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Incomplete records

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Incomplete records

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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  • August 1, 2015 at 7:01 pm #264470
    Tamas
    Member
    • Topics: 2
    • Replies: 8
    • ☆

    Hi John,

    I have a question regarding an example in the BPP book F3 regarding incomplete records.

    The question summarised:
    Camera shop 1JAN2011 $5,000 Inventory; $3,000 Cash.
    End of year 31DEC2011 Inventory $6,600; Cash $15,000; Payables $3,000; Capital introduced $5,000 ; Drawings $7,200.

    I applied the business equation to calculate the profit, but mine was $3,000 more than that of the textbook. I don’t get it why did it deduct the payables 3,000 From inventory and cash as the closing net assets? I thought payables is a liability and it will be b/f to the next period? thanks for your explanation

    regards

    August 2, 2015 at 7:41 am #264568
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Net assets = assets minus liabilities.
    The fact that the liability is still owing at the beginning of the next period is irrelevant (just as assets are still owned at the beginning of the next period)!

    The closing net assets are 6,600 + 15,000 – 3,000 = 18,600
    The opening net assets = 5,000 + 3,000 = 8,000
    Therefore the increase in net assets = 10,600

    Using the accounting equation:
    profit = 10,600 – 5,000 + 7,200 = 12,800

    I do suggest that you watch our free lectures on this (our lectures are a complete course covering everything you need to be able to pass F3)

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