[mahdiniaacc]

just 98 !!!!!!!
It should be 100000000 🙂

[mahdiniaacc]

Oh yea, it could be flexed budget. Those are same but applicable in two ways;

Flexible budget
A budget that takes into account the fact that values for income and expenditure on some items will change with changing circumstances. Consequently, in a flexible budget the cost allowance for each variable cost item will change to allow for the actual levels of activity achieved.

Flexed budget
A budget that has been adjusted in this way ( explained as above ) is known as a flexed budget.

[mahdiniaacc]

Flxed budget ?!!
Do you mean fixed budget? As far as I know, we don’t have anything like Flxed budget.

Good luck

[mahdiniaacc]

@littlestart said:
Hi man,
Yes, the first one do affect the TB balance.
The answer for the second one does NOT affect TB balance. The answer should be wrong, right?
Cheers

Yes, the answer is right and I replied mistakenly about second one. As the discounts column is recorded in the separate entry miscasting of this column doesn’t make any differences but i thought about a kind of writing of the cash book which its payables or receivables columns are written by total of discount and cash amount, in this way the effect of miscasting definitely will be found by the difference which will be appeared in TB.

Good luck

[mahdiniaacc]

first one could make a difference as the debit items were true but total of payments was posted wrongly.
second one also make a difference because discount received was posted wrongly but other accounts were posted as they were.

[mahdiniaacc]

Of course you are right.
You explained it better than me.

Glad to read your post.

[mahdiniaacc]

Both of these are true as they are. Kaplan directly expressed that the accrual is for interest so when the interest outflows are not part of the cash generated from operations therefor it doesn’t have any effects on calculation of cash generated from operations while in your question it’s not obvious the accrual is for interest payable so it should be probably an accrual of operations’ activity expense like accrual for telephone expense and etc. Therefor, this accrual should be accounted in calculation of cash generated from operations.

Key point:
it’s true that the interest paid is not part of cash generated from operations but it should be classified under cash flows from operating activities;

Cash flows from operating activities ……………………. * * *
Cash generated from operations ……………….. * * *
Interest paid ………………………………………… * * *
Dividends paid ………………………………………. * * *
Tax paid ……………………………………………… * * *

Good luck

[mahdiniaacc]

@vrushali said:
my understanding says reconciled balance on bank statement.

How do you understand ” the reconciled balance on bank statement ” from ” closing balance on bank statement ” ????
actually, it’s common in F3’s question that asks students about unadjusted closing balance on bank statement from given information of unadjusted closing balance on bank ledger and all differences between the ledger and the statement.

good luck

[mahdiniaacc]

You’re welcome

[mahdiniaacc]

Hmmmmmmmm, good point

Thank you littlestart for your good view.
As far as I understood from your answer, you assumed that the purchased land and building both are depreciable but I think it’s not true because this land is not a property which will be depreciated. mineral land is an example about a depreciable land but land of business’ buldings is not a depreciable property.

Good luck

[mahdiniaacc]

As you truly said, 2,062 is not true and your answer of 3,320 should be true. according to the question’s information, 2,062 is the final and reconciled figure of bank balance which should be appear on the SOFP but the question asked us about bank statement balance which is 3,320 and we know that the bank statement balance is not necessarily reconciled balance therefor it could be included of any errors made by bank and excluded of other right articles that are in the cash book but are not in the bank statement.

Good luck

[mahdiniaacc]

Of course, we should not leave the questions in exam without answer ( as the wrong answers do not have any negative mark ) but here we are talking about the true answer regardless of options that given in the question.

Thanks for your kindly participation

[mahdiniaacc]

Please forget temporarily this question and study other questions which say about ” closing balance “. Can you remember any debit closing balance that should be accounted in debit side of account?
I think when a question says ” debit closing balance ” its carried forward should be credit. In fact a closing balance is just a balance so it’s not an entry like carried forward in the accounts’ turnover.
I hope you got what I want to say.

