ACC211: Financial Accounting 2A Exam Pack – Comprehensive Study Guide (WSU BCom Accounting)

This guide provides comprehensive, exam‑oriented notes for ACC211: Financial Accounting 2A as offered in Walter Sisulu University (WSU) BCom in Accounting and aligned with similar second‑year financial accounting modules at South African universities (e.g. UNISA FAC2601, CUT FAC25FS). It focuses on the core competencies required in a mid‑level financial accounting course: preparation of company financial statements under IFRS, accounting for property, plant and equipment, inventories, provisions and contingencies, and more complex transactions such as earnings per share and events after the reporting period. The emphasis is on exam technique, typical question styles, and structured, step‑by‑step workings.

1. Overview of ACC211: Financial Accounting 2A (WSU BCom Accounting)

1.1 Module context and learning outcomes

ACC211: Financial Accounting 2A at Walter Sisulu University (WSU) forms part of the BCom in Accounting degree and builds on first‑year principles such as the accounting equation, double‑entry, basic financial statements, and introductory IFRS concepts. It typically sits alongside or just before modules like ACC212: Financial Accounting 2B, which extend into more complex group accounts and specialised topics.

By the end of ACC211, a student is expected to:

Prepare and present a complete set of financial statements for a single company in accordance with IFRS (focusing strongly on IAS 1, IAS 2, IAS 16, IAS 37, IAS 10, and IAS 33).
Apply accrual accounting and matching concepts to more complex adjustments.
Distinguish between and account for:
- Property, plant and equipment (PPE) including cost model and revaluation model.
- Inventory valuation using FIFO and weighted average.
- Provisions, contingent liabilities and contingent assets.
Compute and interpret basic and diluted earnings per share (EPS).
Deal with events after the reporting period and their impact on financial statements.
Read and interpret exam‑style scenarios similar in complexity and wording to UNISA FAC2601 exam questions and CUT FAC25FS past papers.

1.2 Exam structure and weighting (typical pattern)

While the precise structure can differ per semester, a typical ACC211 examination at WSU follows a pattern similar to other South African universities’ Financial Accounting 2 papers:

Time allowed: 3 hours.
Total marks: 100.
Section A – Short Questions (20–30 marks)
- Definitions, theory, short calculations.
- IFRS terminology: provision vs contingent liability, PPE recognition criteria, EPS components, etc.
Section B – Structured Questions (70–80 marks)
- One comprehensive company financial statements question (30–40 marks).
- One PPE and depreciation/revaluation question (15–20 marks).
- One provisions / contingencies / events after date question (10–15 marks).
- One EPS / disclosure question (10–15 marks).

Internal assessments (class tests, tutorials, assignments) usually contribute 40–50% to the year mark, with the exam carrying the remainder. Always confirm current WSU regulations, but the exam remains the main hurdle.

1.3 IFRS framework and key standards in ACC211

ACC211 is not a full IFRS technical paper like a final‑year module (e.g. UNISA FAC3701), but it introduces and deepens several key standards:

IAS 1 – Presentation of Financial Statements
- Components of a complete set of financial statements.
- Classification of assets and liabilities into current and non‑current.
- Statement of profit or loss and other comprehensive income (SOCI).
- Statement of changes in equity (SOCE).
IAS 2 – Inventories
- Measurement at lower of cost and net realisable value (NRV).
- Cost formulas: FIFO and weighted average.
IAS 16 – Property, Plant and Equipment
- Initial recognition (cost).
- Subsequent measurement (cost model vs revaluation model).
- Depreciation methods and residual value.
- Revaluation surplus and its transfer to retained earnings.
IAS 37 – Provisions, Contingent Liabilities and Contingent Assets
- Recognition and measurement of provisions.
- Disclosure and non‑recognition of contingencies.
IAS 10 – Events after the Reporting Period
- Adjusting vs non‑adjusting events.
IAS 33 – Earnings per Share
- Basic EPS formula and, in some syllabi, a basic introduction to diluted EPS.

Understanding the interaction between these standards is crucial. For example, a provision for dismantling a plant (IAS 37) increases the cost of PPE (IAS 16), which affects depreciation and ultimately the profit figure that drives EPS (IAS 33).

1.4 Study strategy and typical pitfalls

Students from WSU, UNISA and CUT often face similar challenges:

Over‑focusing on theory OR on calculations, instead of blending both.
Weak time management in long questions (e.g. 40‑mark financial statements question).
Poor layout and presentation, losing method marks even when understanding is sound.

