Day 6 - Chapter 14

Question 1

Approach for long questions

Answer 1

1. set up cost matrix, PPE and retained earnings
2. insert figures from TB into SPL and SFP
3. go through each adjustment and determine the required double entry
4. input double entries into SPL, SFP or workings
5. cast the SPL
6. add the net profit or loss to retained earnings in SFP

Question 2

When do you credit accruals?

Answer 2

1. when you haven’t paid an expense but you are due to pay to before year end
   - so you credit the accrued liability
2. when you have earned revenue but not actually received the payment yet
   - so you credit revenue

Question 3

How do you account for overprovison of tax?

Answer 3

DR tax payable

CR tax expense

Question 4

What’s the double entry for removing opening inventory?

Answer 4

DR opening inventory - cos

CR inventory - SFP

Question 5

What is the double entry for recording closing inventory?

Answer 5

DR inventory - SFP

CR closing inventory - SPL

Question 6

Do preference shares require adjustment?

Answer 6

no