SLLC - 2021 - Acc - Lecture Note - 02

LW309 SRI LANKA LAW COLLEGE
Trust Accounts (SLLC)

& Book-Keeping Attorneys –At-Law Final Examination
Lecturer
2021 /2022
Sugath Nandasiri
Chartered Tax Advisor,
B.Sc. Accountancy and Financial Management(SP) USJ,
MBA (Sri Jayewardenepura),
MFE (Financial Economics) Colombo,
PgD ( Business Management) Colombo,
B.A (Peradeniya), MAAT,
Diploma in Banking & Finance (DBF) IBSL,
CIMA Adv. Dip in MA.
Special Notice.
All students are strictly advised to use
updated learning materials provided by the
lecturer for 2021/2022 Examinations and
disregard previous outdated learning
materials collected from other sources.
Unit-02
Objectives of Financial
Statements,Need for
Accounting in The Legal
Environment, and
Statutory Framework of
Accounting.
• Conceptual Framework for
Financial Reporting.
• Objectives of General Purpose
FSs.
Unit -02 • Components of Financial
Statements.
Objectives of • Elements of Financial
Financial Statements.
Statements, • Qualitative Characteristics of
Financial Information.
Need for • Fundamental Assumptions of
Accounting in Financial reporting .
The Legal • Measurement of elements of
FSs.
Environment, • Need for Accounting in the legal
and Statutory environment.
Framework of • Regulatory framework of
Financial Statements.
Accounting.
Session 3 & 4
Objectives of Financial Statements, Need for
Accounting in The Legal Environment, and
Statutory Framework of Accounting.
Objectives of
Financial
Statements, Need Learning Materials
for Accounting in
The Legal 01. Lecture Notes - 02
Environment, and
02. Additional Reading- 01
Statutory
Framework of 03.
Accounting.
Review Questions- (Set 01)
04. Past Questions.
05. Classroom Test-02
Unit 2
Sri Lanka Law College , Attorneys-At-Law :Final Examination, Trust Accounting By Sugath Nandasiri
7
Syllabus ( Unit -02) 5%
01. Explain the objectives of Financial Statements.
02. Identify the components of Financial Statements and Explain

objectives of each Statement.
03. Identify the elements of Financial Statements.
04. Identify Regulatory framework of Financial Statements.

8 Learning Outcomes
After studying this unit, you should be able to ;
• Define “Conceptual Framework of Financial Reporting”

• Identify Structure of Conceptual Framework.
• Identify Components of Financial Statements and their Objectives.
• Explain the Elements of Financial Statements.
• Explain the Qualitative Characteristics of Financial Information.
• Identify the need for Accounting in the Legal Environment.
• Identify Regulatory Framework of Financial Statements.
9 Conceptual Framework for Financial
Reporting.
“Framework is a set of guiding principles that influence and

direct decisions in a particular subject area / discipline ”
Conceptual framework in financial Reporting sets out concepts

and guiding principles in preparation and presentation of
Financial Statements ( General Purpose Financial Statements)
for external users.
10
for Financial Reporting.
1st Level
2nd Level
3rd Level
Structure of The Conceptual Framework
11
Components of Conceptual Framework for
Financial Reporting.
The International Accounting Standards Board (Board) issued the revised
Conceptual Framework for Financial Reporting (Conceptual Framework), a
comprehensive set of concepts for financial reporting – (IFRS)

The framework includes following components:
(a) The objective of financial reporting.
(b) Qualitative characteristics of useful financial information.
(c) Financial statements and the reporting entity.
(d) The elements of financial statements.
(e) Recognition and derecognition.
(f) Measurement.
(g) Presentation and disclosure.
( International Financial Reporting Standards Foundation – IFRS Foundation , 2018)
12 Objectives of Financial Statements.
“The objective of financial statements is to provide information about the
financial position, financial performance and cash flows of an entity that is
useful to a wide range of users in making economic decisions.” – (LKAS-1)

To meet this objective, financial statements provide information about an entity’s:
(a) Assets;
(b) Liabilities;
(c) Equity;
(d) Income and Expenses, including Gains and Losses;
(e) Contributions by and distributions to owners in their capacity as owners;
(f) Cash flows.
13 Objectives of Financial Statements…
The elements of financial statements such as Assets, Liabilities, Equity;
Income and Expenses, including Gains and Losses; Contributions by and
distributions to owners in their capacity as owners; and Cash flows can be

literally grouped as follows for the purpose of learning.
Elements of Financial Statements
Assets Liabilities Equity Income Expenses

14 Objectives of Financial Statements…
- Financial statements are a structured representation of the
financial position and financial performance of an entity.

