OpenTuition.com Free resources for accountancy students
Free ACCA and CIMA on line courses | ACCA , CIMA, FIA Notes, Lectures, Tests and Forums
July 11, 2018 at 9:49 am
Mr. John, could you tell me why we didn’t include cash spending to calculation of current asset in Q1? Thanks in advance.
John Moffat says
July 12, 2018 at 10:14 am
We do not know all the cash transactions during the year, so we cannot calculate a cash balance. Also, the question only asks for ‘these items’ i.e. only the items listed.
July 12, 2018 at 2:59 pm
If we could calculate a cash account for a year, and it was a credit balance, would it have decreased current assets account?
July 12, 2018 at 3:18 pm
There is no such thing as a ‘current assets account’. If there was a credit balance at the end of the year then it would mean that there was an overdraft, which is a current liability.
June 7, 2018 at 3:14 pm
I think sir question 4 is miscalculated. Please check the way question is rising isnt matching with the answer. Thanks
June 7, 2018 at 4:47 pm
I have checked, and the answer is completely correct 🙂
See my answer to the question below!
December 21, 2017 at 1:01 pm
Please explain question 4
December 21, 2017 at 3:57 pm
For the SOPL, we need the expense for the period 1 July 2007 to 30 June 2008. For 1 July 2007 to 31 March 2008, this is 9 months out of a 12 month bill to 31 March 2008 for $25,920 For 1 April 2008 to 30 June 2008, this is 3 months out of a 12 month bill to 31 March 2009 for $28,800. Therefore the total expense = (9/12 x 25920) + (3/12 x 28800) = $26,640.
For the SOFP, the prepayment is the period from 2 July 2008 to 31 March 2009, which is 9 months out of a 12 month bill for 28,800. So the amount of the prepayment is 9/12 x 28800 = $21,600
November 12, 2017 at 2:24 pm
Rent in arrears in 2007 was $50880 why did we subtract and not add sir? (question No 6)
November 12, 2017 at 3:39 pm
It is rent received and this is rent that was owing to us from last year (and so was last years income) but the cash was received this year. It is not this years rent so it needs subtracting from the cash received this year.
June 27, 2017 at 2:41 am
I have another question: The electricity account for the year ended 30 june 20X1 was as follows. Opening balance for electricity accrued at 1 July 20X0: 300 $ Payment made during the year: 1 August 20X0 for 3 months to 31/7/20X0: 600$ 1 November 20X0 for 3 months to 31/10/20X0: 720$ 1 February 20X1 for 3 months to 31/1/20X1: 900$ 30 June 20X1 for 3 months to 30/4/20X1: 840$ 1 August 20X1 for 3 months to 31/7/20X1: 840$
Caculate the amount of accrued at 30/6/20X1 and charge to SPL year ended 30/6/20X1 ?
Thank you Sir 😀
June 27, 2017 at 6:45 am
You must ask this sort of question in the Ask the Tutor Forum and not as a comment on a test.
February 23, 2017 at 12:34 pm
Hi John, I am having a bit of a hard time with the rent expense in Q2. Whilst I got it right, I had a doubt that 1Apr09 – 31Apr 09 isn’t included in the final rent expense amount. Shouldn’t be Apr-May 08 : 33600 + June 08: 19200 + period covering July 08 – 31 March 09: 57000*3 + additional 19200 for full April 2009?
Thank you for your help
February 23, 2017 at 12:36 pm
Never mind 😀 I counted an additional month in a year
December 6, 2017 at 11:50 am
I cannot understand why the insurance is accrued and how this figure has been gained.
December 6, 2017 at 1:54 pm
Which question are you referring to? You have posted under a question about Q2, but there is no insurance in Q2 🙂
February 12, 2017 at 3:13 pm
Mr.John,could you explain why the accrual (quest.1) ($ 9600) wad added in $ 53376 ?I suppose that you reverse the transaction ? Thank you and regards
February 12, 2017 at 4:03 pm
The business is owed interest by the employee and this is therefore a current asset.
January 24, 2017 at 3:03 pm
sir for q5 or other questions I have seen how do I now the year which is relevant and which is not in this question it was required and asked 2006 and you add 2005 transactions. thanks
January 4, 2017 at 11:10 am
Sir, could you please explain question 5 please?
