Financial Accounting – KASNEB Syllabus

PAPER NO. 5 FINANCIAL ACCOUNTING

GENERAL OBJECTIVES

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to prepare 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

CONTENT

Introduction to accounting

The accounting framework
Sources of regulations at national and global levels; the law (Companies Act), professional bodies, global regulatory bodies
Accounting standards (IASs/IFRSs) (their importance and limitations)
Professional ethics

Accounting for assets and liabilities

Assets
- Property, plant and equipment – recognition, capital and revenue expenditure, measurement (depreciation and revaluation), disposal and disclosures – property, plant and equipment schedule
- Intangible assets – recognition, measurement (amortisation, impairment and revaluation), disposals and disclosures
- Financial assets – examples and risks only

Liabilities

Loans – Accounting treatment of repayment of principal and interest

Financial statements of a sole trader

Income statement
Statement of financial position

Financial statements of a partnership

Income statement
Statement of financial position
Changes in partnership – admission of a new partner, retirement and change in profit sharing ratio

Financial statements of a company

Financial statements – income statement and statement of financial position
Published financial statements (describe a complete set of published financial statements but not preparation)

Financial statements of a manufacturing entity

Features of a manufacturing entity
Classification and apportioning costs between manufacturing and selling and administration
Financial statements – manufacturing account, income statement and statement of financial position

Accounts from incomplete records

Features
Types of incomplete records (pure single entry, simple single entry, quasi single entry)
Ascertainment of profit by capital comparison
Preparation of statement of affairs and profit determination
Techniques of obtaining complete accounting information

Financial statements of a not-for-profit making organisation

Features
Types of funds and their accounting treatment
Income and expenditure account
Statement of financial position

Analysing financial statements

Statement of cash flows (categories of cash, methods of preparing statement of cash flows and the importance)
Financial ratios – definition, categories, analysis and interpretation, application and limitations

Introduction to Public Sector Accounting

Features of public sector entities (as compared to private sector)
Structure of the public sector (National and county governments, state corporations and other agencies)
Regulatory structures and oversight [IPSASB, PSASB (establishment, mandate and functions), Director of Accounting Services, National Treasury, Parliamentary Committees, Accounting Officers at national and county levels]
Objectives of public sector financial statements
Objectives of IPSAS
Accounting techniques in public sector (budgeting, cash, accrual, commitment and fund)

(Preparation of financial statements excluded)