CODeL ASSIGNMENT COVER

2020 ACADEMIC YEAR

Student Name LISTER SILOKA SANZILA
Student number 201709717
Email Address [email protected]
Cell/Tel no 0810366791
CODeL Centre Windhoek Centre

Course/Module Name Course/Module

Code
Financial accounting 1B AFE 3692

Assignment no
(e.g. 1, 2 or 3, etc.).
1
QUESTION 1

1. The conceptual framework is the one that sets out the fundamental concepts for financial
reporting that guides the board in developing International financial reporting standards. The
conceptual framework also helps to ensure that the standards are conceptually consistent and also
the same transactions are handled or treated in a similar way in order to provide or produce useful
information to the investors, lenders and other creditors. The conceptual framework also helps the
companies in developing accounting policies when there are no IFRS applying to any particular
transaction, and substantially it helps stakeholders and all other parties that have interest in the
companies to understand and interpret standards.

According to the conceptual framework there are fundamental qualitative characteristics which are
essential for usefulness and enhancing qualitative characteristics which improves usefulness of
financial statements. The fundamental qualitative characteristics are for instance relevance this
looks at how relevant the information Mr Bob is omitting or rather postponing in the books of the
business is and must also consider if the postponement of a transaction will affect or make a
difference in decision making by the users of the financial statements.

The other fundamental qualitative characteristic is faithful representation which entails that
information must truly represent the transaction, and in order to achieve faithful representation,
the information Mr Bob is postponing must be complete, it must be neutral (in consideration of
prudence) and it should also be free from any sort of errors that could lead to misinterpretation and
analysis of financial statements by the users.

Enhancing qualitative characteristics include comparability which means the information must be
able to be compared to the financial information presented for other accounting periods so that the
users can be able to identify the trends in the performance as well as financial position of Magano
Ltd. The other enhancing qualitative characteristic is understandability which entails that in order
for information to be understandable it has to be readily understandable to the user of the financial
statements, it also must be well presented and clearly presented with additional information
supplied in the supporting footnotes as it is needed in clarification. The other one is timeliness
meaning that the information Mr Bob presents must be available timeously so that it can be used
in decision making by Magano ltd as well as the users.
The two options Mr Bob is faced with the first option is viable which is postponing the issuance
of the 31 May 2019 financial statements until the transaction is finalized. This is because:

 In the meantime Mr Bob and Magano Ltd will work or sort out where there errors are and
what the exact material amount is that its omission could affect the financial statements as
well as decision making.
 If they are not able to find errors they can still hire an auditor to verify and rectify their
accounts for them as estimated figures could affect the ratios of Magano Ltd
 A postponement will also allow Mr Bob time to go through his figures and pick up where
the he made errors.
 Lastly postponement that will lead to the 2019 financial year to be is issued one year later
is better compared to using estimates and none exact figures which affects profit figures
and so forth.

Hence, the viable option is postponement of the issuance of 31 May 2019 financial statements.

2. The difference between recording and reporting in practice of accounting

Recording

This involves entering financial transactions into the accounting system of a company or entity
such as bank withdrawals, insurance payments as well employee salaries.

Reporting

This looks at harvesting the data or transactions that were entered during the recording phase,
reporting includes payroll numbers for executives to pulling sales numbers to apply for a loan or
reporting to the company o how their ratios affect them.
QUESTION 2

1.

Quantum Ltd
Statement of profit/loss and other comprehensive income for the year ended 30 September
2018
N$ N$
Notes 2018 2017
Sales 2 895 000,00 XXX
Cost of sales 1 (2 070 000,00) XXX
GROSS PROFIT 825 000,00 XXX
Other income 2 29 500,00 XXX
GROSS INCOME 854 500,00 XXX
Selling and distribution expenses 3 (67 750,00) XXX
Administration expenses 4 (510 300,00) XXX
Other expenses 5 (1 700,00) XXX
Finance cost 6 (40 000,00) XXX
PROFIT BEFORE TAX 234 750,00 XXX
Income tax 32% (75 120,00) XXX
PROFIT AFTER TAX 159 630,00 XXX
Other comprehensive income
Revaluation surplus 7 420 000,00 XXX
TOTAL COMPREHENSIVE INCOME FOR THE 579 630,00 XXX
YEAR

