CHAPTER 39 End of Year Procedure (HL only) Expenses due and prepaid Gains due and prepaid...

CHAPTER 39 End of Year Procedure (HL only)

Expenses due and prepaidGains due and prepaid

Depreciation of Fixed Asset

2R. Delaney

Expenses Due: Summary of Procedure

1. Calculate the full cost of that expense for the year

2. Credit the expense account with this amount (write in “P & L A/C”)

3. Balance the account4. Bring the balance down on the credit side

to indicate the amount owed5. The balance appears as a liability in the

Balance Sheet

3R. Delaney

Q3 page 364 Textbook

Stationery A/C

1,000Balance b/d31/12/11

12,00012,000

_____1,000Balance c/d31/12/11

12,000P&L A/C31/12/1111,000Balance b/d1/12/11

€FDetailsDate€FDetailsDate

The balance of €1,000 is a credit balance indicating that it is a liability. Thus it will be shown as a current liability in the balance sheet.

€11,000 + €1,000 due

4R. Delaney

1. Calculate the full cost of that expense for the year

2. Credit the expense account with this amount (write in “P & L A/C”)

3. Balance the account4. Bring the balance down on the debit side

to indicate the amount prepaid5. The balance appears as an asset in the

Balance Sheet

Expenses Prepaid: Summary of Procedure

5R. Delaney

Q1 Page 364 Textbook

Insurance A/C

1,600Balance b/d31/12/11

2,4002,400

1,600Balance c/d31/12/11____

800P&L A/C31/12/112,400CB1Bank1/9/11


4/12th of €2,400 = €800

The balance of €1,600 is a debit balance indicating that it is an asset. Thus it will be shown as a current asset in the balance sheet

6R. Delaney

Gains prepaid (i.e. income received in advance) Summary of Procedure

1. Calculate the full amount of the gain due for the year

2. Debit the gain account with this amount (write in “P & L A/C”)

3. Balance the account4. Bring the balance down on the credit side

to indicate the prepayment5. The balance appears as a liability in the

Balance Sheet.

7R. Delaney

Q2 Page 364 Textbook

Rent Receivable A/C

10,000Balance b/d31/12/11

24,00024,000

____10,000Balance c/d31/12/11

24,000Bank CB1

1/6/1114,000P & L A/C31/12/11


7/12th of €24,000 = €14,000

The balance of €10,000 is a credit balance indicating that it is a liability. Thus it will be a current liability in the balance sheet

8R. Delaney

Gains Due (i.e. income owed to the business) Summary of Procedure

1. Calculate the full amount of the gain due for the year

2. Debit the gain account with this amount (write in “P & L A/C”)

3. Balance the account4. Bring the balance down on the debit side

to indicate money owed to you5. The Balance appears as an asset in the

Balance Sheet

9R. Delaney

Q9 Workbook page 214Let It Ltd was owed €3,000 rental income on 31/12/12. Close off and balance the rental income account at 31/12/12. Show clearly the amount to be transferred to the Profit and Loss Account

3,000Balance b/d31/12/12

36,00036,000

3,000Balance c/d31/12/12_____

33,000Balance b/d1/12/1236,000P & L A/C31/12/12


Rental Income A/C€33,000 already received + €3,000 owed to Let It Ltd

The balance of €3,000 is a debit balance indicating that it is an asset. Thus it will be shown as a current asset in the balance

sheet

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R. Delaney

Depreciation: Summary of Procedure

1. Debit the Asset Account with the cost price of the Asset. Carry down this balance each year

2. Calculate the amount of depreciation to be written each year and Debit the “Depreciation A/C” and Credit the “Provision for Depreciation Account” with this amount each year

3. Close off the Depreciation Account each year, i.e. Debit the “Profit and Loss A/C” and credit the “Depreciation Account with the value of the depreciation each year

4. Balance the Provision for Depreciation Account each year and carry this balance forward to the next year.

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R. Delaney

Q5 Textbook page 364

Computer A/C

8,0008,000

8,000Balance c/d31/12/128,000Balance b/d1/1/12

8,0008,000

8,000Balance c/d31/12/118,000CB1Bank1/1/11


Note: The asset A/C (Computer) is shown on its own on this slide. The other 2 accounts are shown on the next slide

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Q5 (cont)

Depreciation A/C

1,6001,600

1,600P & L A/C31/12/121,600Prov. for Depr31/12/12

1,6001,600

1,600P & L A/C31/12/111,600Prov. for Depr. 31/12/11


Provision for Depreciation A/C

3,2003,200

1,600Depreciation A/C31/12/12_____

1,600Balance b/d1/12/123,200Balance c/d31/12/12

1,6001,600

1,600Depreciation A/C31/12/111,600Balance c/d31/12/11


Depreciation A/C

CHAPTER 39 End of Year Procedure (HL only) Expenses due and prepaid Gains due and prepaid...

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Transcript of CHAPTER 39 End of Year Procedure (HL only) Expenses due and prepaid Gains due and prepaid...