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Hi John,
I am just a bit confused about the fact you said that if closing inventory is lower, profit is lower. Where can I find the example for this? I thought is closing inventory is lower than profit is higher from the cost of sales equation (opening inv. + purchases – closing inv.)?
Thank you for your help
If closing inventory is lower, then cost of sales is higher (use the equation you have written and try it with some invented numbers 🙂 )
If cost of sales is higher, then profit is lower.
Thank you for the quick answer ! Now I got it 😀
if the inventory is lower it means we are over stating the cost of sales and consquently lower gross profit and same to profit and reverse happens respectively to the above items if the inventory is higher than expected
True, although why have you repeated what I had written last week? 🙂
Thank you for this lecture, the additional informations on this example treated touches so many aspect I might not think off. You are the best.
Sir, your lecture was really amazing. I’ve really understood now and i have gained knowledge. Thank you
Kind regards.
Sir I don’t understand why your didn’t add 2000 to the profit as the goods still alison’s goods. I though as the bookkeeper considered a sale, he removed in stock and we should resend it in s and increase the profit.
I do explain this in the lecture!
The inventory needs increasing by 2000, the sale needs removing (2400) and so the net effect on the profit is to reduce it by 400.
Take 2400 from the sales figure and add the inventory 2000 into the closing inventory and you will get the same result
But that is exactly what I have said!! 🙂
Most of us are non English speaker. It takes us a while to understand what you’ve said:p
I appreciate that, but I explained in the lecture and I wrote in my reply also. What Lee wrote said no different.
I am afraid that the exams are in English and although the ACCA try to be fair, so many questions really depend on really understanding the English.
I appreciate that – I teach in a country where English is not the first language – but I explained in the lecture and I explained in my reply also. What Lee wrote said no different.
I am sorry, but the exams are in English and although the ACCA try to be fair, so many questions depend on really understanding the English.
I know john 🙂 .Was just changing the English around a bit in case new English speakers were still having trouble. By the way hats off to your lectures far better than my university lectures.
No problem, and thanks a lot 🙂
great lecture but I am unsure of the last part which was if $500 for electricity had been incorrectly credited to telephone. Why due to this would you need to adjust by $1000?
Kind regards
If we pay $500 for electricity we should debit the expense account.
Here it has obviously gone to the wrong account – that would not stop the trial balance balancing except that instead of debiting they have credited.
So……we need to debit telephone 500 to remove it from that account.
We also need to debit electricity 500 to make things correct.
In total it means we need to adjust by 1000.
Hello sir.Thank you for this amazing lecture.
However,am still not getting this part.I understood the what you explained about the $1000.But the $500 that we wrongly credited,did it affect our profit?
I thought that our profit would decrease by $500 only because our expense is actually increasing by $500 only,the other $500 is just to correct the error.
Because if initially itself we had correctly recorded the entry,wouldn’t have the expense been only $500?
Because the 500 has been credited to telephone, it would have made the telephone expense lower, which would have increased the profit.
So we remove it from telephone – the expense is higher and the profit lower by 500.
Then we charge it to electricity (debit) and that makes the electricity expense higher, and therefore the profit lower by another 500.
So total affect on profit is 1,000.
Thank you so much sir.I understood it now.
Thanks again!
Hello Sir,
for example 1, i have some difficulties for the adjustment C).
If no sale was done, why not remove the whole sale value??? which means profit decreasing by 2400???
why only 400???? :S … It says it was accounted as a firm sale, and the sale value is 2400???? So by removing it, we should decrease the profit by 2400?? 🙁
Oops… just got the answer from the lecture itself… #FeelingSilly
Thank you! 😀
Admin/ Sir Moffat,
Where can I find the list of answers for the revision mock exams so that I may know how to solve the questions that I answered right/ wrong? Unlike F2 mock test, F3 does not show the answers after u enter the answers. Plz help!!! My exam is on Monday!
