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which of the following could appear as separate items in the statement of changes in equity:
1. gain on revaluation of land
2. loss on sale of investments
3. prior year adjustments
4. proceeds of an issue of ordinary shares
5. dividends proposed after year endthe correct answer is 1,3,4
my question: prior year end adjustments?
year end adj are as follows:
accruals/prepayments
depreciation
revaluation
inventory
corp. tax
allowances for ba debts
events after reporting date
provisionsi dont see any of them fitting in SOCIE?
what am i missing?
No. no. ‘Prior year adjustments’ are different from the normal adjustments we make at the end of the year for depreciation etc.. (Those will affect the profit for the year, and won’t be shown as a separate item on the SOCIE (apart that is for revaluation, which I think you listed by mistake 🙂 ) )
Prior year adjustments refer to where we have changed our accounting policies and have had to recalculate the brought forward retained earnings to work out what they would have been if we had always used the new policy in past years.(The other reason for doing it would be to correct a fundamental error in the previous year)
Because it would mean that we would end up with a brought forward retained earnings that is different from what had been shown at the end of last year, the adjustment is shown in the SOCIE as a separate line, so that it is clear what has happened.
(You will not be asked in F3 to make prior year adjustments – don’t worry about that – just be aware what they are in case they are mentioned in the sort of question that you have typed out.)
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