ACC1006F: Financial Accounting Exam Notes (UCT BCom)

A comprehensive set of ACC1006F Financial Accounting exam notes tailored to the University of Cape Town (UCT) BCom Financial Accounting first-year course. These notes align with typical UCT ACC1006F outcomes and terminology, while also using keywords that students from South African institutions such as UNISA (e.g. FAC1502, FAC1503) and CUT (e.g. FACB101, FACB102) frequently search for, to aid discoverability. The focus is on conceptual understanding, exam technique, and worked-style explanations that mirror the level expected in a first-year financial accounting exam.

1. The Accounting Framework and the Conceptual Basis (ACC1006F / FAC1502 level)

1.1 The Purpose of Financial Accounting

Financial accounting in ACC1006F (UCT), as in UNISA FAC1502 and CUT FACB101, focuses on preparing general-purpose financial statements for external users. These users do not have the power to demand bespoke reports, so they rely on standardized information presented under an accepted framework (IFRS for SMEs or full IFRS, depending on the course).

Key external users include:

Existing and potential investors – assess profitability, risk, and value.
Lenders and creditors – evaluate liquidity, solvency, and default risk.
Employees and trade unions – job security, wage negotiations.
Government and SARS – tax calculation, regulatory oversight, statistics.
Customers and suppliers – long-term stability and ability to fulfil contracts.

Internal users (management) use management accounting, but they also rely on financial accounting information as a base. ACC1006F expects you to:

Understand who uses the information.
Understand why they rely on IFRS-based financial statements.
Explain that financial accounting aims to provide information that is useful for decision-making, not to show a “true value” in an absolute sense.

1.2 The Accounting Equation and Elements of Financial Statements

At the heart of ACC1006F is the accounting equation:

Assets = Equity + Liabilities

Sometimes written as:

Equity = Assets − Liabilities

Each element is defined in the Conceptual Framework:

Asset: A present economic resource controlled by the entity as a result of past events, from which future economic benefits are expected to flow to the entity.
Liability: A present obligation of the entity to transfer an economic resource to another party as a result of past events.
Equity: The residual interest in the assets of the entity after deducting all its liabilities (e.g. share capital, retained earnings in a company; owner’s capital in a sole trader).

Performance elements:

Income: Increases in assets or decreases in liabilities that result in increases in equity (other than contributions from owners). Includes revenue and gains.
Expenses: Decreases in assets or increases in liabilities that result in decreases in equity (other than distributions to owners). Includes losses.

For exam purposes (similar to questions in UNISA FAC1502 study notes and CUT FACB101 tutorials):

You must be able to classify items (e.g. bank loan → liability; prepaid insurance → asset).
You must be able to identify how a transaction affects the equation.

Example (ACC1006F style question):

A business owner, Lindiwe, starts a sole proprietorship, Lindiwe Traders, and contributes R80 000 cash as capital. Immediately, the business buys equipment for R30 000 cash and inventory for R20 000 cash.

After capital introduced:
- Assets: Cash R80 000
- Equity: Capital R80 000
After buying equipment:
- Assets: Equipment R30 000; Cash R50 000
- Equity: Capital R80 000
After buying inventory:
- Assets: Equipment R30 000; Inventory R20 000; Cash R30 000
- Equity: Capital R80 000

Total assets remain R80 000, matching equity (no liabilities yet).

1.3 Qualitative Characteristics of Useful Financial Information

The Conceptual Framework, which you’ll see referenced in ACC1006F past papers, UNISA FAC1503 exam notes, and CUT FACB102, emphasises two fundamental qualitative characteristics:

Relevance
- Information is relevant if it can influence decisions.
- Includes the concept of materiality: an item is material if omitting or misstating it could influence decisions.
- Example: A R100 error in a JSE-listed company with billions of rand in revenue is likely immaterial; a R100 error in a small tutoring business may be material.
Faithful representation
- Information must be complete, neutral, and free from error (in the sense of there being no material errors or bias).
- Does not mean perfectly accurate predictions, but reasonable estimates without manipulation.

Enhancing qualitative characteristics (improve usefulness):

Comparability: Users can identify similarities and differences over time or between entities.
Verifiability: Different knowledgeable, independent observers could reach a similar conclusion.
Timeliness: Available in time to influence decisions.
Understandability: Classify, characterise and present information clearly and concisely.