A robust strategy for ACC211:

Master the formats: SOCI, SOFP, SOCE. Practise blank formats until you can produce them from memory.
Drill standard adjustments:
- Accrued and prepaid expenses.
- Depreciation and impairment.
- Provision entries and reversals.
- Inventory NRV adjustments.
Use past exam papers (WSU ACC211, UNISA FAC2601, CUT FAC25FS) to:
- Identify recurring patterns (e.g. revaluation of PPE in almost every second paper).
- Practise under timed conditions.
Write full workings, properly labelled. Exam markers at WSU, UNISA or CUT give partial marks for correct process, even if the final answer is incorrect.
Always cross‑check:
- SOFP balances (Assets = Equity + Liabilities).
- SOCE movements (opening + profit – dividends + revaluation gains = closing).

2. Company Financial Statements under IFRS (IAS 1 Focus)

2.1 Components of a complete set of financial statements

Under IAS 1, a complete set of financial statements includes:

Statement of Financial Position (SOFP) at the end of the period.
Statement of Profit or Loss and Other Comprehensive Income (SOCI):
- Either a single statement, or separate profit or loss and OCI statements.
Statement of Changes in Equity (SOCE).
Statement of Cash Flows (covered in more depth in other modules like ACC212 but often partly examinable).
Notes, including significant accounting policies and explanatory information.
Comparative information for at least one prior period.

In ACC211 exams (WSU and similar to UNISA FAC2601), the focus is mostly on SOFP, SOCI, and SOCE, with limited direct testing of the cash flow statement.

2.2 Statement of Profit or Loss and Other Comprehensive Income (SOCI)

2.2.1 Structure and format

A simplified SOCI (single statement approach) for a company:

Revenue
Cost of sales
- Opening inventory
- - Purchases
- – Closing inventory
Gross profit
Other income (e.g. interest income, gain on disposal)
Distribution costs (selling & distribution expenses)
Administrative expenses
Other expenses (e.g. finance costs)
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income (OCI)
- Items that will not be reclassified to profit or loss (e.g. revaluation surplus on PPE).
Total comprehensive income for the year

2.2.2 Exam‑type SOCI example (with working)

Consider the following partial trial balance for WSU Ltd at 31 December 20.5 (figures in R):

Account	Debit (R)	Credit (R)
Sales		1 500 000
Returns inwards	20 000
Cost of sales (balancing)	900 000
Distribution costs	120 000
Administrative expenses	200 000
Interest expense	30 000
Income tax expense (estimate)	75 000
Revaluation surplus (OCI)		50 000

Additional information:

Closing inventory at 31 December 20.5: R180 000. Opening inventory (embedded in cost of sales figure) is R150 000.
All sales are on credit.

Step 1: Adjust revenue

Revenue = Sales – Returns inwards
= 1 500 000 – 20 000
= R1 480 000

Step 2: Confirm cost of sales

If the “cost of sales (balancing)” amount already incorporates inventory movement, examiners often leave it as is. But in more advanced questions, you’re asked to reconstruct cost of sales:

Cost of sales = Opening inventory + Purchases – Closing inventory

In this simple example, we accept R900 000 as cost of sales and only disclose closing inventory separately in SOFP.

Step 3: Compute gross profit

Gross profit = Revenue – Cost of sales
= 1 480 000 – 900 000
= R580 000

Step 4: Deduct operating expenses

Total operating expenses = Distribution (120 000) + Admin (200 000)
= R320 000

Step 5: Profit before interest and tax

= Gross profit – operating expenses
= 580 000 – 320 000
= R260 000

Step 6: Profit before tax (after finance cost)

= 260 000 – 30 000
= R230 000

Step 7: Profit for the year

= 230 000 – 75 000 (income tax)
= R155 000

Step 8: Total comprehensive income

Profit for the year: R155 000
Other comprehensive income (revaluation surplus): R50 000
Total comprehensive income: 155 000 + 50 000 = R205 000

Exam hint: Always distinguish profit for the year from total comprehensive income. Marks are often awarded separately for each.

2.3 Statement of Financial Position (SOFP)

2.3.1 Presentation and classification

The SOFP is presented in terms of current vs non‑current classification (IAS 1):

Current assets: expected to be realised in the entity’s normal operating cycle, held primarily for trading, or expected to be realised within 12 months after the reporting date. Includes:
- Inventory.
- Trade and other receivables.
- Cash and cash equivalents.
Non‑current assets: all other assets, such as:
- Property, plant and equipment.
- Intangible assets.
- Long‑term investments.

Similarly for liabilities:

Current liabilities: expected to be settled in the normal operating cycle or within 12 months (e.g. trade payables, current portion of long‑term debt).
Non‑current liabilities: e.g. long‑term loans, long‑term provisions.