January 4, 2017 at 4:25 pm
This is rent received.
We have received cash of 2,003,040 during the year but we need the rent that was earned by us this year.
This will include the rent that was in arrears at the start of the year (i.e. was owing to us) and so this needs subtracting because it is not this years income. It will not include the rent that had been paid to us in advance last year – this needs adding because it is income of this year.
It does include the rent paid to us in advance at the end of this year, but this is next years income and so needs subtracting. It does not include the rent in arrears at the end of this year, but this is this years income and so needs adding.
June 17, 2017 at 8:45 am
Sir, can u explain this question by T account please ?
June 17, 2017 at 10:24 am
Debit the rent received account with the rent that was in arrears at the start of the year. Credit the rent received account with the rent that has been paid in advance at the start of the year. Credit the rent received account with the cash received during the year. Debit the rent received account with the rent that had been paid in advance at the end of the year. Credit the rent received account with the rent that was in arrears at the end of the year.
The missing figure on the account is the rental income for the year.
January 1, 2017 at 8:50 pm
Sir can you explain question number 3?
January 2, 2017 at 7:06 am
The first bill is not relevant because is is for 3 months to 30 November 2005.
Of the second bill, 2 months – January and February – are relevant, so 2/3 of 798.
The whole of the third bill is relevant – it is for March, April and May. The whole of the fourth bill is relevant – it is for June, July and August. The whole of the fifth bill is relevant – it is got September, October and November.
The sixth bill is for December, January and February – only December is relevant so 1/3 x 966.
December 7, 2016 at 10:16 am
Sir kindly explain to me Q3 Is the 840 paid on Jan 2007 not accrual since it is an expenditure from October to December 2006?
December 7, 2016 at 1:38 pm
The question does not ask about accruals – it wants the expense for the year.
Since the 840 is the cost for the 3 months September, October and November, it is an expense of the year – when the bill is received and when the bill is paid is completely irrelevant.
December 2, 2016 at 2:56 pm
hello sir dear sir for question number 1 the loan to employ is taken as current asset. its is because dr receivables and cr cash and this receivable is our current asset?
and for the questions 5 and 6 i am really confused that what it says and how it is calculated so if its possible please help me.
December 3, 2016 at 8:41 am
For question 1 – yes, the loan is a receivable.
Question 5 and 6 are both about rent received, which is income (not an expense).
We know how much cash was received during the year, but we need to adjust by the rent already received in advance and the rent still owing to us, in order to get the income earned during the year.
September 21, 2016 at 10:12 am
Sir, Please explain me about Q3
September 21, 2016 at 12:28 pm
The first payment is for 3 months to November 2005 – they are not in our year and so are not relevant. The second payment is for the 3 months Dec, Jan, and Feb. Only Jan and Feb are in our year, and so only 2/3 of the amount is relevant. The next 3 payments are all for periods in our year and take us up to the end of Nov, and so they are all relevant. The final payment is for Dec, Jan, and Feb. Only Dec is in our year and so only 1/3 of the amount is relevant.
September 24, 2016 at 10:17 am
Thanks for your help sir!
September 24, 2016 at 10:14 pm
You are welcome 🙂
July 19, 2016 at 11:42 am
hello sir please help me with the third question…….thanks in advance.
May 15, 2016 at 11:14 am
Hello, John. Please, help me with the first question. Why should we include the interest of 2% of the loan to current assets?
I consider that the right answer is:
28800+(21000*8/12)+9600 = $52400 ,
because we paid the whole of the interest due on the loan (=> current liabilities= 0), and 28800$ is our cash we recieved from the bank. Therefore, current assets include cash, insuranse and rent.
Please, explain me why I am wrong/
May 27, 2016 at 8:20 am
not sure is this help or not but the company did not borrow money from the bank. Read the question again, it said the company made a loan for employee, hence, the interest is paid to the company 🙂 hope this help you 🙂
May 27, 2016 at 11:13 am
Vladimir: Sorry for not answering earlier but I cannot always see comments on lectures and tests. It is better to ask in the Ask the Tutor Forum – questions there are always answered within 24 hours.