1.4 Underlying Assumptions: Accrual Basis and Going Concern

Two important assumptions that ACC1006F continuously reinforces, likewise in FAC1502 (UNISA) and FACB101 (CUT):

Accrual basis
- Transactions recognised when they occur, not when cash is received or paid.
- Revenue recognised when earned and measurable; expenses when incurred.
- Example: If UCT Bookshop sells books on credit in November 20.5 for R10 000, but receives the cash in January 20.6, the revenue belongs in November 20.5, not in 20.6.
Going concern
- The entity is assumed to continue operations for the foreseeable future (usually at least 12 months after reporting date).
- If not a going concern, assets and liabilities might be measured at liquidation values, and financial statement presentation changes significantly.
- Exam questions may give hints like “The directors intend to liquidate the business” → going concern assumption no longer appropriate.

1.5 The Regulatory Environment: IFRS, IFRS for SMEs and SA Context

In South Africa, companies generally follow:

IFRS (International Financial Reporting Standards) – for public interest entities (e.g. listed companies).
IFRS for SMEs – for smaller, non-public firms.
Local guidance influenced by Companies Act 71 of 2008, CIPC, and professional bodies like SAICA.

First-year courses such as ACC1006F (UCT), UNISA FAC1502, and CUT FACB101 typically:

Introduce IFRS terminology and the idea of standards without requiring full technical application.
Focus on basic recognition and measurement principles:
- Recognise assets and liabilities when it is probable that future economic benefits will flow and the amount can be measured reliably.
- Measure items initially at cost; some later measured at fair value or amortised cost, depending on the standard.

Understanding the framework helps in conceptual questions like:

“Explain why advertising expenditure is generally recognised as an expense rather than an asset under IFRS.”

You’d draw on:

Future benefits are uncertain and not reliably measurable for most advertising campaigns.
Therefore, recognition criteria for an asset are not met; advertising is expensed as incurred (accrual basis).

2. The Double-Entry System, Journals, and Ledgers

2.1 The Logic of Double-Entry

The double-entry system is central to ACC1006F, as well as UNISA FAC1502 and CUT FACB101. Every transaction must be recorded with:

Debits = Credits

This maintains the accounting equation. A simple guide often used in first-year courses:

Element	Normal Balance	Increase with	Decrease with
Assets	Debit	Debit	Credit
Expenses	Debit	Debit	Credit
Drawings/Dividends	Debit	Debit	Credit
Liabilities	Credit	Credit	Debit
Equity	Credit	Credit	Debit
Income	Credit	Credit	Debit

Mnemonic: D E A D C L I C (Debits: Expenses, Assets, Drawings; Credits: Liabilities, Income, Capital).

Example (UCT ACC1006F style):

On 1 March 20.6, Naledi Ltd (a fictional company often used in tutorials) purchased inventory for R15 000 cash.

Inventory (Asset) increases → Debit Inventory R15 000
Cash (Asset) decreases → Credit Bank R15 000

Debit total = Credit total = R15 000.

2.2 Source Documents, Journals, and the Flow of Data

In practice (and in exam questions), transactions start with source documents, which are summarized in journals and posted to ledgers.

Common source documents:

Tax invoice (for credit sales and purchases)
Cash register slip
Bank deposit slip
Cheques or EFT confirmations
Credit notes
Debit notes

These feed into journals:

Cash receipts journal (CRJ) – all cash received.
Cash payments journal (CPJ) – all cash paid.
Sales journal (SJ) – credit sales of inventory.
Purchases journal (PJ) – credit purchases of inventory.
Returns journals – sales returns and purchase returns.
General journal (GJ) – all transactions not suitable for other journals (e.g. depreciation, correction of errors, owner’s drawings in non-cash form).

Typical exam-style task (seen in UCT ACC1006F, UNISA FAC1502, CUT FACB101):

You are given a list of transactions.
You must:
- Identify the correct journal.
- Enter the date, details, and amounts.
- Then post totals (or individual entries) to the general ledger.

2.3 General Ledger, Subsidiary Ledgers, and the Trial Balance

The general ledger contains all T-accounts for assets, liabilities, equity, income, and expenses. Each account uses the debit/credit structure.

Example of a T-account (Bank):

Bank
Debit                        Credit

1 Mar Capital      80 000    3 Mar Equipment     30 000
5 Mar Cash sales   10 000    7 Mar Inventory     20 000
                              
Balance c/d        40 000

Total              90 000    Total              90 000

Subsidiary ledgers:

Debtors (Accounts Receivable) ledger – individual customer accounts.
Creditors (Accounts Payable) ledger – individual supplier accounts.

Control accounts in the general ledger:

Trade receivables control.
Trade payables control.

They must reconcile to the total of individual debtor/creditor accounts. Questions on debtors and creditors reconciliations are common in ACC1006F and in UNISA FAC1502 tutorials.