2.3.2 Example SOFP layout

Continuing from the SOCI example, assume the following additional balances for WSU Ltd at 31 December 20.5:

PPE (at carrying amount following revaluation): R900 000
Inventory (closing): R180 000
Trade receivables: R220 000
Bank (favourable): R50 000
Ordinary share capital (R1 par): R500 000
Share premium: R100 000
Retained earnings at 1 January 20.5: R300 000
Long‑term loan: R200 000
Trade payables: R180 000

We already computed:

Profit for the year: R155 000
OCI – revaluation surplus: R50 000

Retained earnings at 31 December 20.5, assuming no dividends, would be:

Opening retained earnings 300 000

Profit for the year 155 000
= 455 000

The revaluation surplus is recorded in other components of equity, not retained earnings.

Equity section:

Share capital: 500 000
Share premium: 100 000
Retained earnings: 455 000
Revaluation surplus: 50 000
Total equity = 500 000 + 100 000 + 455 000 + 50 000
= R1 105 000

Liabilities:

Non‑current: Long‑term loan = 200 000
Current: Trade payables = 180 000
Total liabilities = 200 000 + 180 000 = R380 000

Total equity and liabilities: 1 105 000 + 380 000 = R1 485 000

Assets:

Non‑current assets: PPE = 900 000
Current assets:
- Inventory: 180 000
- Trade receivables: 220 000
- Bank: 50 000
  Total current assets = 450 000

Total assets = 900 000 + 450 000 = R1 350 000

The statement does not yet balance (1 350 000 vs 1 485 000). In an actual exam, this mismatch signals a missing item (e.g. tax liability, accrued interest, bank overdraft misclassification, or missing asset). When practising, force yourself to diagnose and correct the difference: this simulates exam pressure and trains error checking.

In a complete exam question, you would be given a full trial balance, a list of adjustments, and enough information to arrive at equal totals.

2.4 Statement of Changes in Equity (SOCE)

2.4.1 Purpose and components

The SOCE reconciles opening and closing equity balances across different components:

Share capital.
Share premium.
Retained earnings.
Other reserves (e.g. revaluation surplus).

Typical movements:

Share capital and premium: new issues, buybacks.
Retained earnings: profit/loss for the year, dividends, transfers to/from other reserves.
Revaluation surplus: increases from revaluation, decreases from impairments or revaluation deficits, transfers to retained earnings when the asset is disposed of.

2.4.2 Worked example

Using the earlier WSU Ltd data (assuming no new shares issued, and no dividends declared):

Component	Share capital	Share premium	Retained earnings	Revaluation surplus	Total
Balance 1 Jan 20.5	500 000	100 000	300 000	0	900 000
Total comprehensive income			155 000	50 000	205 000
Dividends			0	0	0
Balance 31 Dec 20.5	500 000	100 000	455 000	50 000	1 105 000

Exam papers at WSU, UNISA or CUT often:

Give opening balances and a list of movements (issues, dividends, revaluations).
Ask for SOCE and/or extract from SOCE showing only the retained earnings and revaluation surplus columns.

Marks are awarded for:

Correct structure (columns and rows clearly labelled).
Correct entries for each movement.
Accurate totaling.

2.5 Common adjustments in financial statement questions

ACC211 exams test your ability to process adjustments like:

Accrued expenses and income:
- E.g. “Interest on loan outstanding R5 000 at year‑end; not yet recorded.”
Prepayments:
- E.g. “Insurance paid R24 000 for 12 months to 31 March 20.6; year‑end 31 Dec 20.5.”
Inventory valuation:
- “Cost R200 000, NRV R180 000.” Inventory must be written down to NRV.
Bad debts and allowances for credit losses:
- “Increase allowance to 5% of debtors after writing off R10 000 as irrecoverable.”
Depreciation and impairment on PPE.
Provisions such as warranties or litigation (IAS 37).
Revaluation of PPE (IAS 16).
Income tax adjustment: tax rate applied on profit, plus deferred tax where the syllabus requires.

Exam technique:
Whenever you see an adjustment, ask:

Does it affect the SOCI (profit or loss or OCI)?
Does it affect the SOFP (asset, liability, or equity)?
Do I need a note or a reconciliation?

Write the journal entry first in rough to clarify the double‑entry, then post to statements.

3. Property, Plant and Equipment (PPE) – IAS 16 in Depth

3.1 Recognition and initial measurement

Under IAS 16, an item of PPE is recognised as an asset when:

It is probable that future economic benefits associated with the item will flow to the entity; and
The cost can be measured reliably.

Cost includes:

Purchase price (including import duties and non‑refundable purchase taxes).
Directly attributable costs to bring the asset to location and condition necessary for intended use:
- Site preparation.
- Delivery and handling.
- Installation and assembly.
- Professional fees.
The initial estimate of dismantling and removing the item and restoring the site (an IAS 37 provision capitalised into PPE).

Example:
WSU Manufacturing Ltd buys a machine on 1 January 20.5 for:

Invoice price: R400 000
Import duties: R20 000
Transport and installation: R30 000
Estimated dismantling cost at end of 5 years: R50 000 (present value at 10% = R31 075, assume for exam)

Initial cost of machine = 400 000 + 20 000 + 30 000 + 31 075 = R481 075

The R31 075 is initially recognised as a provision (IAS 37) and added to the cost of PPE (IAS 16).

