Fa - Assignment Week 1

Question :

Recognition of balance sheet items Sr. No. a b c d e f

Asset Cash

Account receivable

g h i j k

Notes receivable Land

l

A trade mark such as McDonald's Golden Arches

Liability

Owner's quity

Notes payable Office equipment Retained earnings Account payable

Capital Stock

Remarks

A firms goods mgmt - assumng this as people cost for mgmt. It is G&A expenses office supplies is revenue expenses

Intenginlble asset ( assuming that it carries value)

Question :

Balance sheet preparation Assumption 1 - tarnsaction a - initially $ 12000 was paid by cash Assumption 2 - tarnsaction c - supplies on hand are considered as inventory & Assumption 3 - tarnsaction d - supplier payment is assumed as revenue expen Assumption 4 - tarnsaction f - $2500 is considered as goods sold & shown as Assumption 5 - tarnsaction h - Assumed that the inventory is purchased in thi BALANCE SHEET Assets Amount Fixed Assets Equ purchased (a) Land(b)

40000 125000

Investment

Assets Loans & advances Bank balance Inventory ( C, h ) Receivables

109000 25000 2500

Intengiable assets

301500

USE Sr.no

Transaction

Assets

Notes

a

eqp purchase cost

b

old land

c

supplies on hand

40000 -14000 125000 125000 12000 -12000

d

supplier payment

e

share capital

70000

cash

f

account receivable

2500

account receivable

g

retained earnings

78000

cash

Revenue Expenses

cash paid for 12000 + 2000later asset capital a/c inventory cash paid 22000

Notes

h

inventory in hand

13000 13000

cash paid

paid by cash considered as inventory & paid in this year assumed as revenue expenses & not as cash pad for purchasing asset s goods sold & shown as Income. ventory is purchased in this year & hene cashis paid in this year to purchase the same. ANCE SHEET Liabilities Amt Expenses Particualrs Net worth ( Owner's equity) Share capital Capital a/c land Retained earnings PAT

MFG COST / COGS 70000 125000 78000 -19500

Loan & Debentures

Current Liab & provisions Account payable (a,d)

Income Statement Amount

SG&A Supplier payment (D)

22000

Interest & Bank charges 48000 Depreciation

TAX PAT

-19500 22000

301500

= Liabilities

Notes

26000

notes payable

22000

account payable

Sources Income

70000 2500 78000

part of net worth

Income Statement Income Particulars Operating Income Sales (F)

Amount

2500

Other income

2500

ces Bank a/c inflow Tr no.

Details

Amt

e g

share capital retained earnings

70000 78000

Particulars eqp purchased cash paid cash paid for inventory

148000 109000

Amt 14000 12000 13000

outflow Tr no. a c h

39000

Question :

Income Statement Preparation Revenue Cash & sales on a/c Expenses Cost of good sold Gross Profit

2,000,000 1,250,000 750,000

Salary & wages Advt. & promo Misc. exp Insurance exp.

280,000 100,000 25,000 3,000

Total

408,000

Operating profit ( EBIT)

342,000

Depreciation

0 assumed

Non operating income

0 assumed

Non operating expenses

0 assumed

Interest

0 assumed

PBT Tax expenses Net Income

342,000 0 no tax 342,000

Inputs

Sale Salary & wages Cost Insurances Misc. expenses Advt & promo

2,000,000 280,000 1,250,000 3,000 25,000 100,000

Question :

1

Income Statement Interpretation

Sales in this year & cash will be collected next year

Answer Income / Revenue is recognized in the period in which Goods / Services are SOLD, not necessari 2

Advt. expenses resulted from last year's promo & the payment will be made next year. Why amt. is listed

Answer Expenses are the amount of resources used up by the entity to earn revenue during a period. An in the period in which goods & services are used, not necessary the period in which cash is paid 3

100 new computers purchased. Not reflecting in Income statement.

Answer New Computers purchased will be part of assets & hence will not reflect here. The amt. paid ( if in 4

Member of board of director knows the firm issued $ 1000 cash dividend.

Answer Cash dividend will be part of Owner's equity & hence will not be part of income statement. The am

are SOLD, not necessarily in the period in which cash is received.

ext year. Why amt. is listed this year?

enue during a period. An expenses is recognized iod in which cash is paid.

here. The amt. paid ( if in this year) will reflect in Bank a/c statement.

ncome statement. The amt. paid will be shown as cash outflow in Bank a/c statement.