- Financial Statements do not provide all information ,they do not
necessarily provide non-financial information.
- Financial statements also show the results of the stewardship of
management or accountability of management for the resources
entrusted to it.
15
Components of Financial Statements.
Financial Statements are the output of an accounting system through which financial information
is communicated to the decisionmakers or stakeholders of an entity . Following statements are
considered as the Components of Financial Statements.

• A statement of financial position as at the end of the period; (Balance Sheet)
• A statement of profit or loss and other comprehensive income for the period;
(Income Statement)
• A statement of changes in equity for the period;
• A statement of cash flows for the period;
• Notes, comprising significant accounting policies and other explanatory
information;
16 General Features of Financial Statements
1. Fair presentation and compliance with SLFRSs
- Financial statements shall present fairly the financial position,

financial performance and cash flows of an entity.
- Fair presentation requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the Conceptual Framework for Financial
Reporting (Conceptual Framework).
17 General Features of Financial Statements…
2. Going concern
- When preparing financial statements, management shall make an
assessment of an entity’s ability to continue as a going concern. An

entity shall prepare financial statements on a going concern basis
unless management either intends to liquidate the entity or to cease
trading or has no realistic alternative but to do so.
- When an entity does not prepare financial statements on a going
concern basis, it shall disclose that fact, together with the basis on
which it prepared the financial statements and the reason why the
entity is not regarded as a going concern.
3. Accrual basis of accounting.
- An entity shall prepare its financial statements, except for cash flow
information, using the accrual basis of accounting.
- As per the accrual basis , the entity shall include all income earned
during the period (received or not ) while all expenses shall be
included to the income statement (paid or not).
- Accrual accounting depicts the effects of transactions and other
events and circumstances on a reporting entity’s economic resources
and claims in the periods in which those effects occur, even if the
resulting cash receipts and payments occur in a different period.
4. Materiality and aggregation
- An entity shall present separately each material class of similar items.
An entity shall present separately items of a dissimilar nature or

function unless they are immaterial.
- Financial statements result from processing large numbers of
transactions or other events that are aggregated into classes
according to their nature or function. The final stage in the process of
aggregation and classification is the presentation of summarized and
classified data, which form line items in the financial statements.
5. Offsetting.
- An entity shall not offset assets and liabilities or income and expenses,
unless required or permitted by a SLFRS.
- An entity reports separately both assets and liabilities, and income
and expenses.
- Offsetting in the statement(s) of profit or loss and other
comprehensive income or financial position, except when offsetting
reflects the substance of the transaction or other event, detracts from
the ability of users both to understand the transactions, other events
and conditions that have occurred and to assess the entity’s future
cash flows.
6. Frequency of reporting.
An entity shall present a complete set of financial statements

(including comparative information) at least annually. When an
entity changes the end of its reporting period and presents financial
statements for a period longer or shorter than one year, an entity
shall disclose, in addition to the period covered by the financial
statements:
- the reason for using a longer or shorter period, and
- the fact that amounts presented in the financial statements are not
entirely comparable.
7. Comparative information
-Except when SLFRSs permit or require otherwise, an entity shall present
comparative information in respect of the preceding period for all amounts
reported in the current period’s financial statements. An entity shall include

comparative information for narrative and descriptive information if it is relevant
to understanding the current period’s financial statements
- An entity shall present, as a minimum, two statements of financial position, two
statements of profit or loss and other comprehensive income, two separate
statements of profit or loss (if presented), two statements of cash flows and two
statements of changes in equity, and related notes.
8. Consistency of presentation
An entity shall retain the presentation and classification of items in the financial
statements from one period to the next unless:
23 Qualitative characteristics of useful
financial information.
If financial information is to be useful, it must be relevant and faithfully represent
what it purports to represent. The usefulness of financial information is enhanced if it