3.2 Subsequent measurement: Cost model vs Revaluation model

After initial recognition, an entity chooses either:

Cost model:
- Carry at cost – accumulated depreciation – accumulated impairment losses.
Revaluation model:
- Carry at revalued amount (fair value at date of revaluation) less subsequent depreciation and impairment.

Revaluations must be:

Made with sufficient regularity to ensure the carrying amount does not differ materially from fair value.
Applied to an entire class of assets (e.g. all buildings), not selectively.

Revaluation surplus (increase) is recognised in OCI and accumulated in equity under revaluation surplus, unless it reverses a previous revaluation decrease recognised in profit or loss.
Revaluation deficit (decrease) is recognised in profit or loss, unless it reverses a previous surplus.

3.3 Depreciation

3.3.1 Basics

Depreciation is:

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

Depreciable amount = Cost (or revalued amount) – Residual value.

Common methods:

Straight‑line.
Diminishing balance (reducing balance).
Units of production.

Useful life and residual value should be reviewed at least at each financial year‑end.

3.3.2 Example – straight‑line depreciation

Using the earlier WSU Manufacturing Ltd machine with cost R481 075, estimated residual value R20 000, and useful life 5 years.

Depreciable amount = 481 075 – 20 000 = R461 075
Annual depreciation (straight‑line over 5 years) = 461 075 ÷ 5 = R92 215

Journal entry annually:

Dr Depreciation expense 92 215
Cr Accumulated depreciation – machine 92 215

In an exam, if the purchase occurred mid‑year (e.g. 1 April with December year‑end), you must pro‑rate the depreciation for 9 months.

3.4 Revaluation of PPE – detailed worked example

WSU Properties Ltd owns a building acquired on 1 January 20.1 at a cost of R1 000 000. It is depreciated over 20 years (straight‑line), with no residual value. Year‑end is 31 December.

On 31 December 20.4, the building’s fair value is R1 200 000 and the entity adopts the revaluation model.

3.4.1 Carrying amount before revaluation

Cost: R1 000 000
Useful life: 20 years
Annual depreciation: 1 000 000 ÷ 20 = 50 000

Depreciation by 31 December 20.4 (4 years):
4 × 50 000 = 200 000

Carrying amount = 1 000 000 – 200 000 = R800 000

3.4.2 Revaluation surplus

Fair value at 31 Dec 20.4 = 1 200 000
Carrying amount before revaluation = 800 000
Revaluation surplus = 1 200 000 – 800 000 = R400 000

Journal entry:

Dr Building 400 000
Cr Revaluation surplus (OCI) 400 000

New carrying amount: R1 200 000

3.4.3 Depreciation after revaluation

Remaining useful life at 31 Dec 20.4 = 20 – 4 = 16 years.

New annual depreciation (from 20.5 onwards) = 1 200 000 ÷ 16 = R75 000

Impact:

Increase in depreciation (from 50 000 to 75 000) reduces future profits.
The revaluation surplus sits in equity and may be transferred to retained earnings over time or on disposal.

Some ACC211 syllabi (including WSU style) allow a transfer from revaluation surplus to retained earnings equal to the additional depreciation (75 000 – 50 000 = 25 000 per year). This is not required by IFRS but is permitted.

Journal entry annually (transfer):

Dr Revaluation surplus 25 000
Cr Retained earnings 25 000

No impact on profit or loss; it is a transfer within equity, often examined as an SOCE adjustment.

3.5 Disposal of PPE

When PPE is sold, you must:

Update depreciation to date of disposal.
Remove cost and accumulated depreciation from the accounts.
Recognise profit or loss on disposal in profit or loss.
If revalued, transfer any related revaluation surplus to retained earnings.

Example:
WSU Transport Ltd sells a delivery vehicle on 30 June 20.5. Details:

Cost: R300 000 (purchased 1 January 20.3).
Depreciation method: straight‑line over 5 years, no residual.
Year‑end: 31 December.
Sale proceeds: R100 000.

Step 1: Accumulated depreciation to date of disposal

Annual depreciation = 300 000 ÷ 5 = 60 000

Depreciation:

20.3: 60 000
20.4: 60 000
20.5: 6 months (Jan–Jun) = 60 000 × 6/12 = 30 000

Total = 60 000 + 60 000 + 30 000 = 150 000

Step 2: Carrying amount at disposal

Cost 300 000 – Accumulated depreciation 150 000 = R150 000

Step 3: Profit or loss on disposal

Sale proceeds: 100 000
Carrying amount: 150 000
Loss on disposal = 100 000 – 150 000 = (50 000)

Journal entries:

Record depreciation for current year (6 months):
- Dr Depreciation expense 30 000
- Cr Accumulated depreciation 30 000
Remove asset and accumulated depreciation:
- Dr Accumulated depreciation 150 000
- Cr Vehicle (PPE) 300 000
- Dr Loss on disposal (P/L) 50 000
Record cash received:
- Dr Bank 100 000
- Cr Vehicle disposal (or directly to PPE) 100 000

Some lecturers prefer a “disposal account” T‑account for teaching purposes; exam markers usually accept either approach as long as the final loss or gain is correct.

