MIDLANDS STATE UNIVERSITY

P. BAG 9055 Tel: 227411

Gweru Fax: 260442
Zimbabwe

FACULTY OF COMMERCE
DEPARTMENT OF ACCOUNTING

MODULE TITLE: APPLIED FINANCIAL ACCOUNTING 1B (ACC 143)

1. Preamble

This is the second module of a series of six financial accounting modules presented by
the Department of Accounting sciences to accounting students. The module is intended
to have a cumulative effect on the learner’s accounting knowledge. Whereas students
focused on sole traders in level 1.1 this level adds to sole trader’s knowledge by
introducing partnership accounting which has three areas in the form of partnership
establishment, changes in ownership structure and, partnership liquidation. It will also
introduce students to company accounting which will cover issuing of shares,
debentures, capitalization of shares. It will also cover branches- accounting for
dependent branches using both the selling and cost prices approaches.

2. Module assessment
Continuous assessment (coursework) will contribute 30% to the overall assessment while
the sessional examination will contribute 70% to the overall assessment. Continuous
assessment will be by way of in-class tests.

3. Purpose of the module

This module aims at providing a thorough knowledge which at the end should enable the
student to:
 Develop knowledge in preparation of financial statements
 gain knowledge and understanding of the aims and activities of a partnership
as a form of business;
 acquire practical skills in understanding the accounting techniques for a
change in the ownership structure of a partnership
 Develop an understanding of the liquidation of a partnership and the treatment
thereof under both surplus capital and loss absorption capacity methods

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  Gain knowledge in the preparation of statements of cash flows of a sole
trader.
 Acquire a broad understanding of accounting for companies and share
transactions.
 Acquire knowledge and understanding of the intricacies of accounting for
inventories between the branch and the head office.

4. Module objectives

By the end of the module the students should be able:

 Discuss specified aspects of the Conceptual Framework for the preparation and
presentation of financial statements;
 Understand and apply the concept of International Financial Reporting
Standards (IFRS);
 Prepare the financial statements for sole proprietors and partnerships
according to certain of the requirements of International Accounting
Standards 1 (IAS 1);
 Apply the accounting procedures to record changes in the ownership structure
of partnerships on the admittance, retirement or death of partners;
 Apply the accounting procedures to record the simultaneous and piecemeal
liquidation of partnerships;
 Record transactions pertaining to the capital structure of companies;
 Prepare statements of cash flows for sole proprietors and partnerships
according to certain of the requirements of International Accounting Standard
7 (IAS 7;
 Explain how a business entity with branches operates, and record the
transactions between head offices and their branches;

5. Module outline

5.1 Introduction to the preparation of financial statements

 Conceptual framework for financial reporting

 International Financial Reporting Standards
 Presentation of financial statements: IAS 1
 Financial instruments
 Practical applications of IAS 1

5.2 Establishment and financial statements of a partnership

 Reasons for the formation of partnerships

 the legal position of a partner
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  Establishment of a partnership
 The partnership agreement
 Dissolution of a partnership
 Accounting procedures and specialised accounts

5.3 Changes in the ownership structure of partnerships

 Valuation adjustments
 Goodwill
 The calculation of profit-sharing ratios
 Recording a change in ownership structure by way of a personal transaction
 Recording a change in ownership structure by way of a transaction with the
Partnership

5.4 The liquidation of a partnership

 Liquidation methods
 The liquidation account
 Account procedure to record the simultaneous liquidation of a partnership
 Accounting procedure to record the piecemeal liquidation of a partnership.

5.5 Introduction to companies

 Characteristics of a profit company

 Formation (incorporation) of a profit company
 Types of companies
 Shareholders
 The rights of shareholders
 Share transactions
 Dividends
 Debenture transactions

5.6 Statement of cash flows

 Main objective and advantages of a statement of cash flows
 Format of a statement of cash flows
 Relationship between a statement of cash flows and other financial statements
 Identification of non-cash entries in financial statements prepared on the
accrual basis of accounting
 Preparation of a statement of cash flows from financial statements
prepared on the accrual basis of accounting

5.7 Branches
 Accounting for dependent branches
 Recording of transactions where inventory sent to the branch is invoiced
at cost price
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  Recording of transactions where inventory sent to the branch is invoiced at
selling price

5.8Recommended reading
 About financial accounting volume 2. (latest edition)
 Unisa module FAC 1602
 Introduction to financial management waren et al