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ACCA Paper F3 Look inside
Financial Accounting
For exams from 1 September 2016
to 31 August 2017
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producing exceptional study materials for students and tutors alike.
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,Foundations in I
N
Accountancy T
E
FFA R
A
ACCA C
T
Paper F3 I
V
Financial E
Accounting T
BPP Learning Media is an ACCA Approved Content Provider for the Foundations in
Accountancy qualification. This means we work closely with ACCA to ensure this
E
Interactive Text contains the information you need to pass your exam.
X
In this Interactive Text, which has been reviewed by the ACCA examination team,
we:
T
Highlight the most important elements in the syllabus and the key skills you
need
Signpost how each chapter links to the syllabus and the study guide
Provide lots of exam focus points demonstrating what the examination team
will want you to do
Emphasise key points in regular fast forward summaries
Test your knowledge in quick quizzes
Examine your understanding in our practice question bank
Reference all the important topics in our full index
BPP’s Practice & Revision Kit also supports this paper.
FOR EXAMS FROM 1 SEPTEMBER 2016 TO 31 AUGUST 2017
, F3/FFA FINANCIAL ACCOUNTING
First edition March 2011 A note about copyright
Fifth edition January 2016
Dear Customer
ISBN 9781 4727 4590 3
(Previous ISBN 9781 4727 3525 6) What does the little © mean and why does it matter?
e-ISBN 9781 4727 4631 3 Your market-leading BPP books, course materials and e-
learning materials do not write and update themselves. People
British Library Cataloguing-in-Publication Data
write them on their own behalf or as employees of an
A catalogue record for this book
organisation that invests in this activity. Copyright law protects
is available from the British Library
their livelihoods. It does so by creating rights over the use of
the content.
Published by
Breach of copyright is a form of theft – as well as being a
BPP Learning Media Ltd criminal offence in some jurisdictions, it is potentially a
BPP House, Aldine Place serious breach of professional ethics.
London W12 8AA
With current technology, things might seem a bit hazy but,
www.bpp.com/learningmedia basically, without the express permission of BPP Learning
Media:
Printed in the United Kingdom by Ricoh UK Limited Photocopying our materials is a breach of copyright
Unit 2 Scanning, ripcasting or conversion of our digital
Wells Place materials into different file formats, uploading them to
Merstham facebook or e-mailing them to your friends is a breach
RH1 3LG of copyright
You can, of course, sell your books, in the form in which you
Your learning materials, published by BPP Learning have bought them – once you have finished with them. (Is this
Media Ltd, are printed on paper obtained from fair to your fellow students? We update for a reason.) Please
traceable sustainable sources. note the e-products are sold on a single user licence basis: we
do not supply 'unlock' codes to people who have bought them
secondhand.
All our rights reserved. No part of this publication may
be reproduced, stored in a retrieval system or And what about outside the UK? BPP Learning Media strives
transmitted, in any form or by any means, electronic, to make our materials available at prices students can afford
mechanical, photocopying, recording or otherwise, by local printing arrangements, pricing policies and
without the prior written permission of BPP Learning partnerships which are clearly listed on our website. A tiny
Media. minority ignore this and indulge in criminal activity by illegally
photocopying our material or supporting organisations that do.
We are grateful to the Association of Chartered Certified If they act illegally and unethically in one area, can you really
Accountants for permission to reproduce past trust them?
examination questions. The suggested solutions in the
practice answer bank have been prepared by BPP Copyright © IFRS Foundation
Learning Media Ltd, except where otherwise stated.
All rights reserved. Reproduction and use rights are strictly
limited. No part of this publication may be translated,
BPP Learning Media is grateful to the IASB for
reprinted or reproduced or utilised in any form either in whole
permission to reproduce extracts from the International
or in part or by any electronic, mechanical or other means,
Financial Reporting Standards including all
now known or hereafter invented, including photocopying and
International Accounting Standards, SIC and IFRIC
recording, or in any information storage and retrieval system,
Interpretations (the Standards). The Standards together
without prior permission in writing from the IFRS Foundation.
with their accompanying documents are issued by:
Contact the IFRS Foundation for further details.