3.6 Common exam pitfalls in PPE questions

Forgetting pro‑rata depreciation when assets are bought or sold mid‑year.
Applying the wrong base (cost vs revalued amount) for depreciation.
Misunderstanding the direction of revaluation entries (increase vs decrease).
Ignoring the dismantling provision (IAS 37) in the initial cost.
Not linking PPE movements to SOFP and SOCE.

Exam tip: In a complex ACC211 exam question:

Prepare a PPE movement schedule (Cost and Accumulated depreciation columns).
Apply each transaction in date order: additions, disposals, revaluations, depreciation.
At the end, tie your closing carrying amount to the SOFP and your depreciation and gain/loss figures to the SOCI.

4. Inventories, Provisions, Contingencies, and Events after the Reporting Period

4.1 Inventories – IAS 2

4.1.1 Definition and measurement

Inventories are assets:

Held for sale in the ordinary course of business (finished goods).
In the process of production for such sale (work in progress).
In the form of materials or supplies to be consumed in production or in rendering services (raw materials).

Measurement: Lower of cost and net realisable value (NRV).

Cost includes:
- Purchase cost (net of trade discounts).
- Conversion costs (labour and overheads).
- Other costs to bring inventories to their present location and condition.
NRV = Estimated selling price – Costs to complete – Costs to sell.

If NRV < cost, inventory is written down and the loss is recognised in profit or loss.

4.1.2 Cost formulas: FIFO and weighted average

Many South African institutions, including WSU, UNISA (e.g. FAC1502, FAC2601) and CUT, emphasise the FIFO (first‑in, first‑out) and weighted average methods.

Example: FIFO

WSU Traders Ltd inventory data for Product X in 20.5:

Opening inventory: 100 units @ R10 = R1 000
Purchases:
- 1 March: 200 units @ R12 = R2 400
- 1 July: 150 units @ R13 = R1 950
Sales:
- 1 September: 250 units
- 1 November: 120 units

Total units available = 100 + 200 + 150 = 450
Total units sold = 250 + 120 = 370
Closing units = 450 – 370 = 80 units

FIFO assumption: Earliest units sold first.

For the 250 units sold on 1 September:
- 100 (opening) @ 10 = 1 000
- 150 (from 1 March) @ 12 = 1 800
- Cost of these 250 = 2 800
Remaining after 1 September:
- From 1 March: 200 – 150 = 50 units @ 12
- From 1 July: 150 units @ 13

Now, 120 units sold on 1 November:

50 @ 12 = 600
70 (of 1 July) @ 13 = 910
Cost of these 120 = 1 510

Total cost of sales for 20.5:

= 2 800 + 1 510 = R4 310

Closing inventory units = 80 units:

Remaining from 1 July: 150 – 70 = 80 units @ 13
Closing inventory value = 80 × 13 = R1 040

Exam tip: Use a table or inventory T‑account to track flows. Neat workings earn marks even if a final number is slightly off.

Example: Weighted average

Using the same data, but under periodic weighted average:

Total cost of goods available = 1 000 + 2 400 + 1 950 = 5 350
Total units available = 450

Average cost per unit = 5 350 ÷ 450 ≈ R11,89 (rounded)

Cost of goods sold (370 units) ≈ 370 × 11,89 ≈ R4 399,30
Closing inventory (80 units) ≈ 80 × 11,89 ≈ R951,20

In exams:

State whether you are using a periodic or perpetual system if asked.
Round consistently (e.g. to 2 decimals) and use that consistently.

4.2 Provisions, Contingent Liabilities and Contingent Assets – IAS 37

4.2.1 Definitions

Provision: A liability of uncertain timing or amount. Recognised when:
1. An entity has a present obligation (legal or constructive) due to a past event.
2. It is probable (more likely than not) that an outflow of resources will be required to settle the obligation.
3. A reliable estimate can be made.
Contingent liability:
- A possible obligation depending on whether some uncertain future event occurs; or
- A present obligation that is not recognised because:
  - It is not probable that an outflow will be required, or
  - The amount cannot be measured reliably.
    → Not recognised, only disclosed in the notes (if material and probable enough).
Contingent asset:
- A possible asset arising from past events, confirmation depending on future uncertain events.
  → Not recognised, only disclosed if inflow is probable; recognised as an asset only when realisation is virtually certain.

