• 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.

  1. 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)

  2. 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

  3. 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
      Opening Capital + investment + profit – withdrawal = ending capital
      101,508 +60000 +345687-72000= 435 195
      435,195 = 435,195

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