Intermediate Financial Accounting II

198 Pages·2013·1.61 MB·English

NATIONAL OPEN UNIVERISTY OF NIGERIA

SCHOOL OF MANAGEMENT SCIENCES

COURSE CODE: ACC 312

COURSE TITLE: INTERMEDIATE FINANCIAL ACCOUNTING II
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INTERMEDIATE FINANCIAL ACCOUNTING II
ACC312
Course Guide

Course Developer/Writer: ICAN STUDY PACK

Adapted by: Anthony Idialu Ehiagwina
National Open University of Nigeria

Course Editor: Mr. E. U. Abianga
National Open University of Nigeria

Programme Leader: Dr. I. D. Idrisu
National Open University of Nigeria

Course Coordinator: Anthony Idialu Ehiagwina
National Open University of Nigeria

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CONTENT
Introduction
Course Aim
Course Objectives
Study Units
Assignments
Tutor Marked Assignment
Final Examination and Grading
Summary

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INTRODUCTION
You are holding in your hand the course guide to ACC312 (Financial Accounting). The purpose of the
course guide is to relate to you the basic structure of the course material you are expected to study
as an Accounting Student in National Open University of Nigeria. Like the name ‘course guide’
implies, it is to guide you on what to expect from the course material and at the end of studying the
course material.
COURSE CONTENT
The course content consists basically of the treatment of transactions according to the provisions of
accounting standards. More specifically, the accounting standards as provided by standard setting
bodies are the content of this course material such as Statement of Accounting Standards (SAS),
International Accounting Standards (IAS), International Financial Reporting Standards (IFRS), and
other related standards provided by standard setting bodies.
COURSE AIM
The aim of the course is to bring to your cognizance the conceptual and regulatory framework that
provides the basis for the treatment and presentation of financial transactions.
COURSE OBJECTIVES
At the end of studying the course material, among other objectives, you should be able to:
1. Explain the accounting method for oil and gas, farmers, estate agencies and property
companies;
2. To prepare accounts relating to solicitors, provident funds, voyage/shipment, cooperative
societies.
3. Explain some of the provisions concerning issues in the Statement of Accounting Standard
18, 19, 20;
4. Explain the accounting treatment of government grants;
5. State accounting treatment of borrowed costs.
6. Explain some of the provision of International Accounting Standard (IAS) 24: Related Party
Disclosures, IAS 29: Financial Reporting in Hyper Inflationary economy.
7. Redraft the financial statement, using the current purchasing power basis.

COURSE MATERIAL
The course material package is composed of:
The Course Guide
The study units
Self-Assessment Exercises
Tutor Marked Assignment
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References/Further Reading
THE STUDY UNITS
The study units are as listed below:
MODULE 1: SPECIALIZED BUSINESSES AND ACCOUNTING STANDARDS
Unit 1: Accounting for Specialized Businesses 1
Unit 2: Accounting for Specialized Businesses 2
Unit 3: Generally Accepted Accounting Principles
Unit 4: Development of Accounting Standards
Unit 5: The International Accounting Standards Board
Unit 6: Content and Application of Accounting Standards
MODULE 2: ACCOUNTING FOR PETROLEUM ACTIVITIES AND FINANCIAL INSTITUTIONS
Unit 1: Leases and Accounting for Investment
Unit 2: Accounting in the Petroleum Industry: Upstream Activities and Accounting by Banks and
Non-banks Financial Institutions
Unit 3: Accounting for Insurance Business and Accounting in the Petroleum Industry: Downstream
MODULE 3: FINANCIAL REPORTING 1
Unit 1: Statement of Cash flow, Accounting for Taxes and Abridged Financial Statements
Unit 2: Earnings per Share, Research and Development, and Provisions, Contingent Liabilities and
Contingent assets
Unit 3: Segment Reporting and Telecommunication Activities
MODULE 4: FINANCIAL REPORTING 2
Unit 1: Business Combinations, Interim Financial Reporting, Presentation of Financial Statements,
Events after the Reporting Period and Revenue
Unit 2: Accounting for Government Grants and Disclosure of Government Assistance, Borrowing
Costs, Related Party Disclosures and Financial Reporting in Hyper Inflationary Economy
Unit 3: Impairment Loss
Unit 4: First-time Adoption of IFRS, Share Based Payment, Non-current Assets held for Sale and
Discontinued Operations
MODULE 5: REGULATORY FRAMEWORK
Unit 1: Regulatory Framework of Financial Accounting 1
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Unit 2: Regulatory Framework of Financial accounting 2
Unit 3: Legal and Regulatory framework of Group Accounts
ASSIGNMENTS
Each unit of the course has a self assessment exercise. You will be expected to attempt them as this
will enable you understand the content of the unit.
TUTOR MARKED ASSIGNMENT
The Tutor Marked Assignments (TMAs) at the end of each unit are designed to test your
understanding and application of the concepts learned. Besides the preparatory TMAs in the course
material to test what has been learnt, it is important that you know that at the end of the course,
you must have done your examinable TMAs as they fall due, which are marked electronically. They
make up 30 percent of the total score for the course.
SUMMARY
It is important you know that this course material was actually adapted from ICAN study pack. This
provides you the opportunity of obtaining a degree in Accounting and preparation for your
professional examinations. Therefore, it is very important that you commit adequate effort to the
study of the course material for maximum benefit.

