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

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  2. I wanted To Know That How Do We came Know that The TAx Amount is Under/Over Provision, Even If The Questions Doesn’t Mentions It Clearly. Why should the tax $1700 was charged In Statement Of Profit And Loss and $1500 In SOFP? Kindley Reply

  3. Hello Chris..
    I would love to see the solution video of examples 3 for the statement of changes in equity and that of earning per share for example 2 ie. Multiple shares issues and prior year comparative…please.

  4. how can one answer this question? uneaned revenue includes $100 for services not performed for the client . the terms for the sale were that,on 1 jan, 2018,real estate sold equipment to T for $620. the price includes a two year assurance warranty received and paid for the equipment on the same date. the standalone price for the equipment is $600. while that for the warranty service is $100 per year. including journals

    • My response might be a little too late, but, on the additional information it is statetd that staff cost is spit equally among the (3 costs) cost of sales, dist and adm cost (5400 devide by 3)

  9. Hi Chris,
    Would you be kind to explain my doubts

    1. Deprecation: As per the TB the accum. depr. for buil. Is 2,400 as of 1/1/17 – Why did we assume that this is the total deprecation of the building up-until 1/1/17? Can’t we take this as last yr depe value and since it’s the straight line method we apply the same value for this year?

    2. I wan in an impression that TB represents the value as of statement date. If yes, how can we take the Building value as the original cost of building for deprecation calculation? Note: AI1 – No additional assets are bought or sold during the year.

    3. I am referring to previous comments regarding Tax: in your response, you mentioned ‘If that $200 opening balance is a debit, then your answer is incorrect’. Isn’t the Tax value $200 is in Debit side of the TB?

    Thank you very much for your time and effort.

    P.s: This is my 1st A/c paper after a long time. Last time I did A/cs was when I was at uni 13yrs ago.

    Kind Regards
    Ditson

    • 1 The word ‘accumulated’ means the total amount of depreciation that has been charged in respect of that asset since the date of acquisition

      The double entry to record depreciation is:

      Dr Depreciation Expense Account
      Cr Accumulated Depreciation Account

      The figure in the Expense Account is charged against the year’s profits through the statement of profit or loss and the newly-increased figure in the Accumulated Depreciation Account is carried forward and set-off against its related asset for the purposes of showing the net book value of that asset on the statement of financial position

      It may help you to imagine it as a negative asset to be read in conjunction with its related asset

      2 Your impression that “the trial balance represents the value as of statement date” is really quite alarmingly wrong! Unless a business has adopted the revaluation method for its assets (and thus will revalue on a regular basis to reflect current values) figures in the financial statements of that business in relation to tangible non-current assets represent the cost of and the accumulated depreciation on those assets. It would only be by an amazing coincidence that the current value of an asset was equal to its historic cost less accumulated depreciation

      3 My earlier response of ‘If that $200 opening balance is a debit, then your answer is incorrect’ was to set up the position where I was then able to correct the post from Mayzin where that post was trying to explain to Vanlishoutp the way in which the tax figure had been calculated

      Mayzin’s explanation was wrong!

      In an exam question, the examiner could give you a trial balance with a figure in the line for ‘taxation’ together with a note that says something like ‘The figure for taxation in the trial balance represents the over- or under-provision for the previous year.

      That figure in the trial balance could be in the column for debit balances or in the column of credit balances … it depends whether it was an over- or an under-provision

      For your information, if it’s in the debit column, that means that we had under-provided for the tax liability in the prior year … but you DO NOT need to know that!

      Just accept that it’s a debit (or a credit as the case may be)

      That is the situation that Mayzin was trying unsuccessfully to explain

      OK so far?

      You mention in your post that ‘Last time I did A/cs was when I was at uni 13yrs ago’

      May I suggest that you could usefully spend some time watching John Moffat’s lectures for Financial Accounting on this site (used to be called F3)

      OK?

  10. Sayar,
    Let me clarify for the tax payable, as per additional information number 4, the balance of tax over/under provision for the prior year. That means in the TB, $200 debited is opening.
    An estimate of $1,500 has been made for the tax payable at the year-end. That means closing is $1,500 is going to SFP and difference 1300 which is 1500 credited and 200 debited is going to SPL taxable.
    Therefore SPL tax amount is should be 1300 instead of 1700?

    Thank you.
    May

    • If that $200 opening balance is a debit, then your answer is incorrect

      In order to arrive at $1,500 as a liability on the SFP, ie an amount of $1,500 credit brought down below the total lines, there must be a corresponding debit for $1,500 (narrative ‘carried down’) above the total lines

      That means that there are 2 amounts above the total lines on the debit side ($200 and $1,500)

      To balance this account off and take the missing / balancing figure to the Statement of Profit or Loss, we need an entry on the credit side of $1,700 as the tax charge for the year

      OK?

      • Thanks Mike, I think the matter here is that at the begining, tax is in debit side but at the end of the period, tax is payable amount. This means that at the end, tax is in credit side

  12. Hi,

    On the tax working, I understand the b/f position of 200 and the additional amount paid of 1.500 to end up with a c/f balance of 1.700 on the SFP but you show 1.500 in your overview. I just would have thought the P/L impact would be 1.500 and not 1.700 since the 200 b/f thus incurred in prior year not in 2017.

    Not sure how you end up with 1.700 on the SPL and 1.500 on the SFP :-).

  13. Hi,

    On the tax working, I understand the b/f position of 200 and the additional amount paid of 1.500 to end up with a c/f balance of 1.700 on the SFP. I just would have thought the P/L impact would also be 1.500 and not 1.700. I really don’t understand the 1.700 SPL bcs i would have expected that the 200 was incurred in prior year not in 2017.

    • If that $200 opening balance is a debit, then your answer is incorrect

      In order to arrive at $1,500 as a liability on the SFP, ie an amount of $1,500 credit brought down below the total lines, there must be a corresponding debit for $1,500 (narrative ‘carried down’) above the total lines

      That means that there are 2 amounts above the total lines on the debit side ($200 and $1,500)

      To balance this account off and take the missing / balancing figure to the Statement of Profit or Loss, we need an entry on the credit side of $1,700 as the tax charge for the year

      OK?

  14. Hi Chris

    There must be a missing video about the ‘statement of changes in equity’ part. In the note, there is a separate page about SOCE and you also mention that at the beginning of this vedio, but we didn’t see it either in this or the next video. Please check it.

  18. Hello sir. Can you please tell me how come only lower costs are taken in the second additional information regarding the inventory at the end?

    • Hi,

      Inventory is recognised at the lower of cost and NRV in application of the prudence concept. Therefore any fall in value of inventory below cost is recognised immediately and profit is only recognised once the goods are sold.

      Thanks

  19. Note to Instructor

    Answer for Example 2- Statement of changes in equity states:

    Amortisation is an expense and is charged though statement of Profit or Loss, It is not shown in the statement of Comprehensive income.

    I believe it should read:
    Amortisation is an expense and is charged through Statement of Profit or Loss. It is not shown in the Statement of Other Comprehensive Income or The statement of Changes in equity.

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