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I am afraid sir, I still have some doubt.
Below is the definition given in ISA 706 (revised) for other matter paragraph:
Para 7:
For purposes of the ISAs, the following terms have the meanings attributed below:(a) Emphasis of Matter paragraph – A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of the financial statements.
(b) Other Matter paragraph – A paragraph included in the auditor’s report that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor’s judgment, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report.
Which is the same as the question right?
Further down, Para A15 states this:
The content of an Other Matter paragraph reflects clearly that such other matter is not required to be presented and disclosed in the financial statements. An Other Matter paragraph does not include information that the auditor is prohibited from providing by law, regulation or other professional standards, for example, ethical standards relating to confidentiality of information. An Other Matter paragraph also does not include information that is required to be provided by management.
Hence I believe for the given question question the answer would be (C) An other matters paragraph would be included.
It says “discount received column of the cash payments book” 🙂
Cash book is the book of prime entry for Discounts.
Total of dicounts columns are used to post to ledgers.
Discount received column total will be posted to DR – PLC a/c, CR – Dis. Received a/c. So even if the column total is wrong, debit and credit is still matching, so no imbalance of TB. The error would need to be corrected though.For the second one, you are correct to debit asset and maintenance by 400 and suspense credit by 800.
Hi Archana,
Computer purchased for 3500.. the double entry would be:
Dr: Computer 3500
Cr: Cash 3500
But, according to question, what they did was;
Dr: Computer 350
Cr: Cash 3500
Which means the error was made debiting Computer (i.e. amount less by 3150) and credit was ok. So your 2nd answer is wrong and first answer is correct. As debit Computer is less by 3150, we will debit 3150 Compter more by 3150 and credit Suspense accountSir, could I further ask about ordinary dividend.
I know that interim ordinary dividend paid is adjusted in SOCIE.
Ordinary dividend proposed and declared after the year end, (before finalising of accounts) are non adjusting events, unless the the dividend was approved by shareholders. Proposed or declared but unapproved dividends would be disclosed in the notes. Any such dividends approved would be deducted in SOCIE and accrued in SoFP. Am I on the right track so far here?
If in a question they just say dividend declared before the year end (but doesnt give any info if they are approved or not and no info about finalasing accounts)..
Do I deduct that dividend in SOCIE and Accrue it as a liability?@dizzycats said:
DR: Building (Asset) $ 1,800,000
CR: Revaluation Reserve (Equity) $ 1,800,000
(Being revaluation of asset)Dizzy Cats,..
Wouldn’t the double entry be like:
Dr: Building 1,200,000
Dr: Accumulated Dep 600,000
Cr: Revaluation Reserve 1,800,000Revaluation gain amount of 1,800,000 is arrived by deducting the revalued amount of 3,600.000 from NBV of 1,800,000 = 1,800,000 Revaluation gain.
It can also be calculated as 3,600,000 – 2,400,000 (being the cost difference) plus the accumulated depreciation of 600,000 = 1,800,000
Debiting the Asset account with 1,800,000 would increase the asset balance to 2,400,000 + 1,800,000 = 4,200,000 and I believe that is wrong!
Sir,
Could you explain more about redeemable and irredeemable preference shares..If its redeemable preference shares, does the dividend appear as an expense under finance charge, smilar to loan notes? And the redeemable preference share appear as non-current liabilities, not under equity?
Do the irredeemable preference shares appear under equity? And its dividend in SOCIE?
If in a question they simply say preference shares which treatment should I choose?
I think they are the same or at least, related. Let me try and explain 🙂
These two equation are based on the Basic Accounting Equation:
Asset = Capital + Liabilities
It can be re-arranged as Capital = Asset – Liabilities
We also know that: Net Assets = Assets – Liablities
Hence we can say: Capital = Net Assets
Hope that helps 🙂
In the first question, the financial year is 1 July 2000 to 30 June 2001. Among the the list of payments, the last payment made this year was on 30 June 2001 (which is also the year end) covering until 30 April 2001 indicating that during this year May and June payments were accrued. They were paid in next year which is indicated by the last payment on the list which was made on 1 August 2001, which falls out the current financial year. So May, June payments 840 x 2/3 = 560 was accrued.
For the P&L it will be Payments made during this year 600+720+900+840=3060 plus closing accrual of (from above) minus opening accrual:
3060+560-300=3320If an expense relating to that year is not paid, it should be included in SOFP as a liability.