Calculations

1. Cost of sales 2 070 000

Opening inventory 190 000
Purchases 2 100 000
Less: closing inventory 220 000
2. Other income
Plant disposal
Cost 350 000
Accumulated depreciation 76 000
Proceeds 300 000
Profit on disposal 26 000
Reduction and allowance for credit losses 970
Discount received 2 530
3. Selling and distribution expenses
Sales commission 15 000
Advertising 34 000
Vehicle depreciation 18750
4. Administration expenses
Stationery 45 550
Salaries 254 000
Miscellaneous expenses 89 000
Bank charges 8 750
Depreciation 97 250
Auditors fee 15 750
5. Other expenses
Credit losses 1 700
6. Finance costs
Interest on debentures (10/100*400 000) 40 000
2. Quantum Ltd
Statement of financial position as at 30 September 2018
Note 2018 2017
N$ N$
ASSETS
Non-currents assets
Property and equipment 3 1 910 500,00 1 880 500,00

Current assets
Inventories 220 000,00 190 000,00
Trade and other receivables 180 000,00 XXXX
Cash and cash equivalents 426 000,00 XXXX
TOTAL ASSETS 2 736 500,00 XXXX

EQUITY AND LIABILITIES

Equity
Share capital 850 000,00 850 000,00
Retained earning 329 630,00 242 000,00
Other components of equity 678 000,00 236 000,00

Liabilities
Non-current liabilities
10% debentures 400 000,00 XXXX

Current liabilities
Trade and other receivables 478 870,00 XXXX
TOTAL EQUITY AND LIABILITIES 2 736 500,00 XXXX
3.

Quantum Ltd
Notes to the financial statements for the year ended 30 September 2018
3.1 Basis of presentation

Unless indicated otherwise, the financial statements have been compiled on the historical basis
appropriate to the business of the entity in accordance with International Financial Reporting
Standards (IFRS).

3.2 Summary of significant accounting policies

The annual financial statements incorporate the following significant accounting policies which
are consistent with those applied in previous years except where otherwise stated.

3.2.1 Property, plant and equipment

Property, plant and equipment are initially recognized at cost price

Buildings, vehicles, plant and machinery are subsequently measured at historical cost less
depreciation and accumulated impairment losses

Depreciation is written over at a rate deemed to be sufficient to reduce the carrying amounts of the
assets over their estimated useful life. The depreciation rates are as follows:

Land is not depreciated

Buildings are depreciated based on an estimated useful life of fifty years

Depreciation is charged to profit and loss for the period. Gains and losses on disposal are
determined by comparing the proceeds with the carrying amount of the asset. The net amount is
included in the profit or loss for the period

3.3 Trade and other receivables

Trade receivables consists of: 2018 2017

Debtors 179 000,00 XXX
Less: allowance for credit losses (8 000,00) XXX
Prepared expenses 9 000 XXX
3.4 Equity 2018 2017

Ordinary shares 12% preference shares

Number of shares issued 1 200 000

Issued share capital

Ordinary share capital 600 000 XXX

8% preference share capital 250 000 XXX

Retained General Revaluation Share

Reserves earnings reserve reserve premium Total

Balance at 30 September 2017 242,000.00 171,000.00 65,000.00 478,000.00

Adjustments

Profit for the year 161,670.00 161,670.00

Other comprehensive income 432,000.00 432,000.00

Transfer to general reserve (22,000.00) 22,000.00

Dividends declared (50,000.00) (50,000.00)

Balance at 30 September 2018 331,670.00 193,000.00 432,000.00 65,000.00 1,021,670.00

Property , plant and equipment

Land and Plant and Motor

buildings equipment vehicles Total

Net Carrying amount - Opening

balance 410,000.00 608,000.00 892,500.00 1,910,500.00

Gross Carrying amount 430,000.00 830,000.00 1,275,000.00 2,535,000.00

Accumulated depreciation (20,000.00) (222,000.00) (382,500.00) (624,500.00)