At period-end, balances from ledger accounts form the trial balance:

List each account with a debit or credit balance.
Total debits must equal total credits.

If they don’t:

There is an arithmetical error (e.g. posting only one side, wrong amount, incorrect addition).
But even if the trial balance does balance, errors of omission, commission (wrong account) or compensating errors may still exist.

2.4 Common Journal Entries and Their Effects

ACC1006F exams often test typical first-year transactions. A concise list (with exam-style commentary):

Owner contributes cash to start business (sole trader):
- Dr Bank
- Cr Capital (Owner’s equity)
- Increases assets and equity.
Buy inventory for cash:
- Dr Inventory (or Purchases, depending on system)
- Cr Bank
- Asset exchange.
Sell inventory for cash (periodic system):
- Dr Bank
- Cr Sales
- Cost of sales not recorded now; done at year-end.
Sell inventory for cash (perpetual system):
- Entry 1: Dr Bank / Cr Sales
- Entry 2: Dr Cost of sales / Cr Inventory
Credit sale:
- Dr Trade receivables (Debtors)
- Cr Sales
Pay monthly rent:
- Dr Rent expense
- Cr Bank
Receive bank loan:
- Dr Bank
- Cr Loan (Liability)
Pay instalment on loan (where interest is separate):
- Dr Loan (capital repayment)
- Dr Interest expense
- Cr Bank
Depreciation (straight-line):
- Dr Depreciation expense
- Cr Accumulated depreciation (contra-asset)
Owner takes goods for personal use (drawings):
- Dr Drawings
- Cr Inventory (or Purchases).
Provision for doubtful debts (Allowance for credit losses):
- Increase allowance:
  - Dr Impairment loss / Bad debts adjustment
  - Cr Allowance for doubtful debts
- Decrease allowance:
  - Dr Allowance for doubtful debts
  - Cr Impairment reversal / Bad debts recovered

Remember that allowance for doubtful debts is a contra-asset, offset against trade receivables.

2.5 Typical Errors and Suspense Accounts

First-year exams often test error identification, corrections, and the use of a suspense account.

Common error types:

Error of omission: Entire transaction omitted. Trial balance still balances.
Error of commission: Wrong account of the same type used (e.g. posting sales to wrong debtor). Trial balance still balances.
Error of principle: Wrong type of account used (e.g. capitalising repair expenses). Trial balance still balances.
Compensating error: Two independent errors cancel each other. Trial balance still balances.
Single-sided entry or arithmetical error: Trial balance does not balance.

A suspense account is temporarily created to make the trial balance agree. As errors are discovered and corrected, the suspense account should clear to zero.

Example:

Trial balance difference: Debit side is R2 000 higher than credit side.

Create suspense account with a credit balance of R2 000 to balance.
On discovering that a cash sale of R2 000 was only debited to Bank with no credit to Sales:
- Correcting entry:
  - Dr Suspense 2 000
  - Cr Sales 2 000
- Suspense account moves from credit R2 000 to zero.

Understanding which side of the suspense account is used in corrections is a common exam challenge in ACC1006F, UNISA FAC1502, and CUT FACB101.

3. Adjustments and the Preparation of Financial Statements

3.1 From Trial Balance to Adjusted Trial Balance

The trial balance is only the starting point. Adjustments are needed to comply with accrual accounting and matching principles. In ACC1006F-style questions:

You’re given a pre-adjustment trial balance.
Then a list of adjustments at year-end (e.g. 31 December 20.6).
You must:
1. Record adjusting journal entries.
2. Prepare an adjusted trial balance.
3. Draft financial statements: Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, and sometimes Statement of Changes in Equity.

3.2 Types of Adjustments (Accruals and Prepayments)

Accrued expenses (outstanding expenses):

Expense incurred but not yet paid or recorded.
Example: Wages for last week of December, R5 000, unpaid.
Adjusting entry:
- Dr Wages expense 5 000
- Cr Wages payable (Accrued expenses) 5 000

Prepaid expenses:

Expense paid in advance.
Example: Insurance of R12 000 paid on 1 October 20.6 for 12 months. Year-end is 31 December 20.6.
Insurance used from Oct to Dec = 3/12 × R12 000 = R3 000 (expense).
Prepaid at year-end = R9 000 (asset).
If entire R12 000 initially debited to Insurance expense:
- Adjusting entry:
  - Dr Prepaid insurance (Asset) 9 000
  - Cr Insurance expense 9 000

Accrued income:

Income earned but not yet received or recorded.
Example: Interest earned of R1 500 on fixed deposit but not received by year-end.
Adjusting entry:
- Dr Accrued income (Asset) 1 500
- Cr Interest income 1 500

Income received in advance (Deferred income):

Money received for services/goods not yet provided.
Example: Rent of R6 000 received on 1 December 20.6 for 3 months (Dec–Feb). Year-end is 31 Dec 20.6.
Income for Dec only: 1/3 × R6 000 = R2 000.
Income received in advance: R4 000 (liability).
If entire R6 000 recorded as Rent income:
- Adjusting entry:
  - Dr Rent income 4 000
  - Cr Rent received in advance (liability) 4 000

Exams often test your ability to:

Identify the time period.
Correctly allocate amounts to current year vs future periods.

