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  3. The question asks, “Show how Lyon would account for the above ….”

    Can this be demonstrated by detailing the Dr’s and Cr’s or is there a need to show the extracts in the FS?

    Dr PPE 6
    Cr Bank 6

    Dr Dep. Costs 0.6
    Cr PPE 0.6

    Dr Op. Costs 0.6
    Cr Payables 0.6

    Dr Receivables 12
    Cr Revenue 12

    Dr Dir Costs 8.8
    Cr Payables 8.8

  4. In Group SFP,
    PPE – 5400
    Receivable – 12000
    Total assets – 17400

    Profits(R.E) – 2000
    Payables – 9400
    Total equity & liabilities – 11,400

    There will be a difference in group SFP of 6000/-, which I believe is of investment in PPE.
    should we show that 6000 as Bank O.D and tally the SPF.

    Is my understanding correct?

    • Or I think we should treat it as share capital – 6000/-

      Because it’s mentioned in question “accounted for it’s share of the construction cost”.

      Help me in understanding this?

      Thank you.

    • Hi,

      You cannot draw up an SFP as you’ve done above as you do not have a cash balance that has been adjusted following the initial entry to account for the share of the PPE. You need to process the journals and it all will still balance.

      Thanks

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