The International Accounting Standards Board (IASB) The IFRS Foundation logo, the IASB logo, the IFRS for SMEs
30 Cannon Street, London, EC4M 6XH, United logo, the “Hexagon Device”, “IFRS Foundation”, “eIFRS”,
Kingdom. Email: Web: www.ifrs.org “IAS”, “IASB”, “IFRS for SMEs”, “IASs”, “IFRS”, “IFRSs”,
“International Accounting Standards” and “International
Disclaimer: The IASB, the International Financial Financial Reporting Standards”, “IFRIC” “SIC” and “IFRS
Reporting Standards (IFRS) Foundation, the authors Taxonomy” are Trade Marks of the IFRS Foundation.
and the publishers do not accept responsibility for any
Further details of the Trade Marks including details of
loss caused by acting or refraining from acting in
countries where the Trade Marks are registered or applied for
reliance on the material in this publication, whether
such loss is caused by negligence or otherwise to the are available from the Licensor on request.
maximum extent permitted by law.
©
BPP Learning Media Ltd
2016
ii
, CONTENTS
Contents
Page
Introduction
Helping you to pass ...................................................................................................................... v
Chapter features ........................................................................................................................... vi
Studying F3/FFA.......................................................................................................................... vii
The Computer Based Examination ............................................................................................... xxiii
Tackling Multiple Choice Questions.............................................................................................. xxiv
Part A The context and purpose of financial reporting
1 Introduction to accounting ..................................................................................................... 3
2 The regulatory framework .................................................................................................... 19
Part B The qualitative characteristics of financial information
3 The qualitative characteristics of financial information............................................................. 31
Part C The use of double entry and accounting systems
4 Sources, records and books of prime entry ............................................................................. 45
5 Ledger accounts and double entry......................................................................................... 59
6 From trial balance to financial statements.............................................................................. 89
Part D Recording transactions and events
7 Inventory ......................................................................................................................... 107
8 Tangible non-current assets ............................................................................................... 133
9 Intangible non-current assets.............................................................................................. 169
10 Accruals and prepayments ................................................................................................. 181
11 Provisions and contingencies.............................................................................................. 195
12 Irrecoverable debts and allowances..................................................................................... 207
13 Sales tax.......................................................................................................................... 223
Part E Preparing a trial balance
14 Control accounts............................................................................................................... 235
15 Bank reconciliations .......................................................................................................... 257
16 Correction of errors ........................................................................................................... 271
Part F Preparing basic financial statements
17 Incomplete records............................................................................................................ 287
18 Preparation of financial statements for sole traders ............................................................... 311
19 Introduction to company accounting.................................................................................... 323
20 Preparation of financial statements for companies ................................................................ 341
21 Events after the reporting period ......................................................................................... 369
22 Statements of cash flows ................................................................................................... 375
Part G Preparing simple consolidated financial statements
23 Introduction to consolidated financial statements.................................................................. 397
24 The consolidated statement of financial position ................................................................... 411
25 The consolidated statement of profit or loss ......................................................................... 437
Part H Interpretation of financial statements
26 Interpretation of financial statements................................................................................... 451
Practice question bank ......................................................................................................................... 479
Practice answer bank ........................................................................................................................... 505
Index ..................................................................................................................................................... 517
Review form
iii
CONTENT PROVIDER
ACCA Approved Free access
Interactive Text
to our Exam
Foundations in Accountancy FFA / Success site
ACCA Paper F3 Look inside
Financial Accounting
For exams from 1 September 2016
to 31 August 2017
, ACCA APPROVED CONTENT PROVIDER
As the first accredited publisher of ACCA materials, BPP Learning Media has set the benchmark for
producing exceptional study materials for students and tutors alike.
Our Study Texts, Practice & Revision Kits and i-Passes (for exams on demand) are reviewed by the ACCA
examining team and are written by our in-house authors with industry and teaching experience who
understand what is required for exam success.
