Institute of Financial Accountants (IFA) Qualifications Financial Accounting and Reporting Syllabus

Financial Accounting and Reporting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Financial Accounting and Reporting in Institute of Financial Accountants (IFA) Qualifications, not a summary of it.

1. 1

   Foundations of Financial Accounting

   4 topics

   • The accounting equation and double-entry bookkeeping
     • Assets, liabilities and capital relationships
     • Debit and credit rules across account types
     • The dual effect of transactions
   • Books of prime entry and the ledger system
     • Sales, purchases and returns day books
     • Cash book and petty cash imprest system
     • The journal and general ledger posting
   • The trial balance and its limitations
     • Extracting a trial balance
     • Errors not revealed by the trial balance
     • Suspense accounts and error correction
   • Accounting concepts and the conceptual framework
     • Accruals and going concern assumptions
     • Prudence, materiality and consistency
     • Qualitative characteristics of useful information
2. 2

   Adjustments and the Final Accounts of Sole Traders

   5 topics

   • Accruals and prepayments
     • Adjusting expenses and income
     • Accrued and deferred income
   • Depreciation of non-current assets
     • Straight-line and reducing-balance methods
     • Disposals and profit or loss on disposal
     • The non-current asset register
   • Irrecoverable debts and allowances for receivables
     • Writing off and recovering debts
     • Specific and general allowances
   • Inventory valuation
     • Lower of cost and net realisable value
     • FIFO and AVCO cost formulas
   • Preparing the statement of profit or loss and statement of financial position
3. 3

   Control Accounts and Reconciliations

   4 topics

   • Receivables and payables control accounts
     • Reconciling control accounts to ledger listings
     • Contras and credit balances
   • Bank reconciliation statements
     • Timing differences and unpresented items
     • Adjusting the cash book
   • Sales tax and VAT control accounts
   • Correction of errors and the suspense account
4. 4

   Accounting for Partnerships and Companies

   4 topics

   • Partnership accounts
     • Appropriation of profit and current accounts
     • Admission, retirement and goodwill
     • Changes in profit-sharing ratios
   • Limited company accounts
     • Share capital, share premium and reserves
     • Dividends, taxation and retained earnings
   • Incomplete records and single-entry techniques
     • Using mark-up and margin
     • Net asset and accounting equation approaches
   • Not-for-profit and club accounts
     • Receipts and payments accounts
     • Income and expenditure accounts and accumulated fund
5. 5

   Financial Statements under IFRS

   5 topics

   • Presentation of financial statements (IAS 1)
     • Statement of profit or loss and other comprehensive income
     • Statement of changes in equity
   • Property, plant and equipment and intangibles (IAS 16, IAS 38)
     • Cost, revaluation and impairment
     • Recognition criteria for intangible assets
   • Revenue from contracts with customers (IFRS 15)
     • The five-step recognition model
     • Performance obligations and transaction price
   • Statement of cash flows (IAS 7)
     • Operating, investing and financing activities
     • Indirect method reconciliation
   • Provisions, contingencies and events after the reporting period (IAS 37, IAS 10)

Financial Accounting and Reporting flashcards for Institute of Financial Accountants (IFA) Qualifications

25 of 72 cards from the Financial Accounting and Reporting deck — real questions with worked answers.

1. State the accounting equation in its basic form.

   $$\text{Assets} = \text{Capital} + \text{Liabilities}$$ Equivalently, $\text{Capital} = \text{Assets} - \text{Liabilities}$ (net assets).

2. How is the expanded accounting equation written when profit and drawings are included?

   $$\text{Assets} = \text{Opening Capital} + \text{Profit} - \text{Drawings} + \text{Liabilities}$$ where $\text{Profit} = \text{Income} - \text{Expenses}$.

3. In double-entry bookkeeping, what are the rules for debits and credits (DEAD CLIC)?

   Debit increases: Expenses, Assets, Drawings. Credit increases: Liabilities, Income, Capital. Every transaction has equal debits and credits.

4. Name the main books of prime entry and what each records.

   Sales day book (credit sales), Purchases day book (credit purchases), Sales returns day book, Purchases returns day book, Cash book (receipts/payments), Petty cash book (small cash), Journal (everything else, e.g. corrections).

