SEC 3 poa notes

Eects ©wzkai Doubleentry Eectsof non-adjustment andadjustment Dr other income(-l)Cr Incomereceivedinadvance Eectsof non-adjustment of incomereceivedinadvanceIncomeReceivedInAdvance Eect onOtherIncome Eect onProfit Eect onCurrentLiability Not adjusted Overstates Overstates Understates Correctlyadjusted Decreases Decreases Increases Dr Incomereceivable(+A)Cr Other Income(+l) Eectsof non-adjustment of incomereceivableOther Incomereceivable Eect onOtherIncome Eect onProfit Eect onCurrent Asset Not adjusted Understates Understates Understates Correctlyadjusted Increases Increases Increases Dr Other Expenses(+Ex)Cr ExpensePayable(+L) Eect Of non-adjustment of expensespayable ExpensePayable Eect onExpenses Eect onProfit Eect onCurrentLiability Not adjusted Understates Overstates Understates Correctlyadjusted Increases Decreases Increases Dr Prepaidexpenses(+A)Cr Otherexpenses(-Ex) Eect of non-adjustment of prepaidexpensesPrepaidexpenses Eect onexpenses Eect onProfit Eect onCurrent Asset Not adjustes Overstates Understates Understates Correctlyadjusted Decreases Increases Increases

©wzkai Dr Impairment lossoninventory(+Ex)Cr Inventory(-A) Eect of non-adjustment of impairment lossoninventoryImpairment lossoninventory Eect onotherexpenses Eect onprofit Eect onCurrent Asset Not adjusted Understates Overstates Overstates Adjusted Increases Decreases Decreases IncreaseinallowanceDr Impairment lossontradereceivables(+Ex)Cr Allowanceforimpairment oftradereceivables(+CA) DecreaseinallowanceDr Allowanceforimpairment oftradereceivables(+CA)Cr Impairmentlossontradereceivables(-Ex) Eect of non-adjustment of allowance Didnot adjust Eect onotherexpenses Eect onprofit Eect oncurrent assets Increaseinallowance Understates Overstates Overstates Decreaseinallowance Overstates Understates Understates Eectsof adjustment of allowance Afteradjustment Eect onotherexpenses Eect onprofit Eect oncurrent assets Increaseinallowance Increases Decreases Decreases Decreaseinallowance Decreases Increases Increases Dierent methodsof depreciation Eectsof usingdierent methodsof depreciationMethodofDepreciation Eect onotherexpenses Eect onProfit Eect onNon-currentAsset Straight Line Equaldepreciationexpenseeveryyear Profit decreasesbyanequalamount everyyear Net bookvaluedecreasesbyanequalamount everyyear Reducingbalance Higherdepreciationexpenseinearlier yearsandreducesover time Profit decreasesbyahigheramount inearlier years Net bookvaluedecreasesbyahigher amountinearlier years

TheoriesAccountingentity: Theactivitiesof abusinessareseparatefromtheactionsoftheowner. All transactionsarerecordedfromthebusinesspoint of view. Accountingperiod: Thelifeof abusinessisdividedintoregular timeintervals Goingconcern: Abusinessisdividedintoregular timeintervals. Accrual basisof accounting: Businessactivitiesthat haveoccurred, regardlessof whether cashispaidor received, shouldberecordedintherelevantaccountingperiod Consistency: Onceanaccountingmethodischosen, thismethodshouldbeusedtoall futureaccountingperiodstoenablemeaningful comparison. Historical cost: Transactionsshouldberecordedat their original cost Monetary: Onlybusinesstransactionsthat canbemeasuredinmonetarytermsarerecorded RevenueRecognition: Revenueisearnedwhengoodshavebeendeliveredorserviceshavebeenprovided. Matching: Expensesincurredmust bematchedagainst incomeearnedinthesameperiodtodeterminetheprofit for that period. Prudence: Theaccountingtreatment chosenshouldbetheonethat leastoverstatesassetsandprofitsandleast understatesliabilitiesandlosses Objectivity: Accountinginformationrecordedmust besupportedbyreliableandverifiableevidencesothat financial statementswill befreefromopinionandbiases Rule:1. Statethedoubleentryrecordingrule.● Eachbusinesstransactionwill aect at least twoaccounts.● At least oneaccount will bedebited, wheretheamount will berecordedononedebit columnof that account● At least oneaccount will becredited, wheretheamount will berecordedonthecredit columnof that account Goodsreturn:2. Statetworeasonswhycustomersmight makereturns.● Goodsaredefective/faulty/spoiled/expired.● Goodsdeliveredaredierent fromwhat wereorderede.g. wrongspecifications. ©wzkai

