Cameroon GCE A-Level Accounting cheat sheet

Going concern assumes the entity will continue operating for the foreseeable future, so assets are valued on a historical cost rather than break-up basis.

Accruals (matching) concept: revenue and expenses are recognised when earned or incurred, not when cash moves, so profit = revenue earned minus expenses incurred.

Prudence requires that gains are not anticipated but losses and liabilities are recognised as soon as they are reasonably foreseeable.

Consistency requires applying the same accounting policies each period; any change must be disclosed with its effect quantified.

Business entity concept treats the owner and the business as separate, so drawings are a reduction of capital, not an expense.

Materiality allows omission or aggregation of items whose size does not influence users' decisions; there is no fixed monetary threshold.

Objectivity/verifiability favours evidence-based measurement (invoices, contracts) over subjective estimates.

In Cameroon, OHADA Uniform Act on Accounting Law and the SYSCOHADA revised chart of accounts govern financial statements; IFRS applies to certain public-interest entities.

Fundamental qualitative characteristics are relevance and faithful representation; enhancing ones are comparability, verifiability, timeliness and understandability.

Every transaction affects at least two accounts and total debits always equal total credits.

DEAD CLIP: Debit Expenses, Assets, Drawings; Credit Liabilities, Income, Capital (and accumulated provisions).

Books of prime entry: sales day book, purchases day book, sales returns day book, purchases returns day book, cash book, petty cash book, general journal.

The sales day book records credit sales only and is posted as a periodic total: Dr Trade receivables, Cr Sales.

The three-column cash book combines cash and bank and records discount allowed (debit column) and discount received (credit column).

Imprest petty cash: the float is restored by debiting petty cash and crediting bank with the amount spent, leaving the imprest intact.

A contra entry (set-off) between the cash book and a customer's account is recorded in both ledgers and in the cash book on opposite sides.

Trade discount is deducted on the invoice and never entered in the ledger; cash discount is recorded only when payment occurs.

Journal entries correct errors, record opening entries, asset disposals and year-end transfers such as profit to capital.

A trial balance proves arithmetic equality of debits and credits only; it does not prove that entries were posted to the correct accounts.

Errors not affecting trial balance agreement: error of principle, error of omission, error of commission, compensating errors, complete reversal of entries, original entry error.

Errors affecting trial balance agreement: single entry, addition error in one ledger, posting to wrong side, transposition of figures, extraction error.

Suspense account is opened with the difference in the trial balance; it is closed once all one-sided errors are corrected.

Correcting a one-sided error: post the missing entry to the affected account and the opposite to suspense.

Correcting a two-sided error: no suspense entry is needed; simply reverse and repost, or adjust both accounts.

Error of principle example: capital expenditure on machinery debited to repairs expense; correction is Dr Machinery, Cr Repairs.

A corrected net profit is computed by adjusting the draft profit for the profit effect of each error, item by item.

After all corrections, the suspense account balance must be nil; a residual balance signals an uncorrected error.

Bank statement balance is the bank's record of the customer's account; the cash book is the entity's record, so the two differ until reconciling items are adjusted.

Items in cash book but not yet on statement: unpresented cheques (deduct from bank statement balance) and uncredited deposits/lodgements (add).

Items on statement but not in cash book must be entered in the cash book: bank charges, interest, standing orders, direct debits, dividends, dishonoured cheques, and errors by the bank.

Adjusted cash book balance = bank statement balance + uncredited lodgements - unpresented cheques.

Overdraft reconciliation reverses the treatment: an overdrawn adjusted cash book is reconciled against a credit statement balance.

Trade receivables control account: opening balance + credit sales - sales returns - receipts - discounts allowed - bad debts - contra = closing balance.

Trade payables control account: opening balance + credit purchases - purchases returns - payments - discounts received - contra = closing balance.

The control account balance should equal the total of the receivables or payables ledger; a difference indicates an error in one of them.

