FA1

• What is the accounting period end for Company ABC?

  31 Dec
• What was the balance of trade receivables before any write-off for Company ABC?

  £43,000
• What was the balance of provision for doubtful debt before the write-off?

  £1,400
• How much of the trade receivable became uncollectible for Company ABC?

  £1,000
• After the write-off, what is the estimated percentage of the remaining receivables that might not be collected?

  5%
• What is the trade receivable balance after the write-off for Company ABC?

  £42,000
• What is the provision for doubtful debts that needs to be reported on the balance sheet after the write-off?

  £2,100
• What is the net trade receivables after the provision for doubtful debt is deducted?

  £39,900
• What is the bad debt expense that will be reported on the income statement for Company ABC?

  £400
• What was the closing trade receivables as at 31/12/2011 before bad debts were written off?

  £101,000
• What percentage of the closing trade receivables does the business decide to maintain as provision for doubtful debts?

  3%
• How much trade receivables were written off due to a customer going bankrupt?

  £1,000
• How much bad debts expense was recognized to update the balance of provision for doubtful debt?

  £1,400
• What is the formula for the accounting equation?

  Assets + Expenses = Equity + Revenue + Liabilities
• What do accounting standards regulate?

  How financial events need to be recorded to generate objective information
• What is the challenge created by different GAAPs?

  Difficulty in cross-border financial analysis
• What is the IASB?

  International Accounting Standards Board
• When was the IASB established?

  2001
• What does the IASB produce?

  International Financial Reporting Standards (IFRS)
• Since when have all listed companies in the EU been required to use IFRS?

  Since 2005
• What is the ongoing project between US GAAP and IFRS aimed at?

  To better align the standards and reduce differences
• What are the steps in the accounting cycle?

  1. Recording transactions and posting
  2. Adjusting entries
  3. Trial Balance
  4. Closing entries
  5. Financial Statements
• What is the purpose of adjusting entries in the accounting cycle?

  To update accounts and bring them to their correct balances
• What is the purpose of the trial balance?

  To check that the sum of debits equals the sum of credits
• What happens during closing entries in the accounting cycle?

  Temporary accounts are closed and transferred to retained profit
• What was the investment amount made by Yahye in LondonWorkers?

  £800,000
• What were the legal fees paid by Thazuhga for incorporating the business?

  £5,000
• How much did Thazuhga pay for the land and office building?

  £660,000
• What method did LondonWorkers decide to use for depreciation?

  Straight-line method
• What is the expected salvage value of the building purchased by LondonWorkers?

  £0
• What is the annual interest rate on the loan taken out by Thazuhga?

  10%
• When will the interest on the loan be paid?

  30/06 next year
• How long will the company use the building before repayment of the loan?

  20 years
• What are the key components of the accounting cycle?

  • Recording transactions
  • Adjusting entries
  • Trial balance
  • Closing entries
  • Financial statements
• What are the key concepts related to accounting standards?

  • Regulation of financial event recording
  • Different GAAPs create challenges
  • Need for global accounting standards
  • Role of IASB in setting IFRS
• What are the implications of using IFRS in the EU?

  • Mandatory for all listed companies since 2005
  • Many countries worldwide employ IFRS
  • Ongoing convergence with US GAAP
• What are the implications of the LondonWorkers case for accounting transactions?

  • Investment and share issuance
  • Legal fees as expenses
  • Asset purchases and loan implications
  • Depreciation method chosen
• On what date did Thazuhga hire a lawyer and get the business incorporated?

  April 2
• How does the accounting equation relate to the legal fees paid by Thazuhga?

  Legal fees increase expenses and decrease cash
• How much did Thazuhga pay for the land and office building on June 30?

  £660,000