Concepts relating to companies

Concepts relating to GAAP & IFRS

Unique Ledger Accounts of companies

Accounting equation of companies

Final accounts of companies: Trading; Profit & loss; Appropriation Accounts

Income Statement of companies

Cash Flow Statement of companies

Analysis and interpretation of financial statements of companies

Analysis and interpretation of company published financial statements

Directors' Report, Independent Auditors'

Report, Abridged Income Statement,

Balance Sheet, Cash Flow Statement, additional information relating to governance and the company's activities

Close corporations (background information only)

Concepts: Differences in financial statements of companies and close corporations.

Analysis and interpretation of bank, debtors' and creditors' reconciliations and age analysis (Includes Grade 11 content on preparation of reconciliations)

Value-added tax(Calculation of amount payable/receivable; Completion of VAT Control account)

Manufacturing concepts

Production Cost Statement with notes; and short-form Income Statement with notes

Analysis and interpretation of cost information, unit costs, contribution per unit and break-even point

Analysis, interpretation and comparison of Projected Income Statement for sole traders or companies

Analysis, interpretation and comparison of Cash Budgets for sole traders or companies (Includes Grade 11 content on preparation of Cash Budgets)

Interpretation and reporting on movements of fixed assets(Integration into Financial Accounting of companies)

Perpetual and periodic stock systems; validation, valuation and calculation of inventories(Different valuation methods: specific identification, FIFO; weighted average)

Professional bodies and code of conduct

Application of internal control and internal audit processes

Ethical behaviour in financial environment

Legislation governing companies (General overview of Companies Act only)

1.1 Share capital of companies For the purposes of preparing company financial statements, share capital is restricted to ordinary shares only.

Reason: It is not the intention of the Grade 12 curriculum to cover preference shares or other types of shares in the preparation of financial statements. However, when interpreting published annual reports, teachers are advised to alert learners to different types of shares that may appear in the published financial statements (for background information).

1.2 Investments of companies For the purposes of preparing financial statements, investments are restricted to fixed deposits.

Reason: It is not the intention of the curriculum to cover associate or holding/subsidiary company relationships. Therefore the investment in shares of other companies is excluded.

1.3 Asset disposal in Cash Flow Statements For the purposes of preparing Cash Flow Statements, disposal of fixed assets will be at carrying value (book value) only.

Reason: The profit or loss on the disposal of fixed assets would add another complication in respect of cash and non-cash items, which is not intende

OVERVIEW OF NEW CAPS CONTENT

2.1 Shares of no par value The concept of par value no longer applies. Section 35(2) of the new Companies Act states that a share does not have a nominal or par value.

Reason:

Par value bears no resemblance to the true value of a share except on the first day of a company's life. Par value was also confusing to many shareholders.

Application:

• Shares are now issued at issue price.

• New shares may be issued at any price, i.e. higher/lower/the same as the average price or any previous issue price.

• The full proceeds of the share issue are credited to the Share Capital Account.

The double entry in the Ledger is:

Debit: Bank

Credit: Ordinary share capital

• Consequently, the Share Premium Account no longer applies.

• The effect on the Accounting Equation is: Assets +; Owners' equity +.

See Example 3.1 below.

2.2 Buying back (repurchase) of shares by a company

In terms of Section 48 of the new Companies Act, the directors of a company may

decide to repurchase shares from a shareholder, subject to certain conditions.

Reasons:

The reasons are numerous, e.g. reduction in the number of shareholders could result in bigger returns for the remaining shareholders; directors might wish to adjust the debt/equity ratio through the buy-back of shares; heirs of a deceased estate might not wish to become shareholders of a company; a dissatisfied shareholder might wish to withdraw for personal reasons; family members in a private company might wish to retain control of the company by reducing the number of issued shares.

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