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Presentation of financial statements – Example 1 (revision) – ACCA Financial Reporting (FR)

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  4. The way the tax is explained is not clear to me. Is 1,700 amount the expense item which reduces profit before tax figure so that we arrive at profit for the year or is it a tax liability i.e balance sheet item ?
    I believe it is an expense item so mathematically we do need to debit tax expense t-account with 1,700.
    Effectively from initial b/f Dr balance of 200 (assets) we move c/f Cr balance of 1,500 (liabilities).
    Is that correct thinking ?

  5. Hi, Just a quick question, are we not considering the write off of inventories when comparing the lower of Cost and NRV? in this case for gloves (650-500 = 150) 150 as a written down value in P&L? and the same adjusted in inventory valuation at the end of the ear? 4000-150 = 3850

  6. thanks for the lecture.

    how ever about the staff cost and depreciation charges, i wonder why these two items have been posted to cost of sales even if in the question it is asked to do so. Normally, these should have to be charged to admin/distribution expenses?

    Regards,

    Axel Frederick

  8. Why Tax expense for the current year is taken as 1700? Current Year tax expenses are only 1500 and aren’t that amount which should be charged to the P& L account ? and moreover, the tax balance is a debit amount which means they might have overestimated the tax expenses of the previous year.

  10. Hi thanks for the amazing work you guys are doing.
    My question is would have been correct to count for the inventory devaluation as a separate account and therefore to present the COGS $150 lower?
    Thank you

    • Glad you’re liking the work we do. Please spread the word! In published company accounts we would not show this as a separate account. We jut include it as part of cost of sales where we start with opening inventory and then add purchases and deduct the closing inventory. Thanks

  12. Hi- maybe a stupid question, but why is the depreciation for the year for the buildings calculated at historical cost (12000) and not at 12000 less accumulated depreciaton? (as for machine vehicles?)
    Thank you, Cristina

    • that’s cause they have mentioned that the depreciation calculated for motor vehicles is using the reducing balance method hence when calculating the depreciation for the year you deduct the accumulated depreciation from the cost and then calculate 20% depreciation. But for buildings they have clearly mentioned that depreciation is calculated on a straight line basis hence you don’t deduct the accumulated depreciation from the cost.

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