Advanced Accounting for A2 (2nd Edition)

Advanced Accounting for A2 (2nd Edition)

Ian Harrison

Language: English

Pages: 422

ISBN: 0340973595

Format: PDF / Kindle (mobi) / ePub


Advanced Accounting for A2 has been written specifically to help students, who have already been introduced to Accounting, to understand fully the intricacies of this complex subject. It is broken down into manageable units, each explaining a topic clearly using accessible language and including interspersed questions to encourage students to apply what they have learnt. Illustrations and diagrams are used throughout to support explanations. Each unit is rounded up with a series of exercises and exam-style questions ensuring that students get plenty of practice in the areas in which they must be proficient to pass the A2 exam.

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preparing and presenting financial statements’. The principles are the concepts that you have already learned (I hope). They apply to all the financial statements that you have prepared in your studies so far. They are the going concern concept, the accruals concept, prudence, consistency and materiality. The bases are the individual methods of treatment used when applying accounting principles to particular situations – for example, the application of cost value or net realisable value to

distribution Other expenses – administrative Audit fees Debenture interest Corporation taxation Ordinary dividends paid Retained earnings at 31 October 20*8 £ 956,230 438,920 43,310 41,760 106,900 54,970 67,830 54,000 20,000 31,140 34,800 23,000 40,000 21,000 24,000 127,600 Required Prepare an income statement for the year ended 31 October 20*9. continued ➣ The accounts of limited companies 127 WORKED EXAMPLE continued Answer Treadle plc Income statement for the year ended 31 October 20*9

ϩ depreciation of van £20 ϭ £165, which agrees with the bank balance. So, in order to calculate any cash flows for the year, depreciation charges should be added to the net profit for the year. Depreciation on premises at the start of the year is £3,112,000; at the end of the year it is £3,967,000. Change for the year is £855,000. Although this is not really a cash inflow, we treated it as such, as we did with Dougie. To be added to the cash inflows: £855,000 for depreciation of premises. The

prepared, a suspense item is included in the trial balance in order to make it balance. If the ‘balancing’ amount is a debit, the suspense item is included in the balance sheet as a current asset. If the suspense item is a credit, then this will appear in the balance sheet as a current liability. Here are three examples to remind you of how a suspense account is used. WORKED EXAMPLE The sales day book has been overcast by £100. Required Prepare journal entries to correct the error. Answer The

current assets is stock. The liquid ratio tests the ability of the business to cover its current liabilities with its current assets other than stocks. Liquid ratio ϭ Current assets Ϫ Stock:Current liabilities Or Current assets Ϫ Stock :1 Current liabilities FORMULA 20*9 380 :1 304 1.25:1 20*8 790 :1 305 2.59:1 Year 20*8 seems rather high so rather too many resources are tied up in a liquid form, not earning profits. The ratio has improved in 20*9, mainly because of a reduction in the bank

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