Tuesday, August 20, 2019
Introductory accounting and finance :: essays research papers fc
Contents Page Page 3 ~      Section A – Trading, Profit and loss account Page 4 ~      Section B – Balance Sheet Page 5 ~      Section C Page 6 ~      Section D Page 7 ~      Section E Page 8 ~      Section F Page 9 ~      Section G Page 10 ~      Section H Page 11 ~ Bibliography      Trading, Profit & Loss account          for Mr. Stanley relating to trading during                                     £Ã‚      £Ã‚      £Ã‚               Sales               125000               Less Cost of Sales                              Opening Stock     10430                         Add Purchases     67634                              78064                         Less returns outward     48     78016                    Add Carriage Inward          2120                              80136                    Less Closing Stock          11250     68886               GROSS PROFIT               56114                                             Less Expenses                              Salaries     28400                         Postage & Stationary     98                         Rent & Rates (2900-860)     2040                         Packaging     3217                         Bad debt     126                         Provision for Bad Debt     60                         Insurance     1220                         Electricity (953+263)     1216                         Depreciation (3000 + 1680)     4680     41057                    Carriage Outward          2850     43907               NET PROFIT               12207                                                                           This is a balance sheet for Mr. Stanley as at 31st December 2002.       £Ã‚      £Ã‚      £Ã‚     Fixed Assets                    Fixtures & Fittings (15,000 + 8,400)               23,400     Less Depreciation (3,000 + 1,680)               4,680                    18,720     Current Assets                    Stock           11,250          Debtors     3,200               Less Prov.for bad debt     150     3,050                              Bank     590               Add Prepayments     860     1,450          Cash          165                    15,915          Less Current Liabilities                    Creditors          6,765          Accruals          263          Working Capital          7,028     8,887                    27,607                         Financed By                    Capital               25,000     Add Net Profit               12,027                         Less Drawings               9,600                    27,607                                             C. Give an explanation of the accounting treatment for invoices that have been unpaid and unrecorded at the date of the preparation of the final accounts. This is known as an accrual of expenses, an accrual occurs when expenses that have occurred during an accounting period are not included in the trial balance, they are unpaid and unrecorded. When this occurs the accounting treatment in the profit and loss account would be to add the outstanding amount to the expense in question showing the full amount of expense used up in that accounting period. In the balance sheet however an accrual is classed as a current liability. This is because the firm owes the outstanding amount and is expected to pay this debt in the short term. The outstanding amount will therefore appear under current liabilities in the Balance Sheet under the heading ACCRUALS. The reasons for making these adjustments is to ensure that the profit and loss account records the cost that has been incurred for that particular accounting period instead of simply the amount that has been paid. An example of an accrual ~ during the accounting period of January 1st 2002 and December 31st 2002 a phone bill is incurred for the months June to September however it goes unpaid and is not incorporated into the telephone account. This means that adjustments have to be made so that it can be included in the final accounts for that accounting period. D. Mr. Stanley had paid a proportion of the rates for the following accounting period. Explain how this impacted on the preparation of the accounts for the current accounting period. A prepayment is when an amount is paid in advance of the accounting period in which it is actually due.
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