financial accounting

Question 1

How to deal with revaluation

Answer 1

Land: (SOFP) (NCA)

Reval Reserve: (SOFP) (Equity)

Question 2

How to deal with Equipment and Factory

Answer 2

• Calculate depreciation of disposed asset
• Find profit on disposal (with NBV) (IS)
• Update cash balance (SOFP)
• Update Equipment cost (SOFP)
• Find Depreciation expense of equipment (IS)
• find equipment accumulated depreciation (SOFP)
• Factory accumulated depreciation (SOFP)
• Depreciation expenses (factory)

Question 3

How to deal with trade receivables and write offs

Answer 3

• Remaining balance of TR (bad debt write off) (SoFP)
• Required provision
• Release in provision (existing - current prov.)
• Doubtful debt expense (IS)

Question 4

How to deal with inventory, cost of goods sold

and trade payables

Answer 4

• Inventory at cost - inventory write down = ending inventory (SOFP)
• calculate COGS (Beg inventory + purchases – ending inventory) - invt write down

Question 5

How to deal with prepaid insurance

Answer 5

• debit accrued insurance, credit insurance expense
• debit pre paid insurance, credit insurance expense
• show insurance expense (IS)
• show new prepaid insurance (SOFP)

Question 6

How to deal with audit/directors fees

Answer 6

• DR accrued Expense
• CR audit/dir fee Expense
• Audit expenses (IS)
• Accrued interests (SOFP)

Question 7

How to deal with corporation tax

Answer 7

• Find profit before taxation
• Add non-deductible expenses (minus prov for dd and capital allowance)
• Calculate tax for year
• Taxation expense (IS) (don’t forget to add underprovision)
• Tax payable (sofp)