Comprehensive Analysis: SS2 Revision and Examination for Financial Accounting (Second Term)

Financial accounting forms the backbone of business decision-making. It provides essential insights into a company’s financial health, offering key information about its operations, assets, liabilities, and overall economic performance. This article will serve as a detailed, comprehensive, and highly engaging guide for SS2 students studying financial accounting in their second term. The topics covered will help both beginners and more advanced learners understand critical concepts, processes, and practices that are central to accounting. The goal is to drive traffic and engage readers actively searching for reliable financial accounting knowledge.

1. Revision: A Recap of Key Financial Accounting Concepts

This section focuses on revising the fundamental concepts of financial accounting, ensuring students have a strong foundation for more advanced topics. It covers core principles such as the accounting equation, financial statements, bookkeeping, and trial balances.

Likely Questions:

1. What is financial accounting and why is it important?
2. What are the components of financial statements?
3. Explain the accounting equation and its significance.
4. How does double-entry bookkeeping work?
5. What role do ledgers and journals play in accounting?
6. What is a trial balance and why is it prepared?
7. How does depreciation impact financial statements?
8. What is the difference between cash and accrual accounting?
9. How are revenues and expenses recorded in financial accounting?
10. What is the purpose of a balance sheet and income statement?

2. Acquisition/Purchases of Business

In financial accounting, acquisitions refer to one company purchasing another, which may require understanding purchase considerations, goodwill, and the reasons behind acquisitions.

Key Points:

• Purchase Consideration: The total amount paid by the acquiring company for the target company.
• Goodwill: The difference between the purchase price and the fair value of the acquired business’s assets and liabilities.
• Reason for Acquisition: Acquiring businesses may seek to increase market share, expand into new markets, or gain new technologies.

Likely Questions:

1. What is the meaning of business acquisition?
2. How is purchase consideration determined?
3. What is goodwill, and how is it calculated?
4. What are the reasons why companies acquire other businesses?
5. How does acquisition impact the financial health of the acquiring company?
6. What is the format of a purchase agreement?
7. How does working capital impact a business acquisition?
8. What are the key steps involved in a business acquisition process?
9. What is the difference between an asset acquisition and a share acquisition?
10. How does an acquisition affect shareholders?

3. Purchase of Business: Format and Preparation of New Business Account

This topic explains the accounting processes involved in purchasing a business, including preparing the accounts of the newly acquired company.

Key Points:

• Format of Purchase Accounts: After acquiring a business, the new business’s assets, liabilities, and equity need to be recorded correctly in the accounts.
• New Business Account: The new business account reflects adjustments made to the balance sheet after the acquisition.

Likely Questions:

1. What is the correct format for recording the purchase of a business?
2. How do you handle goodwill in purchase accounts?
3. What is the impact of an acquisition on a company’s income statement?
4. How do you calculate the purchase price of a business?
5. What role do fair value adjustments play in the purchase of business accounts?
6. How do liabilities from the acquired business impact the new company’s accounts?
7. How is goodwill amortized and recorded in the books?
8. What adjustments are made to the capital structure after an acquisition?
9. How do you prepare a consolidated balance sheet post-acquisition?
10. What are the challenges in preparing a new business account after an acquisition?

4. Company Amalgamation: Reason, Process, and Working Exercises

Amalgamation refers to the merging of two or more companies into a single company. This process is typically aimed at increasing efficiency, market share, and growth opportunities.

Key Points:

• Reasons for Amalgamation: Companies amalgamate to reduce competition, achieve economies of scale, or diversify their business.
• Process: The process involves various legal, financial, and operational steps, including the valuation of assets and liabilities.

Likely Questions:

1. What is company amalgamation?
2. Why do companies opt for amalgamation?
3. What are the steps involved in the amalgamation process?
4. How do assets and liabilities get consolidated in an amalgamation?
5. What is the role of goodwill in an amalgamation?
6. How are shareholders impacted by amalgamation?
7. What are the key legal requirements for company amalgamation?
8. How is the value of the amalgamated company determined?
9. How does amalgamation affect the financial statements?
10. What are the advantages and disadvantages of company amalgamation?

5. Company Formation: Private and Public Companies, Quoted and Unquoted

This topic explains the formation of companies and distinguishes between private, public, quoted, and unquoted companies. Understanding the type of company is crucial for financial accounting because it determines how the company is taxed and how capital is raised.

Key Points:

• Private Companies: These companies have limited shareholders and do not issue shares to the public.
• Public Companies: These companies are listed on the stock exchange, allowing the public to buy and sell shares.
• Quoted vs. Unquoted: Quoted companies are publicly listed, while unquoted companies are not.

