance到financial statement
清新的泥石流

 1月1日，股东投资2500元
Debit Credit
Cash 2500
Capital 2500
 1月2日，公司花1500元买了100本画册，现金支付
Inventory 1500
Cash 1500
 1月10日，卖出画册80本，共2400元，钱未收到。
Cost of sales 1200
Inventory 1200
Accounts receivable 2400
Sales 2400
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 1月12日，收到2400元，业务发展快，问银行借款5000扩容
Debit Credit
Cash 2400
A/R 2400
Cash 5000
Bank Loan 5000
 1月15日，又买入200本画册共3000元，未支付。
Inventory 3000
Trade payable 3000
 1月20日，支付3000元货款
Trade payable 3000
Cash 3000
 1月30日，卖出150本4500元，赊销。
Cost of good sold 2250
Inventory 2250
A/R 4500
Sales 4500
清新的泥石流

 T-accounts for Cash at Jan 31
Cash
Capital Investment 2500 Purchase 1500

From A/R : 2400 Purchase 3000
Bank
Bank Loan
Loan :: 2400
5000 balance c/d 5400
9900 9900
Balance b/d 5400
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 T-accounts for A/R at Jan 31
A/R
Sales 2400 Receive cash 2400

Sales 4500 balance c/d 4500
6900 6900
Balance b/d 4500
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 T-accounts for Capital at Jan 31
Capital
Balance c/d 2500 Investment 2500

Balance b/d 2500
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 T-accounts for Inventory at Jan 31
Inventory
Purchase 1500 sales 1200

Purchase 3000 sales 2250
4500 balance c/d 1050
Balance b/d 1050 4500
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 T-accounts for payables at Jan 31
Payable
Payment 3000 Purchase 3000
Balance c/d 00 Balance b/d 00
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 T-accounts for Loans at Jan 31
Loans
Balance c/d 5000 Bank Loan 5000
Balance b/d 5000
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 T-accounts for Sales for the period ended at Jan 31
Sales
Inventory sold 2400

Inventory sold 4500
P&L a/c 6900 6900
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 T-accounts for Cost of sales for the period ended at Jan 31
COS
Inventory sold 1200

Inventory sold 2250
3450 P&L a/c 3450
清新的泥石流

 T-accounts for profit or loss: P&L最后需要结转到Retained earning，所以可以出现
c/d, b/d
P&L
COS 3450 sales 6900

P&L c/d 3450 6900
6900 Balance b/d 3450
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 Trial Balance
Trial
Debit Balance Credit
Cash 5400
A/R 4500
Inventory 1050
Capital 2500
A/P
Bank Loan 5000
Sales 6900
COS 3450
14400 14400
清新的泥石流

 Statement of Financial Position； Profit and Loss Statement
SOPL SOFP
Sales 6900
Inventory 1050 Capital 2500
COS 3450
A/R 4500 Retained earning 3450
P&L 3450
Cash 5400 Equity 5950
Total Asset 10950 Bank Loan 5000
Total Liabilities 5000
Liability and Equity 10950
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Double entry bookkeeping-special issue

 The correction of errors (以后章节有具体复杂情况）
 Buy a pen for 45 dollar
• Original Entry:
Debit Credit
Office Expense 54
Cash 54
• 一种是把之前的取消然后重新记：Adjusting Entry
Cash 54
Office Expense 54
Office Expense 45
Cash 45
• 另外一种是直接调差额：Adjusting Entry
Cash 9
Office expense 9
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Three column cash book
Discount Discount
allowed received
 Discount allowed 销货折价：给别人折扣，对公司是一笔损失（现在分录中不再使用）

 Discount received 采购折价：是别人给的折扣，对公司是一笔利润
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08
Purchase and sales
清新的泥石流
Cash discount
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F3 学习框架
Statement of Financial position for F3 Statement of profit or loss for F3
Non current asset Equity Sales Revenue X

Property Plant &Equipment X Share capital X Cost of sales
Purchase (X)
Gross profit X
Long term Investment X Retained earning X
Administration expense (X)
Current asset
Inventory X Non current liability Other income (Discount received) X
Marketable securities X Current liability Profit before tax X
Cash X Trade Payables X Tax expense (X)

Total asset X Sales tax or Income tax payable X Profit after tax X
Bank Overdraft X
Total Equity + liabilities X
清新的泥石流
中英文词义
 Sales tax 销售税，增值税（value added tax）是一个意思。譬如A 买某样东西支付了100的sales tax，
税是支付给政府的，由供应商（B）代收。如果之后A卖出某样东西收到sales tax150，这也是A替
政府代收的。所以到期末只要支付50给政府。
• Output sales tax 销项税出售时收的sales tax
• Input sales tax 进项税购买时支付的sales tax
 Sales tax payable （经常和sales tax混用）应付销售税 -负债科目
• 是否替政府收取sales tax 取决于有没有登记销售税。如果没有登记则不用问消费者收取sales
tax，是否给供应商支付sales tax 取决于供应商有无登记sales tax。
• 如果支付了sales tax，但自己没有register sales tax 那么也不能向政府申报进项税，把相应税收
归看成一笔费用
 Zero tax product: 零税率商品，在出售商品时征收零税收（需0申报）
 Exempt tax product：豁免税率商品，直接豁免其税收（免申报）
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Sales Tax
 Sales tax is an indirect tax levied征税 on the sale of goods and services. It is usually
administered by the local tax authorities
 Registered businesses charge output sales tax on sales and suffer input sales tax on
purchases.
• If output sales tax exceeds input sales tax, the business pays the difference in tax to
the authorities.
• If output sales tax is less than input sales tax in a period, the tax authorities will
refund the difference to the business
清新的泥石流
Sales Tax
 If consumer does not register sales tax, irrecoverable sales tax must be regarded as part
of the cost of the items purchased
• For example: if a business pays $500 for entertaining expenses and suffers
irrecoverable input sales tax of $75 on this amount, the total of $575 paid should be
charged to the statement of profit or loss as an expense.
 Sales tax related terminology
• The gross amount of a sale or purchase is the amount inclusive of sales tax
 Gross amount/(1+tax rate)=net amount
• The net amount of a sale or purchase is the amount exclusive of sales tax.
 Sales tax= Net amount * tax rate
• Return inward=sales return 销售退货
• Return out=purchase return 购买退货
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Sales Tax
 Example: Sales tax:10%,
Sells price 1000 (供应商是Registered businesses)
Dr Cash (T/R) 1100
Cr Sales 1000
Cr Sales tax payable 100 (只有政府有权利征收，这是企业代收的，需要上缴）
Sells price 1000 (供应商是Unregistered businesses)

Dr Cash (T/R) 1000
Cr Sales 1000
Buy goods for 800 (供应商和消费者是Registered businesses)

Cr Cash (T/P) 880
Dr Purchase 800
Dr Sales tax payable 80 （公司额外支付的税收，由供应商上缴，可以抵消销项
税）
清新的泥石流
Sales Tax
 Example: Sales tax:10%,
Buy goods for 800 (供应商是registered businesses，消费者是unregistered businesses)
Cr Cash (T/P) 880
Dr Purchase 880
Irrecoverable sales tax 含在费用中
Buy goods for 800 (供应商是unregistered businesses)

Cr Cash (T/P) 800
Dr Purchase 800
 BASE 法则运用for sales tax for registered businesses

Opening sales tax liability + output sales tax – input sales tax = closing sales tax liability
Credit balance of sales tax 公司欠政府钱
Debit balance of sales tax 政府钱欠公司
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Sales Tax
 Impact to financial statement：
Purchases Sales
Statement of profit or loss: Irrecoverable input sales tax: include Exclude sales tax
Recoverable input sales tax: exclude
Statement of financial position:

Payable Receivable
Include sales tax Include sales tax
清新的泥石流
Sales and purchase

 BASE法则的运用 for trade payable and receivable
 买入item 1000 on credit plus 100 sales tax，第二天支付了500
Debit Credit
Purchase 1000
Sales tax 100
Trade Payable 1100
Trade Payable 500

Cash 500
Credit purchase，sales tax使得Payable增加，付钱使得Payable下降
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Sales and purchase

 买入 item 1000 on credit，退回200的item
Debit Credit
Purchase 1000
Trade Payable 1000
Trade Payable 200

Purchase return 200
综述上面，所以请记住以下公式！！！BASE法则
期初Payable+ sales tax + credit purchase -purchase return-cash paid=期末Payable
期初Receivable+sales tax + credit sales-sales return-cash received =期末Receivables
清新的泥石流
Discount
 Discount
• Trade discount: 在正式交易前，对于成交价所协商的折扣。例如：最终协商，给与10%折扣
• Cash discount: 鼓励对方早日付款所提供的折扣。例如：10天之内付清，给与5%的折扣
 Trade discounts received 采购的商业折扣 are deducted from the cost of purchases.
For example, Company A purchases inventory on credit from Supplier B at a gross cost
of $100, and receives a trade discount of 5% from the supplier. The double entry for the
purchase is as follows:
DEBIT Inventory $95
CREDIT Trade payables $95
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Discount
 Trade discounts allowed销售的商业折扣 are deducted from the gross sales price, and
the net amount is then invoiced to the customer.
 For example, Company B sells inventory on credit to Customer A at a gross sale price
of $100 and offers a trade discount of 10% to the customer. The double entry for the
sale is as follows:
DEBIT Trade receivables $90
CREDIT Sales revenue $90
清新的泥石流
Discount
 Cash/settlement discounts received 采购现金折扣 are included as 'other income' of the
period.
 For example: A has the following choices.
(a) Holding on to its money for 30 days and then paying the full $2,000
(b) Paying $2,000 less 4% – ie $1,920 now
For (a) In the purchases account, the cost of purchases will be at the invoiced price (or 'full trade' price) of
$2,000. When the invoice for $2,000 is received by A, it will be recorded in A's books of account at that
price
For (b) In the statement of profit or loss, the settlement discount received is shown as income received.
Cr Cash discounts received
Dr Trade payable
BASE for payable
期初Payable+ sales tax + credit purchase -purchase return-cash paid – cash discount received =期末Payable
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Discount
 Cash/settlement discount allowed
• If a customer is expected to take up a cash/settlement discount allowed, the discount is deducted from
the invoiced amount when recording the revenue for the sale. If the customer subsequently does not
take up the discount, the discount is then recorded as revenue.
For example, Chippies sells goods to Table Tops at a price of $7,600 including delivery. Table Tops is
allowed 60 days' credit before payment, but is also offered a discount of 5% for payment within 10 days
of the invoice date.
Chippies expects Table Tops to take advantage of the discount. Therefore the invoiced sales value less the
discount
DEBIT Trade receivables $7,220
CREDIT Sales $7,220
If the customer subsequently does not take up the discount, then credited to revenue:
DEBIT Trade receivables $380
CREDIT Sales $380
清新的泥石流
Discount
 Cash/settlement discount allowed
• If the customer is not expected to take up the discount, the full invoiced amount is recognised as
revenue when recording the sale. If the customer subsequently does take up the discount, revenue is
then reduced by the discount.
Using the same information from the previous example. Chippies not expects Table Tops to take cash
discount
Accounting for the sale
DEBIT Trade receivables $7,600
CREDIT Sales $7,600
Revenue is then reduced to account for the discount taken of $380:
DEBIT Sales $380
CREDIT Trade receivables $380
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09
Inventory
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Expense recognition
Disclosure requirement
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F3 学习框架

