ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)

ADVANCED FINANCIAL ACCOUNTING (8553)

CHECKLIST

SEMESTER AUTUMN, 2018

This packet comprises the following material:

1. Text Book (One)

2. Assignment No. 1,2
3. Assignment Forms ( 2 sets )

In this packet, if you find anything missing out of the above mentioned material,
please contact at the address given below:

The Mailing Officer

Allama Iqbal Open University
Sector H-8, Islamabad
PH:051-9057611-12

Muhammad Munir Ahmad

(Course Coordinator)

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 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce)
WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE
ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF
DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENT(S) BORROWED OR STOLEN FROM
OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN
“AIOU PLAGIARISM POLICY”.
Course: Advanced Financial Accounting (8553) Semester: Autumn, 2018
Level: M. Com Total Marks: 100
Pass Marks: 50
ASSIGNMENT No. 1
(Units: 1–9)
Q. 1 (a) Describe the role of the following bodies in development of IFRS:
(i) IFRS Foundation (ii) IASB (iii) IFRS
(iv) IFRS interpretation Committee (10)
(b) Which qualitative characteristics must be possessed by financial
statements according to conceptual framework of accounting? Explain. (10)

Q. 2 (a) Advances in IT are likely to have a continuing impact on financial

accounting. What are some changes you think will occur in the way
financial information is gathered, processed, and communicated as a result
of increasingly sophisticated information technology? (10)
(b) Why is it important to view an AIS as a combination of hardware, software,
people, data, and procedures? (05)

Q 3. (a) In wholesale and retail companies, inventory is composed of the items

that have been purchased for resale. What types of inventory does a
manufacturing firm have? (05)
(b) Why is it more difficult to account for the inventory of a manufacturing
firm than for that of a merchandising firm? (05)
(c) Bilal Company has gross sales of 250% of cost of goods sold. It has also
provided the following information for the calendar year 2018: (10)

Inventory balance, January 1, 2018 22,000

Total cost of goods available for sale 84,000
Sales returns 4,200
Purchase returns 2,000
Freight in 800
Sales (net of returns) 169,800

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 Operating expenses 7,500
Required:
Using the available information, compute the following.
1. Gross sales for 2018
2. Net purchases and gross purchases for 2018
3. Cost of goods sold for 2018
4. Inventory balance at December 31,2018
5. Gross margin for 2018
6. Net Income for 2018

Q.4 The income statements for Xcel Co. and Yarl Co. for the year ended 31 st
December 2018 are shown below. Xcel Co. acquired 60% of the ordinary share
capital of Yarl Co several years ago: (15)

Xcel Co Yarl Co
Rs '000' Rs '000'
Sales 4,000 2,000
Cost of sales and expenses (2,600) (1,000)
Gross profit 1,400 1,000
Distribution Cost (60) (20)
Admin cost (20) (10)

Finance income / (Cost) 5 (5)

Profit before tax 1,325 965
Tax (115) (15)
Profit after tax 1,210 950
Additional information:
i. Goods were sold by Yarl Co to Xcel Co Rs 20,000 at a margin of 50% (all goods
were unsold by Xcel at the year end.
ii. Goodwill impairment at the year end Rs 10,000. The current impairment is to be
recognized as operating cost
iii. Additional depreciation due to FV adjustment Rs 15,000 is to be recognized at
the year end.
Requirement: Prepare the Consolidated Comprehensive Statement of Income for the
year 2018.

Q. 5 (a) Explain the factors that affect retained earnings and describe the factors
determining whether a company can and should pay or account for cash
dividends. (05)
(b) The Tiger Company was involved in the following treasury stock
transactions during 2018:
i. Purchased 40,000 shares of its Rs. 1 par value common stock on the market
for Rs. 2.50 per share.
ii. Purchased 8,000 shares of its Rs.1 par value common stock on the market for
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 Rs. 2.80 per share.
iii. Sold 22,000 shares purchased in (i) for Rs. 65,500.
iv. Sold the other 18,000 shares purchased in (i) for Rs. 36,000.
v. Sold 3,000 of the remaining shares of treasury stock for Rs. 1.60 per share.
vi. Retired all the remaining shares of treasury stock. All shares originally were
issued at Rs. 1.50 per share.
Required:
1. Record the treasury stock transactions in T accounts.
2. What is the reasoning behind treating the purchase of treasury stock as a
reduction in stockholders' equity as opposed to treating it as an investment asset?
(15)
Q.6 The Taco limited leased plant and machinery having fair value of Rs. 125,000 from
leasing corporation limited. The lease agreement contains a bargain purchase option
and requires 15 annual minimum lease payment of Rs. 15,000 payables at the end of
each year. The economic life of the plant and machinery is 20 years. Implicit rate of
leasing corporation limited is 8%. (10)
Required
a. Calculate present value of minimum lease payments payable in 15 years.
b. Prepare a statement showing repayment of principal and mark-up for the first
five years.
C. In the light of IAS-17, what are the criteria, which attract capitalization of leased
plant and machinery in above case?
d. In the absence of bargain purchase option, will the pure limited capitalize the
lased plant and machinery? Briefly explain reasons.
GUIDELINES FOR ASSIGNMENT #1
The student should look upon the assignments as a test of knowledge, management skills, and
communication skills. When you write an assignment answer, you are indicating your
knowledge to the teacher:
· Your level of understanding of the subject;
· How clearly you think;
· How well you can reflect on your knowledge & experience;
· How well you can use your knowledge in solving problems, explaining situations, and
describing organizations and management;
· How professional you are, and how much care and attention you give to what you do.

