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I am confused!!! Let me rephrase them in points 🙂 Are they correct now sir?
1) If the accidents occurred before the end of the year but the court has not started the case yet then we need to record the provision based on its probability consider to be probable (>50%) as shown in the probability table below.
2) BUT if the accidents occurred after the end of the year but the court has not started the case yet then we need to disclose the provision based on its probability consider to be possible (5 – 50%) as shown in the probability table below.
3) BUT if the probability is remote (<5%) then we do nothing (not even disclosed!)
Probable >50% – Recognize as Provision
Possible 5-50% – Disclose as Provision
Remote <5% – No recognition or disclosure4) Is it true that probability table for provision is different from the probability table for contingent liability (because you have both in the notes!)?
I forgot to ask two more question. I hope you do not mind 🙂
1) When will we actually pay our tax payable of $20000 on SOFP?
2) Lastly please explain something about deferred tax?
According to example 1 of chapter 14.
Once we know the profits at the year-end then we estimate the Tax expense in SOPL of $39000.
But we have Tax Payable of $30000 in 2007 and $20000 in 2008 respectively. This means that the tax expense of $39000 (out of which include the tax of $30000 of 2007 & $9000 of 2008)
However in actual we have paid tax of $49000 (30000 + 39000 – 20000) out of which we paid tax of $30000 belong to 2007 and $19000 of 2008.
Is that correct too?
Can you please correct my adjusting entries that we will make in nominal ledgers…
Dishonored cheques:
DR Dishonored cheques (expense in SOPL)
CR CashError correction:
DR Cash
CR IncomeProfit credited by bank:
DR Cash
CR IncomePayment debited by bank:
DR Expense
CR CashStanding order:
DR Standing order (expense in SOPL)
CR CashI appreciate your time but what do you say about these…
1) Is it true that the reason profit in the SOPL is not a cash is because we use the accrual accounting where revenue and expenses are recorded when they happened (earned) irrespective when the cash will be received or paid?
2) I understood that we have to look for information in the question to identify the cash or non-cash items but how do we identify it in real-life (unless we memorize it)?
3) If the item is non-cash items then whatever we added as income should be deducted AND whatever we deducted as expenses should be added back to remove non-cash items from SOCF.
4) You start SOCF with PBT but can we use PBIT or net profit instead?
5) In Investing activities we are looking for the cash received or paid from investments such as Buying & selling of PPE, Equity and NCL.
6) In Financing activities we are looking for the cash received or paid from finances such as Equity and NCL.
Sorry for so questions. Thanks by the way!
1. That means it depends whether uncleared cheques are cheques we have received from customers or we have paid to suppliers but unpresented cheques are always cheques we have paid to the supplier but they are outstanding (not presented to the bank)?
2. How do we make adjusting entries of adjusted entries into the cash account. Can you give example from your illustration in the notes?
3. Is it correct that we make adjusting entries of cash account only?
Thank you so much. You’re GREAT!
The points (1) and (2) are not cleared to me. Let me rephrase myself.
We need to ask ourselves these questions in order to make adjustments in the right book.
1. IF bank has already made the entry then we need to adjust our cash account like bank charges.
2. IF business has already made the entry then we need to adjust in BRS like uncleared cheques.
When dividend is paid – this would be first entry:
Dr Dividend expense
Cr CashYou said in one forum that we should make this entry at the end of the year but why do we need this one? (see below)
At the end of the year – this would be last entry:
Dr Retained earnings
Cr Dividend expenseSecondly, I watched your lecture on SOCE but I assume that we include all the equity (or capital) balances in SOCE where profit for the year, drawings and dividends paid all include in the retained earnings. True?
Thirdly, if we received dividend as income then we make only one entry:
DR Cash
CR Dividend incomeThanks of your answers 🙂