KASNEB ATD cheat sheet

Accounting equation: Assets = Capital + Liabilities. Every transaction changes at least two elements and the equation remains balanced.

Double entry: total debits must equal total credits for each transaction; debit the account that receives value and credit the account that gives value.

Order of recording: source document → book of original entry (sales, purchases, returns, cash book, general journal) → ledger → trial balance → financial statements.

Agreement of a trial balance proves only arithmetic equality; it does not reveal errors of principle, complete omission, compensating errors or a wrong account within the same class.

Capital expenditure is capitalised and depreciated over the asset's life; revenue expenditure is charged to profit or loss in the period incurred.

Straight-line depreciation = (Cost − Estimated residual value) ÷ Useful life. Reducing-balance depreciation = Fixed percentage × Carrying amount.

A valid contract requires offer, acceptance, consideration, capacity, intention to create legal relations and a lawful object; a gratuitous promise is generally not enforceable.

Bank reconciliation adjusts the cash book for items the bank has recorded but the business has not (bank charges, standing orders, direct credits) and adjusts the bank statement for unpresented cheques and uncredited deposits.

A business plan covers the description of the venture, market analysis, marketing plan, operations plan, management team and financial projections.

Partnership appropriation: net profit is applied first to interest on capital and partners' salaries, interest on drawings is deducted, and the residual profit is shared in the profit-sharing ratio.

Manufacturing account: prime cost = direct materials + direct labour + direct expenses; production cost = prime cost + factory overheads; cost of goods manufactured = production cost + opening work in progress − closing work in progress.

IAS 2 requires inventory to be measured at the lower of cost and net realisable value on an item-by-item basis; FIFO and weighted average cost are permitted, LIFO is not.

Receivables control account balance = opening balance + credit sales − cash received − discounts allowed − returns inwards − bad debts written off.

A suspense account is opened only when trial balance totals differ; errors that leave the trial balance in agreement are corrected by journal entry, not through suspense.

Company equity comprises ordinary share capital at nominal value, share premium as a capital reserve, and retained earnings; debenture interest is a finance cost charged to profit or loss.

Simple interest I = (P × R × T) ÷ 100; compound amount A = P(1 + r)^n; compound interest = A − P.

Mean = Σx ÷ n; median = middle value of ordered data; mode = most frequently occurring value; standard deviation measures dispersion around the mean.

Addition rule: P(A or B) = P(A) + P(B) − P(A and B). Multiplication rule for independent events: P(A and B) = P(A) × P(B).

A complete set of financial statements under IAS 1 comprises the statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows and notes.

IAS 16: property, plant and equipment is initially measured at cost; subsequently the cost model (cost less accumulated depreciation and impairment) or the revaluation model may be applied.

IFRS 15 five steps: identify the contract; identify the performance obligations; determine the transaction price; allocate the price to the obligations; recognise revenue as each obligation is satisfied.

Overhead absorption rate = Budgeted production overhead ÷ Budgeted activity base (direct labour hours, machine hours or direct labour cost).

CVP: contribution = sales − variable costs; break-even units = fixed costs ÷ contribution per unit; margin of safety = (budgeted sales − break-even sales) ÷ budgeted sales.

Difference between absorption and marginal costing profit = change in inventory units × fixed overhead absorption rate per unit.

Audit evidence must be sufficient in quantity and appropriate in quality (relevant and reliable); externally generated evidence is generally more reliable than internally generated evidence.

Audit opinions: unmodified; qualified (except for); adverse, where misstatement is material and pervasive; disclaimer, where evidence cannot be obtained and the effect is material and pervasive.

Kenya VAT: standard-rated supplies bear 16%; zero-rated supplies bear 0% and related input tax is recoverable; exempt supplies bear no VAT and related input tax is not recoverable.