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What is the difference between the Statement of Comprehensive Income and the Income Statement?

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The Statement of Comprehensive Income is the same as the Income Statement but with the addition of any surplus on revaluation.(For later exams there are other differences, but the above is the only relevant one for Paper F3).

What is meant by a gross margin?

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The gross margin is the gross profit expressed as a percentage of the sales.

What is meant by an early settlement discount?

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An early settlement is a discount given if payment is made quickly.

What is the double entry for the sale of goods on credit?

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Debit receivablesCredit sales

What is the double entry for the purchase of goods for resale on credit?

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Debit purchasesCredit payables

Will an increase in capital be a debit or a credit entry in the ledger account for capital?

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An increase in capital will be a credit entry in the capital account.

Will an increase in income be a debit or a credit entry in the ledger account for the income?

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An increase in income will be a credit entry in the income account.

Will an increase in a liability be a debit of a credit in the ledger account for the liability?

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An increase in a liability will be a credit entry in the liability account.

Will drawings be a debit or a credit entry in the drawings account?

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Drawings will be a debit entry in the drawings account.

Will an increase in an asset be a debit or a credit in the ledger account for the asset?

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An increase in an asset is a debit entry in the asset account.

Will an increase in an expense be a debit or a credit in the ledger account for the expense?

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An increase in an expense is a debit entry in the expense account.

What is meant by net assets?

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Net assets = total assets – total liabilities

What is the accounting equation?

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The increase in net assets = capital introduced + profit – drawings

What are non-current assets?

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Non-current assets are assets acquired on a long-term basis, not held for resale in the normal course of trading.

What are current assets?

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Current assets are assets which are expected to be realised in the normal course of trading.

What are current liabilities?

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Current liabilities are liabilities payable within 12 months of the reporting date.

What are non-current liabilities?

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Non-current liabilities are liabilities payable more than 12 months after the reporting date.

What is the definition of drawings (or withdrawals)?

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Drawings is anything taken from the business by a sole trader, whatever he/she chooses to call it.

What is the definition of capital?

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Capital is the amount due to the owner(s) of the business.

What is the separate entity concept?

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The business is treated as separate from its owners.

What is the definition of gross profit?

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The gross profit is the sales revenue less the cost of goods sold.

What is the definition of a liability?

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A liability is an item owed by the business.

What is the definition of an asset?

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An asset is an item owned by the business.

What does the Income Statement show?

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The revenues, expenses and profit or loss of the business – the financial performance of the business over a period of time.

What does the Statement of Financial Position show?

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The assets, liabilities and capital of the business – the financial position of the business at one point in time.

Comments

At the start of the financial year 2011, the building account had a balance of 43,000 and accumulated depreciation account had 26,600.During the year company purchased a building for 35,000 on 13 September 2011. In connection to this new building company has incurred following cost:
1. Legal fee 2,000
2. Paint 800
3. Wiring 2,600
4. Electricity cost in wiring process 550
5. Labour cost of wiring 1300

Company also carried out some repair work on existing building which is as follows:

1. Painting 300
2. 2 additional rooms 4200

Further information revealed that labour employed for wiring purposes on new machinery was
company’s own staff. Amount paid to labour for appreciation of good work was 150 which is included in1300. Besides this amount nothing has been paid in addition to their normal wages.

Company depreciates the asset on reducing balance method at the rate of 20%. In case a new asset is purchased during the year then depreciation is calculated on the basis of months used during the year starting from the first day of the month subsequent to the month of purchase.

Prepare:
1. Building account
2. Accumulated Depreciation account – Building
3. Extracts from income Statement
4. Extracts from Statement of Financial Position

in irrecoverable debts and allowances chp can you please solve test question 2 i think the answer is a=98.40 if iam wrong should not we be deducting irrecoverable debts of 2040 from receivables 173760 and then applying the general allowance percentage 2% and compare closing allowance of 3434.4 with opening allowance of 5376 the decrease in allowance will be 1941.6 and profit and loss charge will be 98.40………………………… if this is not the correct answer can u please give me the logic of answer( b ) 139.20

This is not the place to ask questions like this – you should ask them in the Ask the Tutor Forum.

However your answer is wrong. The reason is that if you read the question carefully it says that “during the year, debts were written off”. This means that the balance on receivables at the end of the year was already after removing the irrecoverable debts. They should not therefore be subtracted again when calculating the allowance.

This is different from the wording in test question 1 – in that question it gives the balance on receivables and says that “it was then decided” to write off some debts.

A company with an accounting date of 31 October carried out a physical check of inventory on 4
November 20X3, leading to an inventory value at cost at this date of $483,700.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:
1 Goods costing $38,400 were received from suppliers.
2 Goods that had cost $14,800 were sold for $20,000.
3 A customer returned, in good condition, some goods which had been sold to him in October for
$600 and which had cost $400.
4 The company returned goods that had cost $1,800 in October to the supplier, and received a
credit note for them.
What figure should appear in the company’s financial statements at 31 October 20X3 for closing
inventory, based on this information?
A $458,700
B $505,900
C $508,700
D $461,500

I don’t understand how the answer is D. i thought we must add purchases a less sales. .not add sales and less purchases