Is there anyone out there who has done Assignment 6 on Level II? Q1 is an income and expenditure account and BS......stupidly my brain seems to have gone into meltdown and I am struggling with it !! It should be relatively easy, but my BS doesn't balance.
Any help gratefully appreciated! Maybe just discussing it with someone would make something click!
Also forgot to say that this is Ideal Schools I'm studying with, so that's what the Assignment 6 refers to!
Currently my difference is £1,120. I had to work out the starting capital and then do the income and expenditure account which worked out as an excess of expenditure over income which I deducted from the original capital. The Balance Sheet total at the end of the period came to £3,765 and the Capital part less the excess of expenditure over income came to £2,645.
It's not an assignment I've done (I did HLC) but I'd look for a figure of £ 560 as a first step. When you worked out the starting capital what was the Bank balance, DR or CR?
No, there were no Trial Balances involved. I'm doing an Income and Expenditure Account for a non-profit making organisation, so I had to work out the opening capital from the Receipts and Payments account, then do an Income and Expenditure account, work out surplus of income over expenditure and then do a Balance Sheet at the end of the year.
I'm having another look at it tonight, so I'll let you know how I get on!
Wah hey! Finally, I have figured it out. Hope I don't take this long over this in the exam...lol Have to practise lots!
Thanks everyone for trying to help. What I was doing wrong was including the purchase of a fixed asset and also sale of equipment in the Income and Expenditure account when I shouldn't have. Seems a little weird that, if you've spent £1200 on the purchase of a fixed asset that the expenditure shouldn't be included in the I & E account.
Phew! Just got to do the rest of the Assignment now.
With the purchase of the fixed asset the cost is spread over its useful life via depreciation. It is a capital purchase rather than a revenue item and so goes into the balance sheet. Eg spend £1000 on a new piece of machinery that is expected to last 5 years, then on a straight line method you would depreciate at £200. Shaun has an alarm fitted to his pc which goes off if anyone mentions 'straight line' and he will explain the sum of digits method any moment now!!! The tax treatment of the asset is treated totally differently though.
Rob
-- Edited by RobH on Thursday 8th of April 2010 09:42:39 PM
I've got the site logged in but been a bit too busy to answer anything and now too tired.
Straight line, reducing balance. All good so long as the method chosen accurately reflects the depreciation of the period during which the asset is consumed. (FRS15 Tangible Fixed Assets).
The one where I was pushing sum of digits was related to HP rather than depreciation in that the interest apportionment of the monthly payments is larger at the start of the agreement than at the end so for that sum of digits works. (FRS18 Accounting Policies : Income and expenditure should be matched to the period to which it relates).
That's it, my brains finally giving out for the night. remembering which Financial Reporting Standards the bit relate to has just pushed it over the edge!
Have a good one matey.
Congrats on getting it to balance Pauline. (Robs spot on with the fixed assets by the way).
Nighty night peeps,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I see you've managed to get to the bottom of what is a very very tricky question. Remember that Ideal Schools tutorial staff are always available to point you in the right direction.
If you'd like me to give you an idication if you are on the right lines you can give me your Opening Capital figure and Income/Expendiure balance.
Ah, I see you lurk on here then! I would have got in touch with you eventually, but I do like to try and solve things myself first I think you learn more that way. One of my failings I think, if you can call it one, is not asking for help! Anyway, I have sorted it now, my opening Capital figure was £4220 and the excess of expenditure over income was £455.
Thanks everyone for your responses. Hope the alarm on your pc hasn't gone off too much lately Shaun! Thanks Rob for the explanation, I had remembered to include the depreciation figure in the I & E account. I feel really silly now cos I should have known all that really! Think I'm due a holiday!
