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FAC1501/102/3/2012

Tutorial Letter 102/3/2012


Introductory Financial Accounting

FAC1501 Semesters 1 and 2


Department of Financial Accounting
This tutorial letter contains important information about your module.

Lecturers responsible for FAC1501 are: Mrs MS du Rand Mrs L Govender Telephone number: 012 429 4233 E-mail: FAC1501@unisa.ac.za

Bar code

Dear student The International Accounting Standards Board published amendments to IAS 1 Presentation of Financial Statements in June 2011. At that time the study guide for 2012 was already in print and changes implicated by IAS 1 could not be done in the study guide. The only issue that affects this module is the change of the name of the statement of comprehensive income to the statement of profit or loss and other comprehensive income. The purpose of this tutorial letter is to highlight the paragraphs and heading that must be changed to the statement of profit or loss and other comprehensive income. The following pages have changes: CONTENTS - Page (iii): STUDY UNIT 3: THE ACCOUNTING EQUATION: FINANCIAL PERFORMANCCE 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Bottom of page 2: The third activity encompasses the communication of the recorded information to interested users. The information is communicated through the preparation and distribution of accounting reports, the most common of which are known as financial statements, that consist of: a statement of financial positions; a statement of profit or loss and other comprehensive income (income statement); a statement of changes in equity; a statement of cash flows; notes, comprising of a summary of significant accounting policies and other explanatory notes. Introduction The accounting equation: Financial performance The trial balance The profit or loss account The statement of profit or loss and other comprehensive income Summary Exercises and solutions 33 34 34 44 44 47 48 51

Page 12: Profit of loss is frequently used as a measure of performance. The elements directly related to the measurement of financial performance for a period in the statement of profit or loss and other comprehensive income are income and expenses. Page 33 Contents: 3.5 The statement of profit or loss and other comprehensive income 48

FAC1501/102 Page 33 Last learning outcome: prepare a statement of profit or loss and other comprehensive income for a service entity Page 33 Last key concept: Statement of profit or loss and other comprehensive income Page 34 Last assessment criteria: Expenses and income and gains and losses are defined and classified for recognition in the statement of profit or loss and other comprehensive income. Page 45: At the end of the financial period (usually a year) all expense/loss accounts and income/profit accounts of a service entity must be closed off to a profit of loss account which forms the basis for the preparation of a statement of profit or loss and other comprehensive income.

Page 46: Please change the sentence above the Telephone expense account to: The profit or loss account is debited with R1 200. This is done to adhere to the double-entry principle. Page 47 First paragraph: The profit or loss account is a final account in the general ledger and the statement of profit or loss and other comprehensive income is one of the financial statements an entity has to prepare. It uses the same information, but the one is an account while the other is a statement (no debit side of credit side). Page 48: A statement of profit or loss and other comprehensive income will now be compiled using the information included in the profit or loss account.

3.5

THE STATEMENT OF PROFIT COMPREHENSIVE INCOME

OR

LOSS

AND

OTHER

The aim of the statement of profit or loss and other comprehensive income is to reflect the financial performance (profit/loss) for a financial period. The statement of profit or loss and other comprehensive income is as follows: BS ELECTRICAL STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE MONTH ENDED 31 JANUARY 20.6 3

Page 51 Solution: Exercise 1 (b): (b) The statement of profit or loss and other comprehensive income for the year ended

Page 58 Last self-assessment question: Prepare a statement of profit or loss and other comprehensive income?

Page 327 Content 11.2.2 11.2.2 Financial performance as measured by the statement of profit or loss and other comprehensive income 358

Page 328 Third last learning outcome: Prepare a statement of profit or loss and other comprehensive income Page 328 Third last key concept: Statement of profit or loss and other comprehensive income Page 328 Third last assessment criteria: You can correctly prepare a statement of profit or loss and other comprehensive income for a sole trader. Page 358: 11.2.2 Financial performance as measured by the statement of profit or loss and other comprehensive income

The structure of the statement of profit or loss and other comprehensive income The statement of profit or loss and other comprehensive income is a statement format of the trading and profit or loss accounts which should be familiar to you by now. The statement of profit or loss and other comprehensive income is divided into a gross profit section (similar to the trading account) and a net profit section (similar to the profit or loss account).

FAC1501/102 Page 360:

XXX TRADERS
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED

You will be required to know the structure of the statement of profit or loss and other comprehensive income as set out above. Page 363: Required (1) (1) Prepare the statement of profit or loss and other comprehensive income of Mimosa Dealers for the year ended 30 September 20.3. SOLUTION: ILLUSTRATIVE EXAMPLE (1) MIMOSA DEALERS STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 20.3 Page 366: Required (1) (1) Prepare the statement of profit or loss and other comprehensive income for Lucky Traders for the year ended 30 April 20.4. Year-end adjustments

11.2.5

This section was discussed in detail in this study unit of the study guide. But let us now consider how this fits into the accounting cycle. We have seen how the performance of an entity can be determined for a financial period. This is done by means of a statement of profit or loss and other comprehensive income or trading and profit or loss accounts. Page 368: Required (1) (1) Prepare the statement of profit or loss and other comprehensive income for Joyner & Sons for the year ended 31 October 20.4.

Page 369: SOLUTION: COMPREHENSIVE EXAMPLE (1) JOYNER & SONS STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 OCTOBER 20.4 Page 373: Required (1) (1) Prepare the statement of profit or loss and other comprehensive income for Swinton Dealers for the year ended 31 March 20.4.

SOLUTION: ACTIVITY 2 (1) SWINTON DEALERS STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 20.4 Page 375: Notes on adjustments (a) The fire insurance premium equals R2 880/12 = R240 per month. By 31 March 20.4 only 3 months insurance have been used. Thus R240 x 3 = R720 must end up in the statement of profit or loss and other comprehensive income as an expense, and R240 x 9 = R2 160 must end up in the statement of financial position as an asset. The opening trade inventory is R45 900. The closing trade inventory is R23 000. Both these amounts are used to calculate cost of sales in the statement of profit or loss and other comprehensive income. The closing inventory of R23 000 will be shown in the statement of financial position as a current asset. The initial double-entry made must have been a debit against ban and a credit against income (rent) received in advance. There have in the meantime, however, been some reversals made against the rent received in advance account. This is evident from the fact that an income account for rental income exists as well. The total rent for the year must have been R16 000 + R3 200 = R19 200. This amounts to R1 600 per month for the tenant. By 31 March 20.4 the tenant had only occupied the premises for 4 months (since he moved in). This means that Swinton Dealers had only earned 4 months of rent at R1 600 per month. The income for rent (as shown in the statement of profit or loss and other comprehensive income) will thus be R6 400. 8 months of rent have been received in advance (R12 800) and will be disclosed in the statement of financial position as a current liability.

(b)

(d)

FAC1501/102 Page 378 third last self-assessment question: Correctly prepare a statement of profit or loss and other comprehensive income for a sole trader?