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Q1 Globalization demands a single set of high-quality international accounting standards. List the elements of High Quality Standards and explain the two major boards that sets standards.
Q2. Q2. What do you understand by deferrals and accruals in adjusting entries? Give numerical examples on how such adjusting entries are made.
Q3. Fill in the blanks (1 Mark)
Sales Revenue
– Cost of goods sold = Gross Profit
– Operating expenses
=Net Profit
500,000 ? 175,000
?
76,500
?
305,800
?
115,750
65,250
Q4. a. What do you understand by allocation to non-controlling interest and discontinued operations? Explain how they are reported in the income statement. :
Q4b. Intraperiod Tax Allocation. XYZ Co. has income before income tax of SR 50,000. XYZ Co. has a gain of SR 10,000 from a discontinued operation. Assuming a 35 percent income tax rate, how would XYZ Co. present the information on the income statement, and if it had a loss of SR 10,000 from a discontinued operation. Assuming a 35 percent income tax rate, show the changes in Income on the income statement
Prepare:
1.Changes in Income on the income statement when Loss made from discontinued operations
2.Changes in Income on the income statement when Gain made on discontinued operations
Q5
The following information in SAR. Prepare a Cash Flow Statement:- (3 Marks)
Opening Cash Balance 15,000
Closing Cash Balance 23,000 Increase in current liabilities 13,000 Decrease in current assets 17,000
Fixed assets purchase 30,000
Redemption of 12% bonds 14,000
Profit for the year 18,000
Depreciation 4000

 

📌 Struggling with where to start this assignment? Follow this guide to tackle your assignment easily!

This assignment covers fundamental accounting concepts, including international accounting standards, adjusting entries, financial statement preparation, and cash flow statements. Let’s break down each question and guide you step by step.

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Q1: High-Quality International Accounting Standards

Step 1: List the Elements of High-Quality Standards

High-quality accounting standards ensure financial transparency, comparability, and reliability. The key elements include:

• Relevance – Information must be useful for decision-making.
• Faithful Representation – Financial statements should be accurate and free from bias.
• Comparability – Accounting principles must be consistent across periods and companies.
• Verifiability – Financial information should be backed by evidence.
• Timeliness – Reports should be prepared promptly.
• Understandability – Financial statements should be clear and easy to interpret.

Step 2: Explain the Two Major Standard-Setting Boards

1. International Accounting Standards Board (IASB)

   • Develops International Financial Reporting Standards (IFRS) used in many countries.
   • Focuses on global consistency in financial reporting.

2. Financial Accounting Standards Board (FASB)

   • Develops Generally Accepted Accounting Principles (GAAP) used in the U.S.
   • Ensures financial reports meet regulatory requirements and investor needs.

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Q2: Understanding Deferrals and Accruals in Adjusting Entries

Adjusting entries ensure financial statements reflect the correct financial position.

Step 1: Definitions

• Deferrals – Revenue or expenses recorded after cash has been paid or received.
• Accruals – Revenue or expenses recorded before cash has been paid or received.

Step 2: Numerical Examples

✅ Example of a Deferral (Prepaid Expense):
A company pays SAR 12,000 for a one-year insurance policy in January.

• Initial entry (January):

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  Prepaid Insurance (Asset) 12,000
Cash 12,000


• Adjusting entry (End of January):

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  Insurance Expense 1,000
Prepaid Insurance 1,000


  (12,000 ÷ 12 months = 1,000 per month)

✅ Example of an Accrual (Accrued Revenue):
A company provides services worth SAR 5,000 in December but hasn’t received payment.

• Adjusting entry (December):
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  Accounts Receivable 5,000
Service Revenue 5,000


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Q3: Fill in the Blanks

The missing values in the income statement are calculated step by step:

Solution:

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Q4: Allocation to Non-Controlling Interest and Discontinued Operations

Step 1: Definitions

• Non-Controlling Interest (NCI) – The portion of a subsidiary’s profits not owned by the parent company.
• Discontinued Operations – Business segments that a company has stopped operating.

Step 2: Reporting in the Income Statement

• NCI is shown separately in the equity section.
• Discontinued operations appear separately below continuing operations, net of tax.

✅ Example of Intraperiod Tax Allocation (XYZ Co.)

1. Loss from discontinued operations (SR 10,000)

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   Income before tax 50,000
- Income tax (35%) (17,500)
------------------------------------
Net income from continuing operations 32,500
- Loss from discontinued operations (10,000)
+ Tax Savings (3,500)
------------------------------------
Net Income 26,000


2. Gain from discontinued operations (SR 10,000)

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   Income before tax 50,000
- Income tax (35%) (17,500)
------------------------------------
Net income from continuing operations 32,500
+ Gain from discontinued operations 10,000
- Tax on gain (3,500)
------------------------------------
Net Income 39,000


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Q5: Preparing a Cash Flow Statement

Step 1: Categorizing Transactions

• Operating Activities: Profit for the year, depreciation, changes in working capital.
• Investing Activities: Purchase of fixed assets.
• Financing Activities: Redemption of bonds.

Step 2: Calculating Cash Flow

✅ Cash Flow Statement (SAR)

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Final Checklist Before Submission:

✅ Use Times New Roman, Size 12, Double-Spaced formatting.
✅ Do not include any images containing text.
✅ Ensure all calculations are correct and clearly presented.
✅ Provide proper headings and format tables neatly.
✅ Review for grammar and clarity before submission.

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