f3 Night
f3 Night
f3 Night
ACCA F3 Paper
Suggested Study Notes for F3 ACCA Examinations
1 Accounting Matrix
Assets A Liabilities L
(+Capital) C
Expenses E Gains G
Comparing assets and liabilities, this statement is called the balance sheet.
Comparing expenses and gains, this statement is called the profit & loss account.
Buy stationary on credit: Debit expense (stationary) and credit creditor (name of supplier)
When you pay the supplier, you debit creditor account and credit bank account.
Pay wages:
wages: Debit wages and credit
credit bank.
Goin
Going
g con
conce
cern
rn Norm
Normalal ass
assum
umpt
ptio
ions
ns tha
thatt enti
entity
ty will
will cont
contin
inue
ue ffor
or nex
nextt 12mt
12mths
hs.. If not,
not, the
then
n
assets would then need to reviewed, show at "breakup value".
Mate
Materi
rial
alit
ityy Incl
Includ
ude
e all
all mate
materi
rial
al item
items.
s. If excl
exclud
uded
ed,, this
this coul
could
d infl
influe
uenc
nce
e the
the deci
decisi
sion
on
on the users viewpoint of the financial statements
Accruals Entries to reflect when they are incurred as opposed recorded or paid.
Financial statement then report costs/revenues in the correct period.
Supports the matching concept.
Pru
Prudenc
dence
e Exerc
xercis
ise
e cau
caution
tion.. Ensu
Ensure
re all
all costs
osts and
and liab
liabil
ilit
itie
iess are
are corre
orrecctly
tly state
tated
d.
If loss foreseen, it should be accounted for and provision made.
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Suggested Study Notes
ACCA F3 Paper
2 Typical entries
Ensure you know if A, E, L, G, C for each ledger account. This determines the accounting
treatment and where the ledger account is shown and disclosed.
Company XP Limited
Trial Balance
Year ending 31 December 20xx KEY
Debit $ Credit $
Sales 190000 G
Discounts Received 200 G
Discounts Allowed 50 E
Opening Stock p&l 5000 E <used for cost of sales
Closing Stock p&l 6000 G <used for cost of sales
Purchases 60000 E <used for cost of sales
Carriage Inwards 2000 E <used for cost of sales
Carriage Outwards 4000 E
Salaries 40000 E Net total = p&l figure
Rent 10000 E = $65,350 profit
Rates 1000 E credits > debits
Insurance 3000 E
Selling commission 3800 E
Bad Debts 3000 E
Bad Debts recovered 1000 G
Sundry Income 3000 G
Depreciation of equipment 3000 E
Equipment - cost 30000 A
Accumulated Depreciation - Equipment 6000 L < PROVISION
Investments 10000 A
Stock 6000 A
Debtors 15000 A
Bad Debts Provision 1500 L < PROVISION
Bank Deposit 5000 A
Bank overdraft 15000 L
Creditors 3000 L
Bank Loan 37000 L
Preference Shares 100000 C
Ordinary Share Capital 100 C
Reserves - Opening 161950 C Loss b/f
362800 362800
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Suggested Study Notes
ACCA F3 Paper
4 Be familiar of entries in a sales & purchase account
Sales Account
Bank - cash sales 30000
Debtor - T Murphy 2000
(credit note issued) Debtor - T Murphy 100000
Debtor - J Smith 62000
192000 192000
Purchases Account
60300 60300
5 The system for looking after petty cash is also known as an imprest system.
Keep a pre-determined float and use vouchers to track costs and analysis.
The expense total is refunded later to reinstate the float or imprest amount.
Sales 1000
Bank 1230
VAT 230
Purchases 488
Bank 600
VAT 488 x 23% 112
Therefore the net VAT due is $118 (230-112). When paid the entry will be:
VAT 118
Bank 118
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Page 3 of 11
Suggested Study Notes
ACCA F3 Paper
7 Learn the gross profit / (Loss) statement
Sales 190,000
Questions can be given to work out the missing entry. Follow the format to solve.
Note that carriage outwards (freight costs for selling and shipping goods out to customers)
is not part of this format. Carriage inwards is the freight cost for buying goods for resale, so
part of cost of sales.
8 Stock valuation
IAS2 states that inventory should be valued at the lower of cost and net realisable value (NRV)
item 1 30 50 45 30
item 2 20 18 17 17
item 3 10 20 9 9
60 88 71 56 = Ans.
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Suggested Study Notes
ACCA F3 Paper
9 Depreciation
Method of writing off the cost of tangible fixed assets (or non current assets) to the
profit and loss account.