Dishonoured cheques previously received from a customer are debited back to the receivables control account.

Trading account: gross profit = net sales (sales less returns inwards) - cost of goods sold.

Cost of goods sold = opening inventory + purchases (less returns outwards) + carriage inwards - closing inventory.

Profit and loss: net profit = gross profit + other income - all operating expenses, including depreciation, bad debts and discount allowed.

Balance sheet: assets = capital + liabilities, where capital = opening capital + net profit + additional capital - drawings.

Closing inventory appears twice: deducted in cost of goods sold and shown as a current asset in the balance sheet.

Accrued expense: debit expense, credit accrual (current liability); prepaid expense: debit prepaid (current asset), credit expense.

Accrued income is a current asset; income received in advance is a current liability.

Carriage inwards is a cost of purchases; carriage outwards is a selling/distribution expense in the profit and loss.

Goods taken by the owner for personal use are recorded as drawings at cost, not as sales.

Appropriation account distributes profit: interest on capital, partners' salaries, interest on drawings, then residual profit shared in the agreed profit-sharing ratio.

Interest on drawings is income to the partnership: Dr Current account of partner, Cr Appropriation account.

In the absence of a partnership agreement, the Partnership Act default applies: profits shared equally, no interest on capital or salaries.

Fixed capital method uses separate capital and current accounts; the current account absorbs profits, drawings, interest and salaries.

Admission of a partner: revaluation gain or loss is shared by old partners in the old ratio; goodwill brought in cash or through capital accounts.

Sacrifice ratio = old share - new share; the incoming partner's premium for goodwill is credited to sacrificing partners.

Retirement: the retiring partner is credited with share of goodwill, revaluation gains and reserves; the balance is settled or transferred to a loan account.

Dissolution: realise assets, pay realisation expenses, then settle outside creditors before partners' loans, then partners' capital; any deficiency is borne per Garner v Murray.

Realisation account records disposal proceeds and book values; the resulting profit or loss is shared in the profit-sharing ratio.

Share capital is recorded at nominal (par) value; any excess received is share premium, a non-distributable reserve.

Ordinary shares carry voting rights and variable dividends; preference shares carry a fixed dividend rate and priority over ordinary dividends.

Calls in arrears are deducted from called-up capital; calls in advance are a current liability until the shares are fully paid.

Bonus (capitalisation) issue: Dr reserves, Cr share capital; no cash is received and reserves fall.

Rights issue: shares offered to existing shareholders, usually below market price; recorded at par in share capital and the excess in share premium.

Debentures are long-term borrowings; interest is a finance cost charged to profit or loss whether or not paid, and is not a dividend.

Statement of financial position: non-current assets + current assets = equity + non-current liabilities + current liabilities.

Statement of changes in equity: opening equity + shares issued + profit for the year - dividends paid = closing equity.

Dividends are recognised only when declared; proposed dividends are disclosed, not provided, under IFRS presentation.

Prime cost = direct materials + direct labour + direct expenses (royalties, hire of special plant).

Production cost = prime cost + factory overheads + opening work in progress - closing work in progress.

Cost of goods manufactured = production cost + opening finished goods - closing finished goods, transferred to the trading account.

Manufacturing profit is shown only when goods are transferred at cost plus a mark-up; unrealised profit in closing finished goods must be eliminated.

Work in progress is valued at prime cost plus the attributable share of factory overheads, depending on the stated policy.

IAS 2: inventory is measured at the lower of cost and net realisable value, applied item by item.

FIFO assumes oldest units are sold first, so closing inventory reflects recent prices; weighted average smooths price movements.

Net realisable value = estimated selling price - estimated costs of completion - costs of sale.

Abnormal loss of inventory is written off to profit or loss, not carried in closing inventory.

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life; it is not a valuation of the asset.

Straight-line: (cost - residual value) / useful life, or a fixed percentage of cost each year.

Reducing balance: a fixed percentage applied to the net book value, giving a higher charge in early years.

