A business arranges insurance for a vehicle purchased on 1 October 2016. The charge for insurance of £1,000 is to cover a six-month period starting on 1 October. Given, with a financial year-end following the calendar year, that half of this charge belongs to the next financial year, the account for insurance would appear as follows: Insurance 2016 £ 2016 £ 1 Oct Bank 1,000 […]

The annual charge for business rates is £2,000. However, in the year ending 31 December 2015 a business had paid £314 in advance for 2016. By 31 December 2016 the business had paid £275 in advance for 2017. The account for business rates would appear as follows: Business rates 2016 £ 2016 £ 1 Jan Balance b/d 314 31 Dec Income statement 2,000 31 Dec […]

A vehicle costs £15,000 and is to be depreciated using the reducing balance method with a percentage rate of 20 per cent. Depreciation to be charged on this vehicle will be as follows: e Cost of vehicle 16,000 Depreciation in year 1 (20% of £15,000) 3,000 Net book value at end of year 1 12,000 Depreciation in year 2 (20% of £12,000) 2,400 Net book […]

A business purchases machinery at a cost of £30,000. It is expected to have a life of six years, after which it will have no residual value. It is to be depreciated using the straight-line method. The annual depreciation for the machinery will be £5,000. This would appear as a charge in the income statement for each of the six years. The relevant section of […]

delivery van originally cost £18,000 and was to be depreciated at 25 per cent using the reducing balance method. The van was held by the business for two years before it was sold for £8,500. The profit or loss on the disposal would be calculated as follows: we need to ascertain the net book value of the asset. Therefore we need to calculate the depreciation […]

The following data relates to the year ended 31 December 2019. £ Sales 99,200 Purchases 65,100 Returns inwards 1,190 Returns outwards 550 Carriage inwards 1,975 Opening inventory 11,230 Closing inventory 13,460 The trading account would appear as follows: Trading account for year ended 31 December 2019 £ £ Sales 99,200 Less Returns inwards 1,190 Net turnover 98,010 Less Cost of goods sold: Opening inventory 11,230 […]

The following trial balance and additional information covers all the new adjustments featured in this chapter. The income statement and balance sheet constructed from this trial balance are accompanied by explanatory notes which should be viewed carefully. Ian Yates Trial balance as at 31 December 2018 £ £ Opening inventory 12,560 Sales 328,000 Purchases 185,000 General expenses 15,755 Salaries and wages 51,010 Electrical and power […]

The other balances listed in the trial balance are not needed for the income statement but will be used in the construction of another financial statement – the balance sheet. A full income statement is illustrated in the following example. Dr £ Cr £ Sales 124,500 Purchases 76,800 Inventory as at 1 January 2014 8,940 Machinery 15,000 Fixtures and fittings 8,450 Trade receivables 9,876 Trade […]

From the following trial balance and additional information construct an income statement for the year ended 31 March 2016 and a balance sheet as at that date. K Emery Trial balance as at 31 March 2016 Dr £ Cr £ Sales 92,300 Purchases 65,620 Opening inventory 4,232 Premises 85,000 Vehicles 11,200 Debtors 3,453 Creditors 5,981 Returns inwards 328 Returns outwards 209 General expenses 1,897 Office […]

Subsidiary not consolidated under previous GAAP Background Entity A”s date of transition to IFRSs is 1 January 2012. Under its previous GAAP, Entity A did not consolidate its 75 percent interest in Entity B, which it acquired in a business combination on 15 July 2009. On 1 January 2012: (a) the cost of Entity A”s investment in Entity B is $180. (b) under IFRSs, Entity […]