4.2.2 Recognition and measurement of provisions

Typical exam scenarios (WSU, UNISA, CUT):

Warranty provision: A company gives 12‑month warranties on goods sold; historical data indicates 3% of sales result in warranty claims.
Legal claim: Customer sues for damages; lawyer advises 60% chance the entity will lose; estimated payout range R100 000 to R150 000, most likely R120 000.

For a warranty provision:

If sales in 20.5 = R2 000 000, and 3% expected warranty costs:

Provision = 2 000 000 × 3% = R60 000

Journal entry:

Dr Warranty expense (SOCI) 60 000
Cr Provision for warranty (SOFP – liability) 60 000

For a legal claim with 60% chance of losing and best estimate R120 000:

Probability > 50% (probable).
Best estimate method → Recognise provision R120 000.

If probability were only 30%, then it would be a contingent liability disclosed in notes, not recognised.

4.2.3 Changes and reversals of provisions

Provisions must be reviewed at each reporting date and adjusted to reflect the current best estimate. If it becomes no longer probable that an outflow will be required, the provision is reversed.

Example: WSU Retail Ltd had a provision for onerous contract of R200 000 at 31 Dec 20.4. At 31 Dec 20.5, revised estimates suggest only R150 000 needed.

Decrease in provision = 200 000 – 150 000 = 50 000

Journal entry:

Dr Provision 50 000
Cr Reversal of provision (profit or loss) 50 000

4.3 Events after the reporting period – IAS 10

4.3.1 Adjusting vs non‑adjusting events

Events after the reporting period are events occurring between the reporting date and the date when the financial statements are authorised for issue.

Adjusting events:
- Provide additional evidence of conditions that existed at the reporting date.
- Require adjustment to amounts recognised in financial statements.
Non‑adjusting events:
- Indicate conditions that arose after the reporting date.
- Do not lead to adjustments, but if material, require disclosure.

Typical exam examples:

Customer bankruptcy:
- If a major debtor goes insolvent after year‑end but the financial difficulty existed at year‑end → Adjusting (write down receivable).
Court case:
- If a court case regarding an event before year‑end is settled afterwards, confirming the obligation amount → Adjusting (update provision).
Natural disaster (e.g. fire, flood) after year‑end destroying a factory:
- If the event occurred after year‑end and was unrelated to conditions at year‑end → Non‑adjusting, disclose in notes if material.
Dividend declared after year‑end:
- Does not create a present obligation at year‑end, thus non‑adjusting. Only disclose in notes.

4.3.2 Going concern assumption

If events after the reporting period indicate that the going concern assumption is no longer appropriate (e.g. severe financial difficulties, liquidation decision), the financial statements must not be prepared on a going concern basis. This is a significant adjusting event.

ACC211 exams may ask theory questions like:

“Explain the term ‘going concern’ as used in IAS 10 and IAS 1.”
“Discuss whether the following event after the reporting period is adjusting or non‑adjusting and explain the required accounting treatment.”

4.4 Integrated exam example combining IAS 2, IAS 37, IAS 10

WSU Electronics Ltd’s year‑end is 31 December 20.5. The draft financial statements show:

Trade receivables: R500 000
Inventory (at cost): R300 000
No provisions.

Additional information:

On 15 January 20.6, a major customer owing R80 000 at 31 Dec 20.5 was declared bankrupt. The financial difficulty started months before year‑end.
Inventory items with cost R50 000 have a NRV of only R30 000 due to technological obsolescence identified during a stock count on 29 December 20.5.
The company’s lawyer advises a 75% chance of losing a court case relating to a product injury that occurred in November 20.5. Estimated payout R100 000.
On 20 February 20.6, the board declared dividends of R40 000.

Required: Indicate the effect on the 31 Dec 20.5 financial statements.

Analysis:

Customer bankruptcy: Adjusting event – conditions existed at year‑end. Adjust receivables and recognise bad debt expense of R80 000.
Inventory NRV: Condition existed at year‑end (obsolescence). Inventory should be written down to NRV: decrease inventory by R20 000 (50 000 – 30 000), recognise expense.
Court case: Present obligation from event in November 20.5, probable outflow and reliable estimate: recognise a provision of R100 000.
Dividend: Non‑adjusting; only disclose in notes, no liability recognised at 31 Dec 20.5.

This type of integrated question is common across WSU ACC211, UNISA FAC2601, and CUT exam packs.

5. Earnings per Share (EPS), Exam Technique, and Integrated Revision

5.1 IAS 33 – Earnings per Share (focus on basic EPS)

Most ACC211 syllabi introduce basic EPS, with some limited exposure to diluted EPS. For WSU BCom Accounting, ACC211 usually focuses on basic EPS, leaving complex dilutive instruments (convertible notes, options) for later modules.

