• Profile photo of John Moffat says

      I am not sure what you are wanting! 23 words about what?

      The retained earnings increase each year because of the profits that have not been paid out as dividends.

      So the increase in the retained earnings will be the profit for the year less whatever dividend has been paid.

      • Profile photo of Rustam says

        So any decreases in profit lead to decreases in REtained earnings and vice versa, right?
        E.g 1)depreciation policy changed from 10 % to 20 %.
        What’s the effect? Retained earning should decrease ain’t it?
        And 2) do losses in inventory have any effect on sales? Because I have read that ” no ” and didn’t understand why:) thank you.

      • Profile photo of John Moffat says

        Any profit increases retained earnings!
        But if we reduce the profit then we reduce the retained earnings.

        Why should losing inventory affect how much you sell? What you sell depends on what people want to buy!

  1. Profile photo of Kayman says

    I have a few questions:

    1) What if there is a decrease in share capital & share premium? How do you treat this?
    2) Say Yr1 there was no Loan but Yr2 there is loan of say 100,000. If you calculate loan repaid then its will be (0-100 = -100) Is this shown as a cash inflow or simply its left out?

    Thanks in advance looking forward for a response as soon as possible.
    Video helps a lot *thumps up*

    • Profile photo of John Moffat says

      In future, please ask this sort of question in the Ask the Tutor Forum rather than as a comment on a lecture.

      1. Share premium can only decrease if there has been a bonus issue of shares. In that case there is no cash flow (share premium down, share capital up).
      Share capital will not decrease – not in Paper F3.

      2. In this case it means they have taken a loan (borrowed money) and therefore there is a cash receipt which will appear under the heading of financing activities.

    • Profile photo of John Moffat says

      Assuming you are taking the computer based exam, it will be fill in the blanks.

      However you need to know the layout because you can be asked in the multiple choice section which heading certain items appear under.

  2. Profile photo of John Moffat says

    Yes – the cash balance also includes short-term investments.

    Proceeds of sale of non-current assets is shown under ‘cash flows from investing activities’.

    (Have you watched the lecture, because all these questions are actually answered in the lecture :-) )

  3. Profile photo of Bakhtawer says

    Hey Mr Moffat

    Could you just give a minute and explain how will we know if interest has actually been paid or charged only if we have been given it in the statement of profit and loss charged after Operating profit ? Like in example One it was given and it was hard to understand if it was paid or not yet in the answer it was deducted from cash generated from operation to get Net Cash from operations.(Treated as interest paid)

    Please explain this.

    :) good day!

    • Profile photo of John Moffat says

      The interest shown in the Statement of profit or loss is the interest expense for the year.

      If the amount paid during the year is less, then the balance would still be owing and there would be a current liability in the SOFP.

      So….we take the expense from the Statement of profit or loss, and adjust by any current liability in the SOFP to get the interest actually paid during the year.

      • Profile photo of Bakhtawer says

        Could you also tell me the double entries when a cash discount has been given on sales and the company is registered for sales tax.How will we calculate the receivables figure and what will we show in the T accounts ?

        Many Thanks :)

      • Profile photo of John Moffat says

        You will not be asked for the double entry – F3 is not a double entry exam!

        If there is a cash discount, then the sales tax is calculated on the invoice amount after subtracting the discount (and it will not be changed even if the customer is late paying and so does not get the discount).

        We debit receivables with the gross amount (including sales tax); Cr Sales with the net amount, and Cr Sales tax with the tax.

        When they pay, we Dr Cash and Cr Receivables.

        If they have been able to take the discount, then we Cr Receivables and Dr discount allowed, with the amount of the discount.

  4. Profile photo of John Moffat says

    They have received cash of 1669200. However some of that cash was not for this years rent – it was owing at the end of last year for last years rent (the rent in arrears at the start of the year) – so you need to subtract that. Also, it does not include the cash that was received last year for this years rent (the rent in advance at the start of the year) – so you need to add that.

    Looking at the end of the year, there is rent in arrears – rent still owing to use for this year – and so that needs adding.
    Finally, there is rent in advance – we have received cash this year for next years rent, and so that needs subtracting.

    Now you should be able calculate the answer yourself.

    PS Please do not ask questions below a lecture that is on something completely different! The place to ask questions is in one of the forums – either the general F3 forum or the F3 Ask ACCA Tutor forum.

    • Profile photo of John Moffat says

      @mellen, For most of the missing chapters you must work through the course notes (or study books) yourself. This is because there are no numbers and there is no point in a lecture simply reading the course notes.
      Lectures for the other chapters will be uploaded in the next few weeks.
      (F2 chapters 2, 18, 19, and 20 are not missing – they are there :-) )

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