IAS 1 Presentation of Financial

Statements 19
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COMPLETE SET OF FINANCIAL STATEMENTS
A complete set of financial statements comprises:
1. a statement of financial position
2. a statement of profit or loss and other comprehensive income
3. a statement of changes in equity
4. a statement of cash flows (covered separately under IAS 7)
5. Notes to financial statements including accounting policies (not examined)
IAS 1 does not make it mandatory to use the above titles. It is likely in practice that many
companies will continue to use the previous terms of balance sheet etc.

COMPREHENSIVE FORMAT FOR M4 Level

ABC PLC
Statement of profit or loss and other comprehensive income
For the year ended 31 December ______
Rs.
Revenue IFRS 15 XXX
Cost of sales (XXX)
Gross profit XX
Administrative expenses (XX)
Distribution expenses (XX)
Exceptional items IAS 1 (XX)
Operating profit XX
Finance cost (XX)
Other income X
Profit before tax XXX
Taxation IAS 12 (X)
Profit after tax XXX
Profit (loss) on discontinued operations IFRS 5 XX
Profit for the period XX

Other comprehensive income

Gain (loss) on revaluation IAS 16/38 XX
Gain (loss) on investments (FVTOCI) IFRS 9 XX
Other comprehensive income XX
Total comprehensive income XXX
ABC PLC
Statement of Changes in equity
For the year ended 31 December ______
Share Share Revaluation Other Retained
Total
Capital premium surplus reserves earnings
Rs. Rs. Rs. Rs. Rs. Rs.
Balance as at 1 January XX XX XX XX XX XXX
Correction of prior period error IAS 8 (X)
Change in accounting policy IAS 8 X
XX XX XX XX XX XXX
Issue of shares XX XX XX
Total comprehensive income XX XX XX XX
Incremental depreciation IAS 16 (XX) XX
Dividends (XX) (XX)
Balance as at 31 December XXX XXX XX XX XX XXX
 ICMAP M4 Financial Accounting

ABC PLC
Statement of Financial Position
As at 31 December ______
Non-current assets Rs.
Property, plant and equipment IAS 16 XX
Investment property IAS 40 XX
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Investments (esp. FVTOCI) IFRS 9 XX
Intangible assets IAS 38 XX
Deferred tax asset IAS 12 XX
XXX
Current assets
Non-current assets held for sale IFRS 5 XX
Inventories IAS 2 XX
Trade receivables IFRS 15 XX
Cash and bank balances IAS 32 XX
XXX
Total assets XXX

Equity
Share capital IAS 32 XX
Share premium IAS 32 XX
Revaluation Surplus IAS 16/38 XX
Other reserves IFRS 9 XX
Retained earnings XX
XXX
Non-current liabilities
Loan notes, redeemable preference shares & long term loans IFRS 9 XX
Deferred government grant IAS 20 XX
Lease liability IFRS 16 XX
Long term provisions IAS 37 XX
Deferred tax liability IAS 12 XX
XXX
Current liabilities
Trade and other payables XX
Deferred government grant IAS 20 XX
Lease liability IFRS 16 XX
Current tax payable IAS 12 XX
Short term provisions IAS 37 XX
Short term borrowings / Bank overdraft IAS 32 XX
XXX
Total equity and liabilities XXX

IMPORTANT POINTS
An asset or liability is classified as current if:
Current vs. non-
 It will be settled within 12 months of the reporting date
current
 It is part of the entity’s normal operating cycle.
Statement of This provides a summary of all changes in equity arising from
changes in transactions with owners in their capacity as owners.
equity

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 Class Notes

EXCEPTIONAL ITEMS
These are material items of income and expense of such size or nature that
Definition
disclosure is necessary to understand entity’s financial performance.
Generally, these items are included in standard income statement line and
their nature and amount is disclosed in notes.
Accounting
treatment
However, in some cases, it may be more appropriate to show the item |3
separately on the face of income statement.
 Write down to NRV  Restructuring  Litigation settlement
Examples  Impairment loss  Gain / loss on  Reversal of
disposal provisions

HOW TO SOLVE EXAM QUESTION

Step 1 Prepare the format
Step 2 Post the trial balance figures (as per TB sequence) in the formats
Step 3 Pass and post the journal entries for adjustments in the format
Step 4 Calculate sub totals and totals.