3.3 Depreciation and Impairment

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

Key concepts:

Cost: Purchase price + directly attributable costs (e.g. delivery, installation).
Residual value: Estimated amount to be received at the end of useful life.
Depreciable amount: Cost − Residual value.
Useful life: Period over which the asset is expected to be used.

Straight-line method (common in first year):

Annual depreciation = (Cost − Residual value) ÷ Useful life (years)

Example:

UCT Campus Café (imaginary business) buys equipment for R120 000 on 1 Jan 20.4, residual value R20 000, useful life 5 years.

Depreciable amount = R120 000 − R20 000 = R100 000
Annual depreciation = R100 000 ÷ 5 = R20 000 per year

Adjusting entry at 31 Dec 20.4:

Dr Depreciation expense (Equipment) 20 000
Cr Accumulated depreciation (Equipment) 20 000

At 31 Dec 20.5 (second year), another R20 000 depreciation is recorded; accumulated depreciation becomes R40 000, and carrying amount = R80 000.

Diminishing balance method (if included in syllabus):

Annual depreciation = Carrying amount at beginning of year × Rate

Example: Rate 20% on reducing balance.

Impairment (basic level):

When the recoverable amount of an asset is less than its carrying amount.
Recoverable amount is higher of:
- Fair value less costs to sell
- Value in use (present value of future cash flows)
Impairment loss:
- Dr Impairment loss (expense)
- Cr Accumulated impairment (or directly to asset)

ACC1006F usually introduces only basic impairment ideas, not full calculations.

3.4 Bad Debts and Allowance for Doubtful Debts

Bad debts:

Trade receivables that are irrecoverable.
Written off when there is evidence debtor will not pay (e.g. bankruptcy).
Entry:
- Dr Bad debts expense
- Cr Trade receivables (specific debtor)

Allowance for doubtful debts:

Estimates of future credit losses on existing debtors.
IFRS 9 uses an expected credit losses model; first-year courses often teach it as a percentage of trade receivables.
Example:
- Trade receivables at year-end = R50 000
- Allowance 5% → R2 500
- If existing allowance before adjustment = R1 000 (credit balance), need to increase by R1 500.

Adjusting entry:

Dr Bad debts adjustment (or Impairment loss) 1 500
Cr Allowance for doubtful debts 1 500

If previous allowance was R3 000, but new estimate is R2 500, then need to decrease allowance by R500:

Dr Allowance for doubtful debts 500
Cr Bad debts recovered (or Impairment reversal) 500

Exam questions test:

Ability to calculate new required allowance.
Compare with existing allowance balance.
Post correct entry using the difference.

3.5 Inventory: Perpetual vs Periodic Systems and Year-End Adjustments

In South African first-year accounting (ACC1006F, UNISA FAC1502, CUT FACB101), two systems are tested:

Perpetual inventory system:

Inventory account updated continuously.
Purchases recorded as Inventory.
Sales recorded with two entries (sales and cost of sales).
At year-end, a stock count verifies inventory; any difference may be recorded as inventory shrinkage.

Periodic inventory system:

Purchases recorded in Purchases account.
No continuous record of Cost of Sales or Inventory.
At year-end, a physical stock take determines Closing Inventory.
Cost of Sales is computed:

Cost of Sales = Opening Inventory + Purchases − Closing Inventory

Adjusting entry at year-end (one common approach):

Transfer opening inventory:
- Dr Cost of sales
- Cr Inventory (opening balance)
Transfer purchases:
- Dr Cost of sales
- Cr Purchases
Establish closing inventory:
- Dr Inventory (closing)
- Cr Cost of sales

Then in the Statement of Profit or Loss:

Sales
Less: Cost of sales (calculated as above)
Gross profit = Sales − Cost of sales

Exam tip (ACC1006F): Clearly label Opening Inventory, Purchases, Closing Inventory, and show Cost of Sales calculation.

3.6 From Adjusted Trial Balance to Financial Statements

After processing all adjustments, you will:

Identify which accounts go to the Statement of Profit or Loss and Other Comprehensive Income (income and expenses).
Identify which accounts go to the Statement of Financial Position (assets, equity, liabilities).
In company questions, also prepare a Statement of Changes in Equity.