Typeof transaction1.Statethedierencebetweenacashtransactionandacredit transaction Payment ismadeat thesametimeor immediatelyduringacashtransactionwhilepayment isdelayedor postponedduringacredit transaction, 2. Suggest areasonwhyabusinessbuysservicesoncredit insteadof payingcashfor them. Whenthebusinessbuysservicesoncredit, it isabletodelaypayment andusethecashtomeet itsimmediateneeds. AccountingcycleList thestagesof theaccountingcycle● Theaccountingcyclecomprisesfour stages- Sourcedocumentsareusedtoidentifyandrecordtransactionsdaily- Theendingbalanceof ledger accountsarelistedinatrial balanceand=adjustedat least onceinafinancial year- After thefinancial statementsarefinalised, income, expenses, incomesummary, drawingsanddividendsaccountsareclosedat theendof thefinancial statements. AccountinginformationsystemWhat isanaccountinginformationsystem?- Accountinginformationsystemisasystemthat abusinesscollect, storeandprocessaccountingdata Statetheorder inwhichfinancial transactionareprocessedthroughtheaccountingsystem- Sourcedocuments, journal, ledger, trial balance, financial statements Sourcedocuments6. What aresourcedocuments? Sourcedocumentsprovideevidence/ proof that transactionshaveoccurredanddetailsthat canberecordedinajournal. 7. Stateonereasonwhybusinesswouldissueacredit notetoacustomer. Businessissuescrest notetoreducetheamount owedbycredit customers.● Whowerepreviouslyovercharged● After goodswerereturned ©wzkai

Sourcedocumentsanditspurpose; Sourcedocument Purposeof sourcedocument Receipt Acknowledgespayment receivedfromcustomersimmediatelyafterthebusinesshassoldgoodsor providedservices. Remittanceadvice Informscredit supplier that payment bychequehasbeenmadeforaspecificinvoice Invoice Informscredit customersof theamount owedafter thebusinesssoldgoodsfor providedservicesoncredit Creditnote Reducestheamount owedbycredit customers:● Whowerepreviouslyovercharged● After goodswerereturned Debit note Increasestheamount owedbycredit customerswhowerepreviouslyundercharged Paymentvoucher Processespayment tocredit suppliers:● Must beapproved byauthorisedpersonnel● Must besupportedbyoriginal supplier’sinvoice Bankstatement Checksandtalliesagainst thebusinessrecordsof itscashat bankaccount Elementsof financial statementsNon-current assets1. Benefitslast beyondonefinancial year2. Not easilyconvertedintocash Current assets1. Benefitsareusedwithinonefinancial year2. Areeasilyconvertedintocash Non-current liability:1. Duetobepaidbeyondonefinancial year Current liabilities1. Duetobepaidwithinonefinancial year Income● Amountsearnedfromtheactivitiesof abusiness©wzkai

Incomereceivable● Incomeearnedbut not receivedyet Incomereceivedinadvance● Theearnedrevenuewhichistobeearnedinthefuturebut isalreadyreceivedinthecurrent accountingperiod Revenue● Amountsearnedfromthemainactivitiesof abusiness Expenses● Cost incurredtoearnincomeinthesameaccountingperiod DoubleentryrecordingDebit ( Dr ) : assets+expense+drawingsCredit ( Cr ) : liabilities+capital +income Ledger accountDate Particles Debit Credit Balance 20X3 $(+) $(-) $ Nov1 Balanceb/d 375Dr 4 Advertisingexpense 1400 7 Tradereceivable-FunInternetCafe 3580 12 Inventory 2420 15 Tradepayable-HitTechnology 2250 23 Salaryexpense 1590 26 Cashinhand 500 31 Interestexpense 30 3175Cr Dec1 Balanceb/d 3175Cr ©wzkai

Trial Balance1. Reversal of impairment lossontradereceivablesisshownasanegativeexpense, withtheuseof brackets. e.g.(300)2. Lossfor theyear/periodisshownasanegativenumber, withtheuseofbrackets. e.g.(1000)3. If customersdidnot returngoods<zerosalesreturns>, thereisnoneedtocalculatenet salesrevenue.Hence, salesrevenuecanberecordedintheouter column.● TradingportionShowsthegrossprofit or lossfromthebuyingandsellingof goods●Profit andlossportion- Reportstheoverall profit earnedfromoperatingthebusiness. - Profit or lossfor theperiodisthefinal profit after includingotherincomeanddeductio