tag:blogger.com,1999:blog-66026027230133807042024-03-05T06:01:21.637-08:00Accounting trouble shooter for the AAT StudentMikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-6602602723013380704.post-77612841595738046512018-10-19T08:17:00.002-07:002018-10-19T08:17:59.309-07:00Accruals and prepayments revisited<iframe allowfullscreen="" frameborder="0" height="500px" marginheight="0" marginwidth="0" max-width="100%" mozallowfullscreen="" msallowfullscreen="" sandbox="allow-forms allow-modals allow-orientation-lock allow-popups allow-same-origin allow-scripts" scrolling="no" src="https://sway.office.com/s/ONUt2JFH8LmWddFm/embed" style="border: none; max-height: 100vh; max-width: 100%;" webkitallowfullscreen="" width="760px"></iframe>Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-71039781062225408382016-02-20T15:57:00.002-08:002018-11-11T12:29:14.108-08:00Incomplete records - the net assets approach<div class="separator" style="clear: both; text-align: center;">
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<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><b>Incomplete records - the net assets approach</b></span><br />
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<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Another area of incomplete records that students struggle with is solving incomplete records questions which require you to adopt the net assets approach.</span><br />
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><br />Essentially, this approach relies on your knowledge (and understanding) of the Accounting Equation:</span><br />
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<span style="background-color: white; font-family: "century gothic" , sans-serif; font-size: 11pt;"><b><span style="color: purple;">Assets - Liabilities = Capital</span></b></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><b><span style="color: blue;">Let's look at a scenario:</span></b></span><br />
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px;">Jayne has asked you to find the following figures:</span></div>
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capital (at the beginning of the financial year)<o:p></o:p></span></div>
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book summary for the year<o:p></o:p></span></div>
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for the year<o:p></o:p></span></div>
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for the year<o:p></o:p></span></div>
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for the year and a year end statement of financial position</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 12pt; line-height: 115%; text-indent: -18pt;">Let's look at each one in turn:</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 12pt; line-height: 115%; text-indent: -18pt;"><span style="color: blue;"><b>Opening capital. </b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 12pt; line-height: 115%; text-indent: -18pt;">Using the accounting equation we can quickly work out the capital at the start of the year:</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 12pt; line-height: 115%; text-indent: -18pt;"><b><span style="color: blue;"> Cash book summary for the year</span></b> (from the bank summary):</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 12pt; line-height: 115%; text-indent: -18pt;">All we need to do here is take the information in the bank summary and transfer it to the Cash book (Bank t-account). You will see that the balancing figure is the balance c/d at the end of the year:</span></div>
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<span style="color: blue; font-family: "century gothic" , sans-serif;"><span style="line-height: 18.4px;"><b>Sales and Purchases for the year:</b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="line-height: 18.4px;">Here we just reconstruct the Sales Ledger Control Account (SLCA) and the Purchases Ledger Control Account (PLCA) from the information provided using the control account method (see my blog post on this subject). While we're at it, we may as well work out the Administration expenses for the year:</span></span></div>
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<span style="color: blue; font-family: "century gothic" , sans-serif;"><span style="line-height: 18.4px;"><b>Profit</b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="line-height: 18.4px;">Now we can turn to the final figure needed - the profit for the year. Taking all the figures we've established, we can no draw up a statement of profit or loss for Jayne Perry for the year ended 31 December 2012:</span></span></div>
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<span style="font-family: "century gothic" , sans-serif;">Sales
revenue<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">119000<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">Cost of
sales<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">Opening
inventory<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">25600<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">Purchases<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">77800<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">Closing
inventory<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">-29800<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;">73600<o:p></o:p></span></div>
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<b><span style="color: red; font-family: "century gothic" , sans-serif;">Gross profit<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 88.45pt;" valign="bottom" width="118"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.4pt;" valign="bottom" width="131"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;">45400<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 152.95pt;" valign="bottom" width="204"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 88.45pt;" valign="bottom" width="118"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.4pt;" valign="bottom" width="131"></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 152.95pt;" valign="bottom" width="204"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;">Admin
expenses<o:p></o:p></span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 88.45pt;" valign="bottom" width="118"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;">30700<o:p></o:p></span></div>
</td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.4pt;" valign="bottom" width="131"></td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 152.95pt;" valign="bottom" width="204"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 88.45pt;" valign="bottom" width="118"></td>
<td nowrap="" style="height: 15.0pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.4pt;" valign="bottom" width="131"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;">-30700<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.75pt; mso-yfti-irow: 11; mso-yfti-lastrow: yes;">
<td nowrap="" style="height: 15.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 152.95pt;" valign="bottom" width="204"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;">Net profit<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="height: 15.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 88.45pt;" valign="bottom" width="118"></td>
<td nowrap="" style="border-bottom: double windowtext 2.25pt; border-left: none; border-right: none; border-top: solid windowtext 1.0pt; height: 15.75pt; mso-border-bottom-alt: double windowtext 2.25pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 98.4pt;" valign="bottom" width="131"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;">14700<o:p></o:p></span></b></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 12pt; line-height: 115%; text-indent: -18pt;"><br /></span></div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><br /></span>
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Finally, we can draw up a statement of financial position for Jayne Perry as at 31 December 2012:</span><br />
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><br /></span>
<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgl-xwUYcrhMuSByppVcphmCTjznKT0F1QJ799Iwgx4BPRs3_YzYCeEjNRFTYNwZ7zjdrdNkum4Edza1nqb2IAqdjqvShf6U-0P5VZu1hIA6lB-f11BNL5FIlQm75WZrTPj0JRrT6mKDO3d/s1600/Jayne+Perry+3.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgl-xwUYcrhMuSByppVcphmCTjznKT0F1QJ799Iwgx4BPRs3_YzYCeEjNRFTYNwZ7zjdrdNkum4Edza1nqb2IAqdjqvShf6U-0P5VZu1hIA6lB-f11BNL5FIlQm75WZrTPj0JRrT6mKDO3d/s1600/Jayne+Perry+3.JPG" /></a></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px;"><br /></span></div>
<div class="separator" style="clear: both; text-align: left;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;">As with the control account method from my earlier blog post, all we've done is taken what we already know and use that knowledge to solve a riddle. Incomplete records is basically a jigsaw puzzle - requiring us to fit together all the pieces we have been given then, using our best judgement and knowledge, drawing in the missing parts of the picture to help us see the whole picture in all its balancing glory.</span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;">Don't fear these questions - take a methodical approach:</span></span></div>
<div class="separator" style="clear: both; text-align: left;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
<div class="separator" style="clear: both; text-align: left;">
</div>
<ul>
<li><span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px;">What did we start with?</span></li>
<li><span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px;">What has happened during the year?</span></li>
<li><span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px;">What information have we gleaned to be able to establish the end of year picture?</span></li>
</ul>
<br />
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;">Happy days!</span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><br /></span>Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com1tag:blogger.com,1999:blog-6602602723013380704.post-47751188937254711272016-02-20T12:45:00.006-08:002018-11-11T12:27:36.236-08:00Incomplete records - the control account method<div class="MsoNormal">
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><b>Incomplete Records</b><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">One area students seem to have
difficulty with is Incomplete Records.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">What you need to remember that, for
this part of your assessment, all you're doing is taking what you should already
know and putting it to use.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">For example, you may be given a
scenario like this:<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<b><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Ammar</span></b><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">
operates an incomplete system of accounting records for his business, from
which the following information is available.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><br /></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVgmEHDYMEws1o0s5DcSRpi2QKG-yQmEbB_R6-qsBK_C2E6N1_p5iN0DQcMHRS8FHibQbnziHN0UkO3k1s9_EHitPKviJQXFrTX3Bn2UU0hzvtGctYmBquzDxd7P4X4uxuw2ZdoB9jUfoK/s1600/Ammar+1.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVgmEHDYMEws1o0s5DcSRpi2QKG-yQmEbB_R6-qsBK_C2E6N1_p5iN0DQcMHRS8FHibQbnziHN0UkO3k1s9_EHitPKviJQXFrTX3Bn2UU0hzvtGctYmBquzDxd7P4X4uxuw2ZdoB9jUfoK/s400/Ammar+1.JPG" width="400" /></a></div>
<div class="MsoNormal">
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><br /></span></div>
<div class="MsoNormal">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 480;"><tbody>
<tr><td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 213.05pt;" valign="top" width="284"><br /></td><td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 213.05pt;" valign="top" width="284"><div align="right" class="MsoNormal" style="text-align: right;">
<u><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"> </span></u><u><span style="font-family: "century gothic" , sans-serif;"><o:p></o:p></span></u></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxG4OTjJyb1-pm_oNKxSGDr2jbHr6L45mrUpGws0K0FijGawZ7yfI4A6PgNTM_3t2dv7CA2j0vPqZO4atxakh8yk8jmf6Da1AmYk_A4c99C9L-okW-DbtkvguxLBqVhM7C82srenT3o0F5/s1600/Ammar+2.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxG4OTjJyb1-pm_oNKxSGDr2jbHr6L45mrUpGws0K0FijGawZ7yfI4A6PgNTM_3t2dv7CA2j0vPqZO4atxakh8yk8jmf6Da1AmYk_A4c99C9L-okW-DbtkvguxLBqVhM7C82srenT3o0F5/s400/Ammar+2.JPG" width="400" /></a></div>
<br />
<h4>
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"> </span></h4>
<h4>
<u><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Day-book summaries for the year<o:p></o:p></span></u></h4>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" valign="top" width="154"><div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">Net £<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">VAT £<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">Total £<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" valign="top" width="154"><div class="MsoNormal">
<b><span style="font-family: "century gothic" , sans-serif;">Sales<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">125,000<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">25,000<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">150,000<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" valign="top" width="154"><div class="MsoNormal">
<b><span style="font-family: "century gothic" , sans-serif;">Purchases<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">60,000<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">12,000<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154"><div align="right" class="MsoNormal" style="text-align: right;">
<b><span style="font-family: "century gothic" , sans-serif;">72,000<o:p></o:p></span></b></div>
</td>
</tr>
</tbody></table>
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><u><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">General
expenses<o:p></o:p></span></u></b></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 154.0pt;" valign="top" width="205"><div align="right" class="MsoNormal" style="text-align: right;">
<b><u><span style="font-family: "century gothic" , sans-serif;">Net<o:p></o:p></span></u></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 154.05pt;" valign="top" width="205"><div align="right" class="MsoNormal" style="text-align: right;">
<b><u><span style="font-family: "century gothic" , sans-serif;">VAT<o:p></o:p></span></u></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 154.05pt;" valign="top" width="205"><div align="right" class="MsoNormal" style="text-align: right;">
<b><u><span style="font-family: "century gothic" , sans-serif;">Total<o:p></o:p></span></u></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 154.0pt;" valign="top" width="205"><div align="right" class="MsoNormal" style="text-align: right;">
<b><u><span style="font-family: "century gothic" , sans-serif;">3,917<o:p></o:p></span></u></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 154.05pt;" valign="top" width="205"><div align="right" class="MsoNormal" style="text-align: right;">
<b><u><span style="font-family: "century gothic" , sans-serif;">783<o:p></o:p></span></u></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 154.05pt;" valign="top" width="205"><div align="right" class="MsoNormal" style="text-align: right;">
<b><u><span style="font-family: "century gothic" , sans-serif;">4,700<o:p></o:p></span></u></b></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<h4>
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"> </span><span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">Required</span></h4>
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<!--[if !supportLists]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">(a)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><!--[endif]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"> Prepare the sales ledger control account for
the year ended 31 October 20X2 and calculate the discounts allowed<o:p></o:p></span></div>
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<br /></div>
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<!--[if !supportLists]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><!--[endif]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Prepare
the rent account showing the rent for the year ended 31 October 20X2. Included
in the rent paid during the year is £1,500 for the quarter ending 31 December
20X2.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">(c)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><!--[endif]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Prepare
the VAT account showing the closing balance.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">(d)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><!--[endif]--><span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Prepare
the payroll account showing the payroll expenses for the year. <o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><b>Solution:</b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;">The way to tackle this type of task is to take each element of the task in turn. Don't try to rush in and try to solve the whole thing - you'll end up in an awful mess!</span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;">It's also good practice to tick off items as you use them - so, for example, if you were to take the bank opening balance to adjust it, you would tick of the Bank figure at the start of the period. This means that, when you come to drawing up the final accounts, you don't reuse something you've already used.</span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><b>So, let's get started.</b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="color: blue;"><b><span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">(<i>a)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></i></span><span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><i> Prepare the sales ledger control account (SLCA) for the year ended 31 October 20X2 and calculate the discounts allowed.</i></span></b></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"> What you need to think of is 'where would I find information for this account?'</span><span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">As I said before, you're not doing anything new, you're just taking something you already know to solve the problem. So, here we're asked to prepare the SLCA and calculate the discounts allowed. </span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">What does the information does the SLCA normally contain? Well, hopefully, your work at level 2 and in Accounts Preparation will help you here:</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKtBYzOFefEDPBBMsAFVtZeNdOLGrPjUt9fnMWj2aLH2IGvbsvGrB1LEIdJBlLhuChRs2wfSeKZyksCLPAbAilhyphenhyphenqW7MG3M-lfBZtXaYS4JRzKkrPVOok78rKm3XJbq770R8_aHyf1AHUM/s1600/SLCA.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="144" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKtBYzOFefEDPBBMsAFVtZeNdOLGrPjUt9fnMWj2aLH2IGvbsvGrB1LEIdJBlLhuChRs2wfSeKZyksCLPAbAilhyphenhyphenqW7MG3M-lfBZtXaYS4JRzKkrPVOok78rKm3XJbq770R8_aHyf1AHUM/s320/SLCA.JPG" width="320" /></a></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">So, can we find any information to help us? Where would you look?</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -18pt;">Balance b/d - you could find this on last year's financial statements (specifically the Trade receivables figure on the Statement of financial position)</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px; text-indent: -18pt;">Sales per sales day book - Sales Day Book</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px; text-indent: -18pt;">Dishonoured cheques - notified by your bank</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px; text-indent: -18pt;">Returns per returns day book - Sales Returns Day Book</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px; text-indent: -18pt;">Cash from debtors - Cash book (receipts)</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px; text-indent: -18pt;">Discounts allowed - Cash book (receipts)</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px; text-indent: -18pt;">Bad debts written off - Journals</span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 14.6667px; text-indent: -18pt;">Contra - Journals</span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;">So, let's see if we can out together the SLCA for Ammar:</span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
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<b><span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">Sales
Ledger Control Account<o:p></o:p></span></span></b></div>
</td>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Balance b/d </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from balances as at 31 October 20X1)<o:p></o:p></b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>10,500<o:p></o:p></b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Bank </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from Bank summary)<o:p></o:p></b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>142,800<o:p></o:p></b></span></span></div>
</td>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Sales </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(Gross figure from Sales day book)<o:p></o:p></b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>150,000<o:p></o:p></b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Balance c/d </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from balances as at 31 October 20X2)<o:p></o:p></b></span></span></div>
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<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>12,900</b><o:p></o:p></span></span></div>
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<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">Discounts allowed<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">(This is the balancing figure)</span></span></b></div>
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<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">4,800<o:p></o:p></span></span></b></div>
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</tr>
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<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>160,500<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><b><span style="font-size: x-small;">160,500</span><o:p></o:p></b></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;">Now we've done that, let's look at the next part:</span></span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: 14.6667px;"><br /></span></span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<i><span style="color: blue;"><b><span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">(b)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">Prepare the rent account showing the rent for the year ended 31 October 20X2. Included in the rent paid during the year is £1,500 for the quarter ending 31 December 20X2.</span></b></span></i></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">Again, you need to think, 'where can I find information about this account?'</span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">Tasks like this often include prepayments and accruals so the opening and closing balances can provide information on Balances b/d & c/d.</span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">The bank summary, bank statement or cash book can be used to find out what happened during the year (see my blog entry on accruals and prepayments.</span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;">Again, let's have a look at the solution:</span></div>
<div class="MsoNormal" style="margin-left: 36.0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt;"><br /></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="4" style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "century gothic" , sans-serif;">Rent<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Prepayment b/d </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from information given)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>750<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: #0070c0; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">Prepayment c/d<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: #0070c0; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">(This will be a current asset on this year's statement of financial position</span></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: #0070c0; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">1,000<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Bank </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from Bank summary)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>6,250<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red; font-family: "century gothic" , sans-serif; font-size: x-small;"><b>Transferred to Statement of profit or loss (SPL)</b></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">6,000<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>7,000<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>7,000</b><o:p></o:p></span></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
</tbody></table>
<br />
<div>
<br /></div>
<div>
<i><span style="color: blue;"><b><span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;">(c)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;">Prepare the VAT account showing the closing balance.</span></b></span></i></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;"><br /></span></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;">As before, you need to think about what goes where in the VAT account. Remember, VAT always travels with the goods so, if your purchases figure is a debit then your VAT on Purchases must be a debit also. Also remember to use the bank as your anchor - payments made to HMRC are Credit Bank, Debit VAT.</span></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;"><br /></span></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;">Again, let's look at the completed VAT account:</span></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;"><br /></span></div>
<div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="4" style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">VAT
Control<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Bank </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from the Bank summary)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>11,025<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b><span style="color: blue;">b/d (remember VAT payable is a liability so must be credit balance b/d)</span><o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>2,200<o:p></o:p></b></span></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>General
