HELP P&L and Balance Sheet

jojo1979
jojo1979 Registered Posts: 75 ? ? ?
Hi Guys,

Was hoping someone would be able to help, i am getting so confused with adjustments etb and the finacial statements.

Am i right in thinking that in the ETB the accounts are put into either the P&L or BS sheet columns once and the accounts that are used to make the adjustments are put into the P&L and the BS? Hope this makes sense. Am going around in circles trying to figure it out and im just confusing myself even more.

Jo

Comments

  • Rinske
    Rinske Registered Posts: 2,453
    jojo1979 wrote: »
    Hi Guys,

    Was hoping someone would be able to help, i am getting so confused with adjustments etb and the finacial statements.

    Am i right in thinking that in the ETB the accounts are put into either the P&L or BS sheet columns once and the accounts that are used to make the adjustments are put into the P&L and the BS? Hope this makes sense. Am going around in circles trying to figure it out and im just confusing myself even more.

    Jo
    A ETB has 4 columns (each 4 has 1 debit and credit side).

    The first is the normal TB, which you technically copy over from the TB.
    The second is the adjustment columns where you add the adjustments after reviewing the TB.
    The third one is the P&L accounts, where you only copy over those items that go on the P&L statement (expenses and income), which helps you calculate profit.
    The fourth one is the BS, where you only copy over those items that go on the BS statement (assets, liabilities and capital), which will need the profit calculated in the P&L to balance.

    All figures listed in column one and two will need to be involved somewhere in column three or four, not just the ones you have adjusted, but all of them and only once, so if you make an adjustment you need to add it up or deduct it before putting the figure in column 3 or 4.

    After you have done that column three is your full P&L statement, while column four is your full BS statement and you could just copy those figures over in the right layout.

    Does that help?
  • Jo Clark
    Jo Clark Registered Posts: 2,525
    That is very clear and well explained Rinske! :)

    How are your CIMA studies going?
    ~ An investment in knowledge always pays the best interest ~
    Benjamin Franklin
  • jojo1979
    jojo1979 Registered Posts: 75 ? ? ?
    Hi Rinske

    Thank you for that and yes it does help so thank you.

    Another problem im having is putting the adjustments into the etb. Im getting confused as to which account in the adjustments column they go into. Do you have any tips or help you can give on this?

    Jo
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Adjustments (also called Journals) go into the account you worked out for the adjustment (if that makes sense). Sometimes you will have to create an extra account for the adjustments.

    E.g. If you are given a TB, told to do an ETB, and told that one of the adjustments in depreciation, you need to calculate the depreciation, and then post the calculated figure to Dr depn expense and Cr accumulated depn in the Adjustment columns of the ETB.

    The figures in the PL / BS columns will then be the sum of the TB and ADJ columns. Eg if you have a Dr Advertising £300 in the TB and then you have calculated a prepayment adjustment of £20 Cr, you will put £280 Dr in the PL column under Advertising.

    If you have drawn up your adjustments in Dr Cr form, they should just drop into the corresponding adjustment column in the ETB.

    I hope that makes senses and i have understood your query properly!
  • Rinske
    Rinske Registered Posts: 2,453
    Jo Clark wrote: »
    That is very clear and well explained Rinske! :)

    How are your CIMA studies going?

    Thanks! Well, Saturday is my study day, so I should really focus on studying, but having a short break and just reading here with a cup of tea, before I start on some more E1 questions. I do like my F1 a lot better than E1 still!

    How are you getting on with all the studying?
    jojo1979 wrote: »
    Hi Rinske

    Thank you for that and yes it does help so thank you.

    Another problem im having is putting the adjustments into the etb. Im getting confused as to which account in the adjustments column they go into. Do you have any tips or help you can give on this?

    Jo
    Monsoon wrote: »
    If you have drawn up your adjustments in Dr Cr form, they should just drop into the corresponding adjustment column in the ETB.

    I fully agree with Monsoon here. If you get confused, just write it down as you would normally do a journal, and then add the figures to the adjustment columns.

    It might take a while to get used to adding figures to the ETB and by just writing down the journals for the adjustments, you have the names of the accounts with the amounts behind it. You can then see if you did the correct double entry and didn't miss a bit and can then write them into the ETB based on the journals you made!

    It's a bit more work, but once you do more ETB questions, you will need it less and less!
  • Jo Clark
    Jo Clark Registered Posts: 2,525
    Not too bad thanks. Just completed Level 3 and start Level 4 next week. Any tips in advance? Have also been thinking about the future and whether to do ACCA/CIMA once I complete AAT... and I have enjoyed reading the various posts about the differences between both qualifications.

    What made you decide to study CIMA over ACCA?

    Enjoy your break :)
    ~ An investment in knowledge always pays the best interest ~
    Benjamin Franklin
  • jojo1979
    jojo1979 Registered Posts: 75 ? ? ?
    Hi Guys,

    Firstly thank you for your replies and i think i understand it now.

    Am i right in thinking if for every adjustment i make i make journal entries then i post the figures to the adjustment column in the accounts that i make entries in the journal for (hope that makes sense). Is this correct?

    Also one other question. If i enter entries in the provision for depreceiation account and depreciation adjustment account in the adjustment column do i then need to make an entry in the depreciation account as well in the adjustment column or only in the p&l and Balance sheet column?

    Jo
  • Rinske
    Rinske Registered Posts: 2,453
    Yes, any journals after you created the original TB go in via the adjustment column.

    As for the second question there are two depreciation accounts:

    Say you need to adjust the depreciation expense and accumulated depreciation with 300 more than you calculated at first.

    You add the 300 in the adjustment column in both depreciation expense and accumulated depreciation. One debit and one credit.

    You then move the total of the depreciation expense to the P&L by adding up the figures from column one and two.
    The same goes for the accumulated depreciation to the BS column, you move them by adding up column one and two and writing in the total in the BS column.

    Does that answer your question?
  • jojo1979
    jojo1979 Registered Posts: 75 ? ? ?
    I think so i am going to do a few practice ones and see if i can get the hang of it.

    I am doing a practice question now and the adjustment i have to make in the etb is a bank loan was taken out on the 1 June 00 and the interest charges is at 7.5% per annum. THe year end is 31 May 01. The bank loan account in TB shows a cr of 60000 and the bank interest account shows a dr bal of 3750. Where do i enter the adjustment and to which account? Then at the bottom i have a loan interest owing account. What would go there? Oh my goodness i am getting so confused here :-(

    Jo
  • Rinske
    Rinske Registered Posts: 2,453
    Well, based on that, calculate how much interest you would pay on the loan.

    If you have a loan of 60,000 and the interest is 7.5% per year, the yearly interest would be 4,500. As you only have paid 3,750 interest so far (bank loan interest account balance), you still have to pay the difference of 750 for this year.

    You would need to adjust the bank loan interest account with 750 debit to get to your total of 4,500.
    You would also create an accruals account (loan interest owing account), which you would credit with 750, as that is how much interest you are still owing to the bank for the period.
  • jojo1979
    jojo1979 Registered Posts: 75 ? ? ?
    Ah that makes perfect sense. I get it now.

    Thank you

    Jo
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