CIMA C02 Fundamental of Financial Accounting

1zaheerswati@ciit.net.pk

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Wherever the examiner uses the following words, then consider trading account.

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Trading Accounts

(i) Opening stock (if first year of trading, this will not be given)

(ii) Closing stock

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MCQs 1Mark-up on cost of sales = 10%

Sales = £6,160

Cost of sales = ????

6,160/110 *100 = £5,600

Solution:

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MCQs 2Gross profit on sales = 20%

Cost of sales £20,000

Sales ????

Solution:

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Control Accounts

Whenever the examiners use the following words or terminology, always consider opening a DLCA to calculate the sales figure.

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Debtor Ledger Control Accounts

(i) Opening debtors(ii) Closing debtors(iii) Amount received from debtors

Example 6.1: Zeeshan knows that his receivables at 1 January 20X1 were $27,000, and during the year he received $140,000 in cheques from customers, after allowing $2,000 in cash discounts for prompt payment. He wrote off a bad debt of $5,000 during the year, and his closing receivables at 31 December 20X1 amount to $24,500. Calculate the value of his sales for the year (Note: Sales ledger control account is actually receivable control account)  Solution:

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$144,500

Whenever the examiner uses the following words or terminology, always consider opening a CLCA to calculate the purchase figure.

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(i) Opening creditors(ii) Closing creditors(iii) Cash/cheque paid to creditors

Example 6.2: Mr. Walied knows that his payable at 1 January 20X1 were $50,000,

and during the year he paid through bank and cash to supplier $10,000, receiving

$1,000 in cash discounts for prompt payment to vendor and his closing payables at

31 December 20X1 amount to $75,500. Calculate the value of his purchase for the

year (Note: Purchase ledger control account is actually payable control account)  Solution:

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• An organization is not a business.

• Different set of words used to ‘flag’ this difference.

• Cash Book Receipts & Payments a/c

• P & L Income & Expenditure a/c

• Profit Excess of Income or Surplus

• Loss Deficit

• Capital Accumulated Fund

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Accounting for Non-Profit Organizations

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MCQs 3

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MCQs 4

This type of scheme requires members to pay a fee annually in order to retain membership

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Annual Subscription Account

Care must be taken to adjust appropriately for subscriptions in advance (a liability) and for subscriptions in arrears (an asset)

If a member has outstanding subscriptions it is unlikely that legal action will be taken to recover them (because of the legal costs involved and the difficulty of proving the debt)

So it is common for them to be written off as a bad debt. However, each organisation will have its own policy

These are fees payable in addition to the annual

subscription when a person first joins the organisation as a

member (they may also be referred to as joining fees)

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Annual Subscription Account

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MCQs 5A receipts and payments account is similar to

(a) An income and expenditure account

(b) A profit and loss account

(c) A trading account

(d) A cash book summary

(d) A cash book summary

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MCQs 6

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Regulatory Framework

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