CHAPTER 39 End of Year Procedure (HL only)
Expenses due and prepaidGains due and prepaid
Depreciation of Fixed Asset
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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
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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
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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
€FDetailsDate€FDetailsDate
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
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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.
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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
€FDetailsDate€FDetailsDate
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
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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
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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
€FDetailsDate€FDetailsDate
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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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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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
€FDetailsDate€FDetailsDate
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
€FDetailsDate€FDetailsDate
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
€FDetailsDate€FDetailsDate
Depreciation A/C
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