Expenses (from the information in the table below the day books)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>783<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Sales </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from the day books)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>25,000<o:p></o:p></b></span></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Purchases </b></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>(from the day books)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>12,000<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">Balance c/d (appears as a current liability on the statement of financial position at the end of the year)<o:p></o:p></span></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">3,392<o:p></o:p></span></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>27,200<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>27,200</b></span><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
</div>
<div>
<br /></div>
<div>
<b><i><span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;"><span style="color: blue;">(d)<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal;"> </span></span></span><span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;"><span style="color: blue;">Prepare the payroll account showing the payroll expenses for the year.</span></span></i></b></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;"><br /></span></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;">This element of the task is another accruals task:</span></div>
<div>
<span style="font-family: "century gothic" , sans-serif; font-size: 11pt; text-indent: -24px;"><br /></span></div>
<div>
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<tbody>
<tr>
<td colspan="4" style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "century gothic" , sans-serif;">Payroll<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Bank (from the bank summary)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>22,000<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Accrual b/d (from the list of opening balances)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>200<o:p></o:p></b></span></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>Accrual c/d (from the list of closing balances and will show as a current liability in the Statement of financial position at the end of the year)<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>320<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">SPL<o:p></o:p></span></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: red; font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;">22,120<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>22,320<o:p></o:p></b></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: "century gothic" , sans-serif;"><span style="font-size: x-small;"><b>22,320</b><o:p></o:p></span></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.7pt;" valign="top" width="150"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
</tbody></table>
</div>
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<br /></div>
<div>
<div class="MsoNormal">
<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">Hopefully, you can now see that just
taking what you know, you can pull together the information you’ve been given
to help you find missing figures. This part of the Level 3 Final Accounts for
Sole Trader and Partnerships assessment is not as hard as you think – it’s more
a case of taking time to think about where to find information.<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;">I hope this blog entry has been useful
for you.<o:p></o:p></span></div>
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<span style="font-family: "century gothic" , sans-serif; font-size: 11.0pt;"><br /></span></div>
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Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com3tag:blogger.com,1999:blog-6602602723013380704.post-90223239496898400312015-11-08T08:44:00.002-08:002015-11-08T08:44:44.221-08:00General things - particularly RTFQ!<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Observations<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">As a tutor, I see many problems caused by students not
reading the full question (or, as I like to call it RTFQ!)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Reading the assessment performance feedback documents
published by AAT, it is clearly evident that it’s not just my students who fail
to ‘RTFQ’. Missing out key information or, worse still, seeing what you think
is there and not what is actually there, can cause you to under-perform on tasks
so, where you normally meet or exceed expectations, you move into the
borderline or below requirements grade criteria.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">If I could provide one cure-all antidote shot, it would be
‘inject’ every one of my students with the RTFQ serum so they never, ever fail
to RTFQ again. Sadly, I can’t ‘magic’ this so I have to hope my students
remember to take a couple of extra seconds to RTFQ every time. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">I know what you’re thinking, it’s easy for me to say all of
this, and in the heat of battle when you’re in the middle of your assessment,
nervous and a little upset that things aren’t going quite as planned RTFQ
really is the last thing on your mind but please, take a breath, look
up/around/away from the screen for a couple of seconds then refocus on that
pesky task. You’ll be surprised what this can do for you. Also, if you’re
really struggling with a task (e.g. Statement of financial position – SFP -
isn’t balancing), flag the task, move on and come back to it – often this will
‘fix’ the problem as you’ve got a fresh pair of eyes again. Also remember that,
in the event of your SFP not balancing, you will get credit for things you have
got right – just because you’ve not balanced is not the end of the world - use any workings boxes provided..<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Another issue I find a regular problem is that students
sometimes forget that units are linked. What do I mean? Level 2 financial
accounting units (PBKT & CJBS) link with Level 3 units (ACPR and FSTP)
which, in turn link to Level 4 units (FSTM, CSHM and CRDC). I often find
students starting Level 4 Financial Statements have forgotten how to deal with
an accrual or prepayment. This type of problem is particularly evident at the
beginning of the year when we’re starting the new level. Students have had a
summer break and it seems the sun, sea and Sangria have melted away their
ability to carry our end of year adjustments. Similarly, BSCT, CSTR, BDGT &
FPFM are linked. Once you’ve passed your assessment, that is not then end of it
– you need to move up to the next level – You don’t stand on the bottom of a
staircase and magically find yourself at the top, do you? (Not unless you’ve
got a Stannah Stairlift of course). Think of each unit as a step up to the next
level/course/qualification.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">I also see many posts from distance learners asking for the
best order to study units. Whilst I would always recommend asking your training
provider in the first instance, here’s my thoughts:<o:p></o:p></span></div>
<div class="MsoNormal">
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<tbody>
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<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 70.65pt;" valign="top" width="94">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" valign="top" width="142">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Financial Accounting<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" valign="top" width="170">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Management Accounting<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 146.25pt;" valign="top" width="195">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">‘Other stuff’<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 70.65pt;" valign="top" width="94">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Level 2<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" valign="top" width="142">
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">1.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->PBKT<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">2.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->CJBS<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" valign="top" width="170">
<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">3.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->BCST<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 146.25pt;" valign="top" width="195">
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">4.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->CPAG<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">5.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->WKAF<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 70.65pt;" valign="top" width="94">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Level 3<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" valign="top" width="142">
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">1.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->ACPR<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">2.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->FSTP<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" valign="top" width="170">
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">3.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->CSTR<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 146.25pt;" valign="top" width="195">
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">4.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->SDST<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">5.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->ITAX<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">6.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->PETH<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 70.65pt;" valign="top" width="94">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Level 4<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" valign="top" width="142">
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">3.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->FSTM<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" valign="top" width="170">
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">1.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->BDGT<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">2.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->FPFM<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 146.25pt;" valign="top" width="195">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Options<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">4.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->1<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">5.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->2<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Then:<o:p></o:p></span></div>
<div class="MsoListParagraph" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">6.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->ISYS<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Looking at <b>level 2</b>
– my reasoning for having CPAG at no 4 is to give you time to learn what is
going on with the debits and credits in PBKT & CJBS and gain a good
understanding of what the computerised accounting system is actually doing for
you. Basic Costing is at no 3 purely to give a little ‘light relief’ after the
first two units. WKAF is left to last as it may draw on some knowledge gained
from the other units.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Level 3<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Getting the financial accounting units out of the way early
is good - your knowledge from Level 2 is a little fresher in your mind. It’s
amazing how many students I see forgetting what one should enter into the
Sales/Purchase Ledger Control Accounts and, more importantly, on which side of
the T-account you would find such entries.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">SDST is left to no 4 as you’re often asked to work out profit
– well if you’ve not learned how to calculate profit manually in ACPR and FSTP,
how can you possibly expect to know how to tell a spreadsheet to do it?<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ITAX can, actually, be done at any time – maybe even as no
1. You learn how to construct the VAT control account here – some of which may
be useful in FSTP.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">PETH is left to last because it’s horrible and needs focus. <o:p></o:p></span></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Level 4<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Getting the management accounting units done first is good
because they follow on from CSTR at level 3. BDGT is quite a straight-forward
unit but FPFM is a lot heavier but follows on well from BDGT. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">FTSM is a good one to do next, that way your financial
accounting knowledge may still be fresh (ish).<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Your options should be done next – I always CRDC and CSHM
for those in industry and PTAX and BTAX for those in practice. EXTA could be
useful for anyone.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ISYS should always be your very last unit as it draws upon
knowledge you’ve gained from every single unit at all three levels.
Traditionally, students find this unit quite difficult because it’s all words –
accountants like numbers and balances.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Think of it this way, 45 words a day will give you your
5,000 words report within 4 months – surely even the most challenged student
can find 45 words to write every day? Also think of this, how sad would it be
if you didn’t achieve your goal because you procrastinated? I’ve seen too many
go that way – please don’t be one of them.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">These are just a couple of things I wanted to say - feel free to ignore them if you don't agree but, whatever you do, don't give up half way through a unit. Persevere - it will be worth it!</span></div>
<br />
<div class="MsoNormal">
<br /></div>
Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-48367760629257647212015-10-17T07:06:00.000-07:002015-10-17T07:14:11.415-07:00Disposal of non-current assets<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Disposal of non-current assets</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Well Howdy!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">It's been a while since I 'blogged' but, like Freddie Kruger, I'm back!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">I though in this article, I would briefly look at Disposal of non-current assets and the T-accounting needed to calculate profit.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Have a look at the Slideshow below then we'll work through an example:</span><br />
<br />
<br />
<iframe allowfullscreen="true" frameborder="0" height="389" mozallowfullscreen="true" src="https://docs.google.com/presentation/d/13-9Poef_Fo9UtBzDlcQcXgY3yc89teny-R5Jsi-a3yc/embed?start=false&loop=false&delayms=3000" webkitallowfullscreen="true" width="480"></iframe>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">So, Let's say we have a car we paid £25,000 for and over the past couple of years, we've accumulated £12,000 of depreciation against it. Today we're going to sell it for £9,000. Have we made a profit?</span><br />
<br />
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse; mso-yfti-tbllook: 1056; width: 864px;">
<colgroup><col style="mso-width-source: userset; width: 58pt;" width="77"></col>
<col style="mso-width-source: userset; width: 255pt;" width="340"></col>
<col style="mso-width-source: userset; width: 139pt;" width="185"></col>
<col style="mso-width-source: userset; width: 197pt;" width="262"></col>
</colgroup><tbody>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT'; font-weight: bold;">Step</span></div>
</td>
<td class="oa2" colspan="3" style="width: 590pt;" width="787"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
</div>
</td>
</tr>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">1</span></div>
</td>
<td class="oa2" colspan="3" style="width: 590pt;" width="787"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Open a Disposals T-account</span></div>
</td>
</tr>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">2</span></div>
</td>
<td class="oa2" style="width: 255pt;" width="340"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Dispose of asset</span></div>
</td>
<td class="oa2" style="width: 139pt;" width="185"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Debit Disposals £25,000</span></div>
</td>
<td class="oa2" style="width: 197pt;" width="262"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Credit Asset £25000</span></div>
</td>
</tr>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">3</span></div>
</td>
<td class="oa2" style="width: 255pt;" width="340"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Transfer accumulated depreciation to
Disposals account</span></div>
</td>
<td class="oa2" style="width: 139pt;" width="185"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Debit Disposals £12,000</span></div>
</td>
<td class="oa2" style="width: 197pt;" width="262"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Credit Accumulated</span><span style="font-family: 'Tw Cen MT'; vertical-align: baseline;">
depreciation £12,000</span></div>
</td>
</tr>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">4</span></div>
</td>
<td class="oa2" style="width: 255pt;" width="340"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Record sale proceeds (if any)</span></div>
</td>
<td class="oa2" style="width: 139pt;" width="185"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Debit Bank £9,000</span></div>
</td>
<td class="oa2" style="width: 197pt;" width="262"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Credit Disposals £9,000</span></div>
</td>
</tr>
</tbody></table>
<br />
The Disposals T-account will look like this:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9p3rJsjT0I5kZbjZTneh6ADaZKw_8utKOE9oak5v8Xa5Yp4rDLqCQlbAjb6-GQmL9YUEyADdrhTX75JcGZSUGl3f9YfYCxGtNG0tlErkjvu8I8k7bSfKm66dJ3pUFnFEQNBMLKVxI673h/s1600/Disposal.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="177" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9p3rJsjT0I5kZbjZTneh6ADaZKw_8utKOE9oak5v8Xa5Yp4rDLqCQlbAjb6-GQmL9YUEyADdrhTX75JcGZSUGl3f9YfYCxGtNG0tlErkjvu8I8k7bSfKm66dJ3pUFnFEQNBMLKVxI673h/s640/Disposal.jpg" width="640" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">We can follow a similar process for Part-exchange.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Let's use similar figures to the last example but, instead of selling the car, we use it a part payment for a new vehicle. </span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both; text-align: left;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">We were given a part exchange allowance of £11,000 against the purchase of a new car which cost £30,000.</span></div>
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<br /></div>
<table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse; mso-yfti-tbllook: 1056; width: 864px;">
<colgroup><col style="mso-width-source: userset; width: 58pt;" width="77"></col>
<col style="mso-width-source: userset; width: 226pt;" width="301"></col>
<col style="mso-width-source: userset; width: 168pt;" width="224"></col>
<col style="mso-width-source: userset; width: 197pt;" width="262"></col>
</colgroup><tbody>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT'; font-weight: bold;">Step</span></div>
</td>
<td class="oa2" colspan="3" style="width: 590pt;" width="787"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
</div>
</td>
</tr>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">1</span></div>
</td>
<td class="oa2" colspan="3" style="width: 590pt;" width="787"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Open a Disposals T-account</span></div>
</td>
</tr>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">2</span></div>
</td>
<td class="oa2" style="width: 226pt;" width="301"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Dispose of asset</span></div>
</td>
<td class="oa2" style="width: 168pt;" width="224"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Debit Disposals £25,000</span></div>
</td>
<td class="oa2" style="width: 197pt;" width="262"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Credit Asset £25,000</span></div>
</td>
</tr>
<tr height="39" style="height: 29.2pt; mso-height-source: userset;">
<td class="oa1" height="39" style="height: 29.2pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">3</span></div>
</td>
<td class="oa2" style="width: 226pt;" width="301"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Transfer accumulated depreciation to
Disposals account</span></div>
</td>
<td class="oa2" style="width: 168pt;" width="224"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Debit Disposals £12,000</span></div>
</td>
<td class="oa2" style="width: 197pt;" width="262"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Credit Accumulated</span><span style="font-family: 'Tw Cen MT'; vertical-align: baseline;">
depreciation £12,000</span></div>
</td>
</tr>
<tr height="96" style="height: 72.0pt; mso-height-source: userset;">
<td class="oa1" height="144" rowspan="2" style="height: 108.0pt; width: 58pt;" width="77"><div style="direction: ltr; language: en-GB; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: center; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">4</span></div>
</td>
<td class="oa2" rowspan="2" style="width: 226pt;" width="301"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Record Part exchange</span></div>
</td>
<td class="oa2" style="width: 168pt;" width="224"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Debit Asset with part exchange
allowance £11,000</span></div>
</td>
<td class="oa2" style="width: 197pt;" width="262"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Credit Disposals with part exchange</span><span style="font-family: 'Tw Cen MT'; vertical-align: baseline;">
allowance £11,000</span></div>
</td>
</tr>
<tr height="48" style="height: 36.0pt; mso-height-source: userset;">
<td class="oa2" height="48" style="height: 36.0pt; width: 168pt;" width="224"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Debit Asset with amount paid</span></div>
<div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">£19,000</span></div>
</td>
<td class="oa2" style="width: 197pt;" width="262"><div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">Credit Bank/Loan with amount</span><span style="font-family: 'Tw Cen MT'; vertical-align: baseline;">
</span><span style="font-family: 'Tw Cen MT';">paid</span></div>
<div style="direction: ltr; margin-bottom: 0pt; margin-left: 0in; margin-top: 0pt; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Tw Cen MT';">£19,000</span></div>
</td>
</tr>
</tbody></table>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The T-account for Disposals look like this:</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgWh0L1EG80RZQf5iJxqywGNb8NJFIh4xFLNu0VGtH3p4yiAzYOIM-JgUYB_oBu0o4nYfV9ImsJtmK3W8gdxyZZo24ioM2iyFgAvsrvVahQb0_EpyLA5NEpUqKNIYXrRZZa67p82GN7d32-/s1600/Part+ex.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"></span></a></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTa86a8UIbEI4aK6vOBIyLbypzu5Bik8_MMwaSUdowFHOV3qLsX5Y41zqUttCR4tYe-rrxzFlk42pryloFj0FReMbhzYXbHl3U2TpT5FOBR_D6uoz1uuL7zI-dOnNDyeDN7sRUqiNga7DN/s1600/Part+ex.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTa86a8UIbEI4aK6vOBIyLbypzu5Bik8_MMwaSUdowFHOV3qLsX5Y41zqUttCR4tYe-rrxzFlk42pryloFj0FReMbhzYXbHl3U2TpT5FOBR_D6uoz1uuL7zI-dOnNDyeDN7sRUqiNga7DN/s640/Part+ex.jpg" width="640" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Remember, when balancing off the T-account, if the debits outweigh the credits, you have a loss on disposal, whilst credits exceeding debits mean you have a profit on disposal.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">I some tasks, you may have to calculate the accumulated depreciation - remember to RTFQ (Read The Full Question). as it's so common for students to miss key information.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both; text-align: left;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">I hope this little article helps.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Until next time</span></div>
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<br /></div>
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<br />Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-66590004959289684952015-06-06T08:15:00.000-07:002015-06-06T08:15:19.510-07:00Correcting errors<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 16.0pt; line-height: 115%; mso-bidi-font-family: Arial;"><span style="font-family: Arial, Helvetica, sans-serif;">Errors and how to correct them<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">Despite our
attempts to maintain double entry and make sure that we do not make errors,
sometimes mistakes cannot be avoided. Therefore, we need strategies to correct
mistakes.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">We can separate
errors into two types:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo1; text-indent: -18.0pt;">
</div>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -18pt;">·</span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 7pt; font-stretch: normal; text-indent: -18pt;">
</span><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -18pt;">Errors revealed
by an imbalance in the trial balance</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -18pt;">·</span><span style="font-family: Arial, Helvetica, sans-serif; font-size: 7pt; font-stretch: normal; text-indent: -18pt;">
</span><span style="font-family: Arial, Helvetica, sans-serif; text-indent: -18pt;">Errors
not revealed by the trial balance</span></li>
</ul>
<!--[if !supportLists]--><br />
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">We shall deal with
each type in turn:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="5" style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 462.1pt;" valign="top" width="616">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Errors revealed by an imbalance in the trial balance<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.55pt;" valign="top" width="130">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Type of error<o:p></o:p></span></b></div>
</td>
<td colspan="2" style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 133.45pt;" valign="top" width="178">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Description<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Example<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.55pt;" valign="top" width="130">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">One-sided entry<o:p></o:p></span></div>
