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Outstanding Invoice — Accrual Method
If you use the accrual method, you must account for expenses when they are incurred (no matter when they are paid). If you receive an invoice before you receive the goods listed on that invoice, you must count the expense on the invoice date. The delivery of the goods is irrelevant to the accounting for the expense.Delivered Goods With No Invoice
Under the accrual method, if the goods arrive before the invoice, you do not count the expense. The fact that you possess the goods does not affect the accounting method. Only enter the expense when the invoice actually arrives.This is what i read somewhere in the internet which made me confused. This is exactly opposite of what you explained. Sir, kindly relate this to the accounting standard. by the way, i am very much convinced by ur explanation.
What is the difference between financial statements are authorised for issue and financial statements are actually issued. ias 10 says events until the financial statements are authorised for issue. in one question i encounter two different dates for authorised for issue and issued. i considered the events after the reporting period from year end to the date authorised for issue and my answer was right. i am convinced with the answer. but two different dates for authorised for issue and date of actual issue is confusing me. Pls kindly explain.
sorry sir, i mean current tax b/d to be presented on the SOFP.
this $360,000 is for I/S. After adjustment current tax will increase by $30,000. Now $390,000 will be shown in I/S. But wot about the current tax b/d for the SOFP. This is wot is confusing me.“except this adjustment” means adjustment # 3 sir;
Why 150 is deducted from administrative expenses in I/S.
still i am not clear sir. Pls explain.DR OUFL a/c 22,000
CR Rental of leased plant 22,000
(to correct incorrect accounting treatment)
->
FC in I/S 7,000 and CL 16,500 and LTL 60,500 ; i have understood
Sir, what is meant by OUFL; pls explain this part without Dr and Cr.Pedantic
(iv) Sophistic’s trade receivables at 30 September 2008 include $600,000 due from
Pedantic which did not agree with Pedantic’s corresponding trade payable. This was
due to cash in transit of $200,000 from Pedantic to Sophistic.Both companies have
positive bank balances.-> Sir, what is meant by “Both companies have positive bank balances.”
In Page 10; Compound bar charts have separate bars for each element. (Department 2 and Department 1)
In Page 11; Components bar charts have one bar split into sections for each element. (Series 1, Series 2 and Series 3)
There is no examples of Multiple Bar Chart.
* So, if Multiple bar charts have separate bars for each element then Compound bar chart in page 10 has similar chart; then both Multiple and Compound chart are same.
* If Compound bar charts have one bar split into sections for each element then Component bar chart in page 11 has similar chart; then both Compound and Component chart are same.
This is what is confusing me sir.sir, i have watched the lectures and this is why i am very much comfortable in solving the exam kit. your lectures has helped me a lot.
Q26 Why a manager is not a cost center?Thank you sir,
Q26 Cost is associated with a cost center and product as well. so, a manager is not a cost center but how?Q38 Rental of the finished goods warehouse is distribution cost but how sir?
-> I am not taking any Formal class of F9. It is only because of the opentuion lecture that i am comfortable in solving the question of the BPP revision kit. I have passed F5 also in my last attempt only with the help of your lecture and your support through ask the tutor forum. I hope you remember me. I am hopeful to pass F9 as well because i am very comfortable with the way you teach. Even in other subject which you teach i wont take any formal class because i am confident to pass the paper with your lecture and support through ask the tutor forum.
RGH Co (6/09, amended)
->Risks arising from granting credit to foreign customers
Foreign debts raise the following special problems. When goods are sold abroad, the customer might ask for
credit. Exports take time to arrange, and there might be complex paperwork. Transporting the goods can be slow, if
they are sent by sea. These delays in foreign trade mean that exporters often build up large investments in
inventories and accounts receivable. These working capital investments have to be financed somehow.
The risk of bad debts can be greater with foreign trade than with domestic trade. If a foreign customer refuses to
pay a debt, the exporter must pursue the debt in the debtor’s own country, where procedures will be subject to the
laws of that country.
How risks can be managed and reduced
A company can reduce its investment in foreign accounts receivable by insisting on earlier payment for goods.
Another approach is for an exporter to arrange for a bank to give cash for a foreign debt, sooner than the exporter
would receive payment in the normal course of events. There are several ways in which this might be done.
Where the exporter asks his bank to handle the collection of payment (of a bill of exchange or a cheque) on his
behalf, the bank may be prepared to make an advance to the exporter against the collection. The amount of the
advance might be 80% to 90% of the value of the collection.
Negotiation of bills or cheques is similar to an advance against collection, but would be used where the bill or
cheque is payable outside the exporter’s country (for example in the foreign buyer’s country).
Discounting bills of exchange is where a bank buys the bill before it is due and credits the value of the bill after a
discount charge to the company’s account.
Export factoring could be considered where the exporter pays for the specialist expertise of the factor in order to
reduce bad debts and the amount of investment in foreign accounts receivable.
