ACCA F3 LRP - Answers PDF

ANSWERS
F A/FF A: F INAN C IALACCO UNTING
MULTIPLECHOICEQUESTIONS
REGULATORYFRAMEWORK
1
A
ThecorrectanswerisA.TheIASBFrameworkstates:'Prudenceistheinclusionofadegreeof
caution in the exercise of the judgements needed in making the estimates required under
conditions of uncertainty, such that assets or income are not overstated and liabilities and
expensesarenotunderstated'.
D
Thehistoricalcostconventionisunreliablewhentherateofinflationishigh,andcanbevery
misleadingwhennoncurrentassetsareheldforalongtime,suchthattheirhistoricalcostis
farlowerthantheircurrentvalue.Whenthepricesoflandandbuildingsriseovertime,the
historicalcostconventionisprobablyinappropriateforthevaluationoflandandbuildingsthat
anenterprisehasownedformanyyears.
66
KA PLAN PUBLISHING
LECTURER RESO UR CE PAC K AN SWER S
DOUBLEENTRYBOOKKEEPING
3
Customerreceipt
Pettycash
Balancec/d
Bankaccount
$
500 Balanceb/d
1,300 Drawings
805 Purchases

2,605

$
1,750
225
630
2,605
KA PLAN PUBLISHING
67
SALESTAX
8
D
Priceofgoods
Less:5%tradediscount
Salestax
($712.502%)20%
Inputtax
(450,00020%)
Balancec/d
10
Salestaxaccount
$
90,000 Balanceb/d
Outputtax
(750,00020/120)
62,338

152,338

$
27,338
125,000
152,338
Inputtax
(15,00020%)
Balancec/d
11
$750.00
($37.50)
$712.50
$139.65
Salestaxaccount
$
3,000.00 Outputtax
(26,612.5020/120)
1,435.42

4,435.42

$
4,435.42
4,435.42
C
($90,000$72,000)10%=$1,800
68
KA PLAN PUBLISHING
12
Bank
Inputtax
(40,50010/110)
Balancec/d
Salestaxaccount
$
2,200 Balanceb/d
3,682 Outputtax
(60,00010%)
3,618

9,500

$
3,500
6,000
9,500
KA PLAN PUBLISHING
69
INVENTORY
13
A
Inventoryshouldbevaluedatthelowerofcostandnetrealisablevalue.
Thenetrealisablevalueofitem1:
Salevalue:(500$20)
Remedialwork
Sellingexpenses
Netrealisablevalue
$
10,000
(1,800)
(400)
7,800
This is higher than cost, therefore the item should be valued at cost in the statement of
financialposition.
Thenetrealisablevalueofitem2is(100$8)$150=$650.Thisis$350lowerthanthecost
of the inventory ($1,000), so the inventory must be reduced in value by $350 to its net
realisablevalue.
Startingvalueofinventory
Item1
Item2
Adjustedinventoryvalue
14
$
284,000
(350)
283,650
Nochange
Reducetonetrealisablevalue
D
Carriage outward is a selling expense. General administrative overheads are not part of the
costofproduction.
15
B
Grossprofit=30%ofsales,thereforecostofsales=70%ofsales.
Costofsales=70%$64,800=$45,360.
Openinginventory
Purchases
Costofsales
Lostinventory
$
28,400
49,600
78,000
(45,360)
32,640
70
KA PLAN PUBLISHING
16
B
Takingthelowerofcostvsnetrealisablevalueforeachlineofinventoryisasfollows:
Small250units$5=$1,250
Medium 100units$9=$900
Large150units$12=$1,800
Total=$3,950
KA PLAN PUBLISHING
71
NONCURRENTASSETS
17
A
Disposalaccount
$
5,000 Accumulateddepreciation
Bank
Lossondisposal
(balancingfigure)

5,000

Assetatcost
$
2,440
2,200
360
5,000
Assetcarryingvalue=$5,00080%80%80%=$2,560.
Thereforeaccumulateddepreciation=$5,000$2,560=$2,440.
18
C
Annualdepreciation=
$40,000 $4,000
=$3,600
10
DepreciationfortheperiodJulySeptember20X3(3months)=3/12$3,600=$900.
19
D
Accumulateddepreciationatthetimeofdisposal=3years20%$12,000=$7,200.
Carryingvalueattimeofdisposal=$12,000$7,200=$4,800.
Tradeinvalueofassetdisposedof=$5,000.
Profitondisposal=$5,000$4,800=$200.
20
D
Plantandmachineryheldthroughouttheyear=
OpeningbalanceAssetsdisposedofintheyear=
$381,200$36,000=$345,200.
Depreciationcharge
Assetsheldallyear
Assetsboughton1Dec
Assetsdisposedof
21
72
20%$345,200
10/1220%$18,000
8/1220%$36,000
$
69,040
3,000
4,800
76,840
KA PLAN PUBLISHING
ACCRUALSANDPREPAYMENTS
22
Rentalincomereceipts
Receivedinadvancein20X7,for20X8
Receivedinadvancein20X8,for20X9
Receivedin20X8,relatingto20X7
Rentduefor20X8,inarrearsandnotyetreceived
Rentalincomefortheyearto31December20X8
23
1January30September:(9/12$12,000)
1October31December:(2/12$16,000)
24
$
49,200
2,600
51,800
(2,400)
49,400
(1,400)
48,000
1,800
49,800
$
9,000
4,000
13,000
B
(7/12$8,400)+(5/12$12,000)=$9,900
$1,000(1/3(3/12$12,000))paidinadvanceinsundrypayables
Therentreceivedinadvanceistreatedasaliability.
25
A
Rentexpensefortheyear:
1February30June:(5/12$24,000)
1July31January:(7/12$30,000)
$
10,000
17,500
27,500
KA PLAN PUBLISHING
73
RECEIVABLES
26
C
20X3
1Jan
31Dec
20X4
1Jan
27
Balanceb/d
Creditsales
Balanceb/d
$
179,790
800
3,660
1,800
4,920
282,830
473,800
Openingbalance
Creditsales
Interestcharged
28
Receivablesledgercontrolaccount
$
20X3
284,680 31Dec
Cash
189,120
Contras

Discountsallowed

Irrecoverabledebts

Salesreturns

Balancec/d

473,800
282,830
$
308,600 Cash
154,200 Discountsallowed
2,400 Irrecoverabledebts
Contras
Closingbalance

465,200

$
147,200
1,400
4,900
4,600
307,100
465,200
D
$28,500+((5%($868,500$28,500))$38,000)=$32,500
29
A
The total charge is the actual amount of Irrecoverable debts written off plus the increase in
theallowanceforreceivables,orminusthedecreaseintheallowance.
Allowanceatendofyear(5%of$120,000)
Allowanceatstartofyear
Decreaseinallowance
Irrecoverabledebtswrittenoff
Chargetoprofitorloss
74
$
6,000
9,000
(3,000)
5,000
2,000
KA PLAN PUBLISHING
PAYABLES
30
Paymentstosuppliers
Purchasereturns
Contra
Balancec/d
31
$
36,220
74,800
111,020
Payablesledgercontrolaccount
$
235,000 Balanceb/d
2,200 Creditpurchases
3,000
800
39,000

280,000

$
65,000
215,000
280,000
Paymentstosuppliers
Purchasereturns
Contra
Debitbalances
Balancec/d
32
Payablesledgercontrolaccount
$
68,900 Balanceb/d
4,700 Creditpurchases
520
36,900

111,020

KA PLAN PUBLISHING
75
CAPITALSTRUCTURE
33
At30June20X2
Rightsissue(75cpremiumon(62,5004)shares)
1for5bonusissue
At30June20X3
34
Ordinaryshare
capital
$
125,000
62,500
187,500
37,500
225,000
Share
premium
$
100,000
187,500
287,500
(37,500)
250,000
B
Issued share capital and reserves are credit balances in the nominal ledger accounts (since
capital balances are credit balances). The money raised is 200,000 $1.30 = $260,000, of
which$200,000issharecapital(nominalvalue)and$60,000issharepremium.
35
$100,000/$0.50=200,000shares
200,000/4=50,000shares$0.70=$35,000
Balanceonsharepremiumaccountb/d$30,000+$35,000=$65,000
36
76
KA PLAN PUBLISHING
BANKRECONCILIATIONS
37
C
Itemsshowninthebankstatementthatshouldsubsequentlyberecordedinthecashbookare
items that the business does not learn about until it receives the bank statement. These
includebankcharges,dishonouredchequesandstandingordersanddirectdebitpayments.
38
Overdraftperbankstatement
Outstandingchequepayments
Depositsnotyetcreditedbybank
Balancepercashbook
39
40
KA PLAN PUBLISHING
$
(68,100)
(41,800)
(109,900)
141,200
31,300
77
THETRIALBALANCEANDERRORS
41
D
Discountsreceivedshouldberecordedas:
DebitPayables
CreditDiscountsreceived.
Here,thediscounthasbeendebitedinsteadofcredited,sothatthebalanceinthediscounts
receivedaccountis2$200=$400toolow.Tocorrect,wemust:
CreditDiscountsreceived$400
ThereforeDebitSuspenseaccounts$400.
42
B
Totaldebits
=$509,750
Totalcredits
=$517,270
Thereforediscountsallowed
43
44
45
Purchases
Allowanceforreceivables
Closingbalance
=$7,520debitbalance
Suspenseaccount
$
150 Openingbalance
480
980