</td>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 133.45pt;" valign="top" width="178">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Only one side of the double
entry has been made in the ledger accounts e.g. the debit and not the credit<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Make the missing entry and
post the other side to the suspense account<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;"><i>Erro</i>r<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">£10 cash purchase only
credited to cash<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Purchases £10<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £10<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.55pt;" valign="top" width="130">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Entry duplicated on one
side, nothing on the other<o:p></o:p></span></div>
</td>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 133.45pt;" valign="top" width="178">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Instead of posting a
transaction as a debit in one account and a credit in another, both accounts
are posted with debit entries, or both with credit entries. One account is
correct but the other is out of balance by twice the amount of the posting<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Post the account that was
posted on the wrong side with twice the amount, and post the other side to
suspense<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">£10 cash purchase credited
to both cash and purchases<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Purchases £10<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £20<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.55pt;" valign="top" width="130">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Unequal entries normally
caused by a transposition error<o:p></o:p></span></div>
</td>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 133.45pt;" valign="top" width="178">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">The correct amount is
entered on one side, but there is an error in the writing in the other side
of the entry. Often this is caused by a transposition error in the incorrect
entry, where the digits in a number are transposed. If this is the only error
in the accounts then the difference between the debits and credits will be
divisible by 9<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">In the account with the
wrong posting, post an amount to bring the entry to the right amount, and
post the other side to the suspense<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">£10 cash purchase debited to
purchases as £100 (correct credit to cash)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Suspense £90<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Purchases £90<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.55pt;" valign="top" width="130">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Account balance incorrectly
transferred to the trial balance<o:p></o:p></span></div>
</td>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 133.45pt;" valign="top" width="178">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">This may be because of a
calculation error when calculating the balance on a ledger account, or it may
be that a balance which has been calculated correctly in the ledger is
entered incorrectly to the trial balance<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">In the account with the
wrong balance, post an amount to bring the balance to the right amount, and
post the other side to suspense<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">£1,000 debit balance on
purchases account written into trial balance as a£100 debit balance<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Purchases £900<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £900<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.55pt;" valign="top" width="130">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Balance omission<o:p></o:p></span></div>
</td>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 133.45pt;" valign="top" width="178">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">A balance on a general
ledger account is omitted from the trial balance completely<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Enter the missing balance on
the correct side and enter the suspense account with the same amount on the
other side<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">£1,000 debit balance on
purchases account omitted<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Purchases on Trial
Balance £1,000<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense on Trial Balance
£1,000<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 97.55pt;" valign="top" width="130">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td colspan="2" style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 133.45pt;" valign="top" width="178">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td colspan="4" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 346.55pt;" valign="top" width="462">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Errors not revealed by the trial balance<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.65pt;" valign="top" width="140">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Type of error<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 126.35pt;" valign="top" width="168">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Description<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Example<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.65pt;" valign="top" width="140">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Error of principle<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 126.35pt;" valign="top" width="168">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">The double entry is
arithmetically correct but the wrong type of account has been used (e.g. non-current
asset debited with expenses)<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Remove the incorrect entry
and post it to the correct account<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Motor expenses of £100 have
been debited to the motor vehicles cost account<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Motor expenses £100<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Motor vehicles cost £100<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.65pt;" valign="top" width="140">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Error of original entry<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 126.35pt;" valign="top" width="168">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Both the debit and credit
entries have been made using the wrong amount because:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The
transaction was recorded in the book of prime entry at the incorrect amount,
or<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0.0001pt 18pt; text-indent: -18pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The
wrong figure was picked up from the primary record (e.g. a transposition was
made), this figure was used to write up the book of prime entry and so to
make both the debit and the credit entry<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 0.0001pt 18pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">In both accounts, post an
amount to bring the entry to the right amount<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Motor expenses of £100 have
been recorded as £10 in the purchases day book<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Motor expenses £90<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr PLCA £90<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.65pt;" valign="top" width="140">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Error of omission<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 126.35pt;" valign="top" width="168">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">A transaction has been
completely omitted from the ledger accounts<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Make the appropriate posting<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cash purchases of £10 have
not been corrected<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Purchases £10<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Cash £10<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.65pt;" valign="top" width="140">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Reversal of entries<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 126.35pt;" valign="top" width="168">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">The correct figure has been
used and a debit and a credit entry made but the debit and the credit are on
the wrong side of the respective accounts<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Remove the incorrect entries
and make the correct ones by posting the accounts correctly but with double
the amount<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cash purchases of £10 have
been debited to cash and credited to purchases<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Purchases £20<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Cash £20<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.65pt;" valign="top" width="140">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Error of commission<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 126.35pt;" valign="top" width="168">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">The double entry is
arithmetically correct but the wrong account of the same type has been used
(e.g. a phone expense is debited to the electricity account rather than the
telephone account <o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Remove the incorrect entry
and post it to the correct account<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" valign="top" width="154">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Error<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Motor expenses of £100 have
been debited to the office expenses account<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Correction<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Dr Motor expenses £100<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Cr Office expenses £100<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<!--[if !supportMisalignedColumns]-->
<tr height="0">
<td style="border: none;" width="130"></td>
<td style="border: none;" width="9"></td>
<td style="border: none;" width="168"></td>
<td style="border: none;" width="154"></td>
<td style="border: none;" width="154"></td>
</tr>
<!--[endif]-->
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><u><span style="font-family: Arial, Helvetica, sans-serif;">What does this mean for the trial
balance?<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;">Before we
can proceed to find the error(s), we should now create a Suspense account to
hold the error until such time as we are able to clear it.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.75pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td colspan="2" style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 102.3pt;" width="136">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">Trial Balance<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td colspan="2" style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.35pt;" width="138">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">Suspense Account<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.75pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Total Debits<o:p></o:p></span></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.2pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, Helvetica, sans-serif;">190,467<o:p></o:p></span></div>
</td>
<td style="border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Total Credits<o:p></o:p></span></div>
</td>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, Helvetica, sans-serif;">191,996<o:p></o:p></span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Trial Balance<o:p></o:p></span></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.6pt;" width="70">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, Helvetica, sans-serif;">1,529<o:p></o:p></span></div>
</td>
<td style="border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.75pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;">Suspense account<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; mso-border-right-alt: solid black .5pt; mso-border-right-themecolor: text1; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.2pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, Helvetica, sans-serif;">1,529<o:p></o:p></span></div>
</td>
<td style="border: none; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-alt: solid black .5pt; mso-border-right-themecolor: text1; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.6pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.75pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; mso-border-right-alt: solid black .5pt; mso-border-right-themecolor: text1; mso-border-right-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.2pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, Helvetica, sans-serif;">191,996<o:p></o:p></span></div>
</td>
<td style="border: none; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid black 1.0pt; border: none; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-bottom-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-family: Arial, Helvetica, sans-serif;">191,996<o:p></o:p></span></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid black 1.0pt; border: none; mso-border-right-alt: solid black .5pt; mso-border-right-themecolor: text1; mso-border-right-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.6pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.75pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.2pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border: none; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border: none; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" width="68">
<div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 51.1pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 52.6pt;" valign="top" width="70">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.75pt;" valign="top" width="68">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;">If we draw
up a trial balance and it does not balance we have to have a procedure to find
errors:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">1)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Check your totalling of both columns (debit and
credit) – it is very easy to enter the wrong number on your calculator<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">2)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Calculate the difference between the two
columns. This may reveal the error straight away. Divide the difference by 9,
if it works out to a whole number, your error could be in a transposition of
figures.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">3)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Check that each account balance has been brought
into the trial balance correctly.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">4)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Ensure all balances from the
main/nominal/general ledger have been brought into the trial balance and that
the cash and bank balances are on the correct side of the trial balance.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">5)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Check your balancing of each T-account.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">6)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Look in each t-account for an amount that is the
same as the difference you are looking for.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">7)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Look in the ledger accounts for a figure that is
exactly half of the difference in the trial balance. If you find one, check
that the double entry has been carried out correctly for this transaction.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l0 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">8)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->If all else fails, check that all of your double
entry has been carried out correctly.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<b><u><span style="font-family: Arial, Helvetica, sans-serif;">Clearing the Suspense Account<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;">Using the
example from earlier, we will now proceed to clear the suspense account.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMEjp-SgK1kpDiuSlXodTqIinqVdOCIcNshMnrtiUpG6uSd1grQh3VxF3L4esBKSU94Gu0_aN3522idQ1TkVrf0FP4cpMpWXrdXPZ2xuzk75IPUJFBAI1xs5MpnU7LEd4INuxASvh4wvUF/s1600/Suspense+1.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="153" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMEjp-SgK1kpDiuSlXodTqIinqVdOCIcNshMnrtiUpG6uSd1grQh3VxF3L4esBKSU94Gu0_aN3522idQ1TkVrf0FP4cpMpWXrdXPZ2xuzk75IPUJFBAI1xs5MpnU7LEd4INuxASvh4wvUF/s640/Suspense+1.JPG" width="640" /></a></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;">After
finding that the trial balance did not balance and having created a suspense
account to hold the difference, we have now found the following errors:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">a)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Payments for motor expenses of £350 were
correctly recorded in the cash payments book, but credited to the motor
expenses account.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">b)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Payment for postage of £67 was correctly
recorded in the cash payments book but entered into the postage account as £76.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">c)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->An invoice (including VAT) for £470 was omitted
from the sales day book.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">d)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->When the discounts allowed account was balanced
the balance was undercast by £100.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">e)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Cleaning costs of £240 were included in the cash
payments book, but were not posted to the cleaning costs account.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">f)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The balance from the miscellaneous expenses
account of £498 was omitted from the trial balance.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">Solution<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;">We have our
Suspense account in place, so now we can deal with each error in turn:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l4 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><i>a)<span style="font-size: 7pt; font-stretch: normal; font-style: normal;"> </span></i><!--[endif]--><i>Double entry that has taken place<o:p></o:p></i></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Bank £350<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr
Motor Expenses £350<o:p></o:p></span></i></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">To correct
this we have to reverse the error, and then make the correct entry:<o:p></o:p></span></i></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<br /></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Dr Motor Expenses £700 (2 x £350)<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-indent: 36.0pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £700<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l4 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><i>b)<span style="font-size: 7pt; font-stretch: normal; font-style: normal;"> </span></i><!--[endif]--><i>Error is £9 (£9 too much in the postages
account) so we have to reduce the postages account by £9:<o:p></o:p></i></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Dr Suspense £9<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-indent: 36.0pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Postage £9<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l4 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><i>c)<span style="font-size: 7pt; font-stretch: normal; font-style: normal;"> </span></i><!--[endif]--><i>This error has no impact on the trial
balance but we must still record the sale:<o:p></o:p></i></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Dr SLCA £470<o:p></o:p></span></i></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Sales £400<o:p></o:p></span></i></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr VAT £70<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraph" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l4 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><i>d)<span style="font-size: 7pt; font-stretch: normal; font-style: normal;"> </span></i><!--[endif]--><i>Undercast means that we have calculated a
balance that is too small.<o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Dr Discounts Allowed £100<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £100<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l4 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><i>e)<span style="font-size: 7pt; font-stretch: normal; font-style: normal;"> </span></i><!--[endif]--><i>The cleaning costs have not been recorde3d
in the cleaning expenses account, so we must now record them.<o:p></o:p></i></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Dr Cleaning Costs £240<o:p></o:p></span></i></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £240<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto; mso-list: l4 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><i>f)<span style="font-size: 7pt; font-stretch: normal; font-style: normal;"> </span></i><!--[endif]--><i>The £498 balance from the Miscellaneous
Expenses account was omitted from the trial balance so we must now include it a
sit should have been originally:<o:p></o:p></i></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Dr Miscellaneous Expenses £498<o:p></o:p></span></i></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; mso-add-space: auto;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £498<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;">Our Suspense
T-account should now be completed to ensure that it has been cleared (i.e.
there is no remaining balance left on the account):<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_LLsPY_LlqRABkL4f-2i7cmkkBmrgwgyHKqkfBCKA853hMAJFfDcOtx24CCIg69JoJv95nQS950q6l1C9rrVYhfb6JXiMUqHbJVWDnxV1_agEqXPYeTo5NFKD6cN-NmMIYMh2bekRTsar/s1600/Suspense+2.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="310" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_LLsPY_LlqRABkL4f-2i7cmkkBmrgwgyHKqkfBCKA853hMAJFfDcOtx24CCIg69JoJv95nQS950q6l1C9rrVYhfb6JXiMUqHbJVWDnxV1_agEqXPYeTo5NFKD6cN-NmMIYMh2bekRTsar/s640/Suspense+2.JPG" width="640" /></a></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;">Sometimes we
may be unsure where to post an amount so we can create the Suspense Account to
hold the amount until we establish where we should be posting it.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">E.g. a
purchase of a special part for a machine valued at £700, paid by cheque.<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;"> <i>Dr Suspense £700<o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">(Because
we do not know whether to debit the machine account [Asset] or maintenance
account [expense])<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr
Bank £700<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Arial, Helvetica, sans-serif;"> <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Later,
we find that we should have posted the debit entry to the machinery maintenance
account so:<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 36.0pt; margin-right: 0cm; margin-top: 0cm;">
<i><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-indent: 36.0pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Dr Machinery Maintenance £700<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; text-indent: 36.0pt;">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Cr Suspense £700<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<br />
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Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-13619165424948794422015-04-25T11:29:00.000-07:002016-02-20T11:45:29.246-08:00Accruals and prepayments<div class="MsoNormal">
<b>Accruals and
prepayments – the bane of an AAT student’s Level 3 life!.<o:p></o:p></b></div>
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<b><br /></b></div>
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In this post, I’m going to try and explain accruals and
prepayments in a way that will (hopefully) help you to understand them.<o:p></o:p></div>
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Before we even try to tackle a prepayment or accrual, it’s
important to remind ourselves about the effect of a transaction on a t-account:<o:p></o:p></div>
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<b>Prepayment of expenses<o:p></o:p></b></div>
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<b><br /></b></div>
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Imagine you have a 13 litre bucket full of water (Bucket 0X1)
and an empty 13 litre bucket (Bucket 20X2) (stay with me here). <o:p></o:p></div>
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<b>20X1<o:p></o:p></b></div>
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<b>20X2<o:p></o:p></b></div>
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<o:p> </o:p> </div>
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You move 1 litre water from bucket 20X1 to Bucket 20X2. You
now have one bucket with 12 litres in (20X1) and one with 1 litre (20X2).<o:p></o:p></div>
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<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b>20X1<o:p></o:p></b></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b>20X2<o:p></o:p></b></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-top: none; border: solid windowtext 1.0pt; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now, instead of buckets and water, we have expense accounts
and amounts – can you see where I’m going with this? The water represents
monetary amounts – the buckets represent accounts. Here, we’re saying that £1
is being moved from 20X1 to 20X2 as it ‘belongs there’ as the expense relates
to an expense that will be incurred during 20X2 (e.g. advance payment of rent).
We’ll take £1 from 20X1 and move it to 20X2 by using double entry bookkeeping
so that we correctly show the amount of expenditure that applies to 20X1 and
the £1 is already registering as a prepaid expense (albeit prepaid) in 20X2.