Property Plant &Equipment X Share capital X Cost of sales
Purchase (X)
Gross profit X
Current asset
Inventory X Non current liability Other income (Discount received) X

Bank Overdraft X
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中英文词义
 Cost flow method 成本流动方法：
• FIFO First-in, First-out先进先出，假设先进入成本先出去
• LIFO Last-in, First-out 后进先出
• Weighted average cost (AVCO) 平均计价
 Sales based on mark up on cost 20% 销售基于成本上升20%
• Cost=sales/1.2
• Profit=(sales/1.2)*0.2
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Definition
 Inventories can include any of the following.
• Retailer: Goods purchased and held for resale
• Manufactory:
 Finished goods produced for sale
 Work in progress (WIP) being produced
 Materials, labor and supplies in the production process
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Measurement of inventories
 Inventories should be measured at the lower of cost (1) and net realizable value(2)
 先讨论Cost: Initial cost of inventories：(cost ready for sell)
• Purchase
 (a)Purchase price
 (b)Import duties and other taxes (Irrecoverable)
 (c)Transport(cost of carriage inwards) and handling any other cost directly attributable
 (d)Less any trade discounts, rebates and other similar amounts
• Costs of conversion
 (a) Costs directly related to the units of production, e.g. direct labor
 (b) Production overheads: based on normal level of activity in the period
e.g. Depreciation of plant, factory supervisor’s wage
• Any other costs bringing the inventories to their present location and condition.
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 The standard lists types of cost which would not be included in cost of inventories 不放在库
存就直接进入利润表
• Abnormal amounts of wasted materials, labour or other production costs
• Storage costs of finished goods (半成品和原材料的储存成本是含在库存里面的)
• Administrative overheads not incurred to bring inventories to their present location and
conditions
• Selling costs
• Cost of carriage outwards (卖出东西运费，属于销售费用）
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 BASE 法则（适用于任何资产负债表科目）
• Beginning +Add - Subtract =Ending
 Opening inventory + purchase + customer return – return to supplier – cost of sales = Closing inventory
• Purchase+Opening: Avaliable for sale (可以出售的总数）
• COS：卖出去的库存的cost
• Ending Inventory：留在公司部分的库存的cost
 Cost flow method (库存成本流动方法)
• First in, first out (FIFO): 假设先进来的成本先出去
• Weighted average cost (AVCO): 假设留着公司每个产品的成本是相同的，A recalculation can be
made after each purchase
• Last in，fist out (LIFO):假设后进的成本先出去，formula is not permitted by IAS 2.
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 Inventory count system (库存的盘点方法)
• Periodic inventory system 期间盘存法 is physical count of inventory in the ending
period. 在期间买入库存记入purchase account（过度科目），等到最后通过
Openning Inv，Closing Inv and Purchase算出COS记入利润表（BASE 法则）
• Perpetual inventory system 永续盘存法 is a continuous inventory count （每次购
入，卖出库存都记入Inventory 和 COS. 不需使用purchase account）
 Continuous inventory system can be used to keep track of quantity of each stock item
 The cost of each receipt of inventory and cost of each issue from inventory is recorded
individually
 Both FIFO and AVCO may be used in continuous inventory system
 Physical inventory count results can reconciliation with a accounting records in the
system（实物清点仍然需要，确保系统数据和实物盘点数据一致）
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假设购入类似物品价格先后为1，2，3，4，5，6。
第一天购入3个
第二天卖出去2个
第三天购入3个
第四天卖出2个
Continuous Day one：购 Day two：卖出2个 Day three: 购入4，5， Day Four: 卖出2个
Inventory 入1，2，3 6
FIFO Inventory:6 Inventory:3 Inventory:3+15=18 Inventory：5+6=11

COS:0 COS:1+2=3 COS:0 COS：3+4=7
AVCO Inventory:6 Inventory:(6/3)*1=2 Inventory:2+15=17 Inventory: (17/4)*2=8.5

COS:0 COS:(6/3)*2=4 COS：0 COS:8.5
LIFO Inventory:6 Inventory:1 Inventory:1+15=16 Inventory:1+4=5
COS:0 COS:3+2=5 COS:0 COS:5+6=11
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假设购入类似物品价格先后为1，2，3，4，5，6。
第一天购入3个
第二天卖出去2个
第三天购入3个
第四天卖出2个
Periodic Day one：购入1，2，3 Day two：卖出 Day three: 购入4，5，Day Four: 卖出2个
2个 6
FIFO Purchase:6 COS:0 Purchase:15 Inventory=5+6=11
COS=21‐11=10
AVCO Purchase:6 COS:0 Purchase:15 Inventory=21/6*2=7
COS=21‐7=14
LIFO Purchase:6 COS:0 Purchase:15 Inventory=1+2=3
COS=21‐3=18
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Cumulative AVCO 是 Continuous inventory system 下的 AVCO

Periodic AVCO 是 Periodic inventory system 下的 AVCO
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如果使用periodic inventory system，AVCO 的单价是：(300*12+ 400*12.5 + 400*14+ 400*15)/1500=13.47

Closing inventory 13.47*400 =5478
Cost of sales 13.47*1100=14817
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FIFO VS AVCO
 A higher closing inventory valuation Higher profits
 A lower closing inventory valuation Lower profits
 Assuming that the price of inventory items have risen throughout the period, then for
that given period, closing inventory determined using FIFO will have a higher value
than inventory determined using AVCO.
• Therefore gross profit will be higher where closing inventory is determined using
FIFO as opposed to AVCO.
 If the company decided to switch from using FIFO to AVCO, the adjustment should be
retrospectively (以前年度都要调整，好像一直是使用平均计价法)
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FIFO VS AVCO
 A company has always valued inventory on a FIFO (first in, first out) basis. In 20X9 it decides to switch
to the weighted average method of valuation. Gross profit in the 20X8 financial statements was
calculated as follows.
Revenue 869
Cost of sales: Opening inventory 135 + Purchases 246 - Closing inventory 174 = 207
Gross profit 662
 In order to prepare comparative figures for 20X8 showing the change of accounting policy, it is
established that opening inventory for 20X8 based on the weighted average method would be 122 and
closing inventory would be 143. So the 20X8 gross profit now becomes:
Revenue 869
Cost of sales: Opening inventory 122 + Purchases 246 - Closing inventory 143 = 225
Gross profit 644
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 再讨论Net realizable value 净可实现价值
 Net realisable value (NRV)=Selling price-Cost of completion-selling cost
• If NRV less then the cost, it needs to write down the cost to NRV, the difference
should be recognized in statement of profit or loss as cost of sales
 NRV is likely to be less than cost.
• An increase in costs or a fall in selling price
• Obsolescence（变旧） of products
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 Inventories should be measured at the lower of cost (1) and net realizable value(2)
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Expense recognition and disclosure requirement

 Expense recognition:
• (a) Recognition as an expense when inventories are sold
• (b) The amount of any write down of inventories to NRV and all losses of
inventories are recognized as an expense in the period (Cr inventory，Dr expense )
• (c) The amount of any reversal of any write down of inventories. (回调不能超过之前减值)
 Disclosures in the financial statements include the following:
• (a) 'The accounting policies adopted in measuring inventories'
• (b) 'The total carrying amount of inventories and the carrying amount in classifications
appropriate to the entity'
• (c) 'The carrying amount of inventories carried at fair value less costs to sell' (NRV)
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10
Tangible non-current assets
11
Intangible assets
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F3 学习框架
Non current asset Equity Sales Revenue Depreciation X

Property Plant &Equipment X Share capital X Amortization
Cost of sales (X)
Gross profit X
Current asset
Inventory X Non current liability Gain & loss on disposal X

Bank Overdraft X
Gross Property Plant &Equipment X
Accumulated depreciation (X)
PP&E (net) X
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中英文词义
 Measurement base 衡量基础
• Fair value 公允价值（selling price）
• Value in use 使用价值，未来现金流折现计算所得
• Historical cost 是历史成本，当初购买的产品的成本
• Replacement cost 代替成本，现在购买相同产品所需的成本
 Book value 账面价值 –特指财务报告上科目的数值。缩写成 BV
 Carrying value/carrying amount 现存价值（只有资产负债科目才有carrying value，carrying value是
一期一期变动后的结果，例如上一期的房子的carrying 是 100万，本期carrying value =100万减去5
万折旧等于95万显示在账上）经常和book value 混用，因为资产，负债和权益的carrying value 是
资产负债表的账面数。
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中英文词义
 Depreciation折旧和Amortization 摊销。 Depreciation 用于有形实物资产。Amortization 用于无形资
产。两者用法一样
• Depreciation expense 折旧费用确认在损益表上
• Accumulated depreciation累计折旧是负的资产是长期资产的备抵科目！是资产类的科目。如果
说Accumulate depreciation增加一般指的是累计折旧数值增加--降低资产（为了避免误解最好
用借贷，cr Accumulated deprecation ）
• 折旧不会导致现金减少，折旧是一笔费用。最初购买长期资产是现金支出
 Accumulated other comprehensive income（OCI）是累计的其他综合性收益，属于权益里的科目。
f3阶段介绍其中的一个子科目revaluation surplus重估溢价或者revaluation reserve
• other comprehensive income 当期发生的其他综合性收益
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Capital and revenue expenditure

 Capital expenditure is expenditure which results in the acquisition of non-current
assets or an improvement in their earning capacity. It forms part of the cost of the non-
current assets.
 Revenue expenditure is expenditure incurred for the purpose of the trade or to maintain
noncurrent assets.
 Capital income is the proceeds from the sale of non-trading assets (ie non-current
assets or long term investments).
 Revenue income is the income derived from the sale of trading asset, such as inventory,
the provision of service, or interest and dividends received from investments
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Capital and revenue expenditure
消耗现金，可以是费用，可以是库存，也可以是长期资产
Inventory
Recognize
YES assets in Non Tangible assets
SOFP current
Is there any
assets Intangible assets
future economic
benefit for the
expenditure? eg:
Recognized
Selling expenses
NO expenses in
Administrative cost
the SOPL
General expenses…
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Tangible non-current assets (definition)

 Property, plant and equipment are tangible non-curremt assets that:
• Are held by an entity for use in the production or supply of goods or services, for
rental to others, or for administrative purposes
• Are expected to be used during more than one period
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Initial measurement of non-current assets

 Cost of non-current asset (Ready for use):
• Purchase price, including any import duties paid, excluding any trade discount and sales tax
• Initial of the costs of dismantling and removing the item
• Directly attributable costs of bringing the asset to working :
 The cost of site preparation,
 Initial delivery and handling costs
 Installation and assembly costs
 Professional fees (lawyers, architects, engineers)
 Costs of testing whether the asset is working properly
 Labor costs arising directly from the construction of the asset
 Staff training员工培训费用，maintenance expense日常的维护费用，road tax道路税费不含在长期资
产里面
 形成长期资产后，之后花费，除了可以提高性能或者使用期的一般不会加入长期资产中
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Subsequent measurement-Measurement Methods