1,610

$
1,610
1,610
78
KA PLAN PUBLISHING
PREPARINGBASICFINANCIALSTATEMENTS
46
Openinginventory
Purchases
Closinginventory
Costofsales=60%ofsalesrevenue
Grossprofit=40%ofsalesrevenue
Sales=$952,500100/60=
47
Bank
Discountsreceived
Purchasereturns
Closingbalancec/d
48
$
386,200
989,000
1,375,200
(422,700)
952,500
1,587,500
Payables
$
542,300 Openingbalanceb/d
13,200 Purchases(balance)
27,500
137,800

720,800

Openingbalanceb/d
$
142,600
578,200
720,800
137,800
Openinginventory
Purchases
Carriageinwards
Closinginventory
Costofsales
$
13,500
299,000
3,500
(18,160)
297,840
KA PLAN PUBLISHING
79
INCOMPLETERECORDS
49
Usingmarkup
$900140%=$1,260
Usingmargin
$90060%=$540
50
Accumulateddepreciationis$1,000
10,000+2,0007,5003,500=$1,000
Thegrossprofitwouldbe:
11,00025/125=$2,200
51
Theprofitis$4,000
Assets16,500Liabilities$10,300=Capital$3,700+Profit$4,000Drawings$1,500
52
A
Costofsales=75,000+840,00086,000=829,00070%=$580,300
53
Sales(195,2301,230)
Openinginventory
Purchases
Carriageinwards
Closinginventory
Costofsales(194,000100/125)
15,785
147,058
1,500
Bal(9,143)
$
194,000
155,200
80
KA PLAN PUBLISHING
GROUPACCOUNTS
54
A
Tangiblenoncurrentassets=$1,918,000+$1,960,000=$3,878,000
Note:WedonotincludetheAssociatesassetsandliabilitiesinthelinebylineconsolidationof
thegroupstatementoffinancialposition.
55
C
Costofinvestment
Postacquisitionreserves
30%($896,000$296,000)
Investmentinassociate
56
$448,000
$180,000
$628,000
$2,610,000
$500,000
$(2,000,000)
$1,110,000
$1,110,000
$3,878,000
$628,000
$5,616,000
$2,040,000
$1,000,000
$186,000
$8,842,000
B
CostofInvestment
FairvalueofNCIatacquisition
Less:Fairvalueofnetassetsatacquisition
57
B
Noncurrentassets
Goodwill(perQ56)
Tangiblepropertyplantandequip(perQ54)
Investmentinassociate(perQ55)
Currentassets
Inventory(760,000+1,280,000)
Receivables(380,000+620,000)
Cash(70,000+116,000)
KA PLAN PUBLISHING
81
58
A
RetainedearningsofPike
Postacquisitionretainedearnings:
75%($1,884,000$1,000,000)
30%($896,000$296,000)
Note:Additionalworkingforinformationonly:
Noncontrollinginterest:
NCIatacquisition
NCIshareofpostacquisitionearningsofNeal
25%($1,884,000$1,000,000)
82
$2,946,000
$663,000
$180,000
$3,789,000
$500,000
$221,000
$721,000
KA PLAN PUBLISHING
STATEMENTSOFCASHFLOWS
59
D
Statement1isincorrect:netcashfromoperatingactivitiesisthesame,whichevermethodof
presentationisused.
Statement 2 is incorrect. Companies with high profits can be cashnegative, due to high
spendingonnewnoncurrentassetsand/oralargebuildupofnetcurrentassets.
Statement 3 is incorrect. Profits and losses on noncurrent asset disposals are shown in the
section of the cash flow statement that reconciles the net profit before taxation to the net
cashfromoperatingactivities.
60
Profitfortheyear
Depreciation
Noncurrentassetpurchases
Lossondisposal
Increaseininventories
Decreaseinreceivables
Increaseintradepayables
Netcashinflow
61
62
63
Loansredeemed
Dividendspaid
Increaseinsharecapital
$000
63,400
2,700
(17,300)
3,000
(2,500)
600
900
50,800
$
(82,000)
(185,000)
55,000
(212,000)
KA PLAN PUBLISHING
83
INTERPRETATIONOFFINANCIALSTATEMENTS
64
A
Profitaftertax=$22million
Equityshareholders'funds=$500million
Returnonequityshareholders'capitalemployed=22/500=0.044or4.4%.
65
A
Accepted 'norms' are 2.0for the 'ideal' current ratio and 1.0 for the 'ideal' acid test ratio or
quick ratio. However, these 'ideal' ratios are only a rough guide, since 'norms' vary greatly
between companies in different industries. In this question, the current ratio is (1,390/420)
3.3 times and the acid test ratio is [(380 + 40)/420) 1.0 times. The current ratio is therefore
highandtheacidtestratiois'ideal'.
66
A
Gearingisusuallymeasuredastheratiooflongtermdebttoequity(shareholderscapitaland
reserves).
At31.10.X8,gearingwas20/(15+3+22)100%=50%.
At31.10.X9,gearingwas40/(30+18+12)100%=66.7%.
Gearinghasthereforerisen.Highergearingincreasesthefinancialriskfortheshareholders.
67
C
This is possibly a confusing question, because the average receivables collection period (in
days) can be calculated in different ways. Strictly, the average receivables collection period
shouldbecalculatedas(receivablesincludingsalestax/creditsalesincludingsalestax)365.
Thiswouldgive(23,500/50%of235,000)365=73days.
In practice, the average receivables collection period might be calculated as (receivables
includingsalestax/totalsalesrevenueincludingsalestax)365.Thisisbecauseinformationis
not always available about the division of total sales revenue between cash sales and credit
sales. In this question, the average receivables collection period would then be
(23,500/235,000)365=37days.
Evenmoreofteninpractice,itisusualtomeasuretheaveragereceivablescollectionperiod
approximatelyas(totalreceivablesincludingsalestax/totalsalesrevenueexcludingsalestax)
365days.Thismeasurementisoftenusedbystockmarketanalysts,whocanextractthese
figures easily from the published financial statements of an entity. In this question, the
average receivables collection period would then be (23,500/(235,000/1.175)) 365 days =
43days.
ThismeansthatanswersA,BandCcouldallbecorrect.However,giventheinformationinthe
question,youareprobablyexpectedtocomparelikewithlike,i.e.receivablesincludingsales
taxshouldbecomparedwithrevenuefromcreditsalesincludingsalestax.
84
KA PLAN PUBLISHING
68
C
Whenyouareaskedtocalculateagearingratio,yououghttobegiveninformationaboutthe
basisonwhichtheratioiscalculated,becausetherearedifferentwaysofmeasuringgearing.
In particular, gearing might be measured as the percentage ratio of longterm debt to total
sharecapitalandreserves.Alternatively,gearingcouldbemeasuredasthepercentageratioof
(longtermdebtplussomeshorttermloans)tosharecapitalandreserves.
In this question, the problem is deciding what to do about the shortterm borrowings of
$50,000,whichtheenterprisehasapparentlyhadthebenefitofforonlythesecondhalfofthe
year.
(1)
Ifgearingismeasuredaslongtermdebttosharecapitalandreserves,theratiowould
be(75/500)100%=15%.Thisisnotanoptioninthequestion.
(2)
Ifgearingismeasuredas(longtermdebtplusshorttermborrowings)tosharecapital
andreserves,theratiowouldbe((75+50)/500)100%=25%.Thisisnotanoptionin
thequestion.
(3)
Itmightbeassumedthatsincetheshorttermborrowingshaveonlybeeninplacefor
onehalfoftheyear,just onehalfofit($25,000)shouldbeincludedin debt,together
withthelongtermdebtof$75,000.Thiswouldgiveagearingpercentageof((75+(1/2
50))/500)100%=20%.Thisisanoptioninthequestion.
Althoughitispossiblynotthebestwayofmeasuringgearing,itisthemostplausibleofthe
fouravailableanswers.
69
A
Averageinventory=$(4,000+6,000)/2=$5,000.
Inventoryturnoverrate=Costofsales/averageinventory=$24,500/$5,000=4.9times.
70
A
Therearedifferentwaysofmeasuringgearing.Inparticular,gearingmightbemeasuredasthe
percentage ratio of longterm debt to total share capital and reserves. Alternatively, gearing
could be measured as the percentage ratio of longterm debt plus shortterm debt to total
capitalandreserves.Inagearingratio,thefigureabovethelineisalwaysdebt,nevercapital
andreserves.AnswerAisacorrectdefinition.
KA PLAN PUBLISHING
85
RECORDING,HANDLINGANDSUMMARISINGACCOUNTINGDATA
BOOKKEEPING
71
JANEGRIGSON
(a)
Generalledger
12JuneSDB
Salesaccount
$
12JuneSDB
12JuneCRB
$
3,666
340
$
3,666 12JuneRIB
12JuneCRB
12JuneCRBdiscounts
allowed
$
141
1,295
68
12JuneRIB
Returnsinwardsaccount
$
141
12JuneCRB
Cashaccount
$
1,635
12JuneCRB
Discountsallowedaccount
$
68
Receivablesledger
8JuneSDB
9JuneSDB
12JuneSDB
9JuneSDB
PK
$
423 12JuneRIB
HS
$
1,410 9JuneCRB
940 9JuneCRBdiscount
11JuneCRB
11JuneCRBdiscount
RDContractors
$
893 11JuneCRB
$
141
$
140
20
680
48
$
475
86
KA PLAN PUBLISHING
(b)
Thediscountsallowedcolumninthecashreceivedbookisamemorandumcolumnonly
andshouldnotbeincludedinthecrosscastingofthetotals.
Thediscountsallowedtotalisincludedinthecashbookasaremindertoputthrough
thedoubleentryfordiscountsallowedwhichis
Dr
Discountsallowed
Cr
Receivablesledgercontrol
KA PLAN PUBLISHING
87
72
RBD
20X2
31May
31May
20X1
1June
20X2
31May
31May
20X2
31May
31May
31May
20X1
1June
88
Rentsreceivable
$ 20X1
1June
4,004
517
20X2
31May