Example:
Motor car purchased for 30,000
Expected life 3 yrs
Residual value expected in year 3 is 3,000
Ans:
If at end of year 2 the car was sold for 10,200, what is the profit / (loss) on disposal ?
30000 30000
Note: Net book value (NBV) of car in yr 2 is 12,000 (30k less 18k)
Review period of accounting and dates. If purchased or sold mid year, then you will need
to time apportion values.
Straight line
Reducing balance
Depreciation is a non cash item. Relevant to cash flow statement, where always added back.
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Suggested Study Notes
ACCA F3 Paper
10 Accruals
You use electricity for your business. You know the cost will be about 500 per year. You never
got a bill until year 3 for 1600. Show the entries and p&l and balance sheet extracts.
(assume all entries happen at end of year)
Debit Credit
P&L Extracts:
Yr 1 Accruals 500
yr 2 Accruals 1000
Yr 3 Accruals 0
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Suggested Study Notes
ACCA F3 Paper
11 Know the entries for bad debts
3000 3000
1500 1500
Bal b/f 1500
Bank 1000
1000 1000
Where a trade debtor will not pay or you assume the debt is doubtful to be received, you can
1) clear the account be writing off the ledger balance or 2) leave the ledger balance put make
a provision in another account - called BDP above. The BDP a/c can be general say 10% of
the debtors total or specific to individual debtors. Any movement in the BDP a/c is shown in
the bad debts account in the P&L account.
Where a debt was written off (ledger balance = 0) and later received. We setup a new
account called bad debts recovered. The entry goes straight there and shown separately in the
p&l. This account highlights the fact that it was recovered after a decision was made to
write off.
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Page 7 of 11
Suggested Study Notes
ACCA F3 Paper
12 Bank Reconciliation Statement
Understand format and what are debit and credit balances for the ledger and the bank.
(15,100)
Typically the bank is normally right and our books would need to be adjusted for omissions etc.
Rarely will the bank be wrong, if so, you show the error under the bank statement line
noting it is an bank error and due to be reversed in the future.
NB:
In any bank reconciliation, important to check if opening balances agree. If not you may need
to follow though this reconciliation first, so you can then finish the closing reconciliation.
Some entries may still be outstanding and so you will need to c/f again on your closing
reconciliation.
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Suggested Study Notes
ACCA F3 Paper
13 Share Capital - a few key points:
Share Premium Price paid over the par value of the shares
entry:
Debit bank $5
Credit share premium $4.5
Credit share capital $.50
14 Cashflow Statement
Understand format. To show cashflow movements only, thus explain the bank movement.
An increase in creditors (a liability), gives you extra funds. You are getting more credit. So
you add to working capital adjustment.
Depreciation and the disposal account is not a cashflow item, so you add back.
(if profit on disposal you deduct, if loss on disposal you deduct)
Do "T accounts" for the following balance sheet accounts to get the cash flow item for:
Purchase of fixed assets (non current assets) => Fixed Assets Account
Taxation paid => Taxation Account
Dividends paid => Dividends Account
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Suggested Study Notes
ACCA F3 Paper
15 Consolidation IAS27
Own over 50% or deemed to have control of an entity. You then consolidate results.
Review acquisition date as you may need to apportion the profit figures in various
workings.
Add 100% of the subsidiary P&L results, you then deal with the non controlling interest
share of profits at the end.
Important to understand mark-up and margin. As you may need to work out the unrealised
profit element for the stock adjustment.
B/S: Cost of investment plus group share of profit (profit after tax)
E.& O. E.
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Suggested Study Notes
ACCA F3 Paper
th
The next course commences on Monday, 27 August 2012. Lectures are delivered from our
City Centre location (South Great George’s Street, D2), Templeogue (Dublin 6W), and are streamed
online live and are recored for online review.
Course Fees:
Full course Revision
F1 Accounting in Business Wednesday €350 €199
F2 Management Accounting Tuesday €350 €199
F3 Financial Accounting Thursday €350 €199
F4 Corporate & Business Law Tuesday €650 €295
F5 Performace Management Monday €650 €295
F6 Taxation Wednesday €650 €295
F7 Financial Reporting Thursday €650 €295
F8 Audit & Assurance Tuesday €650 €295
F9 Financial Management Tuesday €650 €295
P1 Governance, Risks & Ethics Thursday €795 €325
P2 Corporate Reporting Wednesday €795 €325
P3 Business Analysis Tuesday €795 €325
P4 Advanced Financial Management Monday €795 €325
P5 Advanced Performance Management Wednesday €795 €325
P6 Advanced Taxation Thursday €795 €325
P7 Advanced Audit & Assurance Monday €795 €325
The most up-to-date course materials are included in the course fee.
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