On 1 January 2020, iMzansi (Pty) Ltd started operation in South Africa, their core business is to manufacture and sell smartphones in South Africa. You have been hired as their engineer. During January the below transaction occurred:

• 1 January 2020, iMzansi bought a PC board Manufacturing machine for R5 500 000 on credit from Simertech. 

• 25 January 2020, iMzansi sold 20 000 smartphones on their lunch day, totaling R40 million (R2 000 per phone). 

• 31 January 2020, iMzansi paid R30 000 rent for their manufacturing building. As the engineer of the business with full knowledge of accounting from your studies in university, you have been tasked to ensure that the senior management team of iMzansi understands the general purpose of financial statements and how the financial statements are so important to them as users of financial information in respect to the financial position, performance, and cash flows of iMzansi in decision making.

Q.1.In accordance with IAS 1, what are the five main components of these financial statements that iMzansi senior management should be aware of? 

Q.1. Explain what is meant by the following terms and what their implications for the preparation of financial statements of iMzansi are: 

a) Going concern basis 

b) Accrual basis 

Q.1. Explain how the Conceptual Framework define the acquired asset and the liability with Simertech? 

Q.1. Explain how does the Conceptual Framework define income and expense from the transactions on 25 and 31 January? 

Q.1. Prepare journal entries that should be recorded by the iMzansi in January 2020. (Hint: include dates and journal narrations)