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Exam of 1 pages for the course Financial Accounting for Companies at Unisa (Assessment 1 and 4)
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15748952FAC2601 – Assessment 1
1. These standards should require high quality, transparent and comparable information in
financial statements and other financial reporting to help investors, other participants in the
world's capital markets and other users of financial information make economic decisions.
2a. A state-owned company is either a company defined as a “state-owned enterprise” in the
Public Finance Management Act 1 of 1999 (PFMA) or a company owned by a municipality.
2b. The Preface to the Standards of GRAP determines that directives will be used to set
transitional provisions and transitional arrangements for the entities required to comply with
Standards of GRAP
3a. • Issued Share Capital is the total value of shares that a company has issued to its
shareholders. Issued Share Capital is the total value of shares that a company has
issued to its shareholders. The value of Issued Share Capital can fluctuate based on
the market value of the shares.
• A rights issue is when a company offers its existing shareholders the chance to buy
additional shares for a reduced price. Usually, the discounted price will stand for a
specified time frame, after which it is returned to normal.
• A share capitalisation issue (also known as a Bonus Issue) is when a company issues
new shares of stock to its existing shareholders at a specific ratio. The new shares are
typically issued at a discount to the market price of the company's existing shares.
3b. Going concern is an accounting term for a company that has the resources needed to
continue operating indefinitely until it provides evidence to the contrary. This term also
refers to a company's ability to make enough money to stay afloat or to avoid bankruptcy.
3c. Liquidity and solvency risks continue to threaten Eskom's ability to achieve financial and
operational sustainability and to continue as a going concern.
4a. IAS 2 Inventories contains the requirements on how to account for most types of inventory.
The standard requires inventories to be measured at the lower of cost and net realisable
value (NRV) and outlines acceptable methods of determining cost, including specific
identification (in some cases), first-in first-out (FIFO) and weighted average cost.
5 100 000 – ((1500 – 500) x 140 = 140 000) + ((500 + 1000) x 140 = 210 000) = 5 170 000
4b. The following are specifically excluded from the cost of inventory but expenses in the period
in which they are incurred:
Abnormal spillage
Allocation of fixed production overhead costs that were not allocated to production
Storage costs unless it is essential in the production process.
Administrative expenses not related to the location and condition
Selling expenses
4c. over recovery or budgeted fixed production overhead costs absorbed in units produced
may be less than actual fixed production overhead costs incurred (under recovery). Under
and over recovery is recoded as expense or income in the cost of sales, respectively.
((2000 x 600 = 1 200 000) +(4000 x 400 = 1 600 000) + (2000 x 450 = 900 000) + (4000 x 350 =
1 400 000) = 5 100 000)
200 100 000 = 3.92%
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