Adjustments

Additions

Disposals (274,000.00) (274,000.00)

Depreciation (2,000.00) (36,000.00) (75,000.00) (113,000.00)

Revaluation surplus 392,000.00 392,000.00

Net Carrying amount - Closing

balance 800,000.00 298,000.00 817,500.00 1,915,500.00

Gross Carrying amount 800,000.00 480,000.00 1,275,000.00 2,555,000.00

Accumulated depreciation - (182,000.00) (457,500.00) (639,500.00)

QUESTION 3

Items that do not comply with the minimum Minimum disclosure requirements
disclosure requirements

Accounting policies Accounting policies should provide a

summary of measurement basis used in the
does not include Basis of presentation
preparation of financial statements

Accounting policies Accounting policies should include any

relevant accounting policies and state whether
Does not mention whether accounting policies
these have been applied consistently
have been applied consistently from prior
years or not

Accounting policy for PPE Accounting policy for PPE should disclose the
useful lives or the depreciation rates used
Does not disclose the useful lives or
depreciation rates used for buildings, plant and
machinery are not disclosed

Non distributable reserve For each reserve within equity, a reconciliation

between the opening and closing balances for
Does not disclose a reconciliation between the
the period should be disclosed
opening and closing balances for the period

Mortgage bond Description of the mortgage bond should be

stated, for example from where it was acquired
Does not disclose the description of the
and whether or not it is secured by any assets
liability
eg land and buildings
Does not disclose a reconciliation of the
A reconciliation of the carrying amount at the
carrying amount at the beginning and end of
beginning and end of the period should be
the period
disclosed
Property, plant and equipment Gross carrying amount and accumulated
depreciation should be disclosed at the
Does not disclose the Gross carrying amount
beginning and end of the period
and accumulated depreciation at the beginning
and at the end of the period

A reconciliation of the carrying amount at the

beginning and end of the period showing:
Does not disclose a reconciliation of the
carrying amount at the beginning and end of Additions
the period
Disposals

Depreciation

Impairment losses

Increases or decreases resulting from

revaluations

Other changes

Amount of any property, plant and equipment

pledged as security for liability should also be
disclosed

Financial assets Financial assets should be disclosed separately

in the SFP
Should not be included in the PPE note

Listed investments For listed investments, the classes of shares

held should be disclosed
Does not disclose the class of shares held in
Trustco Ltd and Etosha transport ltd

Listed investments Number of shares held should be disclosed

 Number of shares in Etosha transport ltd in not
disclosed

Unlisted investments Class of shares should be disclosed

Does not disclose the number of shares held in

Dinapama ltd and Etamba Pty Ltd is not
disclosed

Unlisted investments Directors valuation of unlisted investments

should be disclosed
Does not disclose directors valuation

2. Otjomuise Ltd

Statement of financial position as at 31 December 2018 (extract)

Equity Notes N$

Ordinary stated capital 1,020,000.00

14% Redeemable preference shares 125,000.00

Share premium 42,000.00

Non distributable reserve 100,000.00

Retained earnings 40,200.00

Total equity 1,327,000.00

Calculations

12% cumulative preference shares = 240000

Preference dividend on these shares = (12%*240000*2/12) = 4800

Total amount to of the Preference shareholders payable = 244800

14% redeemable preference shares that can be issued = 50000

Value of these shares at a premium of N$0.30 = (50000*2.8) = 140000

14% redeemable preference shares (50000*2.5) = 125000

Share premium = (50000*0.30) = 15000

Balance will be financed from Retained earnings = (244800-140000) = 104800

Closing balance of share premium = 2000+30000+15000-5000 = 42000

Opening balance : Preference shares (242000-240000) = 2000

Ordinary shares (1030000-1000000) = 30000

Share premium from issue of new shares = 15000

Share issue expenses = 5000

Closing balance of Retained earnings = 190000-45000- 104800 = 40200

Opening balance = 190000

Deferred expenditure written off = 45000

Financing of new share issue = 104800