is comparable, verifiable, timely and understandable.
Fundamental qualitative characteristics
- Relevance.
- Faithful representation.
Enhancing qualitative characteristics
- Comparability.
- Verifiability.
- Timeliness.
- Understandability.
24 Qualitative characteristics of useful financial
information…
Fundamental qualitative characteristics
Relevance Faithful Representation

- Information is relevant if it is capable of - Information must faithfully represent the substance of
making a difference to the decisions made by what it purports to represent
users - A faithful representation is, to the maximum extent
- Financial information is capable of making a possible, complete, neutral and free from error.
difference in decisions if it has predictive - A faithful representation is affected by level of
value or confirmatory value. measurement uncertainty.
Enhancing qualitative characteristics
Comparability Verifiability Timeliness Understandability

financial information…
Relevance
Relevant financial information is capable of making a difference in the decisions

made by users. Information may be capable of making a difference in a decision
even if some users choose not to take advantage of it or are already aware of it
from other sources.
Materiality
Information is material if omitting it or misstating it could influence decisions that
the primary users of general-purpose financial reports make on the basis of those
reports, which provide financial information about a specific reporting entity.
financial information…
Faithful representation
- Financial reports represent economic phenomena in words and numbers.
To be useful, financial information must not only represent relevant
phenomena, but it must also faithfully represent the substance of the
phenomena that it purports to represent.
- To be a perfectly faithful representation, a depiction would have three
characteristics. It would be complete, neutral and free from error. Of
course, perfection is seldom, if ever, achievable. The objective is to
maximize those qualities to the extent possible.
27
Comparability
-Users’ decisions involve choosing between alternatives, for example, selling or
holding an investment, or investing in one reporting entity or another.
Consequently, information about a reporting entity is more useful if it can be
compared with similar information about other entities and with similar
information about the same entity for another period or another date
- Comparability is the qualitative characteristic that enables users to identify
and understand similarities in, and differences among, items. Unlike the other
qualitative characteristics, comparability does not relate to a single item. A
comparison requires at least two items.
28
Verifiability
- Verifiability helps assure users that information faithfully represents the economic phenomena it
purports to represent.
- Verifiability means that different knowledgeable and independent observers could reach
consensus, although not necessarily complete agreement, that a particular depiction is a faithful
representation.
- Verification can be direct or indirect. Direct verification means verifying an amount or other
representation through direct observation, for example, by counting cash.
- Indirect verification means checking the inputs to a model, formula or other technique and
recalculating the outputs using the same methodology. An example is verifying the carrying
amount of inventory by checking the inputs (quantities and costs) and recalculating the ending
inventory using the same cost flow assumption (for example, using the first-in, first-out method)
29
Timeliness
- Timeliness means having information available to decision-
makers in time to be capable of influencing their decisions.
- Generally, the older the information is the less useful.
However, some information may continue to be timely long
after the end of a reporting period because, for example,
some users may need to identify and assess trends.
30
Understandability
- Classifying, characterizing and presenting information clearly and concisely makes it
understandable
- Some phenomena are inherently complex and cannot be made easy to understand. Excluding
information about those phenomena from financial reports might make the information in
those financial reports easier to understand.
- Financial reports are prepared for users who have a reasonable knowledge of business and
economic activities and who review and analyze the information carefully.
31 Reporting period.
Financial statements are prepared for a specified period of time (reporting period) and
provide information about:
Assets and Liabilities—including unrecognized assets and liabilities—and equity that

existed at the end of the reporting period, or during the reporting period; and
Income and Expenses for the reporting period
- To help users of financial statements to identify and assess changes and trends,
financial statements also provide comparative information for at least one preceding
reporting period.
- Financial statements include information about transactions and other events that
have occurred after the end of the reporting period if providing that information is
necessary to meet the objective of financial statements.
32 Going Concern Assumption.
- Financial statements are normally prepared on the assumption that the