Documentary credits provide a method of payment in international trade, which gives the exporter a secure risk free method of obtaining payment. The buyer (a foreign buyer, or a UK importer) and the seller (a UK exporter or a
foreign supplier) first of all agree a contract for the sale of the goods, which provides for payment through a
104 Answers
documentary credit. The buyer then requests a bank in his country to issue a letter of credit in favour of the
exporter. The issuing bank, by issuing its letter of credit, guarantees payment to the beneficiary.
Counter trade is a means of financing trade in which goods are exchanged for other goods.
Export credit insurance is insurance against the risk of non-payment by foreign customers for export debts. If a
credit customer defaults on payment, the task of pursuing the case through the courts will be lengthy, and it might
be a long time before payment is eventually obtained.
Premiums for export credit insurance are however very high and the benefits are sometimes not fully appreciated.Q 23
Discuss how risks arising from granting credit to foreign customers can be managed and reduced. (10 marks)
With all due respect, you might have noticed that i struggling with theoretical part rather than the numerical parts.
Q 18
(c)
How the financing of working capital can be arranged in terms of short and long term sources of finance ?
-> I am struggling with this question, please help sir.Q 17 (b)
Discuss the relationship between working capital management and business solvency, and explain the factors that influence the optimum cash level for a business. (7 marks)-> the answer is given in the revision kit but i shall be grateful if you will be kind enough to make it more simpler. your explanation make me feel more comfortable.
Q 10.1
The following has been calculated for BB Co:
Receivables days: 58
Inventory turnover: 10 times per annum
Payables days: 45
Non-current asset days: 36
What is the length of the cash operating cycle?
A 23 days
B 49.5 days
C 85.5 days
D 139.5 days
-> i have understood the question & know how to calculate operating cycle. The only thing i am confused in this question is how to calculate inventory days?Q 67
Materials Usage Operational variance is calculated by multiplying with Std. Material Cost in solution of the book; but I think it should be multiplied with Revised cost of material.Solution in the book
(Actual Purchase – Revised purchase ) x Std CostWhat I think
(Actual Purchase – Revised purchase ) x Revised CostIs it a printing mistake in the book or i have not rightly understood?
Q 21.10
A company makes two products, X and Y, on the sametype of direct labour and production capacity per period is restricted to 60,000 direct labour hours. The contribution per unit is $8 for Product X and $6 for Product Y. The following constraints apply to production and sales:
x <= 10,000 (Sales demand for Product X)
y <= 12,000 (Sales demand for Product Y)
5x + 4y <= 60,000 (Direct labour hours)
The contribution-maximising output is to produce and sell 10,000 units of Product X and 2,500 units of Product Y.
What is the shadow price per direct labour hour and for how many additional hours of labour does this shadow price per hour apply?
A $1.50 per hour for the next 38,000 direct labour hours
B $1.50 per hour for the next 47,500 direct labour hours
C $1.60 per hour for the next 38,000 direct labour hours
D $1.60 per hour for the next 47,500 direct labour hours-> though i am familiar with the shadow price concept, i am unable to understand this question. I am not clear what is the point where profit is maximised. i mean which lines crosses at the profit maximising point. Moreover, how to calculate the next additional labour hour.
Q 21.5
A company is selling a product at a price of $120 per unit.At this price it is selling 200,000 units per period. It has been estimated that for every $5 increase or reduction in price, sales demand will fall or increase by 10,000 units.At what selling price will total sales revenue per period be maximised?
A $80
B $90
C $100
D $110
-> I have the concept of profit is maximised when MR = MC.
But I am unable to understand “Revenue is maximised when marginal revenue = 0”
Please kindly explain sir.Q 21.3
A company wishes to go ahead with one of three mutually exclusive projects, but the profit outcome from each project will depend on the strength of sales demand, as follows.
Strong demand Moderate demand Weak demand
Profit/(Loss) Profit Profit/(Loss)
$ $ $
Project 1 70,000 10,000 (7,000)
Project 2 25,000 12,000 5,000
Project 3 50,000 20,000 (6,000)
Probability demand 0.1 0.4 0.5
What is the value to the company of obtaining this perfect market research information, ignoring the cost of obtaining the information?
A $3,000
B $5,500
C $6,000
D $7,500->EV of Project 1 = (70000*0.1) + (10000*0.4) + (-7000*0.5) = 7500
EV of Project 2 = 9800
EV of Project 3 = 10000
And now i am confused what do the next. Please help, sir.Q 20.9
In context of relevant cost; what is meant by carrying value and realisable value?
Though i was able to solve the question; i was confused with these words.
Please kindly explain, sir.Q 18.7
The following statements have been made about linear programming analysis.
(1) The sales price of units produced and sold may be a constraint in a linear programming problem.
(2) If a constraint is 0.04x + 0.03y <=2,400, the boundary line for the constraint can be drawn on a graph by joining up the points x = 80,000 and y = 60,000 with a straight line.
Which of the above statements is/are true?
A 1 only
B 2 only
C Neither 1 nor 2
D Both 1 and 2
-> I am unable to understand this question.
