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CH1, Example 1,Kaplan textbook

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › CH1, Example 1,Kaplan textbook

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • April 6, 2021 at 3:55 am #616049
    7fsa
    Participant
    • Topics: 58
    • Replies: 41
    • ☆☆

    Dear Chris,

    How are you?
    I hope you are doing well,
    In the example mentioned above its given the following,
    Warranty provision. 90 in credit side.
    And in the additional information it’s mentioned that, the year-end provision for warranty claims has been estimated at $75. And warranty costs are charged to administrative expense.
    I note that it decreases administrative expenses by $15 but I don’t know why can you explain it in simple way using the T-account please.

    April 6, 2021 at 3:57 am #616050
    7fsa
    Participant
    • Topics: 58
    • Replies: 41
    • ☆☆

    And show me the journal entry if possible

    April 10, 2021 at 8:39 am #616626
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6460
    • ☆☆☆☆☆

    Hi,

    I’m very well, thanks.

    I’d not worry about the T-accounts as that might make it more complicated in this instance. In this situation we have a provision of 90 that needs to be reduced to 75, a reduction of 15. To reduce the provision we debit the provision and the credit is taken through profit or loss in administrative expenses.

    Thanks

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