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Provision

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Provision

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • July 12, 2019 at 3:10 pm #522742
    seolinmin
    Member
    • Topics: 9
    • Replies: 3
    • ☆

    Hi John

    Wanda co allows customers to return faulty goods wothin 14 days of purchase. At 30 November 20×5 a provision of $6,548 was made for sales returns. At 30November 20×6, the provision was re calculated and should mow be $7,634. What should be reported in Wanda co’s statement of profit or loss for the year to 31 October 20×6 in respect of the provision?

    The answer is ‘a charge of $1,086’
    Mine was ‘a credit of $1,086’ because a provision should be increased by $1,086.
    So I think expense should be debited and a provision should be credited.

    Which part do I understand wrong?

    July 12, 2019 at 4:54 pm #522755
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54790
    • ☆☆☆☆☆

    Your entry is correct – the expense should be debited and appears as an expense in the SOPL.

    The question asks what should be in the SOPL, and in the SOPL will be the expense (or charge) of 1,086.

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