The personal businesss of a concern are to be treated as being quite separate from the non-business activities of its proprietor ( s ) .
The accounting records reflect the fiscal activities of a specific corporate entity, separate and distinguishable from the people who finance it or work in it. It is one of the ‘ground regulations ‘ of accounting.
Accumulations Concept
Concerned with the difference between hard currency grosss and hard currency outgo ( existent payments and grosss of money for points ) and gross and outgo.
It states that point should be recorded when used and non when paid for.
Traveling Concern Concept
It implies that the concern will go on to run for the foreseeable hereafter.
Example: the premise should non be made are:
If the concern is traveling to shut down in the close hereafter.
Where deficit of hard currency makes it about certain that the concern will hold to discontinue trading.
Business has to shut down because of deficit of hard currency.
Consistency Concept
Each house should seek to take the methods which give the most dependable image of the concern.
This can non be done if one method is used in one twelvemonth and another method is use in the following twelvemonth and so on.
degree Celsius ) State why is it of import to distinguish between capital outgo and gross outgo, and briefly explain the accounting intervention of each type of outgo.
The difference between gross and capital outgo can be seen clearly with the entire cost of utilizing a motor new wave for a house.
To purchase a motor new wave is capital outgo, the motor new wave will be in usage for several old ages and is, hence, a fixed assets.
To pay for gasoline to utilize in the motor new wave for the following few yearss is gross outgo, this is because the outgo is used up in a few yearss and does non add to the value of fixed assets.
Capital outgo
Is made when a house spends money either to:
Buy fixed assets.
Add to the value of an bing fixed plus.
Included in such sums should be those spent on:
Geting fixed assets.
Bringing them in to the house.
Legal costs of purchasing edifice.
Passenger car inwards on machinery bought.
Any other cost needed to acquire the fixed plus ready for usage.
Gross outgo.
Outgo which is non for increasing the value of fixed assets, but for running the concern on a daily footing, is known as gross outgo.
Accounting intervention.
Expenses – Income statement.
Capital – Fixed assets – Balance sheet.
vitamin D ) Plant and Machinery was purchased on 1st June 2005 for RM100, 000 and estimated disposal value of RM10, 000. Calculate the depreciation for the old ages 2005 and 2006 utilizing the cut downing balance taking the rate as 10 % method.
Calculation:
2005 – RM 100,000 ten 10 % x 7/12 = 5833
RM 100,000 – 5833 = 94, 167
2006 – RM 94, 167 ten 10 % = 9417
RM 94, 167 – 9,417 = 84, 750
vitamin E ) The model for the readying and presentation of fiscal statements states that in order to be utile, fiscal information should run into four aims. These are:
Relevance – Relevance is one more factor that must be present in the information for it to be utile. Information that is non relevant is considered as waste of valuable clip in determination devising.
Reliability – The right determination based on set of fiscal information would besides depend on the dependability of the information. In this context, self generated information is considered to be most dependable as compared to information gather by 3rd parties. The user must be able to depend on the truthfulness of the information.
Comparability – This implies the ability for users to be able to compare similar companies in the same industry group and to do comparings of public presentation over clip. Much of the work that goes into puting accounting criterions is based around the demand for comparison.
Understandability – This implies the look, with lucidity, of accounting information in such a manner that it will be apprehensible to users – who are by and large assumed to hold a sensible cognition of concern and economic activities
degree Fahrenheit ) Identify any five users of accounting information.
