The regulatory framework of financial reporting
- Supervisory body of the board and is responsible for
Why do we need regulation?
- Ensures financial statements can be relied upon by a
variety of users when making decisions.
- Promotes consistency and comparability of accounting
information helps users interpret the financial
statements.
IAS is also known as IFRS
- IAS : International accounting standards
- IFRS: International financial reporting standards
IFRS standards is a term used to include all IAS and IFRS
International financial reporting standards (IFRS Standards)
- There has been a move towards internalization of
financial reporting
- Harmonization was considered necessary to provide
consistent and comparable information to an
increasingly global audience
- IFRS standards are very important
Four separate but related bodies contolling the setting of IFRS
Standards as illustrated below:
1) The IFRS Foundation
2) IASB
3) IFRS AC
4) IFRS IC
The IFRS Foundation
the promotion, rigorous application of high quality
financial reporting standards
The IASB board
- The board is independent standard setting body of the
IFRS Foundation
- Development, approval, publication of IFRS Standards
and interpretations developed by IFRS IC
The IFRS interpretations committee
- Reviews widespread accounting issues on a timely
basis and provides authoritative guidance on these
issues
Notes on bank reconciliation statements:
Objective of doing this:
- providing accuracy checks for the entity agains the
bank statements
- preventing fraud and errors
Supplier statement:
- Dr : debit : represents receivables (they are owed this
amount)
- Cr: credit : represents payables (they owe this amount
to their customers)
Control accounts: one of the most important topics: The key to trial balance is to show
- Nominal ledger accounts that summarise a large
number of transactions – part of the double entry Interpreting financial statements – calculation of different
system types of ratio:
- Used to prove the accuracy of the ledger accounting 1) Current ratio
system 2) Acid test ratio
- Mainly used with regards to the receivables – SLCA and 3) Gross profit margin
payables- PLCA 4) Gross profit markup
5) Gearing ratio
Sales ledger accounts (personal accounts) – memorandum 6) Return on capital employed
accounts 7) Total capital employed
8) Receivables days
The individual postings to the sales ledger should exactly equal 9) Payables days
to the total postings made to the nominal ledger 10) Inventory turnover
11) Average inventory holding days
- Posting of balances to the wrong side of the individual
receivable balance accounting wouldn’t affect the total
of sales daybook because the values are correct – just
posted to different side- adjustments have to be made
to the individual receivables account – no adjustments
to the control accounts – refer to the study text as well
as the supplementary objective questions in the
integrated workbook given by CIMA
- If the value recorded to the receivables individual
account is wrong – this would affect the total of the
sales daybook and hence the sales ledger control
account
- If the value is posted to the wrong customer’s account
this would have no effect on the sales ledger contor
account since the totals transferred from the sales
daybook is not affected