Unit 5 practice simulations

john.carter14
john.carter14 Registered Posts: 22 Dedicated contributor ? ? ?
Hi
Currently trying to get my head round D1908 (Maintaining Financial Records and Preparing Accounts).

In Part Two Task 8 it asks you to enter adjustments in the second two columns of the extended trial balance, one of these being matters listed in a memo from Monica Singh, this being as follows

Work-in-Progress

As you know fees charged to clients are normally based on the time spent on their affairs, the value of the hours that have been worked but not billed at the year end is work in progress, this is included in the balance sheet as acurrent asset. The profit for the year is adjusted for work in progress at the beginning of the year and work in progress at the end of the year.

Total work in progress was £73,650 at 31st March 2004 Included in this total is £2,550 that relates to Libra Partners, As this is a new client we have agreed to charge them only £1,200 for this work.



Now the figure on the balance sheet as at 31st March 2004 was £84,668.45.

Question now is where do I start on this as we only touched on the subject during tutorials

Comments

  • sdv
    sdv Registered Posts: 585
    This question is about application of IAS 2 (SSAP9).
    Closing stock should be valued at lower of Cost or Net Realisable value (NRV).

    Unbilled hours work is your work in progress, or your stock. P&L takes into account of opening and closing work-in-progress.

    The closing w-i-p calculation should be £73650 less £2550 (value included in closing w-i-p) and add £1200 (NRV lower then cost)

    Closing W_I_P = £72,300
  • john.carter14
    john.carter14 Registered Posts: 22 Dedicated contributor ? ? ?
    Thanks very much for your help :001_smile:
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