1110-03 Lecture

Teaching notes for all campuses
Progress on materials A word about language This session is about the

reporting framework: what gets
In Hendon we didn’t complete So far, we have been relaxed reported and how, not the pro
the content for LW02, so some about language in our forma. That comes later.
of those slides are repeated references to primary financial
here. In future years, I plan to statements: P&L, income Messages to students
spend more time on the statement, statement of activity,
Conceptual Framework as it balance sheet etc. Please encourage your
provides the foundation for so students to take part in the
much of students’ later Make it clear to students that quizzes.
understanding. as soon as we are talking about
financial statements prepared The participation rate is quite
For this week, I have integrated under IASB, we must refer to: low: see graph on next slide.
the IASB concepts of financial
statement elements into the • Statement of Financial Reassure them that quizzes
material that covers primary Position are not assessed, and they can
financial statements. If you • Statement of Profits or sit them as often as they like.
have already covered this, you Losses They are to help their learning.
can skip along a bit faster. • Statement of Cash Flows
Quiz 1: participation and average score by campus
35
250
30
Active Inactive
Number of students
Average point score

200
25
150 20
15
100 25.9
22.0 23.7
10
50
5
- 0
Hendon Dubai Mauritius
Recognition criteria: example with assets
Should this leased photocopier be
recognised? = Asset to lessee
Unit A3 > The Reporting framework
controlled providing
by the entity relevant
information and a faithful
An economic representation
as a result of
resource, a right a past event benefits
outweigh
Definition costs
Usefulness
Cost
Timetable and work programme

Five things you should know by now…
1. The language, structure and mechanics of the BaSIS Quiz 00
Framework TM
Quiz 01
2. How to post the Classic Transactions to the BaSIS Quiz 02

Framework TM
Quiz 03
3. How to post the Classic Transactions as journals Quiz 04
4. The IASB definitions of the five elements
Quiz 05
Quiz 06
5. The IASB concepts of recognition and measurement
1. The language, structure and Quiz 00

Quiz 01
mechanics of the BaSIS Framework TM
Quiz 02
2. How to post the Classic Transactions Quiz 03

as journals Quiz 04
As a journal, we write this as:

Dr Cash £30,000
Cr Loan £30,000
3. The qualitative characteristics of

Quiz 06
financial information
4. The IASB definitions of the five

Quiz 06
elements
5. The IASB concepts of recognition

5. The IASB concepts of recognition

Recognition criteria: example with assets
Should it be recognised by the
lessor? = Asset to lessor
controlled providing
by the entity relevant
information and a faithful
An economic representation
as a result of
resource, a right a past event benefits
outweigh
Definition costs
Usefulness
Cost
1. The language, structure and mechanics of the BaSIS
Framework TM
2. How to post the Classic Transactions to the BaSIS

Framework TM
3.
ze
How to post the Classic Transactions as journals
s
4.
u i z
The IASB definitions of the five elements
5.
Q
The IASB concepts of recognition and measurement
A3
starts here
Notes for students using this presentation
About these slides How to learn Quiz, quiz, quiz…
These slides have been By far the most effective way of Do the quizzes.
designed for teaching, not learning this material is to:
learning. They are provided to The participation rate is still
you because you ask for them, • make your own revision quite low (< 50%).
not because we think they are notes and mind maps
helpful to you. The quizzes give you lots of
• read from the set text. contextual feedback, so they
The notes associated with each Specifically Weetman tell you what you have learned
slide are teaching notes. They Chapters 3 and 7. and they give you the missing
contain information that is not information that you have not
relevant to your learning, • attempt the self assessment yet learned.
specifically highlighting to activities on UniHub.
teaching staff what not to Go to the quizzes…
mention.
Using these may confuse you.

A3: Learning outcomes
By the end of this lecture you will understand:

• The reporting framework:
• Statement of financial position
• Statement of profit or loss
• Statement of cash flows
Weetman, Chapter 3

Weetman, Chapter 3

Weetman, Chapter 3
The BaSIS Framework TM
Uses of funds Sources of funds
Assets Liabilities
£45,000
£60,000 Equity
Profit
& Loss £15,000
Assets = Liabilities + Equity
Assets – Liabilities = Net assets

