Companies' Accounts

lgarside

I have some home work to re the above but need some help with couple of the adjustments as we don't seem to have covered these in class.

1. yr end is 19x1 and in the TB there are assets under construction for 26,600 the note says this relates to tangible fixed asset which is due to be brought into use in 19x2 what do I do with this on the financial statements?

2. debentures are 10,000 (10%) 6,000 repayable in 3 mths time and 4,000 repayable in 5 yrs time, what do I do with this?

3. If it says all dividends due for 19x1 are included in the TB (66,300) as divs paid does this go on the income statement?

peugeot

Hi,

Re the asset under construction IAS 16 (property, plant and equipment) says that you can recognise the asset as 'Property plant and equipment' if (and only if) it is probable that future economic benefits associated with it will flow into the entity and the cost of the item can be measured reliably. Therfore you need to capitalise the asset under construction as we can assume the cost is reliably measured in the question.

The debentures in your question attract notional interest at 10%, therefore they are 'debt' rather than 'equity'. You need to show the amounts redeemable in 3 months under current liabilities and the £4k as long term liabilities. You need to check your question to see if you have to do something with the 10% interest charge (i.e whether or not you need to accrue for any).

Dividends do not go on the face of the income statement, they go through the statement of changes in equity.

karenv

Sorry I may be missing something but the dividend payable for the year, as far as I can, tell goes in the income statement. In the question here it is already calculated and included in the trial balance, The figures just need entering into the income statement.
I agree with peugeot on the other items.
Would be interested to know if i got this wrong...peugeot advice needed please!
Ploughing through DFS myself at the moment..

peugeot

Hi Karen,

Dividends used to be shown on the face of the income statement after 'profit after tax'. However, they are now shown as a reconciling item through the statement of changes in equity so you no longer see them on the face of the income statement. So the statement of changes in equity would show (as an extract):

Reserves brought forward................................X
Profit for the year (this is post tax profit)...........X
Dividends....................................................(X)
Reserves carried forward.................................X

So the income statement stops at profit after tax.

If you look at my suggested answers to DFS in December 2007:

http://www.aat.org.uk/forums/showthread.php?t=16645

see task 1.2(b) this will illustrate the above.

Best wishes
Steve

karenv

Thanks Steve
When did that change?
Guess I out of touch...

peugeot

Hi Karen,

It only changed a couple of years ago so it is still relatively new.

Kind regards
Steve

karenv

Thanks Steve,
Thats cleared my confusion up.