QUESTION 01
The following trial balance relates to Moon plc, a publicly listed company, at 30 September
2010:
Rs. Rs.
Revenue (net) 280,000
Inventories at 01 October 2009 54,000
Purchases (net) 175,000
Dividends paid 20,000
Administrative expenses 40,000
Interest paid 5,000
Bank Charges 1,000
Distribution costs 7,000
Other income 2,000
Land 100,000
Building – cost 70,000
Plant and equipment – cost 50,000
Accumulated depreciation – building 47,000
Accumulated depreciation – plant and equipment 20,000
Ordinary share capital of Rs. 1 each 150,000
Share premium 15,000
Retained earnings 01 October 2009 17,000
Revaluation Surplus 01 October 2009 5,000
Loan notes (Redemption date October 2015) 50,000
Deferred tax liability 12,000
Trade receivables 53,000
Bank 35,000
Trade payables 12,000
610,000 610,000

The following have not yet been recorded:

(a) The inventory at 30 September 2010 is Rs. 49,000.
(b) Land has been revalued on 30 September 2010 at Rs. 120,000
(c) The building is to be depreciated at 10% of cost using straight line basis. Plant and
equipment are to be depreciated 20% reducing balance method. The 60%
depreciation relates to production and remaining relates to administrative expenses.
(d) The company issued 1 for 3 right shares at end of the year at Rs. 1.5 per share but
no entry has been passed.

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 ICMAP M4 Financial Accounting

(e) The current income tax for the year is Rs. 18,000. The deferred tax liability need not
be adjusted.

Required:
Prepare the draft statement of profit or loss and other comprehensive income, statement of
changes in equity and statement of financial position along with relevant workings.
4|

QUESTION 02
The following trial balance relates to Jupiter Limited at 31 March 2009:
Rs. 000 Rs. 000
Administrative expenses 170
Interest paid 5
Share capital of Rs. 1 each 200
Dividend 6
Cash at bank and in hand 9
Income tax (remaining balance from previous year) 10
Distribution costs 193
Revaluation surplus (1 April 2008) 40
Land and building (Land Rs. 110; Building Rs. 100) 210
Accumulated depreciation – Land and building 48
Plant and machinery 125
Accumulated depreciation 75
Retained earnings (1 April 2008) 270
Loan 80
Purchases 470
Sales 1,300
Inventory (1 April 2008) 150
Trade payables 60
Trade receivables 725
2,073 2,073

Additional information:
(a) Inventory at 31 March 2009 was valued at Rs. 250,000
(b) Buildings and plant and machinery are depreciated on a straight line basis (assuming
no residual value) at the following rates (on cost):
Buildings 5%
Plant and machinery 20%

The depreciation charge is to be apportioned as follows:

Cost of sales 60%
Distribution expenses 20%
Administrative expenses 20%

(c) There were no purchases or sales of property, plant and equipment during the year.
(d) Income taxes for the year to 31 March 2009 are estimated to be Rs. 135,000
(e) The previous revalued amount of land was Rs. 110,000. However, due to recent
slump in property market the revalued amount at the year-end has been estimated at
Rs. 95,000 only.
(f) The loan is repayable in five years.

Required:
Prepare the draft statement of profit or loss and other comprehensive income, statement of
changes in equity and statement of financial position along with relevant workings.

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 Class Notes

QUESTION 03 PE Feb 2014 Q2

Following trial balance relates to ABC & Company (Pvt.) Limited as on December 31, 2013:
Debit Credit
Rs. 000. Rs. 000.
Sales 15,700
Purchase 9,140
Administration expenses 1,400 |5
Selling and distribution expenses 190
Interest paid 25
Dividend paid 80
Retained earnings at start 3,535
Land 1,000
Building 4,000
Accumulated depreciation-Building 800
Plant 5,300
Accumulated depreciation-Plant 2,900
Investment property 3,000
Inventory at start 2,800
Advance, deposits and prepayments 1,440
Trade receivables 4,100
Trade payables 3,900
Bank 1,060
5% Loan note 500
Equity shares capital (@ Rs.10 each) 5,600
Deferred tax 600
33,535 33,535

