KASNEB Principles of Accounting Notes

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CS PART 1 SECTION 2

COURSE OUTLINE

GENERAL OBJECTIVE

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to prepare and interpret financial statements for different entities.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

• Prepare books of original entry and basic ledger accounts under double entry system
  • Prepare basic financial statements of sole traders, partnerships, companies and manufacturing entities and not for profit organisations
  • Comply with the regulatory framework in the accounting field
  • Account for assets and liabilities
  • Analyse financial statements by use of ratios and statement of cash flows.

CONTENT

Introduction to accounting

• The nature and purpose of accounting
• Users of accounting information and their respective needs
• Accounting Standards and their purposes
• Regulatory framework (ICPAK, IASB, IAESB, IPSASB)
• Professional ethics
• Principles; concepts and conventions underlying the preparation of accounting statements

Accounting procedures and techniques

• Double entry book-keeping
• The cash book; two and three column including cash journal
• The ledger and their role in recording and summarising, classifying accounting data
• Books of original entry
• Petty cash book
• Balancing accounts and preparing the trial balance
• Introduction to simple statements of financial performance
• Statements of financial position

Computerised accounting

• Different accounting packages
  • Rationale for computerised accounting system
    • Components of a computerised accounting system
    • Selecting a good computerised accounting system
    • Challenges of a computerised accounting system
    • Current trends in computerised accounting software

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Preparation of financial statements and year-end adjustments

• Depreciation of non-current assets including their disposal (by part exchange; ordinary sale; accident)
• Methods and reasons of providing for depreciation
• Preparation of movement of property, plant equipment (as per International Financial Reporting Standards)
• Trade receivables, bad debts write-offs and provision for bad and doubtful debts
• Accruals, prepayments, reserves and provisions
• Necessary adjustments in statements of financial performance to record increase and decrease in provision for bad and doubtful debts

Confirming and correcting mechanism

• Bank reconciliation statements
• Control accounts

Errors and correction of errors

• Errors affecting and not affecting the agreement of the trial balance
• Use of the suspense accounts
• The effect of errors on statement of financial performance and statement of financial position

Sole traders accounts

• Income statements
• Statements of financial position

Partnership accounts

• Basic contents of a partnership agreement
• Provisions of the Partnership Act
• Partnership statement of financial performance and appropriation account
• Partners current account and statement of financial position
• Financial statements to reflect elementary changes in partnership such as admission, retirement and dissolution

Introduction to simple company accounts

• Share capital and reserve
• Issue of shares at par; premium; discount
• Over and under subscriptions
• Allotment and calls on shares, forfeiture of shares
• Preparation    of    statements    of    financial    performance    and    appropriation account and the statement of financial position
• Published  accounts:     Components of a complete set of published financial statements only

Manufacturing accounts

• Elements of cost and cost behaviour
• Preparation of manufacturing accounts, statement of financial performance and statement of financial position
• Accounting treatment of manufacturing profit or loss and unrealised profit on closing stock

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Financial statements of a not-for-profit organisation

• What non-profit making organisations are
• Receipts and payments accounts
• Income and expenditure accounts and statement of financial position

Incomplete records and single entry book keeping

• Why incomplete records
• Preparation of statement of affairs
• Preparation of financial statements

Analysis of financial statements Introduction to accounting ratios

Profitability ratios

• Revenue ratios
• Liquidity ratios

Preparation of cash flow statements (International Accounting Standard 7)

Public sector accounting

• Features of public sector entities (as compared to private sector)
• Structure of the public sector and examples of entities in public sector
• Objectives of public sector financial statements
• Users of public sector financial statements and officers (treasury, accounting officers, public accounts committee, auditor general)
• IPSAS on inventory, property, plant and equipment and intangible assets (the ledger accounts of central and county governments are not examinable)
• Accounting techniques in public sector (budgeting, cash, accrual, commitment and fund)

Emerging issues and trends

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