Units of production: (cost - residual value) x units used in the period / total expected units.

Disposal account: Dr Disposal with accumulated depreciation and Cr Disposal with asset cost; proceeds are credited, and the balancing figure is profit or loss on disposal.

Profit on disposal = proceeds - net book value at disposal; it is reported as other income.

Capital expenditure is added to the asset; revenue expenditure is charged to profit or loss.

Revaluation surplus arises when an asset is revalued upward; it is credited to other comprehensive income, not to profit for the year.

Depreciation policy and useful lives must be reviewed at each reporting date, with changes treated prospectively.

Marginal costing values inventory at variable cost only; fixed costs are treated as period costs.

Contribution = sales - variable costs; profit = total contribution - fixed costs.

Break-even units = fixed costs / contribution per unit; break-even revenue = fixed costs / contribution-to-sales ratio.

Margin of safety = (actual sales - break-even sales) / actual sales, expressed as a percentage.

Absorption costing values inventory at direct cost plus absorbed overhead; over-absorption arises when actual activity exceeds budgeted activity.

Overhead absorption rate = budgeted overheads / budgeted activity base (labour hours, machine hours or units).

Relevant costs for a decision are future, incremental cash flows; sunk costs and apportioned fixed costs are irrelevant.

A limiting factor is ranked by contribution per unit of the scarce resource, not by unit contribution.

Prepare budgets in sequence: sales, production, materials usage and purchases, labour, cash; production budget = sales + closing inventory - opening inventory.

IAS 7 classifies cash flows as operating, investing and financing activities.

Operating cash flow (indirect method) = profit before tax + depreciation + other non-cash items - increase in receivables + increase in payables - increase in inventory.

Interest and dividends paid are usually classified as financing; interest and dividends received as investing.

Investing activities include purchase and sale of non-current assets; financing includes share issues, loans raised and repayments.

Cash and cash equivalents include cash in hand, bank balances and short-term highly liquid investments, excluding overdrafts unless repayable on demand and integral to cash management.

Gross profit margin = gross profit / sales x 100; net profit margin = net profit / sales x 100.

Return on capital employed = operating profit / capital employed x 100, where capital employed = total assets - current liabilities.

Current ratio = current assets / current liabilities; quick ratio = (current assets - inventory) / current liabilities.

Inventory turnover = cost of sales / average inventory; receivables collection period = receivables / credit sales x 365 days.

Public sector entities use modified accrual or cash-based accounting, with budgets compared against actual expenditure (vote accounting).

Government accounting emphasises fund accounting, budgetary control and accountability for public money rather than profit measurement.

Not-for-profit entities prepare a receipts and payments account (cash basis) and an income and expenditure account (accruals basis).

A surplus of income over expenditure increases the accumulated fund; a deficit reduces it.

Subscriptions in arrears are current assets; subscriptions received in advance are current liabilities; life membership is capitalised.

Fundraising costs, depreciation and accruals are charged in the income and expenditure account even though no cash moves.

Fundamental ethical principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.

A conflict of interest or self-interest threat requires disclosure and safeguards, or refusal of the engagement.

Confidentiality continues after the professional relationship ends; client information may be disclosed only when legally required.

Going concern assumes the entity will continue operating for the foreseeable future, so assets are valued on a historical cost rather than break-up basis.

Accruals (matching) concept: revenue and expenses are recognised when earned or incurred, not when cash moves, so profit = revenue earned minus expenses incurred.

Prudence requires that gains are not anticipated but losses and liabilities are recognised as soon as they are reasonably foreseeable.

Consistency requires applying the same accounting policies each period; any change must be disclosed with its effect quantified.

Business entity concept treats the owner and the business as separate, so drawings are a reduction of capital, not an expense.

Materiality allows omission or aggregation of items whose size does not influence users' decisions; there is no fixed monetary threshold.

Objectivity/verifiability favours evidence-based measurement (invoices, contracts) over subjective estimates.

