QUESTION 1

Snow Berhad
Statement of Comprehensive Income for the year ended 31 August 2020
RM RM
Sales Revenue 800,000
Less: Cost of Sales
Inventory 1 September 2019 68,000
(+) Purchases 425,000
(-) Inventory 31 August 2020 78,000 415,000
Gross Profit 385,000
Less: Expenses
Distribution cost 102,500
Administration cost 89,000 191,500
Operating Income 193,500
(-) Finance cost 5,000
Taxable Income 188,500
(-) Tax Expense (2,000 + 31,000) 33,000
Net Profit for the year 155,500

Snow Berhad
Statement of Changes in Equity for the year ended 31 August 2020
Share Share Retained Accumulated
Total
Capital Premium Earnings OIC
Opening Balance 1 September 2019 - - 72,000 -
Issues of share 700,000 425,000 1,125,000
Net profit for the year 155,500 155,500
Other Comprehensive Income 192,000 192,000
Dividend -55,000 -55,000
Ending Balance 31 August 2020 700,000 425,000 172,500 192,000 1,489,500
 Snow Berhad
Statement of Financial Position as at 31 August 2020
RM RM
Non-Current Assets
Freehold Land 1,302,000
Motor Vehicles 48,000
(-) Accumulated Depreciation 20,000 28,000
Fixture and Fittings 125,000
(-) Accumulated Depreciation 17,400 107,600
TOTAL NON-CURRENT ASSET 1,437,600

Current Assets
Cash at Bank 22,000
Trade Receivables 95,400
Inventory 31 August 2020 78,000 195,400
TOTAL ASSETS 1,633,000

Financed By:
Share Capital 1,125,000
Retained Earnings 172,500
Accumulated Other Comprehensive Income 192,000
Shareholder's Fund 1,489,500

Non-Current Liabilities
Debentures @10% 50,000
TOTAL NON-CURRENT LIABILITIES 50,000

Current Liabilities
Trade Payables 60,000
Debentures Payable 2,500
Tax Payable 31,000
TOTAL CURRENT LIABILITIES 93,500

TOTAL EQUITY AND LIABILITY 1,633,000

Date Transactions Debit Credit

Sep-01 Bank 220,000

Twilight Berhad
SOCI for the year ended 31 March 2021
Operating Income 842,000
(-) Finance Cost 58,267
Taxable Income 783,733
(-) Tax Expense 226,000
Net Profit for the year 557,733

Twilight Berhad
Statement of Changes in Equity for the year ended 31 March 2021
Share Share Retained Accumulated
Total
Capital Premium Earnings OIC
Opening Balance 1 September 2019 400,000 280,000 346,000 110,000 1,136,000
Issues of share 400,000 400,000
Net profit for the year 557,733 557,733
Other Comprehensive Income 0
Dividend 200,000 200,000
Ending Balance 31 August 2020 800,000 280,000 1,103,733 110,000 2,293,733
Question 3

(a) Explain what is meant by ‘recognition’ and distinguish this from ‘disclosure’ with
reference to IASB Conceptual Framework.

Recognition is the recording or inclusion of account that meets the definition of an

(b) What is the criterion for recognition of a financial statement item?

The definition of an element must be met, and second, the element must meet
recognition criteria.

Question 4

State the amount that will be recognized as asset or expensev and justify your answer by referring
to the Framework’s asset and expense definitions, and recognition criteria:

a) Rosemary Berhad acquired freehold building on 1 October 2019 for RM1,500,000 with the
intention of using the building for its business’ operations. As of 30 June 2020, the freehold
building is yet to be used due to the Restricted Movement Control Order that was imposed
following the COVID-19 outbreak.

It will be recorded as an expense as the building is yet to be used which indicates no future
benefits will be generated. It cannot be recorded as Asset, asset is only recognized when there
is future cash flowing into entity.

b) On 1 December 2019, Herbs Berhad paid rent in advance, RM60,000, for two years. The
payment of rent in advance is made for the factory that the company intends to rent to produce
its bottled herbs.

It will be recorded as an asset as payment of rent was in terms of prepaid. Prepayment will
generate economic benefit in near future which meets the asset requirement

c) On 9 March 2020, Tamarind Books Berhad, a bookstore located in Subang Jaya, purchased
books worth RM12,000 from its supplier, BookXcess. The books will be sold to Tamarind Books
Berhad’s customers.

It will neither be recorded as an asset or expense but a liability instead. This is because
Tamarind is having present obligation in which Tamarind has to transfer an economic resource
(book sales) as a result of past events (Credit purchase from BookXcess)