INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

INTERNATIONAL ACCOUNTING STANDARD (IAS 1)

IAS 1- PRESENTATION OF FINANCIAL STATEMENTS

This Standard prescribes the basis for presentation of general purpose financial
statements to ensure comparability both with the entity’s financial statements of
previous periods and with the financial statements of other entities. It sets out overall
requirements for the presentation of financial statements, guidelines for their structure
and minimum requirements for their content.
Financial statements

Financial statements are a structured representation of the financial position and

financial performance of an entity. The objective of financial statements is to provide
information about the financial position, financial performance and cash flows of an
entity that is useful to a wide range of users in making economic decisions. Financial
statements also show the results of the management’s stewardship of the resources
entrusted to it. To meet this objective, financial statements provide information about an
entity’s (In other words these are the elements of financial statements)
i. Assets
ii. Liabilities
iii. Equity
iv. Income and expenses, including gains and losses
v. Cash flows.
A complete set of financial statements comprises of the followings:
I. A statement of comprehensive income for the period
II. A statement of financial position as at the end of the period
III. A statement of changes in equity for the period
IV. A statement of cash flows for the period
V. Accounting policies and explanatory notes
INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

According to IAS 1 presentation of financial statements entities have a choice and can
present profit or loss and other comprehensive income in either:

(a) A single statement of comprehensive income

(b) Two statements: a statement displaying components of profit or loss and a

statement beginning with profit or loss and displaying the components of OCI (a
statement of other comprehensive income).

A RECOMMENDE FORMAT IS AS FOLLOWS (SINGLE STATEMENT FORMAT)

ABC: STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2006
TZS.
Revenue X
Cost of sales (X)
Gross profit X
Distribution costs (X)
Administrative expenses (X)
Profit from operations X
Finance costs (X)
Investment income X
Profit before tax X
Income tax expense (X)
Profit for the year X
Other comprehensive income:
Gain/loss on revaluation X
Gain/loss on FVTOCI financial assets X
Total comprehensive income for the year X
INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

TWO STATEMENT FORMAT

ABC: STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER
2006
TZS.
Revenue X
Cost of sales (X)
Gross profit X
Distribution costs (X)
Administrative expenses (X)
Profit from operations X
Finance costs (X)
Investment income X
Profit before tax X
Income tax expense (X)
Profit for the year X
ABC: STATEMENT OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31
DECEMBER 2006
TZS.
Profit for the year X
Other comprehensive income:
Gain/loss on property revaluation X
Gain/loss on FVTOCI financial assets X
Total comprehensive income for the year X
INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

IAS 1 requires an entity to present a separate statement of changes in equity. The

statement must show summary of all changes in equity arising from transactions with
owners in their capacity as owners.
FORMAT
ABC: STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31
DECEMBER 2006
Share Share Revaluation Retained Total
Capital Premium Surplus Earnings Equity
TZS TZS TZS TZS TZS

Balance (Opening) X X X X X
Change in accounting policy/
Prior year error -- -- -- (X) (X)
Restated balance (Opening) X X X X X
Dividends (X) (X)
Issue of share capital X X X
Total comprehensive income X X X
Transfer to retained earnings _ _ (X) X _
Balance (Closing) X X X X X

FORMAT
INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

ABC: STATEMENT OF FINANCIAL POSITION AS AT 31 DEC 2006

Assets TZS. TZS.
Non-current assets:
Property, plant and equipment X
Investments X
Intangibles X XX

Current assets:
Inventories X
Trade receivables
Cash and cash equivalents X XX
Total assets XX

Equity and liabilities

Capital and reserves:
Share capital X
Retained earnings X
Other components of equity X
Total owners’ equity XX

Noncurrent liabilities:
Longterm borrowings X
Deferred tax X XX

Current liabilities:
Trade and other payables X
Short-term borrowings X
Current tax payable X
Short-term provisions X XX
Total equity and liabilities XX
INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

QUESTION 1
The trial balance of Kinoko Co, a limited liability entity, as at 31 December 2017 was as
follows:
Dr Cr
TZS. TZS.
Sales 50,000
Stocks 8,000
Purchases 20,000
Distribution costs 8,000
Administration expenses 15,550
Debtors and Creditors 10,000 20,000
Fundamental reorganization costs 2,400
Cash at bank 7,250
Ordinary shares 50c 8,000
10% irredeemable preference shares tzs.1 9,000
10% loan notes 8,000
Non-current assets at carrying amount 35,000
Share premium 3,000
Accumulated profits at 1 January 2017 3,000
Loan note Interest paid 800
Preference dividend paid 900
Interim ordinary dividend paid 1,600
Income Tax 500
Suspense 8,000
109,500 109,500
The following is to be taken into account.
(i) A building whose carrying amount is currently tzs.5, 000 is to be revalued
to tzs.11, 000.
(ii) A final ordinary dividend of 10c per share is to be proposed.
INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

(iii) The balance on the income tax account represents an overprovision of tax
for the previous year. Tax for the current year is estimated at tzs.3, 000.
(iv) Closing stock is tzs.12, 000.
(v) The balance on the suspense account represents the proceeds from the
issue of 4,000 ordinary shares.
REQUIRED:
Prepare the following financial statements of Kinoko Co for the year ended 31
December 2017:
(a) statement of profit or loss and other comprehensive income
(b) statement of changes in equity
(c) statement of financial position

QUESTION 2.

The following trial balance extracts (i.e. it is not a complete trial balance) relate to Moston as at 30 June
2019:

$’000 $’000

Revenue (note (i)) 113,500

Cost of sales 95,700

Distribution costs 4,600

Administrative expenses 7,300

Loan note interest paid 1710

Dividends paid 4,000

Investment income 300

Equity shares of $1 each (note (iv)) 30,000

Retained earnings as at 1 July 2018 6,200

Revaluation surplus as at 1 July 2018 3,000

Other components of equity 9,300

Property at valuation 1 July 2018 (note (ii)) 26,600

Plant and equipment at cost 27,100

Accumulated depreciation plant and equipment 1 July 2018 9,100

INSTITUTE OF ACCOUNTANCY ARUSHA - FINANCIAL ACCOUNTING - AFU 7208

Financial asset equity investments at fair value 1 July 2018 (note (iii)) 8,800

The following notes are relevant:

(i) Revenue includes a $3 million sale made on 1 January 2019 of maturing goods which are not
biological assets. Moston is still in possession of the goods (but they have not been included in the
inventory count).

(ii) Moston’s property is carried at fair value which at 30 June 2019 was $29 million.

(iii) At 30 June 2019, the financial asset equity investments had a fair value of $9·6 million. There were
no acquisitions or disposals of these investments during the year.

(iv) Moston paid a dividend on 30 March 2019, which was followed the day after by an issue of 10
million equity shares at their full market value of $1·70. The share premium on the issue was recorded
in other components of equity.

Required:

(a) Prepare the statement of profit or loss and other comprehensive income for Moston for the year
ended 30 June 2019.

(b) Prepare the statement of changes in equity for Moston for the year ended 30 June 2019.