Simplified example (numbers kept consistent):

Adjusted trial balance (extract) for Maseko Traders at 31 Dec 20.6:

Sales: R200 000 (credit)
Cost of sales: R120 000 (debit)
Rent expense: R15 000 (debit)
Wages expense: R30 000 (debit)
Depreciation: R5 000 (debit)
Interest expense: R2 000 (debit)
Interest income: R1 000 (credit)
Trade receivables: R25 000 (debit)
Inventory: R35 000 (debit)
Bank: R20 000 (debit)
Equipment (cost): R50 000 (debit)
Accumulated depreciation: R10 000 (credit)
Capital: R80 000 (credit)
Drawings: R10 000 (debit)
Loan: R20 000 (credit)
Trade payables: R15 000 (credit)

Statement of Profit or Loss and Other Comprehensive Income for year ended 31 Dec 20.6:

Revenue (Sales): 200 000
Cost of sales: (120 000)
Gross profit: 80 000
Other income:
- Interest income: 1 000
Total income: 81 000
Expenses:
- Rent: 15 000
- Wages: 30 000
- Depreciation: 5 000
- Interest expense: 2 000
Total expenses: (52 000)
Profit for the year: 29 000

Statement of Changes in Equity (simplified for a sole trader / owner’s equity account):

Opening capital: 80 000
Add: Profit for the year: 29 000
Less: Drawings: (10 000)
Closing capital: 99 000

Statement of Financial Position as at 31 Dec 20.6:

Assets

Non-current assets
- Equipment (cost) 50 000
- Less: Accumulated depreciation (10 000)
- Carrying amount: 40 000
Current assets
- Inventory: 35 000
- Trade receivables: 25 000
- Bank: 20 000
Total assets: 120 000

Equity and Liabilities

Equity
- Capital (closing): 99 000
Non-current liabilities
- Loan: 20 000
Current liabilities
- Trade payables: 15 000
Total equity and liabilities: 134 000

Notice that 120 000 ≠ 134 000, which signals a mistake. This is the type of consistency check you must do in exams. The error here is that the closing capital must be adjusted to make the equation balance properly.

Let’s rework capital calculations properly:

Given:

Assets at year-end: Inventory 35 000 + Trade receivables 25 000 + Bank 20 000 + Equipment 40 000 = 120 000
Liabilities: Loan 20 000 + Trade payables 15 000 = 35 000

Therefore, Equity must be:

Equity = Assets − Liabilities = 120 000 − 35 000 = 85 000

We earlier computed closing capital as 99 000, which is inconsistent. Assume instead:

Opening capital was R66 000 (not R80 000).
Closing capital = Opening capital + Profit − Drawings
= 66 000 + 29 000 − 10 000
= 85 000

Now Statement of Changes in Equity is:

Opening capital: 66 000
Add: Profit for the year: 29 000
Less: Drawings: (10 000)
Closing capital: 85 000

And Statement of Financial Position:

Equity: Capital 85 000
Liabilities: Loan 20 000; Trade payables 15 000
Total equity and liabilities: 85 000 + 35 000 = 120 000, which matches assets.

This sort of internal consistency is crucial in all financial accounting courses, whether at UCT (ACC1006F), UNISA (FAC1502, FAC1601), or CUT (FACB101, FACB102).

4. Accounting for Different Business Forms (Sole Traders, Partnerships, Companies)

4.1 Sole Traders and Basic Owner’s Equity

A sole trader is owned by one person. Legal personality and accounting entity are separated for accounting purposes, but legally the owner is not separate from the business.

Equity section for a sole trader (like many examples in ACC1006F) typically includes:

Capital account
Drawings account (temporary, closed to capital at year-end)

Owner’s equity movement:

Closing capital = Opening capital + Additional capital introduced + Profit − Drawings

Example:

Opening capital at 1 Jan 20.6: R50 000
Profit for year: R30 000
Drawings: R12 000
Additional capital introduced during year: R8 000

Closing capital:

= 50 000 + 8 000 + 30 000 − 12 000
= 76 000

This is a recurring calculation in exams.

4.2 Partnerships: Basic Principles (as seen in UCT ACC1006F and UNISA FAC1503)

A partnership is an association of two or more persons carrying on business with the intention of making a profit. Not a separate legal entity, but treated as a separate accounting entity.

Key exam topics:

Partnership agreements: Profit-sharing ratios, interest on capital, salaries to partners, interest on drawings, etc.
Appropriation of profit:
- Start with net profit.
- Allocate to partners according to agreement.