Every transaction affects at least two accounts and total debits always equal total credits.

DEAD CLIP: Debit Expenses, Assets, Drawings; Credit Liabilities, Income, Capital (and accumulated provisions).

Books of prime entry: sales day book, purchases day book, sales returns day book, purchases returns day book, cash book, petty cash book, general journal.

The sales day book records credit sales only and is posted as a periodic total: Dr Trade receivables, Cr Sales.

The three-column cash book combines cash and bank and records discount allowed (debit column) and discount received (credit column).

Imprest petty cash: the float is restored by debiting petty cash and crediting bank with the amount spent, leaving the imprest intact.

A contra entry (set-off) between the cash book and a customer's account is recorded in both ledgers and in the cash book on opposite sides.

A trial balance proves arithmetic equality of debits and credits only; it does not prove that entries were posted to the correct accounts.

Errors not affecting trial balance agreement: error of principle, error of omission, error of commission, compensating errors, complete reversal of entries, original entry error.

Errors affecting trial balance agreement: single entry, addition error in one ledger, posting to wrong side, transposition of figures, extraction error.

Suspense account is opened with the difference in the trial balance; it is closed once all one-sided errors are corrected.

Correcting a one-sided error: post the missing entry to the affected account and the opposite to suspense.

Correcting a two-sided error: no suspense entry is needed; simply reverse and repost, or adjust both accounts.

Error of principle example: capital expenditure on machinery debited to repairs expense; correction is Dr Machinery, Cr Repairs.

Bank statement balance is the bank's record of the customer's account; the cash book is the entity's record, so the two differ until reconciling items are adjusted.

Items in cash book but not yet on statement: unpresented cheques (deduct from bank statement balance) and uncredited deposits/lodgements (add).

Items on statement but not in cash book must be entered in the cash book: bank charges, interest, standing orders, direct debits, dividends, dishonoured cheques, and errors by the bank.

Adjusted cash book balance = bank statement balance + uncredited lodgements - unpresented cheques.

Overdraft reconciliation reverses the treatment: an overdrawn adjusted cash book is reconciled against a credit statement balance.

Trade receivables control account: opening balance + credit sales - sales returns - receipts - discounts allowed - bad debts - contra = closing balance.

Trade payables control account: opening balance + credit purchases - purchases returns - payments - discounts received - contra = closing balance.

Trading account: gross profit = net sales (sales less returns inwards) - cost of goods sold.

Cost of goods sold = opening inventory + purchases (less returns outwards) + carriage inwards - closing inventory.

Profit and loss: net profit = gross profit + other income - all operating expenses, including depreciation, bad debts and discount allowed.

Balance sheet: assets = capital + liabilities, where capital = opening capital + net profit + additional capital - drawings.

Closing inventory appears twice: deducted in cost of goods sold and shown as a current asset in the balance sheet.

Accrued expense: debit expense, credit accrual (current liability); prepaid expense: debit prepaid (current asset), credit expense.

Accrued income is a current asset; income received in advance is a current liability.

Appropriation account distributes profit: interest on capital, partners' salaries, interest on drawings, then residual profit shared in the agreed profit-sharing ratio.

Interest on drawings is income to the partnership: Dr Current account of partner, Cr Appropriation account.

In the absence of a partnership agreement, the Partnership Act default applies: profits shared equally, no interest on capital or salaries.

Fixed capital method uses separate capital and current accounts; the current account absorbs profits, drawings, interest and salaries.

Admission of a partner: revaluation gain or loss is shared by old partners in the old ratio; goodwill brought in cash or through capital accounts.

Sacrifice ratio = old share - new share; the incoming partner's premium for goodwill is credited to sacrificing partners.

Retirement: the retiring partner is credited with share of goodwill, revaluation gains and reserves; the balance is settled or transferred to a loan account.

Share capital is recorded at nominal (par) value; any excess received is share premium, a non-distributable reserve.

