2.3 - Statements Flashcards
‘Owing’
Expenses that have been received and have not been paid
Accrued expenses
- Increase the expense
- Create a current liability called “accrued expenses”
‘Owing’
Income that has been earned but has not been received
Accrued income
- Increase the income
- Create a current asset called “accrued income”
‘In advance’
Expenses that have not been received and have been paid
Prepayments
- Decrease the expense
- Create a current asset called “prepayments”
‘In advance’
Income that has not been earned but that has been received
Income in advance
- Decrease the income
- Create a current liability called “income in advance”
‘Invoice on hand’
Income
- Increase accounts receivable by full amount
- Increase income by GST exclusive amount (divide full amount by 1.15)
- Increase GST by the difference between the two amounts
‘Invoice on hand’
Expense
- Increase accounts payable by full amount
- Increase expense by GST exclusive amount (divide full amount by 1.15)
- Decrease GST by the difference between the two amounts
Depreciation on PPE
- Create depreciation expense
* Increase accumulated depreciation
(Classify)
Term deposit
Investment Asset
(Classify)
Rates
Administrative expense
(Classify)
Hire purchase
Non-current liability
(Classify)
Interest on term deposit
Other income
(Classify)
Depreciation on building
Administrative expense (If it doesn't specify 'shop')
(Classify)
Freight outwards
Distribution cost
(Classify)
Courier expenses
Distribution cost
Straight line depreciation
Asset cost - residual value / useful life of asset
OR
Asset cost x __% of depreciation
Diminishing value depreciation
(Asset cost - accumulated depreciation) x __% of depreciation
Units of use depreciation
(Asset cost - residual value) / Estimated useful life production x Actual units produced
Reporting inventory at net realisable value
- Decrease inventory by the difference between the GST exclusive cost of inventory and the GST exclusive net realisable value of inventory
- Increase Cost of Goods Sold by the same figure
- Only done if net realisable value < Cost price
Write off bad debts
- Decrease accounts receivable by full amount
- Increase bad debts by GST exclusive amount (divide full amount by 1.15)
- Decrease GST by the difference between the two amounts
Doubtful debts
- Multiply new accounts receivable figure x percentage of allowance, and make allowance for doubtful debts = the answer
- Increase/decrease doubtful debts expense (or create) with the difference between the old and new allowance for doubtful debts figure
Headings for PPE table
‘For the year ended...’ Opening carrying amount Additions (Cost of new PPE purchased) Disposals (Carrying amount of old PPE sold) Depreciation Closing carrying amount
‘As at…’
Cost
Less accumulated depreciation
Closing carrying amount
General ledger for drawings
+ -
Balance
Capital (Cr -)
General ledger for capital
- +
Balance
Income summary (Cr +)
Drawings (Dr -)
To close accounts…
- Use ‘income summary’
- Put balances on the opposite sides (if it is a Dr balance, make it Cr to remove it) (if it is a Cr balance, make it Dr to remove it).