(i) Inventory at December 31, 2013 is Rs. 3,390,000. This includes damaged goods that
had a cost of Rs. 550,000. These would require remedial work costing Rs. 200,000
before these could be sold for an estimated price of Rs. 450,000.
(ii) Sale proceeds of an item of plant that was sold in October 2013 for Rs. 300,000 is
included in revenue. Cost of the plant is Rs.1,000,000 and it had been depreciated by
Rs. 400,000 at the date of its sale. No other accounting entries for the disposal of the
plant have been made, other than recording the proceeds in sales and cash.
(iii) Reducing balance method is used for depreciation of all plant @ 25% per annum.
(iv) On January 1, 2013, the land was valued at Rs. 1200,000.On January 1, 2013, the
land was valued at Rs. 1200,000. The directors wish this value to be incorporated
into the financial statements. The company charges 2% depreciation on cost of
building using straight-line method. Depreciation on plant and building are to be
included in cost of goods sold.
(v) The company adopts the fair value model for its investment property. Its value at
December 31, 2013 has been assessed by a qualified surveyor at Rs. 2,000,000.
(vi) The directors have estimated the provision for income tax for the year ended
December 31, 2013 at Rs. 150,000. The deferred tax liability at December 31, 2013
is Rs.560,000.
(vii) Depreciation for the year to December 31, 2013 has not yet been accounted for in
the draft financial statements.

Required:
Prepare the following financial statements for the year to December 31, 2013:
(a) Statement of Profit or Loss (10)
(b) Statement of Financial Position (10)

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 ICMAP M4 Financial Accounting

QUESTION 04 PE Model 2013 Q2

The accountant of Paramount Company prepared the following trial balance of the company
for the year ended December 31, 2011. The notes prepared by the accountant are followed
by the trial balance:
Paramount Company
Trial Balance
6| As at December 31, 2011
Rs. in million
Debit Credit
Property at cost 600
Plant and equipment at cost 450
Accumulated depreciation-property 90
Accumulated depreciation-plant and equipment 104
Inventories (Dec. 31,2011) 84
Accounts receivable 60
Cash and bank 253
Interest paid on loan notes 15
Dividend paid 1
Distribution costs 15
Administrative expenses 21
Revenue 800
Over provision of tax-2010 1
Deferred tax liability 25
Accounts payable 20
10% Loan notes 300
Retained earnings (Dec.31,2010) 62
Cost of sales 568
Share capital 465
8% Bonds payable 200
Totals 2,067 2,067

The following notes pertain to the accounts:

(a) The directors of the company have been contemplating to raise extra funds not only to
meet the production targets due to increase in sale but also to meet other expenses
associated with the expansion plan. In order to provide required funds, they decided to
issue convertible bonds amounting to Rs.200 million on January 1, 2011. The bonds
carried nominal interest rate of 8% per annum payable on January 1, each year. Par
value of bond is Rs.1,000 each, bonds were issued for a term of five years and each
bond is convertible at any time up to maturity, into 30 ordinary shares of Rs.10 each. The
prevailing interest rate on the similar debts without conversion option is 10% per annum.
The accountant wrongly recorded the transaction as 8% long term bonds payable.

(b) The present administrative offices are located in a remote place of industrial area. Owing
to the problems of frequent power break-downs, in sufficient transportation facilities and
other issues, the management decided to shift to its factory premises having a capacity
of administrative departments at the end of December 2011. The factory is located at a
convenient place. The management decided to rent-out the former administrative offices
having carrying value of Rs.50 million and fair value of Rs.65 million at December 31,
2011. The tenant signed the agreement and paid annual rent amounting to Rs.250,000
in advance on December 31, 2011. This amount is included in accounts payable.

(c) Income tax provision for the current year was estimated at Rs.30 million. Taxable
temporary differences have increased by Rs.12 million. The tax rate is 35%.

(d) The depreciation policy of the company provides that the property should be depreciated
at 2% on straight-line method. The plant and equipment should be depreciated at 10%

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 Class Notes

using reducing-balance method. During the year an item of equipment costing Rs. 3
million with accumulated depreciation of Rs. 1 million was sold for Rs. 1 million for cash.
The accountant made a wrong entry for this transaction by debiting bank account and
crediting sales account for the proceeds. All deprecation is charged to cost of sales.

