The Secrets to Passing ICAN PE1 Exams (Part 2)

...continuing from Part 1...

Tackling Financial Accounting

These days Financial Accounting (FA) has proven to be a bit difficult. This is not unconnected with the recent adoption of the International Financial Reporting Standard (IFRS) by the Nigerian Government in 2012. Most ICAN candidates were drawn aback as there were limited materials to prepare for the exams.

The only new thing that happened to FA is the approach the examiners have adopted. The focus is now on the standards. You must familiarize yourself with the standards that relates to published accounts and group accounts.

The FA syllabus is divided into major topics; Group Accounts, Published Account, Bankruptcy, Interpretation of accounts, Miscellaneous Accounts and Specialized Accounts. Note that I didn't mention standards. The reason is that from IAS 1- 41 to IFRS 1 - 13, they all talk about the major topics I listed above.
Your major concern should be to understand, Group, Published, interpretation and Bankruptcy Accounts and all the standards relating to them. You should spend more time in these areas. As for Specialized and Miscellaneous Accounts that contains up to 25 sub-topics, you should spend less time on them. The reason is because, only one question will come from this areas in a diet and chances are you'll spend too much time trying to understand them. The point is this: you don't have all the time to read all that miscellaneous and specialized accounts.



Handling Information Technology  (IT)

IT is perhaps the easiest of the four subject in PE1.  No wonder the pass rate is usually on the high side every other time.

The age we are now is the information age. You must know something about computers to be relevant in this era. Get to know hardware, software, internet, Servers, database, cloud, networking, etc and how all these can help you as an accountant. Get to know also accounting packages and excel.

The beautiful thing about reading IT is that you're also reading to answer one question from the other three (3) subjects. That's because each subject has at least one question from IT.

...to be concluded in part 3...

The Secrets to Passing ICAN PE1 Exams (Part 1)

INTRODUCTION

For the average Nigerian Accounting Graduate, the next part to career advancement is the ICAN exam. This is particularly useful especially with the rate of unemployment in the country. They (the graduate) believe getting the ICAN qualification will enhance their employability. This is also TRUE because most job vacancies today require the qualification.

The road to getting this qualification is not an easy one I must tell you but following some secrets that I'll be sharing here is going to make the process less tedious and the qualification quicker to obtain.
Before I go on with the secrets, you must have at the back of your mind that the purpose of the exam is not just to land you your dream job but also to make you a thoroughly breed professional.

The ICAN PE1 exam is the first stage to write as an accounting graduate from an ICAN accredited institution and this stage comprises of four subjects, including Financial Accounting (FA), Management Accounting (MA), Advance Audit & Assurance (AAA) and lastly Information Technology (IT). I will take them one after the other.

FIRST SECRET - ATTEND LECTURES

The first secret after making up your mind to write the exam is ATTENDING LECTURES. Remember the terrain you're venturing into is a 'fresh' one. You need people who are familiar with the part to guide you. You might have graduated as the best student in your class or even with a first class degree, please attend lectures. The tutors most times have both theoretical and practical experience as professionals. Some of them are examiners with several years of experience and they know how and where to teach. I know a few people who didn't attend lectures and still passed. The truth is; they will not be as good as the ones that attended lectures (professionalism). Other advantages of attending lectures is that you have the opportunity of tapping from combined knowledge and also NETWORKING. You'll meet the future ICAN president in your class!

SECRET TWO - READING PLAN

Planning your personal reading timetable is the second secret. You should already know that attendance of lectures is not enough, you need to strategically plan your reading. The exams are held twice every year; May and November, so you've a minimum of four months to prepare for the next exam after the results are released. If you can consistently read and understand (you can always ask questions in class even if you don't understand) minimum of 2hrs everyday or 10hrs every week, you're sure to pass the exams. The plan is to alternate the subjects. The 'difficult' ones should be read early in the mornings or late at night (depending on your peak period). Break the months into weeks, weeks into days and days into hours. Make sure your four months is totally booked. Each day has its allotted hours.