5. What is the difference between the general (nominal) ledger and the sales/purchases ledgers?

   The general ledger contains all nominal accounts including control accounts and is part of the double entry. The sales and purchases ledgers are memorandum records of individual customer and supplier balances, outside the double entry.

6. What is a trial balance and what is its main purpose?

   A list of all ledger account balances with debits in one column and credits in another. Its main purpose is to check the arithmetical accuracy of the double entry; total debits should equal total credits.

7. List the types of error NOT revealed by a trial balance.

   Errors of: omission, commission, principle, original entry, complete reversal, compensating errors, and errors in casting affecting both sides equally. These leave the trial balance still balancing.

8. Distinguish an error of principle from an error of commission.

   Error of principle: entry made in the wrong type/class of account (e.g. capital expenditure posted as revenue expense). Error of commission: entry made in the wrong account but of the same class (e.g. wrong customer's account).

9. Under the IASB Conceptual Framework, what are the two fundamental qualitative characteristics of useful financial information?

   Relevance and faithful representation. Relevance includes materiality; faithful representation means complete, neutral and free from error.

10. Name the four enhancing qualitative characteristics in the Conceptual Framework.

    Comparability, verifiability, timeliness and understandability.

11. Give the Conceptual Framework definitions of an asset and a liability.

    Asset: a present economic resource controlled by the entity as a result of past events. Liability: a present obligation of the entity to transfer an economic resource as a result of past events.

12. What is the accruals (matching) concept?

    Income and expenses are recognised in the period to which they relate, when earned or incurred, regardless of when cash is received or paid.

13. How is an accrued expense treated at the year end?

    Dr Expense (increasing the charge in profit or loss), Cr Accruals (a current liability in the statement of financial position).

14. How is a prepayment treated at the year end?

    Dr Prepayments (a current asset), Cr Expense (reducing the charge in profit or loss), because the cost relates to a future period.

15. Define depreciation per IAS 16.

    The systematic allocation of the depreciable amount of an asset over its useful life, where depreciable amount = cost (or revalued amount) less residual value.

16. State the straight-line depreciation formula.

    $$\text{Annual depreciation} = \frac{\text{Cost} - \text{Residual value}}{\text{Useful life (years)}}$$

17. State the reducing-balance depreciation calculation.

    $$\text{Depreciation charge} = \text{Rate} \times \text{Carrying amount at start of year}$$ where carrying amount = cost − accumulated depreciation.

18. What is the double entry to record the annual depreciation charge?

    Dr Depreciation expense (profit or loss), Cr Accumulated depreciation (contra-asset reducing carrying amount in the statement of financial position).

19. How is the profit or loss on disposal of a non-current asset calculated?

    $$\text{Profit/(loss)} = \text{Sale proceeds} - \text{Carrying amount at disposal}$$ where carrying amount = cost − accumulated depreciation.

20. What is an irrecoverable (bad) debt and how is the write-off recorded?

    A debt considered uncollectable. Write-off: Dr Irrecoverable debts expense, Cr Trade receivables. The receivable is removed entirely.

21. How is an allowance for receivables created or increased, and how does it appear in the financial statements?

    Increase: Dr Irrecoverable debts expense, Cr Allowance for receivables. Only the movement goes to profit or loss; the full allowance is netted off receivables in the statement of financial position.

22. How is a decrease in the allowance for receivables recorded?

    Dr Allowance for receivables, Cr Irrecoverable debts expense (a credit/reduction in the expense).

23. What is the IAS 2 rule for valuing inventory?

    Inventory is measured at the lower of cost and net realisable value (NRV), where $\text{NRV} = \text{estimated selling price} - \text{costs to complete} - \text{costs to sell}$.

24. Compare FIFO and AVCO methods of inventory valuation.

    FIFO (first-in, first-out): assumes earliest purchases are sold first, so closing inventory is valued at most recent prices. AVCO (weighted average): values issues and inventory at a weighted average cost. LIFO is not permitted under IAS 2.

25. What effect does overstating closing inventory have on profit?

    It reduces cost of sales and therefore overstates profit for the period (and overstates current assets). The reverse applies the following year.

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