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The Statement of Financial Position and Income Statement (part c) – ACCA (FA) lectures

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  2. Thank you for the lecture. Correct me if I am wrong – so in the beginning of the year, the cost of sales was 30000 of opening inventory, then you had additional 120,000 of purchases (which gives us 150,000). the closing inventory is what you had left at the end of the year (4000) and that’s mean you the gross cost of sales is 110,000?

      • For a sole trader, there is no ‘exact’ format, but what is in the lecture is the normal format. For limited companies there are strict rules and the format of the SOPL for limited companies is explained in a later lecture.

      • It is where the bank allows your normal current account to go negative.
        For example, suppose that at the moment I have $100 in the bank. I then go and spend $150 from my bank account. So my balance is now minus $50 (we say that I am $50 overdrawn).

        I can only do this if the bank has given me permission to go negative/overdrawn – they will usually set a maximum amount allowed, depending on how good a customer I am.

        They will charge interest on the overdrawn amount because they are effectively lending me money. It is only for short-term borrowing from the bank.

  5. Hi. If a share holder in a limited liability company (or a sole proprietor) decides to give the company money (to help with revenue expenditure) and money is repaid to the shared holder / sole proprietor at a later date, will that also considered to payment of dividend or drawing (in the case of a sole proprieter )?

  6. Hello,

    I know you mention that if an owner takes money from they business its drawings but what if they also work for the business in a management position. Are they still taking drawings when they pay themselves say a monthly.

    The other question is if someone who owns a stake in a company(for example 30%) and works can take a salary and also draw money from the business.

    Look forward to hearing from you.

    Thanks

    • If it is a sole trader (i.e. not a limited company) then anything the owner takes is drawings, even if they do work for the business.

      If it is a limited company then anyone working for the company is paid a salary and there is no such things as drawings. If they also own shares in the company then they will get paid a dividend. This is all explained in the later lectures on limited companies.

  8. Knowledge is one thing but imparting it is to master the art of teaching. This is something very special that not many people can do. I aspire to be as good of a teacher as you. Everything is broken down and explained clearly as if we were 4 year olds. Richard Feynman would be proud. Who thought I would genuinely find a subject as menial as accounting so much fun. Absolute Godsend

  11. Sir,
    I have always struggled with these basic knowledge of accounting as subject but never took an active decision to learn them. As I am preparing for my March Financial Reporting exam, I planned to get my basics knowledge concrete. I find it more empowering to know actually what is going on in accounts. Makes me feel more confident. Thank you sir.

  16. When you are crediting and deducting from the right column, I don’t understand why you wouldn’t put the deduction as a minus. Such as;

    Sales Rev – (110,000)
    70,000
    Gross Profit – 11,000
    81,000
    Expenses – (31,000)
    50,000

    Is this just an unspoken rule, that you would look at the header and automatically know, and/or is it up to the person who creates the FS P&L as you said it can vary depending on the company.

    Thank you

      • Firstly, the layout in this lecture is for a sole trader – not for a limited companies (limited companies are covered in a later chapter and the layout of their financial statements is a little different and is dictated by law).

        Second, you cannot be asked to prepare a set of financial statements in the Paper FA exam, but you could be presented with statements (or extracts from them) for either a sole trader a limited company in the exam, and so you should know how they are likely to be shown in the exam.

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