Question One

The opening balances on the Statement of Changes in Equity for Twatasha limited company as at 1 January 2020, was as follows:

Share Capital K	Share premium K	Retained earnings K	Revaluation surplus K	Total K
500,000	300,000	225,000	120,000	1, 145,000

The following information was known as at 31 December 2020:

10,000 K1 shares had been issued on 1 June 2020 at a premium of K1.40

Retained earnings for the year after dividends of K20, 000 were K35, 200.

Land was revalued upwards by 45, 000 during the year.

On 1 February 2020, Twatasha made a 1 for 4 bonus issue, utilising the share premium account.

Products of K3, 250 sold in 2019, and included in revenue for the year, were incorrectly included in closing inventory at 31 December 2019 and opening inventory 1 January 2020. This is regarded as a fundamental error.

Required:

1. Prepare the Statement of Changes in Equity for the year ended 31 December 2020. 10 marks

2. Give an account of the purpose of the Conceptual Framework. 15 marks