 Cost methods: Carrying amount= Historical cost-accumulated depreciation-impairment loss
 Revaluation methods: Carrying amount=Fair value-accumulated depreciation-impairment loss
• The gain on revaluation (Fair value>carrying amount) cannot go into the statement
of profit or loss. Instead, it is recognized as revaluation surplus in other
comprehensive income, part of equity in the statement of financial position
• The loss on revaluation write down revaluation surplus first, if any; and then the
excessive amount recognized in statement of profit or loss
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Non Current Assets: Subsequent Measurement

 Depreciation is the allocation of the depreciable amount of an asset over its estimated useful
life.
• The residual value/scrap value 残值、剩余价值 is the net amount which the entity
expects to obtain for an asset at the end of its useful life after deducting the expected costs of
disposal.
• Useful life: The period over which a depreciable asset is expected to be used by the
enterprise
• Depreciable amount of a depreciable asset is the historical cost less the estimated residual
value.
• Depreciation for the accounting period is charged to net profit or loss for the period
• 折旧只是把可折旧金额进行分配，不是对资产进行估值！！
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 Depreciation method: Straight line method
 如果折旧时间不足一年按照月份百分比去换算(x/12)。如果题目注明full charge in the year of

acquisition第一年按全年
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 Reducing Balance method:
• Depreciation expense: Reducing Percentage* Opening carrying value
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 Depreciation-example
如论直线还是余额递减折旧，只能把可折旧金额进行分摊
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 The depreciation charge for an accounting period is a charge against profit. It is
accounted for as follows.
• DEBIT Depreciation expense (statement of profit or loss)
• CREDIT Accumulated depreciation account (statement of financial position)
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 Revise the scrap value, useful life and depreciation method are permitted under IAS,
and the adjustment should be prospectively (过去的不用做任何调整，直接调整未来)
 Example: A purchased a machine with an estimated useful life 5 years for 34000 on 30
September 20X5. A estimated the scrap value at the purchase data was 4000.
On 1 October 20x8, A revise scrap value to 2000 and 4 years remaining life. What is the
depreciation charge for the year ended 30 September 20x9?
Carrying value at 1 Oct 20x8: 34000-[(34000-4000)/5]*3=16000

Depreciation expense for year ended 30 September 20x9: (16000-2000)/4=3500
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 Example of revaluation method：On 1 January 20X1, the building part of the business
premises was worth the remaining $30,000. This would be depreciated by the straight
line method to a nil residual value over 30 years. After 5 years of trading, on 1 January
20X6, his business premises are now worth $75000, he estimates that the building still
has a further 25 years' useful life remaining and the business apply the revaluation
method.
 重估前：直线折旧 30,000/30=1000每年。五年后carrying amount=30,000-5000=25000

 重估后：每年折旧75000/25=3000每年，估值上升：资产价值上升，权益中的OCI部分的
revaluation reserve 上升。
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 重估前折旧（1-5年）：
• Dr Depreciation Expense 1000
• Cr Accumulated depreciation 1000
 重估：
• Dr Building-Cost 50000
• Cr OCI（Revaluation Surplus） 50000
Or
• Dr Accumulated depreciation 5000
• Dr Building-Cost 45000
• Cr OCI (Revaluation surplus) 50000
 重估后折旧
• Dr Depreciation Expense 3000
• Cr Accumulated depreciation 3000
 调整OCI 到R/E (选择性调整)
• Dr OCI 2000
• Cr R/E 2000
折旧增加是因为重估值。可以选择性每年调整: 重估导致的excess depreciation transfer from revaluation
surplus to retained earning（Dr Revaluation Surplus 2000，Cr R/E 2000) 。如果不做此调整，等资产折
旧完后,一次性调整（Dr Revaluation surplus 50,000, Cr R/E 50,000)
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Subsequent measurement-Disposal
 When a non-current asset is sold
 Gain & Loss=Sales proceeds – Carrying amount. Gain & Loss is recognized in SOPL
 Gain = profit on disposal
 在资产负债表上，处置资产之前一般有：设备原值，累计折旧，这些科目在处置之后应
该全部清理
• Equipment：3000
• Accumulated depreciation：1000
• Sales proceeds：1500
 Dr Accumulated depreciation 1000
 Cr Equipment 3000
 Dr Cash 1500
 Dr Loss 500
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Subsequent measurement-Disposal
请务必记住下面的公式: BASE
Opening CV + Revaluation + Purchase – Disposal CV – Depreciation = Closing CV
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An asset register
 An asset register (固定资产登记簿) is used to record all non-current assets and is an
internal check on the accuracy of the nominal ledger.
 Purpose and function of an asset register:
• The asset register is separate from the nominal ledger(总分类账)
• Compare the assets on the asset register with the net carrying amount of non-current assets
recorded in the nominal ledger. This can be done as follows.
 Assets at cost (Nominal ledger) X
 Accumulated depreciation (Nominal ledger) (X)
 Total of carrying amounts listed in the asset register X
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An asset register
 Non-current asset register may not reconcile to the non-current assets actually present:
• The asset was stolen and it has not been reported or noticed
• An asset may become obsolete or damaged and so should be written down. Financial
record does not tie up to physical condition.
• New assets purchased but not recorded in non-current assets register.
• Error made in entering details in the non-current assets register.
• Asset physically present but not in records.
 To overcome these problems:
• Physically inspect Non-Current Assets on register
• Have tight administrative procedures for recording the movement of NCA
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Non-Current asset disclosure

 The disclosure requirements in IAS 16.
• Reconciliation of the opening and closing carrying amounts of non-current assets to be given in the
financial statements (从期初到期末的变动-BASE)
• An accounting policy note should disclose the measurement bases used for determining the amounts
• For each class of property, plant and equipment:
 Depreciation methods used
 Useful lives or the depreciation rates used
 Gross amount of depreciable assets and the related accumulated depreciation
• For revalued assets:
 Effective date of the revaluation
 Whether an independent valuer was involved
 Carrying amount of each class of property, plant and equipment
 Revaluation surplus
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Definition of intangible assets

 An intangible asset is an identifiable non-monetary asset without physical substance
The asset must be:
• (a) Controlled by the entity as a result of events in the past
• (b) Something from which the entity expects future economic benefits to flow
 Identifiable:
• If an intangible asset is acquired separately through purchase or rented separately,
there may be a transfer of a legal right that would help to make an asset identifiable.
(硬件的专属软件不能确认为无形资产-因为not identifiable)
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Measurement of intangible assets

 Intangible (such as a license, patent, brand name, copy right, trade mark)
• Intangible assets should be initially be measured at cost, but subsequently they can
be carried at cost or at a revalued amount. (Same as tangible assets)
• Use the term “amortization” for intangible assets and “depreciation” for tangible
assets
• An intangible asset with an indefinite useful life should not be amortised but
requires that such an asset is tested for impairment at least annually
 Generally, internally generated intangibles cannot be capitalized, as the costs
associated with these cannot be separated from the costs associated with running the
business.
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Special items-R&D
 Special internal generated cost
• Research is original and planned investigation undertaken with the prospect of
gaining new scientific knowledge and understanding.
• Development is the application of research findings or other knowledge to a plan or
design for the production of new or substantially improved materials, devices,
products, processes, systems or services before the start of commercial production or
use.
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Special items-R&D
 Research expenditure: write off as incurred to the statement of profit or loss.
 Development expenditure must be capitalised as an intangible asset, if the criteria are
satisfied(不满足就必须费用化) . The recognition criteria are as follows:
• Probable future economic benefits from the asset, whether through sale or internal cost
savings.
• Intention to complete the intangible asset and use or sell it
• Resources available to complete the development and to use or sell the intangible asset
• Ability to use or sell the intangible asset
• Technical feasibility of completing the intangible asset so that it will be available for use or
sale
• Expenses attributable to the intangible asset during its development can be measured.
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Special items-Goodwill
 Purchased and non-purchased goodwill
• Purchased goodwill:
 arises when one business acquires another as a going concern includes goodwill
arising on the consolidation of a subsidiary
 will be recognised in the financial statements as its value at a particular point in
time is certain.
• Non-purchased goodwill:
 is also known as inherent goodwill
 has no identifiable value
 is not recognised in the financial statements.
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Disclosure
 The disclosure requirements in IAS 38 are extensive and include both numerical and
narrative disclosures.
• The financial statements should show a reconciliation of the carrying amount of intangible
assets at the beginning and at the end of the period. (Addition, disposal and any other
movement)
• Disclose the accounting policies for intangible assets that have been adopted
• For each class of intangible assets (including development costs), disclosure is required of
the following:
 The method of amortisation used
 The useful life of the assets or the amortisation rate used
 The gross carrying amount, the accumulated amortisation and the accumulated
impairment losses as at the beginning and the end of the period
 The carrying amount of internally generated intangible assets
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Accruals and prepayments
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F3 学习框架

Property Plant &Equipment X Share capital X Cost of sales (X)
Gross profit X
Current asset
Accrued revenue (accruals) X Profit before tax X
Prepayment/Prepaid expense X Current liability Tax expense (X)
Cash X Trade Payables X Profit after tax X
Deferred income X
Total asset X Accrued expense (accruals) X
Bank Overdraft X
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中英文词义
 Accrued expenses (accruals)应记费用（负债）。按照权责发生, 已经发生的费用应
该记账，但没有收到Invoice，所以不能归为Payable, 用Accrued expense代替，收
到invoice 后需反冲。
 Prepaid expense (Prepayment)预付费用（资产）。已支付现金，但还未发生事件，
不能确认为费用，所以记入在资产，类似于一笔存款，等发生后记入费用(举例：
Rent paid in advance) 消费者的角度
看此问题
事前现金事后现金
Prepaid Accrued
Expense Expense
Happened
 Payment in arrear 期末付款事发时间
 Payment in advance 期初付款

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中英文词义
 Accrued revenue(accruals)应记收入（资产）。此科目和accrued expense相对，提
供商品或者服务后，还未给出invoice，不能记入receivables，但是已经履行其责
任用 accrued revenue暂代，等向客户发出invoice之后，冲销Accrued revenue
 Deferred income (received in advance) 递延收益（负债）。收到了现金，还未履行
责任是一笔负债，等履行之后变成正真的收益。(举例：Rent received in advance)
供应商的角度
看此问题
事前现金事后现金
Deferred Accrued
income revenue
Happened
事发时间
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 Accrued expenses (accruals) are expenses which relate to an accounting period but not
yet been invoiced and paid for.
• They are shown in the statement of financial position as a liability.
 Prepaid expenses (prepayments) are expenses which have already been paid but relate to a
future accounting period.
• They are shown in the statement of financial position as an asset.
Dr expense
Cr cash
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Exam tip
题目中最常见的两种题型：
1. 求损益表中的费用：已知现金, 推断出accruals和prepayment （直接给出），然后求出费用。解题
方法：现金然后调整accruals和prepayment 或者运用BASE法则
2. 求资产负债表的年底的 prepayment or accruals （年底假设为12月31日）：

