The personal businesss of a concern are to be treated as being quite separate from the non-business activities of its proprietor. Example of this construct, if the proprietor withdraws money from the concern history for personal usage, it is recorded as pulling. Any injection or reinvestment or net income would be regarded as capital in the accounting context.
Accumulations Concept
Concerned with the different between hard currency grosss and hard currency outgo ( existent payments and grosss of money for points ) and gross and outgo. It states that points should be recorded when used and non when paid for. Example for this construct, if an endeavor sell some goods on recognition, the gross revenues is instantly recorded and an plus receivable will be recorded even through the client has non acquire paid for the goods. If the goods were delivered on 18 June and the payment was made on 20 June, the sale is deemed to hold topographic point on 18 June.
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 have to shut down because of deficit of instance
Example of this construct, where the venture is a specific intent like puting up a stall in an exhibition or carnival or the building or span under a contract, the concern comes to an terminal on the competition of the undertaking.
Consistency construct
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 is usage in the following twelvemonth and so on
Example of this construct, if a company has adopted for one twelvemonth method of consecutive line depreciation and in another twelvemonth it changes it to written down value method so the net income for those two old ages can be compared as the alteration in method of depreciation will impact the net incomes to a great extend and therefore proper decision ca n’t be drawn.
Question 1 ( degree Celsius )
State why is of import to distinguish between capital outgo and gross outgo, and briefly explain the accounting intervention of each type of outgo.
Capital Outgo
Capital outgo is made when a house spends money either to:
Buy fixed plus
Add to the value of an bing fixed assert
Include in such sums should be those spent on:
Geting fixed assert
Bringing them into the house
Legal costs of purchasing edifice
Passenger car inwards on machinery bought
Any other cost needed to acquire the fixed assert ready for usage
Gross outgo
Outgo which is non for increasing the value of fixed assert, but for running the concern on a daily footing, is know as gross outgo.
Different between gross outgo and capital outgo
The different between gross and capital outgo can be seen clearly with the entire cost of utilizing the a motor new wave for a house. To purchase motor new wave is capital outgo. The motor new wave will be in usage for several old ages and is, hence, a fixed plus
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.
The accounting intervention of each type of outgo:
Gross outgo – Expenses – Income statement
Capital outgo – Fixed plus – Balance sheet
Question 1 ( vitamin D )
Plant and Machinery was purchased on 1st June 2005 for RM 100000 and estimated disposal value of RM 10000. Calculate the depreciations for the old ages 2005 and 2006 utilizing the cut downing balance taking the rate 10 % method.
Old ages 1: 100000 10 % A- 7/ 12 = 5833 100000 – 5833 = 94167 ( Reducing Balance )
Old ages 2: 94167 A- 10 % = 9417 94167- 9417= 84750 ( Reducing Balance )
Question 1 ( vitamin E )
The model for the readying and presentation of fiscal statement provinces that in order to be utile, fiscal information should run into four aims. These are:
Relevance
Dependability
Comparison
Comprehensibility
Relevance
Relevance means that direction accounting information applies to certain stuffs, labour or overheat in the company. This information let company to find which cost are direct or indirect, where direct cost relate to accessory service. Relevance cost relate to the current determination at manus. Management accounting can describe several types of information ; nevertheless information may be unneeded for a determination.
Dependability
The right determination based on a set of fiscal information would besides depend on the dependability of the information. In this context, self generated information is considered to be the most dependable as compared to information gather by 3rd parties. The user must be able to depend on the truthfulness of thee information.
Comparison
Consideration in determination devising, in add-on to the quantitative or fiscal factor highlighted by Incremental Analysis. They are factor relevant to a determination that are hard to mensurate in footings of money.
Comprehensibility
The 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.
Question 1 ( degree Fahrenheit )
Identifying any five user of accounting information
Bank
Capital
Creditor
Government
Stockholder
Question 2
You have been supplied with the undermentioned balances for Betsy Li, a exclusive bargainer, for the twelvemonth ended 31 December 2009:
A
RM
Property at cost
140000
Equipment at cost
70000
Provision for deprecation at 01/01/09
A
Property
4200
Equipment
17500
Purchases
385000
Gross saless
592000
Stock at 01/01/09
17400
Discount allowed
14000
Discount received
1900
Tax returns outward
17600
Wagess and wages
43400
Creditors
28500
Debtors
15800
Bank overdraft
2900
Cash in manus
520
Pulling
17950
Provision for bad depts. at 01/01/09
200
General disbursals
11400
Long term loan
20000
Capital at 01/01/09
30670
The undermentioned accommodations need o be taken into history:
Stock at 31/12/09 is RM 21600
Wagess and wages outstanding at31/12/09 are RM 4100
General disbursals include a prepayment for rates of RM 1000
The proviso for bad debts needs increasing to RM 280
Depreciation for the twelvemonth has still to be provided as follow:
Property 1.5 % per twelvemonth utilizing the consecutive line method
Equipment 25 % per twelvemonth utilizing the cut downing balance method
Loan involvement of RM 2000 is outstanding
Required:
Fix a test balance for Betsy Li as at 31 December 2009
Fix the Income and Balance Sheet for Betsy Li for the period stoping 31 December 2009.
( A )
Betsy Li
Trial balance as at 31 December 2009
A
Debit
Recognition
Property at cost
140000
A
Equipment at cost
70000
A
Provision for deprecation at 01/01/09
A
A
Property
A
4200
Equipment
A
17500
Purchases
385000
A
Gross saless
A
592000
Stock at 01/01/09
17400
A
Discount allowed
14000
A
Discount received
A
1900
Tax returns outward
A
17600
Wagess and wages
43400
A
Creditors
A
28500
Debtors
15800
A
Bank overdraft
A
2900
Cash in manus
520
A
Pulling
17950
A
Provision for bad depts. at 01/01/09
A
200
General disbursals
11400
A
Long term loan
A
20000
Capital at 01/01/09
A
30670
Entire
715470
715470
( B ( I ) ) Betsy Li
Income statement for the twelvemonth ended 31 December 2009
RM
RM
RM
Gross saless
592000
less ) cost of good gross revenues
Opening stock
17400
Purchases
385000
less ) Tax return outwards
( 17600 )
367400
384000
less ) shutting stock
( 21600 )
363200
Gross net income
228800
other income
Discount received
1900
230700
Expenses
Discount allowed
14000
Wages & A ; wages ( 43400+4100 )
47500
Increase proviso for bad debt
80
General disbursals ( 11400-1000 )
10400
Depreciation of belongings ( w1 )
2100
Depreciation of equipment ( w2 )
13125
Loan involvement
2000
89205
Net net income
141495
Working 1 Working 2
Depreciation of belongings Depreciation of equipment
1.5 % A- 140000 = 2100 70000 – 17500 = 52500
52500 A- 25 % = 13125
( B ( two ) ) Betsy Li
Balance sheet as at 31 December 2009
At Cost
Accumulated Depreciation
Net Book Value
RM
RM
RM
Non- Current Asset
Property
140000
6300
133700
Equipment
70000
30625
39375
Current Asserts
Stock at 31/12/09
21600
Debtors
15800
Provision for bad debts
( 280 )
15520
Cash in manus
520
General disbursals prepayment
1000
38640
Current Liabilitiess
Creditors
28500
Bank overdraft
2900
Wages & A ; wages outstanding
4100
Lend involvement outstanding
2000
( 37500 )
Working capital
1140
174215
Finance by:
Capital
30670
Net net income
141495
172165
less ) Pulling
( 17950 )
154215
Non-current liabilities
long term loan
20000
174215