Example:

Partnership: A & B Traders
Capital accounts:

Partner A: R60 000
Partner B: R40 000

Agreement:

Interest on capital: 10% per year.
Annual salary to A: R20 000.
Remaining profit shared 60:40 (A:B).

Net profit: R70 000.

Appropriation:

Interest on capital:
- A: 10% of 60 000 = 6 000
- B: 10% of 40 000 = 4 000
- Total = 10 000
Salary to A: 20 000

Subtotal of fixed appropriations: 10 000 + 20 000 = 30 000

Remaining profit to be shared: 70 000 − 30 000 = 40 000

Distribute remaining profit:

A: 60% of 40 000 = 24 000
B: 40% of 40 000 = 16 000

Total share of profit:

Partner A: Interest 6 000 + Salary 20 000 + Share 24 000 = 50 000
Partner B: Interest 4 000 + Share 16 000 = 20 000

Check: 50 000 + 20 000 = 70 000 = net profit.

Appropriation account:

Dr Profit for year (statement of profit or loss) 70 000
Cr Interest on capital – A 6 000
Cr Interest on capital – B 4 000
Cr Salary – A 20 000
Cr Share of profit – A 24 000
Cr Share of profit – B 16 000

Partners’ current accounts (if separate from capital accounts) will reflect these appropriations and drawings.

This mirrors typical partnership questions in ACC1006F, UNISA FAC1503 exam notes, and CUT FACB102 tutorials.

4.3 Partnerships: Changes in Membership

Common subtopics:

Admission of a new partner.
Retirement of a partner.
Revaluation of assets and liabilities.
Goodwill treatment (if included in your syllabus level).

Basic principles:

When a new partner is admitted:
- Partners may agree on a new profit-sharing ratio.
- May bring in new capital.
- Goodwill may be recorded to compensate old partners.
When a partner retires:
- Retiring partner’s capital and current account balances must be paid out (or transferred to a loan account if not paid immediately).
- Revaluation of assets may occur to ensure fair settlement.

First-year courses like ACC1006F often test simple partnership changes rather than full complexities.

4.4 Companies: Share Capital and Basic Equity (UCT ACC1006F, UNISA FAC1502/FAC1601)

A company is a separate legal entity. Owners are shareholders and have limited liability.

Equity in a company typically includes:

Share capital (ordinary share capital, preference share capital).
Share premium (if shares issued above par value, though many JSE-listed companies use no-par value ordinary shares).
Retained earnings (or accumulated profit).
Other reserves (revaluation surplus, etc., usually beyond first-year scope).

Basic company transactions examiners love:

Issue of shares for cash:
- Dr Bank
- Cr Share capital (or Share capital and Share premium)
Declaring and paying a dividend:
- On declaration:
  - Dr Retained earnings / Dividends declared
  - Cr Dividends payable (liability)
- On payment:
  - Dr Dividends payable
  - Cr Bank
Profit for the year closing to retained earnings:
- Dr Profit or loss (or Income summary) (if using clearing account)
- Cr Retained earnings

But in practice, profit is directly shown as addition in Statement of Changes in Equity.

4.5 Company Financial Statements (IFRS Presentation Basics)

First-year ACC1006F questions usually focus on:

Statement of Profit or Loss and Other Comprehensive Income (single-statement format).
Statement of Changes in Equity.
Statement of Financial Position.

Basic layout for a company:

Statement of Profit or Loss and Other Comprehensive Income:

Revenue
Cost of sales
Gross profit
Other income
Distribution, administrative, and other expenses (classified by nature or function, depending on course requirement).
Finance cost (interest expense)
Profit before tax
Tax expense
Profit for the year

Statement of Changes in Equity:

Columns for:

Ordinary share capital
Share premium
Retained earnings
(Possibly other reserves)

Rows for:

Balance at beginning of year
Changes in share capital (issues, buy-backs)
Total comprehensive income (profit for year)
Dividends
Balance at end of year

Statement of Financial Position:

Assets:

Non-current assets
Current assets

Equity and Liabilities:

Equity
Non-current liabilities
Current liabilities

Example (simplified and consistent numbers):

At 31 Dec 20.6, Siyanda Ltd’s balances:

Ordinary share capital: 100 000
Retained earnings (opening): 50 000
Profit for year: 30 000
Dividends declared and paid: 10 000
Non-current assets (carrying amount): 120 000
Current assets: 70 000
Non-current liabilities (loan): 30 000
Current liabilities: 20 000

Statement of Changes in Equity:

Balance at 1 Jan 20.6:
- Share capital: 100 000
- Retained earnings: 50 000
Profit for year:
- Retained earnings: +30 000
Dividends:
- Retained earnings: −10 000
Balance at 31 Dec 20.6:
- Share capital: 100 000
- Retained earnings: 70 000
- Total equity: 170 000

Statement of Financial Position:

Assets

Non-current assets: 120 000
Current assets: 70 000
Total assets: 190 000

Equity and Liabilities

Equity: 170 000
Non-current liabilities: 30 000
Current liabilities: 20 000
Total = 170 000 + 30 000 + 20 000 = 220 000

This does not balance with assets (190 000), which shows an inconsistency. To maintain coherence, adjust the figures so:

Let:

Non-current assets: 120 000
Current assets: 80 000 (not 70 000)
Then total assets: 200 000

Let liabilities:

Non-current: 20 000
Current: 10 000
Total liabilities: 30 000

Equity must then be:

Equity = Assets − Liabilities = 200 000 − 30 000 = 170 000

Which matches the statement of changes in equity figure.

Revised balances (consistent):

Non-current assets (carrying amount): 120 000
Current assets: 80 000
Non-current liabilities: 20 000
Current liabilities: 10 000
Share capital: 100 000
Opening retained earnings: 50 000
Profit: 30 000
Dividends: 10 000
Closing retained earnings: 70 000
Total equity: 170 000

Now the Statement of Financial Position is:

Assets

Non-current assets: 120 000
Current assets: 80 000
Total assets: 200 000

Equity and Liabilities

Equity: 170 000
Non-current liabilities: 20 000
Current liabilities: 10 000
Total equity and liabilities: 200 000

This level of consistency and structure is often assessed in ACC1006F, UNISA FAC1502, and CUT FACB102 exams.

5. Cash, Bank Reconciliations, and Exam Technique (ACC1006F / FAC1502 / FACB101)

5.1 Cash and Cash Equivalents

In first-year accounting:

Cash includes:
- Cash on hand (petty cash, tills).
- Bank balances (current accounts, sometimes call deposits).
Cash equivalents are short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value (e.g. 3-month Treasury bills).

Typical exam tasks:

Identify which items are cash and cash equivalents.
Present them under current assets in the statement of financial position.

5.2 Bank Reconciliation: Purpose and Structure

Bank reconciliations are a favourite topic across South African universities (UCT ACC1006F, UNISA FAC1502, CUT FACB101).

Purpose:

To reconcile the balance on the bank statement with the balance in the cash book (bank account in general ledger).
Identify errors and timing differences.

Typical reconciling items:

Outstanding deposits: Money received and recorded in cash book, but not yet shown by bank.
Outstanding cheques: Cheques issued and recorded in cash book, but not yet presented at bank.
Bank charges, interest, debit orders: Recorded by bank before entity updates its cash book.
Deposits directly into bank (e.g. from customers) not yet recorded in cash book.
Errors in either bank statement or cash book.

5.3 Steps in Preparing a Bank Reconciliation

Exam questions often follow this pattern:

Given:
- Cash book balance before reconciliation.
- Bank statement showing different balance.
- Additional information (cheques, deposits, charges, errors).
Required:
- Update cash book (adjusted cash book).
- Prepare bank reconciliation statement.

Standard approach:

Update the cash book:
- Record all items appearing in bank statement but missing in cash book:
  - Bank charges, debit orders, interest, dishonoured cheques, direct deposits.
- Correct any errors in cash book.
- Determine updated cash book balance.
Prepare bank reconciliation statement starting from updated cash book balance:

Two common formats:

Start with Balance as per cash book, reconcile to Balance as per bank statement.
Or start with Balance as per bank statement, reconcile to Balance as per cash book.

Example:

Balance as per updated cash book (debit): R8 000
Reconciling items:

Outstanding cheques: R3 000
Outstanding deposit: R2 000
Error in bank statement: Bank incorrectly debited R1 000 (should be reversed by bank).

Bank reconciliation (to get balance per bank statement):

Balance as per cash book (debit) R8 000
Add: Outstanding cheques R3 000
Less: Outstanding deposit (R2 000)
Less: Bank error (R1 000 to be reverse debited back to bank statement, so treat as increase in cash book relative to bank) (R1 000)
= Balance as per bank statement R8 000

Here, reconciling items were chosen to keep numbers consistent. In real exam, numbers are given and you must apply them logically.

5.4 Petty Cash and Imprest System

Many ACC1006F / FAC1502 / FACB101 syllabi cover petty cash:

Used for small payments (e.g. taxi fares, office refreshments).
Imprest system:
- Petty cash is kept at a fixed amount (imprest).
- At period-end, petty cash is reimbursed to restore imprest amount.
- Expenditure is recorded in various nominal accounts (e.g. stationery, postage).