Accrual：
如果最后支付的现金不足支付对应的费用，产生accrued expense。例如：上次支付日11月1日付清前
三月，11月，12月和1月份账单总计约900要在2月1日付清，会计年底是12月31日。如果没有特殊说
明，费用均摊，则12月底应计600
Prepayment：
如果最后支付的现金超出支付对应的费用，产生Prepayment。例如：上次支付日11月1日付清后三月，
11月，12月和1月份账单总计约900，会计年底时12月31日。如果没有特殊说明，费用均摊，则12月
预付300
BASE 法则公式：按消费者角度！
PrepaymentBeg + Cash (outflow) - Expense = Prepayment End
AccrualsBeg - Cash (outflow) + Expense = AccrualsEnd (类似于应付）
结合上面的公式 AccrualsBeg - PrepaymentBeg - Cash (outflow) + Expense = AccrualsEnd - Prepayment End
Expense =Cash + AccrualsEnd - Prepayment End + PrepaymentBeg -AccrualsBeg
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 Horace Goodrunning, trading as Goodrunning Motor Spares, ends his financial year
on 28 February each year. His telephone was installed on 1 April 20X6 and he receives
his telephone account quarterly at the end of each quarter. On the basis of the
following data, you are required to calculate the telephone expense to be charged to
the statement of profit or loss for the year ended 28 February 20X7.
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Debit accruals 500

Credit repair and maintenance cost 500
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Irrecoverable debts and allowances
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F3 学习框架

Irrecoverable debt or
Gross profit bad debt X
Current asset
Deferred income X
Total asset X Accrued expense (accruals) X
Bank Overdraft X
Gross T/R X Total Equity + liabilities X
Allowance for bad debt (X)
T/R (Net) X
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中英文词义
 Irrecoverable debts 和 bad debt expense 是一个意思。应收账款坏账损失是一笔费
用确认在损益表的管理费用当中。不影响gross profit，影响net profit
 Allowance for receivables 是坏账准备-是资产类科目，是Account receivable的备抵
科目。题中说allowance 下降，一般指的是绝对数值下降，资产上升！
 Write off 指的是冲销，勾销，抵消。这里特指应收账款下降。
 Supplier statement ：消费者收到的来自供应商的对账单，列示其采购及付款情况。
消费者可以用供应商对账单来核对自己账本数据，确保信息的一致
 A owed to B: A 欠 B
 A owed from B：B 欠A
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Irrecoverable debts
 Irrecoverable debts are specific debts owed to a business which it decides are never
going to be paid. They are written off as an expense in the statement of profit or loss
• Simple method to record
Dr Irrecoverable debts 费用类科目
Cr Accounts Receivables
 To to control irrecoverable debts, it may use credit control:
• A customer credit limit （管理客户的拖欠的金额和时间）
• Aged receivables analysis账龄分析（列示每个客户的拖欠款项和日期）
 Efficiency credit control process
• Despatching invoices and statements promptly
• Setting credit limits for credit customers
• Make sure that sales are not made to customers who have a history of not paying their bills
• Monitor receivables balances and make sure they are paid within the company's allowed credit period
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Irrecoverable debts
 Allowance for receivables (allowance for bad debt) is a prudent precaution （预防）
to account for the fact that some receivables balances might not be collectable.
 An increase in the allowance for receivables is shown as an expense in the statement
of profit or loss (准备有钱收不回)
Dr Irrecoverable debt 100
Cr Allowance for receivable 100
表示对A/R的怀疑
 Trade receivables in the statement of financial position are shown net of any
receivables allowance.
A/R 1000
Allowance for receivable (100) 资产负债表科目
Net A/R 900
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Irrecoverable debts
 Write off the allowance for receivables and receivables (确定收不回，例如：客户破产)
• Dr Allowance for receivables 100
• Cr Receivables 100
 Record an irrecoverable debt recovered (receive 50 from previous irrecoverable debt)
• Dr Cash 50
• Cr Irrecoverable debt 50
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Irrecoverable debts
 Question type I : BASE 法则对 Account receivable 的运用
• Increase the A/R
 Credit sales (not cash sales)
• Decrease the A/R
 Cash payment for credit sales
 Sales return
 Write off
注：Allowance 会decrease the net A/R, 对gross不影响，net A/R是计算结果，一般不再
BASE运用
 Question type II: BASE 法则对 Allowance的运用 (Ending Allowance 根据期末的Gross A/R
or credit sale的百分比求出)
• Increase the Allowance
 Irrecoverable debt or bad debts (Expense)
• Decrease the Allowance
 Write off
注：Write off 如果说明是在年中（during the year）那么题目告知的期末应收不用扣减冲
销值，如果题中告知期末A/R ，然后决定冲销部分，那么期末数减去冲销金额=新的
Gross A/R 清新的泥石流
Irrecoverable debts
 Quest
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Irrecoverable debts
 Quest
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Provisions and contingencies
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F3 学习框架

Provision related
Gross profit expense X
Current asset
Deferred income X
Total asset X Provisions X
Bank Overdraft X
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Provisions
 Provision should be recognised when:
• An entity has a present obligation as a result of a past event
• It is probable that a transfer of resources embodying economic benefits will be
required to settle it
• A reliable estimate can be made of its amount
 A provision is a liability of uncertain timing or amount.
 An obligation is something that cannot be avoided:
• A constructive obligation arises when an entity's past practice or published policies
creates a valid expectation amongst other parties that it will discharge certain
responsibilities.
• A legal obligation arises from a contract or from laws and legislation
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Provisions
 The amount recognised as a provision should be the best estimate of the expenditure
• Where the provision involves a single item (单一事件), such as the outcome of a legal case,
provision is made in full for the most likely outcome (10% 4000, 90% 3000。选3000）.
• For large population of items (多个事件), the obligation is estimated by weighting all
possible outcomes by their associated probabilities, ie expected value.
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Accounting for provisions

 A provision is reported as a liability in the statement of financial position. It is created
by:
Dr Expense category (e.g. legal expenses)
Cr Provision for expense
 When the provision is used for the purpose it was created, the correct entry is:
Dr Provision for expense
Cr Cash
 If a provision is also required at subsequent period ends after its creation, only the
movement in provision should be recorded.
• An increase in provision is recorded by:
Dr Expense
Cr Provision for expense
• A decrease in provision is recorded by:
Dr Provision for expense
Cr Expense
BASE 法则运用 Provisionbeg + Related expense – Payment = Provisionend
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Provisions
 A contingent liability is:
• A possible obligation that arises from past events and whose existence will be confirmed
only by the occurrence or non occurrence of one or more uncertain future events not wholly
within the control of the entity or,
• a present obligation that arises from past events, but does not meet the criteria for
recognition as a provision. This is either because an outflow of economic benefits is not
probable or because it is not possible to make a reliable estimate of the obligation
• A contingent liability is disclosed, unless the possibility of a future outflow of economic
benefits is remote.
• If an outflow of economic benefits becomes probable then contingent liabilities must be
reclassified as provisions
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Provisions
 Contingent asset as a possible asset that arises from past events and whose existence
will be confirmed by uncertain future events that are outside of the entity's control.
• A contingent asset should be disclosed if the an inflow of future economic benefits
is at least probable
• If the future inflow of benefits is virtually certain(>95%), then it ceases to be a
contingent asset and should be recognised as a normal asset.
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Provisions
 The accounting treatment can be summarised in a table:
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Disclosure
 Disclosures required in the financial statements for provisions fall into two parts.
• (a) Disclosure of details of the change in carrying amount of a provision from the
beginning to the end of the year.
• (b) For each class of provision, disclosure of the background to the making of the
provision and the uncertainties affecting its outcome, including:
 (i) A brief description of the nature of the provision and the expected timing of
any resulting outflows
 (ii) An indication of the uncertainties about the amount or timing of those
outflows and, where necessary to provide adequate information
 (iii) The amount of any expected reimbursement relating to the provision and
whether any asset that has been recognised for that expected reimbursement
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Disclosure
 Disclosures for contingent liabilities Unless remote, disclose for each contingent
liability:
• A brief description of its nature, and where practicable
• An estimate of the financial effect
• An indication of the uncertainties relating to the amount or timing of any outflow
• The possibility of any reimbursement
 Disclosures for contingent assets Where an inflow of economic benefits is probable, an
entity should disclose:
• A brief description of its nature, and where practicable
• An estimate of the financial effect
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Capital structure and finance costs
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F3 学习框架

Dividend
Ordinary Share X Cost of sales (X)
Property Plant &Equipment X Irredeemable pref shares X
Gross profit X
Current asset Gain & loss on disposal X
Inventory X Non current liability
Debentures (Loan) X Profit before tax X
Trade Receivables X Redeemable pref shares X Tax expense (X)
Accrued revenue (accruals) X Profit after tax X
Prepayment/Prepaid expense X Current liability
Cash X Trade Payables X
Deferred income X
Total asset X Provisions X
Bank Overdraft X
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中英文词义
 Par value平价价值, face value面值，nominal value名义价值和legal value法律价值，
指的是股票或者债券票面上的价值，并不是实际价值
 At par 等于面值
 Market value 市场价值
 Equity，Net book value of the company 和 net assets 是一个意思
 Share stock 股票(在市场上流通的股票)
• 持有票的人：shareholder股东，investor投资者
• 发行票的人：investee被投资人
 Loan stock 债券 (在市场上流通的债券)
• 持有票的人：creditor债权人，investor投资人
• 发行票的人：debtor债务人，investee被投资人
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中英文词义
 Owner’s equity
• Share capital 股本
 Ordinary shares 普通股股本
 Preference shares 优先股股本
• Non-distributable reserve/statutory reserve 不可分配公积/法定公积
 Share premium 股本溢价
 Accumulated other comprehensive income 累积的其他综合收益
‣ Revaluation surplus 重估溢价
• Distributable reserve/non-statutory reserve 可分配公积/非法定公积
 Retained earning留存收益（可用来分红）
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Loan stock or bonds

 Limited liability companies may issue loan stock or bonds. These are long-term
liabilities. They are different from share capital in the following ways.
• (a)Shareholders are members(owner) of a company, while providers of loan capital
are creditors.
• (b) Shareholders receive dividends whereas the holders of loan capital are entitled to
a fixed rate of interest (an expense charged against revenue).
• (c) Loan capital holders can take legal action against a company if their interest is
not paid when due, whereas shareholders cannot enforce the payment of dividends.
• (d) Loan stock is often secured on company assets, whereas shares are not.
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Loan stock or bonds

 Interest payment is calculated on the par or legal value of loan capital, regardless of its
market value.
 For example: If a company has $700,000 (par value) 12% loan stock in issue, interest
of $84,000 will be charged in the statement of profit or loss per year. If pays interest on
30 June and 31 December each year, and ends its accounting year on 30 September,
there would be an accrual of 3 months' unpaid interest (3/12 × $84,000) = $21,000 at
the end of each accounting year that the loan stock is still in issue
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Shares
 Ordinary shares
• Have the voting rights
• Claim the residual interest of the company
• Limited liability
 Shares par value can be 25 cents, 50 cents, $1 or whatever seems appropriate.
• $100,000, it may be decided to issue:
 (a) 100,000 shares of $1 each par value;
 (b) 200,000 shares of 50c each;
 Share premium or capital paid-up in excess of par value(股本溢价)
• Example: 发行一个股票面值为1，售价为5，那么share premium就是4
• Double entry: Dr cash 5
Cr share capital 1
Cr share premium 4
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Shares
 Share capital
• Authorised (or legal) capital授权股本 is the maximum par amount of share capital
that a company is empowered to issue. （监管机构授权的最高可募集的股票资本）
• Issued capital发行的股本 is the par amount of share capital that has been issued to
shareholders. The amount of issued capital cannot exceed the amount of authorised
capital.
• Called-up capital认缴股本: The amount that company expects shareholders to pay
 Paid-up capital实缴股本: The actual received capital
 Capital not paid-up 未缴股本
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Shares
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Shares
 Preference shares（优先股） are shares which confer(授予) certain preferential rights
on their holder.
• Preference shareholders have a priority right to a return of their capital if the
company goes into liquidation
• Preference shares do not carry a right to vote.
• If the preference shares are cumulative, it means a company need to pay off the
pervious and current preference shares dividend before pay the ordinary dividend
• Return are predetermined such as: 8% of the preference share value
 Preference shares may be classified in one of two ways.
• Redeemable可以赎回，属于liability 科目，其dividend属于interest的一部分
• Irredeemable 不可以赎回，属于equity 科目
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Reserve and Dividends