reporting entity is a going concern and will continue in operation for the
foreseeable future.
- Hence, it is assumed that the entity has neither the intention nor the need to
enter liquidation or to cease trading. If such an intention or need exists, the
financial statements may have to be prepared on a different basis. If so, the
financial statements describe the basis used.
33
The reporting entity.
- A reporting entity is an entity that is required, or chooses, to prepare
financial statements.
- A reporting entity can be a single entity or a portion of an entity or can
comprise more than one entity. A reporting entity is not necessarily a
legal entity.
- Determining the appropriate boundary of a reporting entity can be
difficult if the reporting entity: (a) is not a legal entity; and (b) does not
comprise only legal entities linked by a parent subsidiary relationship.
34
Elements of Financial Statements.
The elements of financial statements defined in the Conceptual Framework are
- Assets, Liabilities and Equity, which relate to a reporting entity’s financial position;
and
- Income and Expenses, which relate to a reporting entity’s financial performance.
Economic Changes in economic resources
Resources Claim/ Claims and claims, reflecting financial

performance.
Assets Equities Liabilities Income Expenses

35 Elements of Financial Statements.
Assets Statement of
Financial
Position
Liabilities
Statement of
Cash flow
Equities Statement of
Change in
Equities
Notes and Income

Accounting Income
policies Statement
Expenses
Assets.
“ An asset is a present economic resource controlled by the entity as a result of

past events. It is an economic resource is a right that has the potential to produce
economic benefits.”
There are three aspects of assets :
- Right
- Potential to produce economic benefits
- Control
All assets can be categorized into two groups based on the liquidity .
1. Current Assets.
2. Non-current Assets.
Assets.
- Right
❑ Rights that have the potential to produce economic benefits take many forms, including:
rights to receive cash, rights to receive goods or services , rights to exchange economic
resources with another party on favorable terms.
❑ Legal ownership of a physical object may give rise to several rights, including:
(a) the right to use the object;
(b) the right to sell rights over the object;
(c) the right to pledge rights over the object;
(d) other rights not listed above.
Assets…
Potential to produce economic benefits.

An economic resource is a right that has the potential to produce economic benefits. For
that potential to exist, it does not need to be certain, or even likely, that the right will
produce economic benefits.
Control.
Control links an economic resource to an entity. Assessing whether control exists helps to
identify the economic resource for which the entity accounts.
An entity controls an economic resource if it has the present ability to direct the use of the
economic resource and obtain the economic benefits that may flow from it. Control
includes the present ability to prevent other parties from directing the use of the economic
resource and from obtaining the economic benefits that may flow from it
39
Assets…
Current Assets
An asset should be classified as a current asset when ,

- It is expected to be realized in, or is held for sales or consumption in the normal course of the
enterprise's operating cycle or
- It is held primarily for trading purposes or
- It is expected to be realized after the twelve months of the reporting period or
- The asset is cash or cash equivalent which is not restricted in its use within twelve months.
Non-current Assets
Any asset which is not fallen into current assets should be classified as non-
current assets
Liability.
“A liability is a present obligation of the entity to transfer an economic

resource as a result of past events. .”
For a liability to exist, three criteria must all be satisfied:
(a) The entity has an obligation.
(b) The obligation is to transfer an economic resource.
(c) The obligation is a present obligation that exists as a result of past events.
All liabilities can be categorized into two groups based on short-term and long-term nature.
1. Current Liabilities
2. Non-current Liabilities.
Liability...
An obligation.
- An obligation is a duty or responsibility that an entity has no practical ability to avoid.
- An obligation is always owed to another party (or parties).
- The other party (or parties) could be a person or another entity, a group of people or other
entities, or society at large.
Present obligation as a result of past events
The next criterion for a liability is that the obligation is a present obligation that
exists as a result of past events.
Liability...
The obligation is to transfer an economic resource.