Likely Questions:

1. What is the difference between a private and a public company?
2. How does a company go about forming a public or private company?
3. What are the requirements for a company to be listed on the stock exchange?
4. What are the advantages of forming a private company?
5. How does being a quoted company affect a company’s operations?
6. What are the benefits of listing shares on the stock exchange?
7. How do public companies raise capital?
8. What are the financial reporting requirements for public companies?
9. What are the advantages and disadvantages of unquoted companies?
10. How are private companies taxed compared to public companies?

6. Nigeria’s Financial System: Meaning, Components, Features, Operators, Money Market and Capital Market Functions

The Nigerian financial system is a network of institutions, markets, and instruments designed to provide financing, facilitate transactions, and support economic growth.

Key Points:

• Money Market: A market for short-term borrowing and lending, typically involving instruments like Treasury bills.
• Capital Market: A market for long-term securities like stocks and bonds.
• Operators: Includes banks, insurance companies, pension funds, and regulatory bodies like the Central Bank of Nigeria (CBN).

Likely Questions:

1. What is the Nigerian financial system?
2. How does the money market function?
3. What role does the capital market play in Nigeria’s economy?
4. Who are the key operators in the Nigerian financial system?
5. What is the role of the Central Bank of Nigeria?
6. How do financial institutions like banks and insurance companies operate?
7. What are the features of Nigeria’s financial system?
8. What is the difference between the money market and the capital market?
9. What is the importance of the Nigerian financial system for economic development?
10. How do financial markets in Nigeria contribute to business growth?

7. Types of Shares, Issue of Shares, and the Difference Between Shares

This section focuses on the different types of shares issued by companies, including ordinary and preference shares, and how shares are issued at par, at a discount, or at a premium.

Likely Questions:

1. What are the different types of shares issued by companies?
2. How are shares issued at par, at a discount, or at a premium?
3. What is the difference between ordinary and preference shares?
4. How does the issue of shares affect the ownership structure of a company?
5. What are the advantages and disadvantages of issuing shares?
6. How do companies determine the price at which shares are issued?
7. How does issuing shares at a premium affect a company’s capital?
8. What are bonus shares, and how are they issued?
9. What is a right issue and how is it different from a public offering?
10. How are shares recorded in the financial accounts?

8. Preparation of Accounts for Issue of Shares at Par, Discount, Premium, Bonus Shares, Right Issues

This topic explains how to prepare accounts when a company issues shares under various conditions: at par, discount, premium, as well as bonus shares and rights issues.

Likely Questions:

1. How do you prepare accounts for shares issued at par?
2. What is the treatment of shares issued at a discount in the accounts?
3. How do you record bonus shares in the financial accounts?
4. How are rights issues recorded in financial accounts?
5. How does the issue of shares at a premium impact the balance sheet?
6. What are the journal entries for issuing shares at discount or premium?
7. How does the issuance of bonus shares affect shareholders’ equity?
8. What is the difference between a rights issue and a public offering?
9. How do you calculate the value of rights issues?
10. How do issues of shares affect the company’s capital structure?

9. Loan Capital: Debenture Types, Distinction Between Shares and Debentures

This section distinguishes between shares and debentures, two primary forms of capital raised by companies. It covers the accounting for debenture issuance and how debentures are treated in financial accounts.

Likely Questions:

1. What is loan capital and how is it different from equity capital?
2. What are debentures, and how do companies use them to raise funds?
3. How are debentures recorded in the financial accounts?
4. What are the different types of debentures?
5. How do debentures impact a company’s capital structure?
6. What is the difference between shares and debentures?
7. How are the interest payments on debentures treated in the financial statements?
8. What is the process of issuing debentures?
9. How are debenture holders treated in terms of company liquidation?
10. How do debentures differ from other forms of borrowing?

10. Capital Market: Requirements for Enlisting in Capital Market, Second-Tier Security Market

The capital market is a vital source of funding for businesses and offers a marketplace for trading stocks, bonds, and other securities. This section explains the listing requirements and features of secondary markets.

Likely Questions:

1. What are the requirements for listing securities in the capital market?
2. How does the second-tier security market operate?
3. What are the advantages of participating in the capital market?
4. How do individuals and investors benefit from the capital market?
5. How does the government benefit from the capital market?
6. What are the key functions of the capital market in economic development?
7. How are securities traded in the capital market?
8. What is the role of stock exchanges in capital markets?
9. How does the capital market provide liquidity for companies?
10. What are the risks of investing in the capital market?