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    • Profile photo of John Moffat says

      It is the accounting equation: increase in net assets = capital introduced + profit – drawings

      The capital introduced is 7,200. The profit is 30,600. The drawings are (12 x 960) + 840 = 12,360.

      So you can now calculate the increase in net assets.

      You know the net assets at the end of the year (64,800) so if you subtract the increase then you know the net assets at the start of the year.

      (I hope you do realised that the answers are at the end of the lecture notes)

      • avatar says

        sorry, i do realise it, but i got confused at the part where it said 31st August and 24the december 2007. I wasn’t sure if I should’ve calculated by (960 x 5) or (960 x 12)

        Thanks John.

  1. avatar says

    Hello,

    Please help, I try to solve the question 1 of page 14 of Chapter 2 and I missed it.
    I choose “D” but the correct answer is “A”. Please can you explain why?

    Thank you.

    • Profile photo of John Moffat says

      You will know from the lecture that:

      Increase in net assets = capital introduced + profit – drawings

      So…closing net assets – opening net assets = cap int + profit – drawings

      If you subtract cap int from both sides, and add drawings to both sides, you get:

      closing net assets – opening net assets – cap int + drawings = profit (which is answer A)

      • avatar says

        Thank for the quick response to my question, I really do appreciate.

        Could you please explain further, what net asset is? because am a little bit confuse about closing net assets and opening net assets… am new to this please.

        Thanks

    • Profile photo of John Moffat says

      The lectures are what we cover on a 5 day course and cover more than enough to be able to pass the exam well. We do not claim to deal with every single topic in the syllabus nor do we claim to replace a Study Text.

      The exam will contain very little on either corporate governance or on the conceptual framework (and what is needed is covered within other lectures and lecture notes anyway). All of the examinable IFRS’s are covered in the lectures (most are still referred to as IAS’s) in chapters 5, 7, 9, 13, 14, 19, 20, 21, 22, and 27 of the lecture notes (and the lectures that go with them)!

    • Profile photo of John Moffat says

      The Statement of financial position does not try to show the ‘true’ value of a business.
      The main reason is because of the non-current assets. In the example statement on page 9 for example, land and buildings are shown at 100,000. This will be what we paid for them (although as you will see in a later chapter, in fact we reduce that amount gradually and call it depreciation). They might however be actually worth a lot more than 100,000 – buildings usually tend to go up in value (or of course they could be worth less).

      All the statement does is list all the assets and liabilities, but again it does not show the ‘true’ value.

  2. avatar says

    Kindly help with this question

    Here is an extended trial balance extract:
    Initial trial Adjustments Accruals and Income Statement of
    balance prepayments statement financial position
    Dr Cr Dr Cr Accruals Prepmnts Dr Cr Dr Cr

    Cell 1 Cell 2 Cell 3 Cell 4

    AT PT

    AT = accruals total
    PT = prepayments total
    To where should AT and PT be transferred?

    A- AT to Cell 3; PT to Cell 4
    B- AT to Cell 1; PT to Cell 2
    C- AT to Cell 4; PT to Cell 4
    D- AT to Cell 2; PT to Cell 1

    • Profile photo of John Moffat says

      The answer at the back of the notes is correct – but the letter is wrong.

      Accruals appear in the Statement of financial position – cell 4.
      Prepayments appear in the Statement of financial position – cell 3

      (Please do not ask these questions under a lecture for F3 – it confuses everyone. I know there is no Ask the Tutor Forum for FA2, so please ask them in the FA2 forums)

  3. avatar says

    Hello, please help!
    Where I can find the answers to chapter 2questions, q3 I am during as mentioned in the comment above, but can’t get the answer c.

    Please help.

    Many thanks. J

  4. avatar says

    Hi, could anybody help me with this question please? Aubrey made a profit for the year of $345.687 and has closing net assets of $435.195. During the financial year, capital of $60.000 was introduced which consisted of $40.000 in cash and €20.000 in non -current assets. Drawings of $6.000 were taken out of the business each month. What was the opening capital balance? After watching a fantastic lecture on open tuition, I tried to use the formulae but am not really understanding if I’m using it right. So here it is… 435.195= 60.000+345.687-72.000 then 435.195 less 333.687 =101.508 Does that look right as I don’t really understand if that’s anywhere close to the answer? Many thanks in advance…

      • Profile photo of John Moffat says

        Your equation is correct, but you have put the numbers in wrongly!!
        If you are going to put closing net assets as 435.195 (instead of 435195) then you need to put profit as 60.0 and drawings as 72.0. So your final answer is wrong!

    • avatar says

      Given: Profit = 345,687, Net Assets = 435,195, investment = 60,000, withdrawal = 6,000*12 = 72,000
      Required : Opening Capital = X
      Opening Capital + investment + profit – withdrawal = ending capital
      Net asset = Total assets – Total liablties= Ending capital = 435,195, given above
      X +60,000 + 345687 -72,000 = 435,195
      x = 435,195 – 333,687 =101,508
      Check!
      Opening Capital + investment + profit – withdrawal = ending capital
      101,508 +60000 +345687-72000= 435 195
      435,195 = 435,195

    • Profile photo of John Moffat says

      Appreciation will only be relevant if there is a revaluation. This is not something that will happen often. If is really only limited companies that will do this, and it is dealt with in a letter chapter (on limited companies).
      For a sole trader there is nothing else that will change net assets other than what is dealt with in this lecture.

  5. Profile photo of thekhalid says

    i am directly following the OT . i mean i am not getting any coaching from any college so i heard the lectures which were no doubt absolutely great and easy to understand but in the end of chapter 2 there are three test questions which were very tough and out of my understanding specially the third one i am very disappointed in myself :(

    • avatar says

      By definition, capital expenditure is spending on acquiring assets while revenue expenditure is spending on expenses. Inventory is an asset, how is spending thereon classifies?

      I am not sure but I think if you spend money on bying an inventory (assets not bills ) it could be capital expenditure.

  6. avatar says

    Dear Admin, I’m new in learning ACCA topics. I started with F3 (financial accounting). Firstfull thanks for providing all nesessary materials.
    Just i finish listening Chapter 2, and was working on a test at the end. i would ask you if i did it right? Q1-A, Q2- D, Q3-C.
    Is it correct? Thanks in advance

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