Bank
Supplier
LHDN ( Inland Revenue )
Director
Potential portion holder
Bibliografy
Ebrary, 2011, Financial Accounting, A practical attack,
Retrieved 20th February
& A ; lt ; hypertext transfer protocol: //www.ebrary.com/corp/accounting.jsp & A ; gt ;
Ebrary. 2011, The Basicss of Hospitality Accounting, Qualitative of fiscal information,
Retrieved twentieth February,
& A ; lt ; hypertext transfer protocol: //www.ebrary.com/corp/financial-information.jsp & A ; gt ;
Ebrary. 2011, Accounting Concept, The of import construct in Accounting,
Rretrieved twentieth February,
& A ; lt ; hypertext transfer protocol: //www.ebrary.com/corp/collateral/en/Corporate/ebrary_accountingbasicsinformationconcept =OEFFFKKEPMPJ, & A ; gt ;
Question 2
You have been supplied with the undermentioned balance for Betsy Li, a exclusive bargainer, for the twelvemonth ended 31 December 2009:
RM
Property at cost 140,000
Equipment at cost 70,000
Provision for depreciation at 01/01/09:
-Property 4,200
-Equipment 17,500
Purchase 385,000
Gross saless 592, 000
Stock at 01/01/09 17,000
Discount allowed 14,000
Discount received 1,900
Returns outward 17,600
Wagess and wages 43,400
Creditors 28,500
Debtors 15,800
Bank overdraft 2,900
Cash in manus 520
Drawings 17,950
Provision for bad debt at 01/01/09 200
General disbursals 11,400
Long term loan 20,000
Capital at 01/01/09 30,670
The undermentioned accommodations need to be taken into history:
Stock at 31/12/09 is $ 21,600
Wagess and wages outstanding at 31/12/09 are $ 4,100
General disbursals includes a prepayment for rates of $ 1,000
The proviso for bad debt needs increasing to $ 280
Depreciation for the twelvemonth has still to be provided as follows:
Property 1.5 % per twelvemonth utilizing the consecutive line method.
Equipment 25 % per twelvemonth utilizing the cut downing balance method.
Loan involvement of $ 20,000
Required:
Fix a test balance for Betsy Li as at 31 December 2009/
Fix the Income Statement and Balance Sheet for Betsy Li for the period stoping 31 December 2009.
The Trial balance for Betsy Li as at 31 Dec 2009
Debit
Recognition
Property at cost
RM 140,000
Equipment at cost
RM 70,000
Provision for depreciation at 01/01/09
Property
RM 4,200
Equipment
RM 17, 500
Purchases
RM 385,000
Gross saless
RM 592,000
Stock at 01/01/09
RM 17,400
Discount allowed
RM 14,000
Discount received
RM 1,900
Tax returns outward
RM 17,600
Wagess and wages
RM 43, 400
Creditors
RM 28,500
Debtors
RM 15,800
Bank overdraft
RM 2,900
Cash in manus
RM 5,200
Pulling
RM 17,950
Provision for bad debts at 01/01/09
RM 200
General disbursals
RM 11,400
Loan
RM 20,000
Capital
RM 30, 670
RM 715,470
RM 715,470
Income statement for the twelvemonth stoping 31 Dec 2009
RM
RM
RM
Gross saless
592,000
Less ) Return inward
Net gross revenues
Less ) Cost of good sold
17,400
Purchases
385,000
Less )
( 17,600 )
Net purchase
367,400
384,800
Closing stock
( 21,600 )
( 363,200 )
228,800
Add ) Gross
1,900
Discount received
230,700
Less ) Expenses
Discount allowed
14,000
Wagess and wages
47,500
General disbursals
10,400
Provision for bad debt
80
Provision for depreciation: Property
2100
: Equipment
2000
Loan involvement
13,125
( 89,205 )
Net net income
141,495
Depreciation for the twelvemonth has still to be provided as follows:
Property 1.5 % per twelvemonth utilizing the consecutive line method.
1.5 % x 140,000 = 2,100.
Property = 2,100
Equipment 25 % per twelvemonth utilizing the cut downing balance method.
70,000 – 17, 500
52,500 ten 25 %
= 13,125
Equipment = 13,125
Balance sheet as at 31 Dec 2009
Fixed assets
RM
RM
RM
Property
140,000
Less ) Accumulated depreciation – belongings
( 6,300 )
133,700
Equipment
70,000
Less ) Accumulated depreciation – equipment
( 30,625 )
39,375
173,075
Current assets
Stock
21,600
Debtor
15,800
Less ) Provision for dubious debt
( 280 )
15,520
Cash
520
Prepaid disbursals
1,000
38,640
Less ) Current liabilities
Creditor
28,500
Accrued disbursals
6,100
Bank overdraft
2,900
( 37,500 )
Working capital
1,140
174,215
Financed by
Capital
30,670
Add ) Net net income
141,475
172,165
Less ) Pulling
( 17,950 )
154,215
Add ) Long term loan
20,000