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Good day Mike,
Refer to course note page 52, and answer to example 3 on page 160. I noticed that the ‘excess on dep charged’ is adjusted in working 3 instead of adjusting in tnca in the csofp (like what u showed in the video)?
the retained earning figure is higher if adjustment is made in w3. Lesser if adjusted in tnca. Will i still be getting marks if i do the same? Bcos i still get the csofp balanced.
Can u pls comment?
Hi Marilyn
Good morning to you too.
The excess depreciation (without looking at the notes, I presume this is a transfer of TNCA between group companies) is adjusted for in the seller’s records as part of the pup adjustment.
The NET pup is deducted in W3 from the seller’s retained earnings and also from the TNCA cross-addition.
Surely I have made the adjustment in both W3 AND in TNCA
The only other “excess depreciation” matter which you could be referring to is where an item of TNCA has been revalued. As a result of that revaluation (Dr TNCA and Cr Revaluation Reserve) the newly revalued asset will be being depreciated on its increased value. But that means that the Statement of Income is now “suffering” an amount of depreciation greater than if the revaluation had not taken place. To compensate the Retained Earnings, it is good practice to make an annual transfer from Revaluation Reserve to Retained Earnings representing the amount of “additional” or “excess” depreciation which has been charged on that asset each year (Dr Revaluation Reserve Cr Retained Earnings through the Statement of Changes in Equity)
Does that answer it? If not, post again
Hello,
Yes u are right. U did made an adjustment in both W3 and TNCA. U showed the workings in the video too.
But, the w3 is different in page 160. It shows minus pup and add excess depreciation. I read the question in example two for the second time, and no tnca revaluation was mentioned. Or is there any indication of revaluation in the question that i may overlooked?
Now u are explaining about revaluation and makes me more confused. Hahaha. Im not ready for that…..yet! Lol
Thanks
Mike,
Pls ignore previous comment. Except thepart about making me confused 😉
Okay, i did the working all over again.
I should have toldu that in answer page 160, w3 includes adjustment BOTH pup AND excess of depreciation in THE SELLING COMPANY.
Why is it in ur working shows pup adj made in selling co and excess in buying. I thought i have understand the concept! Ahhhhhh…..pls tell me the answer in page 160 is outdated. Hehehe
No, page 160 is correct – the NET adjustment goes through the selling company. It USED to be the case as in the video but that changed about a year ago. I really must get round to rerecording the video
Please don’t get confused – I don’t like to be held responsible for that 🙁
Thanks Mike. Now i understand…hehehe
Yep, i think so too, otherwise u will be getting loads of similar questions 🙂
Thank u so much again. I’ll let u know when i do get confused ..HEhehe
Have a great day
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