POA Notes Chapter 1-16

(Thesenotesconsist mainlyof thetheorypartsof thetextbook, refertoself notesandtextbookforpractical. Somechaptersareskipped) 1.1IntroductiontoBusinessTypesofBusinesses TradingBusiness ServiceBusiness Buysfromsuppliersandsellsgoodstocustomers Providesservicetocustomers E.g.Cafes,restaurants E.g.Salons,webdesign >FormsofBusinessOwnerships SoleProprietorship LimitedLiabilityPartnership PrivateLimitedCompany Ownedbyonepersonwhocontributescapital Ownedbytwoormorepartnerswhereeachpartnercontributescapital Ownedby50orlessshareholderswhereeachshareholderbuyssharesandcontributescapital BanksandotherlendersarelesslikelytolendmoneytoanSPduetolackof personal assetsthatcanserveascollaterals BanksandotherlendersaremorelikelytolendmoneytoLLPastherearesourcesofpersonal assetsfrompartnersandbusinessassetsthatserveascollaterals BanksandotherlendersaremorelikelytolendmoneytoPLCastherearebusinessassetsof highvaluethatcanserveascollaterals WhenSPincursdebt/loss,thesoleownerisexpectedtopayusinghis/herpersonalassets WhenLLPincursdebt/loss,partnersarenot personallyliableforthem.However,ifitisduetothewrongfulactionsof onepartner, onlythat personisresponsiblewhileotherpartnersarenotaffected. WhenPLCincursdebt/loss,shareholdersarenot obligedtopaythemusingpersonalassets,butmaynotreceivedividends.Atmost,theywillonlyforfeittheirinvestments. Ownerusuallyrunsthebusinessbythemselfandhasabsolutecontrol.Theymayhire Controloverthebusinessissharedamongpartnerswithat least onepartnerheavilyinvolved.Partnersmayhire Shareholdershavenocontroloverthebusiness(unlesstheyarepartofmanagementteam)Companyhiresprofessionals

professionalstohelpmanagethebusiness professionalstohelpthem. tomanagethebusinessonbehalf of theshareholders SPexistsaslongastheownerisaliveanddesirestocontinueoperation LLPexistsforeveruntilwounduporstruckoff Companyexistsforeveruntilwounduporstruckoff Ownercaneasilyupdateparticularsofthenewownertonotifythecorporateregulatoryauthorityoftransferofownership All partnersneedtoagreetoaddition/withdrawal ofpartnersbeforecorporateregulatoryauthoritywillacknowledgethetransferofownership Shareholderspayastampdutytothetaxauthoritytogivetheirsharestoanotherpersonororganisation Stampduty-taxrelatedtotransferofproperty,stocksandshares 1.2StakeholdersandtheirDecisionNeeds Stakeholders InteractionwithBusiness DecisiontoMake OwnersandShareholders Contributecapitaltobusinessandexpectprofitinreturn Whethertocontinuetoinvestorsellthebusinessdependingontherisksandreturnsrelatedtothebusiness Managers Workforbusinessanddevisestrategiestorunitefficiently Whethertoconsiderwaystoimprovethebusiness’performance Employees Workforbusinessandperformexecutiveduties Whethertocontinueworkingatthebusiness Lenders Makemoneyavailabletobusinessandexpecttobefullyrepaidwithinterest Whethertograntloanstothebusiness Suppliers Supplygoodsand/orservices Whethertoselltothebusinessoncredit Customers Buygoodsand/orservices Whethertobuyfromthebusiness Government Enforcetaxregulations Whetherbusinesscomplieswithtaxregulationsanddecidetheamountoftaxtocollect

Competitors Sellsimilargoodsand/orservicesasthebusiness Whethertheyarecomparabletothebusinessandhowtoimprovetheirperformance1.3RoleofAccountingandAccountants >RoleofAccountingAccountingisaninformationsystemthatprovidesaccountinginformationforstakeholderstomakeinformeddecisionsregardingmanagementofresourcesandperformanceofbusiness >RoleofAccountantsAccountantsprepareandprovideaccountinginformationfordecisionmaking,becomingstewardsofbusinessesAccountantshaveto: adapt, solveproblems, thinkcriticallyandprovideaccounting+non-accountinginformationfordecisionmaking;andProvidetimely, relevant andcredibleinformationbasedonaccountingtheorieswhichareeasilyandappropriatelyunderstoodbystakeholders >ProfessionalEthicsIntegrity:AnethicalaccountantmustbestraightforwardandhonestisallprofessionalrelationshipsObjective:Anaccountantwillnotletbias,conflictofinterestorundueinfluenceofothersoverridetheirprofessionaljudgement Unethicalactions:- Prepareaccountingrecordscontainingfalseinformation- Acceptgiftsorpreferentialtreatment- Getinvolvedinselectionofavendorwhentheirimmediatefamilycouldbenefitfinanciallyfromthetransaction- Preparefalseinformationduetothreatofdismissal