Example:

Imprest amount: R1 000.
At start of month, petty cashier has R1 000.
During month, spends R600 on various small expenses (documented with petty cash vouchers):

Stationery: R200
Postage: R150
Refreshments: R250

At month-end, cash remaining: R400.
Reimburse to R1 000: R600.

Entry in cash book (when reimbursing):

Dr Stationery 200
Dr Postage 150
Dr Refreshments 250
Cr Bank 600

Petty cash account remains at R1 000 in general ledger (unless imprest level changes).

5.5 Exam Technique and Common Pitfalls in ACC1006F (and Similar Modules like UNISA FAC1502, CUT FACB101)

5.5.1 Time Management and Layout

For computational questions:

Show all workings clearly, label them (e.g. “W1: Depreciation on equipment”).
Start each major requirement on a new page or clearly separated section.
Use proper headings: “Statement of Profit or Loss for the year ended 31 Dec 20.6”.

Examiners for ACC1006F, as well as UNISA and CUT modules, often award method marks even if the final figure is wrong, so visibility of your process is critical.

5.5.2 Reading the Question Carefully

Common traps:

Ignoring “as at” vs “for the year ended”.
Using wrong dates in depreciation (e.g. full-year depreciation when asset purchased mid-year).
Ignoring phrases like “include in above balances” or “not yet recorded”.

Useful approach:

Skim the entire question to get context (sole trader vs company; periodic vs perpetual).
Underline keywords:
- “On 1 July…”
- “At year-end…”
- “Exclude VAT” or “Amounts are inclusive of 15% VAT”.
Identify which learning outcomes are being tested (e.g. bank reconciliation, partnership appropriation, inventory).

5.5.3 Handling Multi-part Questions

ACC1006F exam questions often have multiple parts:

(a) Prepare the general journal for…
(b) Open and balance ledger accounts…
(c) Draft the Statement of Profit or Loss…

Strategy:

Work in order unless a later part is independent and easier.
If stuck, write down your assumption and move on, to avoid losing time.
Use any subtotals from earlier parts even if you suspect they might be slightly wrong; later parts often carry marks for technique, not for carrying through a single wrong figure.

5.5.4 Typical Mistakes to Avoid

Across UCT ACC1006F, UNISA FAC1502, and CUT FACB101, frequently observed errors include:

Confusing debit and credit rules:
- Remember: Assets and expenses increase on the debit side; liabilities, equity, and income increase on the credit side.
Forgetting year-end adjustments:
- Leaving out accrued expenses, prepaid expenses, etc., which undermines accrual concept.
Mixing up cost of sales computation in periodic inventory system:
- Wrong formula, or forgetting to include purchase returns or carriage inwards appropriately.
Incorrect treatment of drawings:
- Treating drawings as an expense instead of a reduction in equity.
Incorrect format of financial statements:
- Misplacing items (e.g. bank overdraft classified as asset instead of current liability).
- Failing to sub-total correctly (e.g. gross profit, operating profit).
Not reconciling final totals:
- Failing to check that Statement of Financial Position actually balances.

5.5.5 Practice Strategy Using Past Papers (ACC1006F, FAC1502, FACB101)

Best preparation approach:

Gather past exam papers and solutions for:
- UCT ACC1006F (Financial Accounting).
- UNISA FAC1502, FAC1503 (Financial Accounting Principles).
- CUT FACB101, FACB102 (or similar module codes).
For each paper:
- Attempt questions under timed conditions.
- Then compare to official or textbook solutions.
- Create your own summary notes of typical patterns and question styles.
Focus on:
- Journal entries.
- Ledger posting.
- Adjustments and adjusted trial balances.
- Full financial statements for sole traders, partnerships, and companies.
- Bank reconciliations.
- Depreciation and bad debts / allowance calculations.
- Partnership profit appropriation.
Keep a formula sheet and concept sheet:
- Depreciation formulae.
- Accounting equation.
- Cost of sales formula.
- Changes in equity formula.
Use active recall and spaced repetition:
- Regularly test yourself on definitions (asset, liability, equity).
- Rework tricky question types several times over weeks, not just once.

This comprehensive set of ACC1006F: Financial Accounting Exam Notes is aligned to the level and structure expected in the University of Cape Town BCom Financial Accounting first-year course, with overlapping relevance for South African modules like UNISA FAC1502/FAC1503 and CUT FACB101/FACB102. Mastery of these concepts, methods, and exam techniques provides a solid foundation for both passing the exam and progressing to more advanced accounting modules.