Chapter 2 - FS Notes Flashcards
(11 cards)
REVENUE
Revenue – sales of goods or services
Other Operating Income - Rental received, Gain on disposal of assets, Commission revenue, Decrease in AFDD
Investment Income - Dividend income, Interest on fixed deposit
EXPENSES
Administrative expenses:
• The overhead costs of running the business
• E.g. office expenses, director’s salaries, auditor fees
Distribution costs:
• All costs incurred in procuring & sustaining sales
• E.g. advertising expenses, salesmen’s salaries and commission, warehouse cost, depreciation od delivery vehicle
Finance cost:
• All costs of using borrowed capital
DEPRECIATION
Depreciation is charged as an expense in the SOPL.
SLM:
Depreciation = Original cost x %
or
Depreciation = Cost – Salvage value
= Answer ÷ Expected no. of useful life
RBM (Carrying amount of NCA):
Dep. for 1st Year = % x Cost
Dep. for 2nd year and above = % x Carrying Amount
AFDD & BAD DEBT
Bad debts: Debts that are uncollectible from the debtors (Death, migration, bankruptcy)
Recording the Write-Off of an Uncollectible Account:
(Example) Hasya Trading decided to write-off the RM500 balance owed by customer Jiji as BAD DEBTS on March 1, 2022. Under this method, companies debit every bad debt write-off to the allowance account rather than to Bad Debts Expense.
Recording Estimated Uncollectible:
AFDD = Net Account Receivable × %
NR = Account Receivable - Bad Debt
• 1st year accounting, record in FULL AMOUNT
• Next accounting period, record only the INCREASE (expenses) or DECREASE (revenue) of the allowances.
TAXATION
TAX EXPENSE:
If tax payable is more than the amount paid = Any liability for unpaid income taxes is reported in the income tax payable line item on the SOFP. Tax payable is considered a current liability.
TAX RECOVERABLE:
If tax payable is less than the amount already paid = Amount of a tax refund that a company anticipates receiving from the tax authorities. It would be treated as a current asset in SOFP.
INCOME TAX EXPENSE: for recording income tax costs in the period during which they were incurred
INCOME TAX PAYABLE: taxes that a company owes to the government but that has not yet been paid. Until it is paid, it remains as a liability.
REVALUATION (Gains)
A company purchased a building on 1 April 20X1 for RM1,100,000. On 1 April 20X3 the company revalued the building to its fair value of RM1,200,000.
Cost/Carrying amount = RM1,100,000
Fair value = RM1,200,000
Surplus on revaluation = RM100,000
DIVIDENDS (Cash / Bonus Issue)
Issued and fully paid capital:
7,000,000 7% Preference Shares of RM0.50 each: RM3,500,000
20,000,000 RM0.50 Ordinary Shares: RM10,000,000
During the year, ABC Bhd paid the preference share dividend in full, and an interim dividend of RM0.03 per ordinary share.
Calculation:
Preference dividend paid = 7% x 7,000,000 x RM0.50 = RM245,000
Interim ordinary dividend paid = RM0.03 x 20,000,000 shares = RM600,000
ACCRUALS
ACCRUED REVENUE: Revenue for the period but not yet recorded or received
Shown in the CURRENT ASSETS in the SOFP
Dr Accrued Revenue
Cr Revenue
ACCRUED EXPENSES: Expenses incurred during the accounting period but not yet paid.
Shown in the CURRENT LIABILITIES in the SOFP
Dr Expenses
Cr Accrued Expenses
PREPAYMENTS
UNEARNED REVENUE: Revenue received in advance during the current year for the goods or services which yet to be sold or rendered.
Shown in the CURRENT LIABILITIES in the SOFP.
Dr Revenue
Cr Unearned revenue
PREPAID EXPENSES: Expenses for the following accounting period paid in advance in the current period.
Shown in the CURRENT
ASSETS in the SOFP.
Dr Prepaid Expenses
Cr Expenses
REVALUATION (Losses)
A company purchased a building on 1 April 20X1 for RM1,100,000. On 1 April 20X3 the company revalued the building to its fair value of RM800,000.
Cost/Carrying amount = RM1,100,000
Fair value = RM800,000
Deficit on revaluation = RM300,000
DISPOSAL
COST - ACCUMULATED DEPRECIATION - PRICE SOLD = DISPOSAL (LOSS/GAIN)