Hoale is correct. The money is owed to the company by an employee and the employee also owes interest at the end of the year. (Cash is not relevant because it is not one of the three items required, and we have no idea what the cash balance is anyway because there will be lots of other things during the year that will have affected the cash balance)
June 27, 2017 at 1:42 pm
Hello John, I am not quite sure why the 28800 was included only with plus sign at the beginning of the year when the loan was given to the employee as the accounting formula should be : Loan (receivable short term/current asset) increase Debit 28800, and Cash/Bank account( current assets) given to the employee Credit 28800 so basically the impact on current assets is 0. Could you please clarify? Thanks in advance!
June 27, 2017 at 5:00 pm
The question only wants to know the current assets and liabilities in relation to the items listed. Certainly cash is a current asset, but there are lots of other transactions that we do not know about that would affect the cash balance – not just the loan.
I appreciate that it is a bit confusing, but I am afraid that this was an actual exam question.
April 29, 2016 at 8:43 am
Thank you sir, I got all the answer are correct. 🙂
April 29, 2016 at 8:53 am
April 25, 2016 at 8:36 pm
Why only these six questions?
April 26, 2016 at 6:15 pm
The practice tests are meant to be short tests after each chapter, and each contains 5 or 6 questions.
We also have an online mock exam where questions are taken at random from a large bank of questions (just as in the real exam) and so every time you attempt the exam you are likely to get different questions. This is to be attempted after you have watched all our free lectures because it covers the whole syllabus.
You should obviously have bought a Revision Kit from one of the ACCA approved publishers, and these contain lots of questions to practice.
April 12, 2016 at 7:25 pm
Thank you Sir! Appreciate your help
April 13, 2016 at 6:52 am
April 8, 2016 at 2:29 pm
Sir, I do not understand Q 5 and 6 workings. For q 5 Why do we have to add arrears of 2006 since we have yet not received them, and should we not add arrears of 2005, since we have recieved them in 2006 which becomes our rental income? Thanks
April 8, 2016 at 5:49 pm
Although we have not received the arrears of 2006, the rent was earned in 2006 and is therefore income of 2006. Similarly although the arrears of 2005 were actually received in 2006, they were earned in 2005 and not in 2006. We need to show the total amount earned during the year (not the cash received).
April 11, 2016 at 4:52 pm
Thank you Sir, I understood for the arrears part. We add the arrears we have earned in the following month. However, I do not seem to understand the rent in advance. The rent in advance is the rent we have earned in 2006, so why do we subtract it. Should it not be our income?
April 12, 2016 at 6:00 am
Rent in advance at the end of the year means that although we have received the cash this year, it is rent for next year and therefore it not income of this year and needs subtracting.
March 4, 2016 at 2:40 pm
sir can you please answer this question ?
The profit earned by a business in 20X7 was $72,500. The proprietor injected new capital of $8,000 during the year and withdrew goods for his private use which had cost $2,200.
If net assets at the beginning of 20X7 were $101,700, what were the closing net assets?
March 4, 2016 at 5:55 pm
You must ask this sort of question in the F3 Ask the Tutor Forum.
(Although I do suggest that you watch our free lectures because this is a straightforward application of the accounting equation. Our free lectures are a complete course for Paper F3 and cover everything needed to be able to pass the exam well.)
February 29, 2016 at 6:45 pm
For both the question 5 and 6, total cash received for the year should also include the current years arrears. Then why the same is added again,
February 29, 2016 at 7:59 pm
The current year arrears are money that we have earned, but we have not received the cash. The Statement of profit and loss should show the total earned, which is the cash received plus the money still owing to us.
The answers to both questions are correct.
February 22, 2016 at 3:51 pm
how do i watch the free lecture please?
February 22, 2016 at 7:31 pm
If you go to the main page for Paper F3 you will find links to all of our free resources, including the lectures and the lecture notes that go with the lectures.
February 21, 2016 at 1:03 pm
Hi John, where can I find the written solutions to these questions? I’ve been watching your lectures and they are amazing, thank you very much for them and for creating such a wonderful platform.
February 21, 2016 at 3:25 pm
The solution to each question (and workings) appears in a pop-up window immediately you have submitted your answer.
February 18, 2016 at 5:00 am
Sir. I do not understand questuon 1. (3) transaction.
