LEVEL: FORM 6

SYLLABUS TOPIC: FINANCIAL ACCOUNTING

SUB –TOPIC: COMPANY ACCOUNTS

COMPETENCE SKILLS

 Research

 Communication

 Problem Solving

BACKGROUND

The preparation and presentation of annual financial statements for limited liability companies is
governed by the Companies and Other Business entities Act and a number of International
Accounting Standards and Financial Reporting Standards. As an Advanced Level Accounting Student,
demonstrate your understanding of different aspects of Company Accounts.

CALA ACTIVITIES

Part A [Reserves]

Reserves constitute an integral part of equity for limited liability companies.

(i) Explain the difference between capital and revenue reserves [4]
(ii) Identify the uses of share premium [4]
(iii) Explain the conditions under which companies are compelled to create a capital redemption
reserve [2]

Part B [Events after the reporting period]

(i) Identify the international accounting standard that deals with events after the reporting
period [1]
(ii) Distinguish between adjusting and non-adjusting events [4]
(iii) Give five examples of adjusting events and five examples of non-adjusting events [5]
(iv) Explain the accounting treatment of proposed dividends in accordance to the dictates of the
standard identified in (i) above [3]

Part C [Issue and Redemption of shares]

(i) Distinguish between a bonus issue and a rights issue [4]

(ii) Show by means of journal entries the accounting entries for:
 A bonus issue of shares [2]
 Rights issue of shares [2]

NB: Hypothetical amounts may be used for illustrative journals

(iii) Identify the conditions under which a limited liability company is permitted by law to
redeem its shares [4]
(iv) Discuss the accounting treatment of redeemable and non-redeemable preference shares [3]

PART D [Prepare a Statement of changes in equity]

Using hypothetical amounts, prepare a statement of changes in equity including:

 Rights issue of shares

 Bonus issue of shares
 Transfer to General reserves
 Dividends paid [12]