CMA PART 1

FAR SECTION
Montaser Mohammed
HELLO CMA CANDIDATE!
IAM MONTASER MOHAMMED
Iam here to provide you a simplified explanation
for Financial Accounting (FAR)
 SECTION CONTENTS

Introduction to Financial Accounting

Financial Accounting Standards

Financial Accounting Assumptions

Financial Reporting vs Financial Statements

Users of Financial Information

A Full Set of Financial Statements 1

1
Introduction to
Financial Accounting
2
Intro. Financial Accounting

Definition of Financial Accounting:

The Financial Accounting is the Process of:
• Identifing: the transactions and events
• Measuring: the identified transactions and events
• Recording: the business transactions (Journal Entry)
• Classifing: the recorded data of similar data (General Ledger)
• Summarising: the classified data to know the result of business transactions (Trail balance, Income
Statement, and Balance Sheet)

• Communicating: the financial information to various users such as: Investor, Creditors, and other
parties
3
Intro. Financial Accounting

Analysis of Financial Transaction:

Double Entry System:
• Every financial transaction recorded in the accounts of a business,
there is a (Debit) entry and a (Credit) entry

4
Intro. Financial Accounting

Analysis of Financial Transaction:

Types of Accounts
Temporary Accounts Revenue Expenses Losses Gains
Permanent Accounts Assets Equity Liabilities -

Account Type Increase with Decrease with Account Type Debit Credit
Assets Debit Credit Assets Increase + Decrease -
Expenses/Losse Debit Credit Expenses/Losse Increase + Decrease -
Equity Credit Debit Equity Decrease - Increase +
Liabilities Credit Debit Liabilities Decrease - Increase +
Revenue/Gain Credit Debit Revenue/Gain Decrease - Increase +

5
Intro. Financial Accounting

Accounting Cycle:
• In the business world, keeping the financial record accurate is crucial
as it will ampact decision-making and regulatory compliance. One way to
maintain financial integrity is the Accounting Cycle
• The Accounting Cycle is a set of procedures that take place in the
accounting system, It begins with the transaction and is later represented
on the financial statements

6
Intro. Financial Accounting

7
2
Financial Accounting
Standards
8
Accounting Standards

Since 1973 the Financial Accounting Standards Board (FASB) became responsible for
issuing the accounting standards which known as (GAAP). The purpose of these
standards is to guide accountants towards the correct practice of financial transaction.

G A A P
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

9
Accounting Standards

Basic GAAP Principles:

• Historical Cost Principle
• Revenue Recognition Principle
• Expense Recognition Principle
• Accrual basis Principle
• Materiality Principle
• Disclosure Principle

10
3
Financial Accounting
Assumptions
11
Accounting Assumptions

Basic Accounting Assumptions:

The accounting assumptions are the fundamental premises based on which
the entire accounting process is carried out. These assumptions include:
• Economic Entity Assumption
• Going Concern Assumption
• Monetary Unit Assumption
• Conservatism Assumption
• Periodic Assumption

12
4
Financial Reporting vs
Financial Statements
13
Finanacial Reporting

• Financial reporting is a vital tool used by management, shareholders,

creditors, and bookkeepers to learn about how the company is doing
financially.

• The financial report shows the financial activities carried out by the entity
during a specific period.

• The Financial Statements are a set of lists that describe the entity‘s
performance during a specific period of time.

14
Financial Statements

A Full Set of Financial Statements includes the following:

• Statement of Financial Position also called (Balance sheet)
• Income Statement also called (Statement of Profit or Loss)
• Statement of Comprehensive Income
• Statement of Changes in Equity
• Statement of Cash Flows

15
Financial Statements

Major Elements of Financial Statements

Assets Statement of Financial Position
Liabilities Statement of Financial Position
Equity Statement of Financial Position
Sales Revenue Income Statement
Cost of Goods Sold Income Statement
Net Income Income Statement
Tax Income Statement
Depreciation Income Statement
Cash & Components Statement of Cash Flows
Retained Earnings Statement of Changes in Equity

16
5
Users of Financial
Information
17
Financial Information

The Objective of General Purpose Financial Reporting:

The objective of general purpose financial reporting is to provide financial
information about the reporting entity that is useful to the primary users of
financial reporting in making decisions

Users of financial information can be classified into:

• Direct users: They are influenced directly by the entity‘s performance they
include: existing investors (Shareholders), creditors, suppliers, and employees

• Indirect users: They need financial information to make effective

decisions related to the reporting entity they include: potential investors,
stock exchange market, banks, and regulatory agencies

18
Financial Information

Or

• External users: use financial statements to determine whether doing with

the entity will be beneficial, they include: investors (Shareholders), creditors,
lenders, financial advisors, and regulatory agencies

• Internal users: use financial statements to make decisions affecting the

operations of the business, they include: management, board of directors,
and employees

To be useful, information presented in the financial statements must be relevant

and faithfully represented

19
6
Financial Statements
20
Financial Statements

To be useful to external parties the financial statements must prepared in

accordance with (US GAAP)

BALNACE SHEET INCOME STATEMENTS STATAEMENT OF CHANGES STATEMENT OF CASH FLOWS

IN EQUITY
Current assets Sales Revenue
Net income Operating activities
Cost of Goods sold
Non-current assets
Gross Profit Retained earnings
Intangible assets Investing activities
OCI

Operational expenses Common stock Financing activities

Current liabilities

Non-current liabilities EBIT Permium/APIC

Income tax
Equity

Common stock
OCI
Premium/APIC
Net income
Retained earnings 21
Terminology Appendix

Terminology Arabic Translation Terminology Arabic Translation

Financial Accounting
Financial Statements
Balance Sheet
Income Statement
Statement of Comp. Income
Statement of Cash Flows
Statement of Changes in Equity ‫قائمة التغير في حقوق الملكية‬
Assets
Liabilities
Equity
‫المحاسبة المالية‬ Accounting Standards ‫المعايير المحاسبية‬
‫القوائم المالية‬ Accounting Assumptions ‫الفروض المحاسبية‬
‫الميزانية العمومية‬ Accounting Cycle ‫الدورة المحاسبية‬
‫قائمة الدخل‬ Journal Entry ‫قيود اليومية‬
‫قائمة الدخل الشامل‬ Financial Reporting ‫التقرير المالي‬
‫قائمة التدفقات النقدية‬ Shareholders ‫حملة األسهم‬
Cost of Goods Sold ‫تكلفة البضاعة المباعة‬
‫األصول‬ Retained Earnings ‫األرباح المحتجزة‬
‫المطلوبات‬ Gross Profit ‫مجمل الربح‬
‫حقوق الملكية‬ Net Income ‫صافي الدخل‬

22
#CMAROADMAP

Download the material

(Gleim or Hock) Attend classes regularly Solve MCQs Take the exam

1 3 5 7

2 4 6

Enroll in course Summarize topics Comorehensive revision

23
CMA Part 1
FAR
Montaser Mohammed

+249 99 7733 628

MontaserMohammedCMA

Montaser.cma@gmail.com