JAIBP Accounting for Financial Services Syllabus

What are the three sections of the Statement of Cash Flows?

Operating activities, investing activities, and financing activities.

What does the operating activities section of the cash flow statement include?

Cash flows from the entity's principal revenue-producing activities — e.g. cash from customers, cash paid to suppliers and employees, interest and tax paid — i.e. day-to-day trading cash flows.

Give examples of investing activities in the cash flow statement.

Purchase and sale of property, plant and equipment and intangibles, purchase/sale of investments, and interest/dividends received from investments (acquisition and disposal of long-term assets).

Give examples of financing activities in the cash flow statement.

Proceeds from issuing shares, proceeds and repayment of loans/borrowings, payment of dividends to shareholders, and lease principal payments (changes in equity and borrowings).

Under the indirect method, what is the starting point for cash from operations?

Profit before tax, which is then adjusted for non-cash items (e.g. depreciation), non-operating items, and changes in working capital (inventory, receivables, payables).

What is an accrued expense and how is it treated?

An expense that has been incurred but not yet paid by the period end. It is added to the expense in the profit or loss and shown as a current liability (accrual) in the statement of financial position.

What is a prepaid expense (prepayment) and how is it treated?

An expense paid in advance for a future period. The prepaid portion is deducted from the expense in profit or loss and shown as a current asset in the statement of financial position.

What is accrued income?

Income that has been earned during the period but not yet received by the period end; it is added to income in profit or loss and shown as a current asset (receivable).

What is depreciation?

The systematic allocation of the depreciable amount (cost less residual value) of a non-current tangible asset over its useful economic life, recognising the consumption of its economic benefits.

State the straight-line method of depreciation formula.

Annual depreciation = (Cost - Residual/Scrap value) / Useful life in years. This charges an equal amount each year.

State the reducing (diminishing) balance method of depreciation.

Depreciation = Fixed percentage rate x Carrying amount (net book value) at the start of the year, giving a higher charge in early years and a lower charge later.

What is the carrying amount (net book value) of an asset?

Carrying amount = Cost (or revalued amount) - Accumulated depreciation - Accumulated impairment losses.

What is a provision under accounting standards?

A liability of uncertain timing or amount, recognised when there is a present obligation from a past event, an outflow of resources is probable, and a reliable estimate can be made.

What is a bad debt and how is it accounted for when written off?

A bad debt is a receivable considered irrecoverable. It is written off by debiting Bad Debts Expense (P&L) and crediting Trade Receivables, removing it from the accounts.

What is an allowance for doubtful debts (expected credit losses)?

An estimate of receivables that may not be collected. It is created by charging an expense and is offset against trade receivables in the statement of financial position to show their net realisable value.

How is a change (increase) in the allowance for doubtful debts treated?

Only the movement is charged: an increase in the allowance is debited to the P&L expense; a decrease is credited (income) to the P&L. The allowance balance reduces gross receivables in the SOFP.

In banking, how are customer deposits classified in the bank's books?

Customer deposits are liabilities of the bank, because the bank owes that money back to its customers.

In banking, how are loans and advances to customers classified in the bank's books?

Loans and advances are assets of the bank, because customers owe that money to the bank.

For a bank, are interest income and interest expense recognised on a cash or accrual basis?

On an accrual basis using the effective interest method — interest income (on loans/investments) and interest expense (on deposits/borrowings) are recognised as earned/incurred, not when cash moves.

What is a bank reconciliation statement?

A statement that reconciles the balance per the entity's cash book with the balance per the bank statement, explaining differences so the true bank balance is confirmed.

List common causes of difference in a bank reconciliation.

Unpresented (outstanding) cheques, deposits in transit (uncredited lodgements), bank charges and interest, direct debits/standing orders, direct credits, dishonoured cheques, and errors in the cash book or by the bank.

In a bank reconciliation, how are unpresented cheques and uncredited deposits treated when starting from the bank statement balance?

Deduct unpresented (outstanding) cheques and add deposits in transit (uncredited lodgements) to the bank statement balance to arrive at the adjusted cash book balance.

What are the primary financial statements of a bank?

Statement of financial position, statement of profit or loss (income statement), statement of comprehensive income, statement of changes in equity, and statement of cash flows, with accompanying notes.

What is net interest income for a bank?

Net interest income = Interest income earned on loans, advances and investments minus Interest expense paid on deposits and borrowings. It is a key driver of bank profitability.

What is the difference between IFRS and IAS?

IAS (International Accounting Standards) were issued by the former IASC up to 2001; IFRS (International Financial Reporting Standards) are issued by the IASB from 2001 onwards. Both are part of the IFRS framework; new/updated standards are issued as IFRS.

Which body currently issues IFRS Standards?

The International Accounting Standards Board (IASB), under the oversight of the IFRS Foundation.

What are the two fundamental qualitative characteristics of useful financial information under the IFRS Conceptual Framework?

Relevance and faithful representation.

Name the enhancing qualitative characteristics in the IFRS Conceptual Framework.

Comparability, verifiability, timeliness and understandability.

What are the three classification categories of financial assets under IFRS 9?

Amortised cost; Fair value through other comprehensive income (FVOCI); and Fair value through profit or loss (FVTPL).

What two tests determine the classification of a financial asset under IFRS 9?

The business model test (how the asset is managed - to collect cash flows, to collect and sell, or other) and the SPPI test (whether contractual cash flows are solely payments of principal and interest).

What impairment model does IFRS 9 introduce and what are its stages?

The Expected Credit Loss (ECL) model. Stage 1: 12-month ECL (no significant increase in credit risk). Stage 2: lifetime ECL (significant increase in credit risk, not yet impaired). Stage 3: lifetime ECL on credit-impaired assets, with interest on net carrying amount.

What is the current ratio and what does it measure?

Current ratio = Current assets / Current liabilities. It measures short-term liquidity — the ability to meet current obligations from current assets.

What is the quick (acid-test) ratio?

Quick ratio = (Current assets - Inventory) / Current liabilities. It measures immediate liquidity using only the most liquid assets, excluding inventory.

What is the gearing (leverage) ratio and what does it indicate?

Gearing = Debt / Equity (or Debt / (Debt + Equity)). It measures financial leverage — the proportion of financing from debt versus equity and the entity's exposure to financial risk.

How are return on equity (ROE) and return on assets (ROA) calculated?

ROE = Net profit / Shareholders' equity x 100. ROA = Net profit / Total assets x 100. They measure profitability relative to equity and to total assets respectively.

What is the difference between trend (horizontal) analysis and comparative analysis?

Trend (horizontal) analysis examines changes in the same line items across several periods to identify patterns over time, using a base year. Comparative analysis sets figures of two or more periods or entities side by side to compare performance and position.

What is common-size (vertical) analysis?

A technique expressing each line item as a percentage of a base figure — each P&L item as a % of revenue and each SOFP item as a % of total assets — to compare structure across periods or between companies of different sizes.