Ordinary shares carry voting rights and variable dividends; preference shares carry a fixed dividend rate and priority over ordinary dividends.

Calls in arrears are deducted from called-up capital; calls in advance are a current liability until the shares are fully paid.

Bonus (capitalisation) issue: Dr reserves, Cr share capital; no cash is received and reserves fall.

Rights issue: shares offered to existing shareholders, usually below market price; recorded at par in share capital and the excess in share premium.

Debentures are long-term borrowings; interest is a finance cost charged to profit or loss whether or not paid, and is not a dividend.

Statement of financial position: non-current assets + current assets = equity + non-current liabilities + current liabilities.

Prime cost = direct materials + direct labour + direct expenses (royalties, hire of special plant).

Production cost = prime cost + factory overheads + opening work in progress - closing work in progress.

Cost of goods manufactured = production cost + opening finished goods - closing finished goods, transferred to the trading account.

Manufacturing profit is shown only when goods are transferred at cost plus a mark-up; unrealised profit in closing finished goods must be eliminated.

Work in progress is valued at prime cost plus the attributable share of factory overheads, depending on the stated policy.

IAS 2: inventory is measured at the lower of cost and net realisable value, applied item by item.

FIFO assumes oldest units are sold first, so closing inventory reflects recent prices; weighted average smooths price movements.

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life; it is not a valuation of the asset.

Straight-line: (cost - residual value) / useful life, or a fixed percentage of cost each year.

Reducing balance: a fixed percentage applied to the net book value, giving a higher charge in early years.

Units of production: (cost - residual value) x units used in the period / total expected units.

Disposal account: Dr Disposal with accumulated depreciation and Cr Disposal with asset cost; proceeds are credited, and the balancing figure is profit or loss on disposal.

Profit on disposal = proceeds - net book value at disposal; it is reported as other income.

Capital expenditure is added to the asset; revenue expenditure is charged to profit or loss.

Marginal costing values inventory at variable cost only; fixed costs are treated as period costs.

Contribution = sales - variable costs; profit = total contribution - fixed costs.

Break-even units = fixed costs / contribution per unit; break-even revenue = fixed costs / contribution-to-sales ratio.

Margin of safety = (actual sales - break-even sales) / actual sales, expressed as a percentage.

Absorption costing values inventory at direct cost plus absorbed overhead; over-absorption arises when actual activity exceeds budgeted activity.

Overhead absorption rate = budgeted overheads / budgeted activity base (labour hours, machine hours or units).

Relevant costs for a decision are future, incremental cash flows; sunk costs and apportioned fixed costs are irrelevant.

IAS 7 classifies cash flows as operating, investing and financing activities.

Operating cash flow (indirect method) = profit before tax + depreciation + other non-cash items - increase in receivables + increase in payables - increase in inventory.

Interest and dividends paid are usually classified as financing; interest and dividends received as investing.

Investing activities include purchase and sale of non-current assets; financing includes share issues, loans raised and repayments.

Cash and cash equivalents include cash in hand, bank balances and short-term highly liquid investments, excluding overdrafts unless repayable on demand and integral to cash management.

Gross profit margin = gross profit / sales x 100; net profit margin = net profit / sales x 100.

Return on capital employed = operating profit / capital employed x 100, where capital employed = total assets - current liabilities.

Public sector entities use modified accrual or cash-based accounting, with budgets compared against actual expenditure (vote accounting).

Government accounting emphasises fund accounting, budgetary control and accountability for public money rather than profit measurement.

Not-for-profit entities prepare a receipts and payments account (cash basis) and an income and expenditure account (accruals basis).

A surplus of income over expenditure increases the accumulated fund; a deficit reduces it.

Subscriptions in arrears are current assets; subscriptions received in advance are current liabilities; life membership is capitalised.

Fundraising costs, depreciation and accruals are charged in the income and expenditure account even though no cash moves.

Fundamental ethical principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.