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Presentation on question one adjustments for bstai conference Presentation Transcript

  • 1. ALAN RYAN BComm GDE(Bus) HDEA MEd
  • 2.  I always leave it until 6th year I cover all the 60 mark options in 5th year that are relevant for successful completion of Q1 adjustments, especially suspense; depreciation & revaluation I usually leave out one topic (depending on the group‟s progress), usually Published Accounts, so I stress the importance to students of mastering Q1 in case Published Accounts comes up as a 60 marker Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 3.  I would try to cover adjustments for Sole Trader; Company Final Accounts and Manufacturing Accounts all in one go so that students don‟t feel that they have three separate topics to master e.g. if we are mastering a Q1 adjustment that appears on a Sole Trader past paper, I will assign a similar Q1 adjustment for homework but from a Company Final Account or Manufacturing Account Question Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 4.  Most questions worked on in class and for homework would be from the past exam papers and past pre exam papers, with all tests coming from past pre exam papers After mastering the required adjustments for a Question One, I encourage them to closely watch their timing for future questions on this topic by using an egg timer or similar device for homework assignments, it focuses their mind, speeds up the length of time to complete Q1 and acts as a competitive spur Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 5.  Focus their minds: Company Final accounts came up in 2012 so Sole Trader or Manufacturing Accounts should come up in 2013! Adjustments that we will cover today come up in both these Q1 options Work on one exam question (2010 Sole Trader) & give another for homework (e.g. 2008 Sole Trader or most of 2007 Company Final accounts adjustments) Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 6. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 7.  Go down through the trial balance first Explain how to get the opening balance for Depreciation of Buildings and Delivery Vans Note that Investments were only acquired during the year Show that some of the Mortgage wasn‟t received until start of April Purchases and Sales PS at end of a letter State that Stock 1/1/09 is opening stock Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 8. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 9.  Commission – instil/drill into them to remember to visualise where all expenses/gains go in the bank account and then they go on the opposite side of the expense/gain account, so commission is therefore an expense Explain that while suspense is included in Salaries & General Expenses this does not necessarily mean that we subtract it to take it out Explain that Provision for Bad Debts is totally unrelated to Bad debts and mention the prudence concept Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 10. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 11.  Discount (net): remind them of A before R in the alphabet and put the A and R on either side of a T account showing Allowed on the debit(left) and Received on the credit(right) Mortgage Interest appearing in the trial balance = the amount paid during the year Bank: emphasise the basic rule of: DR Assets CR Liabilities implying that Bank is an overdraft in this case Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 12. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 13.  Explain what VAT/PAYE & PRSI are and that therefore they are usually owed to the Revenue Commissioners and will then go into the Liabilities in the Balance Sheet Explain the difference between Drawings and Capital (unless you have done Correction of Errors question with them previously) State that Capital and Drawings will only appear in Sole Trader and that in Company Final Accounts and Manufacturing Account it will be Authorised and Issued Share Capital that we encounter with drawings not being possible Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 14. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 15.  Involves separating patents from investment income and transferring part of the new patents figure into the p & l account Beware of the commencement year for patents being written off, there may be a few years written off before this year‟s accounts Always sort investment income provision while doing this adjustment Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 16.  Patents, which incorporate three months investment income received, are to be written off over a five year period commencing in 2009. Relevant figures from the trial balance: 4% Investments (1/7/09) €120,000 Patents € 60,400 Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 17. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 18. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 19.  „Incorporation/included in‟ rule: Option A: same side we would have added so now we subtract Option B: opposite side we would have subtracted so now we add Patents is on left(debit) side; investment income is on right(credit) side so they are on opposite sides so its Option B Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 20. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 21. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 22. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 23.  Complete lines 1, 2 and 3 Line 1 = the investment X number of months that we have it for this year/12 X % interest rate Line 2 = the amount of investment income received during the year (usually the amount incorporated in Patents) Watch out for additional investment income received directly into bank account if there is a bank reconciliation adjustment Line 3 = Line 1 minus Line 2 (this is the amount of investment income still owed to us and is therefore a Current Asset in the Balance Sheet) Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 24. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 25. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 26. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 27.  Usually involves disposal of delivery van; purchase of new delivery van with a trade-in allowance on the old van along with the cheque payment for the new van being treated as a purchase for resale as opposed to a purchase of a fixed asset Following T accounts required: Delivery Vans Depreciation of Delivery Vans Disposal of Delivery Vans Purchases Account Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 28.  Provide for depreciation on vans at the annual rate of 12½% of cost from the date of purchase to the date of sale. NOTE: On 31/03/2009 a van, which cost €24,000 on 30/09/2006, was traded in against a new van which cost €48,000. An allowance of €12,000 was given on the old van. The cheque for the net amount of this transaction was incorrectly treated as a purchase of trading stock. This was the only entry made in the books in respect of this transaction. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 29. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 30. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 31. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 32. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 33. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 34. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 35. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 36. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 37. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 38. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 39. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 40. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 41. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 42. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 43.  Usually included in something in the trial balance for which we will have to do an account Usually have two errors to sort out, with one of them generally to do with a wrong figure being used for payment of mortgage/debenture interest in the trial balance Always sort provision of mortgage/debenture interest here also Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 44.  The suspense arises as a result of the incorrect figure for mortgage interest (although the correct entry had been made in the bank account) and from €1,000 paid towards PAYE and PRSI entered only in the bank account. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 45. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 46. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 47. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 48. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 49. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 50.  „Incorporation/included in‟ rule: Option A: same side we would have added so now we subtract Option B: opposite side we would have subtracted so now we add Salaries & General Expenses is on left(debit) side; suspense original balance figure is on left (debit) side so they are on same sides so its Option A Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 51. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 52. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 53.  Now we need to adjust the accounts that we sorted in the middle column of the three column system by entering them into those T accounts on the same side as they are on in the middle column. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 54. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 55. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 56. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 57.  Similar to investment income we need to complete Line 1, 2 & 3 Line 1 = the mortgage X number of months that we have the mortgage for this year/12 X % interest rate(needs to be calculated in two parts if part of the mortgage was received during the year) Line 2 = the correct amount of interest paid during the year(having sorted suspense) Line 3 = Line 1 minus Line 2 (this is the amount of mortgage interest still owed by us and is therefore a Current Liability in the Balance Sheet) Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 58. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 59. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 60. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 61. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 62. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 63.  Usually involves working out depreciation charge for the year and revaluing at the end of the year. Accounts required: Buildings Account Depreciation of Buildings Account Revaluation Reserve Account Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 64.  Provide for depreciation on buildings at a rate of 3% of cost per annum. It was decided to revalue the buildings at €850,000 on 31/12/2009. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 65. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 66. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 67. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 68. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 69.  Revaluation part involves two things: In Buildings Account let the revalued figure equal to your closing balance at the end of the year as Balance B/d on the debit side and bring it back up to the credit side (remind them of DR Assets CR Liabilities with Bal B/d) In the Depreciation of Buildings Account get rid of all depreciation up to the date of revaluation meaning there will be no closing balance in this account if the revaluation is at the end of the year as it is in 2010 question Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 70. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 71. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 72. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 73. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 74. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 75. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 76.  Usually a figure in the trial balance, let this = “the old” figure Usually asks in the adjustments to adjust provision for bad debts to a certain % of debtors, let this adjusted figure =“the new” figure(make sure to check all other adjustments so that the debtors figure that you are getting a % of has taken all adjustments into account) Let the difference between both = “the change” Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 77.  Rules for dealing with Provision for bad debts “The old” goes nowhere “The change” goes into the Trading & Profit & Loss Account, if it goes up it goes down under “Less expenses” as an expense and if it goes down it goes up under “gross profit” as a gain (now dealt with as an add-on to operating income after expenses and before arriving at operating profit) Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 78.  “The new” goes into the Balance Sheet as a minus figure subtracted from Debtors under Current Assets Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 79. Provision for bad debts to be adjusted to 3% ofdebtors.Relevant figures from trial balance:Debtors € 76,500Provision for Bad Debts € 3,900 Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 80. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 81. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 82. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 83. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 84.  Usually asked in Company Final Accounts question but can potentially be asked in Sole Trader/Manufacturing Account also Trial balance bank figure forms opening balance in your own cash book Bank statement figure (given in the adjustment) forms opening balance in the bank reconciliation statement Explain that it‟s a miniature version of what they did at Junior Cert level but you also have to adjust the individual accounts that are affected Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 85. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 86. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 87. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 88. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 89. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 90. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 91. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 92. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 93. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 94. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 95.  Not relevant for Sole Trader Usually worth 12 marks in Company Final Accounts and potentially also in Manufacturing Account but easy mistakes made calculating figures Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 96.  Always work out the interim preference dividend first, the remainder of interim dividends is then equal to interim ordinary dividends Work out the remaining number of months for the final preference dividend The final ordinary dividend depends on the wording of the adjustment, in 2007 the interim ordinary dividend will reduce the amount of the final ordinary dividend but potentially the final ordinary dividend may not be affected by the interim ordinary dividend. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 97.  (a) The Preference dividend due be paid (b) A final dividend on ordinary shares be provided bringing the total dividend up to 11 cent per share Relevant figures from the trial balance: 600,000 10% Authorised Preference Shares at €1 each Issued Ordinary Shares €800,000 Issued Preference Shares €400,000 Interim dividends for 1st 6 months € 48,000 Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 98. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 99.  (a) The Preference dividend due be paid (b) A final dividend on ordinary shares be provided bringing the total dividend up to 11 cent per share Relevant figures from the trial balance: 600,000 10% Authorised Preference Shares at €1 each Issued Ordinary Shares €800,000 Issued Preference Shares €400,000 Interim dividends for 1st 6 months € 48,000 Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 100. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 101. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 102.  All four calculated figures go into “less appropriations” being: Interim preference dividend Interim ordinary dividend Final preference dividend Final ordinary dividend Only the two final dividends go into the Balance Sheet under Current Liabilities Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 103. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 104. Alan Ryan BComm, GDE(Bus), HDEA, MEd
  • 105.  alanryandungarvan@hotmail.com Alan Ryan BComm, GDE(Bus), HDEA, MEd