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Malright Co has an accounting year end of 31 October. The accountant is preparing the financial statements as at 31 October 20X7. A trial balance has been prepared but no year-end adjustments have been made.
Should each of the following amounts be used to determine the figures to be reported on the statement of financial position (SOFP) as at 31 October 20X7 before any year-end adjustments?
Answers:
Buildings at costs Yes
Buildings accumulated depreciation at 1 November 20X6 No
Plant at cost Yes
Plant accumulated depreciation at 1 November 20X6 No
Bank balance Yes
Revenue No
Net purchases No
Inventory at 1 November 20X6 No
Cash Yes
Trade payables Yes
Trade receivables Yes
Administrative expenses No
Allowance for receivables at 1 November 20X6 No
Retained earnings at 1 November 20X6 No
Equity shares, $1 Yes
Share premium account YesSo these answers have confused me.
Why isn’t accumulated depreciation used? Don’t we need to deduct that and the current charge as part of year end adjustment.
What adjustment is bank balance and trade payables used for?
Maybe I did not understand the question.
The question says that the trial balance has been prepared before the year end adjustments.
As I explain in my lectures, after preparing the trial balance we then make the year end adjustments for accruals and prepayments, irrecoverable and doubtful debts, inventory, and depreciations.
Therefore we are not going to show the accumulated depreciation as at 1 Nov X6 on the SOFP at 31 October X7. The same applies to the other items with NO against them.
Yes of course- after you clarified what the question was asking it makes sense! It seems that I am having a few issues with understanding what the questions are asking 🙁
But thank you for helping again!
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