The Student Workbook, Colour Accounting instructional videos and text are licensed under a Creative Commons Attribution-Non Commercial-No Derivatives 4.0 International License.
© Color Accounting International (1992-2018) 'Accounting Comes Alive', 'AccountingSchool.org', 'Color Accounting', 'Colour Accounting', and 'BaSIS Framework' are trademarks of Colour Accounting
Classification within elements
Uses of funds Sources of funds
Liabilities Non-current
Non-current
£23,000
£43,000 £45,000
Assets Current
£22,000
£60,000
Current Equity
£17,000 £15,000
Liquidity
Assets
Non-current
Current
Least liquid Most liquid

IASB statement of position
Liabilities
Assets = +
Equity
The Student Workbook, Colour Accounting instructional videos and text are licensed under a Creative Commons Attribution-Non Commercial-No Derivatives 4.0 International License.
© Color Accounting International (1992-2018) 'Accounting Comes Alive', 'AccountingSchool.org', 'Color Accounting', 'Colour Accounting', and 'BaSIS Framework' are trademarks of Colour Accounting
Assets
=
Liabilities
+
Equity
£’000
Non-current assets 43,000
Assets Current assets 17,000
Total assets 60,000
=
Current liabilities 23,000
Liabilities Non-current liabilities 22,000
+ Total liabilities 45,000

Total equity 15,000
Equity
Total liabilities and equity 60,000
The ‘other’ statement of position
Assets
–
Liabilities
=
Equity
The ‘other’ statement of position
£’000
Non-current assets 43,000
Assets
Current assets 17,000
–
Total assets 60,000
Liabilities Non-current liabilities 22,000

Total liabilities 45,000
= Net assets 15,000
Total equity 15,000

Equity
Both types of statement of position
£’000 £’000
Non-current assets 43,000 Non-current assets 43,000
Current assets 17,000 Current assets 17,000
Total assets 60,000 Total assets 60,000
Current liabilities 23,000 Non-current liabilities 22,000
Non-current liabilities 22,000 Total liabilities 45,000
Total liabilities 45,000 Net assets 15,000

Total equity 15,000
Total liabilities and equity 60,000 Total equity 15,000

Weetman, Chapter 3

Weetman, Chapter 3
_Assets Liabilities_
Balance Sheet
Equity_
Profit &
Loss
_Expenses Income_
Profit & Loss
Balance Sheet
Equity_
Profit &
Loss
_Expenses Income_
Profit & Loss
Balance Sheet
Equity_
Profit &
Loss
_Expenses
Decreases in assets, or Increases in assets, or Income_
Profit & Loss
increases in liabilities, that result in decreases in liabilities, that result in

decreases in equity, other than those increases in equity, other than those
relating to distributions to holders of relating to contributions from holders
equity claims. of equity claims
IASB statement of profit or loss
IAS 1 states that the SPL must include
line items for the following amounts:
Income
• Revenue
– • Finance costs
Expenses • Tax expense
• Profit or loss
= Specific IFRSs require additional
Profit disclosures and IAS 1 has additional
requirements, but this comes later.
Entity name
Statement of profit or loss
For the year ended 31 December 20X9
£’000 £’000
Revenue
Cost of sales
Operating
Gross profit
Distribution and selling costs Profit / loss
Administrative expenses
Operating profit
Interest receivable and similar income
Financing
Interest payable and similar charges
Profit / loss
Net profit before tax
Tax
Taxation
Net profit after tax
Entity name
£’000 £’000
Revenue Revenue is net of VAT
Cost of sales
or other taxes that are
collected by entities on
Gross profit behalf of their

Distribution and selling costs governments.
Operating profit
Tax
Entity name
£’000 £’000
Revenue
Cost of sales Cost of sales is the
cost of the goods sold,
Gross profit
not the cost of selling
Distribution and selling costs
the goods. It would
Administrative expenses include transport costs
Operating profit to get goods to a place
Interest receivable and similar income where they could be
sold but not, for
example, sales
Net profit before tax commissions.
Tax
Entity name
£’000 £’000
Revenue Gross profit is a
Cost of sales
calculated figure
showing profit made
Gross profit
after deducting the
Distribution and selling costs cost of goods sold. It
Administrative expenses is an important
Operating profit number to make
comparisons with
other businesses in
Interest payable and similar charges the same sector. GP%
Net profit before tax is commonly quoted
Tax and used.
Entity name
£’000 £’000
Revenue 57.5) 30.2) Gross profit is a
Cost of sales (54.1) (10.4)
calculated figure
showing profit made
Gross profit 3.4) 19.8)