[mahdiniaacc]

I just reviewed again the opposite of my assumption and got the same answer too, therefor this assumption is not necessary. Actually I wanted to say that all received debts should be received by the till ( not partially by the bank ) because we don’t have all turnover of the bank account.

[mahdiniaacc]

@vrushali said:
hi
but i think that the closing debit balance is given and so,
Dr- 9600
Cr-4540+2720+14250=21510
=11910 on Dr..ie closing credit balance

I’m so sorry for my wrong post.
As vrushali said the answer is 11,910
Actually, I didn’t draw the T account for this question and posted my answer just by reading the prior answer. The question said that the closing balance is a debit figure of 2,720 so it means that 2,720 should be account as a credit c/f figure because the b/f is a debit figure.

Beg your pardon again

[mahdiniaacc]

You can solve it by drawing of a T account for each necessary balance which given in the question; however,the answer of this question assuming on that all the sales of period were on credit ( not partially in cash ) should be as below :

receivables

---

B/f 2,000 ……………………………….
Sales 98.750 ………………………….
……………………………..Till 97,250
…………………………….. C/f 3,500

---

100,750 …………………… 100,750

Till

---

B/f 300 …………………………………
Receivables 97.250 …………………
……………………… Banking 95,000
……………………… Drawings 1,200
……………………….. Expenses 800
……………………… Stolen cash 400
………………………………… C/f 150

---

97,550 ………………………. 97,550

Good luck

[mahdiniaacc]

Dear littlestart

Could you please explain that why you deducted the wrong depreciation charge and added the true one to the profit figure?
I’m sure you know that depreciation charge has a decreasing effect on the profit figure so if there is any wrong depreciation in the calculation of profit, definitely, the wrong figure should be added to profit then the true charge will be deducted.

Good luck

[mahdiniaacc]

@joseph89 said:
First.
Weblock inc purchased land and building worth 80,000$ out of which the cost of land was 30,000$. The profits earned for the year were 115,000$. Depreciation was charged bu the company at 2% under the straigh line method on buildings. The accountant also charged 20% depreciation on the land and buildigns?

what are the correct profits after rectification of the above error?
A) 114,000
🙂 99,000
C) 100,000
D) 117,000

My first possible answer :
Unadjusted profit ……………………. 115,000
Extra depreciation ……………………. 16,000 ( 80,000 * 20% )
Adjusted profit ……………………….. 131,000

And second possible answer :
Unadjusted profit ……………………. 115,000
Wrong depreciation ………………….. 16,000 ( 80,000 * 20% )
True depreciation …………………….. ( 1,000 ) ( 50,000 * 2% )
Adjusted profit ……………………….. 130,000

[mahdiniaacc]

@joseph89 said:
Which one of the following would cause a company’s gross profit percentage on sales to fall?
A Sales volume has declined.
B Closing inventory is lower than opening inventory.
C Some closing inventory items were included at less than cost.
D Selling and distribution costs have risen.

The true answer is C because :
A – Sales volume decrease or increase doesn’t affect on gross profit margin because with change in the sales volume subsequently the sales revenue and cost of sales also will be changed.
B – If the closing inventory is lower than the opening inventory with decrease in the purchases the margin ratio could be fixed. Therefor, just this criteria is not enough for change in the margin ratio.
C – When the closing inventory contains some items at less than their cost definitely the cost of sales will be increased, so the gross profit also will be decreased, therefor the margin percentage will be decreased.
D – Selling and distribution cost are not parts of the gross profit. They are figures that represented after the gross profit. actually, these are parts of operating profit.