The balancing figure for this t-account of £12 is the expense for the year.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Expense
Account<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">31/12/20X1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 102.1pt;" valign="top" width="136"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Bank<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.15pt;" valign="top" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">13<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">31/12/20X1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Prepayment c/d<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 102.1pt;" valign="top" width="136"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.15pt;" valign="top" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">31/12/20X1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Statement of profit or loss (SPL)<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">12<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 102.1pt;" valign="top" width="136"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.15pt;" valign="top" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">13<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">13<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The prepayment is held in a prepayment account until the start
of the new year when we transfer it to the expense account for 20X2:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Prepayment<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">31/12/20X1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Prepaid expense b/d<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">1/1/20X2<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Expense<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Expense
Account<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">1/1/20X2<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Prepayment<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
This £1 will be included in 20X2’s expenses plus any further
expense incurred during the year.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Let’s now look at accrued expenses (accruals)</div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNormal">
Again, we use the bucket analogy:<o:p></o:p></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="background: white; border-top: none; border: solid windowtext 1.0pt; mso-background-themecolor: background1; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: white; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: background1; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: yellow; border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
1 litre belongs in 20X1<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b>20X1<o:p></o:p></b></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b>20X2<o:p></o:p></b></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-top: none; border: solid windowtext 1.0pt; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Here we’ll top up 20X1’s bucket with the yellow 1 litre:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="background: yellow; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: white; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: background1; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: white; border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: background1; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b>20X1<o:p></o:p></b></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b>20X2<o:p></o:p></b></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-right: solid windowtext 1.0pt; border: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="background: #BDD6EE; border-top: none; border: solid windowtext 1.0pt; mso-background-themecolor: accent1; mso-background-themetint: 102; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="background: #9CC2E5; border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-background-themecolor: accent1; mso-background-themetint: 153; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now we can see that 20X1 is full and that 20X2 has reduced
in volume by 1 litre.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Again, we can take this analogy and turn it into an accounting
question:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Expense
Account<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">31/12/20X1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 102.1pt;" valign="top" width="136"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Bank<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.15pt;" valign="top" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">12<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">31/12/20X1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">SPL<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">13<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">31/12/20X1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 102.1pt;" valign="top" width="136"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Accrued expense c/d<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.15pt;" valign="top" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 102.1pt;" valign="top" width="136"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 48.15pt;" valign="top" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">13<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">13<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
As with prepayments, the accrual is reversed at the start of
the new year:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;"> Accrued expense<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">1/1/20X2<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Expense<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">1/1/20X2<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Accrued expense b/d<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Expense
Account<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">1/1/20X2<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="color: red;">Accrued expense<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="color: red;">1<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.1pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 116.3pt;" valign="top" width="155"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 33.95pt;" valign="top" width="45"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 75.15pt;" valign="top" width="100"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.5pt;" valign="top" width="138"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 46.8pt;" width="62"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
It’s common to have to deal with accruals as you will
receive invoices relating to events, purchases and services used after the year
end. You will allocate part of the invoice to the previous year (20X1) with the
remainder relating to the current year 20X2.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Prepaid and accrued Income can be dealt with in a very similar
manner – making sure that you remember that incomes naturally exist on the
credit side of the t-account so, to increase the value of the t-account (an
accrued expense) you credit it and debit the accrued income and to decrease the
income account (prepaid income) you debit the income account and credit the
prepaid income account.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>IMPORTANT<o:p></o:p></b></div>
<div class="MsoNormal">
<b><br /></b></div>
<div class="MsoNormal">
You need to understand that the accruals and prepayments are
carried between years (as we saw above) via the statement of financial position
(or as old people call it – the balance sheet).<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Prepaid expenses<o:p></o:p></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.05pt;" valign="top" width="73"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Debit<o:p></o:p></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 245.5pt;" valign="top" width="327"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Current asset (as we’re owed the money as we paid upfront and so
could ask for a refund)<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Accrued expenses<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.05pt;" valign="top" width="73"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Credit<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 245.5pt;" valign="top" width="327"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Current liability (a s we owe the amount at year end – we’re liable
to pay it)<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Prepaid income <o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.05pt;" valign="top" width="73"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Credit<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 245.5pt;" valign="top" width="327"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Current liability (we could be asked to repay the customer if we fail
to deliver)<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Accrued income<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 55.05pt;" valign="top" width="73"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Debit<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 245.5pt;" valign="top" width="327"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Current asset<o:p></o:p></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In my experience, the thing people have most difficulty with
is deciding what part of the expense/income relates to the year we’re dealing
with and what part relates to next year/last year. Obviously, we’re likely to
encounter situations when the expense or income relates to parts of two accounting
periods.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The best way to deal with these is to use a timeline approach.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Example<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
You have been working on a business’ accounts for the year
ended 31 December 2013. You may ignore VAT for this task.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
You have the following information:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: 5.4pt; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 234.0pt;" valign="top" width="312"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b>Balances at:<o:p></o:p></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 84.95pt;" valign="top" width="113"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b>1 January 2013<o:p></o:p></b></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 234.0pt;" valign="top" width="312"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Accrual for rent paid<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 84.95pt;" valign="top" width="113"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
£800<o:p></o:p></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 234.0pt;" valign="top" width="312"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
Prepayment for motor expenses<o:p></o:p></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 84.95pt;" valign="top" width="113"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
£600<o:p></o:p></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The bank summary for the year shows payments for rent of
£11,250. Included in this figure is £1,800 for the quarter ended 28 February
2014<o:p></o:p></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->a)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->You are to
write up the Rent paid account for the year ended 31 December 2013 and close it
off by showing the transfer to the statement of profit or loss. (You do not
need to show dates)<o:p></o:p></div>
<div class="MsoListParagraphCxSpMiddle">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: 36.0pt; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 13.45pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td colspan="4" style="border-bottom: solid windowtext 1.0pt; border: none; height: 13.45pt; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 415.3pt;" valign="top" width="554"><div class="MsoListParagraphCxSpLast" style="margin-left: 0cm; mso-add-space: auto;">
<b>Rent
paid<o:p></o:p></b></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.6pt;" width="138"><div class="MsoListParagraphCxSpFirst" style="margin-left: 0cm; mso-add-space: auto;">
<b><span style="color: red; mso-ansi-language: EN-GB;">Bank<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<b><span style="color: red; mso-ansi-language: EN-GB;">11,250<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.1pt;" width="137"><div class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto;">
<b><span style="color: red; mso-ansi-language: EN-GB;">Accrual b/d<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpLast" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<b><span style="color: red; mso-ansi-language: EN-GB;">800<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.6pt;" width="138"><div class="MsoListParagraphCxSpFirst" style="margin-left: 0cm; mso-add-space: auto;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.1pt;" width="137"><div class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto;">
<b><span style="color: red; mso-ansi-language: EN-GB;">SPL<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpLast" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<b><span style="color: red; mso-ansi-language: EN-GB;">9,250<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 3;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.6pt;" width="138"><div class="MsoListParagraphCxSpFirst" style="margin-left: 0cm; mso-add-space: auto;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.1pt;" width="137"><div class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto;">
<b><span style="color: red; mso-ansi-language: EN-GB;">Prepayment c/d<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpLast" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<b><span style="color: red; mso-ansi-language: EN-GB;">1,200<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 4; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.6pt;" width="138"><div class="MsoListParagraphCxSpFirst" style="margin-left: 0cm; mso-add-space: auto;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<b><span style="color: red; mso-ansi-language: EN-GB;">11,250<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 103.1pt;" width="137"><div class="MsoListParagraphCxSpMiddle" style="margin-left: 0cm; mso-add-space: auto;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 104.3pt;" width="139"><div align="center" class="MsoListParagraphCxSpLast" style="margin-left: 0cm; mso-add-space: auto; text-align: center;">
<b><span style="color: red; mso-ansi-language: EN-GB;">11,250<o:p></o:p></span></b></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: 18.0pt;">
The bank summary for the year
shows payments for motor expenses of £15,700. In January 2014, £250 was paid
for administration expenses incurred in December 2013.<o:p></o:p></div>
<div class="MsoNormal" style="margin-left: 18.0pt;">
<br /></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]-->b)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->You are to
prepare the administration expenses account for the year ended December and
close it off by showing the transfer to the income statement. <b>Include dates.</b><o:p></o:p></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<b><br /></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 478.8pt;" valign="top" width="638"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b>Motor expenses<o:p></o:p></b></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">1/1/13<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Prepayment b/d<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: red;">600<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">31/12/13<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">SPL<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: red;">16,550<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">31/12/13<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Bank<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: red;">15,700<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 3;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">31/12/13<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="color: red;">Accrual c/d<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: red;">250<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 4;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: red;">16,550<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" width="106"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: red;">16,550<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 5; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 79.8pt;" valign="top" width="106"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
So, let’s see how we can solve this question with a time
line approach.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In part (a) we’re told that some of the expense we’ve paid
during the year (£1,800) relates to the quarter ended 28<sup>th</sup> February
2014. <o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A ‘quarter’ is 3 months so, we can now assign a monthly
figure for this expense (we assume that expenses/incomes occur evenly over
time):<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
£1,800 ÷ 3 = £60 per month.<o:p></o:p></div>
<div class="MsoNormal">
Our year end is 31 December 2013.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Now, let’s put all of this onto a timeline:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="3" style="border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 1.0pt; border-top: none; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 450.8pt;" valign="top" width="601"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #0070c0;">£1,800 for the period 1 December 2013 – 28 February
2014<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-bottom: none; border-left: solid windowtext 1.0pt; border-right: solid windowtext 4.5pt; border-top: none; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext 4.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #0070c0;">£600<o:p></o:p></span></b></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext 4.5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #0070c0;">£600<o:p></o:p></span></b></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #0070c0;">£600<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-bottom: solid windowtext 1.0pt; border-left: solid windowtext 1.0pt; border-right: solid windowtext 4.5pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext 4.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-bottom: solid windowtext 1.0pt; border-left: solid windowtext 1.0pt; border-right: solid windowtext 4.5pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext 4.5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #0070c0;">December 2013<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #0070c0;">January 2014<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #0070c0;">February 2014<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-right: solid windowtext 4.5pt; border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: #0070c0;">Year end<o:p></o:p></span></b></div>
</td>
<td style="border: none; mso-border-left-alt: solid windowtext 4.5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
</tbody></table>
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
<div class="MsoNormal">
Using this approach makes it much easier to see that only
part of the £1,800 ‘belongs’ on 2013, with the remainder belonging in 2014.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
We must also ensure that we’re very clear on when this
expense was actually paid - here we’re told that it’s included in the expenses account
at the end of 2013 and so it must be a prepayment. So, we have £1,200 prepaid
and can now carry out the t-accounting: Debit Prepayment, Credit Expense<o:p></o:p></div>
<div class="MsoNormal">
Part (b) – here we can adopt a similar procedure:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
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</v:shape><![endif]--><!--[if !vml]--><span style="height: 12px; left: 0px; margin-left: 154px; margin-top: 1px; mso-ignore: vglayout; position: absolute; width: 80px; z-index: 251659264;"><img height="12" src="file:///C:/Users/Michael/AppData/Local/Temp/msohtmlclip1/01/clip_image003.png" v:shapes="Straight_x0020_Arrow_x0020_Connector_x0020_2" width="80" /></span><!--[endif]--><b><span style="color: #385723; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #385723; mso-style-textfill-fill-colortransforms: lumm=50000; mso-style-textfill-fill-themecolor: accent6; mso-themecolor: accent6; mso-themeshade: 128;">Belongs here<o:p></o:p></span></b></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext 4.5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #385723; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #385723; mso-style-textfill-fill-colortransforms: lumm=50000; mso-style-textfill-fill-themecolor: accent6; mso-themecolor: accent6; mso-themeshade: 128;">£250 (paid here)<o:p></o:p></span></b></div>
</td>
<td style="border-right: solid windowtext 1.0pt; border: none; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-bottom: solid windowtext 1.0pt; border-left: solid windowtext 1.0pt; border-right: solid windowtext 4.5pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext 4.5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-bottom: solid windowtext 1.0pt; border-left: solid windowtext 1.0pt; border-right: solid windowtext 4.5pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext 4.5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #385723; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #385723; mso-style-textfill-fill-colortransforms: lumm=50000; mso-style-textfill-fill-themecolor: accent6; mso-themecolor: accent6; mso-themeshade: 128;">December 2013<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-left-alt: solid windowtext 4.5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #385723; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #385723; mso-style-textfill-fill-colortransforms: lumm=50000; mso-style-textfill-fill-themecolor: accent6; mso-themecolor: accent6; mso-themeshade: 128;">January 2014<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="color: #385723; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #385723; mso-style-textfill-fill-colortransforms: lumm=50000; mso-style-textfill-fill-themecolor: accent6; mso-themecolor: accent6; mso-themeshade: 128;">February 2014<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="border-right: solid windowtext 4.5pt; border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="color: #385723; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #385723; mso-style-textfill-fill-colortransforms: lumm=50000; mso-style-textfill-fill-themecolor: accent6; mso-themecolor: accent6; mso-themeshade: 128;">Year end<o:p></o:p></span></b></div>
</td>
<td style="border: none; mso-border-left-alt: solid windowtext 4.5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.25pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="border: none; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 150.3pt;" valign="top" width="200"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Again, the expense must be moved – but this time, backwards
into 2013. As we’ve not yet paid it, it must be an accrual so we can now Debit
Expense (2013) £250 and Credit Accrued expense £250. <o:p></o:p></div>
<div class="MsoNormal">
It’s common to see a similar situation as with part (a)
where an accrual relates to two financial years – adopting the timeline approach
will help you tackle the question confidently.<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
In summary, then, we need a standard approach to any
accrual/prepayment question so, why not try this:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 18.0pt; mso-add-space: auto; mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US">1)<span style="font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]--><span lang="EN-US">Establish the position at the
start of the financial reporting period (i.e. the beginning of the year we’re
dealing with)<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US">2)<span style="font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]--><span lang="EN-US">Identify the bank transactions
for each income or expense.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US">3)<span style="font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]--><span lang="EN-US">Establish the position at the end
of the reporting period – do we have any prepayments or accruals of expenses of
incomes. <o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US">4)<span style="font-size: 7pt; font-stretch: normal;">
</span></span><!--[endif]--><span lang="EN-US">Balance off the t-account to calculate
the expense/income figure for the reporting period you’re dealing with (The SPL
figure).<o:p></o:p></span></div>
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<br /></div>
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Hopefully, these rambling will help you get to grips with
accruals and prepayments – please leave a comment if you find any errors or would
like to request a subject for a Level 3 blog post.<o:p></o:p></div>
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<b>Good luck</b><o:p></o:p></div>
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Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com6tag:blogger.com,1999:blog-6602602723013380704.post-44567191313361100702015-04-06T16:40:00.000-07:002015-04-06T16:43:26.749-07:00FSTP (Preparing final accounts for sole traders and partnerships) - Assessment tips<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">FSTP (Preparing final accounts for sole traders and partnerships)</span><br />
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">FSTP - the second financial accounting unit at Level 3 - often appears to be quite a straightforward and small unit at first glance. Indeed, I often see people saying that the books are small compared to ACPR. Don't be fooled by the short books! This unit holds a lot of nasty twists if you're not <i>fully</i> confident/competent with material covered in ACPR and, more importantly, Level 2 financial accounting units PBKT & CJBS.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Let's take a look at the assessment task by task and try to identify common errors.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Incomplete records</span><br />
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 1 is all about incomplete records.</span><br />
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">It always pays dividends to take a little time to read and re-read the information provided for this task as, in my experience, it's very common for students to skim the written information in favour of jumping in a completing each element of the task.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">It is very common to have to complete either the Sales ledger control account (SLCA) or Purchase ledger control account (PLCA) and, to be honest, given the typical information you're provided, I would expect any Level 2 student to be able to competently draw up the SLCA or PLCA. Between Level 2 and Level 3, nothing changes with regards to the items one would expect to find in these accounts. It's also important to remember where you get the information from (i.e. day books) as, again, this should be very familiar territory for all competent Level 2's.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Remember that gross (inclusive of VAT) figures are used to help complete the SLCA and PLCA whilst discounts allowed and received should not be forgotten. You should also remember to check any information about bad debt write offs, returned cheques and contra entries as these will all affect the closing balance *(which is sometimes the figure you're asked to find). </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Sometimes you have to find the closing balance, whilst other times you have to complete the t-account (including opening and closing balances which have been given) in order to be able to establish the missing figure (which, of course, you will be told needs to be calculated).</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Sometimes you are also asked to complete a VAT control account which, as with SLCA and PLCA, should not be to much of a problem - epsecially given that you are usually given nearly all the figures you need to complete the task. Remember input VAT (on expenses identified in the informtion, sales returns and purchases) are debits and outputs (on sales and purchase returns) - often this information will also be found in the extracts of the day books (Sales day book, Purchases day book etc). It is very common to have to calculate the payment made to HMRC (a debit in VAT account) and this should be entered as the balancing figure.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Sometimes you will have to reconstruct a bank t-account and, again, the majority of the information if already given to you - just remember that money in is a debit and money out is a credit.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 1 is not a difficult task - if you're well prepared and, of course, you take time to RTFQ (Read The Full Question)!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 2 often requires you to find a missing figure by employing the accounting equation:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Assets - Liabilities = Capital</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Make sure that you can also identify assets, liabilities and capital items (Capital, Drawings and Profit/Loss) as, without this, you will not succeed in this task.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 2 also requires you to employ the margin/mark-up techniques in order to calculate missing elements of a Trading account. See my blog entry on Mark-up and Margin for guidance on a fool-proof way to be able to answer any task thrown at you.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 2 often has a few tick box/multiple choice tasks - take care to RTFQ here too as it's very common to miss key words/phrases and, therefore, give an incorrect answer.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">For example, one practice task I've seen asks you to identify where one would find a prepayment of income in the financial statements. It's so common for students to select current asset because, of course, they know that prepayments are assets. Sadly, however, missing the key word income in prepayment of income means they get 0 marks as a prepaid income is a current liability (think about it - we may have to pay it back!)</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 3 is often very well done as students love the financial statements - just remember to check to see if you're allowed to use a minus symbol for negative figures as, of course, -£100 is very different from £100 and the computer won't know what you 'meant' when you entered your figure.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 3 also often has tasks similar to ACPR which check your general accounting knowledge so, if you had a few difficulties in ACPR with these multiple choice tasks, revise the same sort of material for this part of FSTP too.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Partnership Accounting</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Task 4 deals with partnership accounting and you're often required to complete a t-account to show the introduction and elimination of goodwill. Remember, in the Goodwill account, the goodwill is created by debiting the a/c in the old profit share ratio and elimination is achieved by crediting it in the new profit share ratio (in with the old, out with the new may help here).</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Take care to complete the correct things too - sometimes, students make all the entries one would expect to see in the capital accounts but, sadly, they make them in the goodwill account and, therefore, they are all on the wrong side of the t-account. Similarly, it's very common for students to make all the entries for an admission of a new partner but, they have actually been asked to deal with a retirement of a partner. Therefore, 4 little letters come out to play again RTFQ!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">You will also be required to complete either an appropriation account or the current accounts for a partnership. Again, please take a few minutes to RTFQ (twice even) to be sure you're fully aware what you've been asked to do - it's so common to see students making all the entries in an appropriation account in both time periods when, in fact one of the partners has not been a partner for part of the year. Partners are only entitled to salaries, interest on capital and have to pay interest on drawings only when they are actually partners. Partners do not receive salaries or interest on capital before they join the partnership and, similarly, they do not pay interest on drawings before they join Partners are also only entitled to a share of the profits earned when they were actually a partner, so, if a partner leaves six months into the year, he/she should only receive a share of the profits earned whilst he/she was a partner. (I may appear to have over-emphasised this but I know from experience how many people do forget - almost as if they're on autopilot).</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">You should also remember that you may be completing a partnership appropriation account for a year (12 months). It is so common to find students miscounting the number of months for each profit share ratio. For example, let's look at situation where the accounting year is April to March and a partner leaves at the end of October. The partner leaving has been a partner for how many months - I see some of you counting on fingers now whilst other jump straight in with 6 months. Sadly those who jump in are incorrect:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">April May June July August September October (when the partner leaves) = 7 months not 6!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Take a moment to learn to check your 'gut feeling' by counting properly!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Finally, you have to complete a statement of financial position (SFP) for a partnership - again, most students do this really well. Just take a minute to remember that you may have to take the current account calculated in part a of this task and include it in the Financed by section at the bottom of the statement - don't be tempted to use the figures included in trial balance (you're told to use the figures calculated in part a instead of the figures in the trial balance, so there really is no excuse for getting this wrong.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">One important point to remember with the SFP is the order of liquidity in the current assets. This is the order you list the current assets:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Inventory</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Trade receivables (less any allowance for doubtful debt)</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Prepayments</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Bank (not overdrafts which are current liabilities</span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">)</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Cash</span></li>
