[AlinaaF]

What I understood is that since the company has paid tax and interest during the year which means we need to deduct the cash payments?

Secondly, I have a confusion with the starting because do we need to start the cash flow with profit before tax and interest or net income. Do we deduct the interest and tax paid during the year no matter whether we start the statement with Net income or Profit before interest and tax?

[AlinaaF]

In HIGH inflation period:
Our non-current assets on SOFP will be undervalued because both the value of NCA and depreciation charged are based on historical cost which means we have less depreciation charge for the year. However in low inflation period the cost of NCA will be overvalued because we charge more depreciation on historical cost which means we have more depreciation charge for the year?

Similarly in high inflation period our net profits on SOPL will be undervalued because we have more depreciation charge for the year which will reduce our profit for the year?

However if we calculate our depreciation on historical cost then our profits in high inflation would be overvalued but if we calculate our depreciation on inflationary cost then our profits in high inflation period would be undervalued because we have higher depreciation expense each year and it will decrease our profits for the year?

Is it okay?

[AlinaaF]

Can you please also explain how do we deal with tax and interest expenses when preparing statement of cash flow?

And should we start the statement with net profit or profit before interest and tax and how does interest and tax should be dealt in either case?

[AlinaaF]

Can you please also explain how do we deal with tax and interest expenses when preparing statement of cash flow?

And should we start the statement with net profit or profit before interest and tax and how does interest and tax should be dealt in either case?

Have a good one!

[AlinaaF]

1. Could you please explain how can we differentiate between share capital and preference shares if both of them are issued at nominal value?

2. Is is true that preference shares are those shares issued to the preferred shareholders but if they are not paying more than ordinary shareholders to buy a share then how they are preferred to claim their right on assets before common shareholders?

3. Is it true that preference shares and share premium both are the components of the share capital?

4. Is it also true that since preference shares both redeemable and irredeemable are not part of the reserves then they cannot be paid as dividend; correct?

[AlinaaF]

In prudence concept we record revenue in the same year when they are earned and expenses in the same year when they are incurred which I get it…

BUT isn’t it true that in prudence concept profits are recorded only when the asset is sold and money is received which is the reason for valuing inventory at cost but expenses are recognised when they are incurred regardless when cash is paid which is reason for valuing inventory at NRV ???

Secondly, isn’t prudence concept and accrual accounting is the same thing!?

[AlinaaF]

You are saying that the difference costs of closing inventory is because of the inflation?

I don’t really get it, what you said about the profits up there, how profits are affected every year first of all then how does opening inventory does not make a difference even though it is last year closing inventory!?

Is it also true that these figures remain true only if we assume that we do not have any opening inventory otherwise these figures might not hold true?

Please comment that the profit we calculated here is the gross profit and it is basically not the net profit that we are considering here, is that correct?

[AlinaaF]

BUT i read that “whenever an asset’s carrying amount is increased as a result of a revaluation then this gain is recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus”.

The journal entry would be:
DR NCA cost (difference between original amount and fair value)
DR Accumulated depreciation (less any accumulated depreciation]
CR Revaluation surplus (gain on revaluation recognised in OCI)

For example a company purchased a building on 1 April 20X1 for $100,000. The asset had a useful life at that date of 40 years. On 1 April 20X3 the company revalued the building to its fair value of $120,000.

Calculation for gain on revaluation:
PPE Carrying value = $95,000
Revaluation amount = $120,000
Gain or loss on revaluation = $25,000

The journal entry would be at 1 April 20X3:
DR Building cost $20,000
DR Accumulated depreciation $5000
CR Revaluation surplus $25,000

Is it also correct that we shall record the revaluation surplus of $25,000 in SOFP as equity item as well as in SOPL as profit on revaluation in other comprehensive income

Revaluation surplus:
Equity item = $25,000
OCI item = 25,000

Is that all right?

[AlinaaF]

Sorry to ask again.

(1) Parents looking after a child is a natural duty of each parent. A mother cannot claim consideration from the father of the child because it is her natural duty. The court will dismiss the case as there is no obligation for the father to provide consideration to the mother for simply looking after a child.

However, if a mother promises to keep a child happy then the mother can claim consideration from the father of the child in the court because it is over and above her natural duty and if the father was unable to show that the entirety of the mother’s actions was simply the performance of a natural duty so it is a separate contract between them.

