Financial Accounting CPA KASNEB notes

1. Introduction to Accounting

• Nature and Purpose of Accounting
• The objective of Financial Accounting
• The Elements of Financial Statements
• The Accounting Equation
• The Users of Accounting Information

2. The Accounting Process and Systems

• The Source documents such as receipts and invoices
• The Books of Prime entry/Original Entry from the journals, cashbooks, Petty cash books and registers
• The Ledger and the concept of double entry
• The Trial Balance
• The Financial Statements

3. Regulation and other principles guiding the accounting profession

• The legal sources of regulation
• The professional sources of regulation (local and international bodies) and ethical requirements
• Accounting Standards
• Common accounting principles/concepts
• Qualities of useful financial information

4. Accounting for Assets and Liabilities

• Property, Plant and Equipment (depreciation, acquisition, disposal, exchange, excluding revaluations)
• Intangible Assets
• Financial Assets and Financial Liabilities (Definition, Examples and Classification only)
• Inventory
• Cash in hand and cash at bank (bank reconciliation statements)
• Trade Receivables (Measurement and credit Losses)
• Trade payables
• Accrued Incomes/Expenses and Prepaid Incomes/Expenses

5. Financial Statements of a sole trader

• Statement of Profit or Loss
• Statement of Financial Position

6. Financial Statements of a partnership

• The partnership deed/agreement
• The statement of Profit or Loss and appropriation
• Partners’ capital and current accounts
• The statement of financial position
• Accounting treatment and presentation when there is a change in profit/loss sharing ratio, admission/retirement of a partner, dissolution of a partnership

7. Financial Statements of a company

• Important concepts of a company (Ordinary and Preference share capital, issuing new shares way of full market price, bonus shares and rights issue, Reserves, retained profits and corporation tax)
• Statement of Profit or Loss
• Other comprehensive incomes
• Statement of Financial Position
• Statement of Cash flows

8. Financial Statements of a manufacturing entity

• Manufacturing Statement of production
• Statement of Profit or Loss
• Statement of Financial Position

9. Statements of a not-for-profit entity

• Objectives of Not-for-profit organisations
• Statement of Income and Expenditure
• Statement of Financial Position

10. Correction of errors and preparing financial statements with incomplete records

• Types and causes of errors
• Correcting errors in source documents, the books of prime entry, the ledger, the trial balance and financial statements
• Reasons for incomplete information
• Preparation of financial statements from incomplete information

11. Analyzing Financial Statements

• The objective of analysing financial statements
• Analysing financial statements using financial ratios (Liquidity, Profitability, Solvency, Efficiency, Investor/Value and Cash Flow categories)

12. Accounting in the Public Sector

• Features of public sector entities (as compared to private sector)
• Structure of the public sector (National and county governments, State Corporations, Departments and Agencies)
• Regulation and oversight (International Public Sector Accounting Standards Board, Director of Accounting Services, National Treasury, Parliamentary Committees, Accounting Officers at national and county levels)
• Objectives of public sector financial statements and Standards (IPSAS)
• Accounting techniques in public sector such as budgeting, cash, accrual, commitment and fund accounting)

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