</ul>
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Similarly, there is a preferred order for current liabilities:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Trade payables</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">VAT</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Bank overdraft</span></li>
</ul>
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This is not a difficult assessment to pass just make sure that you're well prepared. Things to remember are:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">RTFQ</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Revise what goes where in SLCA/PLCA/BANK/CASH and VAT accounts</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Be happy classifying accounts as assets, liabilities, capital, expenses or incomes.</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Make sure that you can also understand the effect of a debit/credit entry on each type fo account (e.g. a credit reduces the value of an expense account).</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Partnerships - be very clear what you've been asked to do and what information is available to you. Make sure that you account the correct event (partner joining or leaving the partnership) and, of course, make sure you know when the profit share ratio changes.</span></li>
</ul>
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">You have 2 hours for this assessment but, in reality, you can be out of there much quick if you're well prepared.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Final advice comes in 4 parts:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">RTFQ</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Practice</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Practice</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Practice</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Good luck!</span><br />
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Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-35507874521353743742015-03-01T05:06:00.000-08:002015-03-01T05:08:44.032-08:00Mark-up or Margin?<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">These are often used
when dealing with missing items in the trading section of the profit and loss
account, i.e. sales, cost of sales (or elements making up that figure) and
gross profit.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: "Arial\,Bold";">Mark-up<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Mark-up is the
percentage added to the cost of a sale to calculate the selling price.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Example<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">If cost of sales is
£100 and the mark up on cost of sales is 50% then our selling price will be £100
+ 50% = £150.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Using a basic
proforma you can calculate <i>any</i>
missing item from the trading account as long as you are given your mark-up
percentage.</span><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: "Arial\,Bold";"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
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<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
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<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100 + Mark-up<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">150<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">150<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Cost
of sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Gross
profit<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Mark-up<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">50<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">50<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">By using this proforma,
you can now work out sales, cost of sales or profit if you are given the
mark-up percentage.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Example<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">You are told that
Dewi made sales totalling £125,000 with a mark-up on cost of sales of 25%.
What is the cost of sales and the gross profit?<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: -8.8pt; mso-border-alt: solid windowtext .25pt; mso-border-insideh: .25pt solid windowtext; mso-border-insidev: .25pt solid windowtext; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 671px;">
<tbody>
<tr style="height: 18.45pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" valign="top" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100 + Mark-up<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">125,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">125<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Cost
of sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Gross
profit<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Mark-up<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">25,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">25<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Margin<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Shows in percentage
terms the amount of profit generated from sales i.e. what percentage of the
sales revenue eventually ends up as gross profit.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">E.g. if sales are
£150 and the margin is 50% then the gross profit would be £150 x 50% = £75<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Using a basic
proforma you can calculate any missing item from the trading account as long as
you are given your margin percentage.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">E.g. if cost of sales
where £75,000 and there is a margin of 25% what would the<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">sales and the gross
profit be<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .25pt; mso-border-insideh: .25pt solid windowtext; mso-border-insidev: .25pt solid windowtext; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 659px;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-height-rule: exactly; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-height-rule: exactly; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Cost
of sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100 - Margin<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">75,0000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">75<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-height-rule: exactly; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Gross
profit<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Margin<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">25,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">25<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Notice the difference
in Sales value between this and the example of Dewi (above).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Example<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Siân had sales of
£200,000 with a margin of 30%. What is the cost of sales?<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .25pt; mso-border-insideh: .25pt solid windowtext; mso-border-insidev: .25pt solid windowtext; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 659px;">
<tbody>
<tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-height-rule: exactly; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">200,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-height-rule: exactly; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Cost
of sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100 - Margin<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">140,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">70<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 17.0pt; mso-height-rule: exactly; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 118.8pt;" valign="top" width="158"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Gross
profit<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 73.05pt;" valign="top" width="97"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 99.85pt;" valign="top" width="133"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Margin<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 68.1pt;" valign="top" width="91"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">60,000<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.0pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; mso-height-rule: exactly; padding: 0cm 5.4pt 0cm 5.4pt; width: 134.65pt;" valign="top" width="180"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">30<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: 'Century Gothic', sans-serif;">Hopefully this makes things a little easier to understand. You can use this 'grid' format to help answer any margin task. </span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: 'Century Gothic', sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: 'Century Gothic', sans-serif;">Remember, sometimes you will have to calculate profit or cost of sales before you can go on and calculate purchases or opening/closing inventory.</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: 'Century Gothic', sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: 'Century Gothic', sans-serif;">Example</span><br />
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: "Century Gothic"; mso-fareast-font-family: "Century Gothic";"><span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"><br /></span></span>
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: "Century Gothic"; mso-fareast-font-family: "Century Gothic";"><span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">J Jackson is a trader who marks the selling
price of his goods at 25% above cost. His books give the following information
at 31st July 20X4.</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Inventory at 1/8/X3 £4,936, Inventory at 31/7/X4
£6,310, <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Sales for the year £30,000<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<br /></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<b><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Find:
<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<br /></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">a) the cost of goods sold,<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Here the Sales figure and mark-up (25% above cost) is given so we can calculate the missing figures in the grid</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: -8.8pt; mso-border-alt: solid windowtext .25pt; mso-border-insideh: .25pt solid windowtext; mso-border-insidev: .25pt solid windowtext; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 671px;">
<tbody>
<tr style="height: 18.45pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" valign="top" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">£<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.3pt;" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100 + Mark-up<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
30,000</div>
</td><td style="border-bottom-color: windowtext; border-bottom-width: 1pt; border-right-color: windowtext; border-right-width: 1pt; border-style: none solid solid none; height: 18.45pt; padding: 0cm 5.4pt; text-align: center; width: 106.3pt;" width="142">125</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Cost
of sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">100<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
24,000</div>
</td><td style="border-bottom-color: windowtext; border-bottom-width: 1pt; border-right-color: windowtext; border-right-width: 1pt; border-style: none solid solid none; height: 18.45pt; padding: 0cm 5.4pt; text-align: center; width: 106.3pt;" width="142">100</td>
</tr>
<tr style="height: 18.45pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 122.85pt;" width="164"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Gross
profit<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 54.4pt;" width="73"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">X<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">Mark-up<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.45pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 127.6pt;" width="170"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
6,000</div>
</td><td style="border-bottom-color: windowtext; border-bottom-width: 1pt; border-right-color: windowtext; border-right-width: 1pt; border-style: none solid solid none; height: 18.45pt; padding: 0cm 5.4pt; text-align: center; width: 106.3pt;" width="142">25</td></tr>
</tbody></table>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">S0, cost of goods sold is £24,000</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">b) value of purchases during the year, and</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Here we can use an extract from the profit and loss account to help us:</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: 'Century Gothic', sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: 'Century Gothic', sans-serif;">Opening inventory £ 4,936</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Purchases £</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">less closing inventory <u>£ 6,310</u></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Cost of sales £ 24,000</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">We can work backwards here: £24,000 + £6,310 - £4,936 = £25,374</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Check</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: 'Century Gothic', sans-serif;">Opening inventory £ 4,936</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: 'Century Gothic', sans-serif;">Purchases £25,374</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: 'Century Gothic', sans-serif;">less closing inventory <u>£ 6,310</u></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: 'Century Gothic', sans-serif;">Cost of sales £ 24,000</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><o:p></o:p></span><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">c) profit made by Jackson</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">Sales - cost of sales</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;">£30,000 - £24,000 = £6,000 (Which agrees with our calculation in the grid!)</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Helvetica;"><br /></span></div>
Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-81927469019381957772015-02-15T09:47:00.002-08:002015-02-17T09:54:44.223-08:00Tips for written bits and pieces Level 4 Financial Performance<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This comes from an article published by AAT back in 2010/11. Whilst it refers to FNPF (AQ2010) and PEV (NVQ Standards), what Cliff Floyd says stands true for FPFM today,</span></b><br />
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b>
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Finding the right words for the right numbers</span></b><br />
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Correct calculation is all well and good, but correct explanation is essential. Cliff Floyd presents some ideas on how to express Financial Performance concepts This article deals with written tasks in the Financial Performance (FNPF) unit of AAT Level 4 Diploma in Accounting. The FNPF examination consists of two sections. Section 1 contains 8 tasks covering numerical and short answer</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">questions and Section 2 contains two written tasks, task 1 covering standard costing and variance analysis and task 2 covering key performance indicators and what if analysis.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Many candidates struggle to provide a competent answer to these questions and this may be due to lack of preparation as well as the nature of these tasks. The key to success on these tasks is to undertake detailed preparation to develop knowledge and understanding, and detailed practice to apply the knowledge and understanding. The prepared student is able to score high marks on these tasks and clearly demonstrate that they have studied a range of practice questions.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">TASK: Variance analysis</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The task will be based upon a brief scenario including some standard costing variances and some basic information to aid the analysis of the variances. For example, the direct material price variance may be given as £10,000 adverse and it may be stated that a high quality material was purchased. The task may require the candidate to prepare a report covering all or some of the following:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">REQUIREMENT:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of what the given variance means</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ANSWER: The adverse material price variance means that the actual price paid was more than the budgeted price (alternate terms which will receive full credit could be expected price, planned price or standard price). The important point is to explain that the actual price was greater than the original plan.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">REQUIREMENT:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Give one possible reason for each given variance</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ANSWER: the variance may have been caused by the purchase of a higher quality material which was more expensive than the standard price. This is the obvious answer but any reasonable reason will receive full marks.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">REQUIREMENT:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of any links between the variances</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ANSWER: the variance may be linked to some or all of the other variances. The higher quality material may allow for a lower quantity to be used in each product and therefore create a favourable direct material usage variance, the better quality material may have also lead to a favourable labour efficiency variance because it allowed the labour to finish the product more quickly because it was</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">easier to work on (only one link is required).</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">REQUIREMENT:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">State any action that could have been taken</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ANSWER: The answer to this will depend on the data given and other variances for example if the other variances are favourable and the net effect of purchasing the higher quality material was for a saving on usage and labour efficiency which is greater than the adverse price variance the answer may be to take no action because the overall savings are greater.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Over the past few months many candidates have scored very highly on this task on the online examination and clearly many candidates are preparing themselves for this topic. One way to help the preparation is to work through previous PEV (Unit 8) papers which similar tasks in section 1.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">TASK: Analysis of key performance indicators and what if analysis</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The task will be based upon a brief scenario including some key performance indicators and extracts from the accounts. The requirements may include some or all of the following:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of why the gross profit margins are different in each scenario by considering the key variables of sales price, volume, material, labour and overhead costs at the given variance means</span></li>
<li><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of why the gross profit is different between two scenarios</span></li>
<li><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of the net profit margin</span></li>
<li><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of the return on net assets</span></li>
<li><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">A recommendation as to which option should be taken and why</span></li>
<li><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">A recalculation of key indicators or profit based upon given information</span></li>
</ul>
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">A very common problem with this task is the confusion demonstrated by many students over the difference between the gross profit and the gross profit margin and how the variables affect one or other. It is common for a task to require the analysis of the gross profit margin by considering the variables that affect it. The following table will be used to illustrate common errors made by students.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqa8wu_a8fz86U9Blur8g3hqwTmRqckzPioJzVGTSZfOgRhiPtO8FM51TNsBcOykVgagWTSihzO4sp1u-hNj3idLHCdSMV5Zr_qMNFvHnBfhPyTqtAscNg-6Id2kx3ydzXEpegKEODAO4W/s1600/Table.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqa8wu_a8fz86U9Blur8g3hqwTmRqckzPioJzVGTSZfOgRhiPtO8FM51TNsBcOykVgagWTSihzO4sp1u-hNj3idLHCdSMV5Zr_qMNFvHnBfhPyTqtAscNg-6Id2kx3ydzXEpegKEODAO4W/s1600/Table.jpg" height="262" width="320" /></span></a></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">In order to be successful at this task, candidates need to understand the mathematics of the gross profit and gross profit margin.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">REQUIREMENT:</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of why the gross profit margin is different between S1and S2 by considering the sales price and sales volume</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ANSWER: The sales price is higher for scenario 1 which will improve the gross profit margin for S1. However, the sales volume is higher for S2, which will improve the gross profit margin for this scenario if there are fixed production costs because these costs will be spread over more units therefore increasing the gross profit per unit.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">COMMON ERRORS: Many candidates simply say something like ‘the sales price is lower for scenario 2 but the volume is higher this gives a greater margin’. This answer does not really explain the effects.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">REQUIREMENT: An explanation of why the gross profit margin is different between S1 and S2 by considering the material cost ANSWER: The material cost per unit is constant which therefore has not effect on the gross profit margin.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">COMMON ERRORS: Many students are unable to correctly explain the relationship between the variable costs and demonstrate confusion between the gross profit and gross profit margin. Common statements include ‘the material costs increase with increased volume of production and therefore reduce the margin for S2’ this is obviously incorrect because the unit cost is constant and although the total material cost increases it increases in proportion to the sales revenue and therefore has no effect on the margin.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">REQUIREMENT:</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">An explanation of why the gross profit margin is different between S1 and S2 by considering the fixed production cost </span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ANSWER: The fixed production cost is constant which means that the increased volume will reduce the fixed cost per unit. A lower fixed cost per unit will increase the gross profit margin for S2.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">COMMON ERRORS: A very common incorrect response is ‘the fixed costs are constant and therefore do not effect the margin’. This is clearly incorrect but is used by many candidates.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Students again are advised to work through all the past/sample papers to practice these types of tasks. </span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Also, students are directed to the AAT website to review Assessment Performance Feedback Reports.</span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">There's also some <a href="http://padlet.com/mwebster4/1jkhaxd1jy0b" target="_blank">Accounting Technician articles here</a></span></div>
<br />Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-84340325151928134602015-02-15T09:13:00.001-08:002015-02-15T09:13:47.665-08:00Take a tablet... A spoonful of ethics help the medicine go down...<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">On a side note, I've been included in a pilot to use tablet computers in the classroom. To say I'm worried is an understatement but I have started to take things like Osborne Books' Professional Ethics material and adapt it for use with tablets. </span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br />Watch this space as this particular unit needs a lot of thinking about...!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Here's a taste of things to come</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><a href="http://padlet.com/mwebster4/fm08ajkn5upj" target="_blank">My Trial Ethics material</a></span>Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-1415575508301448272015-02-15T08:49:00.000-08:002015-02-15T08:51:04.670-08:00Bad debts aren't so bad!<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">IRRECOVERABLE
AND DOUBTFUL DEBTS<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Debtors should only
be included as assets in a balance sheet if they are expected to settle the
amounts due from them. The <b><u>prudence concept</u></b> requires an organisation to
recognise future losses as soon as it becomes aware of their existence. This
means that as soon as an organisation is aware that a debt may not be settled,
then the asset value should be reduced by an adjustment being put through the
accounts.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">Irrecoverable
debts (Bad debts)<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">This is a debt that
will NOT be recovered. It should be completely removed from the ledger accounts
and therefore from the balance sheet.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Double entry to
account for an irrecoverable debt<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Dr Irrecoverable debt X (Income
statement)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Cr SLCA X
(Statement of financial position)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;"><b>Example</b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";"><br /></span></b></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-LAJ-WAAGT42rvA2GytbcaRXWvx_wUdEBOge4VLNccYDL4M-8P9HKiABXFA7Hk-n_gjAyBocSgH-8Jxx8mTzFXP8vtOpQlxcsp7bxJY4la52ccBUR-I1mShpExB4iEKMJJjCiBiGTWYTp/s1600/Debt+write+off.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-LAJ-WAAGT42rvA2GytbcaRXWvx_wUdEBOge4VLNccYDL4M-8P9HKiABXFA7Hk-n_gjAyBocSgH-8Jxx8mTzFXP8vtOpQlxcsp7bxJY4la52ccBUR-I1mShpExB4iEKMJJjCiBiGTWYTp/s1600/Debt+write+off.jpg" height="248" width="400" /></span></a></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";"><br /></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">Doubtful
debts<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">This is a debt about
which there is some question as to whether or not the amount will be settled.