Basic EPS formula:

[
\text{Basic EPS} = \frac{\text{Profit or loss attributable to ordinary shareholders}}{\text{Weighted average number of ordinary shares outstanding during the period}}
]

Key elements:

Profit attributable to ordinary shareholders:
- Start with profit after tax.
- Deduct preference dividends (if any) – because they are not available to ordinary shareholders.
Weighted average number of shares:
- Adjust for:
  - New shares issued (pro‑rated for time outstanding).
  - Share buybacks.
  - Bonus issues and share splits (retroactively adjusted for all periods presented).

5.2 Worked basic EPS example (straightforward)

WSU Ltd has the following for year ended 31 December 20.5:

Profit after tax: R600 000
31 December 20.5 number of ordinary shares: 300 000
No preference shares; no changes in share capital during the year.

Weighted average number of shares = 300 000 (no changes)

EPS = 600 000 ÷ 300 000 = R2,00 per share

In an exam, this could be a 3‑mark question:

Profit attributable to ordinary shareholders (1 mark).
Weighted average number (1 mark).
EPS calculation (1 mark).

5.3 EPS with changes in ordinary shares during the year

Now consider a more exam‑relevant scenario typical of WSU ACC211, UNISA FAC2601 and CUT FAC25FS:

WSU Mining Ltd has:

1 January 20.5: 400 000 ordinary shares in issue.
1 April 20.5: Issued 100 000 new shares at market price.
1 October 20.5: Repurchased 50 000 shares (treasury shares).
Profit after tax for 20.5: R1 000 000.
No preference shares.

Step 1: Compute weighted average number of shares

Break down the year into segments with constant share numbers:

1 Jan – 31 Mar (3 months): 400 000 shares
Weight = 3/12
Weighted = 400 000 × 3/12 = 100 000
1 Apr – 30 Sep (6 months): 400 000 + 100 000 = 500 000 shares
Weight = 6/12
Weighted = 500 000 × 6/12 = 250 000
1 Oct – 31 Dec (3 months): 500 000 – 50 000 = 450 000 shares
Weight = 3/12
Weighted = 450 000 × 3/12 = 112 500

Total weighted average = 100 000 + 250 000 + 112 500 = 462 500 shares

Step 2: EPS

EPS = Profit after tax ÷ Weighted average shares
= 1 000 000 ÷ 462 500 ≈ R2,16 per share

Exam tips:

Show your time apportionment clearly.
Don’t round the weighted average until the final step (round EPS to e.g. 2 decimals).
Treasury shares reduce the number of outstanding shares – an easy mark that many candidates miss.

5.4 EPS and preference dividends

If a company has preference shares, the preference dividends must be deducted from profit after tax before calculating EPS.

Example:

WSU Finance Ltd for year ended 31 December 20.5:

Profit after tax: R800 000.
100 000 8% non‑redeemable preference shares of R1 each.
500 000 ordinary shares throughout the year.
Dividends on preferences are not yet paid but are cumulative.

Preference dividend = 8% × 100 000 × R1 = R8 000.

Profit attributable to ordinary shareholders = 800 000 – 8 000 = R792 000.

EPS = 792 000 ÷ 500 000 = R1,58 per share.

Exam note: Even if preference dividends are not declared, cumulative preference dividends for the year must be treated as an appropriation of earnings when computing EPS.

5.5 Integrated exam question: From SOCI to EPS

A common structure in ACC211 exam packs (WSU, UNISA, CUT) is:

Prepare the SOCI for a company (20–25 marks).
Compute basic EPS using your profit figure (5–10 marks).

Example (simplified):

You are given a trial balance for WSU Retail Ltd, year ended 30 June 20.5. After processing adjustments, you find:

Profit for the year = R1 200 000.
Ordinary shares: 600 000 in issue at 1 July 20.4.
1 January 20.5: Issued 200 000 new ordinary shares.
10 000 10% preference shares of R2 each (cumulative).

Required:

a) Prepare SOCI (already done in previous parts).
b) Calculate basic EPS for the year ended 30 June 20.5.

Step b: EPS calculation

Profit attributable to ordinary shareholders

Profit after tax: 1 200 000

Preference dividend: 10% × 10 000 × 2 = 20 000

Profit available to ordinary shareholders = 1 200 000 – 20 000 = 1 180 000

Weighted average ordinary shares

1 July 20.4 – 31 Dec 20.4 (6 months): 600 000 × 6/12 = 300 000
1 Jan 20.5 – 30 Jun 20.5 (6 months): (600 000 + 200 000) = 800 000 × 6/12 = 400 000

Weighted average shares = 300 000 + 400 000 = 700 000

EPS

EPS = 1 180 000 ÷ 700 000 ≈ R1,69 per share

Clearly label in your solution:

“Profit attributable to ordinary shareholders = …”
“Weighted average number of ordinary shares = …”
“Basic earnings per share = …”

Examiners can then award method marks.

