Accounting Q&A by dot point

Record the issue of shares for cash, the declaration and payment of interim and final dividends, transfers to reserves, and prepare the equity section showing share capital and retained earnings

Record balance day adjustments for accrued expenses, prepaid expenses, accrued revenue and revenue received in advance, and explain how each adjustment affects profit and the balance sheet

Distinguish bad debts from doubtful debts, write off a bad debt, create and adjust an allowance for doubtful debts, and present accounts receivable at net realisable value

Explain the purpose of the Conceptual Framework, the objective of general purpose financial reports, the qualitative characteristics of useful information, and the definitions and recognition criteria for the five elements

Define assets, liabilities, equity, income and expenses using the Conceptual Framework, apply the recognition criteria, and explain how the definitions drive whether an item appears in the financial statements

Calculate and record depreciation using the straight-line and reducing-balance methods, determine carrying amount, and record the disposal of a non-current asset including any profit or loss

Record interim and final dividends, declared dividends and transfers to and from reserves, and reconcile the opening and closing balances of retained earnings for a company

Process balance day adjustments for accruals, prepayments, depreciation, doubtful debts and stock, and prepare a classified Income Statement, Statement of Changes in Equity and Balance Sheet for a company

Apply the first-in first-out (FIFO) method under a perpetual system to value closing inventory and cost of sales, and value inventory at the lower of cost and net realisable value

Explain the fundamental qualitative characteristics of relevance and faithful representation and the enhancing characteristics of comparability, verifiability, timeliness and understandability, and apply them to judgements about financial information

Prepare a Statement of Cash Flows classifying cash flows into operating, investing and financing activities, reconcile to the change in cash, and interpret what the statement reveals about the business

Prepare a Statement of Changes in Equity showing movements in share capital, retained earnings and reserves, reconciling opening and closing balances of total equity

Explain how the sales, production, expense and cash budgets combine into a master budget, and prepare a budgeted Income Statement and budgeted Balance Sheet

Explain the purpose and benefits of budgeting, prepare a cash budget showing receipts, payments and closing balance, and use budget variances and internal controls to monitor performance

Classify costs as direct or indirect, fixed or variable, and explain cost behaviour, relevant range, and the use of cost classification in pricing and decision-making

Calculate contribution margin, the break-even point in units and dollars, the margin of safety, and the sales needed to achieve a target profit, and explain the assumptions of CVP analysis

Explain the purpose and principles of internal control, including separation of duties, authorisation and reconciliation, and apply them to safeguarding cash

Explain the limitations of ratio analysis, evaluate the role of non-financial and ethical factors in decision-making, and recommend a course of action using both financial and qualitative information

Calculate and interpret the current ratio, quick ratio, debt to equity and equity ratio, and explain what they reveal about short-term solvency and financial stability

Trace manufacturing costs through prime cost and conversion cost, calculate the cost of goods manufactured using work in process, and link it to cost of sales for a manufacturer

Calculate and interpret gross profit margin, net profit margin, return on assets, return on equity, inventory turnover and accounts receivable turnover, and explain what each reveals

Calculate and interpret profitability, liquidity, efficiency and financial stability ratios, and evaluate business performance and its limitations using ratio analysis

Calculate budget variances for revenue and expenses, classify them as favourable or unfavourable, and explain how variance analysis supports control and decision-making