1: 400 x 4 = 1600 cost is higher than the NRV of (400 x 3) – 200 = 1000
2:2200 x 30 = 6000 cost is higher than the NRV of 200 x 35 – 1200 – 300 = 5500So in both cases we have to use NRV.
Note that the amount of 116400 is not including these two items. So this time we will not need to deduct the cost and then add NRV. (In earlier question it was given including the cost.) So we will just add NRV as NRV is lower in both cases.
So answer will be:
116400 + 1000 + 5500 = 122900Ques-3
This one is similar to to the first one, but we can just calculate by looking at the inventory movement. Cost of the sales and sales returns are given, so we don’t need to calculate cost of sales.
Answer will like this:
Hope that helps.. and see you in class tomorrow 🙂
Ques-2
According to IAS 2, inventory must be valued at lower of cost and net realisabe value.
So in the two points given, we have to see if the NRV is lower than the cost at which they are valued at.
1:
400 x 80 = 32000 is cost
Due to the defect in the products they were sold at 50% less than the normal selling price. So now the selling price will be 150 x 0.5 = 75 / coat
Selling expenses amounted to 5 % of proceeds, hence: 75 x 0.05 = 3.75 / coat
So NRV (which is selling price – selling expenses) for the 400 coats will be:
400 (75 – 3.75) = 28,500
NRV is lower than the cost, so they should be adjusted.2:
NRV ( [28-5-1] x 800 = 17,600 is higher than the cost of 20 x 800 = 16,000. So this one doesn’t need adjustment.So the answer would be:
284700 – 32000 + 28500 = 281200Ques-1
From the information given we can assume a 7 days period and prepare a p&l account. Inventory on 7 July can be assumed as closing inventory and hence inventory on 30 June (which we have to find out) can be assumed as opening inventory.
While preparing the p&l account, we can calculate the cost of sales using the sales of 14,950 and mark-up of 15%. Then we can use that cost of sales and the rest of items given to calculate the inventory on 31 October 2003 like this below:
It says rent is charged in arrears at the end of February, May, August and November.
That means that rent for December, January and February will be charged end of February next year, and the accountant forgot to charge rent for December this year. In other word, December rent for this year is accrued. February bill is expected to be 30,000. So an accrual of 30,000/3 = 10,000 for December should be made.
Accrued expenses increase expense for the year, hence reducing profit for the year and..
Accrued expenses also increase( or create) current liability, reducing net assets.
The double entry will be :
Rent Expense(p&l) – Dr
Rent Accrued(sfp) – CrHence the answer would be:
25,000 – 10,000 = 15,000 profit for the year
275,000 – 10,000 = 265,000 net assets.NCA Cost account doesn’t include depreciation.
But when we do Carrying Value or Net Book Value accounts, we need to deduct it. CV(NBV) is arrived at after deducting Accumulated depreciation from the Cost.
The opening 200,000 indicates the CV balance after deducting previous year’s accumulated depreciation. So this years depreciation has to be deducted to arrive at the closing CV balance for this year.
Hi Archana,
For that question, you would need to create NCA account with carrying values.
If there were any Additions or Revaluation surpluses, they would be added to the opening carrying value and depreciation for the year plus carry value of disposal would be deducted to arrive at closing carrying value.In this question they have given opening carrying value, depreciation for the year and carrying values of disposal can be calculated using the proceeds and loss on disposal.
To calculate CV of disposals:
Proceeds – CV = Profit (Loss) on disposal
∴ 25,000 – CV = – 5,000
∴ CV = 30,000So the answer would be:
200,000 – 20,000 – 30,000 = 150,000NCA account with carrying values will be like this:
It could be any way. Can be 2005 or 2015 or 2025. When it’s given like 20W4, 20W5… you need to realise that it’s just one year after the other, like 2004, 2005 or 2014, 2015.(In both it’s ‘W’ and 4 or 5. So it’s just one year after the other.)
If given like 20X4, 20Y5 it means like 2004, 2015. (In this case it’s ‘X’ and ‘Y’. So if I assume X is 0, then Y (which is after X) should be assumed as 1 (which is after 0).
I came across such dates when I did BPP practice kit.
Since John sir mentioned that in exams they will only give proper dates, we need not worry about it at all 🙂