 Dividends are appropriations批准支出 of profit after tax.
 Many companies pay dividends in two stages during the course of their accounting year
• (a) In mid-year, after the half-year financial results are known, the company might
pay an interim dividend.
• (b) At the end of the year, the company might propose a further final dividend.
 Proposed dividends are not adjusted for, they are simply disclosed by note。如果
只是提出没有正式批准(authorise)和宣告(declare)
 Retained earnings is variously described as: (a) Revenue reserve (b) Retained earnings
(c) Accumulated profits (d) undistributed profits (e) distributable profits
R/Ebeg + profit – dividend = R/Eend
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 Account for pay dividend
第一步：宣告分红
Dr Retained earning (SOFP)
Cr Dividend payable
第二步：支付分红
Dr Dividend payable
Cr Cash
 Account for receive dividend
Dr Cash
Cr Dividend income (SOPL)
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 Dividend payment disclosed in statement of change in equity
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Bonus issue and Rights issue

 A company can increase its share capital by means of a bonus issue or a rights issue.
 Bonus issue: Double entry: Dr share premium (normally) or other reserves
Cr share capital
 Bonus (capitalization) issues红利发行的股票: reclassify some of its reserves as share
capital
• No funds raise
 Advantages of bonus issue
• Increases capital without diluting current shareholders' holdings
• Capitalises reserves, so they cannot be paid as dividends
 Disadvantages of bonus issue
• Does not raise any cash
• Could jeopardies payment of future dividends if profits fall
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 A rights issue供股、权利发行的股票 (unlike a bonus issue) is an issue of shares for
cash. The ‘rights’ are offered to existing shareholders (一般是优先认购权), who can
sell the rights if they wish. Usually issued at a discount to the current market price.
• Double entry Dr cash
Cr share capital
Cr share premium
• Advantages of rights issue
 Raises cash for the company
• Disadvantage of rights issue
 Need keep reserves available for future dividends
 Dilutes shareholders' holdings if they do not take up rights issue
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16
Chapter 16 Control accounts
Chapter 17 Bank reconciliation
Chapter 18 Correction of errors
Chapter 19 Suspense Account
Chapter 20 Incomplete records
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F3 学习框架 Statement of profit or loss for F3
Sales Revenue X
Statement of Financial position for F3
Cost of sales (X)
Non current asset Equity Gross profit X
Ordinary Share X Distribution cost (X)
Property Plant &Equipment X Irredeemable pref shares X Administration expense (X)
Intangible Asset X Share premium X Gain & loss on disposal X
Long term Investment X Retained earning X Finance cost (interest) (X)
Other comprehensive income X Profit before tax X
Current asset Tax expense (X)
Inventory X Non current liability Profit after tax X
Debentures (Loan) X
Trade Receivables X Redeemable pref shares X
Accrued revenue (accruals) X
Prepayment/Prepaid expense X Current liability
To prepare the statement:
Control accounts
Cash X Trade Payables X Bank reconciliation
Deferred income X Correction of errors
Total asset X Provisions X Suspense Account
Bank Overdraft X Incomplete records
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Control Accounts
 The General Ledger contains all accounts or a summary of all accounts necessary to
produce the trial balance and financial statements.
 The Accounts receivable ledger (Personal Ledger) contains an account for each credit
customer to show how much each one owes.
• An account to summarize this information, the receivables control account, is normally
contained within the general ledger
 The Accounts payable ledger (Personal Ledger) contains an account for each credit
supplier to show how much we owe them.
• An account to summarize this information, the payables control account, is normally
contained within the general ledger.
 Personal Ledger contains Memorandum accounts and is not part of double entry process
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Control Accounts
Personal Account 和 Nominal ledger做账基础都是day book，如果day book出错可能导

Personal account 和 control account 相等但是都是错误的。
如果day book是准确的，制作个人分类账出错，不影响控制账户正确性
Memorandum accounts备忘录还没有真正录入的，如果有错不需要对控制账户调整
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Control Accounts
 Credit side of a receivables (sales) ledger control account (减少应收)
• Cash received from customers
• Irrecoverable debts written off
• Credits for goods returned by customers
• Contra entries with payables (个人账和控制账都要调整)
 Debit side of a receivables (sales) ledger control account (增加应收)
• Credit sales
• Cash refunds to customers (退款)
• Dishonored cheques (之前收到支票应收减少，支票未能兑现应收恢复)
• Interest charge on overdue (拖欠导致利息增加，从而应收增加)
Contra entries (针对同一个客户或者供应商) Debit Credit
Account Payable XXX
Account Receivable XXX
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Control Accounts
 Credit side of a payable (purchase) ledger control account (增加应付)
• Credit purchases
• Cash refunds from supplier (退款)
 Debit side of a payable (purchase) ledger control account (减少应付)
• Cash paid
• Discounts received
• Return outwards
• Contra entries with receivable
Personal use 个人使用会降低公司的purchase
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Reasons for having control accounts

 Reasons for having control accounts
• They provide a check on the accuracy of entries made in the personal accounts in the
receivables ledger and payables ledger.
• The control accounts also assist in the location of errors （定位错误）
• The control account provides an internal check for a separation of clerical duties
• To provide total receivables and payables balances more quickly for producing a
trial balance or statement of financial position.
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Control Accounts Differentiation

 Why control accounts different from personal account
• Miscast (误记) and post to control account
• A transposition error（换位误差） eg $250 might be posted to the account as $520
• A transaction may be recorded in the control account and not in the memorandum
account (personal account)
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Bank reconciliations-中英文词义
 Bank statement：银行对账单，是由银行发出给客户银行账户的明细
 Cash book or Per book：是公司记录的银行账户的明细
 Bank reconciliation：银行存款调节/银行往来对账
 Outstanding lodgments: 银行未处理的存款，由于公司收到销售款，存往银行但由于办理时间关系，
在公司账上已经显示，但未显示在银行对账单上！
 Unpresented cheques：未兑现的支票，一般指公司支出账已经记录但银行还未处理
 Standing order：经常性支出(一般在银行账户中直接扣除，不经过公司)
 Dishonored cheque：不能兑现的支票
 Overcast：高估
 Undercast：低估
 Bank charge：银行手续费
 Revenue receipts：经营收到的现金。增加收入
 Capital receipts：融资收到现金。不影响损益表
 本章最重要的一个概念！如果是错在公司，那么需要对cash book调账，如果是错在银行或者还未
处理则公司无需调整。调整后的cash book账户和调节之后银行账户bank statement应该是一样的
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Bank reconciliations
银行对账单的借贷和公司借贷相反：
对于公司Dr cash 是增加现金，把钱存
入银行后，在银行对账单上显示贷方，
说明银行欠你更加多，你存入银行的
钱是你的资产银行的负债！！
假如说：bank credit the account 说明

银行在你账上增加了一笔现金。
Debit说明扣除了一笔现金
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Bank statement and cash book

 Differences between the cash book and the bank statement arise for：
• Omissions and errors for the company (adjust the per book-修正现金账簿)：
 bank charges not posted in the cash book （公司调账）
 Payments made into the bank account (e.g. Dividends received in bank) but not yet been
entered in the cash book（公司调账）
 Direct debit (e.g. standing order)银行自动转账费用 but not yet entered in the cash book
（公司调账）
 Errors in the cash book that need to be corrected （公司调账）
 收到Dishonored cheque （未能兑现，但公司之前已经入账-需公司调账）
• Time difference and error for the bank (adjust the per bank-银行往来对账)
 unpresented cheques （银行还未处理，公司无需调整）
 Outstanding lodgments or cheque paid in （银行未处理，公司无需调整）
 Error in the bank statement (e.g. credit to the account belongs to another customer)
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如果错在cash book或者未处理, 在cash book上调整

如果错在银行或者银行未处理，在bank reconciliation上调整
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The following information relates to a bank reconciliation.
(i) The bank balance in the cashbook before taking the items below into account was
$8,970 overdrawn.
(ii) Bank charges of $550 on the bank statement have not been entered in the cashbook.
(iii) The bank has credited the account in error with $425 belongs to another customer.
(iv) Cheque payments totalling $3,275 have been entered in the cashbook but have not
been presented for payment.
(v) Cheques totalling $5,380 have been correctly entered on the debit side of the cashbook
but have not been paid in at the bank.
What was the balance as shown by the bank statement before taking the above items into
account?
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Types of errors
 Errors NOT affecting Trial balance （不影响借贷平衡）
• Errors of principle （会计原则错误,把维修费计入成固定资产，借贷仍然平衡）
• Errors of commission （记账账户错误，把电话费放到水费，借贷仍然平衡）
• Error of complete omission (完全漏掉，借贷相等)
• Error of compensation （补偿误差，两次错误导致，借贷仍然平衡）
• Error of original entry （从原始账簿中抄错数字，借贷仍然平衡）
 Errors affecting Trial Balance (影响借贷平衡)
• Errors of transposition (错位，480写成840)
• Errors of partial omission （遗漏部分分录，写了借方忘记贷方）
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Types of errors
 Errors of principle
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Types of errors
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Types of errors
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Types of errors
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Types of errors
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Suspense account
 A suspense account (暂存科目或者存疑科目) is a temporary account which can be
opened for a number of reasons:
• (a) A trial balance is drawn up which does not balance (ie total debits do not equal
total credits).
• (b) The bookkeeper of a business knows where to post the credit side of a
transaction, but does not know where to post the debit
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Suspense account
 Suspense account 主要包含了一些未知的借贷差和不明科目。等到找出原因，再
用正确的科目取代suspense account或者冲销掉suspense account！
 A good approach is to consider:
• 1. What was the double entry? (‘Did do’).
• 2. What should the double entry have been? (‘Should do’).
• 3. What correction is required? (‘to correct').
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Suspense account
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Incomplete records
 Incomplete records:
• Accounting records are destroyed by accident, such as fire.
• Some essential figure is unknown and must be calculated as a balancing figure. This
may occur as a result of inventory being damaged or destroyed.
• A trader does not maintain a ledger and therefore has no continuous double entry
record of transactions.
 此章内容利用报表之间的钩稽关系，算出未知数额。熟记BASE法则。
 Mark-up base on cost is the profit as a percentage of cost.
 Gross profit margin is the profit as a percentage of sales.
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Incomplete records
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21
Chapter 21 Financial Statements
Chapter 22 Notes disclosure and Event
after reporting periods
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Event after reporting date
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Statement of Financial position

