7: Company F.S.

Question 1

The following transactions occurred during a company’s reporting period:

1. A non-current liability was paid in full
2. A substantial amount was written off as irrecoverable debts
3. Depreciation was charged on non-current assets
4. A non-current asset was sold at its carrying amount

Which of these transactions result in expense items appearing in the company’s draft statement of profit or loss?

Answer 1

(2) and (3) only

Irrecoverable debts written off (2) and depreciation charged (3) are both expenses in the statement of profit or loss.

Paying a non-current liability in full affects only the statement of financial position (DR Payables, CR Cash at bank account)

A non-current asset sold at its carrying amount also only
affects the statement of financial position (DR Cash at bank account, CR Carrying amount).