SECRET THREE - MATERIALS

The first material is the ICAN pack. Forget about what you've heard about the packs, you need it. From experience, some examples from the packs have been lifted as exam questions. Moreso, each subject has a list of recommended textbooks. These textbooks are not for 'decoration'! They are to be bought (borrow/steal-to be returned later) and read. You can get this list inside the syllabus. 
Another valuable material that you cannot do without is the ICAN PATHFINDERS. One of my tutors used to put it like this, "it's a sin not to see past questions before you write any exam". To commit this sin is to limit your chances of passing the exam. Go over the pathfinder again and again.

...to be continued.

How to Prepare Payroll

I've got several requests on how to prepare payroll from gross earnings to net pay.
I will be addressing this issue here today. If you need more clarifications, don't hesitate to ask.

The opinion shared here is in compliance with the law (Personal Income Tax Act 2010, as amended) and what is obtainable in the private sector.

TOTAL GROSS PAY

When an individual employment is confirmed, (s)he is given his letter of appointment which contains also his/her total emoluments. The gross earning is further broken down (according to company policy) into different pay elements of Basic, Housing, Transportation, meal, security, clothing etc. For example, if an individual receives a gross amount of say N1,200,000.00 ( one million two hundred thousand naira) annually. That's 100k monthly. The company might decide to break it down into basic 500k, housing 200k, transportation 150k, meal 100k and security 50k. Like I said earlier, this is at the discretion of the company.

STATUTORY DEDUCTIONS

In preparing the payroll, after determining the gross earning, there are some statutory amount that is expected to be deducted from the gross earning. These include PAYE, pension and NHS. According to PITA 2010 (as amended) , pension and NHS are deducted first before charging PAYE. The percentage of Pension is minimum of 7.5% of the gross earning for both the employee and employer (note: only the employee's amount is deducted from the payroll). The NHS is 2.5% also of the gross earning. When the above deductions have been made then for the PAYE can now be deducted from the net (of pension & NHIS). The net is subjected to the PAYE using the tax table which is:
First 300k - 7%, next 300k - 11%, next 500k - 15%, next 500k - 19%, next 1,600k - 21% and above 3,200k 24%.
If after the table is applied and the tax payable is less than 1% of the gross earning, then the tax payable will be 1% of gross earning (I.e. Minimum tax).

NET PAY

The net pay is what the employee receives at the end of the day. From our example above. The pension value will be 75k I.e 7.5% of 1.2m. And the NHS will be 25k (2.5% of 1.2m). The net of this is 1.1m. This amount is to be subjected to tax as follows:
First 300k @ 7% = 21k, next 300k @ 11% = 33k, next 500k @15% = 75k. Total tax payable is therefore 129k. This amount compared to the minimum tax ( 1% of 1.2m= 12k) is still higher, therefore tax payable is still 129k pa. Approx 10.75k monthly. Total net pay is now; 1.2m - 75k - 25k - 129k =971k approx 80.91k monthly.

LEGAL WAYS TO REDUCE YOUR TAX PAYABLE

Everyone always don't want to pay more and especially not for something they don't enjoy. To reduce your tax liability with respect to PAYE tax some options to explore are;
1. You can increase your pension contributions. This will in turn reduce the amount taxable.
2. Take up a life insurance. This also can reduce the taxable amount which in turn will reduce your tax payable.

Please drop a comment, question or query.
Thank you.

Expense and Expenditure, any Difference?

An Expense is an overhead that is normally written off in the Income Statement.

On the other hand , an Expenditure means PAYMENT which may be a Capital Outflow or a Revenue Outflow. It is Capital when the payment is for a fixed asset whereas it is Revenue if the payment is an expense which is written off immediately from the Profit Loss account. It could also be Deferred Revenue Expenditure such Rent Prepaid , WHT Recoverable ,etc. This can be better enunciated when you are comparing a P&L account with an Income and Expenditure account.

The Word

If you are going to see things work for you, then the word of God must be in your mouth, mind, and body. The word of God must take over your ears, eyes, heart.  That means everything God is saying about you should be wrapped in the word. God is saying to you let your eyes read my word, let your ears hear my word, let your heart hide my word, let your mind think my word, let your body carryout my word.

When you do this, He said in Joshua 1:8 “then you will make your ways prosperous.” It is you who will make your way prosperous.  Are you looking for prosperity? It’s in the word of God!

Happy New Month

Welcome to the month of August.