DON’T ‘CLOSE’ CAPITAL AND DRAWINGS
- Close income, expenses and COGS
General journal - Transfer net profit to capital
• Income summary (Dr) =
to amount of net profit
• Capital (Cr) =
to same amount as above
General journal - Transfer drawings to capital
• Capital (Dr) =
to amount of drawings
• Drawings (Cr) =
to same amount as above
Prepayments adjustment
- ‘The (expense name) was paid for a 12 month period, commencing on (date)’
OR
- ‘An annual (expense name) contract of (amount) was paid in full on (date)’
• Find start date
• Find end date by using the length of the time period (12 months)
• Find trial balance date
• Calculate how many months difference between the end date and trial balance date (__)
(Indicates how many months in advance the prepayment amount is for)
• Calculate the amount by doing __ / 12 x (total amount paid)
Income in advance adjustment
- ‘(business name) rents out part of the building office space to (business name) for (amount) including GST per month’
- Find GST exclusive amount owed per month
- Multiply this amount by 12 to find the GST exclusive amount owed per year
- Make rent received = to this amount
- Add/subtract the difference between the old and new rent received amount to find the income in advance amount
Statement of Cash flows - Accounts receivable
(Remember to show working in numbers and in words)
Opening accounts receivable balance \+ credit sales/invoices issued - bad debts - discount allowed - sales returns/credit notes issued - closing accounts receivable balance = Accounts receivable (cash received from customers)
Statement of Cash flows - Accounts payable
(Remember to show working in numbers and in words)
Opening accounts payable balance
+ credit purchases/invoices received
- discount received
- purchase returns/credit notes received
- closing accounts payable balance
= Accounts payable (cash paid to suppliers)
Headings for statement of financial position (‘as at’)
Current assets Non current assets (Property plant and equipment) Total carrying amount (note 1) (Investment assets) (Intangible assets) Total assets Less liabilities Current liabilities Non current liabilities Total liabilities Net assets
Equity Opening capital Plus profit for the year Less drawings Closing capital
Headings for income statement (‘for the year ended’)
Revenue
Sales
Less sales returns/discount allowed
Net sales
Less cost of goods sold
Gross profit
Add other income
\_\_\_\_\_\_\_\_
Less expenses
(Distribution costs)
(Administrative expenses)
(Finance costs)
Total expenses
Profit for the yearHeadings for statement of cash flows (‘for the year ended’)
Cash receipts Total cash receipts Less cash payments Total cash payments Net cash (increase/decrease) Add bank balance at beginning Equals bank balance at end
PPE tables
Cost price
(If the trial balance is at the start of the year)
- Remember to add the cost of new PPE and subtract the cost of old PPE to find the cost price ‘as at’.
Calculating opening carrying amount for PPE
(Assuming trial balance is from the end of the year and the additions and disposals from throughout the year HAVE been included in it)
If there are no additions or disposals…
Opening cost
- Opening accumulated depreciation
= Opening carrying amount
If there are additions or disposals... Opening cost - Opening accumulated depreciation - GST exclusive cost of new PPE purchased \+ Carrying amount of old PPE sold = Opening carrying amount
Calculating cost for PPE
(Assuming trial balance is from the start of the year and the additions and disposals from throughout the year HAVE NOT been included in it)
If there are no additions or disposals…
Cost of PPE from trial balance
If there are additions or disposals... Opening cost \+ GST exclusive cost of new PPE purchased - GST exclusive cost of old PPE sold = Cost
Calculating accumulated depreciation
(Assuming trial balance is from the start of the year and the additions and disposals from throughout the year HAVE NOT been included in it)
If there are no additions or disposals…
Opening accumulated depreciation
+ depreciation for the year
= Accumulated depreciation
If there are additions or disposals... Opening accumulated depreciation - (GST exclusive cost of old PPE sold - carrying amount of old PPE sold) \+ depreciation for the year = Accumulated depreciation
Investments note
Investments comprise of Shares in (business name). The current fair value of the shares is $(amount from additional information), which is their market value on (trial balance date).
(Classify)
Gain on sale
Other income
Statement of cash flows
- Record any direct debts (payments) and direct credits (receipts)
- Record any cash received, or cash paid
- If trading PPE in for its carrying amount on a new PPE purchased on credit, use (new cost - carrying amount)
- If purchased PPE on credit, use GST inclusive cost
- Only use cash drawings (ignore any drawings of goods/inventory)
- Ignore any loss/gain on sale
- Ignore any trade in allowance
- Ignore doubtful debts
Accrued expenses adjustment
- ‘Interest on loan is due’
- Use interest rate x loan to find interest on loan expense due per year
- Make interest on loan = to this amount
- Make difference = accrued expenses
Prepayments adjustment
‘An advertising campaign lasting from 1 January 2017 to 30 April 2017’ cost $1,932 including GST and was paid for on 1 January 2017.’
- Calculate how many months difference between the start date and end date
(Indicates how many months in advance the prepayment amount is for) - Divide amount by 1.15 to get GST exclusive amount
- Calculate the amount by dividing GST exclusive amount by the number of months
