Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

BPP Black Friday sale!

40% discount on all BPP books specially for OpenTuition students!
Get it here >>

Reader Interactions

Comments

  1. Hi, I am the new learner for the ACCA, my friend recommend me here, and I found I love it! I am a foreigner, but the professors’ talk speed is really suits me. Thanks!

    And my friend, she passed 9 in 7 months! and she said cause your free resources.

  2. Thank you for these insightful lectures.
    I would just like to ask for one clarification question.
    It is stated therein that anything taken by the owner from business is considered as withdrawals whatever he/she names it. But in the case that the owner is also employed by the business, meaning that he/she is in the business’s payroll as Director or Manager or else, shouldn’t his/her wages and salaries as employee be considered as salary expenses?
    Kind regards

  3. Hi

    First of all thank you for your lectures they have been invaluable in helping me to understand certain topics which my text books are rather vague with (I’m doing distance learning!)

    My question is this – You say that anything that the owner takes from the business is drawings, and anything taken as drawings reduces the amount owed to the owner by the business, but does not affect the profit. When it gets to the stage that the owner has withdrawn the total amount of capital he/she input in the first place, where do further drawings get withdrawn from? The profit? I ask because is was stated that drawings should not affect the profit…

    Many Thanks

    Pippa

    • Each year the capital increases by the profit and decreases by the drawings.

      So suppose the capital at the start of the year is 10, the profit is 100, and the drawings are 50.

      The capital at the end of the year will be 10 + 100 – 60 = 50.

      The profit does belong to the owner, and on these figures the owner is taking some of the profit, but it does not mean that the profit itself is any different.

  7. Hello Sir.

    I just want to ask that if i buy the kaplan/bpp revision kit.Are the chapters same as the notes and lectures like are the numbered the same and is the quantity of chapters the same or not? Thank you so much. Really appreciate what you are doing.

    • In future please ask this sort of question in the Ask the Tutor Forum – not as a comment on a lecture.

      The Revision Kits are not teaching books – they are books containing lots of exam-standard questions to practice on.

      You should use our free lecture notes and lectures to study the topics, and the Revision Kit to practice questions on them.

  8. Hi Sir, I had a doubt. If the capital at 1 April 2007 is 130,000 plus the profit which is 50,000 making it 180,000. Will the capital for next year be written as 180,000 itself?

    Thanks 😀

  9. What is the effect of drawings when they are made in the form of goods,do they reduce inventory or what?

    In our example i see they have reduced cash and what the owner is owed.

    • Yes 🙂

      If you watch the lectures in order then they are a complete course for Paper F3 and cover everything you need to be able to pass the exam well.
      (The only extra thing that you really should buy is a Revision Kit from one of the ACCA approved publishers, because they have lots of exam standard questions to practice on and practice is vital.)

      • It is mentioned all the way through – it is an underlying concept of accounting, not a specifically separate topic. I suppose maybe more in chapters 6 and 7. However the lectures (and chapters) are for working through in order – each one builds on the previous one because they are designed to be a full course.

    • I assume you mean why is there no lecture (because there is certainly a chapter 7 in the lecture notes!)

      The reason is that there is no need for a lecture since all the important provisions are dealt with in the previous lecture. The rest of them you should be quite capable of reading for yourself in the lecture notes.

    • Revenue is another word for the total sales; purchases is the name given to goods purchased for resale; the trading accounting is what we call the first bit of the Statement of profit or loss (i.e. the calculation of the gross profit).

    • hi John , i have a question
      chapter 2 , test question 3
      I have noted that you deducted profit and capital
      from the net assets , would you explain why

      am abit confused with this formula that says
      INCREASED IN NET ASSETS = CAPITAL INTRODUCED +PROFIT-DRAWINGS

      And on question 1 same chapter , why are we deducting closing assets from opening

      many thanks

      • In both questions I have used the accounting equation that you have typed out.

        In question 3, you are given the net assets at the end of the year. Since the increase over the year is due to the profit + cap int – dwgs, to get the net assets at the start of the year we need to subtract the increase, which means subtracting the profit and cap int, and adding the drawings.

        In question 1, we are not deducting closing net assets from opening net assets. All of the choices involve subtracting the opening from the closing (which gives the increase).

  17. Mr John, are the drawings are levied by income/profits tax? and if the owner could have managed to make a tax collector believe that it is actually wages, then it ? net profit and ? tax levied…does it actually happen in business entities?
    Thank you sir,
    Rustam.

    • No. The owner is taxed personally on all the profit made by the business – it makes no difference how much or how little he/she took as drawings (or whatever he/she called the drawings).

      All of the profit belongs to the owner, and so the owner pays tax on all the profit. (That is the ‘real life’ position for sole traders!!)

    • Hi John!
      One thing I didn’t get, why would we consider wages and salaries as (drawings)? Just because it was taken by the owner? From what I know wages and salaries are considered to be business expense called salaries expense or so and yes they are deducted from the capital but they are not called “drawings”, drawings are what the owner takes out the capital for his own personal use, can you explain please?

      • Wages and salaries paid to other people are an expense and appear in the Statement of profit or loss.

        However anything taken by the owner is drawings. As I explain in the lecture, it does not matter if the own decides to call it something else (such as salary) – anything the owner takes is drawings and therefore does not appear in the Statement of profit or loss.

        (If I own a business then all the profit belongs to me – it would be ridiculous for me to take out more or less money and have as a result more or less profit, just because I decided to call it a salary)

  18. Hi John!

    Pretty long time! ln a merchandising company limited by shares, if one of the directors or shareholders took out goods which he didnt pay for, how l am going to treat that transcation: which of the accounts will l post it to?

    • That will not happen in the exam – if they did not intend to pay for them then it would be illegal!

      However, assuming they were intending to pay for them, then Dr Receivables Cr Sales (as with any customer buying on credit).

      • if the thing really happed, we should treat is as a sales event,right? and tax is necessary?

  19. if the owner takes out cash as wages…..why would it be a withdrawal….he maybe paying himself and others from the sum that he took from the business. How may we know then what exactly he took fro himself?

    • If he is paying himself then it is always drawings – never wages – whatever he/she might call it. Anything the owner takes for himself/herself is drawings whatever he/she calls it.

      If any of the money was in fact being used to pay wages to employees, then the question would tell you (and that money would indeed be wages). If you are not told that then you assume that it is all kept by him or her.

Leave a Reply