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Week 14: Fundamentals of Financial Accounting (FFA)

The document provides information to prepare financial statements for Crown Co for the year ended 31 December 20X5. It includes details of inventory, prepaid rent, light and heat expenses owed, write-off of uncollectible debt and adjustment to allowance for receivables, and depreciation calculations. The summary is to prepare a statement of profit or loss, statement of changes in equity, and statement of financial position based on the information given.

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66 views10 pages

Week 14: Fundamentals of Financial Accounting (FFA)

The document provides information to prepare financial statements for Crown Co for the year ended 31 December 20X5. It includes details of inventory, prepaid rent, light and heat expenses owed, write-off of uncollectible debt and adjustment to allowance for receivables, and depreciation calculations. The summary is to prepare a statement of profit or loss, statement of changes in equity, and statement of financial position based on the information given.

Uploaded by

Daddy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Week 14

Fundamentals of
Financial Accounting
(FFA)

BBA 2k21
Example

2
Example
You are given the following additional information:
1. Inventory at 31 December 20X5 was $25,680.
2. Rent was prepaid by $1,000 and light and heat owed was $460 at 31 December 20X5.
3. Following a final review of the receivables at 31 December 20X5, Crown Co decided to write off another
debt of $130. The entity also adjusted the allowance for receivables to $516 at 31 December 20X5.
4. Crown Co estimated that the income tax charge on profit for the year was $7,300.
5. Depreciation is to be provided as follows:
• building – 2% annually, straight-line
• fixtures & fittings – straight line method, assuming a useful economic life of five years with no
residual value
• motor vehicles – 30% annually on a reducing balance basis.
• A full year’s depreciation is charged in the year of acquisition and none in the year of disposal.

Prepare a statement of profit or loss and other comprehensive income for the year ended 31 December
20X5, Statement of Changes in Equity and a statement of financial position as at that date for Crown Co.
3
Prepaid Rent $ 1,000

Prepaid Rent (Dr.) $ 1,000 (SFP)


Rent Expense (CR.) $ 1,000 (SP&L)
and light and heat owed was $460 at 31
December 20X5.
Light & Heat Expense (Dr.) $ 460 (SP&L)
Light & Heat Payables / Accruals (Cr.) $ 460 (SFP)
Following a final review of the receivables at 31 December
20X5, Crown Co decided to write off another debt of $130.

Irrecoverable Debt Expense (Dr.) $ 130 (SP&L)


Trade Receivables (CR.) $ 130 (SFP)
The entity also adjusted the allowance for
receivables to $516 at 31 December 20X5.
Allowance for receivables – Closing $ 516
Allowance for Receivables – Opening $ 588
Reduce (588-516) $ 72

Allowance for receivables (dr.) $ 72


Irrecoverable debt expense (cr.) $ 72
Depreciation
1- Building – 2% annually, straight-line

Cost * 2% = 100,000*2% = $ 2,000

2- Fixture & Fitting


(Cost – Residual Value) / Useful life =
28,000 -0 / 5 $ 5,600
3- motor vehicles – 30% annually on a reducing balance basis.
Carrying Amount = (Cost – Accumulated Deprecation) * 30%
(24000-12240) *30% = $3,528

Total Depreciation = $ 11,128


Depreciation Expense (Dr.) 11,128 (SP&L)
Acc. Depreciation (Cr.) $ 11,128 (SFP)
Crown Co estimated that the income tax
charge on profit for the year was $7,300.

Income Tax Expense (Dr.) $ 7,300 (SP&L)


Income Tax Payable (Accruals) (Cr.) $ 7,300 (SFP)

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