Obligations to transfer an economic resource include, for example:
(a) obligations to pay cash.
(b) obligations to deliver goods or provide services.
(c) obligations to exchange economic resources with another party.
(d) obligations to transfer an economic resource if a specified uncertain future
event occurs.
43
Liabilities…
Current Liabilities
A liability should be classified as a current liability when ,

- It is expected to be settled in its normal operating cycle
- It holds the liability primarily for the purpose of trading.
- The liability is due to be settled within twelve months after the reporting period
- It does not have an unconditional right to settle liability for at lease after twelve
months of the reporting period.
Non-current Liabilities
Any Liability which is not fallen into Current Liabilities should be classified
as Non-current Liabilities
Equity
“Equity is the residual interest in the assets of the entity after

deducting all its liabilities..”
Equity claims are claims on the residual interest in the assets of the entity after
deducting all its liabilities. In other words, they are claims against the entity that do
not meet the definition of a liability.
Such claims may be established by contract, legislation or similar means, and
include, to the extent that they do not meet the definition of a liability:
(a) shares of various types, issued by the entity; and
(b) some obligations of the entity to issue another equity claim
Equity.
“Equity is the residual interest in the assets of the enterprise after deducting all its
liabilities ”
Equity = Total Assets – Total Liabilities
Total Equity can also be calculated as follows,
Equity = Capital+ Profit + Reserves – Drawings
Equity = Capital+(Income-Expense) + Reserves - Drawings
Equity= Share capital + Total Reserves +Net profit/loss for the period- Dividends
Income
“Income is increases in assets, or decreases in liabilities, that result in

increases in equity, other than those relating to contributions from
holders of equity claims .”
-an economic benefit
-results an increase in equity
-an inflow of assets or decreases in liabilities
-not a contribution form owners
Expenses
“Expenses are decreases in assets, or increases in liabilities, that

result in decreases in equity, other than those relating to distributions
to holders of equity claims..”
-decrease in an economic benefit
-results an decrease in equity
-an outflow of assets or increases in liabilities
-not a distribution to owners
48 Measurement Bases.
Elements recognized in financial statements are quantified in
monetary terms. This requires the selection of a measurement basis.

A measurement basis is an identified feature—for example, historical
cost, fair value or fulfilment value—of an item being measured.
Applying a measurement basis to an asset or liability creates a
measure for that asset or liability and for related income and
expenses.
49 Measurement Bases.
Measurement bases
Historical cost measurement base Current Value measurement bases

1.Fair Value
The price that would be received to sell an asset, or
- Historical cost provides information derived, at least paid to transfer a liability, in an orderly transaction
in part, from the price of the transaction or other between market participants at the measurement date.
event that gave rise to the item being measured. 2.Value in use (for assets) Fulfilment value (for
- Historical cost of assets is reduced if they become liabilities).
impaired and historical cost of liabilities is increased reflects entity-specific current expectations about the
if they become onerous. amount, timing and uncertainty of future cash flows
- One way to apply a historical cost measurement 3.Current Cost.
basis to financial assets and financial liabilities is to Reflects the current amount that would be:
measure them at amortized cost. - paid to acquire an equivalent asset
- received to take on an equivalent liability
50 Regulatory framework of Financial
Statements.
Corporate financial reporting requirements in Sri Lanka are
stipulated in several laws.

• The Companies Act No. 7 of 2007,
• Securities and Exchange Commission Act No. 36 of 1987,
• Banking Act No. 30 of 1988,
• Finance Business Act of 2012,
• Regulation of Insurance Industry Act No. 27 of 2011,
• Inland Revenue Act No. 9 of 2015,
• Microfinance Act No. 6 of 2016,
• Finance Act No. 38 of 1971,
• Accounting and Auditing Standards Act No. 15 of 1995.
Statements…
The Companies Act No. 7 of 2007
As per Section148 of the Act

Every company shall keep accounting records which correctly record and explain the
company’s transactions and will—
(a) At any time enable the financial positions of the company to be determined with
reasonable accuracy;
(b) Enable the directors to prepare financial statements in accordance with this Act.
(c) Enable the financial statements of the company to be readily and properly audited
Statements…
As per Section151 of the Act

