Exam (elaborations)
Exam (elaborations) Fac1502
This document contains exam questions with solutions of previous year papers assignment 3 and 4
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GOLDEN RULE Accounting cannot be studied by merely reading/memorising information. You need topractice, practice and practice!
GOLDEN RULE Accounting involves the recordings of transactions in order to provide useful information
for decision-making.
GOLDEN RULE Financial statements must give a fair presentation of the financial position, the financial
performance and the cash flow of an entity.
Statement of profit or loss and other comprehensive income for the period Information on the financial
performance (Income – Expenses) of an entity in a specified period is provided in the statement of profit
or loss and other comprehensive income. The financial performance of an entity should be reflected by
the concept of accrual accounting. In accordance with this concept, the effects of transactions are
recognised when they occur (and not as cash is received or paid) and they are recorded in the
accounting periods and reported in the financial statements of the periods to which they relate
GOLDEN RULE
The elements of financial statements are as follows:
■ Elements that measure the financial position (assets = equity + liabilities):
(1) assets
(2) liabilities
(3) equity
■ Elements that measure profitability (profit or loss = increase or decrease in equity):
(4) income
(5) expenses
The statement of profit or loss and other comprehensive income
The statement of profit or loss and other comprehensive income reports on the
financial performance of an entity. At the end of the financial year all income and
expense accounts are closed off to the statement of profit or loss and other
comprehensive income. The Conceptual Framework (par 70) defines these elements
as follows:
Income
Income refers to increases in assets or decreases in liabilities that result in increases
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