I thought it is current liabiliy. It means company got the rent payment from tenant as a landlaord , so (3) is kind of unearn revenue, current liability
February 18, 2016 at 7:35 am
As 31 December 2008 they had not received the rent (it was received the next day). However they had earned it during 2008 and therefore they were owed it – so it is a current asset.
February 13, 2016 at 1:56 pm
I dont underatnad why cash (21,600)for insurance expense is not reduced from asset in question #1 (2)
February 13, 2016 at 2:10 pm
The asset is that part of the payment that is prepaid at the end of the year. As at 31 December 2008 they have already paid for the period from 1 January 2009 up to 31 August 2009, so those 8 months are prepaid and the prepayment is the asset.
I hope that you have watched the free lecture on prepayments and accruals (otherwise there would be no point in attempting the test).
February 13, 2016 at 5:11 pm
This is how I journalized for transaction 2:
Debit: insurance (paid in 2008) 21,600
Credit: Cash (paid in 2008) 21,600
Debit: Pre Payment: 14,400 (8/12*21,600)
Credit: Insurance: 14,400
Is this wrong?
February 13, 2016 at 6:12 pm
That is correct, and I now realised what your problem was. You agree (I think) that the prepayment is 14,400. We can not include the cash balance because there are likely to have been lots of other cash transactions that we do not know about. So all that is relevant for the question with respect of insurance is the prepayment (which is obviously a current asset).
February 7, 2016 at 8:33 am
sir in my calculation it comes 3,417
please tell me where I went wrong
(2/3*798)+898.80+814.80+840+(1/3*996) 532+898.80+814.80+840+332= 3417.6
February 7, 2016 at 1:45 pm
You really should have been able to check this yourself against the working that appear after you submit your answer! The last invoice is 966 (not 996).
January 31, 2016 at 4:14 pm
sir i have some problems in understanding question 2 can you explain it please?
January 31, 2016 at 5:46 pm
You will have to say which part of the workings that appear you are not clear about.
February 1, 2016 at 6:38 am
regarding the payment for quarters year
February 1, 2016 at 6:50 am
When they pay is not relevant for calculating the actual expense for the year – it is only relevant when calculating the prepayment for the Statement of financial position. The year end is 30 April 2009, and so the last payment before the year end will have been on 1 April 2009. Since they are paying in advance, this payment will have been for April, May, and June. Therefore May and June are prepaid (two months) and since the rate is 230,400 per year, the prepayment for 2 months will be 2/12 x 230,400 = 38,400.
January 26, 2016 at 4:15 am
Sir, could you please explain question 4 please?
January 26, 2016 at 7:42 am
The year end is 30 June.
From 1 July 2007 to 31 March 2008 is 9 months, and therefore the expense for this period is 9/12 x 25920 = 19440 (9/12 = 3/4) From 1 April 2008 to 30 June 2008 is 3 months, and therefore the expense for this period is 3/12 x 28,800 = 7,200 Therefore the total expense = 19440 + 7200 = 26640
The prepayment should now make sense from the pop-up answer.
February 18, 2016 at 11:16 pm
Regarding question 4, why are we drawing reference from 1 July 2007?
February 19, 2016 at 6:49 am
Because the year end of the business is 30 June 2008, and the year starts on 1 July 2007
February 20, 2016 at 8:10 pm
February 21, 2016 at 8:24 am
January 20, 2016 at 2:00 pm
Hey John..i have not understood the answer to question three…..please help
January 20, 2016 at 3:52 pm
We need the total expense for January to December.
The first bill is for three months to November of the previous year and so is not relevant. The second bill is for three months to February. Only January and February are a cost for this year and so only 2 out of the three months is this years expense. The final bill is for December, January and February. Only December is this year and so only 1 out of the three months is this years expense.
(I do assume that you have watched our free lectures before attempting the test.)
January 31, 2016 at 4:17 pm
sir why the first bill is irrelevant?if we consider it as an accured??
January 12, 2016 at 2:06 am
Mr. John, Can you explain the answer of this question for me. And, do we have a general formula for this type of question ? Thank you so much :).
January 12, 2016 at 7:51 am
You do not say which question you are asking about – there are six questions in this test.
You must be logged in to post a comment.