AC404 Explanatory Chart

Business Cycles, financial statement line items and assertions

Statement of financial position Statement of comprehensive

(account balances) income (classes of transactions
Business Cycle
and events)
Assertions

– Existence: Assertions
– Completeness:
– Rights and Obligations – Occurrence:
– Accuracy, Valuation & allocation – Completeness:
– Classification – Cut-off
– Presentation – Accuracy
– Classification
– Presentation
Revenue and  Accounts receivable  Credit sales
receipts cycle  Cash and cash equivalents  Sales returns
 Discount allowed
 Credit losses
 Interest received
 Cash sales
 All receipts (revenue and other)

Acquisitions and  Accounts payable  Credit purchases

payments cycle  Cash purchases
 Purchase returns
 Discount received
 Interest on late payments
 Expenses
Inventory and  Inventory  Cost of sales
production cycle

Payroll and  Bank and cash  Wages and salaries (net of

personnel cycle  Accounts payable employee deductions such as
(Accumulated leave, unclaimed PAYE, pension fund, medical aid
wages, pension funds, medical aids and other)
and other)

Finance and  Share capital Reserves  Dividends paid

investment cycle  Long-term loans  Profit or loss (reserves)
 Property, plant and equipment  Interest paid
 Investments  Profit or loss on sale of asset
 Profit or loss on investment