Good luck

[mahdiniaacc]

@joseph89 said:
accountant of trans Tld noticed a difference in debit and credit side of trial balance of 8131$.
which of the following errors would have the effect of reducing the difference when corrected?
A) the petty cash balance of 500$ has been omitted from the trial balance
b) 400$ received for rent of part of the office has been correctly recorded in the cash book and debited to rent account.
c) no entry has been made in the records for cash sale of 2500$
d) 3000 paid for repairs to plant has been debited to the plant asset account

The answer is depend on the difference whether is debit balance or credit balance. if the suspense account of 8,131 is debit then B will reduce the difference but if the suspense is credit balance, so A will reduce the difference.

[mahdiniaacc]

Oh yea, I got now your mistakenly view on this question. actually, it’s not ” 10 month accounting period “, it is “10 month, accounting period to . . . ” . In other words, generally, the depreciation charge is presented based on the annual rates, this means that the rates given in the questions are for annual depreciation calculation ( 12 month ) unless the questions directly specify the different base for depreciation rates.
If the fiscal year in this question was 10 months then it should be specified that the rate of 20% is for ten months not usually for a full year ( 12 months ).

Good luck

[mahdiniaacc]

1 May 2010 until 30 September 2010 is 5 months ;
30,000 * 20% = 6,000 is 12 months depreciation charge ;
therefor the proportionate depreciation charge for 5 months should be 6,000 * 5/12 = 2,500

In the first look, some students immediately calculate the depreciation charge for 10 months ( ie 6,000 * 10/12 ) while the business used the car just for 5 months form 1 May until 30 September. However, this figure of 10 is given for making the question more complicated.

Good luck

[mahdiniaacc]

@sue888 said:
With a provison, there is a uncertainty about the timing or the amount of the future payment that will be required to settle this obligation. But we are almost sure the settlement will take place and we give the best esti of the future obligation.

Actually, you repeated again the main point of my referred problem ( future obligation ).

@sue888 said:
That’s why in BPP’s answer: the calculation is based on next year’s projected sales number.

I’m so sorry, honestly, I didn’t understand your reason about “that’s why …”

@sue888 said:
I think we have deducted the sales return from the total sales of this year. Think of the T account of sales.

No, I don’t agree with you in this point because if we have deducted all the sales returns of this year’s sales we will not have any returns later in respect of this year’s sales while probably we will have returns later in respect of sales revenue of this year.
so please tell me which one of the sales figures is reliable for calculation of provision of sales return of this year’s sales , current certain sales or future uncertain sales?

good luck

[mahdiniaacc]

@sue888 said:
I agree with your closing capital figure.
But the adjusted profit = 35,500+ 100*52 ( 100 is weekly wages, I assume 1 year =52weeks)+400=38,100.

Of course you are right.

@sue888 said:
I hava a question on building dep. should I ask you here or ….

It’s better to creat a separate topic for your different issue.

good luck

[mahdiniaacc]

Dear Mike

Your explain about the accounting of the difference between depreciation based on the historical cost and depreciation based on the revalued amount of the asset is completely true and it’s according to the IAS 16 :

Quote:

International Accounting Standard 16
Property, Plant and Equipment
41 – The revaluation surplus included in equity in respect of an item of property, plant and equipment may be transferred directly to retained earnings when the asset is derecognised. This may involve transferring the whole of the surplus when the asset is retired or disposed of. However, some of the surplus may be transferred as the asset is used by an entity. In such a case, the amount of the surplus transferred would be the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost. Transfers from revaluation surplus to retained earnings are not made through profit or loss.

However, as far as I understood from Heezay’s question and his/her further explanation, this is not the main point of his/her problem because you kindly explained about difference of 9,000 but Heezay’s problem is about prior expense of 160,000.
I think Heezay misunderstood that the depreciable amount of the asset for next 40 years should be 840,000 ( 1,000,000 – 160,000 ) while, as I said before, this 1,000,000 is the asset’s value for its next 40 years useful life not its 50 years useful life. Even, if we assume that this 1,000,000 is the asset’s 50 years useful life so its 40 years equivalent useful life value should be 800,000 ( 1,000,000 * 40 / 50 ) – ie depreciated replacement value.

thank you for your attention.

[Author]

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