4,521
Profitorloss
Balc/f
Rentpayable
$ 20X1
1,246 1June
20X2
10,296 31May
382 31May

11,924
Balb/f
Bankrent
Balc/f
Bank
Discountsreceived
Balc/f
Balb/f
Payables
$ 20X1
1June
75,181 20X2
1,043 31May
4,720
80,944
Balb/f
Bank
Balb/f
Profitorloss
Balc/f
Balb/f
$
463
4,058
4,521
$
315
10,100
1,509
11,924
$
5,258
Profitorlosspurchases 75,686
80,944
Allowancefordiscountsreceivable
$ 20X2
106
31May Profitorloss
31May Balc/f

106
$
12
94
106
KA PLAN PUBLISHING
Tutorialnote:
In this example the discounts received during the year of $1,043 have been debited to the
payables account and credited to discounts received, the only entry in the allowance for
discountsaccountbeingthedecreaseinallowancerequiredof$12beingdebitedtoprofitor
loss.
Analternativetreatmentwouldbetocredittheallowancefordiscountsreceivedaccountwith
$1,043givinganettransfertoprofitorlossfromthataccountof$1,031.
KA PLAN PUBLISHING
89
73
MICHAELROBERTSON
(1)
Businessexpenditureiscategorisedintocapitalexpenditureandrevenueexpenditure.
Capitalexpenditureisexpenditureonnoncurrentassetsoronmajorimprovementsto
noncurrent assets which improve their earning capacity. Capital expenditure is not
charged to profit or loss as an expense but is capitalised in the statement of financial
positionandwrittenoffoveranumberofyearsintheformofdepreciation.
Revenueexpenditureisexpenditureincurredeitherforthepurposesofcontinuingthe
trade of the business or in order to maintain the existing capacity of the noncurrent
assets of the business. Revenue expenditure is the expenditure necessary to run the
businessfromdaytodayandischargedtoprofitorlossintheperiodtowhichitrelates.
(2)
Trade payables and profits are both credit balances on the trial balance because they
are both liabilities of the business. Trade payables are amounts owed to outside
suppliers.Theprofitthatthebusinesshasmadeistheamountowedtotheownerofthe
business.Thereforetheprofitfigureiseffectivelytheamountthatisowedbacktoyou
justasthetradepayablesfigureistheamountowedtosuppliers.
(3)
Opening balances on expense accounts are quite common and are due to either
prepaymentsoraccrualsattheendofthepreviousaccountingperiod.
Ifthereisanopeningdebitbalanceonanexpenseaccountthismeansthatattheendof
the previous accounting period an amount of that expense was paid that in fact
belonged to this accounting period. Therefore it is brought forward as the opening
balanceontheaccount.
Ifthereisanopeningcreditbalanceontheaccountthenthismeansthatattheendof
the previous accounting period an accrual was made for an item of expense that had
beenincurredbutwhichhadnotyetbeenpaid.Whentheaccruedamountispaidinthis
accountingperioditwillnotbechargedtoprofitorlossinthatperiodasitiseffectively
cancelledbythecreditbalancebroughtforward.
(4)
A credit entry in the statement of profit or loss from the Allowance for Receivables
account is quite valid. It indicates that there has been a decrease in the allowance
necessaryforreceivablesfortheperiod.
(5)
Contra entries are neither expense nor income; they are simply a method of settling
amountsduetosuppliersandfromcustomers.
In some instances a supplier may also be a customer and therefore you will owe him
moneyandhewilloweyoumoney.Thesimplestwaytosettlesuchadebtistonetoff
theamountsthatyouoweeachotherandthenonlythedifferencewillbepaidtoorby
you.Thisiswhatisknownasacontra.
90
KA PLAN PUBLISHING
ERRORCORRECTIONANDSUSPENSEACCOUNTS
74
UPRIGHT
Keyanswertips
Not all errors have an impact on the suspense account balance. The errors that affect the
suspenseaccountarethosethatwillresultinthetotalofdebitbalancesandthetotalofcredit
balances being different. Errors or omissions that maintain equal debits and credits do not
affectthesuspenseaccountbalance.
Upright,yearended31October20X5
(a)
Adjustmentstoprofit
(i)
(ii)
(iii)
(iv)
(v)
Profitperdraftaccounts
Insurance:openingbalanceomitted
Profitonsaleofvehicle
Reductioninsalesrevenuefigure
Depreciation:
Reduction20%$22,000
Insurancepaidinadvanceomitted
Rentreceivableunderstated
Revisedprofit
+
$
48,200
1,600
4,400
1,500
400
56,100
(7,305)
48,795
1,305
6,000
7,305
(b)
Openingbalance
(v)
Rentreceivable
KA PLAN PUBLISHING
Suspenseaccount
$
1,175 (i) Insuranceaccount

(openingbalance
omitted)
400
(vi) Purchaseledgeraccount

1,575

$
1,305
270
1,575
91
Tutorialnotes:
(1)
Item(i).Theopeningbalanceoftheprepaymenthasbeenomitted.Asaresult,ithasnot
beenchargedagainsttheprofitfortheperiod.Theadjustmenttocorrecttheerrorwill
thereforereduceprofit.Sinceadebitbalancehasbeenomitted,thesuspenseaccountis
affected. The correction is to enter the opening prepayment balance in the suspense
account,debitInsurance,creditSuspenseaccount.
(2)
Item(ii).Theprofitonthedisposalofthenoncurrentassetisthesaleproceeds($6,000)
minusthecarryingvalueoftheassetatthetimeofdisposal($22,000$17,600)$4,400.
The profit on disposal is therefore $1,600. The profit has been omitted from the
statementofprofitorloss.However,thesaleproceedsof$6,000havebeentreatedas
revenue, which is incorrect. The $6,000 is not revenue, but instead goes into the
calculation of the profit on disposal of the asset. Although the disposal has not been
entered in the accounts, the omission has not put total debits and total credits out of
balance,sothesuspenseaccountisnotaffected.
(3)
Item (iii). The accounts have not recorded the disposal of the asset, which means that
depreciation has been charged on the asset (20% $22,000 = $4,400). The question
states that we have to make a correction for this, which involves removing the
depreciationchargeandadjustingprofitaccordingly.
(4)
Item (iv). A prepayment to carry forward has been omitted. This will reduce the total
insurance expense for the year, and so profit must be adjusted upwards. The omission
doesnotaffectthesuspenseaccount.
(5)
Item (v). Rent receivable has been understated and so should be increased. As it is
income,theadjustmentwilladdtoprofit.Thetotalcreditshavebeenundercast,sototal
debits and credits differ and the suspense account is affected. To decide which side of
thesuspenseaccountneedstoshowthe$400,thinkintermsofthedoubleentrynature
ofthecorrection.ThecorrectionshouldbecreditRentreceivablebalance,andsodebit
Suspenseaccount.
(6)
Item (vi). The error does not affect profit, because it relates to amounts owed, not
revenueorexpenses.However,thepurchasehasbeenrecordedas$630inthepayables
account.Sincetheentitydoesnotmaintainanaccountspayableledgercontrolaccount,
the individual payables accounts are part of the double entry system, and the total
credits have been overstated by $630 $360 = $270. Since this puts total debits and
totalcreditsoutofbalance,thesuspenseaccountisaffected.Therequiredcorrectionis
toreducethepayablesbalance,i.e.debitPayablesaccount,creditSuspenseaccount.
92
KA PLAN PUBLISHING
75
VB
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Suspense(2246)
Salesreturns
Sales
Beingthecorrectionofthepostingofcashsalestosalesreturns.
Dr
$
492
246
246
Suspense(1,2941,249)
Customer
Beingthecorrectionofatranspositionerrorinacustomersaccount.
45
45
Bankcharges
Bank
Beingtherecordingofbankchargesomittedfromthecashbook.
37
37
Suspense
Purchases
Beingthecorrectionofapostingerror.
45
45
258
258
Supplier(2129)
Customer
Beingcorrectionofamispostingofacontraentry.
Rent(13,500/6)
Accruals
Beingcorrectionoftheomissionoftherentbillintheledgers.
Carriageinwards
Carriageoutwards
Beingcorrectionofthemispostingofacarriageinvoice.
Irrecoverabledebts
Customer
Beingwriteoffofanirrecoverabledebt.
KA PLAN PUBLISHING
Cr
$
2,250
2,250
52
52
40
40
93
76
YTZ
(a)
(b)
Cashbankcharges
Suspenseaccount
$
3,200 Trialbalancedifference
(103,457102,113)
23 Travelexpenses
Payablesledgercontrol
3,223
Draftnetprofit
Travelexpenses
Returnsoutwardsundercast
Electricityaccruedexpense
Overdraftinterest
Machineryincorrectlychargedtorepairs
Depreciationonmachinery(20%1,450)
Discountsallowed
Adjustedprofit
1,344
9
1,870
3,223
$
97,499
(9)
100
(154)
(28)
1,450
(290)
(30)
98,538
Workings
(W1)
94
Thejournalentriesfortheerrorsareasfollows:
$
(1) Travelexpenses
Suspense
(2) Payablesledgercontrol
100
Returnsoutwards/purchasesreturns
(3) Electricity
154
Accruals
(4) Payablesledgercontrol
1,870
Suspense
(5) Interestpayable
28
Bank
(6) Machineryatcost
1,450
Machineryrepairs
Depreciationcharge(20%1,450)
290
Allowancesfordepreciation
(7) Discountallowed
30
(8) Suspense
3,200
(9) Suspense
23
Bank
$
9
100
154
1,870
28
1,450
290
30
3,200
23
KA PLAN PUBLISHING
77
WT
(1)
(2)
(3)
(4)
(5)
Dr
$
Machineryatcost
2,000
Payables
Statementofprofitorlossdepreciation
400
Accumulateddepreciationmachinery
Beingtherecordingofthepurchaseanddepreciationofanitemofmachinery.
Disposals
Noncurrentassetatcost
Accumulateddepreciation
Disposals
Revenue
Disposals
Statementofprofitorlosslossondisposal
Disposals
Thiscanbesummarisedas:
Revenue
Accumulateddepreciationvehicles
Statementofprofitorlosslossondisposal
Vehiclesatcost
Beingthecorrectrecordingofthedisposalofavehicle.
8,000
1,400
5,000
1,600
2,000
400
8,000
5,000
5,000
1,400
1,400
1,600
1,600
8,000
Bank
200
200
Statementofprofitorlossirrecoverabledebtrecovered
Thiscanbesummarisedas:
Bank
200
Statementofprofitorloss
Beingtherecordingofthereceiptofcashfromapreviouslywrittenoffdebt.
Closinginventory
Statementofprofitorlosscostofsales
Beingtheinclusionofinventorypreviouslyomittedinerror.
Cr
$
200
200
200
4,278
4,278
Statementofprofitorlossrent
125
Suspense
125
Being the recording of the prepaid rent from 30 June 20X1 omitted as an opening
balanceontherentaccount.
KA PLAN PUBLISHING
95
(6)
(7)
(8)
96
Payablesledgercontrol
360
Suspense
Beingthecorrectionofatranspositionerrorinpayablesledgercontrolaccount.
Statementofprofitorlossprofessionalfees
Bank
Beingtherecordingofastandingorderomittedfromthecashbook.
Revenue
175
Suspense
Beingthecorrectionofacashsalemistakenlypostedtwicetothesalesaccount.
360
140
140
175
KA PLAN PUBLISHING
INVENTORYVALUATION
78
MRG
Tutorialnotes:
(1)
As the examiner has asked for the value of material issues it is necessary to present a
stores ledger account or equivalent working i.e., had we only been asked to value
inventoryitwouldhavebeenpossibletotakeashortcutfirstinfirstout.
(2)
Caremustbetakentorecordthetransactionindateorder.Inthequestiontheissueon
10 February appears on the line above the receipt on 8 February. Read the question
carefully.
(3)
The book figures show a closing inventory of 600 units whereas the physical count
showed 500 units. The conventional way to deal with this loss in the stores ledger
account is to treat it as an issue on the last day of the month/period being recorded
(i.e.onthedateofthephysicalcount).
(4)
When preparing the stores ledger it is recommended that the balances are listed in
chronologicalordersoastobeabletoapplytheappropriateassumption.
KA PLAN PUBLISHING
97
Calculationofvalueofissuesforthesixmonthsandvalueofclosinginventoryattheendof
June
(a)
98
Firstinfirstout(FIFO)
Date
13Jan
Receipts
200@36=
8Feb
10Feb
400@38=
11Mar
600@40=
12Apr
400@35=
$
7,200
Valueofissues
Balance
15,200
200@36=
200@36
300@38=
200@36
400@38=
18,600 100@38=
100@38
600@40=
100@38
600@40
400@35=
20Apr
100@38
500@40=
15Jun
25Jun
30Jun
500@28=
24,000
14,000
23,800 100@40
400@35=
14,000
Valueofclosinginventory
$
7,200
22,400
3,800
27,800
41,800
18,000
100@40
400@35
500@28=
100@40
100@35
300@35=
14,500 500@28=

