I am new to this forum. I am a student attempting the ACCA exams. Could you help me with the following:
(1) In the Statement of cash flows how are provisions treated for example provision for bad debts and provision for slow moving inventory? (2) How is VAT treated in the statements of cash flows?
Could you provide a working example, I am interested in the indirect and direct method
2) Could you explain the journal entries for posting the current portion of a long term bank loan?Which is the preferred method? (Not posting any entry in the company GL but simply splitting current and noncurrent showing current due in one year on the financial statements (as a manual reclassification)or reversing the entries at the beginning of the year)
Is this journal entry correct?Dr. Non-current Bank loan-B/SCr. Current amount due in one yearB/S
Also, do Current portions of long term debt only include principle repayments for the next 12 months NOT future interest?
3) Under and over provision of income tax,Could you provide an example showing the journal entries for both?In the trial balance or chart of accounts, can I open an account called " Over and provision for income tax "to do my adjustments?
would I be right in assuming that this is paper F3? I this your first paper?
which study texts are you using? BPP or Kaplan?
Your Cashflow questions are quite basic so I would advise reviewing cashflows again from scratch. It was always an area that I hated but at least UKGAAP improved when we adopted the approach of IAS7 (have you read IAS7 yet?).
If you are having difficulties with cashflow statements from your study text then it would not hurt to also buy the other one (BPP is you have Kaplan or Kaplan if ou have BPP)
For the Loan you just need to think about what you are attempting to achieve.
When you took out the loan you loaned an ampount that went into the bank and the equivalent amount became a liability as you owe that money so the balance sheet balances.
Does the interest even meet the criteria of being a liability? Think abnout it. Even at F3 by now you should know that a liability is a present obligation as a result of past events the settlement of which is expected to involve the outflow of economic benefits... Does a present obligation actually exist for the future interest at the balance sheet date?
Generally the answer is that you recognise the capital apportionment only in the balance sheet and the interest through the P&L
So, considering that when you make a payment from the bank to pay the loan some of it reduces the capital in the balance sheet and the rest is recognised as an expense.
So, the amount in the balance sheet does not include future interest
Now, not all loans are like that. With some loans the interest is capitalised at outset but lets not consider the effect of IAS23 just yet as that one isn't even examinable at F3.
I don't think that people here should be providing example journal entries but rather you should provide the journals and ask the site if they think that it is correct. To do it the other way around would not help you.
Provide your example journals in a two (or more) line format with the Credits and Debits shown on different lines. Ensure that you prefix each entry with Cr or Dr.
This reply is not intended to answer your questions but rather to try and help you think about the questions yourself.
I hope that it helps,
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.
