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Qn 1 – Final Accounts one approach. Gabrielle Moran 11th September 2010. Prior to Final Accounts. Double Entry including accruals/prepayments to simple P&L and Balance Sheet Incomplete records Control Accounts – Subsidiary Books Depreciation and Disposal Correction of Errors
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Qn 1 – Final Accountsone approach Gabrielle Moran 11th September 2010
Prior to Final Accounts • Double Entry including accruals/prepayments to simple P&L and Balance Sheet • Incomplete records • Control Accounts – Subsidiary Books • Depreciation and Disposal • Correction of Errors • Bank Reconciliations
Double Entry • Two aspects to all transactions • Matching of Debits and Credits
4 Questions to ask Thus with every transaction you come across you need to decide: • What are the two accounts involved? • Which type of account is each one? • Does the transaction cause an increase or decrease in each account? • Therefore is it a Dr or Cr?
Double Entry • Assets and Liabilities – cash & credit, capital • Purchases, Sales and Returns • Revenue and expenses • Drawings – cash, stock, expenses, f. assets • Debtors & Creditors – discount, interest, bad debts • Simple final accounts – two sided
Bringing it all together At the end of the financial year the Revenue and Expense Accounts are brought together in the FINAL ACCOUNTS to ascertain the firm’s profit for the year. Asset and Liability Accounts are listed in the BALANCE SHEET to ascertain the firm’s worth on a particular date (usually the last day of the financial year).
Transfer to final accounts Record the following transactions in the appropriate accounts of An Other, balance the accounts and prepare final accounts and Bal Sheet, 1. Owner invested €45,000 in a Business Bank alc. 2. Paid rent by cheque €800. 3. Purchased goods on credit from S. Collins €8,400. 4. Sold goods on credit to J. Reilly €9,600. 5. Sold goods for cash €2,500. 6. Purchased goods by cash €2,000. 7. Paid rent by cash €600. 8. Paid S. Collins by cheque €2000. 9. Returned goods to S. Collins €700. 10. Cash sales lodged €5,650. 11. J. Reilly returned goods €200. 12. Paid wages by cheque €650. 13. J. Reilly paid €5,000 by cheque. 14. Received rent €400 cash.
Moving towards “normality” • Split Trading from P & L • Trial Balance • Vertical Approach
Subsidiary Books • Source documents • List • Reduce entries in accounts in nominal ledger
1 Debit matching 6 Credits
Sequence • Prepayments & Accruals • Bad Debts Provision • Simple Incomplete – ord level • Control Accounts – Subsidiary Books • Depreciation and Disposal • Bank Reconciliations • Final Accounts – ord level building adjustments
Adding adjustments to ord Qns • Writing off some closing stock • Goods on sale or return • Bad debts recovered • Adjusting BDP • Building extension to premises – own labour and materials • Built in accruals and prepayments
Adjustments • Hardest Part is sorting the English • Read a Little Talk a Little • Use Dr Cr grid • Make out the accounts
Read a little, Talk a little • Students put in pairs/triads • Students read an adjustment silently • Then they stop and ask each other questions such as: • What information have we got here? • What did you get from that? • What sense do you make of it? • Both team-mates share / integrate their understanding of the material and using Dr/Cr grid work out a possible solution
Full Honours Question • Read carefully – marking anything hidden in Trial Balance • Start with adjustment 1 – prepare T a/cs • Marking off Trial Balance
Full Honours Question • Read carefully – marking anything hidden in Trial Balance • Start with adjustment 1 – prepare T a/cs • Marking off Trial Balance • When adjustments are done -- Trial Balance looks like this
Full Honours Question • Read carefully – marking anything hidden in Trial Balance • Start with adjustment 1 – prepare T a/cs • Marking off Trial Balance • Complete each working
Full Honours Question • Read carefully – marking anything hidden in Trial Balance • Start with adjustment 1 – prepare T a/cs • Marking off Trial Balance • Complete each working • Mark figures you will need P & L figs Bal St figs
Full Honours Question • Read carefully – marking anything hidden in Trial Balance • Start with adjustment 1 – prepare T a/cs • Mark off Trial Balance • Complete each working P & L figs Bal St figs • Enter figures in accounts calculating as you go
Exam Approach • Read carefully – marking anything hidden in Trial Balance • Start with adjustment 1 – LIST • Marking off Trial Balance • Complete each working P & L figs Bal St figs
Exam Approach contd • Prepare Template Accounts Template Trading Profit and Loss a.doc
Exam Approach • Prepare Template Accounts • Enter figures from workings in appropriate place to P & L to Bal St
Exam Approach • Prepare Template Accounts • Enter figures from workings in appropriate place to P & L to Bal St • Enter remaining figures from Trial Balance not struck out
Exam Approach • Prepare Template Accounts • Enter figures from workings in appropriate place to P & L to Bal St • Enter remaining figures from Trial Balance not struck out • Perform calculations (or not!!)