SGS 10 (Business Accounts)

Question 1

What goes in:
Balance sheet
Profit and Loss?

Answer 1

Capital and Liabilities
(Nav in top half, capital in bottom)

Income and expenses (over period of time).

Question 2

When does a final dividend appear in the accounts?

Answer 2

In the accounting year in which shareholders APPROVE it.

Question 3

Where will a final dividend that has been declared and paid appear?

Answer 3

SoCIE (end of period in which declared) 
Trial Balance (item) 
Balance sheet (retained earnings)

Question 4

Where will a final dividend that has been declared but not yet paid appear?

Answer 4

SoCIE (year in which declared) 
Balance sheet (current liability)

Question 5

Where in the company’s account does a paid interim dividend appear?

Answer 5

SoCIE (period in which PAID) 
Trial Balance (item) 
Balance sheet (retained earnings)

Question 6

What is used to issue bonus shares?

Answer 6

retained earnings or share premium account.

Question 7

What is the effect on a balance sheet of a 1:10 issue of bonus shares?

Answer 7

Share capital increases, retained earnings decreases.

No net effect as no consequential amendments to top half of sheet.

Question 8

What is the effect of an increase in bad debt on the Profit and loss account?

Answer 8

Decrease overall profit figure.

Question 9

What is the effect of an increase in bad debt on the balance sheet?

Answer 9

Decrease in retained earnings (profit and loss carried forward)

Reduction in receivables.

Question 10

Effect of a failure to adjust for an accrual on balance sheet?

Answer 10

P and L: expenses overstated –> higher profit for the year,

Balance sheet:
current assets overstated
artificially higher retained profit figure.

Question 11

What does the NBV of an asset represent?

Answer 11

costs of asset - accumulated depreciation. May differ significantly from market value