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May 4, 2021 at 11:33 pm
I am slightly confused after watching the lecture on prepaid rent. I thought that being a prepaid, we will have to reduce that from the profit instead.
As previously asked on adjusting the sales 2000 and profit 400 together instead of only the profit. Your answer mentioned that are not producing the a full statement. How does that differ from the draft financial statement? and will you know if the exam question will differentiate both? because for me, both are the same. of course one is a draft and the other is full FS
John Moffat says
May 5, 2021 at 7:47 am
A draft of anything is a first version. It is then checked and any mistakes corrected before a final version is prepared.
As far as the prepayment is concerned, if it has not been entered then the whole of the cash paid will have been treated as an expense in this period. If some of it was a prepayment then only the rest of the payment should have been charged as the expense. Therefore the correct expense will be lower and therefore the correct profit will be higher.
November 13, 2020 at 6:21 pm
For sale or return, Instead of (400), why dont we make the profit to 1600 ? (-400 + 2000 (increased closing inventory increases profit) by looking at the overall impact ?
July 6, 2020 at 3:40 am
Thank you for the clarification. So adjustments to profit focus only on the effect on profit. I had the same understanding earlier but it’s much clearer now.
July 6, 2020 at 9:27 am
You are welcome 🙂
April 6, 2020 at 2:31 am
Your lectures have been very helpful thanks a lot. However, i thought prepayments shouldn’t be included in the current year’s financial statement? i don’t understand why the 490 was added to the profit. could you explain please.
April 6, 2020 at 8:19 am
They shouldn’t be included, so we need to remove them. Removing them reduces the expense which increases the profit.
April 6, 2020 at 4:29 pm
Oh i see! it makes sense now. Thank you.
July 24, 2020 at 7:25 pm
i still dont understand
July 24, 2020 at 7:39 pm
You will have to say what you do not understand and then I will try and explain 🙂 (I assume that you have actually watched the lecture?)
January 28, 2020 at 10:05 am
Where can I find partnership accounts
January 28, 2020 at 12:50 pm
Partnership accounts are not in the syllabus for Paper FA and have not been for many years !!!
October 19, 2019 at 9:35 am
Hello there. Where can i find lectures on incomplete records?
October 19, 2019 at 10:12 am
‘Incomplete records’ is not a separate topic.
It is being able to deal with basic double entry and/or control accounts and/or mark ups and margins.
All the topics are explained in my free lectures. The lectures are a complete free course and cover everything needed to be able to pass the exam well.
October 16, 2019 at 6:52 am
Lower value of closing inventory will increase the profit ,then why did you deduct the amount while adjusting the profit
October 16, 2019 at 8:18 am
A lower value of closing inventory does not increase the profit. It increases the cost of sales which decreases the profit.
October 16, 2019 at 9:12 am
Thank you so much sir
October 16, 2019 at 4:22 pm
June 13, 2019 at 8:05 am
Requesting for some clarity in the video of adjustments to profit.
In my understanding, I thought that since sales have not been confirmed yet, then they should also be adjusted. Therefore sales 2000 plus profit 400 should both be deducted from the draft profit.
September 15, 2019 at 10:14 am
If we were producing a full profit statement, then we would reduce the sales. But we would also increase the closing inventory because the goods still belong to the company (and this would have the effect of reducing the cost of sales). The net effect of the two would be that the profit would reduce by 400.
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