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lakshmana iyer krishnan says
February 3, 2015 at 8:31 am
Dec 14 MCQ 4
Repro, a company which sells photocopying equipment, has prepared its draft financial statements for the year ended
30 September 2014. It has included the following transactions in revenue at the stated amounts below.
Which of these has been correctly included in revenue according to IAS 18 Revenue?
A Agency sales of $250,000 on which Repro is entitled to a commission
B Sale proceeds of $20,000 for motor vehicles which were no longer required by Repro
C Sales of $150,000 on 30 September 2014. The amount invoiced to and received from the customer was
$180,000, which includes $30,000 for ongoing servicing work to be done by Repro over the next two years
D Sales of $200,000 on 1 October 2013 to an established customer which (with the agreement of Repro) will be paid in full on 30 September 2015. Repro has a cost of capital of 10%
Can you please reply as to why Option D is not correct to be included in Revenue. It appears to be “credit sales” – sales made in 2013 but payment will be received in 2015. ACCA official answer has stated correct answer as C.
February 3, 2015 at 2:02 pm
Option D is incorrect because the value of the receivable as a result of the sale is stated at $200,000 – the apparent face value of the sale – yet the amount to be received is not due to actually be received until another full year has passed. The $200,000 needs to be discounted and recorded as income $165,289 and finance income of $16,529 in the year to 30 September 2014. In the year to 30 September, 2015 there is a further $18,182 finance income to record
Answer C illustrates the concept of an amount receivable in respect of future obligations – it’s not quite the same situation as answer D but it’s similar(ish)
February 3, 2015 at 2:47 pm
Thanks a million, sir. I was wondering why the question has stated the cost of capital!! We are used to this discounting only in lease questions, deferred consideration on Consolidated SOFP and environmental liability creation. This is the first time this discounting concept has come in Revenue recognition.
February 3, 2015 at 3:25 pm
Never too old to learn!
Now you’ve seen it once, you’ll be ready for it next time
June 3, 2014 at 4:53 pm
Thank you Mike you’ve been a great help you are a great lecturer. Your goodwill can never be impaired all the rest are valued under proportionate basis and gratitude will always only ever be to you.
May 12, 2014 at 1:26 pm
hello Mike can you please give me a link where to read up on prudent and other framework.
October 28, 2013 at 8:15 pm
is this enuf ?? seriously ?? @ADMINS
October 30, 2013 at 8:01 am
I’ve just answered this on your previous post
Fahad Siddiqui says
October 12, 2013 at 6:36 am
Its as simple as it is stated – respect teachers even if you don’t like them ! ESPECIALLY IF THEY ARE DOING IT FOR FREE !!!
Thumbs up open-tuition and fellow teachers ! ! !
June 3, 2014 at 4:39 pm
Thumps up to this reply
October 11, 2013 at 2:32 pm
Hi admin, is there any more videos for IAS 16
shahbaz Gohar says
April 19, 2013 at 8:55 pm
City Motors Ltd. Sold a Car to its Customer for $ 1,663,750. on 1st of July.,10 term provided that the Whole Amount Should be Paid After 3 Years. Effective Rate of interest is 10% . what amount of revenue should be recognised at end of year 1,2 n 3 ?????? answer plzzzzzzzzzz
October 11, 2013 at 5:55 pm
“They sold a car for $1,663,750″ ! ! ! ! !!!!!!! ???????
If they are selling cars for > $1.5 million they can afford a qualified accountant to work out appropriate revenue
The present value of the amount receivable in 3 years’ time is $1,663,750 / (1/1.1)(1/1.1)(1/1.1)
The revenue to recognise in year 1 is the present value * 1.1
In year 2 it’s (that amount * 10%)
In year 3 it’s $151,250
Double entries in year 1 Dr receivable Cr revenue $1,663,750 / (1/1.1)(1/1.1)(1/1.1)
Dr receivable Cr finance income (present value * 10%)
Year 2 Dr receivable Cr finance income 10% * balance on receivable account
Year 3 Dr receivable Cr finance income $151,250
and Dr Cash Cr receivable $1,663,750
And tell the car seller not to be so tight with his millions of dollars and pay an accountant to work out the amounts!
I would have done it for you but I’m sitting in a fog-bound airport waiting to catch a plane to get me home
April 13, 2013 at 4:26 pm
I can’t believe i have just read this on here… they are free lectures, the teachers on here take up their time to teach and share their knowledge for free… perhaps you should respect the site or go or pay hundreds to be taught it.
I appreciate all what they do and perhaps instead of moaning about it you should go away and start revising !
yes constructive criticism should be given but not in such a rude way!
thank you Mike all your lectures are helping me with my course!!
November 16, 2012 at 4:43 pm
Or should that be “debit”?
October 20, 2012 at 6:17 pm
teacher of f5 and f9 is great. his method of teaching is great. he writes everythink to explain. on other hand F7 teacher is just trying to get rid of his load
October 20, 2012 at 7:12 pm
@arsal434, Well said – so don’t listen to F7!
November 2, 2012 at 6:51 pm
@MikeLittle, I think i realized my Mistake. so i want to apologize for my comments. So sorry Mike
Miss A.. says
November 16, 2012 at 2:40 pm
@arsal434, hmmm….you should respect him.
Anyways Sir Mike, the notes have significant importance on their own.However, any illustration would do more wonders.I appreciate our efforts for students of f7 & keep up the good work as many students are in need of it.
November 16, 2012 at 4:41 pm
@Miss A.., Whatever is in the notes / lectures for IAS 18 is pretty much all your going to need for F7. These lectures and notes don’t just happen! There is thought that goes into them. Look up the last time that Steve Scott asked a 25 mark question on Government Grants or Revenue and you’ll be looking for a long, long, long time.
Give me break, will you, and credit me with a bit of intelligence
November 16, 2012 at 7:47 pm
@arsal434, WOW, you are sort of Immature Idiot are you, Sir Mike and other teachers are helping us day and night for our bright future by issuing course notes, uploading video lectures and most importantly they try to instantly reply us day and night for our tricky questions, you must be thankful to him for his serious efforts specially when they are offering you all this for FREE……..If you don’t like it then don’t need to comment it and don’t need to visit this website! He doesn’t only deserve appreciation but more then that!
November 16, 2012 at 8:15 pm
@hamzaharoon,there is something called Constructive feedback.Not every comment means criticism.It ‘s just that a small illustration would more deeply clarify the concept.Opentution is a blessing for all acca students.
November 16, 2012 at 8:45 pm
@Miss A.., what he is trying to convey here is that Sir mike wants to get rid of his obligation while other lecturers are performing their duties fully which is a complete insult and shame……I am muslim and one of our caliph Hazrat Ali (R.A) once said that “If anybody teach him one word or sentence then he will always be owed to that person who teach him” this tells us the value of education, May be there are some things which this lecture lacks of but it doesn’t mean that he can insult him the way he did. atleast sir mike is helping us by any means necessary he should be thankful to him
November 16, 2012 at 9:47 pm
@hamzaharoon, rightly said
April 21, 2012 at 1:19 pm
only thory no example of it
March 20, 2012 at 5:15 pm
not of f7 level……..exam questions are not able to be answered…the lecture must be improved…….
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