Statement of Financial position
Non current asset Equity

Ordinary Share X
Property Plant &Equipment (Cost-A.D.) X Irredeemable pref shares X
Intangible Asset (Cost – A.A) X Share premium X
Other comprehensive income (RS) X
Current asset
Inventory X Non current liability
Trade Receivables net of allowance X Debentures (Loan) X
Prepayment/Prepaid expense X Redeemable pref shares X
Cash X
Current liability
Total asset X Trade Payables/Dividend payable X
Accruals X
Loan repayment in one year
Tax payable X
Bank Overdraft X
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Statement of profit or loss and other comprehensive income
Statement of profit or loss and OCI
Sales Revenue X
Cost of sales (X)
Gross profit X
Distribution cost (X) Depreciation expense
Administration expense (X) Amortization expense
Gain & loss on disposal X/(X) Inventory write off
Finance cost (interest) (X) Carriage inward
Profit before tax X Carriage outward
Tax expense (X) Irrecoverable debt
Profit after tax X Warranty expense
Heat and electricity expense
Other comprehensive income Rent expense
Revaluation surplus X
Comprehensive income X
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Statement of changes in equity
STATEMENT OF CHANGES IN EQUITY

Share Share Revaluation Retained Total
capital premium surplus earnings
Balance at 1.1.X2 X X X X X
Changes in accounting policy – – – (X) (X)
Restated balance X X X X X
Changes in equity for 20X2
Dividends – – – (X) (X)
Total comprehensive income – – X X X
Issue of share capital X X – – X
Balance at 31.12.X2 X X X X X
Dividends paid during the year are not shown on the statement of profit or loss; they are shown in the
statement of changes in equity.
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Taxation
 In most jurisdictions, tax is paid several months after the end of the accounting period.
At the period end, an estimated amount is accrued based on the year’s profits and then
we need adjust for any over- or under provision for prior periods
• The charge for income tax on profits for the year is shown as a deduction from profit
for the year
• In the statements of financial position, tax liabilities to the Government is generally
shown as a current liability
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Taxation
 Any under or overprovision from the prior year is dealt with in the current year's tax.
• an under-provision increases the tax charge
• an over-provision decreases the tax charge
 Under/over-provision 其中逻辑：
• 去年税费为预估，例如 Dr tax expense 900；Cr accurals 900
• 今年和税务局核实之后发现去年少算了under-provision, 需要应付1000.
Dr tax expense 100
Dr accruals 900
Cr tax payable 1000
 专业术语 under-provision则 debit to tax expense； over provision 则 credit to tax expense
• 假设今年利润所产生的预计税费为2000，则当期税费2000+100=2100
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Notes disclosure
 Reasons why companies must prepare disclosure notes
• To provide more detail for the users of financial statement
• To comply with accounting standards
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Events after the reporting period

 Events after the reporting period are those events, both favourable and unfavourable,
which occur between the reporting date and the date on which the financial statements
are approved for issue by the board of directors.
• Adjusting events are events after the reporting date which provide additional evidence of
conditions existing at the reporting date. (发生原因在年前-需要调整报表)
• Non-adjusting events are events after the reporting date which concern conditions that arose
after the reporting date.(起因在年后-只需披露)
 Special case: If the going concern assumption is no longer appropriate then that a
fundamental change in the basis of accounting is required. In this case, entities will
prepare their financial statements using the ‘break up’ basis (需要年前调整)
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 Examples of adjusting （原因在年前或者影响公司持续经营）
• Evidence of a permanent diminution in property value prior to the year end
• Sale of inventory after the reporting period for less than its carrying value at the year end
• Insolvency of a customer with a balance owing at the year end
• Amounts received or paid in respect of legal or insurance claims which were in negotiation at the
year end
• Determination after the year end of the sale or purchase price of assets sold or purchased before the
year end
• Permanent diminution in the value of a long-term investment prior to the year end
• Discovery of error or fraud which shows that the financial statements were incorrect
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 Examples of non-adjusting
• Acquisition of, or disposal of, a subsidiary after the year end
• Announcement of a plan to discontinue an operation after the reporting period
• Major purchases and disposals of assets after the reporting period
• Destruction of a production plant by fire after the reporting period
• Announcement or commencing implementation of a major restructuring
• Share transactions after the reporting period
• Litigation commenced after the reporting period
 An entity shall disclose each material category of non-adjusting event after the
reporting period
• The nature of the event
• An estimate of its financial effect, or a statement that such an estimate cannot be made
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23
Chapter 23 Cash flow statement
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中英文词义
 Working capital 运营资本：Current asset – current liability
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Statement of Cash Flows

 Information about a company's cash receipts and cash payments during an accounting
period.
• Operating cash flow
• + Investing cash flow
• + Financing cash flow
• = Change in cash balance for the current year
• + Beginning cash balance
• = Ending cash balance
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 Cash: Cash on hand and on demand deposits (include overdraft)
 Cash equivalents: Short-term, highly liquid investments that are readily convertible
into known amounts of cash and are subject to an insignificant risk of changes in value
 Cash Flow Classification
Cash flows from operating activities (CFO)
Cash flows resulting from major business of company
Inflows Outflows
Cash collected from customers Cash paid to employees and suppliers
Interest received Interest paid
Dividend received Dividend Paid
Taxes paid Can be CFF

Can be CFI
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Cash flows from investing activities (CFI)
Cash flows resulting from acquisition and disposal of long term
asset and investment
Inflows Outflows
Sale proceeds from non-current Acquisition of non-current
assets assets
Sale proceeds from debt & Acquisition of debt & equity
equity investment investment
Principle received from loans
Loans made to others
made to others
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Cash flows from financing activities (CFF)
Cash flows resulting from transactions that affect firm’s capital structure
Inflows Outflows
Principle amounts of debt issued Principle paid on debt
Proceeds form issuing stocks Payment to reacquire stock
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 Basic Principle
• Cash inflow + Cash outflow –
Asset  Liability  Equity 
Cash  Liability  Equity  NonCash Asset
• Cash is positively related to the Liability and Equity
• Cash is negatively related to the Non-cash Asset (Inventory、T/R)
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 Basic Principle (example 1)
Sales: 2000
Beginning T/R:400
Ending T/R: 600
Related Cash flow?
Cash flow=2000-(600-400)=1800
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 Basic Principle (example 2)
Cost of sales: 1500
Beginning inventory:300
Ending inventory: 400
Beginning A/P: 400
Ending A/P: 550
Related Cash flow?
Cash flow=-1500-(400-300)+(550-400)=-1450
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CFO
现金流逻辑 Sales
Cash received -Cost of good sold
Cash received= Sales –(End T/R-Beg T/R)
from customers -Depreciation
Cash paid= Purchase +(Ending T/P-Beginning T/P) -Wage expense
Cash paid to
Beginning Inv + Purchase – COS = Ending Inv
suppliers +Gain on disposal
Cash paid=COS+(End AP-Beg AP)-(End Inv-Beg Inv)
-Interest expense
Cash paid to Cash paid =Wage expense+(Ending wage payable-
employees Beginning wage payable) -Tax expense
=Profit after tax
Cash paid =Interest expense + (Ending interest
Interest paid
payable-Beginning interest payable)
Cash paid = Tax expense +(Ending tax payable-
Taxes paid
Beginning tax payable)
= CFO
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CFO
 The direct method of arriving at cash flow from operating activities uses the actual
trading cash flows. These cash flows are:
Direct method
Cash received from
Cash received= Sales –(End T/R-Beg T/R)
customers
Cash paid= Purchase +(Ending T/P-Beginning T/P)
Cash paid to
Beginning Inv + Purchase – COS = Ending Inv
suppliers Cash paid=COS+(End A/P-Beg A/P)-(End Inv-Beg Inv)
Cash paid to Cash paid =Wage expense+(Ending wage payable-
employees Beginning wage payable)
Cash paid =Interest expense + (Ending interest payable-
Interest paid
Beginning interest payable)
Cash paid = Tax expense +(Ending tax payable-Beginning
Taxes paid
tax payable)
= CFO
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CFO
 Cash flow from operation-Indirect method
Profit before tax X

Adjustments for:
Investment income (X)
Interest expense X
Loss/Gain from disposal non-current asset X/(X)
Depreciation X
X
Increase/Decrease in trade and other receivables (X)/X
Increase/Decrease in inventories (X)/X
Increase/Decrease in trade payables X/(X)
Cash generated from operations X
Interest paid (X)
Income taxes paid (X)
Net cash from operating activities X
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CFI
Purchase long‐term investment (bonds or shares) (X)
 Cash used in purchase of fixed assets:

• CV end = CV Begin + Purchase + Revaluation surplus – Disposal CV – Depreciation
• Costbeg+ Purchase + Revaluation surplus - Costdisposal= Costend
 Proceeds received from sale of fixed assets:
• Gain or loss = Proceeds received(Cash) – Disposal CV
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CFF
Prepayment for long‐term borrowing or repurchase share (X)
 Long-term debt and shares

• Increases supply cash and decreases use cash.
 Dividend paid
• Opening R/E + Net Income – Dividend declared= Ending R/E
• Opening Dividend payable + Dividend declared – Dividend paid=Closing Dividend Payable
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 Example
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Comparison of the statement of cash flows and statement of profit or loss

 Advantages of the statement of cash flows
• It may assist users of financial statements in making judgements on the amount,
timing and degree of certainty of future cash flows.
• It gives an indication of the relationship between profitability and cash generating
ability, and thus of the quality of the profit earned.
• Analysts and other users of financial information often, formally or informally,
develop models to assess and compare the present value of the future cash flow of
entities.
• A statement of cash flows in conjunction with a statement of financial position
provides information on liquidity, viability and adaptability
• Cash flows cannot be manipulated easily and are not affected by judgement or by
accounting policies.
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Comparison of the statement of cash flows and statement of profit or loss

 Limitations of the statement of cash flows
• Statements of cash flows are based on historical information and therefore do not
provide complete information for assessing future cash flows.
• There is some scope for manipulation of cash flows, e.g. a business may delay
paying suppliers until after the year end.
• Cash flow is necessary for survival in the short-term, but in order to survive in the
long-term a business must be profitable. It is often necessary to sacrifice cash flow
in the short-term in order to generate profits in the long-term
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24 Chapter 24 Prepare financial statements
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Example of prepare the financial statement
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第一步，根据题干条件调整：
1. 320*5%=16 比原来多了6
Administrative expense 上升6，资产下降6
2.漏了2个折旧：余额递减折旧设备22，房子直线折旧37
资产下降22和37，费用上升22和37
110*20%=22 740*5%=37
3.期末库存75
COS=160+1140-75=1225 用此代替Purchase，75代替160
COS上升85，资产下降85
4.忘了一笔energy cost，费用上升10，accruals（负债上升）10
三个月一共15费用，到年底2个月未付，所以算成10
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第二步调整 trial balance

