You are presented with the trial balance of Law Limited for the year ended 31 December 2006.
Dr
Cr
$000
$000
Accumulated profits
2,100
Administrative expenses
5,600
Provision for doubtful debts
250
Buildings
3,500
Buildings accumulated depreciation
1,000
Cash at bank and in hand
400
Distribution costs
1,500
General reserve
2,080
Land
4,900
Motor vehicles cost
240
Motor vehicles accumulated depreciation
60
$1 ordinary shares
3,000
Ordinary shares dividends
100
Opening inventory
14,100
Purchases and sales
35,000
55,000
Share premium
600
Returns
170
200
8% Debentures
2,000
loan notes interest
80
Trade Debtors and creditors
2,900
2,200
68,490
68,490
Notes
1. Motor vehicles are to be depreciated by 20% using the reducing balance method.
The depreciation charge is to be treated as a distribution cost.
2. Buildings are to be depreciated by 4% using the straight-line method. The
depreciation charge is to be treated as an administrative expense.
3. The closing inventory was valued at $12,800,000.
4. Corporation tax was estimated at $2,000,000.
5. Distribution costs prepayments were $100,000.
6. The provision for doubtful debts is to be adjusted to 5% of the trade receivables. The change is to be included in the administrative expenses.
7. $100,000 is to be transferred from the accumulated profits to the general reserve.
Required
Prepare an Income Statement and Statement of Changes in Equity for Law Limited, for the year ended 31 December 2006, and a Statement of financial position as at that date.(Total 25 marks)
looks like a big step from wanting to learn accounting about a week ago to profit and loss,balance sheet,etc.
I would think most of the people here working under UK GAAP and you questions come under IAS, not a big difference at this level but if you are doing self-study as you suggested before you must get the right answers using the right terms for IAS as there isn,t anybody to correct your work so I can,t really help you but hopefully someone will...
The things your questions refer to are the basics in accounting so make sure you get them right.
-- Edited by attilabenko on Saturday 5th of June 2010 11:09:40 AM
Hi Yacine - you start by working out the adjustments given in the notes, draw up the income statement, then the s f p and the statement of changes in equity.
Income statement for Law Ltd as at 31st Dec 2006 £ Sales 54,830 Cost of Sales (36,100)
Gross Profit 18,730
Distribution costs (1,448) Administration expenses (5,635)
Operationg profit 11,647
Finance costs (80) Profit before tax 11,567
Corporation tax (2,000)
Profit from continuing operations 9,567
-- Edited by Chriss on Saturday 5th of June 2010 11:00:27 PM
-- Edited by Chriss on Saturday 5th of June 2010 11:03:58 PM
Hi Yacine - you start by working out the adjustments given in the notes, draw up the income statement, then the s f p and the statement of changes in equity.
I get the impression he knows what to do and has already done it. Now he just wants someone to provide the answer to see if he is correct. One of the advantages of going with a learning provider is you get your assignments marked as part of the fee you pay.
Learning provider - my brain has ceased to function. There must be a better description than that.
__________________
Never buy black socks from a normal shop. They shaft you every time.
Cheers - let's just say I could do with Shamus's knowledge on the accounting standards, I've a memory like a goldfish when it comes to this part of the subject, lol. Chriss
From one goldfish to another I really wish that I was as confident of my own knowledge as others seem to be.
It really seems that the more that you know about accounting standards the more that you realise that you don't!
I find that the best way to remember standards though is to write them all down on index cards with the code on one side and the name of the standard on the other. For example SSAP9 on one side and Stock and Long Term Contracts on the other.
Start with three cards then when you have them memorised just keep adding another until you are able to remember all of them.
Now shuffle them and go through again to make sure that you didn't just memorise the sequence.
Now turn them over and give the standard from the description.
Once you've memorised every standard in turn read each standard, jot down the main points, one per index card and start expanding your knowledge.
For example, continuing with SSAP9, on one side write "Stock should be valued at" and on the other side "The lower of cost and Net Realisable Value (NRV)".
For filing purposes always write the code of the standard somewhere on the card otherwise it's very easy to forget which question goes with which standard. Espechially where some standards cover the same ground and seem to contradict each other.
FRS3 for example contradicts FRS12 but there's a one liner in FRS12 that states that it does not apply where other standards offer a more detailed approach.
There are similar situations with SSAP19 and FRS15.
Actually, all of the above refer to UK GAAP. I would advise anyone new to studying standards to study only IFRS as the UKGAAP is falling by the wayside in 2012 (or there abouts!), so to learn the UK GAAP now would really be a waste of time.
When I move to the IAB I fully intend to take their level 4 diploma to move me over to IFRS but for now I'm finishing off my ACCA under UK GAAP.
Good luck with your exam revision... And on that note, that's what I should be doing as well as I've got one on Tuesday!
Talk later,
Shaun.
__________________
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.
Good luck for Tuesday, Shaun. Which consolidation are you hoping for? P2 was my nemesis - failed a cash-flow and passed a balance sheet. They don't call it the 'beast' for nothing! Regards Claire
it's Advanced Audit (P7) on Tuesday then it was supposed to be P2 next Tuesday but I've got to be at a client site for the entirety of that week so looks as though that one's now deferred until the Christmas sitting.
Over the years that I've been doing ACCA I must have paid for at least twice as many exams as I've actually got to sit!
Bit of a bummer as P7 as you know requires all of the knowledge for P2 plus audit specific stuff.
Group Cashflow statements are my pet hate as well. I've sat P2 once before and can see completely why it's referred to as the beast.
It was the first ACCA exam where I've ever sat in the hall before being allowed to open the paper thinking that it would be completely possible to open the paper and not be able to answer a thing on it.
I suppose that if you feel that way then you really shouldn't be in the hall for that sitting so six months additional study has certainly given me more confidence even if I'm not going to get to sit it. Fingers crossed by Christmas it may really be ingrained.
Once these two are finally out of the way though that will be it. I've got my STR signed off so I'll get the letters even though I still won't be able to get a practicing certificate.
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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 also had my STR signed off so I knew that there was no way I could just walk away - tempting as it was several times! I ended up doing a P2 Kaplan course for my re-sit and it was the best money ever spent. I had to change from UK to International though, as they didn't teach UK near me. Am hoping for my practising certificate by September next year.
but it is not a very important one, don,t worry