56,900

Inventoryloss
100@35=
3,500 500@28=

32,000
17,500
14,000
$14,000
KA PLAN PUBLISHING
(b)
Weightedaverage
Date
13Jan
8Feb
10Feb
11Mar
12Apr
20Apr
15Jun
25Jun
30Jun
Receipts
200@36=
400@38=
600@40=
400@35=
500@28=
$
7,200
15,200
24,000
14,000
14,000
Valueofissues
$
500@37.33= 18,665
600@37.94= 22,764
400@32.97= 13,188

54,617

Inventoryloss
100@32.97= 3,297

Valueofclosinginventory
Balance
200@36=
7,200
600@37.33= 22,400
100@37.33= 3,735
700@39.62= 27,735
1,100@37.94=41,735
500@37.94= 18,971
1,000@32.97= 32,971
600@32.97= 19,783
500@32.97= 16,486
$16,486
Tutorialnote:
(1)
Priceisrecalculatedattimeofeachnewreceipt,e.g.
8Feb:Price
7,200 + 15,200
200 + 400
11Mar:Price
3,735 + 24,000
100 + 600
(2)
Because the figures are not exact under weighted average, care needs to be taken to
ensurethatthebalanceafteranissueandthevalueoftheissueadduptothebalance
before the issue. This should happen automatically if one calculates the value of the
issue and deducts this from the old inventory balance to arrive at the new inventory
balance.
KA PLAN PUBLISHING
99
Workings
Calculationofunitpurchaseprices
100
13January
7,200
200
$36
8February
15,200
400
$38
11March
24,000
600
$4
12April
14,000
400
$35
15June
14,000
500
$28
KA PLAN PUBLISHING
RECEIVABLES
79
ALLOWANCEFORRECEIVABLES
1.1.20X1
1.1.20X2
1.1.20X3
Balanceb/d
Sales
Balancec/d
Sales
Balanceb/d
31.12.20X2
Balancec/d
5%18,100
Irrecoverable
debts
31.12.20X2 Balancec/d
(5%6,300)
Receivables
$
10,000
100,000

31.12.20X1

110,000

18,100
90,000

31.12.20X2

108,100

6,300
Salesreturns
Bank
Irrecoverabledebts
Discountsallowed
Balancec/d
Salesreturns
Bank
Payables
Irrecoverabledebts
Discountsallowed
Balancec/d
$
1,000
90,000
500
400
18,100
110,000
1,800
95,000
3,000
1,500
500
6,300
108,100
Allowanceforreceivables
$
1.1.20X1
Balanceb/d

Irrecoverabledebts

905
905
590 1.1.20X2
Balanceb/d
$
400
505
905
905
315
905
905
KA PLAN PUBLISHING
101
APPLICATIONSOFACCOUNTINGCONVENTIONS
80
STATEMENTOFFINANCIALPOSITIONVALUES
REPORT
To:
Managingdirector
From:
Accountant
Date:
XX20XX
Subject: Statementoffinancialpositionvaluations
Thehistoricalcostaccountingconventiondoesnotproduceastatementoffinancialposition
whichwillshowthevalueofthebusiness,asthefollowingthreepointswillillustrate.
(i)
Goodwill
Goodwillhasbeendefinedasthedifferencebetweenthevalueofthebusinessandthe
aggregateofthefairvaluesofitsseparablenetassets.Everybusinessisworthmore(or
maybeless)thanthevalueofitsindividualnetassetsandthistypeofgoodwillisknown
asinherentgoodwill(ornonpurchasedgoodwill).Itarisesbecauseofmanyfactorssuch
asthebusinesshavingagoodreputationforprovidingqualitygoodsandservices,and
employing skilled and motivated staff. These factors have no direct relationship with
cost and therefore inherent goodwill is subjective to value. Given the absence of a
money measurement or an objective basis for valuation it is not prudent to record
inherentgoodwillintheaccounts,andIAS38IntangibleAssetsinfactforbidsit.
(ii)
Thevaluationofnoncurrentassetsatcost
Under the historical cost accounting convention, inflation and changing prices are
ignored and assets are recorded at cost. This has the advantage of being relatively
objective as it is usually certain what the asset cost to buy or construct. However, in
inflationarytimesthiscanleadtostatementoffinancialpositionvalues,sayforlandand
buildings,beingveryoutofdateandunderstated.
If assets were recorded on the statement of financial position at their value, the
calculation of the amounts presented in the statement of financial position would be
lessobjectivethanitisunderthehistoricalcostconvention.Ineffect,recordingassets
attheirfairvaluesiswhatcurrentcostaccountingadvocates,anditcanbearguedthat
suchastatementoffinancialpositionwouldbeusefultosomeusersofaccounts.
(iii)
Research
Therevenueexpenditureonresearchmustbewrittenofftoprofitorlossintheyearof
expenditure.
Byitsverynatureresearchisconcernedwithoriginalscientificortechnicalinvestigation
to discover new knowledge, whether or not this is actually directed at a particular
objective,e.g.,acureforcancer,nuclearfusionetc.Itisvirtuallyimpossibletoplacean
objectivevalueonthebenefitsresearchmaybringgivenitspreliminarynature.Itisnot
probable that the research will generate any future economic benefits, one of the
conditions of an item being classified as an asset. So research expenditure must be
recognisedasanexpenseintheperiodinwhichitisincurred.
102
KA PLAN PUBLISHING
81
ACCOUNTINGTERMS
(a)
An expense is a resource of the business that has been used up either through the
passage of time or by actual use. Forexample, the payment of an insurance premium
forayearscoverinadvancecreatesanassettothebusiness;i.e.,insurancecoverfora
year.Thisassetexpiresovertimesothatbytheaccountingyearendsomeoftheasset
will be an expense of that year and the rest will be carried forward as an asset
(prepayment)andwillbeanexpensenextyear.
(b)
An asset is one of the elements presented in the statement of financial position, as

