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Sir I did the question , I got the Assets and Liabilities section same total , but when I referred the kit answer, it was wrong (I got 148300 while in the book it was 150300). I found out my mistake was in the contract asset section, I did not include the depreciation of specialist plant when we do that proforma entry of finding SOFP contract asset / liability. Instead I included it in the cost of sales with all the other depreciation thereby giving me a different Profit, different retained earnings and a different contract asset figure in the SOFP.
Could you please tell me why the 2000 depreciation was not included in the cost of sales instead it was included in the contract asset formula? Is it wrong to do so? If the depreciation is not included in SPL then why the specialist asset was included in the PPE in the SOFP?
Could you also clarify how the examiner will penalise if I did this in the exam I still got two equal sidesHi,
the first point to note is that there is no credit given in the exam for the totals or them being equal. You are given marks for the figures from the TB and the adjustments made. So, if you get the figure or adjustment wrong then that is where you lose the marks.
The deprecation related to the assets used in the contract does not go to profit or loss as it is a contract cost and goes to the value of the contract asset, hence why you do not see it charged through profit or loss.
Thanks
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