5.6 Exam technique and time management for ACC211

5.6.1 Planning the 3‑hour paper

With a typical 100‑mark, 3‑hour exam:

You have about 1,8 minutes per mark.
A 40‑mark company financial statements question should take about 70–75 minutes.
A 20‑mark PPE question: ~35 minutes.
A 15‑mark provisions and contingencies question: ~25–30 minutes.
The balance for short questions and EPS.

Strategy:

Scan the paper quickly (3–5 minutes):
- Identify the big questions (sections B/C).
- Start with the question you feel most confident about (often the large financial statements question).
On each big question:
- Ring‑fence time. If you allocated 40 minutes and you reach 40 minutes, move on even if not fully finished.
- You can always return later if time allows.
For short theory questions:
- Be concise, but mention key IFRS terms.
- 2‑mark definition: 2 short, well‑structured sentences are enough.

5.6.2 Layout and workings

Markers across WSU, UNISA, CUT emphasise:

Clarity: Headings, subtotals, and obvious labels.
Workings: Numbered and placed either before or after the main statement, but clearly cross‑referenced (e.g. “(W1)”).
Consistency: Figures used in multiple places must be consistent.

Example for a financial statements question:

SOCI (main statement).
SOFP.
Workings:
- W1: PPE movement schedule.
- W2: Inventory NRV.
- W3: Provision for warranties.
- W4: EPS calculation.

Write in columns with totals underlined and double‑underlined, emulating published financial statement format.

5.6.3 Common student errors and how to avoid them

Not reading the full question:
- Missing extra information at the end (e.g. “Ignore VAT” or “Assume all expenses are administrative unless otherwise stated”).
- Solution: Underline key phrases as you read.
Mixing cost of sales with operating expenses:
- E.g. including freight inwards in distribution costs, instead of adding to cost of purchases.
- Solution: Recall that freight inwards increases cost of inventory; freight outwards is a selling/distribution expense.
Forgetting tax or using the wrong tax rate:
- Many questions specify a tax rate (e.g. 28%) and require income tax expense computation.
- Solution: Highlight the tax rate immediately and perform a clear W for tax.
Not balancing the SOFP:
- Significant marks can be lost if big errors cascade through.
- Solution: Always keep a running total; if time permits, recheck especially retained earnings and revaluation surplus calculations.
Weak time management on long questions:
- Spending 2 hours on the first question and rushing the rest.
- Solution: Practise timed past papers (WSU ACC211, UNISA FAC2601, CUT FAC25FS) before the exam date.

5.7 Revision strategy and use of exam packs (WSU, UNISA, CUT)

For WSU ACC211 students, it is useful to leverage widely available resources such as:

WSU’s own ACC211 tutorial letters and past exam papers.
Comparable modules like:
- UNISA FAC2601 – Financial Accounting for Companies exam packs.
- CUT FAC25FS – Financial Accounting 2 past papers.

Approach:

Topic‑based practice:
- Choose all PPE questions across WSU, UNISA, CUT exam packs; practise until revaluation and disposal procedures are automatic.
- Do the same for provisions and contingencies, and for EPS.
Full mock exam simulations:
- Take one full past paper (e.g. an old WSU ACC211 paper, or a UNISA FAC2601 exam structured similarly).
- Sit down for 3 hours, no interruptions, and write it as if it were the actual exam.
- Afterwards:
  - Mark your own script using suggested solutions if available.
  - Identify patterns of mistakes (format, silly calculation errors, running out of time, etc.).
Summarise key formulas and rules:
- IAS 16: recognition criteria, depreciation, revaluation.
- IAS 2: lower of cost and NRV, FIFO vs weighted average.
- IAS 37: definitions and recognition criteria.
- IAS 10: adjusting vs non‑adjusting events.
- IAS 33: basic EPS formula and treatment of preference dividends.
Create a one‑page formula sheet:
- Annual depreciation (straight‑line, reducing balance).
- Cost of sales calculation.
- EPS formula and weighted average share calculation.
- Inventory valuation under FIFO and weighted average.

This sheet is for revision, not to take into the exam (unless allowed in open‑book format, which ACC211 typically is not). Just the act of writing it helps consolidate knowledge.

This ACC211: Financial Accounting 2A Exam Pack – Comprehensive Study Guide aligns with the expectations for Walter Sisulu University (WSU) BCom in Accounting students and is compatible with patterns seen in UNISA FAC2601 and CUT FAC25FS. Mastery of the material here, combined with disciplined practice of past papers and careful attention to exam technique, provides a strong foundation to perform well in Financial Accounting 2A examinations in the South African university context.