opposedtobeingclassifiedasanexpenseinprofitorloss.Anassetisaresource:
underthecontrolofanentityasaresultofpastevents
fromwhichfutureeconomicbenefitsareexpectedtoflowtotheentity.
Because it is expected to generate these future benefits, it is carried forward and

writtenoffovertheperiod(s)expectedtobenefitfromtheresource.
(c)
In preparing financial statements, estimates have to be made to arrive at figures for

inclusioninthem.Forexample,anallowanceforreceivablesmayberequired,inevitably
without knowledge of the exact figure needed. Prudence demands that in such
conditions of uncertainty, judgement should be used so that assets and gains are not
overstated,andliabilitiesandlossesarenotunderstated.
(d)
Objectivitymeansthattheaccountinginformationhasbeenpresentedunderstrictrules
thatcanonlybeinterpretedinoneway.Thereforeiftwodifferentaccountantswereto
dealwiththesametransactiontheywouldrecordthetransactioninthesamewayand
at the same value. For example under the historical cost convention, assets are
recorded at their original cost. As original cost can be precisely defined, the resultant
valueplacedupontheassetisobjective.
KA PLAN PUBLISHING
103
82
MARKETINGSERVICES
ANAccountant
Address
DateXX20XX
DearClient
InvoicefromMarketingServices
I set out how each item on the above invoice is likely to affect the amount recorded as
expensesintheaccountsfortheperiodended31December20X2.
Generaladvice$3,000
This item is clearly an expense for the current year. The services were received in each of
months falling wholly in the accounting period and no future benefits from them can be
reliablyestimated.Thefeemustthereforeberecognisedasanexpenseintheperiod.
Photocopier$10,000
Thephotocopiershouldbetreatedasanoncurrentassetofyourbusinessbecauseitwillbe
usedinthebusinessoveranumberofaccountingperiodsandgenerateeconomicbenefitsin
each. An annual depreciation charge should spread the cost of the asset (less its estimated
resalevalue)overtheaccountingperiodsinwhichitwillbeused.Therefore,partofthecost
willbeanexpenseofthebusinessinthecurrentaccountingperiod.
Youneedtoestimateforhowlongyouintendtousetheasset.Anestimatethenneedstobe
made of the resale value. This will depend in part on how long you expect to use the asset.
Finally,adepreciationmethodneedstobedecidedwhichfairlyreflectstheuseoftheasset
betweenaccountingperiods.Thestraightlineandthereducingbalancemethodsarethemost
common.
Assuming that you intend to keep the asset for the 5 year guarantee period, the estimated
resalevalueisnilandyouusethestraightlinemethod,theannualdepreciationchargewillbe
$2,000.Astheassethasbeeninusefor3monthsofthecurrentaccountingperiod,achargeof
$500shouldberecognised.
Advertisingdeposit$5,000
Astheadvertisingwillnottakeplaceuntilthenextaccountingperiod,itshouldberecognised
as an expense in that period. The cost should be carried forward as a prepayment in the
December20X2statementoffinancial position.Therewouldbe noexpenserecordedinthe
currentaccountingperiod.
Advertisingcampaign$50,000
Theadvertisinghasbeencompletedinthecurrentaccountingperiodanditisnotpossibleto
estimate reliably any benefits wholly attributable to it which will arise in future accounting
periods.Thefullamountoftheexpenditureshouldberecognisedasanexpenseinthe20X2
accountingperiod.
Donothesitatetocontactmeifthereareanypointsthatyouwishmetoclarify.
SIGNATURE
104
KA PLAN PUBLISHING
83
CAPITALMAINTENANCE
(a)
(b)
(c)
(d)
Capitalmaintenance
Investorsallocatecapitaltoabusinessintheexpectationthatthebusinesswillprotect
(i.e.maintain)thevalueofthatcapitalandinadditiongenerateareturnintheformofa
profit.Sotheconventionalmeasureof'profit'foranyperiodistheamountbywhichthe
business' capital has increased over the period. A business cannot be regarded as
earningaprofituntilitscapitalhasbeenmaintained.
Therearetwodefinitionsofthe'capital'whichmustbemaintained:
financial capital, which is the money amount of capital at the beginning of the
period.Soifabusiness'netassets(=capital)is$100atthestartoftheperiodand
$120 at the end, it has earned a profit of $20 after maintaining the $100. (A
variant approach is to adjust the opening capital by inflation as measured by a
retail prices index; if inflation was 5% over the period, the capital to be
maintainedis$1001.05=$105,sotheprofitisonly$15.)
physical capital, which is the operating capacity of the business. If the business
operatesinasectorwithrapidlyfallingnoncurrentassetcosts,itmightbethatat
theendoftheperiod,10%lessfinancialcapitalisneededtomaintainthesame
physicalcapacityasatthestartoftheperiod.Onthismeasurethecapitaltobe
maintainedis$100less10%thereof,so$90;profitisthen$30.
Goodwill
Goodwillisthewordusedtocovertheassetsofabusinesswhicharenotindividually
identifiable,suchasaskilledworkforceandareputationforexcellentcustomerservice.
However,thereisobviouslyadifficultyinmeasuringthegoodwillwithina businessat
any particular time, and, indeed, the inclusion of nonpurchased goodwill in financial
statementsisnotpermittedbyaccountingregulation.
Avalueforitcan,however,bereliablyestimatedwhenabusinesschangeshands.The
valuepaidforthebusinessoverandabovethevalueofitsnetidentifiableassetsisthe
measure of goodwill, and should be included as an intangible asset in the financial
statements.
Fairvalue
Fair value is the amount for which an asset could be exchanged, or a liability settled,
betweenknowledgeable,willingpartiesinanarm'slengthtransaction.Marketvalueis
thereforeoftenanasset'sfairvalue.
Fair value is used as the measure of a number of items in a statement of financial
position(suchasproperty,plantandequipmentandfinancialassets)asanalternative
to historical cost. The rationale is that fair value is a 'today's' value, which is more
relevanttousersoffinancialstatementsthanahistoricalvalue.
Researchanddevelopmentcosts
Forabusinesstoprogress,itneedstoinvestinresearchanddevelopment.Researchis
thetermusedtocoverblueskyinvestigationofpossibilities;itisthereforenotpossible
to estimate reliably any future economic benefits which will be generated from it.
Researchcostsshouldberecognisedasanexpenseinthestatementofprofitorlossin
theyearinwhichtheyareincurred.
Developmentistheapplicationofresearchorotherfindingstoaplantodevelopnewor
improvedproducts.etc.Abusinesswouldnotmoveaprojectfromtheresearchphase
tothedevelopmentphaseifitdidnotexpecttoearnfutureeconomicbenefitsinexcess
offuturecosts.So,subjecttobeingabletodemonstratethosefuturenetbenefits,the
businessshouldclassifydevelopmentexpenditureasanassetandamortiseitoverthe
expectedlifeoftheneworimprovedproducts,etc.
KA PLAN PUBLISHING
105
PREPARINGFINANCIALSTATEMENTS
INCOMPLETERECORDS
84
ERNIE
Keyanswertips
The examiner's report commented that the calculations for sales and purchases were often
poorly done. If you fell down in these areas remember for the future that these two
calculations,broadlyasinthisquestion,featureinalmostallincompleterecordsquestions.
Ernie
Statementofprofitorlossfortheyearended30June20X8
Revenue(W1)
Less:Costofsales
Openinginventory
Purchases(W2)
Less:Closinginventory
Wages
Grossprofit
Salaries
Rent
Telephone
Electricity
Insurance
Miscellaneousexpenses
Irrecoverabledebts
Depreciation: plant
motorvan
Profitonsaleofvan
Loaninterest
Netprofitforyeartodate
106
(750+(3750120%)
(860+240210)
(890+220180)
(700+(1,60050%)
(1,280+490)
(25%(12,6005,800+8,400))
(25%12,800)
(3,000(9,0006,500))
14,160
84,620
98,780
12,170
5,000
3,450
890
930
1,500
1,770
1,280
3,800
1,600
(500)
250
$
204,490
(86,610)
(68,200)
49,680
19,970
29,710
KA PLAN PUBLISHING
Ernie
Statementoffinancialpositionasat30June20X8
Cost
$
Noncurrentassets
Plantandequipment(dep'n5,800+3,800)
21,000
Motorvans
12,800
33,800
Currentassets
Inventory
Tradereceivables
Prepayments(750120%)+(1,60050%)
Cashinhand
Capitalat30June20X7(W3)
Add:Netprofitforyeartodate
Less:Drawings(8,000+29,800)
Noncurrentliabilities
Loan
Currentliabilities
Payables:
Trade
Sundry(5,000+240+220+490+250)
Overdraft
Accumulated
depreciation
$
9,600
1,600
11,200
12,170
9,580
1,700
890
32,640
29,710
62,350
37,800
4,090
6,200
2,100
Carrying
value
$
11,400
11,200
22,600
24,340
46,940
24,550
10,000
12,390
46,940
KA PLAN PUBLISHING
107
Workings
(W1) Sales
Openingreceivables
Refundtocustomer
Sales(balancingfigure)
Salestotalaccount
$
9,490 Receivedfromcustomers
400 Cash
204,490 Bank
Irrecoverabledebts
Closingreceivables
(10,8601,280)

214,380

52,640
150,880
1,280
9,580
214,380
Tutorial note: The irrecoverable debt written off is an expense, not a reduction in sales. It
mustthereforebeincludedinthecalculationoftotalsales.
(W2) Purchases
Paidtosuppliers
Closingpayables
Purchasestotalaccount
$
83,990 Openingpayables
4,090 Purchases(balancingfigure)

