Chapter 12 Flashcards
Define extended trail balance
An accounting technique of moving from the initial trial balance throughout the year and adjustment to the figures for the final accounts
What does an initial trail balance contain?
A list of the closing balances extracted from the general ledger at the end of the period
What happens to the trial balance after the list of closing balances is extracted from the general ledger?
It is then adjusted to take account of period end adjustments before the extended trial balance is prepared
The extended trial balance would have columns for
Initial trail balance, adjustments i.e. non-routine journal entries, statement of profit or loss balance, statement of financial position balance
An extended trial balance is a useful way of
Enabling a business to keep track of any post trial balance adjustments therefore the preparation of an extended trial balance is an important final step which occurs before the accounts are drafted
Where does accumulated depreciation sit on the extended trial balance?
The credit side of the statement of financial column
Where does allowance for doubtful receivables sit on the extended trial balance?
Credit side of this statement of financial position
Where does allowance for doubtful receivables adjustment sit on the extended trial balance?
If the allowance has been increased since the prior period the adjustment is a debit balance on the statement of profit and loss being an expense increase but if it has decreased it is a credit balance in the statement for profit and loss
Where does bank sit in the extendedtrail balance
A debit balance indicates the business as an asset it is included in the debit column of the statement of financial position
Where is bank overdraft or loan and sit in the extended trial balance?
Your credit balance indicates there is a liability is included in the credit column of this statement of financial position
Where does depreciation charge sit in the extendedtrail balance
Expense in the statement of profit and loss, therefore a balance debit
Where does disposal of non-current assets in the extended travel balance?
If the proceeds are lower than the carrying out on the disposal, this would be included in the debit column with a statement of profit and loss being a loss on disposal but if its proceeds exceed the carrying amount under disposal of inclusion in the credit column of the statement of profit and loss
Where do drawings sit in the extended trial balance?
Reduction in the owners capital and is included in the debit column of the statement of financial position
Where do ever recoverable debts sit in the extended trial balance?
This is an expense of the statement of profit and loss and therefore debit balance
Where does purchase returns? Sit in the extended travel balance?
On the credit side of the statement of profit and loss
Where do sales return? Sit in the extended travel balance?
Debit side of the statement of profit and loss column
Where does VAT sit in the extended trial balance?
The credit balance indicates VAT is due to HMRC and is included in the statement of financial position credit column but a debit balance indicates VAT is due from HMRC and is included in the debit column
Where does the suspense can sit in the extended travel balance?
This will be cleared in the adjustment columns in their folder is not appear in the statement profit and loss all the statement of financial position column
What does opening inventory mean?
Was is held by the business at the start of the accounting period
What is the double entry for closing inventory
Debit the statement of financial position and credit the statement of profit and loss
What equation should you remember when it comes to the extended trial balance?
Cost of good sold = opening inventory + purchases - closing inventory
What happens at the end of the year to any balances on the income and expenditure general ledger account?
They are closed off and transferred to the profit or loss account in the general ledger leaving a new balance on the ledger accounts ready for the next period
What is the double entry for completing the capital account at the end of the period?
Debit, profit and loss account and credit capital if the business makes a loss it’s the opposite
Should the total on the statement of financial position agree?
Yes, they should both match
Where is the profit or loss for the year? Inserted in?
The statement of financial position column, a debit in the statement of profit loss column is a credit in the statement of financial position column and vice versa
What generally goes in the statement of financial position?
Entries for assets, liability and drawings
What happens when the initial trial balance and adjustments are included in the extended trial balance?
Each rose totalled and extended into either the statement of profit and loss or the statement of financial position as a debit or credit item
