Question 1
Explain the difference between fixed assets and currents assets.
Explain the undermentioned constructs:
Business Entity Concept
Accumulations Concept
Traveling Concern Concept
Consistency Concept
State why it is of import to distinguish between capital outgo and gross outgo, and briefly explain the accounting intervention of each type of outgo.
Plant and Machinery was purchased on 1st June 2005 for RM 100, 000 and estimated disposal value of RM 10, 000. Calculate the depreciation for the twelvemonth 2005 and 2006 utilizing the cut downing balance taking the rates as 10 % method.
The model for the readying and presentation of fiscal statements states that in order to be utile, fiscal information should run into four aims. There are:
Relevance
Dependability
Comparison
Comprehensibility
Identify any five users of accounting information.
Answer of the inquiry 1:
Fixed Asset is a long term, touchable plus usage for the concern and which the cost is fixed and the cost is non to be converted into hard currency on the approaching fiscal twelvemonth.
Current Assets is the assets that receivable, stock list, hard currency etc. which is the cost that non fixed because a normal class of concern usage to change over the money into goods or alteration back into hard currency. On the other manus, current plus can utilize to be bought for gross revenues.
B )
The history construct is use to enter the fiscal in the corporate entity, it is separate from the people who to finance. This is average, the concern to be treat separate from the non-business activities of the proprietors.
An accounting method that included income and expense points as they are used to gain or to incurred irrespective when money is received or paid out.
Traveling concern construct can specify like, if a company will go on to run the concern, because it go on will traveling out of concern. For this happen, the company must be able to take responsible to raise the concern adequate resource to remain operational.
Once the entity has being chosen an accounting method, which is average it should be go on to utilize the same method, except for a sound ground to make. If non any accounting method alteration must be disclosed.
degree Celsius ) Capital outgo
Capital outgo can be defined as money spent to purchase or upgrade with physical assets such like edifice and machinery, electricity etc.
Gross outgo
Gross outgo can intend as a keeping a gross assets, this assets is include fix and care disbursals, because this are incurred to back up some of the current place. Another gross is use to run with a concern, like gross revenues, rent, office supplies etc.
vitamin D ) 2005 – RM 100,000 ten 10 % = 10, 000
2006 – RM10, 000 ten 10 % = 1, 000
10, 000 – 1, 000 = 9, 000
I: Relevance – Relevance fiscal information is capable for doing determination by the users. Fiscal information is usage to doing a difference determination if there have prognostic value, collateral value.
Two: Reliability – Reliable accounting information is free signifier concern proprietor, directors or professional comptrollers. Business stakeholders need dependable information so they can state all information is accurate and valid.
Three: Comparability – Comparison is the ability to compare with one of the company accounting information and besides another company information. This related a company accounting information fiscal studies. A company can utilize with difference accounting information to enter their method. Asset and liabilities and other information are to name the format for analysis.
Four: Understandability – comprehensibility is a qualifying to showing the information clearly and briefly can do it apprehensible. If some can non be understand, to except such of the information will do for the fiscal study incomplete and potentially deceptive. Fiscal studies usage to hold sensible cognition of concern and economic activates and who to reexamine and to analyze the information with diligence.
degree Fahrenheit )
Bank
Supplier
Government
Owner
Director
Stockholder
Question 2:
You have been supplied with the undermentioned balances for Betsy Li, a Sole 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
Purchases 385,000
Gross saless 592,000
Stock at 01/01/09 17,400
Discount Allowed 14,000
Discount Received 1,900
Return Outward 17,600
Wagess and Wages 43,400
Creditors 28,500
Debtors 15,800
Bank overdraft 2,900
Cash in Hand 520
Drawings 17,950
Provision for Bad debts at 01/01/09 200
General Expenses 11,400
Long term loan 20,000
Capital at 01/01/09 30,670
The undermentioned accommodation demand to be taken into history:
a ) Stock at 31/12/09 is $ 21,600
B ) Wagess and Wages outstanding at 31/12/09 are $ 4,100
degree Celsius ) General Expenses include a prepayment for rates of $ 1,000
vitamin D ) The proviso for bad debts needs increasing to $ 280
vitamin E ) 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
degree Fahrenheits ) Loan interested of $ 2,000 is outstanding
Require:
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
Answer of Question 2
( a )
Trial Balance for Betsy Li as at 31 December 2009
A
A
RM
Property at cost
140,000
Equipment
70,000
Provision for Depreciation at 01/01/09
A
: Property
A
: Equipment
A
Purchase
385,000
Gross saless
A
Stock at 01/01/09
17,400
Discount Allowed
14,000
Discount Received
A
Return Outward
A
Wagess and Wages
43,400
Creditors
A
Debtors
15,800
Bankoverdraft
A
Cash in Hand
520
Drawings
17,950
Provision For Bad Debts at 01/01/09
A
General Expenses
11,400
Long Term Loan
A
Capital at 01/01/09
A
A
A
A
A
A
715,470
( B )
Besty Li the Income Statement as at 31 December 2009
A
A
RM
RM
Gross saless
A
A
Less: Cost of Goods Sold
A
A
Opening Stock
A
17,400
Purchase
385,000
A
Less: Tax return Outwards
17,600
367,400
A
A
384,800
Less: Shutting Stock
A
21,600
A
A
A
Gross Net income
A
A
Add: Gross
A
A
Interested Prepaid
A
A
Discount Received
A
A
A
A
A
Lupus erythematosus: Expenses
A
A
Discount Allowed
A
14,000
Wages & A ; Salaries ( 43,400 – 4,100 )
A
39,300
Increasing of Provision for Bad Debts
A
80
General Expenses
A
10,400
Depreciation of Property ( 140,000 x 1.5 % )
A
2,100
Depreciation of Equipment ( { 70,000 – 17,500 } x25 % )
A
13,125
A
A
A
A
A
A
A
A
A
A
A
Cost
Accumulated Deprecation
Net Assetss
Fixed Assetss
A
A
A
Property
140,000
6,300
133,700
Equipment
70,000
30,625
39,375
A
210,000
36,925
173,075
Current Assetss
A
A
A
Closing Stock
A
21,600
A
Debtors
15,800
A
A
Attention deficit disorder: Interest Prepaid
2,000
A
A
: rewards & A ; wages prepaid
4,100
A
A
: General disbursals prepaid
1,000
A
A
A
22,900
A
A
Less: proviso For Bad Bebts
280
22,620
A
Cash in Hand
A
520
A
A
A
44,740
A
Less: Current Liabilitiess
A
A
A
Creditors
28,500
A
A
Bank overdraft
2,900
31,400
13,340
A
A
A
186,415
Finance by:
A
A
A
Capital at 01/01/09
A
30,670
A
Attention deficit disorders: Net Net income
A
153,695
A
A
A
184,365
A
Less: Drawing
A
17,950
A
Capital at 31/12/09
A
166,415
A
Long-run Liabilitiess
A
A
A
Long-run Loan
A
20,000
186,415
A
A
A
A
A
A
186,415