88,080

(W3) Capitalat30June20X7
Assets
Plantandmachinery(12,6005,800)
Motorvan(9,0006,500)
Inventoryofmaterials
Receivables
Rentinadvance
Insuranceinadvance
Cashatbank
Cashinhand
Less:Liabilities
Payables
Telephone
Electricity
108
6,800
2,500
14,160
9,490
750
700
1,860
230
36,490
3,460
210
180
$
3,460
84,620
88,080
3,850
32,640
KA PLAN PUBLISHING
85
CART
Workings
Openinginventory
Purchases(19,500paid+1,095payable)
Closinginventory
Costofsales
Grossprofit(20,19530/(10030))
Salesrevenue
$
0
20,595
20,595
400
20,195
8,655
28,850
Note:Grossprofit=30%ofsales.Socostofsales=70%ofsalesandgrossprofit=30/70of
costofsales.
Cashatbank
Receipts
Capital
Cashfromsales
Less:Payments
Cashatbank
(18,000+2,000+800+2,500+850+19,500)
20,000
26,250
46,250
43,650
2,600
Cart
Statementofprofitorlossfortheyearended31December20X2
Revenue(W)
Costofsales(W)
Grossprofit
Wages
Stationery
Telephoneexpenses(800+40accrual)
Sundryexpenses
Depreciation:computer(25%of2,000)
Depreciation:motorvehicles(20%of18,000)
Lossfortheperiod
$
28,850
20,195
8,655
(700)
(2,500)
(840)
(850)
(500)
(3,600)
(335)
KA PLAN PUBLISHING
109
Statementoffinancialpositionasat31December20X2
Noncurrentassets
Motorvehicles
Computer
Currentassets
Inventory
Receivables
Cashatbankandinhand(2,600atbank+80inhand)
Totalassets
Initialcapital
Lossfortheperiod
Drawings
Owner'scapital
Currentliabilities
Payables
Accrual
Cost
$
18,000
2,000
20,000
Accum.
dep'n
$
3,600
500
4,100
400
970
2,680
20,000
(335)
(850)
1,095
40
Carrying
value
$
14,400
1,500
15,900
4,050
19,950
18,815
1,135
19,950
110
KA PLAN PUBLISHING
COMPANYFINANCIALSTATEMENTS
86
RULERSCO
Note
Revenue
Costofsales(W1)
Grossprofit
Distributioncosts(W1)
Administrativeexpenses(W1)
Interestreceivable
Interestpayable(10010%)
1
Profitbeforetax
Incometaxexpense
Profitforyear
Statementoffinancialpositionasat31December20X2
Note
Cost
Noncurrentassets
$000
Tangibleassets
2
Currentassets
Inventory
Receivables(W2)
Cashatbank(W3)
Capitalandreserves
Ordinary$1shares
10%Irredeemablepreferenceshares
Sharepremiumaccount
Revaluationreserve
Retainedearnings
10%Loannotes
Currentliabilities
210
Payablesandaccruals(200+10)
10
Preferencedividendpayable
150
Incometax
KA PLAN PUBLISHING
$000
223
300
7
(10)
Depn.
$000
600
495
398
$000
3,500
(2,551)
949
(523)
(3)
423
(150)
273
$000
470
1,493
1,963
500
100
200
30
663
1,493
100
370
1,963
111
Statementofchangesinequityyearended31December20X2
Balancesat
31December
20X1
Surpluson
revaluationof
land
Profitforyear
Dividends
Preference
Ordinary
Ordinary Irredeemable
Share
Revaluation Accumulated
premium
reserve
profit
shares
preference
shares
$000
$000
$000
$000
$000
500
100
200
455
30
500
100
200
30
273
(10)
(55)
663
Total
$000
1,255
30
273
(10)
(55)
1,493
Notestothefinancialstatements
(1)
(2)
Profitonordinaryactivitiesbeforetaxation.
Thisisstatedaftercharging
Depreciation
Tangiblenoncurrentassets
Cost
At1January20X2
Revaluation
At31December20X2
Depreciation
At1January20X2
Chargefortheyear
Carryingvalueat
31December20X2
31December20X1
$000
60
Land
$000
Plantand
machinery
$000
Total
$000
200
30
230
550
550
750
30
780
250
60
310
250
60
310
230
200
240
300
470
500
(3)
112
Anordinarydividendof14cpershare($70,000)isproposed.
KA PLAN PUBLISHING
Workings
(W1) Costanalysis
Costofsales
$000
Costofsales
2,100
Operatingexpenses
400
Managementexp.
Sellingexp.
Irrecoverabledebts(W2)
Depreciation(550250)20%=60 51
Bankcharges
Discountsallowed
2,551
Dist.
$000
220
223
Admin
$000
280
4
6
2
8
300
(W2)
Allowanceforreceivablesaccount
$
Irrecoverabledebts(balfig)
1,000 Balanceb/d
Balancec/d((55050)1%)
5,000
6,000
Irrecoverabledebtsaccount
$
Balanceb/d
5,000 Allowanceforreceivables
Profitorloss
5,000
Receivables550,00050,000
Less:allowance
KA PLAN PUBLISHING
$
6,000
6,000
$
1,000
4,000
5,000
$
500,000
5,000
495,000
113
(W3)
Balanceb/d
Standingorder
Cashbook
$
350,000 Bankcharges
50,000 Balancec/d

400,000
2,000
398,000
400,000
Tutorialnote:
Thedatesinrespectofdividendsareimportant:
114
(a)
the date the dividend is proposed: no accounting entry, because there is not yet a
commitmenttopaythedividend
(b)
the date the dividend is declared (directors usually declare interim dividends, but final
dividends declared by shareholders in general meeting): an accrual entered in the
accounts,becausethereisnowacommitmenttopaythedividend.Soacurrentliability
in the statement of financial position and a deduction in the statement of changes in
equity.
(c)
thedatethedividendpaid:theaccrualisclearedbythepayment.
KA PLAN PUBLISHING
87
ELLISISLANDCO
Itisassumedthatthecostofthepremisesisanadministrationexpenseandthatthecostof
themotorvehiclesandtheirrecoverabledebtexpensearedistributionexpenses.
Workings
Costofsales
Openinginventory
Purchases
Closinginventory
Manufacturingwages
Hireofplant
Depreciationofplant
$000
25
1,152
1,177
(29)
1,148
87
15
66
1,316
Distributioncosts
Salespersonssalaries
Advertisingexpenses
Depreciationofmotorvehicles
Irrecoverabledebtexpense
$000
44
73
22
21
160
Administrativeexpenses
Administrationsalaries
Depreciationofpremises
Auditfee
$000
76
33
9
118
Financecost
Althoughonly$10,000ininteresthasbeenpaid,itisassumedthattheloannoteshavebeen
inissueforthefullyear,andtheannualinterestchargewillbe10%of$200,000=$20,000.
Staffcostsintotal=(in$000)87+44+76=207.
KA PLAN PUBLISHING
115
Revenue
Costofsales
Grossprofit
Distributioncosts
Administrativeexpenses
Profitfromoperations
Financecost
Profitbeforetax
Incometaxexpense
Netprofitfortheperiod
Informationtobedisclosed
Natureofexpenses
Depreciationofplant
Depreciationofpremises
Depreciationofmotorvehicles
Staffcosts
$000
1,920
(1,316)
604
(160)
(118)
326
(20)
306
(57)
249
$66,000
$33,000
$22,000
$207,000
Notes:Dividends
(1)
(2)
Dividends are presented in the statement of changes in equity, not as an expense in

profitorloss.Disclosuremustbemadeof:
thetotaldeclaredintheyear,i.e.$14,000
thetotalproposedattheyearend,i.e.$28,000.
Disclosure must also be made of the amount of dividends per share, but this is not
possibleasthequestiondoesnotstatehowmanysharesoftheentityareinissue.
116
KA PLAN PUBLISHING
88
MOORFOOTCO
Statementofprofitorlossfortheyearended30June20X8
Salesrevenue(13,600+7)
Costofsales(W1)
Grossprofit
Distributioncosts(W1)
Administrativeexpenses(W1)
Profitfromoperations
Financecosts
Netprofitfortheperiod
Statementoffinancialpositionasat30June20X8
Noncurrentassets(W2)
Land
Buildings
Warehouseandofficeequipment
Motorvehicles
Currentassets
Inventory
Tradereceivables(810(6+30)+7)
Prepayments(60+70)
Cash
Capitalandreserves
Calledupsharecapital
Sharepremiumaccount
Retainedearnings(6,772+1,415480360)
10%loannotes
Currentliabilities
Tradepayables(820+18)
Accruals(120+190+50)
*Alternativelytheseitemsmaybeshownas:
Tradepayables
Accruals(360+18)
KA PLAN PUBLISHING
$000
13,607
(7,988)
5,619
(1,948)
(2,156)
1,515
(100)
1,415
$000
1,510
7,114
1,240
640
1,660
781
130
140
1,200
2,470
7,347
838*
360*
820
378
$000
10,504
2,711
13,215
11,017
1,000
1,198
13,215
117
Workings
(W1) Statementofprofitorlossheadings
Purchases(8,100+18)
Inventory1July20X7
Distributioncosts(1,460+12060)
Administrativeexpenses(1,590+19070)
Irrecoverabledebts
Increaseinallowanceforreceivables
Depreciation
Buildings2%8,300
Equipment15%1,800
Vehicles25%1,680
Inventory30June20X8
Cost
ofsales
$000
8,118
1,530
(1,660)
7,988
Distrib'n
costs
$000
1,520
83
135
210
1,948
Admin
expenses
$000
1,710
6
12
83
135
210
2,156
(W2) Noncurrentassets
Perlistofaccountbalances
Cost
Accumulateddepreciationb/f
Depreciationforyear
Land
$000
1,510
1,510
Buildings
$000
8,300
(1,020)
(166)
7,114
Warehouse
andoffice
equipment
$000
1,800
(290)
(270)
1,240
Motor
vehicles
$000
1,680
(620)
(420)
640
118
KA PLAN PUBLISHING
89
LOMONDCO
(a)
Anenterprisemustbeabletodemonstrateallofthefollowing:
(i)
The technical feasibility of completing the project so that it will be available for
useorsale.
(ii)
Theintentiontocompletetheprojectanduseorselltheresult.
(iii)
Itsabilitytouseorselltheproduct.
(iv)
Theabilityoftheproducttogeneratefutureeconomicbenefits.
(v)
Theavailabilityofadequatetechnical,financialandotherresourcestouseorsell
theproduct.
(vi)
The ability to measure the expenditure attributable to the project reliability