The board of every company shall ensure that within six months or within such extended period
as may be determined by the Registrar after the balance sheet date of the company, financial
statements that comply with the requirements of Section 151 are—
(a) Completed in relation to the company and that balance sheet date;
(b) Certified by the person responsible for the preparation of the financial statements that it is in
compliance with the requirements of this Act; and
(c) Dated and signed on behalf of the board by two directors of the company or if the company
has only one director, by that director.
Statements…
As per section 166 and 167 of the Act

(a) There is an obligation to prepare and submit annual report to shareholders too.
(b) As suggested earlier the board of a company shall require a copy of the annual
general meeting report to be sent to every shareholder of the company not
less than fifteen working days before the date fixed for holding the annual
general meeting of shareholders.
Statements…
The Accounting and Auditing Standards Act No. 15 of 1995
- requires specified business enterprises (SBE) to prepare financial statements in

compliance with accounting standards as set by the Institute of Chartered
Accountants of Sri Lanka (CA Sri Lanka).
- CA Sri Lanka has also adopted IFRS for SMEs as SLFRS for SMEs. All companies
other than SBEs can apply SLFRS for SMEs.
- The Accounting and Auditing Standards Act No. 15 of 1995 stipulates mandatory
audits for all SBEs. The act specifies that only Chartered Accountants (CAs),
members of CA Sri Lanka with a Certificate to Practice, are authorized to perform
audits following auditing standards as set by CA Sri Lanka.
Statements…
The Securities and Exchange Commission Act No. 36 of 1987 establishes financial reporting
requirements for companies listed on the stock exchange and recognizes the Securities and
Exchange Commission as the regulator for all listed companies.
The Banking Act No. 30 of 1988 stipulates financial reporting requirements for all banks and recognizes
the Central Bank of Sri Lanka (CBSL) as the regulator of the banking sector.
The CBSL also regulates licensed finance companies, established under the Finance Business Act of 2012,
and microfinance companies, created under the Microfinance Act No. 6 of 2016.
The Regulation of Insurance Industry Act No. 27 of 2011 mandates financial reporting requirements for
all insurance companies and recognizes the Insurance Board of Sri Lanka as the regulator for
insurance companies.
•
56 Regulation of Accountancy profession .
The three professional accountancy organizations and the Sri Lanka Accounting and Auditing
Standards Monitoring Board (SLAASMB) share responsibility for regulating the accountancy
profession in Sri Lanka.

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)
Under the Chartered Accountants Act No. 23 of 1959, the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) is responsible for establishing
initial professional development (IPD) and continuing professional development (CPD) requirements for Chartered Accountants; setting accounting,
auditing, and public sector accounting standards; setting ethical requirements for Chartered Accountants.
The Institute of Certified Management Accountants of Sri Lanka (CMA Sri Lanka)
Under the Institute of Certified Management Accountants of Sri Lanka Act No. 23 of 2009, the Institute of Certified Management Accountants of Sri Lanka (CMA Sri
Lanka) was established to regulate the Certified Management accounting profession. CMA Sri Lanka’s mandate includes: (i) serving as a professional organization
for management accountants, (ii) establishing management accounting standards, as well as standards of professional conduct and ethics for members, (iii)
initiation and oversight of a certification program for management accountants, and (iv) establishing and regulating professional education and training programs,
The Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka)

Registered under the Companies Act No. 7 of 2007, the Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka) is responsible for
administering the Accounting Technician qualification and monitoring the conduct of Accounting Technicians in Sri Lanka. AAT Sri Lanka has
established IPD, CPD, and ethical requirements for its members and put in place an investigative and disciplinary mechanism as well.
57 Need for Accounting in the legal environment.
❖ Accounting provide financial information for decision making in various legal decisions.
Financial statements and other reports are written evidence in law.
❖ Lawyers practice law for fee and earn income. It is required to prepare financial
statements of law firms . Lawyers have to maintain accounts and for this they should have
the knowledge of accounting.
❖ Accounting Knowledge is very important to deal with banks.
❖ As a member of the Bar Association , he should know the Bar council Accounting and the
legal provisions of Accounting of Bar Council.
❖ Lawyers must know the accounting of Legal Services activities and the Supreme Court
Legal Services Committee as the government allots grants for legal aid.
❖ Accounting helps to handle commercial cases and make judgement on cases.
58 Need for Accounting in the legal environment.
❖ Advocates must know the Welfare Fund Accounting as the Bar Association
maintains Welfare funds to provide financial assistance .