EXAM SUCCESS SITE
To help maximise your chances of succeeding in your exams, we’ve put together a suite of exclusive ACCA
resources. Our Exam Success site provides you with access to a free digital version of this publication, as
well as extra resources designed to focus your efforts on exams and study methods.
To access the Exam Success site, please email with the subject line “Access to Exam
Success site - eBook”, including your order reference number and the name of the book you’ve bought (ie
ACCA F5 Study Text) for your access code. Once you have received your code, please follow the instructions
below:
To access the BPP ACCA Exam Success site for this material
please go to:
www.bpp.com/ExamSuccessSite
n Create a user account if you don’t already have one.
Make sure you reply to the confirmation email.
n Log in using your registered username and password.
Select the paper you wish to access.
n Enter the code you received when prompted. You will only
have to do this once for each paper you are studying.
,Foundations in I
N
Accountancy T
E
FFA R
A
ACCA C
T
Paper F3 I
V
Financial E
Accounting T
BPP Learning Media is an ACCA Approved Content Provider for the Foundations in
Accountancy qualification. This means we work closely with ACCA to ensure this
E
Interactive Text contains the information you need to pass your exam.
X
In this Interactive Text, which has been reviewed by the ACCA examination team,
we:
T
Highlight the most important elements in the syllabus and the key skills you
need
Signpost how each chapter links to the syllabus and the study guide
Provide lots of exam focus points demonstrating what the examination team
will want you to do
Emphasise key points in regular fast forward summaries
Test your knowledge in quick quizzes
Examine your understanding in our practice question bank
Reference all the important topics in our full index
BPP’s Practice & Revision Kit also supports this paper.
FOR EXAMS FROM 1 SEPTEMBER 2016 TO 31 AUGUST 2017
, F3/FFA FINANCIAL ACCOUNTING
First edition March 2011 A note about copyright
Fifth edition January 2016
Dear Customer
ISBN 9781 4727 4590 3
(Previous ISBN 9781 4727 3525 6) What does the little © mean and why does it matter?
e-ISBN 9781 4727 4631 3 Your market-leading BPP books, course materials and e-
learning materials do not write and update themselves. People
British Library Cataloguing-in-Publication Data
write them on their own behalf or as employees of an
A catalogue record for this book
organisation that invests in this activity. Copyright law protects
is available from the British Library
their livelihoods. It does so by creating rights over the use of
the content.
Published by
Breach of copyright is a form of theft – as well as being a
BPP Learning Media Ltd criminal offence in some jurisdictions, it is potentially a
BPP House, Aldine Place serious breach of professional ethics.
London W12 8AA
With current technology, things might seem a bit hazy but,
www.bpp.com/learningmedia basically, without the express permission of BPP Learning
Media:
Printed in the United Kingdom by Ricoh UK Limited Photocopying our materials is a breach of copyright
Unit 2 Scanning, ripcasting or conversion of our digital
Wells Place materials into different file formats, uploading them to
Merstham facebook or e-mailing them to your friends is a breach
RH1 3LG of copyright
You can, of course, sell your books, in the form in which you
Your learning materials, published by BPP Learning have bought them – once you have finished with them. (Is this
Media Ltd, are printed on paper obtained from fair to your fellow students? We update for a reason.) Please
traceable sustainable sources. note the e-products are sold on a single user licence basis: we
do not supply 'unlock' codes to people who have bought them
secondhand.
All our rights reserved. No part of this publication may
be reproduced, stored in a retrieval system or And what about outside the UK? BPP Learning Media strives
transmitted, in any form or by any means, electronic, to make our materials available at prices students can afford
mechanical, photocopying, recording or otherwise, by local printing arrangements, pricing policies and
without the prior written permission of BPP Learning partnerships which are clearly listed on our website. A tiny
Media. minority ignore this and indulge in criminal activity by illegally
photocopying our material or supporting organisations that do.
We are grateful to the Association of Chartered Certified If they act illegally and unethically in one area, can you really
Accountants for permission to reproduce past trust them?
examination questions. The suggested solutions in the
practice answer bank have been prepared by BPP Copyright © IFRS Foundation
Learning Media Ltd, except where otherwise stated.