(2) The witness case – the witness was required to attend in Court. Thus, that attendance was in accordance with a legal duty. Simply by attending was merely performing a duty that he was already obliged to perform and so he was unable to show that his actions were sufficient to satisfy the description of consideration in support of a separate contract (I understood this)

BUT, if a witness requested the police to provide protection in excess of the statutory requirement then the police is obliged to provide extra officers to the witness. A witness can claim consideration from the police in the court because it is over and above his legal duty so it is a separate contract between them.

(3) The ship case – the crew that were claiming that they had provided consideration. But they were already contractually obliged to sail the ship back to the UK. Thus, their actions of simply by sailing it back could not be viewed as having provided additional consideration sufficient to support a separate contract (I understood this too)

However, if the captain promises to pay extra for sailing back the ship to the UK. The crew can claim consideration from the captain of the ship in the court because it is over and above their contractual duty so it is a separate contract between them.

Please tell me what I have written is completely correct?
Thank you so much 🙂

[AlinaaF]

Please say whether these statements are correct or not?

1) Compulsory liquidation is initiated by the members (shareholders) of the company to be passed by special resolution (>75%) BUT could you please explain the reason behind this liquidation?

2) Voluntary members liquidation is initiated by the members of the company to be passed by special resolution when the company is able to pay its debt in the future but members voluntary prefer to liquidate.

3) Voluntary creditors liquidation is initiated by the creditors of the company to be passed by special resolution when the company is unable to pay its debt in the future so the debtors to get their money back.

[AlinaaF]

Thanks, BUT I need to know this too.

Could you tell me the 5 situations where ordinary resolution with special notice is used (I know only two such as):

1) Removal of director
2) Removal of auditor

Please mention the rest of it so that I can remember them.

Secondly, I just have to remember that special resolution is used whenever there is a change in the constitution of the company (i.e. articles of association).

BUT I am still stuck that what comes in the constitution of the company such as whether the change in company’s name OR change in memorandum of association?

ANYTHING else that does not need the constitution of the company to be changed then we need ordinary resolution to be passed.

[AlinaaF]

I have Kaplan textbook valid from 1 sept 2017 to 31 aug 2018 but I wonder whether is there any changes that occurred since 2018 in the F4 syllabus?\\

Can I completely rely on this old book for the exam?

[AlinaaF]

The correct answer is county court but in my textbook it says that county court deals with unresolved matters of contract law and tort law.

Since it is a civil law between two individuals so it should be county court (That is what I understood, correct?)

It cannot be magistrate court because it deals with small domestic matters even though it has both civil and criminal jurisdiction. SO it is surely not a domestic matter. (correct too?)

[AlinaaF]

Thank you so much!

SIR, you calculate the change in inventory of 2000 by deducting 11,000 production units against 9000 sales units.

Change in inventory consists of (opening inventory – closing inventory)

BUT how would that be an increase in inventory? Why do we produce more units than we can actually sell?

Secondly could you please help me calculate closing inventory with the following example?

For example:
sales units = 12000
production units = 8000
opening inventory = 3000

I know that we need closing inventory to calculate the cost of goods sold.

opening inventory——–3000
production units———–8000
closing inventory————?
cost of goods sold———-0

BUT we are not told the COGS to calculate closing inventory (how would I do that?)

[AlinaaF]

1) Sales Turnover ratio is a measure to see how much money is brought in through sales over a time period.

2) Inventory Turnover is a measure to see how much of the number of times inventory is sold or replaced.

3) Receivable Turnover is a measure to see how effective a company is in extending credit as well as collecting debts

4) Payable Turnover is a measure to see how many times a company pays off its accounts payable during a period.

Now it is correct???

[AlinaaF]

Thanks for your reply 🙂

Both the Balanced Scorecard and Building Block Model have financial and non-financial measures.

So we will evaluate the financial performance using financial measures such as ratios / % increase or decrease etc.

We will evaluate the non-financial performance using non-financial measures and it depends on the information provided in the question.

But with the non-financial measures, as you said that there is no fixed rule on how to calculate them rather we can calculate them in various ways like this:

1) Using simply increase or decrease in non-financial data from one year to another
2) % increase or decrease in non-financial data from one year to another

Am I Correct?

[AlinaaF]

Sir, I have watched your lecture on that topic but I couldn’t understand this. That led me to ask you.

Could you please explain this to me?

[Author]

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