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INTERMEDIATE FINANCIAL ACCOUNTING II
ACC312

Main Content

Course Developer/Writer: ICAN STUDY PACK

Adapted by: Anthony Idialu Ehiagwina
National Open University of Nigeria

Course Editor: Mr. E. U. Abianga
National Open University of Nigeria

Programme Leader: Dr. I. D. Idrisu
National Open University of Nigeria

Course Coordinator: Anthony Idialu Ehiagwina
National Open University of Nigeria

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TABLE OF CONTENT
MODULE 1: SPECIALIZED BUSINESSES AND ACCOUNTING STANDARDS
Unit 1: Accounting for Specialized Businesses 1
Unit 2: Accounting for Specialized Businesses 2
Unit 3: Generally Accepted Accounting Principles
Unit 4: Development of Accounting Standards
Unit 5: The International Accounting Standards Board
Unit 6: Content and Application of Accounting Standards
MODULE 2: ACCOUNTING FOR PETROLEUM ACTIVITIES AND FINANCIAL INSTITUTIONS
Unit 1: Leases and Accounting for Investment
Unit 2: Accounting in the Petroleum Industry: Upstream Activities and Accounting by Banks and
Non-banks Financial Institutions
Unit 3: Accounting for Insurance Business and Accounting in the Petroleum Industry: Downstream
MODULE 3: FINANCIAL REPORTING 1
Unit 1: Statement of Cash flow, Accounting for Taxes and Abridged Financial Statements
Unit 2: Earnings per Share, Research and Development, and Provisions, Contingent Liabilities and
Contingent assets
Unit 3: Segment Reporting and Telecommunication Activities
MODULE 4: FINANCIAL REPORTING 2
Unit 1: Business Combinations, Interim Financial Reporting, Presentation of Financial Statements,
Events after the Reporting Period and Revenue
Unit 2: Accounting for Government Grants and Disclosure of Government Assistance, Borrowing
Costs, Related Party Disclosures and Financial Reporting in Hyper Inflationary Economy
Unit 3: Impairment Loss
Unit 4: First-time Adoption of IFRS, Share Based Payment, Non-current Assets held for Sale and
Discontinued Operations
MODULE 5: REGULATORY FRAMEWORK
Unit 1: Regulatory Framework of Financial Accounting 1
Unit 2: Regulatory Framework of Financial accounting 2
Unit 3: Legal and Regulatory framework of Group Accounts

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MODULE 1: SPECIALIZED BUSINESSES AND ACCOUNTING STANDARDS
Unit 1: Accounting for Specialized Businesses 1
Unit 2: Accounting for Specialized Businesses 2
Unit 3: Generally Accepted Accounting Principles
Unit 4: Development of Accounting Standards
Unit 5: The International Accounting Standards Board
Unit 6: Content and Application of Accounting Standards
UNIT 1: ACCOUNTING FOR SPECIALIZED BUSINESSES 1
CONTENT
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Estate Agent/Property Company’s Account
3.2 Farmer’s Account
3.3 Oil and Gas Accounting- Upstream Activities
4.0 Conclusion
5.0 Summary
6.0 Tutor Marked Assignment
7.0 References/Further Reading

1.0 INTRODUCTION
In this unit, you will start with the preparation of accounting for a company. When preparing
account for a company, it is common to think of companies that generally engage in the sale of
goods and services, such that, the common way of presenting financial statements is used. Such
accounting presentations are usually of general view. However, there are specialized businesses
whose financial statements might be different from those of a general nature.
The financial statements are usually a summary of all the transactions posted in the various
accounts. The balances of these accounts are reported by the preparation and presentation of the
financial statements. Consequently, without the various accounts, we cannot have the financial
statements. Similarly, the various accounts of specialized businesses will enable the preparation and
presentation of financial statements for specialized businesses. Therefore, let us consider the
accounts in some of these specialized businesses
2.0 OBJECTIVES
After studying this unit, you should be able to:
8. Prepare the accounts of estate agencies and property companies.
9. Prepare the accounts of Farmers.
10. Explain the accounting method for oil and gas accounting
3.0 MAIN CONTENT
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3.1 ESTATE AGENT/PROPERTY COMPANY’S ACCOUNT
Estate Agents and Property Companies prepare profit and loss account and a balance sheet as a
normal trading company and in addition, prepare appropriation account. The peculiarity in its
balance sheet is that freehold land held for re-sale is classified as stock under current assets.
ILLUSTRATION 1
Iruland Estate Development Nigeria Plc, was registered in year 2005. It purchased freehold land at
Ajah for the purpose of creating a highly developed holiday centre and retirement estate. The area
of land purchased consists of 4,000 plots from which a block of 20 plots was designed as sports and
entertainment arena whilst the remaining land was offered for sale at N15,000 per plot, for
development of luxury bungalows. As at 30th April, 2008, the position of the company was as follows:
N’000 N’000
Authorized share capital 50,000
Issued and fully paid:
Ordinary shares @ N1.00 per share 27,000
9% redeemable preference shares 4,500
Unappropriated profit brought forward 9,600
41,100
7% debentures 18,000
Debentures redemption fund 6,900
66,000
N’000
Fixed Assets: 45,330
Entertainment arena including land & filling at cost (750)
44,580
Debenture redemption fund investment, at cost
(market value N7,500,000) 6,900
51,480
Current Assets: N’000
Freehold land (2,000 plots unsold) at cost 12,000
Arena stocks 750
Arena debtors 130
Bank 4,520
17,400
Less: current liabilities:
Trade creditors 180
Proposed ordinary dividend 2,700
2,880
Net current assets 14,520
66,000
The following transactions took place in the year ended 30th April 2008:
a. On 1 July 2007, to be effective 1 May 2007, the company sold the entertainment arena to
complete leisure ltd for N3 million together with arena stocks and debtors at the balance
sheet figure. Cash settlement was made on 20th July 2007.
b. The preference shares were redeemed on 30 June 2007, within the terms of the original
issue, at a premium of 105, to be in lieu of any accrued dividend. The premium on
redemption is to be written off to capital reserve.
c. On 1 July 2007, the proposed ordinary dividend was paid.
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