Required:
(a) Prepare Profit or Loss Account for the year ended December 31, 2011. (09) |7
(b) Prepare Statement of Financial Position as at December 31, 2011. (12)
(c) Prepare a schedule of non-current assets. (04)

QUESTION 05 PE Feb 2013 Q3

Sana Industries Ltd.
Trial Balance
As at December 31, 2010
Debit Credit
(Rs. (Rs. '000')
'000')
Cash 253,600
Accounts receivable 106,000
Rent revenue 18,000
Retained earnings 160,000
Salaries payable 18,000
Sales 1,100,000
Notes receivable 110,000
Accounts payable 49,000
Accumulated depreciation - equipment 28,000
Sales discounts 14,500
Sales returns 17,500
Notes payable 70,000
Selling expenses 232,000
Administrative expenses 99,000
Share capital . ordinary shares of Rs.10 each 300,000
Interim cash dividends 30,000
Allowance for doubtful debts 6,000
Supplies expenses 14,000
Freight-in 20,000
Land 70,000
Equipment - cost 140,000
Bonds payable 100,000
Gain on sale of land 25,000
Accumulated depreciation . building 19,600
Inventory 89,000
Building - cost 98,000
Purchase discounts 10,000
Purchases 610,000
Total 1,903,600 1,903,600

Additional Information:
(i) The company has an authorized capital of 100 million ordinary shares of Rs.10 each.
(ii) Inventory as at December 31, 2010 was Rs.64 million.
(iii) Depreciation is to be provided as follows (to be charged to administrative expenses):
Building at 5% using the reducing balance method.
Equipment at 20% using straight-line method.
(iv) The company had issued bonds on July 1, 2010 and the rate of interest is 12% per
annum payable bi-annually on July 1, and January 1.
(v) Final dividend of Rs.15 million was declared on December 31, 2010.

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 ICMAP M4 Financial Accounting

(vi) Income tax rate is 35%.

Required:
Prepare following financial statements as required by the relevant IFRS / IAS:
(a) Income Statement and the Statement of Retained Earnings for the year ended
December 31, 2010. (14)
8| (b) Statement of Financial Position as at December 31, 2010. (11)

QUESTION 06 PE Nov 2013 Q2

The following trial balance relates to M/s Hi Fliers, a limited company, as on June 30, 2013:
(Rs. in millions)
Debit Credit
Land and building at valuation on July 1, 2012 (Note 3) 130.00
Plant at cost 125.00
Accumulated depreciation of plant 35.00
Investment 40.00
Investment income 5.00
Cost of sales 125.00
Distribution cost 14.50
Administrative expenses 15.50
Finance costs 7.50
Inventory as on June 30, 2013 (Note 1) 36.00
Income tax (Note 2) 6.50
Trade receivables 33.50
Revenue 273.50
Equity shares (Rs.10 each) 80.00
Retained earnings (as on July 1, 2012) 27.00
Trade payables 40.00
Revaluation reserves 15.00
Deferred tax 5.00
Bank (running finance) 40.00
527.00 527.00

The following notes are relevant to M/s Hi Fliers:

(1) The company is engaged in supply of consumer goods and has hundreds of goods in
inventory. During the year, the management decided to discontinue some goods due
to slow movement. The value of these goods is Rs. 3 million and included in ending
inventory. The management is trying to sell these goods but did not receive any good
offer. The best price that has been offered is Rs. 1.2 million.
(2) The balance of income tax in the trial balance is due to difference in tax provision by
the company and assessment by the tax authority for the year ended June 30, 2012.
The estimated income tax liability for the year ended June 30, 2013 is Rs. 27.5
million.
(3) The company has the policy to revalue its land and building each year-end. The
value in the trial balance includes land component of Rs. 40 million. On June 30,
2013, the value of building was Rs. 90 million while value of land was increased by
20%. The estimated remaining life of building was 30 years on June 30, 2012, which
remains same. The company policy is to charge 2/3 depreciation to cost of sales and
1/3 to administrative expenses and the plant is depreciated @ 15% per annum using
reducing balance method and is charged to cost of sales.

Required:
Prepare the following:
(a) Statement of Profit or Loss for the year ended June 30, 2013. (10)
(b) Statement of Financial Position as at June 30, 2013. (10)

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