We must recognise this doubt in the accounts but we should not write off the
debt completely, because the cash may be received. In any event we need to
keeping pressing for it to be settled. Therefore we still need to show the debt
as outstanding.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">Example
1<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Doris has debtors at
her year-end of £25,000.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">There is concern
about whether £5,000 of this will be settled.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
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" o:spid="_x0000_s1026" style="height: 52.35pt; margin-left: -4.35pt; margin-top: 7.35pt; mso-height-percent: 0; mso-height-percent: 0; mso-height-relative: page; mso-position-horizontal-relative: text; mso-position-horizontal: absolute; mso-position-vertical-relative: text; mso-position-vertical: absolute; mso-width-percent: 0; mso-width-percent: 0; mso-width-relative: page; mso-wrap-distance-bottom: 0; mso-wrap-distance-left: 9pt; mso-wrap-distance-right: 9pt; mso-wrap-distance-top: 0; mso-wrap-style: square; position: absolute; v-text-anchor: top; visibility: visible; width: 460.1pt; z-index: -251649024;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;"><o:p></o:p></span></v:rect></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Dr Allowance for doubtful debt adjustment £5,000<o:p></o:p></span></b></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Cr Allowance for doubtful debt £5,000<o:p></o:p></span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">The allowance for
doubtful debts is offset against the receivables’ balance in the statement of
financial position.<o:p></o:p></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzgXBM5iF8OA-E3t1y9lcktTzry-p-YoMzSyFooXknAM3y1wVfFtT6GP8W727qQw4UvFfsGGlja8H4-ryOg2v_7q0dLg5Oo6m8HWR8PCwYWdE7JqX1hrFlibUP2MS7sqURdoV8ZcgSXDIp/s1600/A4DD+1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzgXBM5iF8OA-E3t1y9lcktTzry-p-YoMzSyFooXknAM3y1wVfFtT6GP8W727qQw4UvFfsGGlja8H4-ryOg2v_7q0dLg5Oo6m8HWR8PCwYWdE7JqX1hrFlibUP2MS7sqURdoV8ZcgSXDIp/s1600/A4DD+1.jpg" height="156" width="400" /></span></a></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">Statement
of financial position extract<o:p></o:p></span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">This treatment
clearly shows that there is doubt as to whether the debt will be received but
does not write it off and we can continue chasing it. Receivables will be reduced by the £5,000 in the statement of financial position.<o:p></o:p></span></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">Changes
in allowance<o:p></o:p></span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">As you are aware, any
item that appears in the statement of financial position is carried forward
into the next accounting period. This means that there may be a balance on the
allowance for doubtful debts account brought forward.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">It is unlikely that
the allowance will stay the same from one year to the next, so you may need to
change the amount carried in the statement of financial position.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">The key thing to
remember is that you only need to take account of either the </span><b><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: "Arial\,Bold";">increase
or the decrease </span></b><span style="font-family: "Century Gothic","sans-serif"; mso-bidi-font-family: Arial;">in the allowance, in the profit and loss account.<o:p></o:p></span></span></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">Increase<o:p></o:p></span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Dr Allowance for doubtful debt: adjustments X<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Cr Allowance for doubtful debts X<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">In each case you
would only enter the increase in the allowance e.g. last year £5,000 this year
£7,000 therefore only an extra £2,000 would be charged to the irrecoverable
debt account.<o:p></o:p></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBcXe2Sr0Xszku9m74iAZFSRuC3489H3dutm1I09-OhFE6MMEdf0Iv0at8bISekbQyT-n0TGvHH0Cy43tLnztAZlDnqu-bnWdjUMxExZCQumko_VqUGbwvKi0dHGywF6LXccsMs6MxK0oM/s1600/A4DD+increase.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBcXe2Sr0Xszku9m74iAZFSRuC3489H3dutm1I09-OhFE6MMEdf0Iv0at8bISekbQyT-n0TGvHH0Cy43tLnztAZlDnqu-bnWdjUMxExZCQumko_VqUGbwvKi0dHGywF6LXccsMs6MxK0oM/s1600/A4DD+increase.jpg" height="157" width="400" /></span></a></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: "Arial\,Bold";">Decrease</span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Dr Allowance for doubtful debts X <o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">Cr Allowance for doubtful debt: adjustments X<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">In each case you
would only enter the decrease in the allowance e.g. last year £5,000 this year
£3,000 therefore only remove £2,000.<o:p></o:p></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxx4HHnzsSyrCEBg-EOevKq0y93M_oj1eR97lYbLSlpKd4re-gV_SN5WlIUHW8HkYmRlUKVqmB8DHNjBKpcmOkrTv81tILh7P3ablgove6UJU-ccXExVB3jD8FczcxIV5D2FidC3rCZMSB/s1600/A4DD+decrease.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxx4HHnzsSyrCEBg-EOevKq0y93M_oj1eR97lYbLSlpKd4re-gV_SN5WlIUHW8HkYmRlUKVqmB8DHNjBKpcmOkrTv81tILh7P3ablgove6UJU-ccXExVB3jD8FczcxIV5D2FidC3rCZMSB/s1600/A4DD+decrease.jpg" height="140" width="400" /></span></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; mso-bidi-font-family: Arial;">It is common for students to change the allowance <b><u><i>by</i></u></b> the new allowance figure instead of <b><i><u>to</u></i></b> the new allowance figure - don't fall into that trap!</span></div>
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Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-90100995546899170512015-02-15T08:12:00.002-08:002015-02-15T08:12:37.653-08:00Appreciation of Depreciation<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Another area people struggle with is depreciation of non-current assets.</span><br />
<br />
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">What is depreciation and what is it there for?<o:p></o:p></span></b></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Depreciation
aims to charge the cost of the fixed asset that has been consumed during the
period of the profit and loss account as <b>an
expense</b> in order to match the income that the fixed asset has earned in the
period (the accruals concept).<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>IAS 16</b> <i>(Property, Plant and Equipment)</i> has this to say about depreciation:<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">“<i>Depreciation is the measure of the cost of
the economic benefits of the tangible non-current assets that have been
consumed during the period. Consumption includes the wearing out, using up or
other reduction in the useful economic life of a tangible non-current asset
whether arising from use, effluxation of time or obsolescence through either
changes in technology or demand for the goods and services produced by the
asset</i>”<o:p></o:p></span></div>
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<br /></div>
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<br /></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">What does this
mean?<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Machinery and motor
vehicles wear out over time and so this accounting standard takes care of
this wearing out.</span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"> </span></li>
</ul>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Leases on buildings are
consumed with the passage of time and so their value diminishes.</span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"> </span></li>
</ul>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Computer technology
becomes obsolete as technology advances and so their value is reduced.</span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"> </span></li>
</ul>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Freehold land, however, has
infinite life and so cannot be consumed by the business although the buildings
on the land may be depreciated.<o:p></o:p></span></li>
</ul>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Methods of
Depreciation<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Straight Line
Depreciation<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The
aim of the straight line method of depreciation is to charge the same amount of
depreciation on the fixed asset each year of the asset’s life.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Before
we can work out the depreciation charge, we need to know two things:<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The original cost of the
asset<o:p></o:p></span></li>
<li class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The estimated useful
life of the asset<o:p></o:p></span></li>
</ul>
<div class="MsoNormal" style="margin: 0cm 0cm 0.0001pt 36pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
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" o:spid="_x0000_s1027" style="height: 303.15pt; left: 0; margin-left: -20.85pt; margin-top: 3.5pt; mso-height-percent: 0; mso-height-percent: 0; mso-height-relative: page; mso-position-horizontal-relative: text; mso-position-horizontal: absolute; mso-position-vertical-relative: text; mso-position-vertical: absolute; mso-width-percent: 0; mso-width-percent: 0; mso-width-relative: page; mso-wrap-distance-bottom: 0; mso-wrap-distance-left: 9pt; mso-wrap-distance-right: 9pt; mso-wrap-distance-top: 0; mso-wrap-style: square; position: absolute; text-align: left; v-text-anchor: top; visibility: visible; width: 485.3pt; z-index: -251662336;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><o:p></o:p></span></v:rect></div>
<div class="MsoNormal" style="text-align: justify;">
<b><i><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Example<o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Jo
has a vehicle which cost £15,000 and has a useful life of 5 years. Calculate
the annual depreciation charge using the straight line method.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center">
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: dotted windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 14.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border-bottom: none; border-left: dotted windowtext 1.0pt; border-right: none; border-top: dotted windowtext 1.0pt; height: 14.6pt; mso-border-left-alt: dotted windowtext .5pt; mso-border-top-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 120.3pt;" valign="top" width="160">
<div class="MsoNormal" style="text-align: justify;">
<b><u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Workings<o:p></o:p></span></u></b></div>
</td>
<td style="border-top: dotted windowtext 1.0pt; border: none; height: 14.6pt; mso-border-top-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.15pt;" valign="top" width="19">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border-bottom: none; border-left: none; border-right: dotted windowtext 1.0pt; border-top: dotted windowtext 1.0pt; height: 14.6pt; mso-border-right-alt: dotted windowtext .5pt; mso-border-top-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 282.9pt;" valign="top" width="377">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
<tr style="height: 15.55pt; mso-yfti-irow: 1;">
<td style="border-left: dotted windowtext 1.0pt; border: none; height: 15.55pt; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 120.3pt;" valign="top" width="160">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border: none; height: 15.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.15pt;" valign="top" width="19">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; height: 15.55pt; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 282.9pt;" valign="top" width="377">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
<tr style="height: 15.55pt; mso-yfti-irow: 2;">
<td style="border-left: dotted windowtext 1.0pt; border: none; height: 15.55pt; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 120.3pt;" valign="top" width="160">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td rowspan="2" style="border: none; height: 15.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.15pt;" valign="top" width="19">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; height: 15.55pt; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 282.9pt;" valign="top" width="377">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
<tr style="height: 14.6pt; mso-yfti-irow: 3;">
<td style="border-left: dotted windowtext 1.0pt; border: none; height: 14.6pt; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 120.3pt;" valign="top" width="160">
<div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><u>Cost - residual value</u> </span></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; height: 14.6pt; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 282.9pt;" valign="top" width="377">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> <u>£15,000 - £0</u></span></div>
</td>
</tr>
<tr style="height: 14.6pt; mso-yfti-irow: 4;">
<td style="border-left: dotted windowtext 1.0pt; border: none; height: 14.6pt; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 120.3pt;" valign="top" width="160">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> Expected useful life</span></div>
</td>
<td style="border: none; height: 14.6pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.15pt;" valign="top" width="19">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; height: 14.6pt; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 282.9pt;" valign="top" width="377">
<div class="MsoNormal" style="text-align: left;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> 5 years</span></div>
</td>
</tr>
<tr style="height: 14.5pt; mso-yfti-irow: 5;">
<td style="border-left: dotted windowtext 1.0pt; border: none; height: 14.5pt; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 120.3pt;" valign="top" width="160">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td rowspan="2" style="border-bottom: dotted windowtext 1.0pt; border: none; height: 14.5pt; mso-border-bottom-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.15pt;" valign="top" width="19">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; height: 14.5pt; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 282.9pt;" valign="top" width="377">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
<tr style="height: 14.6pt; mso-yfti-irow: 6; mso-yfti-lastrow: yes;">
<td style="border-bottom: dotted windowtext 1.0pt; border-left: dotted windowtext 1.0pt; border-right: none; border-top: none; height: 14.6pt; mso-border-bottom-alt: dotted windowtext .5pt; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 120.3pt;" valign="top" width="160">
<div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Depreciation = </span></div>
</td>
<td style="border-bottom: dotted windowtext 1.0pt; border-left: none; border-right: dotted windowtext 1.0pt; border-top: none; height: 14.6pt; mso-border-bottom-alt: dotted windowtext .5pt; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 282.9pt;" valign="top" width="377">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> £3,000 per annum</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: red;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></span></div>
</td>
</tr>
</tbody></table>
</div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This
assumes that the asset has no residual value (value at the end of its useful
economic life). <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Here the depreciation will, eventually, bring the carrying value to zero.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7O2zPwLaWH_p-LzYUomFsQSAELF7SgcQjcbna42Dm8fcmJpoVY37hLJyVT_EF-IOTmKAYcHOviuqS3Vpz37Ql47Hw4PseXvjyIV60UcWJC4VQUttMPWsQ2fS8-4mT0Q6ZDZBitEOYGSmE/s1600/Straight+line.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7O2zPwLaWH_p-LzYUomFsQSAELF7SgcQjcbna42Dm8fcmJpoVY37hLJyVT_EF-IOTmKAYcHOviuqS3Vpz37Ql47Hw4PseXvjyIV60UcWJC4VQUttMPWsQ2fS8-4mT0Q6ZDZBitEOYGSmE/s1600/Straight+line.jpg" height="192" width="400" /></a></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">If
the asset does have a residual value, the calculation is slightly different. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Example:<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Jo
has a vehicle which cost £15,000 and has a useful life of 5 years with a
residual value of £5,000. Calculate the annual depreciation charge using the
straight line method.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center">
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: -66.85pt; mso-border-alt: dotted windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="border-bottom: none; border-left: dotted windowtext 1.0pt; border-right: none; border-top: dotted windowtext 1.0pt; mso-border-left-alt: dotted windowtext .5pt; mso-border-top-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 151.75pt;" valign="top" width="202">
<div class="MsoNormal" style="text-align: justify;">
<b><u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Workings<o:p></o:p></span></u></b></div>
</td>
<td style="border-top: dotted windowtext 1.0pt; border: none; mso-border-top-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.2pt;" valign="top" width="19">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border-bottom: none; border-left: none; border-right: dotted windowtext 1.0pt; border-top: dotted windowtext 1.0pt; mso-border-right-alt: dotted windowtext .5pt; mso-border-top-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 271.8pt;" valign="top" width="362">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-left: dotted windowtext 1.0pt; border: none; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 151.75pt;" valign="top" width="202">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.2pt;" valign="top" width="19">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 271.8pt;" valign="top" width="362">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-left: dotted windowtext 1.0pt; border: none; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 151.75pt;" valign="top" width="202"><div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><u>Cost - residual value</u></span></div>
</td>
<td rowspan="2" style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.2pt;" valign="top" width="19">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 271.8pt;" valign="top" width="362">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> <u>£15,000 - £5,000</u></span></div>
</td>
</tr>
<tr>
<td style="border-left: dotted windowtext 1.0pt; border: none; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 151.75pt;" valign="top" width="202">
<div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> Expected useful life</span></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 271.8pt;" valign="top" width="362">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> 5 years</span></div>
</td>
</tr>
<tr>
<td style="border-left: dotted windowtext 1.0pt; border: none; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 151.75pt;" valign="top" width="202">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border: none; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.2pt;" valign="top" width="19">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 271.8pt;" valign="top" width="362">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
<tr>
<td style="border-left: dotted windowtext 1.0pt; border: none; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 151.75pt;" valign="top" width="202">
<div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Depreciation = </span></div>
</td>
<td rowspan="2" style="border-bottom: dotted windowtext 1.0pt; border: none; mso-border-bottom-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 14.2pt;" valign="top" width="19">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td style="border-right: dotted windowtext 1.0pt; border: none; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 271.8pt;" valign="top" width="362">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> £2,000 per annum</span></div>
</td>
</tr>
<tr>
<td style="border-bottom: dotted windowtext 1.0pt; border-left: dotted windowtext 1.0pt; border-right: none; border-top: none; mso-border-bottom-alt: dotted windowtext .5pt; mso-border-left-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 151.75pt;" valign="top" width="202">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
</td>
<td style="border-bottom: dotted windowtext 1.0pt; border-left: none; border-right: dotted windowtext 1.0pt; border-top: none; mso-border-bottom-alt: dotted windowtext .5pt; mso-border-right-alt: dotted windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 271.8pt;" valign="top" width="362">
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</td>
</tr>
</tbody></table>
</div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Sometimes
you will be given the depreciation charge as a percentage using the straight
line method e.g. £15,000 –depreciated at 20% on cost.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This
would be calculated thus:</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Workings</b></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(Cost - Residual value) x % = (£15,000 - £0) x 20% </span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Depreciation = £3,000 per annum</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Reducing/Diminishing
Balance Method<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The
reducing/diminishing balance method has a higher charge for depreciation in the
early years of the fixed asset’s life but a lower charge in later years.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">In
this method, the depreciation charge is a fixed percentage of the <b>carrying value</b> or<b> <u>carrying amount</u></b>(the cost of the asset – depreciation to
date). The determination of the percentage if a complicated calculation but you
will not be required to carry this out, you will be given the percentage.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
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" o:spid="_x0000_s1026" style="height: 448.5pt; left: 0; margin-left: -21pt; margin-top: 9.95pt; mso-height-percent: 0; mso-height-percent: 0; mso-height-relative: page; mso-position-horizontal-relative: text; mso-position-horizontal: absolute; mso-position-vertical-relative: text; mso-position-vertical: absolute; mso-width-percent: 0; mso-width-percent: 0; mso-width-relative: page; mso-wrap-distance-bottom: 0; mso-wrap-distance-left: 9pt; mso-wrap-distance-right: 9pt; mso-wrap-distance-top: 0; mso-wrap-style: square; position: absolute; text-align: left; v-text-anchor: top; visibility: visible; width: 472.2pt; z-index: -251661312;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><o:p></o:p></span></v:rect></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">How it works<o:p></o:p></span></b></div>
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<br /></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Jo
has a vehicle which cost £15,000. Depreciation is charged at 30% per annum
using the reducing/diminishing balance method.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Workings</b></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><br /></b></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Year 1</b></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Cost x % = £15,000 x 30% = £4,500</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This leaves the carrying value (net book value) at the year end as: £15,000 - £4,500 = £10,500</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Year 2</b></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Carrying value x % = £10,500 x 30% = £3,150</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">So the carrying value at year end is £7,350</span></div>