You could see the correct answers when you completed the f3 mock exam..
Hi ,Does anyone know the procedure how to prepare consolidated balance sheet,I need any example how to follow the steps .
Try watching my lecture on the consolidated statement of financial position (used to be called balance sheet) on this website!!!
Hi. I found question (d) in example 1, trickier than it actually was. My initial reaction was that it would have no effect on profit as it was a prepayment BUT, presumably prepayments just affect the Balance Sheet and NOT the Income Statement. Am I correct, even though I got the answer wrong initially? Kindest P.
Prepayments affect the income statement as well. If part of the payment was for next year, then the expense for this year is lower than what was actually paid (and therefore the profit is higher).
Also. Why are long term liabilities added to capital to calculate ROCE? Why wouldn’t they be subtracted to get net assets. Maybe it’s to to with the Assets = Liabilities + capital equation and/or Assets’ debits and credits are (sort of) reversed? Best P.
Just heard in a later lecture LT Liabilities are loans which answer’s my question above.
Fantastic lecture. Lecturer’s sense of humour would make me pay attention 100% while sitting in class. Keep it up. Thank you so much.
@munico1. The sale has been made but, the customer has not yet confirm the sale and because we would like to match the profit to the exact year, we did have to remove the profit until it is being confirmed.
That is what i think.
@akinfenwa,Yes – you would remove the sale, but you would also have to increase the inventory. So..the net effect is to lose the profit!
Hi admin, in relation to example 1, entry c) in adjustment to profits, could you please explain why it is only the profit removed yet the sale in effect hasn’t been made. Shouldn’t the sale figure also be removed?
Thanx
@munico1, i guess its bcuz qs says “no confirmation of sale had been received”
so customer may actually confirm the sale in future.if we removed it now , it can be prob later
in relation to entry c) could someone please explain why it is only the profit removed yet the sale in effect hasn’t been made and the sale figure should in my opinion be also removed.
Thanx
when an entry is omitted it does not effect the trail balance… but still it is entred in the suspence account..??
@dexter34, If an entry is completely missed out (no debit and no credit) then it does not affect the suspense account.
how would the profit be adjusted if the cost was 7930 and NRV 8920. Are we still deducting 990. Someone should help me please.
@markadi, The profit would not be adjusted because inventory would have been valued at the lower of cost and NRV. In this case, an adjustment would only be necessary, as in the example if inventory had been valued at the higher of cost and NRV.
Is the difference between the error of commission and error of principle that, the error in commission is between similar nature accounts and the error in principle is between different nature accounts? admin?
@Shiraz, Yes – you are correct.
hi thank for help
sir please give the answers of test Questions
@masood022, The answers to the test questions are at the back of the Course Notes
pliz heeeeeelp! cnt access da video guyz
Great lectures, Feels the same heat as we are sitting in class and interacting with lecturers on his questions/queries. These new lectures are more interactive than the old ones.
Million of thanks for all this.
@mehmoodhamid, I do not know how you get to watch these lectures… please I need help
@bonifaceb, Switch to another browser. You should be able to watch this. There is some thing wrong with your computer or web browser.
I have taken all the lecturers and last week appeared in CBE. I got 84%. Really appreciate Opentuition. The whole credit goes to them. To be honest, I am totally speachless.
Sir, people are facing problems in watching the video as i have tried different browsers for it. Kindly next time manage to put a video which resolution and compatibility is easier and accessible to all the users computers.
@certifiedca, I’m afraid people with problems are in a minority!
as lecture works fine,
you need someone to help you with your PC! or your settings,… how are we to know why you have problems? ask someone in your office/college for help
i like it)
Your PC is the problem, try another browser
@admin,Hi admin, in relation to example 1, entry c) in adjustment to profits, could you please explain why it is only the profit removed yet the sale in effect hasn’t been made. Shouldn’t the sale figure also be removed?
Thanx
please the newly uploaded videos are not opening. what coud be the problem.
nice