duringitsdevelopment.
Note:Broadly,thesepointsarewordedastheyappearinIAS38.Answersusingyour
ownwordstoexpressthemareobviouslyacceptable.
(b)
ProjectA
Amortisationofdevelopmentcost($200,000/5)
Statementoffinancialposition($120,000$40,000)
ProjectB
Expenditurewrittenoff($175,000+$55,000)
ProjectC
Developmentexpendituretodate
ProjectD
Researchexpenditure(cannotbecapitalised)
(c)
IS
SoFP
40,000
230,000
Nil
80,000
350,000
80,000
Nil
255,000
Nil
335,000
Disclosurerequirements
(i)
Total research and development expenditure recognised as an expense was

$350,000analysedasfollows:
Expenditureduringtheyear
Amortisedorwrittenofffromdeferredexpenditure
KA PLAN PUBLISHING
$
135,000
215,000
350,000
119
Tutorialnote:
Totalexpenditureintheyear=$55,000onProjectBand$80,000onProjectD.Amortisedor
writtenoff=$40,000onProjectAand$175,000onProjectB.
(ii)
Movementsonunamortiseddevelopmentcosts
Balanceat1July20X7(120+175+85)
Expenditurerecognisedasanassetincurrentyear
Amortisedduringyear
Expenditureonabandonedprojectwrittenoff
Balanceat30June20X8
$
380,000
225,000
605,000
(40,000)
(230,000)
335,000
Tutorialnote:
Total expenditure recognised as an asset in the current year = $55,000 on Project B plus
$170,000onProjectC.
120
KA PLAN PUBLISHING
90
IAS10EVENTSAFTERTHEREPORTINGPERIOD
(a)
Eventsafterthereportingperiodshouldbeadjustedinthefinancialstatementsifthey
provide additional evidence to assist with the estimation of amounts relating to
conditionsexistingatthereportingdate.
Events after the reporting period which do not affect conditions at the reporting date
should be disclosed by note if they are of such importance that nondisclosure would
affect the ability of users of the financial statements to make proper evaluations and
decisions.
(b)
(i)
(Disclosurebynote)
Theentityissued100,00050cordinarysharesat$1.80pershareon[date].The
purposeoftheissuewasto[explanation].
(ii)
(Adjustedinfinancialstatements)
The $50,000 should be included as an expense in the calculation of operating

profit,withdisclosureofthedetailsbynote.The$50,000willalsoappearinthe
statementoffinancialpositionasacurrentliability.
(iii)
(Adjustedinfinancialstatements)
Assuming that the loss invalue is notdue damage occurring after the reporting
date,theinventoryatthestatementoffinancialpositiondateshouldbereduced
by$10,000,thusreducingoperatingprofitandthestatementoffinancialposition
inventoryfigurebythisamount.
(iv)
(Disclosurebynote)
A fire on 1 February 20X6 completely destroyed one of the entitys factories

valued at $250,000. Half of this sum was covered by insurance and the insurer
hasagreedtopay$125,000underthepolicy.
KA PLAN PUBLISHING
121
CONSOLIDATEDACCOUNTS
91
PIXIECOANDDIXIECO
PixieCoanditssubsidiary
Consolidatedstatementoffinancialpositionasat31December20X9
Assets
Noncurrentassets
Intangiblegoodwill(W3)
Other(210+110.6)
Currentassets(113.1+43.4)
Equityandliabilities
Issuedsharecapital(100,000+37,500(W3))
Sharepremium(W3)
Retainedearnings(W5)
NCI(W4)
Totalequity
Currentliabilities(76.1+66)
25,000
320,600
345,600
156,500
502,100
137,500
37,500
163,000
338,000
22,000
360,000
142,100
502,100
Workings
(W1) GroupstructureshareholdingsinDixie
Group
Noncontrollinginterest
122
Ordinary
75%
25%
100%
KA PLAN PUBLISHING
(W2) NetassetsofDixie
Sharecapital
Retainedearnings
At
Acquisition
date
$
50,000
30,000
80,000
At
reporting
date
$
50,000
38,000
88,000
(W3) Goodwill
CostofinvestmentinDixie:
Cash
Fairvalueofsharesissued37,500$2
(sharecapital37,500$1=$37,500)
(sharepremium37,500$1=$37,500)
FairvalueofNCIinDixieatacquisition
Less:Netassetsatacquisition(W2)
Goodwillatacquisition
10,000
75,000
85,000
20,000
105,000
(80,000)
25,000
(W4) Noncontrollinginterest
FairvalueofNCIinDixieatacquisition
NCI share of postacquisition retained
earnings:25%(88,00080,000)(W2)
$
20,000
2,000
22,000
(W3) Groupretainedearnings
Pixie:Retainedearnings(given)
Dixie:75%(88,00080,000)(W2)
$
157,000
6,000
163,000
KA PLAN PUBLISHING
123
INTERPRETING/USINGFINANCIALSTATEMENTS
STATEMENTSOFCASHFLOWS
92
SHCO
SHCoCashflowstatementforyearended30June20X6
Cashflowsfromoperatingactivities
Netprofit
Adjustmentsfor:
Depreciation
Lossonsaleofnoncurrentassets(W)
Operatingprofitbeforeworkingcapitalchanges
Increaseininventories
Decreaseinreceivables
Decreaseinpayables
Netcashusedinoperatingactivities
Cashflowsfrominvestingactivities
Purchaseofproperty,plantandequipment
(3,500(3,000230))
Proceedsofsale
Netcashusedininvestingactivities
Cashflowsfromfinancingactivities
Proceedsfromissuanceofsharecapital(3,200+4002,800)
Dividendspaid
Netcashfromfinancingactivities
Netdecreaseincashandequivalentbalances
Cashandequivalentbalancesat1July20X5
Cashandequivalentbalancesat30June20X6
$000
250
255
30
535
(350)
135
(645)
(730)
145
800
(80)
$000
(325)
(585)
720
(190)
2,350
2,160
124
KA PLAN PUBLISHING
Working
Calculationofprofit/lossondisposal
Accumulateddepreciationat30June20X6
Less:Chargefortheyear
Accumulateddepreciationat30June20X5
Therefore,cumulativedepreciationrelatingtodisposal
Proceeds
CV(23055)
Therefore,lossondisposal
$000
2,300
(255)
2,045
(2,100)
(55)
145
175
(30)
KA PLAN PUBLISHING
125
93
AMSCO
AMSCoStatementofcashflowsfortheyearended31August20X8
Cashflowsfromoperatingactivities
Netprofit(W1)
Adjustmentsfor:
Depreciation(50+25)
Lossonsaleofplant
Interestexpense
Operatingprofitbeforeworkingcapitalchanges
Decreaseininventory
Increaseinreceivables
Decreaseinpayables
Cashgeneratedfromoperations
Interestpaid
Incometaxespaid(12+1010)
Netcashfromoperatingactivities
Purchaseofnoncurrentassets(W3)
Proceedsofsaleofplant
Netcashusedininvestingactivities
Cashflowsfromfinancingactivities
Proceedsfromissuanceofsharecapital(W2)
Repaymentofloannotes
Dividendspaid
Netcashfromfinancingactivities
Netincreaseincashandequivalentsfortheyear
Cashandequivalentsat1September20X7
Cashandequivalentsat31August20X8
$000
80
75
10
30
195
100
(20)
(33)
242
(30)
(12)
$000
200
(265)
50
600
(200)
(45)
(215)
355
340
(40)
300
126
KA PLAN PUBLISHING
Workings
(W1)
Grossprofit
Expenses
$000
239
(159)
80
(W2) Issueofordinaryshares
20X7Ordinaryshares
Sharepremium
20X8Ordinaryshares
Sharepremium
Thereforeproceedsoffreshissue
$000
1,300
300
1,600
1,800
400
2,200
600
(W3) Tangiblenoncurrentassets
20X8NVB
20X7NVB
IncreaseinCV
Addback:Depreciation
Disposalatcost
Less:depreciation
Additionsintheyear
$000
85
(25)
$000
2,000
1,870
130
75
60
265
KA PLAN PUBLISHING
127
94
ADDAXCO
(a)
20X2
1April
1Oct
Openingbalance
Cash(purchase)
Plantandequipmentcost
$
20X2
840,000 10Dec Disposalaccount

180,000
20X3
31Mar Closingbalance

1,020,000
$
100,000
920,000
1,020,000
Plantandequipmentdepreciation
20X2
10Dec
20X3
31Mar
Disposalaccount
Closingbalance
$
60,000
393,000
453,000
20X2
1April
20X3
31Mar
Openingbalance
Profitorloss
$
370,000
83,000
453,000
Depreciation charge for the year = 10% of (840,000 100,000) + (6/12 10% of
180,000)=74,000+9,000=83,000.
Plantandequipmentdisposal
20X2
10Dec
Plantandequipment
cost
20X2
10Dec
100,000
Plantand
equipment
depreciation
Cash
60,000