To answer a question effectively, address the question directly, bring important related issues
into the discussion, refer to sources, and indicate how principles from the course materials
apply. The student must also be able to identify important problems and implications arising
from the answer.

For citing references, writing bibliographies, and formatting the assignment, APA format
should be followed.

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 ASSIGNMENT No. 2
(Units: 1–9) Total Marks: 100
This assignment is a research-oriented activity. You are required to obtain information
from a business/commercial organization and prepare a report of about 1000 words on
the issue allotted to you to be submitted to your teacher for evaluation.
You are required to select one of the following issues according to the last digit of your
roll number. For example, if your roll number is P-3427182 then you will select issue # 2
(the last digit): -

ISSUES:
0- The need for a common set of accounting and financial reporting standards
1- Constraints and trade-offs between different qualitative characteristics of Financial
Statements
2- A comprehensive study on International Accounting Standard 17 (lAS 17)
3- Presentation of Financial Statements (lAS 1)
4- Accounting for Merchandizing Business
5- A comprehensive study on International Accounting Standard 2 (lAS 2)
6- Presentation of Annual Accounts of Banking Companies according to accounting
standards.
7- Accounts of Insurance Companies
8- A comprehensive study on International Accounting Standard 27 (lAS 27)
9- An Accounting Information System of an entity
The report should follow the following format:
i. Title page
ii. Acknowledgements
iii. An abstract (one page summary of the paper)
iv. Table of contents
v. Introduction to the issue (brief history & significance of topic assigned)
vi. Practical study of the organization (with respect to the topic)
vii. Data collection methods
viii. Conclusion (one page brief covering important aspects of your report)
ix. Recommendations (specific recommendations relevant to issue assigned)
x. References (as per APA format)
xi. Annexes (if any)

GUIDELINES FOR ASSIGNMENT # 2:

 1.5 line spacing
 Use headers and subheads throughout all sections
 Organization of ideas
 Writing skills (spelling, grammar, punctuation)
 Professionalism (readability and general appearance)
 Do more than repeat the text
 Express a point of view and defend it.
WORKSHOPS
The workshop presentations provide students opportunity to express their communication
skills, knowledge & understanding of concepts learned during practical study assigned in
assignment # 2.

You should use transparencies and any other material for effective presentation. The
transparencies are not the presentation, but only a tool; the presentation is the
combination of the transparencies and your speech. Workshop presentation transparencies
should only be in typed format.

The transparencies should follow the following format:

1) Title page
2) An abstract (one page summary of the paper)
3) Introduction to the issue (brief history & significance of issue assigned)
4) Practical study of the organization (with respect to the issue)
5) Data collection methods
6) Conclusion (one page brief covering important aspects of your report)
7) Recommendations (specific recommendations relevant to issue assigned)

GUIDELINES FOR WORKSHOP PRESENTATION:

 Make eye contact and react to the audience. Don't read from the transparencies or
from report, and don't look too much at the transparencies (occasional glances are
acceptable to help in recalling the topic to cover).
 A 15-minute presentation can be practiced several times in advance, so do that until
you are confident enough. Some people also use a mirror when rehearsing as a
substitute for an audience.

WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT # 2 &

WORKSHOP PRESENTATIONS
Assignment # 2 & workshop presentations are evaluated on the basis of theory & its
applicability. The weightage of each aspect would be:
Theory: 60%
Applicability (practical study of the organization): 40%

Note:
Assignments and Presentation carry 300 Marks:
Assignment 01 100 Marks
Assignment 02 (Submission) 100 Marks
Assignment 02 (Presentation) 100 Marks

AIOU-AS-71(18)PPU-02-10-2018-400