>AccountingTheories* AccountingEntity Activitiesofabusinessareseparatefromtheactionsoftheowner.Alltransactionsarerecordedfrompointofviewofthebusiness AccountingPeriod Thelifeofabusinessisdividedintoregulartimeintervals Accrualbasisofaccounting Businessactivitiesthathaveoccurred,regardlessofwhethercashispaidorreceived,mustberecordedintherelevantaccountingperiod Consistency Onceanaccountingmethodischosen,thismethodshouldbeappliedtoallfutureaccountingperiodstoenablemeaningfulcomparison. Goingconcern Abusinessisassumedtohaveanindefiniteeconomiclifeunlessthereiscredibleevidencethatitmayclosedown Historicalcost Transactionsshouldberecordedattheiroriginalcost Matching Expensesincurredmustbematchedagainstincomeearnedinthatsameperiodtodeterminetheprofitforthatperiod Materiality Atransactionisconsideredmaterialifitmakesadifferenceinthedecisionmakingprocess Monetary Onlybusinesstransactionsthatcanbemeasuredinmonetarytermsarerecorded Objectivity Accountinginformationrecordedmustbesupportedbyreliableandverifiableevidencesothatfinancialstatementswillbefreefromopinionsandbiases. Prudence Theaccountingtreatmentchosenmustbeonethatleastoverstatesassetsandprofitsandleastunderstatesliabilitiesandlosses RevenueRecognition Revenueisearnedwhengoodsandserviceshavebeendeliveredorserviceshavebeenprovided

Chapter2.1TypesofBusinessTransactions CashTransactions Credit transactions Paymentismadeatthesametime/immediatelyduringcashsaleorpurchase Paymentisdelayedorpostponedduringacashsaleorpurchase 2.2AccountingCycle Stage1:IdentifyandrecordSourcedocumentsareusedtorecordtransactionsinthejournalandthejournalentriesarepostedtotheledger.Transactionsarerecordeddaily. Stage2:AdjustEndbalancesofledgeraccountsarelistedinatrialbalance.Anyadjustingentriesarerecordedinthejournalandpostedtotheledger.Accountsareadjustedatleastonceinafinancialyear. Stage3:ReportBasedontheadjustedTB,financialstatementsareprepared.Reportsarepreparedatleastonceinafinancialyear Stage4:CloseAfterFSarefinalised,income,expenses,incomesummary,drawingsanddividendsaccountsareclosedbyfirstpassingjournalentriesbeforebeingpostedtotheledger.Accountsareclosedonceattheendofthefinancialyear. 2.3AccountingInformationSystemJournal:Dailyrecordoftransactionsorganisedbytransactiondates Ledger:Aledgeraccountisaconsolidationofalltransactionsrelatingtoaspecificasset/liability/equity/income/expenseitem Trialbalance:Providessummaryofendingbalancesofeachledgeraccountataspecifieddate.

Financialstatements:Financialperformanceprovidesareportonincome,expenses,andprofit/lossoveraperiodoftime.Financialpositionprovidesareportonassets,liabilitiesandequityataspecificdate. Sourcedocument:providesproofoftransactions →Types:SourceDocument Purposeof SourceDocument Receipt Acknowledgespaymentreceivedfromcustomersimmediatelyaftergoodssold/servicesprovides Remittanceadvice Informscreditsupplierthatchequepaymenthasbeenmadeforaspecificinvoice Invoice Informscreditcustomersofamountowedaftergoodssold/servicesprovided Creditnote Reducesamountowedbycreditcustomers(previouslyovercharged;oraftergoodsarereturned) Debitnote Increasesamountowedbycreditcustomers(previouslyundercharged) Paymentvoucher Processespaymenttocreditsuppliers(mustbeapprovedbyauthorisedpersonnelandsupportedbyoriginalsupplier’sinvoice) Bankstatement ChecksandtalliesagainstbusinessrecordsofCABaccount 3.1ElementsofFinancialStatements Assets:Resourcesabusinessownsorcontrolsthatareexpectedtoprovidefuturebenefits(beyondonefinancialyear→NCA,withinonefinancialyear→CA)>ExampleofassetsNon-currentassets:Officeequipment,motorvehiclesCurrentassets:Inventory:GoodsboughtbythebusinesstoselltocustomersTradereceivables:AmountscollectiblefromcreditcustomersCashat bank:CashdepositedwiththebankCashinhand:Physicalcashkeptbybusiness

Incomereceivable:IncomeearnedbutnotyetreceivedPrepaid