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<br /></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Unlike with the straight-line method, the carrying value under reducing balance will never reach zero.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxcOHqeKE04yo98Fc623QmSi4fZWMEA-VgGlqAIQxDGT7m8P7-hlV6VkC7v7h3JQtW9cw5j6WS8LOfAQfkhLwT-qgvB4Nv0Z15hmXANeaxVBtGsQirCYGnJaNrwC7xj7wDEIvS_4E4JW_U/s1600/Diminishing+balance.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxcOHqeKE04yo98Fc623QmSi4fZWMEA-VgGlqAIQxDGT7m8P7-hlV6VkC7v7h3JQtW9cw5j6WS8LOfAQfkhLwT-qgvB4Nv0Z15hmXANeaxVBtGsQirCYGnJaNrwC7xj7wDEIvS_4E4JW_U/s1600/Diminishing+balance.jpg" height="242" width="400" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The double entry for depreciation </span></b></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Depreciation is an expense - but a non-cash expense. We do not write a cheque for depreciation (this is important if you study cash management at Level 4!)</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Therefore we need to record an expense for depreciation each year.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">If we look at the last example, we will see that:</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Year 1</b></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Debit</b> Depreciation expense (charge) account £4,500</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Credit</b> Accumulated depreciation account £4,500</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">The Accumulated depreciation is carried forward to next year whilst the expense is transferred to the</span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"> Statement of profit or loss.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The debit (expense) is recorded in the Statement of profit or loss whilst the credit serves to reduce the value of the non-current asset on the Statement of financial position. </span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The t-accounts look like this:</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5Aid1zLlohAUTtngKNnuFSRvE9L1b5B7Mswna5luevAmGSBdxu3-u7x082zIRvuqWRAfgbWYgU82pzr8e_veIxGavena9XZNcDGcEm52os0kgyZ7sOjuGvAxyNNTwIuAmXCVe5ygG3XBU/s1600/Depreciation+1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5Aid1zLlohAUTtngKNnuFSRvE9L1b5B7Mswna5luevAmGSBdxu3-u7x082zIRvuqWRAfgbWYgU82pzr8e_veIxGavena9XZNcDGcEm52os0kgyZ7sOjuGvAxyNNTwIuAmXCVe5ygG3XBU/s1600/Depreciation+1.jpg" height="205" width="400" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">In the statement of financial position we see the following:</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEju0Mj8XZebgxRIF0BX4gyjL5hIYmodJZKLtUcobl5_E22CXad52wNRdUfdD_YvEuz-RP_8_cLB9qAmb7dLowyQoeyE6XX1mJS6kBwd0Uw9NCnF_H_feYAyVc9m6ShyphenhyphenoDKwBUO8Am1mThE-/s1600/Depreciation+1+SFP.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEju0Mj8XZebgxRIF0BX4gyjL5hIYmodJZKLtUcobl5_E22CXad52wNRdUfdD_YvEuz-RP_8_cLB9qAmb7dLowyQoeyE6XX1mJS6kBwd0Uw9NCnF_H_feYAyVc9m6ShyphenhyphenoDKwBUO8Am1mThE-/s1600/Depreciation+1+SFP.jpg" height="90" width="320" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">In <b>year 2</b> we see the following occur</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Debit</b> Depreciation expense £3,150</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Credit </b>accumulated depreciation £3,150</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Again the debit is transferred at year end to the Statement of profit or loss whilst the credit builds the value of the Accumulated depreciation to further reduce the carrying value of the non-current asset.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5v_eZEFjiBmdVrTJdMXGS5iI2sTAcotsyZFQ1Qne78cSNwHgux03ZsTfQNIED8Lyk4MmFiJiguxX4LNgTJpEyqQvsM2EiDLmNu_FU5r4KLOvIJbs8X1_BDYR7ZT0MBPoJ5TPsyTF4eWHs/s1600/Depreciation+2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5v_eZEFjiBmdVrTJdMXGS5iI2sTAcotsyZFQ1Qne78cSNwHgux03ZsTfQNIED8Lyk4MmFiJiguxX4LNgTJpEyqQvsM2EiDLmNu_FU5r4KLOvIJbs8X1_BDYR7ZT0MBPoJ5TPsyTF4eWHs/s1600/Depreciation+2.jpg" height="210" width="400" /></a></div>
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<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">In the statement of financial position we see the following:</span></div>
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<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><br /></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQTZASqgPRcVAOMRkxiR3Sxx2Q27HMR4Fqkn1QgmuJ9F-fhWb5bdfvcqbmWHT6LoaiBzRk19U3L7k0-nCQ2erv7d5INYPCfL_gx02tC8s5AvLlhhWmOtiIcxfUcTt0oSXX-geHacnBRmLC/s1600/Depreciation+2+SFP.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQTZASqgPRcVAOMRkxiR3Sxx2Q27HMR4Fqkn1QgmuJ9F-fhWb5bdfvcqbmWHT6LoaiBzRk19U3L7k0-nCQ2erv7d5INYPCfL_gx02tC8s5AvLlhhWmOtiIcxfUcTt0oSXX-geHacnBRmLC/s1600/Depreciation+2+SFP.jpg" height="85" width="320" /></a></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> Note:</span></b></div>
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<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">There is no one 'correct' way to depreciate assets. However, one should always aim to depreciate them according to the expected useful life so, so example, we would aim to depreciate an asset over 5 years if we expected its useful life for us to be 5 years.</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">It is important to remember that the accumulated depreciation is used to assess whether we have made a gain or loss on disposal (see my first blog entry). Whilst we may want to see the word profit (gain), here it tells us that our depreciation figure was too much and we were over-estimating the value of the 'using up or wearing out' of the non-current asset. Similarly, if we make a 'loss' on the disposal, we haven't depreciated enough.</span></div>
Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-74388052794748638492015-02-15T07:03:00.002-08:002015-02-15T07:03:51.280-08:00Quick reference guide for debits and credits<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVwxlkLdZrVlkNGmocbUv6IeD0YaaYSyvZ22tbI9Q1T1unCLw7mfB-UjPNkwbHaBmg7h8DogSlDSaIZMJZ7pbO6cvVeeeSJkxH12-65zJu9JQpdyW_6xBcMVk5NZezeG8B9ITCNi2Dg9OW/s1600/Effect+of+transaction.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhVwxlkLdZrVlkNGmocbUv6IeD0YaaYSyvZ22tbI9Q1T1unCLw7mfB-UjPNkwbHaBmg7h8DogSlDSaIZMJZ7pbO6cvVeeeSJkxH12-65zJu9JQpdyW_6xBcMVk5NZezeG8B9ITCNi2Dg9OW/s1600/Effect+of+transaction.jpg" height="640" width="513" /></a></div>
<br />Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-61798332720471294542015-02-15T06:29:00.001-08:002015-02-15T07:04:38.856-08:00Assets, liabilities income, expense, debit credit... so what?<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Afternoon all!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">During my time teaching, it never ceases to amaze me how many students fail to create a link between units. For example, the Level 2 unit PBKT and CJBS link naturally to the Level 3 units ACPR and FSTP which, in turn link through FSTM at Level 4.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Throughout these units, basic principles remain constant - an expense is an expense, an asset is an asset etc.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">One of the big problems that face students is deciding what type of account and item is - is it an income, expense, liability or asset? You must take time to understand the difference between these types of account (which I will look at next time).</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">One of the many problems students seem to have is to understand what is going on when we debit or credit an account.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">In order to try to help people, why not look at the following table where the effect of a transaction is shown as an increase </span><span style="font-family: Wingdings; font-size: 24px; text-align: center;"><span style="color: #38761d;">é</span></span> <span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">or decrease </span> <span style="font-family: Wingdings; font-size: 24px; text-align: center;"><span style="color: #990000;">ê</span></span><span style="font-size: 24px; text-align: center;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"> </span></span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">in value.</span><br />
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><br /></span>
<br />
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 34.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 34.0pt; mso-border-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 355.3pt;" valign="top" width="474"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif"; font-size: 16.0pt;">The effect of a debit or credit on
different account types with examples<o:p></o:p></span></b></div>
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<td style="border-left: none; border: solid windowtext 1.0pt; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.3pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Century Gothic","sans-serif"; font-size: 16.0pt;">Debit<o:p></o:p></span></b></div>
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<b><span style="font-family: "Century Gothic","sans-serif"; font-size: 16.0pt;">Credit<o:p></o:p></span></b></div>
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<b><span style="font-family: "Century Gothic","sans-serif"; font-size: 16.0pt;">Expense<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.3pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #38761d; font-family: Wingdings; font-size: 24px;">é</span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 56.5pt;" width="75"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #990000; font-family: Wingdings; font-size: 24px;">ê</span></div>
</td>
</tr>
<tr style="height: 112.15pt; mso-yfti-irow: 2;">
<td colspan="3" style="border-top: none; border: solid windowtext 1.0pt; height: 112.15pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 462.1pt;" width="616"><table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .25pt; mso-border-insideh: .25pt solid windowtext; mso-border-insidev: .25pt solid windowtext; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 24.55pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 24.55pt; mso-border-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Telephone<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 24.55pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Rent
paid<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 24.55pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Interest
paid<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 24.55pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Heat
& light<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 26.3pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 26.3pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Motor
expenses<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 26.3pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Repairs<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 26.3pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Discounts
allowed<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 26.3pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Carriage
in/out<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 22.3pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 22.3pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Administration
<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 22.3pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 22.3pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 22.3pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr style="height: 23.95pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 23.95pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Loss
on disposal<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 23.95pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Depreciation<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 23.95pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 23.95pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-size: 18.0pt;"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 34.0pt; mso-yfti-irow: 3;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 355.3pt;" width="474"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif"; font-size: 16.0pt;">Income<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.3pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #990000; font-family: Wingdings; font-size: 24px;">ê</span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 56.5pt;" width="75"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #38761d; font-family: Wingdings; font-size: 24px;">é</span></div>
</td>
</tr>
<tr style="height: 54.9pt; mso-yfti-irow: 4;">
<td colspan="3" style="border-top: none; border: solid windowtext 1.0pt; height: 54.9pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 462.1pt;" width="616"><table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .25pt; mso-border-insideh: .25pt solid windowtext; mso-border-insidev: .25pt solid windowtext; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 21.15pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 21.15pt; mso-border-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Sales
revenue<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 21.15pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Rent
received<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 21.15pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Interest
received<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 21.15pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Discounts
received<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 18.6pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 18.6pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Profit
on disposal<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.6pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.5pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Commission received</span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.6pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 18.6pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 115.55pt;" width="154"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-size: 18.0pt;"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 34.0pt; mso-yfti-irow: 5;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 355.3pt;" width="474"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif"; font-size: 16.0pt;">Asset<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.3pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #38761d; font-family: Wingdings; font-size: 24px;">é</span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 56.5pt;" width="75"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #990000; font-family: Wingdings; font-size: 24px;">ê</span></div>
</td>
</tr>
<tr style="height: 115.85pt; mso-yfti-irow: 6;">
<td colspan="3" style="border-top: none; border: solid windowtext 1.0pt; height: 115.85pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 462.1pt;" width="616"><table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: 5.4pt; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184; width: 609px;">
<tbody>
<tr>
<td colspan="5" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 448.2pt;" width="598"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif";">Non-current assets<o:p></o:p></span></b></div>
</td>
<td style="border: none; mso-cell-special: placeholder; padding: 0cm 0cm 0cm 0cm;" width="11"><div class="MsoNormal">
<br /></div>
</td>
</tr>
<tr style="height: 20.25pt; mso-row-margin-right: 8.5pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 20.25pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.0pt;" width="144"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Property<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 20.25pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 4.0cm;" width="151"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Plant<o:p></o:p></span></div>
</td>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 20.25pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 4.0cm;" width="151"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Equipment<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 20.25pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 4.0cm;" width="151"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Computers<o:p></o:p></span></div>
</td>
<td style="border: none; mso-cell-special: placeholder; padding: 0cm 0cm 0cm 0cm;" width="11"><div class="MsoNormal">
<br /></div>
</td>
</tr>
<tr style="height: 24.8pt; mso-row-margin-right: 8.5pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 24.8pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.0pt;" width="144"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Fixtures<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 24.8pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 4.0cm;" width="151"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Fittings<o:p></o:p></span></div>
</td>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 24.8pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 4.0cm;" width="151"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Furniture<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 24.8pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 4.0cm;" width="151"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Motor
vehicles<o:p></o:p></span></div>
</td>
<td style="border: none; mso-cell-special: placeholder; padding: 0cm 0cm 0cm 0cm;" width="11"><div class="MsoNormal">
<br /></div>
</td>
</tr>
<tr>
<td colspan="6" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 456.7pt;" width="609"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif";">Current assets<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 21.85pt; mso-yfti-irow: 4;">
<td colspan="3" style="border-top: none; border: solid windowtext 1.0pt; height: 21.85pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 8.0cm;" width="302"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Inventory
at end of year<o:p></o:p></span></div>
</td>
<td colspan="3" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 21.85pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 229.9pt;" width="307"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Trade
receivables(debtors/SLCA)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 19.3pt; mso-yfti-irow: 5; mso-yfti-lastrow: yes;">
<td colspan="3" style="border-top: none; border: solid windowtext 1.0pt; height: 19.3pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 8.0cm;" width="302"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Non
trade receivables (prepayments)<o:p></o:p></span></div>
</td>
<td colspan="3" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 19.3pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 229.9pt;" width="307"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Bank
, Cash and cash equivalents<o:p></o:p></span></div>
</td>
</tr>
<!--[if !supportMisalignedColumns]-->
<tr height="0">
<td style="border: none;" width="144"></td>
<td style="border: none;" width="151"></td>
<td style="border: none;" width="7"></td>
<td style="border: none;" width="144"></td>
<td style="border: none;" width="151"></td>
<td style="border: none;" width="11"></td>
</tr>
<!--[endif]-->
</tbody></table>
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-size: 18.0pt;"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 34.0pt; mso-yfti-irow: 7;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 355.3pt;" width="474"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif"; font-size: 16.0pt;">Liability<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 50.3pt;" width="67"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #990000; font-family: Wingdings; font-size: 24px;">ê</span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 34.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 56.5pt;" width="75"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="color: #38761d; font-family: Wingdings; font-size: 24px;">é</span></div>
</td>
</tr>
<tr style="height: 145.3pt; mso-yfti-irow: 8; mso-yfti-lastrow: yes;">
<td colspan="3" style="border-top: none; border: solid windowtext 1.0pt; height: 145.3pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 462.1pt;" width="616"><table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="2" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 451.3pt;" valign="top" width="602"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif";">Current liabilities<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 17.75pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 17.75pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 205.55pt;" width="274"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Trade
payables (creditors/PLCA)<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 17.75pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 245.75pt;" width="328"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Non-trade
payables (accruals, VAT Liability)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 20.9pt; mso-yfti-irow: 2; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 20.9pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 205.55pt;" width="274"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Bank
overdraft<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 20.9pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 245.75pt;" width="328"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td colspan="3" style="border-bottom: solid windowtext 1.0pt; border: none; mso-border-bottom-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 451.3pt;" valign="top" width="602"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: "Century Gothic","sans-serif";">Non-current liabilities<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 19.5pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 19.5pt; mso-border-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 112.25pt;" width="150"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Bank
loans<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 19.5pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 128.75pt;" width="172"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Director/partner
loans<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 19.5pt; mso-border-alt: solid windowtext .25pt; mso-border-left-alt: solid windowtext .25pt; mso-border-top-alt: solid windowtext .25pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 210.3pt;" width="280"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif";">Debentures<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Century Gothic","sans-serif"; font-size: 18.0pt;"><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Note: </b>Capital is a type of liability as it signifies how much the business owes to its owner(s).</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The other problem students have is to remember where each type of account appears in the financial statements - Statement of profit or loss and Statement of financial position.</span><br />
<br />
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Statement of Profit or Loss
(SPL)<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The
‘SPL’ is used to identify how well the business has performed during the year
and whether it has achieved a profit or loss. Profit/loss is the difference
between Income and Expenditure and the SPL shows two elements:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoListParagraph" style="margin-left: 18.0pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;"> </span></span><i style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">T</i><i style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; text-indent: -18pt;">he trading account</i></div>
<div class="MsoNormal" style="margin-left: 18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This
shows the profit or loss generated from the day to day trading activities (i.e.
