AccountancyStudents

Defining a “present” obligation

2008-02-14T08:57:42Z

Good afternoon all,

I have an oddly philosophical sounding query for you: when is obligation “present”?

I strongly suspect I am overthinking this, but it’s bothering me. Let me illustrate what I mean with an example.

Assume that a company has signed a contract in October 2007 to employ a consultant for a three-month period from January 2008 to March 2008.

If the company’s year-end was 30 March 2008, and the consultant had not been paid, his fees would have to be accrued and form a liability in the balance sheet. (ps: please tell me if I am wrong here)

Conversely, if the company’s year-end was 31 December 2007, and the consultant had been paid already, his fees would be a prepayment, and form an asset in the balance sheet. (ps: again, tell me if I’m wrong)

Now, here’s the bit I’m not so sure on. What if the year-end was 31 December 2007 and the consultant had not been paid? Does his fee go in the balance sheet as a liability?

Clearly, its an obligation as a result of past events, the resolution of which will result in the outflow of economic resources from the entity. But, at the year-end date, although the company knew it would incur the expenditure next year, the contract did not start until after the end of the financial year. Does that mean that the obligation was not truly “present” and so it cannot be recognised as a liability?

Do you see what I mean about over-thinking it?

Overstating an expense help

2012-01-19T05:20:56Z

v) On January 1, 2010 Grace Ltd. had a balance in the office supplies account of $1,200. During the month, the company purchased office supplies costing $3,000 and expensed this entire amount. On January 31, 2010, a count of office supplies revealed $1,700 still on hand. The appropriate adjusting entry would
a. Credit office supplies for $1,700.
b. Credit office supplies expense for $500.
c. Debit office supplies for $3,000.
d. Debit office supplies expense for $2,500.

I can keep thinking its d, can someone explain to me pls! :(

(answer is B) btw.

Thank you!

Help please!!

2012-01-17T10:42:26Z

A debit balance of $90 for electricity prepaid has been brought forward as a credit entry in the electricity account. Now the correcting entry i passed for this was debit electricity prepaid by $90, debit electricity account by $90 and credit the suspense account by $180. What i need to know is how this correcting entry will affect the net profit figure. My teacher says the profit will decrease by $180 but I’m not sure if that’s the case since the prepaid would have been subtracted from the electricity expense in the income statement whilst it was added due to being considered accrual in this case so wouldn’t the net profit be increased by $180 after the correcting entry or be deecreased by $90. Please give an easy to understand answer and point out what where I’m going wrong, thanks in advance

Profiled Budget

2012-01-15T16:44:03Z

Hi everyone,

Sorry if this sounds basic, but can someone tell me what a Profiled Budget is? And how one would go about building one in Excel? Any links to some examples will be highly appreciated.

Thanks

Commission and VAT

2012-01-04T13:51:12Z

The company I work for (VAT registered) purchases items from a supplier in Europe, and accounts for the VAT as per the reverse charge procedure.

Our company was introduced to this European company by a person from a VAT registered company in the UK, and his company now invoices us for a % commission based on the cost price of the items we have been invoiced for by the European company.

On these invoices he sends us, he does not charge any VAT.

My question is whether or not he is invoicing us correctly? I always thought that the only commission that is VAT exempt is related to financial and insurance transactions?

Amir

2012-01-03T20:54:56Z

Can an individual lend money or deposit money in a to a Limited company in uk

Forecasting query

2011-11-21T20:44:13Z

I’m attempting to fill in a application form for a job and one competences is knowledge of the following:

Forecast
• Recommend, check and apply appropriate controls in the financial control system

I don’t have any experience/in depth knowledge of forecasting, could any one point me in the right direction as to what exactly I should be writing?

Kind regards

Lee

Drawings

2010-05-17T06:37:04Z

Hi All,

First post so hoping you can help.

When a proprietor removes goods for his own use (drawings) this will cause profit to rise (as you are reducing you cost of goods sold) but it leaves assets unaffected - according to the answer in one of my books.

I can understand why profit improves, but why are assets not effected? The double entry for this is:

DR Drawings
CR Purchases

We are essentially reducing our assets and reducing our capital?! Or is this incorrect?

Thanks,
Ross

stock card help

2011-11-11T22:51:32Z

hi guys

hopeing you can help me with something, i have got my head around lifo, and fifo and avco cost of issue, but how do i calculate closing stock for avco.

any help would be cool

Part disposal of a subsidiary

2011-11-03T17:38:47Z

I understand this is the change in net assets from before disposal and after disposal. In my case this value is £1.

Where does the debit entry for this get posted in the group accounts? P&L or equity? and what account description should be used?

Thanks