Dr Cr 调整1 调整2 调整3 调整4 After adjustment
Revenue 1800
Net purchase 1140 Dr 59 Dr 85 1284
Administrative expense 325 Dr 6 Dr 10 341
Building 740
AD of Buildings 60 Cr 37 97
Plant 220
AD of Plant 110 Cr 22 132
Inventory 160 Cr 85 75
Trade receivable 320
Allowance T/R 10 Cr 6 16
Cash+bank 20
Bank balance 70
Trade payable + accruals 250 Cr 10 260
Equity shares 415
Share premium account 80
Retained earning 130
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516
(341)
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25 Chapter 25 Consolidation
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Accounting for intercompany investment

 A trade investments (Financial assets): an investment in the shares of another entity,
that is held for the accretion of wealth, and is not an associate or a subsidiary.
• Trade investments are simply shown as investments under non-current assets in the
statement of financial position
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 Definition of an associate (联营)
• An entity over which the investor has significant influence and that is neither a
subsidiary nor an interest in a joint venture (合营)
• Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
• Significant influence is assumed with a shareholding of 20% to 50%
 投资百分比只是参考，如果小于20%，但是能够重大影响仍然是associate，
如果投资百分比30%，不能重大影响那么就不是associate
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 The existence of significant influence is usually evidenced in one or more of the
following ways.
• (a) Representation on the board of directors (or equivalent) of the investee
• (b) Participation in the policy making process
• (c) Material transactions between investor and investee
• (d) Interchange of management personnel
• (e) Provision of essential technical information
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 Principles of equity accounting used for associates-One line consolidation
• For SOFP: An ‘investments in associates’ line within non-current assets which
includes the cost of the investment plus the group share of post acquisition reserves
• For SOPL: One line ‘share of profit of associates’ which includes the group share of
any associate’s profit after tax.
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 The associate is include as a non-current asset investment calculated as:
Cost of investment X
Share of post acquisition:
Add: Profit X
Less: Associates dividend (X)
Investment in associates (non-current asset) X
根据考纲说明联营公司不考计算
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Special rules for associates

 No consolidated accounts
• If a company has no subsidiaries, then it is not required to prepare consolidated
accounts and so any investments in associates can be accounted for as an investment
at cost or by using the equity method, in the parent company's individual accounts
 If accounted for as an investment at cost, any dividend received from associated
company treated as dividend income recognized in SOPL
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 Group of Companies arises when one company (Parent) takes control of another
company (subsidiary).
 Subsidiary is a company controlled by another company.
 Parent is a company that controls one or more entities.
 Consolidated Financial Statements: Financial statements of a group in which the assets,
liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are
presented as those of a single economic entity.
 Non-Controlling Interest 少数股东(非控股股东)权益 is a collective representation of
the shareholders that normally own 49% or less of equity.
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 控制与否和拥有公司股权百分比没有必然联系，一般拥有大于50%普通股（投票权）认
为是控制，但是不足50%也能控制，只要实质上是控制的。
 Control can exist when a parent owns less than half of the voting power of a company when
there is;
• Power over more than half of the voting rights as the result of an agreement with other
investors;
• Power to govern the financial and operating policies of the company under the law or an
agreement;
• Power to appoint or remove a majority of the directors;
• Power to cast the majority of votes at meetings of the board of directors
 Group accounts must include all subsidiaries of the parent.
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Principles of the consolidated statement of financial position

 The preparation of a consolidated statement of financial position:
• The investment in the subsidiary (S) shown in the parent’s (P’s) statement of
financial position is replaced by the net assets of S.
• All transactions among the entities consolidated are eliminated;
• Key calculation:
 Goodwill
 NCI
 Group retained earning
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The best approach is to use a set of standard workings.

 (W1) Goodwill arising on consolidation is recognised as an intangible asset in the
consolidated statement of financial position
Goodwill 计算公式 For F3
Parent's consideration
Cash
Shares exchange
Fair value of parent's consideration xxx
NCI 的 fair value xxx Total purchase price
子公司的Capital (xxx)
子公司的Share premium and OCI (xxx)
Identifiable net assets
子公司的R/E-at date of acquisition (xxx)
子公司fair value over book value (xxx)
收购日的Goodwill xxx
所以Goodwill是母公司的购买价+NCI部分超过了子公司的可鉴别的公允价。Goodwill
是无形资产，不做摊销，每年做减值测试。
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 (W2) Non controlling interest (The value of the part not acquired by the parent)
NCI的计算
假设少数股东是20%
Fair value of NCI at date of acquisition xxx
R/E after date of acquisition*20% xxx
S to P 的 URP's 20% (内部库存买卖利润) (xxx)
Total NCI after date of acquistion xxx
Total NCI xxx
假设除R/E外，子公司其他权益项不变
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 (W3) Group retained earnings for F3
母公司拥有子公司80%
母公司：
照抄报表 R/E xxx
P to S URP (xxx)
Total 母公司的 R/E xxx
子公司：
After date of acquisitions' R/E (total R/E-收购时的R/E) xxx
S to P URP (xxx)
Total adjusted 子公司R/E xxx*80%
Total Group R/E 子公司+母公司
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Basic consolidation example
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Fair value of consideration

 Basic rule to calculate goodwill:
• The consideration paid for a subsidiary must be accounted for at fair value
 Cash
 Share exchanges
• The subsidiary’s identifiable assets and liabilities acquired must be accounted for at
their fair values
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 Share exchange
• Parent company will issue shares in its own company in return for the shares acquired in the
subsidiary. The share price at acquisition should be used to record the cost of the shares at
fair value
 Example of fair value of consideration:
Jack acquires 24 million $1 shares (80%) of the ordinary shares of Becky by offering a share
for share exchange of two shares for every three shares acquired in Becky. Jack's shares have a
nominal value of $1 and a current market value of $2.
Calculate the cost of investment and show the journals to record it in Jack's accounts.
Solution：
Shares exchange (24m × 2/3) × $2 = 32m
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P Co acquired 100% of the ordinary shares of S Co on 1 September 20X5. At that date the fair value of S
Co's land and buildings was $23,000 greater than their carrying value and retained earnings were $21,000.
The statements of financial position of both companies at 31 August 20X6 are given below
P’s S’s
Land and buildings 63000 28000
Investment in S Co at cost 67000
Inventory 40000 20000
Receivable 30000 10000
Cash 12000 13000
Total assets 212,000 71000
Equity
Ordinary shares of $1 each 80000 20000
Retained earnings 112000 41000
Current liabilities 20000 10000
Total equity and liabilities 212,000 71000
Prepare P Co's consolidated statement of financial position as at 31 August 20X6.

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做合并需注意的要点
1. 合并子公司是以子公司收购日的公允价为基础：
出现收购时长期资产Fair value和Book value 不一致，
长期资产相加时要使用子公司公允价
2. 待补充
Consolidated financial statement at 31 Aug 20x6
W1.Goodwill
P's consideration 67,000
Land and buildings (63+28+23) 114,000
NCI 0
Goodwill (W1) 3,000
S's FV of identifable net asset at acquisition
Inventory (40+20) 60,000 date
Receivable (30+10) 40,000 Ordinary share 20000
Cash (12+13) 25,000 Retained earning 21000
Total asset 242,000 Fair value adjustment 23000
Goodwill 3,000
Ordinary shares 80000
Retained earnings (W2) 132,000 W2 Group Retained earning
P's R/E 112,000
Current liabilty 30,000
S's R/E after acquistion date (41-21) 20000
Total Equity and Libility 242,000
Group R/E 132,000
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Intra-group trading
 P and S may well trade with each other leading to the following potential problem areas:
• Current accounts between P and S
• Loans held by one company in the other
• Any dividends paid by the subsidiary to the parent
• Unrealized profits on sales of inventory
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Intra-group trading
 Current accounts
• If P and S trade with each other then this will probably be done on credit leading to:
 a receivables (current) account in one company’s SFP
 a payables (current) account in the other company’s SFP.
• These are amounts owing within the group rather than outside the group and therefore they
must not appear in the consolidated statement of financial position.
• They are therefore cancelled (contra’d) against each other on consolidation
 Loans held by one company in the other
• Cancelled (contra’d) against each other on consolidation
 Any dividends paid by the subsidiary to the parent
• Net effect to the group’s SOFP is zero, therefore no adjustment required
• Any unpaid dividend(dividend payable) against dividend receivable
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Intra-group trading
 Unrealised profit 未实现的利润 may arise within a group scenario on:
• inventory where companies trade with each other
 When one group company sells goods to another a number of adjustments may be
needed.
• Current accounts must be cancelled.
• Where goods are still held by a group company, any unrealised profit must be
cancelled.
• Inventory must be included at original cost to the group
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Intra-group trading
 The process to adjust is:
• (1) Determine the value of closing inventory included in an individual company’s accounts which has
been purchased from another company in the group.
• (2) Use markup or margin to calculate how much of that value represents profit earned by the selling
company.
• (3) Make the adjustments. These will depend on who the seller is.
 If the seller is the parent company, the profit element is included in the holding company’s
accounts and relates entirely to the group.
Dr Group retained earnings, Cr Group inventory
 If the seller is the subsidiary, the profit element is included in the subsidiary company’s accounts
and relates partly to the group, partly to non-controlling interests (if any).
Dr Subsidiary retained earnings, Cr Group inventory
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Mid-year acquisitions
 Calculation of reserves at date of acquisition
• If a parent company acquires a subsidiary mid-year, the net assets at the date of acquisition must be
calculated based on the net assets at the start of the subsidiary's financial year plus the profits of up to
the date of acquisition.
• To calculate this it is normally assumed that S’s profit after tax accrues evenly over time.
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 Example:
P bought S on the 1 July 20X1. S's retained earnings at 31 December 20X1 are $15,000 and S's profit for
the year was $8,000. What were S's retained earnings at acquisition?
 Solution
Retained earning at begin: 15000-8000=7,000
Retained earning at acquisition date: 7000+8000/2=11000
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 (W1) Goodwill arising on consolidation is recognised as an intangible asset in the
consolidated statement of financial position
Goodwill 计算公式 For F3
Parent's consideration
Cash
Shares exchange
Fair value of parent's consideration xxx
NCI 的 fair value xxx Total purchase price
子公司的Capital (xxx)
子公司的Share premium and OCI (xxx)
Identifiable net assets
子公司的R/E-at date of acquisition (xxx)
子公司fair value over book value (xxx)
收购日的Goodwill xxx
所以Goodwill是母公司的购买价+NCI部分超过了子公司的可鉴别的公允价。Goodwill
是无形资产，不做摊销，每年做减值测试。
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 (W2) Non controlling interest (The value of the part not acquired by the parent)
NCI的计算
假设少数股东是20%
Fair value of NCI at date of acquisition xxx
R/E after date of acquisition*20% xxx
S to P 的 URP's 20% (内部库存买卖利润) (xxx)
Total NCI after date of acquistion xxx
Total NCI xxx
假设除R/E外，子公司其他权益项不变
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 (W3) Group retained earnings for F3
母公司拥有子公司80%
母公司：
照抄报表 R/E xxx
P to S URP (xxx)
Total 母公司的 R/E xxx
子公司：
After date of acquisitions' R/E (total R/E-收购时的R/E) xxx
S to P URP (xxx)
Total adjusted 子公司R/E xxx*80%
Total Group R/E 子公司+母公司
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综合
P Co acquired 80% of the ordinary shares of S Co on 1 March 20X6. At that date the fair value of S Co's
land and buildings was $23,000 greater than their carrying value and the fair value of the NCI is $ 23,000 at
acquisition date. Retained earnings at 1 September 20X5 were $21,000
Note 1 After the acquisition, During the year S Co sold goods to P Co for $18,000, the profit to S Co being
20% of mark up from cost. At the period end, 25% of these goods remained unsold in the inventories of P
Co.
Note 2 At the period end, P Co owed S Co $5,000 for goods bought and this debt is included in the trade
payables of P Co and the trade receivables of S Co.
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综合
The statements of financial position of both companies at 31 August 20X6 are given below
P’s S’s
Land and buildings 63000 28000
Investment in S Co at cost 67000
Inventory 40000 20000
Receivable 30000 10000
Cash 12000 13000
Total assets 212,000 71000
Equity
Ordinary shares of $1 each 80000 20000
Retained earnings 112000 41000
Current liabilities 20000 10000
Total equity and liabilities 212,000 71000
Prepare P Co's consolidated statement of financial position as at 31 August 20X6.
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综合
W1.Goodwill
做合并需注意的要点 P's consideration 67,000
NCI 23,000
1. 合并子公司是以子公司收购日的公允价为基础：
S's identifable net asset at acquisition date
出现收购时长期资产Fair value和Book value 不一致，
Ordinary share 20000
长期资产相加时要使用子公司公允价 Retained earning (21+(41-21)*6/12) 31000
2. 调整URP时库存一定要记得跟着下调 Fair value adjustment 23000
Consolidated financial statement at 31 Aug 20x6 Goodwill 16,000
Land and buildings (63+28+23) 114,000 W2. URP