after deducting the
Distribution and selling costs cost of goods sold. It
6% 66% is an important
Operating profit number to make
comparisons with
other businesses in
Interest payable and similar charges the same sector. GP%
Net profit before tax 1.8) 3.5) is commonly quoted
Tax and used.
Entity name
£’000 £’000
Revenue
Cost of sales
Gross profit
Distribution and selling costs Distribution and selling
Administrative expenses costs are self-
explanatory. They are
Operating profit
the costs incurred
Interest receivable and similar income distributing and selling
Interest payable and similar charges goods.
Tax
Entity name
£’000 £’000
Revenue
Cost of sales
Gross profit
Administrative expenses Administrative costs
Operating profit are all the other
overheads and
expenses involved
with running the
Net profit before tax business.
Tax
Entity name
£’000 £’000
Revenue Operating profit is
Cost of sales
profit before finance
costs and tax. It is a
Gross profit
calculated figure
Distribution and selling costs showing profit made
Administrative expenses after deducting the
Operating profit cost of goods sold and
operating costs.
Another important
Interest payable and similar charges number to make
Net profit before tax comparisons with
Tax other businesses in
the same sector.
Entity name
£’000 £’000
Revenue
Cost of sales
Gross profit
Operating profit
Finance costs
Tax
Entity name
£’000 £’000
Revenue
Cost of sales
Gross profit
Distribution and selling costs Net profit before tax is
Administrative expenses widely quoted and
Operating profit probably the key
comparable profit
figure. Although it’s not
Interest payable and similar charges on the bottom, this is
Net profit before tax often what people
Tax mean when they say
Net profit after tax ‘the bottom line’
Entity name
£’000 £’000
Revenue
Cost of sales
Gross profit
Operating profit
Tax The tax charge for the
year.
Entity name
£’000 £’000
Revenue
Cost of sales
Gross profit
Operating profit
This is net amount by
which equity has
Net profit before tax increased during the
Tax year.
Net profit after tax Profit
& Loss

Weetman, Chapter 3

Weetman, Chapter 3
The Statement of Cash Flows
Balance Sheet
£30,000
££270,000
0
£5,000
0
£10,0
Equity_
0 0
Profit &
Cash at bank
Loss
_Expenses Income_
Profit & Loss
The Statement of Cash Flows
Operating Investing Financing

cash flows cash flows cash flows
£30,000
££270,000
0
£5,000
0
£10,0
0 0
Sales, fees Non-current Loans and

Cash and cash and similar assets equity
equivalents Repayments
Suppliers, Non-current
wages etc. assets / dividends

Weetman, Chapter 3

Weetman, Chapter 3
The reporting framework
Balance Sheet
£30,000
££270,000
0
£5,000
0
£10,0
Equity_
0 0
Profit &
Cash at bank
Loss
_Expenses Income_
Profit & Loss

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Teaching notes for all campuses

Progress on materials A word about language This session is about the

Average point score

Timetable and work programme

2. How to post the Classic Transactions to the BaSIS Quiz 02

1. The language, structure and Quiz 00

2. How to post the Classic Transactions Quiz 03

As a journal, we write this as:

3. The qualitative characteristics of

4. The IASB definitions of the five

5. The IASB concepts of recognition

5. The IASB concepts of recognition

2. How to post the Classic Transactions to the BaSIS

Using these may confuse you.

By the end of this lecture you will understand:

By the end of this lecture you will understand:

By the end of this lecture you will understand:

Assets = Liabilities + Equity

Assets – Liabilities = Net assets

Least liquid Most liquid

Total assets 60,000

+ Total liabilities 45,000

Current liabilities 23,000

Liabilities Non-current liabilities 22,000

= Net assets 15,000

Total equity 15,000

Total assets 60,000 Total assets 60,000

Current liabilities 23,000

Current liabilities 23,000 Non-current liabilities 22,000

Non-current liabilities 22,000 Total liabilities 45,000

Total liabilities 45,000 Net assets 15,000

By the end of this lecture you will understand:

By the end of this lecture you will understand:

increases in liabilities, that result in decreases in liabilities, that result in

Gross profit behalf of their

Gross profit 3.4) 19.8)

By the end of this lecture you will understand:

By the end of this lecture you will understand:

Operating Investing Financing

Sales, fees Non-current Loans and

By the end of this lecture you will understand:

By the end of this lecture you will understand:

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