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crazyjames1080.
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crazyjames1080
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Hello there
I’ve just watched the lecture in the video below and I’m struggling to understand the journal entries and why we put each figure in their respective debit/credit column. Did we put the £400 figure on the credit side because that’s where it was on the trial balance? If so, how did we know to put the £3500 figure on the debit side? Are there any other double entries relating to this that are worth knowing for this to make more sense? Thank you.
https://opentuition.com/acca/fr/ias-12-introduction-acca-financial-reporting-fr/
James
P2-D2
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Hi James,
The figures in the trail balance are the balances at the end of the reporting period once we have closed off the accounts. So the credit balance of 400 is the closing balance on the credit side of the T-account before any post-year end adjustments.
The 3,500 is the estimate of the tax payable due to the tax authorities and this has not been accounted for. To adjust for it in the T-account then we need to increase the balance from 400 to 3,500, so that the 3,500 is the closing credit balance carried forward that is then paid next year. Remember that this closing carried forward balance will be the opening balance next year and it needs to be a credit. The carried forward is therefore the debit balance, hence why we have shown it where it is. If you’re still unsure then maybe pop back briefly to the FA notes/videos on the topic.
Thanks
crazyjames1080
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Hello there
Many thanks for your help. I’m not sure I fully understand it so I will go back and have a look at the FA notes/videos as suggested. Thank you.
James
crazyjames1080
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