Profit from P: (18000/1.2)*20% 3000
Goodwill (W1) 16,000
Unrealized profit due to unsold 1/4 750
Inventory (40+20-0.75w2) 59,250
Receivable (30+10-5) 35,000 W3. NCI
Cash (12+13) 25,000 Fair value of NCI at acquisition date 23000
Total asset 249,250 NCI after acquisition (41-31)*20% 2000
URP adjustment S to P 750*20% -150
NCI at reporting date 24850
Ordinary shares 80000
Retained earnings (W4) 119,400 W4 Group Retained earning
NCI (W3) 24,850 P's R/E 112,000
Current liability (20+10-5) 25,000 S's R/E after acquistion date (41-31-0.75)*80% 7400
Total Equity and Libility 249,250 Group R/E 119,400
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General rules for consolidated statement of profit or loss

 The consolidated statement of profit or loss follows basic principles of:
• From revenue to profit for the year include all of P’s income and expenses plus all of
S’s income and expenses (reflecting control of S)
• Eliminate intra-group transactions
• After profit for the year show split of profit between amounts attributable to the
parent's shareholders and the non-controlling interest (to reflect ownership).
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 General rules
• Sales revenue to profit for year: 100% P + 100% S
• Sales and purchases: The effect of intragroup trading must be eliminated from the
consolidated statement of profit or loss.
 Consolidated sales revenue = P’s revenue + S’s revenue – intragroup sales.
 Consolidated cost of sales = P’s COS + S’s COS – intragroup sales
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 General rules
• Interest: If there is a loan outstanding between group companies the effect of any
loan interest received and paid must be eliminated from the consolidated statement
of profit or loss.
• Dividends: A payment of a dividend by S to P will need to be cancelled.
 Any dividend income shown in the consolidated statement of profit or loss must
arise from investments other than those in subsidiaries or associates
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Intra-group trading
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Intra-group trading
 Provision for unrealised profit
• The adjustment for unrealised profit should be shown as an increase to cost of sales
 Example:
• A buys an inventory item for $60
• A sells it to B for $80, B being a member of the same group as A
• B still holds the item at the reporting date
• eliminate sales of $80 in A's books and purchases of $80 in B's books
• cancel the unrealised profit of $20 in A (the seller's) books
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Intra-group trading
 Example (cont.):
• If B had sold the item for $95 by the reporting date, the statements of profit or loss of the two
companies would have shown:
• Both companies would have realised their profits and so these should not be adjusted.
• Effect on non-controlling interests
 If the unrealised profit originally arose in the subsidiary, the non-controlling interest must be
adjusted for its share in the unrealised profit
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Intra-group trading
 General rules
• Non-controlling interests:
 NCI % × subsidiary’s profit after tax
Less:
 NCI % × PURP (sub seller only)
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Intra-group trading
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Intra-group trading
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Intra-group trading
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 If a subsidiary is acquired part way through the year, then the subsidiary’s results
should only be consolidated from the date of acquisition
• Time apportionment of the results of S in the year of acquisition. For this purpose,
unless indicated otherwise, assume that revenue and expenses accrue evenly.
• After time apportioning S’s results, deduction of post-acquisition intra-group items
as normal
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26 Chapter 26 Interpretation of financial

statements
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Ratio analysis- Profitability

 Gross profit margin or percentage is:
 Since the ratio is affected by only a small number of variables

• Selling prices – normally deliberate though sometimes unavoidable, e.g. because of
increased competition or entry into a new market
• Sales mix – often deliberate (company discontinuing some products)
• Purchase cost – including carriage inwards or discounts
• Production cost
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 Return on Capital employed is measured as:
• Profit is measured as: operating (trading) profit, or the Profit before interest and tax (PBIT)
• Capital employed is measured as:
 equity, plus interest-bearing finance, i.e. the long-term finance supporting the business (考试当中
一般是权益加上长期负债)
 total assets less current liabilities
 Similar to ROCE is return on equity (ROE)
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 The asset turnover (资产周转率) is:
• It measures management’s efficiency in generating revenue from the assets at its

disposal: the higher, the more efficient.
 ROCE can be subdivided into profit margin and asset turnover.
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Ratio analysis- Liquidity ratios

 Current or working capital ratio:
 The current ratio measures the adequacy of current assets to meet the company’s short-
term liabilities. It is also worth considering:
• What is normal for the business.
• Nature of the inventory – where inventories are slow moving
• Availability of further finance, e.g. is the overdraft at the limit?
• Long-term liabilities, when they fall due and how will they be financed
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 Quick ratio (also known as acid test) ratio:
 Normal levels for the quick ratio range from 1:1 to 0.7:1.
 It is also worth considering:
• Like the current ratio it is relevant to consider the nature of the business
• A company with a low quick ratio may actually have no problem in paying its
amounts due if sufficient overall overdraft facilities are available.
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 Inventory turnover period is defined as:
 An increasing number of days (or a diminishing multiple) implies that inventory is

turning over less quickly which is regarded as a bad sign as it may indicate:
• lack of demand for the goods
• poor inventory control
• an increase in costs (storage, obsolescence, insurance, damage).
 However, it may not necessarily be bad where management are:
• buying inventory in larger quantities to take advantage of trade discounts, or
• increasing inventory levels to avoid stockouts.
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 Receivables collection period is defined as:
 To interpret receivables collection period, the followings need to be consider:

• If credit sales are not available, revenue should be used.
• The collection period should be compared with: the stated credit policy and previous
period figure
 Increasing accounts receivables collection period is usually a bad sign suggesting
lack of proper credit control which may lead to irrecoverable debts
 But increasing accounts receivables collection period may also be due to a
deliberate policy to attract more trade or a major new customer being allowed
different terms
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 Payables payment period
 The ratio is always compared to previous years:

• A long credit period may be good as it represents a source of free finance.
• A long credit period may indicate that the company is unable to pay more quickly
because of liquidity problems.
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Ratio analysis- Long-term financial stability

 There are two methods commonly used to express gearing as follows
 Gearing ratios indicate the degree of risk attached to the company
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 In highly geared businesses:
• a large proportion of fixed return capital is used
• there is a greater risk of insolvency
• returns to shareholders will grow proportionately more if profits are growing.
 Low geared businesses:
• provide scope to increase borrowings when potentially profitable projects are
available
• can usually borrow more easily.
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 Interest cover:
 Interest cover indicates the ability of a company to pay interest out of profits generated:
• low interest cover indicates to shareholders that their dividends are at risk (because
most profits are eaten up by interest payments) and
• the company may have difficulty financing its debts if its profits fall
• interest cover of less than two is usually considered unsatisfactory
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Limitations of financial statements and ratio analysis

 Limitations of financial statements and ratio analysis
• Ratios are not predictive if they are based on historical information.
• They ignore future action by management.
• They can be manipulated by window dressing or creative accounting.
• They may be distorted by differences in accounting policies.
 Comparison between businesses that follow different policies becomes a major
issue
• If a company trades with related parties, such as other companies within the same
group or other companies run by the same directors, then these transactions may not
be at market price
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Further information for interpretation

 Additional information for ratio analysis
• budgeted figures
• other management information industry averages
• figures for a similar business
• figures for the business over a period of time.
• Other nonfinancial information such as:
 market share
 key employee information
 sales mix information
 product range information
 the size of the order book
 the long-term plans of management.
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苟有恒，何必三更起五更眠
最无益，只怕一日曝十日寒
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2020‐12‐04

Section A consists of 35 Questions.

Section B consists of 2 Questions

01 The scope and purpose of, financial

Framework-Guide your mind

Define financial reporting

Business entity (各自优缺点，区别)

Business entity (各自优缺点，区别) 录制

Business entity (各自优缺点，区别)

Business entity (各自优缺点，区别)

Business entity (各自优缺点，区别)

Understand the nature, principles and scope of financial reporting

Identify the users of financial statement

The board of directors

The board of directors

The board of directors

03 The main elements of financial reports

Framework-Guide your mind

The objective of financial reporting

General features of financial reporting

Elements of financial statements

Elements of financial statements

Elements of financial statements

Framework-Guide your mind

Role of the regulatory system

Role of the regulatory system

Role of the regulatory system

Role of the regulatory system

Role of the regulatory system

Simple statements for F3

Bank Overdraft: 银行透支

Simple statements for F3

Statement of profit or loss for F3

Framework-Guide your mind

Books of prime entry

Sales and purchase day books

 Sales return day book记入debit note（来自客户的退货）

Sales and purchase day books

 Purchase returns day book 记入 credit notes （来自供应商确认）

Petty cash book

Accounting equation （一定要理解透彻，贯彻整个财务体系）

Accrual and matching

Assets = Equity + Liability

Assets = Equity + Liability

Assets = Equity + Liability ( Profit= Revenue- Expense)

Assets = Equity + Liability ( Profit= Revenue- Expense)

 Assets + Expense + Dividends(drawing)=Beginning R/E + Revenue + Capital + Liability

Double entry bookkeeping 复式记账

b/f: 200 Cash collection: 50

Credit sales: 100

Debit （借方） Credit （贷方）

Double entry bookkeeping

Double entry bookkeeping

Double entry bookkeeping

Double entry bookkeeping

Capital Investment 2500 Purchase 1500

Double entry bookkeeping

Sales 2400 Receive cash 2400

Balance b/d 4500

 Discount allowed 销货折价：给别人折扣，对公司是一笔损失（现在分录中不再使用）

AVCO Inventory:6 Inventory:(6/3)1=2 Inventory:2+15=17 Inventory: (17/4)2=8.5

如果使用periodic inventory system，AVCO 的单价是：(30012+ 40012.5 + 40014+ 40015)/1500=13.47

 如果折旧时间不足一年按照月份百分比去换算(x/12)。如果题目注明full charge in the year of