Paper 4

PRINCIPLES OF ACCOUNTING AND TAXATION

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to prepare and interpret financial statements and compute taxes for various entities in a non-complex environment.

On completion, a candidate should be able to

Prepare books of original entry and basic ledger accounts under the double entry system
Prepare basic financial statements of corporations and not for profit organisations
Prepare non-complex tax computations for individuals and corporations
Interpret information in financial and tax statements for decision making.

Content

1
Introduction to Accounting
1. 1.1
  The nature and purpose of accounting
2. 1.2
  Users of accounting information and their respective needs
3. 1.3
  Accounting Standards and their purposes (IFRS, IASs, IPSAS)
4. 1.4
  Regulatory framework (ICPAK, IASB, IAESB, IPSASB), the Companies Act
5. 1.5
  Professional ethics
6. 1.6
  Principles, concepts and conventions underlying the preparation of accounting statements
2
Accounting Procedures and Techniques
1. 2.1
  Accounting Cycle
2. 2.2
  Double entry book-keeping
3. 2.3
  Books of original entry (journals, ledgers, cashbooks)
4. 2.4
  Balancing accounts and preparing the trial balance
5. 2.5
  Depreciation of non-current assets including their disposal (by part exchange; ordinary sale; accident)
6. 2.6
  Preparation of movement of property, plant equipment (as per International Financial Reporting Standards)
7. 2.7
  Trade receivables, bad debts write-offs and provision for bad and doubtful debts
8. 2.8
  Accruals, prepayments, reserves and provisions necessary adjustments in statements of financial performance
9. 2.9
  Introduction to simple statements of financial performance
10. 2.10
  Statements of financial position
11. 2.11
  Final accounting statements of a sole trader
12. 2.12
  Financial statements of a partnership business reflecting changes in partnerships such as admission, retirement and dissolution
3
Introduction to Simple Company Accounts
1. 3.1
  Company Formation - Documents
2. 3.2
  Share capital and reserves
3. 3.3
  Issue of shares at par; premium; discount
4. 3.4
  Over and under subscriptions
5. 3.5
  Allotment and calls on shares, forfeiture of shares
6. 3.6
  Preparation of statements of financial performance and appropriation account and the statement of financial position (12)
7. 3.7
  Published accounts: Components of a complete set of published financial statements only
4
Accounting for Non-Profit Making Organisations
1. 4.1
  Features of Non-profit making organisations
2. 4.2
  Types of funds and their accounting treatment
3. 4.3
  Income and expenditure account
4. 4.4
  Statement of financial position
5. 4.5
  Public Sector Accounting and Financial System
6. 4.6
  Features of public sector entities (as compared to private sector)
7. 4.7
  Structure of the public sector (National and county governments, State Corporations, Departments and Agencies)
8. 4.8
  Regulation and oversight [International Public Sector Accounting Standards Board, Director of Accounting Services, National Treasury, Parliamentary Committees, Accounting Officers at national and county levels, Current PFM Acts
9. 4.9
  Objectives of public sector financial statements and Standards (IPSAS)
10. 4.10
  Accounting techniques in public sector such as budgeting, cash, accrual, commitment and fund accounting) (Preparation of financial statements excluded)
5
Introduction to Taxation
1. 5.1
  History of taxation
2. 5.2
  Types of taxation
3. 5.3
  Principles of an optimal tax system
4. 5.4
  Single versus multiple tax systems
5. 5.5
  Classification of tax systems
6. 5.6
  Tax shifting
7. 5.7
  Factors that determine tax shifting
8. 5.8
  Tax evasion and tax avoidance
9. 5.9
  Taxable capacity
10. 5.10
  Fiscal policies
11. 5.11
  The Revenue Authority; history, structure and mandate
6
Investment Allowances
1. 6.1
  Rationale for investment allowances
2. 6.2
  Investment allowance: Ordinary manufacturers
3. 6.3
  Industrial building deductions
4. 6.4
  Wear and tear allowances
5. 6.5
  Farm works deductions
6. 6.6
  Shipping investment deduction
7. 6.7
  Other deductions (13)
7
Customs Taxes and Excise Taxes
1. 7.1
  Customs procedure
2. 7.2
  Import and export duties
3. 7.3
  Prohibitions and restriction measures
4. 7.4
  Transit goods and bond securities
5. 7.5
  Purposes of customs and excise duties
6. 7.6
  Goods subject to customs control
7. 7.7
  Import declaration form, pre-shipment inspection, clean report of findings
8. 7.8
  Excisable goods and services
9. 7.9
  Application for excise duty (licensing)
10. 7.10
  Use of excise stamps
11. 7.11
  Offences and penalties
12. 7.12
  Excisable goods management system