❖ Lawyers must know to prepare the own accounts as every lawyer is
accountable to his client for the amounts received from him. At the same
time, he is accountable to the government according to the tax laws.
❖ A lawyer should keep accounts of the clients.
❖ A lawyer shall furnish to the client a copy of the clients account on demand
provided the necessary copying charges are paid.
59
• The Conceptual Framework for Financial Reporting, The Institute of Chartered
Accountants of Sri Lanka (CA Sri Lanka).

• Sri Lanka Accounting Standard – LKAS 1, Presentation of Financial Statements, The
Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka).
• Conceptual Framework for Financial Reporting, International Accounting Standards
Board® (Board),IFRS Foundation.
• AccountingStandards,www.casrilanka.com/casl/index.php?option=com_content
&view=article&id=235&Itemid=56, accessed June 2021
• CompaniesActNo.07of2007,(2007)www.drc.gov.lk/App/comreg.nsf/200392d5ac
db66c246256b76001be7d8/$FILE/Act%207%20of%202007%20%28English%2
9.pdf accessed June 2021,
• https://www.ifac.org/about-ifac/membership/country/sri-lanka , accessed June 2021
• http://www.slaasc.lk/files/LKAS%201%20-, accessed June 2021
Q A &
Thank You !
Sri Lanka Law College , Attorneys-At-Law :Final Examination, Trust Accounting
60
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LW309 SRI LANKA LAW COLLEGE

Trust Accounts (SLLC)

02. Identify the components of Financial Statements and Explain

04. Identify Regulatory framework of Financial Statements.

• Define “Conceptual Framework of Financial Reporting”

“Framework is a set of guiding principles that influence and

Conceptual framework in financial Reporting sets out concepts

comprehensive set of concepts for financial reporting – (IFRS)

useful to a wide range of users in making economic decisions.” – (LKAS-1)

distributions to owners in their capacity as owners; and Cash flows can be

Elements of Financial Statements

Assets Liabilities Equity Income Expenses

financial position and financial performance of an entity.

considered as the Components of Financial Statements.

- Financial statements shall present fairly the financial position,

assessment of an entity’s ability to continue as a going concern. An

An entity shall present separately items of a dissimilar nature or

An entity shall present a complete set of financial statements

reported in the current period’s financial statements. An entity shall include

what it purports to represent. The usefulness of financial information is enhanced if it

Relevance Faithful Representation

Enhancing qualitative characteristics

Comparability Verifiability Timeliness Understandability

Relevant financial information is capable of making a difference in the decisions

Assets and Liabilities—including unrecognized assets and liabilities—and equity that

- Financial statements are normally prepared on the assumption that the

Economic Changes in economic resources

Resources Claim/ Claims and claims, reflecting financial

Assets Equities Liabilities Income Expenses

Notes and Income

“ An asset is a present economic resource controlled by the entity as a result of

Potential to produce economic benefits.

An asset should be classified as a current asset when ,

“A liability is a present obligation of the entity to transfer an economic

The obligation is to transfer an economic resource.

A liability should be classified as a current liability when ,

“Equity is the residual interest in the assets of the entity after

“Income is increases in assets, or decreases in liabilities, that result in

“Expenses are decreases in assets, or increases in liabilities, that

monetary terms. This requires the selection of a measurement basis.

Historical cost measurement base Current Value measurement bases

stipulated in several laws.

As per Section148 of the Act

As per Section151 of the Act

As per section 166 and 167 of the Act

- requires specified business enterprises (SBE) to prepare financial statements in

profession in Sri Lanka.

The Association of Accounting Technicians of Sri Lanka (AAT Sri Lanka)

maintains Welfare funds to provide financial assistance .

Accountants of Sri Lanka (CA Sri Lanka).

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