45,000

5,000
105,000
105,000
Thetransfertoprofitorlosson31Marchistheprofitonthedisposaloftheplant.
20X3
31Mar
Profitorloss
(b)
Cashflowstatementfortheyearended31March20X3
Cashflowfromoperatingactivities
Netprofitbeforetaxation
Adjustmentsfor:
Depreciation
Profitonsaleofplant
Purchaseofplant
Proceedsfromsaleofplant
128
(extracts)
83,000
(5,000)
(180,000)
45,000
KA PLAN PUBLISHING
RATIOANALYSIS
95
MBCCO
Totaldebt
100%
Sharecapitalandreserves+totaldebt
(a)
Gearingratio
= 20.8%
Alternativelythegearingratiocanbecalculatedas:
Totaldebt
100%
Sharecapitalandreserves
10
100%
38
= 26.3%
(b)
Returnoncapitalemployed
Profitbeforeinterestandtax(W1)
100%
Averagecapitalemployed(W2)
5.6
100%
46.25
= 12.1%
10
100%
48
AnalternativemethodofcalculatingROCEis:
Profitbeforeinterestandtax
100% =
Closingcapitalemployed
5.6
100% = 11.7%
48
Tutorialnote:
Wherever possible use average figures for capital employed, because this will give a more
representativepicturethanusingyearendfigures.
(c)
Ifsharesareissuedtoraisetheadditional$10millionoffinance,thentherewillbeno
additional interest cost in future years. However the purpose of the raising of the
finance is to fund research and development. This means that it is unlikely that there
willbeanyincreaseinprofitinthefollowingyearoreventhenextfewyears.
Ifprofitremainsatthesamelevelandthefundsareraisedbyissuingadditionalshare
capital,thenthegearingratioandROCEarelikelytoappearasfollows:
Gearing
Totaldebt
100%
Totalcapital
10
100%
58
17.2%
KA PLAN PUBLISHING
129
ROCE
Profitbeforeinterestandtax
100%
Averagecapitalemployed
5.6
100%
48 + 58 /2
5.6
100%
53
10.6%
Iftheadditionalfinanceisraisedbytheissueoffurtherloannotes,thentherearetwo
matterstoconsider.Firstly,thegearingwillincreaseastheproportionofdebtfinancein
thecapitalstructureincreases.Secondly,theprofitaftertaxwilldecreaseasadditional
interestispayableontheadditionaldebtfinance,butthisdoesnotaffectROCEwhichis
calculatedbyreferencetoprofitbeforeinterestandtax.
Thelikelyeffectongearingcanbeillustrated:
Totaldebt
100%
Totalcapital
Gearing
20
100%
58
34.5%
Workings
(W1) Profitbeforeinterestandtax
Netprofit
Add:Tax
Add:Interest(106%)
$m
4.0
1.0
0.6
5.6
(W2) Averagecapitalemployed:
Closingcapitalemployed
Openingcapitalemployed(48(40.5))
Averagecapitalemployed=
$m
48.0
44.5
48 + 44.5
= $46.25m
2
Note: This answer is fuller than could be expected from a candidate for ten
marks,butitprovidesusefultutorialmaterial.
130
KA PLAN PUBLISHING
96
PETERJACKSON
Statementofprofitorlossfortheyearended31May20X2
Sales
Openinginventory(W3)
Purchases(balfig)
Less:Closinginventory(W4)
Costofsales(W2)
Grossprofit
Less:Expenses(balfig)
Netprofit(10%300)
40,000
220,000
260,000
60,000
$
300,000
200,000
100,000
70,000
30,000
$
31,288
Statementoffinancialpositionasat31May20X2
Noncurrentassets(balfig)
Currentassets
Inventory
Receivables(W7)
Cash(balfig)
(W9)
Payables(W8)
Capitalemployed30,000 100 30
Financedby
Openingcapital(balfig)
Netprofit
KA PLAN PUBLISHING
60,000
36,986
7,890
104,876
(36,164)
68,712
100,000
70,000
30,000
100,000
131
Workings
(W1) Thefirststepinthisquestionistosetoutasimpleproformastatementofprofitorloss
and statement of financial position so that you can see which figures you need to
calculate.
(W2) CostofsalesProfitmarkuponcostis50%
Sales
$300,000
Costofsales300,000 100 150
$200,000
(W3) Openinginventory300,000 73 365
$60,000
Thisisatsellingpricesocostofopeninginventoryis$60,000 100 150 =$40,000
(W4) Closinginventory300,000 109.5 365
Atcost90,000 100 150
$90,000
$60,000
(W5) After calculating the cost of sales (W2), opening inventory (W3) and closing inventory
(W4)thepurchasesfigurecanbefilledinasthebalancingfigure.
Youaregiventhenetprofitmarginasapercentageofsalesthereforetheexpensesare
alsoabalancingfigure.
(W6) Inthestatementoffinancialpositionyoualreadyknowtheamountofclosinginventory
andbothreceivablesandpayablescanbecalculatedusingthepaymentdaysgiven.
Current assets to current liabilities can then be calculated and cash filled in as the
balancingfigure.
Finally,youaretoldtheratioofnetprofittocapitalemployedandasnetprofitisknown
capital employed can be calculated and noncurrent assets slotted in as the final
balancingfigure.
(W7) Receivables(baseduponsales)300,000 45 365
$36,986
(W8) Payables(baseduponpurchases)220,000 60 365
$36,164
(W9) Currentassets:currentliabilitiesis2.9
Currentassets=36,1642.9=$104,876
132
KA PLAN PUBLISHING
COMPREHENSIVEEXAMPLE
97
TYRCO
(a)
Statementofprofitorlossfortheyearended31October20X7
Revenue(2,56912)
Less: Costofsales
Openinginventory
Purchases(1,745+1534)
Closinginventory(194+7)
Grossprofit
Less Expenses
Administration(26412+17)
Sellinganddistribution(29228)
Loannoteinterest(W2)
Carriageoutwards
Depreciation(W1)
Netprofitbeforetax
Incometaxexpense
Netprofitfortheyear
$000
210
1,726
(201)
269
264
30
18
36
$000
2,557
1,735
822
(617)
205
(40)
165
KA PLAN PUBLISHING
133
(b)
Statementoffinancialpositionasat31October20X7
Accumulated
depreciation
$000
$000
Noncurrentassets
Land(495+55)
550
Premises(350;20+14)
350
34
Plantandequipment(220;30+22)
220
52
Patentsandtrademarks
200
1,320
86
Currentassets
Inventory(194+7)
201
Receivables(87512)
863
Prepayment(12+28)
40
Cash
12
Capitalandreserves
1,600,000Ordinary50cshares
800
200,0005%$1Irredeemablepreferenceshares
200
Sharepremium
Revaluationreserve(135+55)
Retainedearnings((425100135)+165205)
12%Loannotes
Currentliabilities
Payables
318
Bankoverdraft
85
Accruals(17+15(W2))
32
Incometax
40
Preferencedividend(5%2001/2)
5
Note:Afinalordinarydividendof5cpershare($80,000)isproposed.
134
Cost
$000
550
316
168
200
1,234
1,116
2,350
1,000
100
190
330
1,620
250
480
2,350
KA PLAN PUBLISHING
Workings
(W1) Depreciation
Premises4%$350=
Plantandmachinery10%$220
$000
14
22
36
(W2) Loannoteinterest
$250,000@12%=$30,000
$15,000paid,soaccrualfor$15,000isneeded.
(c)
(i)
Grossprofitmarkup=
Grossprofit
822
=
= 47.4%
Costofsales 1,735
Grossprofitmarkuphasfallenslightlyfromlastyears50%.Thismaybedueto:
(ii)
Increased competition preventing the passing on of suppliers price

increases;
A policy of price restriction (or even reduction) to try to increase market

share;
Alackofcontrolinthepurchasingdepartmentwhichresultedinpurchases
beingathigherprices.
Netprofitpercentage=
netprofit
205
=
= 8%
sales
2,557
Netprofitpercentagehasrisenfromlastyears3%.Giventhefallinmarkup,this
mustbeduetoreducedexpenses.Thiscouldbedueto:
(iii)
Improvedcontroloverexpenses
Gainsfromeconomiesofscaleastheorganisationexpanded
Currentratio=
Currentassets
currentliabilities
=1,116
480
=2.3
Thisisslightlybelowlastyears2.4:1.Thiscouldbebecausethereareimproved
controlsoverinventory,leadingtolowerlevelsofinventory.
(iv)
Acidtestratio
Currentassetsinventory
: currentliabilities
=(1,116201)915
: 480
=1.9
: 1
This has increased slightly from last years figure, and probably indicates an
increaseinreceivablesandcashcomparedtolastyear.
KA PLAN PUBLISHING
135
136
KA PLAN PUBLISHING

ACCA F3 LRP - Answers PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ACCA F3 LRP - Answers PDF

Uploaded by

Copyright:

Available Formats

ANSWERS

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

1,175 (i) Insuranceaccount

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

An asset is one of the elements presented in the statement of financial position, as

Because it is expected to generate these future benefits, it is carried forward and

In preparing financial statements, estimates have to be made to arrive at figures for

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

Dividends are presented in the statement of changes in equity, not as an expense in

LECTURER RESO UR CE PAC K AN SWER S

F A/FF A: F INAN C IALACCO UNTING

LECTURER RESO UR CE PAC K AN SWER S

The ability to measure the expenditure attributable to the project reliability

Total research and development expenditure recognised as an expense was

F A/FF A: F INAN C IALACCO UNTING