the main activities of the business)<o:p></o:p></span></div>
<div class="MsoListParagraph" style="margin-left: 18.0pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;"> </span><i>The profit and loss account<o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-left: 18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This
shows the profit of loss after taking into account all of the other income
received and expenses incurred during the reporting period.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<br />
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">It
is important to note that in your assessment in FSTP, the two elements will be combined
into the Statement of Profit or Loss.</span><span style="font-family: Century Gothic, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Statement of profit or loss
for the year ending …………………………………<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The Trading Account<o:p></o:p></span></b></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-insideh: none; mso-border-insidev: none; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 13.9pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">£<o:p></o:p></span></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">£<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 1;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Sales revenue<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 2;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Less: sales
returns<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(<u>xx</u>)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 13.9pt; mso-yfti-irow: 3;">
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 4;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Less: cost of
sales<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 13.9pt; mso-yfti-irow: 5;">
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Opening
inventory<o:p></o:p></span></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 6;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Purchases<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 13.9pt; mso-yfti-irow: 7;">
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Less:
purchases returns<o:p></o:p></span></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(<u>xx</u>)<o:p></o:p></span></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 8;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 9;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Carriage
inwards<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 13.9pt; mso-yfti-irow: 10;">
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Less: closing
inventory<o:p></o:p></span></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(<u>xx</u>)<o:p></o:p></span></div>
</td>
<td style="height: 13.9pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 11;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(<u>xx</u>)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 14.75pt; mso-yfti-irow: 12; mso-yfti-lastrow: yes;">
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 223.75pt;" valign="top" width="298"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Gross profit<o:p></o:p></span></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.1pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 14.75pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 105.8pt;" valign="top" width="141"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The Profit and Loss Account<o:p></o:p></span></b></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-insideh: none; mso-border-insidev: none; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 13.55pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Sundry income<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 12.8pt; mso-yfti-irow: 1;">
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Discounts
received<o:p></o:p></span></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 13.55pt; mso-yfti-irow: 2;">
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Rent received<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
</tr>
<tr style="height: 12.8pt; mso-yfti-irow: 3;">
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 13.55pt; mso-yfti-irow: 4;">
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Less expenses<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 13.55pt; mso-yfti-irow: 5;">
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Discounts
allowed<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 12.8pt; mso-yfti-irow: 6;">
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">All other
running expenses<o:p></o:p></span></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 13.55pt; mso-yfti-irow: 7;">
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Depreciation
charges<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 12.55pt; mso-yfti-irow: 8;">
<td style="height: 12.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Allowance for
doubtful debts: adjustments<o:p></o:p></span></div>
</td>
<td style="height: 12.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="height: 12.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 13.55pt; mso-yfti-irow: 9;">
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Irrecoverable
debts<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr style="height: 12.8pt; mso-yfti-irow: 10;">
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 12.8pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(<u>xx</u>)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 13.55pt; mso-yfti-irow: 11; mso-yfti-lastrow: yes;">
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 225.15pt;" valign="top" width="300"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Profit for
the year<o:p></o:p></span></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 106.55pt;" valign="top" width="142"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="height: 13.55pt; padding: 0cm 5.4pt 0cm 5.4pt; width: 108.05pt;" valign="top" width="144"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Note:<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->The
sales returns and purchases returns are netted off against the sales and
purchases respectively.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Discounts
received have been shown as sundry (miscellaneous) income under gross profit.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The
profit for the year is transferred to the Statement of Financial Position as an
addition to capital<o:p></o:p></span></div>
<div class="MsoNormal">
</div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->All
SPL accounts are closed off at the end of the yea</span><span style="font-family: "Century Gothic","sans-serif";">r.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: "Century Gothic","sans-serif";"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">T</span><b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The Statement of Financial
Position (SFP)</span></b></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The
‘SFP’ shows a snapshot of the business’ financial position (assets, liabilities
and capital) at a specified point in time (normally the reporting period end
date). <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The
SFP reflects the Accounting Equation:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">ASSETS –
LIABILITIES = CAPITAL<o:p></o:p></span></b></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Statement of Financial
Position as at ………………………..<o:p></o:p></span></b></div>
<div class="MsoNormal">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></b></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
</div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-insideh: none; mso-border-insidev: none; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 1184;">
<tbody>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Cost<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Accumulated depreciation<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Carrying amount<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">£<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">£<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">£<o:p></o:p></span></b></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Non-current
assets<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Buildings<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Furniture
& fittings<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Motor
vehicles<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Computers<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Current
assets<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Inventory<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Receivables<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Less:</b> allowance for doubtful
debts<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Prepayments<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Bank<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Cash<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Current
liabilities<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Payables<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">VAT<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Accruals<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></u></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Net
current assets<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Non-current
liabilities<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Loans<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></u></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Net
Assets<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="background: yellow;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></span></u></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Financed
by<o:p></o:p></span></b></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Capital<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Profit<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></u></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Less:
Drawings<o:p></o:p></span></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(xx)<o:p></o:p></span></u></div>
</td>
</tr>
<tr>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 196.8pt;" valign="top" width="262"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 3.0cm;" valign="top" width="113"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 92.1pt;" valign="top" width="123"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<br /></div>
</td>
<td style="padding: 0cm 5.4pt 0cm 5.4pt; width: 88.15pt;" valign="top" width="118"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<u><span style="background: yellow;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">xx<o:p></o:p></span></span></u></div>
</td>
</tr>
</tbody></table>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">x</span></div>
<div class="MsoListParagraphCxSpLast" style="text-indent: -18pt;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Note:</span></b></div>
<div class="MsoListParagraph" style="text-indent: -18pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The allowance taken off the Receivables figure is the allowance for doubtful debt.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="text-indent: -18pt;">
<span style="font-size: 11pt; line-height: 16.8666667938232px;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">All SFP accounts are carried forward and provide the starting point for the next accounting period.</span></span></div>
<div class="MsoListParagraphCxSpLast" style="text-indent: -18pt;">
<span style="font-size: 11pt; line-height: 16.8666667938232px;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The highlighted figures should agree (or balance) and this is from where the 'old' name for the financial statement - the balance sheet - takes its name.</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Hopefully you can now see the importance of linking units together as, without this basic understanding, none of the financial statements would be possible.</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<br />Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com0tag:blogger.com,1999:blog-6602602723013380704.post-73511302968540506742015-02-14T17:46:00.000-08:002015-02-15T08:51:37.196-08:00The beast has awoken. Hello World!<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Hello World!</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">In this blog I will attempt to reveal the mysteries that are AAT Accounts Preparation and Prepare Final Accounts.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">I will try to give simple guidance on how to develop the skills required to be successful in both assessments.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Wherever possible, I will try to provide simple stepped processes to make application of these skills much easier to remember.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">You will find that I like to use t-accounts wherever possible - I apologise if you don't like them but, as my old accounting lecturers taught me, you can't go wrong if you go back to basics (isn't that right Karen and Andy?)</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">So, here goes:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Let's look at an example of disposal of non-current assets.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Jackie has a van which she sold for £2,000. The van originally cost £15,000 and had £10,000 accumulated depreciation associated with it.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Here's the starting position:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDbihMWZlIIB1ibDn6NgIMCkN2B5HfMHQIKRJdbDXTmNgVnkhDBQnEK0NySD1PE2Q8TdBOJirOnlLy0OZYl1KCumsg3A3JT2j0htcAWFM7yL0c_Nqk025jBfUunb5lIItudFIjHFib2dr9/s1600/Disposal+start.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDbihMWZlIIB1ibDn6NgIMCkN2B5HfMHQIKRJdbDXTmNgVnkhDBQnEK0NySD1PE2Q8TdBOJirOnlLy0OZYl1KCumsg3A3JT2j0htcAWFM7yL0c_Nqk025jBfUunb5lIItudFIjHFib2dr9/s1600/Disposal+start.jpg" height="121" width="640" /></a></div>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Let's looks at the process:</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><u>Step 1:</u></b></span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Open a Disposal t-acco</span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">unt</span><br />
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><br /></span>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-uTRveyQsqsjRZbkVSYs76mU0iwBQUDP-RIkBjK385oYzXu4MRQzlyBBrMtsK_P9GtlTttxZyP6cSFSPsH9NQthF7uR4BENP7X8gNLF64qUPZMibA_OAvRfXDQP-Z54pMjr-PLmUSthII/s1600/Disposal+step+1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-uTRveyQsqsjRZbkVSYs76mU0iwBQUDP-RIkBjK385oYzXu4MRQzlyBBrMtsK_P9GtlTttxZyP6cSFSPsH9NQthF7uR4BENP7X8gNLF64qUPZMibA_OAvRfXDQP-Z54pMjr-PLmUSthII/s1600/Disposal+step+1.jpg" height="112" width="320" /></a></div>
<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><u>Step 2</u></b></span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Dispose of the asset</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<br />
<ul>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><b>Debit</b> Disposals with the original cost of the asset</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><b>Credit</b> Motor vehicles with the original cost of the asset</span></li>
</ul>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNLd6y7yUPS_2-Bq_WpXdRPS643-G3mE3yYMg3v0yJ-NiX9_wDALX09bJAUk4K8fkbwtnIX5NNGxyCCRef56T3vRxqo8agCGuXliHaKdKDxKfEZV-NTWe7_NRqdbj_f8OeXzaY6q9e_I_L/s1600/Disposal+step+2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNLd6y7yUPS_2-Bq_WpXdRPS643-G3mE3yYMg3v0yJ-NiX9_wDALX09bJAUk4K8fkbwtnIX5NNGxyCCRef56T3vRxqo8agCGuXliHaKdKDxKfEZV-NTWe7_NRqdbj_f8OeXzaY6q9e_I_L/s1600/Disposal+step+2.jpg" height="293" width="400" /></a></div>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><u>Step 3</u></b></span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Transfer the accumulated depreciation associated with the vehicle being disposed of to the Disposals account</span><br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiruYESc6xbLzwHRn84wkE8LPXRTX5ppY43FACJlIgGMVYZMk74PM-nD1YXb1sqDaHFlK15NpLkTEQRCZgHU30nGqWDGOR375RZwyOE9194zvrxdEx8FKEAABBpQXV1soDtXVybnDQYH6s8/s1600/Disposal+step+3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiruYESc6xbLzwHRn84wkE8LPXRTX5ppY43FACJlIgGMVYZMk74PM-nD1YXb1sqDaHFlK15NpLkTEQRCZgHU30nGqWDGOR375RZwyOE9194zvrxdEx8FKEAABBpQXV1soDtXVybnDQYH6s8/s1600/Disposal+step+3.jpg" height="210" width="400" /></a></div>
<br />
<ul>
<li><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b>Debit</b> Accumulated depreciation with the </span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">accumulated depreciation associated with the vehicle</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><b>Credit</b> Disposals with </span><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">the </span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">accumulated depreciation associated with the vehicle</span></li>
</ul>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><u>Step 4</u></b></span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Record the proceeds from the disposal.</span><br />
<br />
<ul>
<li><b style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Debit</b><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"> Bank with the proceeds</span></li>
<li><b style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Credit</b><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"> Disposals with the proceeds</span></li>
</ul>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5n-EQKOd80xlezJohkF5gcVV2nWqitSYupZt9a2xDhCsCxS4NWuY2tK4Ca8KT0zTiQfgBlSaO0v6p8MUoKl58nTXY02aKhzX2ir5QKWG4agATCMb6qara_eStr32UyIaXvVQVQlp5ZrzP/s1600/Disposal+step+4.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5n-EQKOd80xlezJohkF5gcVV2nWqitSYupZt9a2xDhCsCxS4NWuY2tK4Ca8KT0zTiQfgBlSaO0v6p8MUoKl58nTXY02aKhzX2ir5QKWG4agATCMb6qara_eStr32UyIaXvVQVQlp5ZrzP/s1600/Disposal+step+4.jpg" height="220" width="400" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><u>Step 5</u></b></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Finally, balance of the disposal T-account and transfer the balancing figure to the statement of profit or loss:</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIaJiQKCUgdbe6R0ZKSAmMboEAsNwSgEfwUPdy7XrzrUOnKm63qhA4Mt6g0dHrhx_2PdPiZbQ1QIxmzBrZOQRPDwoSQPiVcFZ0pzbnNsf99kPtBOLkOFTk8fj6tyekhPRGJwglFZDKNr_u/s1600/Disposal+step+5.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhIaJiQKCUgdbe6R0ZKSAmMboEAsNwSgEfwUPdy7XrzrUOnKm63qhA4Mt6g0dHrhx_2PdPiZbQ1QIxmzBrZOQRPDwoSQPiVcFZ0pzbnNsf99kPtBOLkOFTk8fj6tyekhPRGJwglFZDKNr_u/s1600/Disposal+step+5.jpg" height="203" width="400" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">There you have it a simple (hopefully) 5 step process to deal with the disposal of a non-current asset.</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The beauty of adopting this method of dealing with a disposal task is that when you are faced with a part-exchange situation, only step 4 changes!</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><u>Part exchange</u></b></span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Instead of selling the van, Jackie part-exchanged it for a new van which had a cost of £15,000. The part-exchange allowance was £</span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">1,500</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><b><u>Step 4</u></b></span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Here, you must ensure you maintain double entry (debits must equal credits). </span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Debit Motor vehicles with the part-exchange allowance</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Credit Disposals with the part-exchange allowance</span><br />
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<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><b>Debit</b> Motor vehicles with the balance of the payment (i.e. £15,000 - £1,500 part-exchange allowance)</span></li>
<li><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;"><b>Credit</b> Bank/Loan/Liability with the balance of the payment</span></li>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqZZcaSEz_r35h6y6F-c5OjurEQfyZcp5AglY2_YJMuPUTRUJotRkMUrzvinNzT6S-2V-yqXaE0wW6CQi1Lr-6q23b-Ondw3RrG6Cwo1bgc63CLZfzlQCO4Ulofly1uDGb0wUG8eTVv58T/s1600/Disposal+partex+step+4.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqZZcaSEz_r35h6y6F-c5OjurEQfyZcp5AglY2_YJMuPUTRUJotRkMUrzvinNzT6S-2V-yqXaE0wW6CQi1Lr-6q23b-Ondw3RrG6Cwo1bgc63CLZfzlQCO4Ulofly1uDGb0wUG8eTVv58T/s1600/Disposal+partex+step+4.jpg" height="345" width="400" /></a></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">The only thing left to do it balance off the Disposals t-account to see if Jackie made a profit or loss on disposal (that's your job!)</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">So, now you can deal with any disposal task thrown at you! </span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span>Mikehttp://www.blogger.com/profile/08903759317346563528noreply@blogger.com1