I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 EXAM FOCUS POINT 

Questions in the exam may refer to a statement of profit or loss: this means the entries from revenue to 

profit for the year. A reference to other comprehensive income means the last three lines in the 

statement above. However, a reference to statement of profit or loss and other comprehensive income 

means the whole statement shown above. 

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CHAPTER 20  

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  PREPARATION OF FINANCIAL STATEMENTS FOR COMPANIES 

 

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IAS 1 also requires that any other line items, headings or subtotals be shown in the statement of profit or 

loss and other comprehensive income when it is necessary for an understanding of the entity's financial 

performance (para. 85). 

Management must decide whether to present additional items separately. They should consider factors 

including materiality and the nature and function of the items of income and expense when making this 

decision. 

3.2 Revenue 

There are important rules on revenue recognition and these are the subject of IFRS 15 Revenue from 

contracts with customers. We will look at this in detail in later in this chapter. 

3.3 Cost of sales 

This represents the summary of the detailed workings we have used in a sole trader's financial 

statements. 

3.4 Expenses 

Notice that expenses are gathered under a number of headings. Any detail needed will be given in the 

notes to the financial statements. 

3.4.1 Managers' salaries 

The salary of a sole trader or a partner in a partnership is not a charge to the statement of profit or loss 

but is an appropriation of profit. The salary of a manager or member of management board of a limited