All rights reserved. Reproduction and use rights are strictly
limited. No part of this publication may be translated,
BPP Learning Media is grateful to the IASB for
reprinted or reproduced or utilised in any form either in whole
permission to reproduce extracts from the International
or in part or by any electronic, mechanical or other means,
Financial Reporting Standards including all
now known or hereafter invented, including photocopying and
International Accounting Standards, SIC and IFRIC
recording, or in any information storage and retrieval system,
Interpretations (the Standards). The Standards together
without prior permission in writing from the IFRS Foundation.
with their accompanying documents are issued by:
Contact the IFRS Foundation for further details.
The International Accounting Standards Board (IASB) The IFRS Foundation logo, the IASB logo, the IFRS for SMEs
30 Cannon Street, London, EC4M 6XH, United logo, the “Hexagon Device”, “IFRS Foundation”, “eIFRS”,
Kingdom. Email: Web: www.ifrs.org “IAS”, “IASB”, “IFRS for SMEs”, “IASs”, “IFRS”, “IFRSs”,
“International Accounting Standards” and “International
Disclaimer: The IASB, the International Financial Financial Reporting Standards”, “IFRIC” “SIC” and “IFRS
Reporting Standards (IFRS) Foundation, the authors Taxonomy” are Trade Marks of the IFRS Foundation.
and the publishers do not accept responsibility for any
Further details of the Trade Marks including details of
loss caused by acting or refraining from acting in
countries where the Trade Marks are registered or applied for
reliance on the material in this publication, whether
such loss is caused by negligence or otherwise to the are available from the Licensor on request.
maximum extent permitted by law.
©
BPP Learning Media Ltd
2016
ii
, CONTENTS
Contents
Page
Introduction
Helping you to pass ...................................................................................................................... v
Chapter features ........................................................................................................................... vi
Studying F3/FFA.......................................................................................................................... vii
The Computer Based Examination ............................................................................................... xxiii
Tackling Multiple Choice Questions.............................................................................................. xxiv
Part A The context and purpose of financial reporting
1 Introduction to accounting ..................................................................................................... 3
2 The regulatory framework .................................................................................................... 19
Part B The qualitative characteristics of financial information
3 The qualitative characteristics of financial information............................................................. 31
Part C The use of double entry and accounting systems
4 Sources, records and books of prime entry ............................................................................. 45
5 Ledger accounts and double entry......................................................................................... 59
6 From trial balance to financial statements.............................................................................. 89
Part D Recording transactions and events
7 Inventory ......................................................................................................................... 107
8 Tangible non-current assets ............................................................................................... 133
9 Intangible non-current assets.............................................................................................. 169
10 Accruals and prepayments ................................................................................................. 181
11 Provisions and contingencies.............................................................................................. 195
12 Irrecoverable debts and allowances..................................................................................... 207
13 Sales tax.......................................................................................................................... 223
Part E Preparing a trial balance
14 Control accounts............................................................................................................... 235
15 Bank reconciliations .......................................................................................................... 257
16 Correction of errors ........................................................................................................... 271
Part F Preparing basic financial statements
17 Incomplete records............................................................................................................ 287
18 Preparation of financial statements for sole traders ............................................................... 311
19 Introduction to company accounting.................................................................................... 323
20 Preparation of financial statements for companies ................................................................ 341
21 Events after the reporting period ......................................................................................... 369
22 Statements of cash flows ................................................................................................... 375
Part G Preparing simple consolidated financial statements
23 Introduction to consolidated financial statements.................................................................. 397
24 The consolidated statement of financial position ................................................................... 411
25 The consolidated statement of profit or loss ......................................................................... 437
Part H Interpretation of financial statements
26 Interpretation of financial statements................................................................................... 451
Practice question bank ......................................................................................................................... 479
Practice answer bank ........................................................................................................................... 505
Index ..................................................................................................................................................... 517
Review form
iii
