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Financial Statements with End of Year Adjustments

Financial Statements with End of Year Adjustments

Author: Jamshed Ali
Description:

This one is just a collection of past exam questions on the topic. 

Provides practice on preparation of F/S with adjustments using CIE past exam questions.

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Tutorial

F/S with End of Year Adjustments

Before You Start

Just go through the following summary before you do the past paper exam questions.

1. Accrued Expenses (Other Payables):

Concept to Know

Go through the tutorial on Other Receivables and Other Payables.

Formula

  • Amount of expense to be included in the I/S=Amount paid (look in the T/B)+Amount accrued at the end-Amount accrued at the start
  • Amount of expense to be included in the SoFP=Amount accrued at the end (Show under the Current Liabilities as Other Payables)

2. Accrued Incomes (Other Receivables):

Concept to Know

Go through the tutorial on Other Receivables and Other Payables.

Formula

  • Amount of income to be included in the I/S=Amount received (look in the T/B)+Amount accrued at the end-Amount accrued at the start
  • Amount of income to be included in the SoFP=Amount accrued at the end (Show under the Current Assets as Other Receivables

3. Prepaid Expenses (Other Receivables):

Concept to Know

Go through the tutorial on Other Receivables and Other Payables.

Formula

  • Amount of expense to be included in the I/S=Amount paid (look in the T/B)+Amount prepaid at the start-Amount prepaid at the end
  • Amount of expense to be included in the SoFP=Amount prepaid at the end (Show under the Current Assets as Other Receivables

4. Prepaid Incomes (Other Payables):

Concept to Know

Go through the tutorial on Other Receivables and Other Payables.

Formula

  • Amount of income to be included in the I/S=Amount received(look in the T/B)+Amount prepaid at the start-Amount prepaid at the end
  • Amount of expense to be included in the SoFP=Amount prepaid at the end (Show under the Current Liabilities as Other Payables

5. Goods/Stock Drawings (The owner(s) take goods for their own use but make no record of this during the year):

Formula

Deduct from Purchases and Add to Drawings

6. Provision for Depreciation (P4Dep) of NCAs:

Concept to Know

Go through the tutorial on P4Dep.

Formula

  • Add current year's depreciation to the list of expenses in the P/L
  • Deduct the Accumulated Depreciation (bal c/d of P4Dep account) from the Original Cost of each NCA in the SoFP

7. Provision for Doubtful Debts (P4DD):

Concept to Know

Go through the tutorial on P4DD.

Formula

  • Increase in the P4DD is shown as an expense in the P/L (Last year's estimate of bad debts was too little/insufficient)
  • Decrease in P4DD is shown as an other income in the P/L, added to GP (Last year's estimate of bad debts was too high/more than sufficient)
  • The new balance (bal c/d of P4DD account) of the P4DD is deducted from the T/Rs in the SoFP

Source: Self

CIE Past Papers Questions

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Source: www.cie.org.uk