Financial Accounting 2A Individual Assignment: STUDENT NUMBER: 201506736

Financial Accounting 2A
Individual assignment
NAME : THATO TSHABALALA

STUDENT NUMBER : 201506736
GROUP : 1
CAMPUS : BRAAMFONTAIN DAMELIN
TABLE OF CONTANT
Financial Accounting 2A Individual assignment 1
NAME : THATO TSHABALALA 1
STUDENT NUMBER : 201506736 1
GROUP : 1 1
CAMPUS : BRAAMFONTAIN DAMELIN 1
TABLE OF CONTANT 2
Glossary of terms 3
Introduction 3
QUESTION 1 4
Question 2 6
References 7
Glossary of terms
Term Definition
Characteristic a feature or quality belonging typically

to a person, place, or thing and serving
to identify them: certain defining
characteristics of the school emerge
from the study.
Accounting the process or work of keeping financial
accounts.
Element an essential or characteristic part of
something abstract
Introduction
Many people think that the work of accountants involves being locked away alone in
small dusty rooms, armed with calculators and reams of paperwork. However, the modern
accountant is incredibly important to business and he/she needs to be able to contribute to
the effective functioning of all facets thereof
QUESTION 1
A) The objective of general purpose financial statements is essentially to give users
information that they will find useful in their decision making. However, this objective is not
to provide all possible users with all possible kinds of information that they may need.
Instead, the CF states that general purpose financial statements:
-should be designed for 3 primary users: investors, lenders and creditors;
- need only provide financial information.

B) Qualitative characteristics of useful financial information

The qualitative characteristics of useful financial reporting identify the types of information
are likely to be most useful to users in making decisions about the reporting entity on the
basis of information in its financial report. The qualitative characteristics apply equally to
financial information in general purpose financial reports as well as to financial information
provided in other ways.
Financial information is useful when it is relevant and represents faithfully what it purports
to represent. The usefulness of financial information is enhanced if it is comparable,
verifiable, timely and understandable.
Fundamental qualitative characteristics
Relevance and faithful representation are the fundamental qualitative characteristics of
useful financial information.
Relevance :
Relevant financial information is capable of making a difference in the decisions made by
users. Financial information is capable of making a difference in decisions if it has
predictive value, confirmatory value, or both. The predictive value and confirmatory value
of financial information are interrelated.
Materiality :is an entity-specific aspect of relevance based on the nature or magnitude (or
both) of the items to which the information relates in the context of an individual entity's
financial report.
Faithful representation:
General purpose financial reports represent economic phenomena in words and numbers,
To be useful, financial information must not only be relevant, it must also represent
faithfully the phenomena it purports to represent. This fundamental characteristic seeks to
maximise the underlying characteristics of completeness, neutrality and freedom from
error. Information must be both relevant and faithfully represented if it is to be useful.
Enhancing qualitative characteristics
Comparability,: verifiability, timeliness and understandability are qualitative characteristics

that enhance the usefulness of information that is relevant and faithfully represented.
Information about a reporting entity is more useful if it can be compared with a similar
information about other entities and with similar information about the same entity for
another period or another date. Comparability enables users to identify and understand
similarities in, and differences among, items.
Verifiability:
Verifiability helps to assure users that information represents faithfully the economic
phenomena it purports to represent. Verifiability means that different knowledgeable and
independent observers could reach consensus, although not necessarily complete
agreement, that a particular depiction is a faithful representation.
Timeliness:
Timeliness means that information is available to decision-makers in time to be capable of
influencing their decisions.
Understandability:
Classifying, characterising and presenting information clearly and concisely makes it
understandable. While some phenomena are inherently complex and cannot be made
easy to understand, to exclude such information would make financial reports incomplete
and potentially misleading. Financial reports are prepared for users who have a
reasonable knowledge of business and economic activities and who review and analyse
the information with diligence.
C)
The elements of financial statements
Asset: An asset is a resource controlled by the entity as a result of past events and
from which future economic benefits are expected to flow to the entity.
.Liability.:A liability is 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.
Equity.:Equity is the residual interest in the assets of the entity after deducting all its
liabilities.
Income.:Income is 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.
Expense: Expenses are 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.
D)
Criteria for the recognition of assets
The following are the recognition criteria for the recognition of assets
a) It is probable that the future economic benefits will flow to the entity
b) The asset must have a cost or value that can be reliable measured.
Criteria for the recognition of liabilities
a) It is probable that an outflow of resources embodying economic benefits will
result from the settlement of the present obligation
b) The amount at which the settlement will take place can be reliably measured.
Recognition of income
The recognition of income is dependent upon the realisation concept. This means that
income must be earned before it can be recognised. Income is recognised if it meets the
following criteria.
a) There must have been increase in future economic benefits, in the form of an
increase in
assets or decrease in liabilities, both of which increase equity.
b) The income can be reliably measured.
Expenses :A decrease in economic benefits During the accounting period In the form of
decreases in assets or
incurrence of liabilities Resulting in decreases in equity Other than distributions to equity
participants
Question 2
A) Cost calculation framework
Purchase price R700000
Installation and modification cost R130000
Plantation fence cost R20000
Snapping cost R100000
Total cost R950000
B) Depreciable amount
Cost - Estimated residual value
R950000 - R20000
=R930000
C) Depreciation = [(Cost - Estimated value) / useful life ] * n/12
=[(950000- 20000)/10] *11/12
=R93000* 11/12
=R85250
D) Carrying amount
= Cost - Acc dip
= R950000 - R85250
= R864750
References
https://www.iasplus.com/en/standards/other/framework
http://www.accountingcoach.com/blog/carrying-amount-book-value
http://www.accountingtools.com/net-carrying-amount
http://www.investopedia.com/terms/c/

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Financial Accounting 2A

NAME : THATO TSHABALALA

Characteristic a feature or quality belonging typically

B) Qualitative characteristics of useful financial information

Comparability,: verifiability, timeliness and understandability are qualitative characteristics

Income.:Income is increases in economic benefits during the accounting period in the

A) Cost calculation framework

Purchase price R700000

Installation and modification cost R130000

Plantation fence cost R20000

Snapping cost R100000

Total cost R950000

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