Which categories go to SOFP or SPL on the Extended Trial Balance?

danlow93

Hi, I have my ACPR Exam on Wednesday and am having issues remembering which categories go where on the ETB. It's the ones such as accruals, prepayments, allowance for doubtful debts adjustment, accumulated depreciation which I always seem to forget and am wondering if anyone has any techniques to help them remember things like this. Thanks in advance.

Loopster

Income and expenses go to the profit and loss ie. Purchases, rent, heat and light etc... a few tips.. Opening Inventory is a DEBIT in the SPL, Closing Inventory is a CREDIT in the SPL and a DEBIT in the SOFP. Depreciation Charges is an expense (Just think charge = expense) therefore goes to the SPL. Allowance for doubtful debt Adjustment goes to the SPL. If you are increasing your allowance, it is an expense as it is costing the business money, if you are decreasing the allowance, it is income as you are increasing the profit of the company. Only Expenses and Income go to the SPL.

Assets and Liabilities (anything that isn't an expense or income) go to the SOFP. ie, Equipment at cost, VAT, a loan, Accumulated depreciation. A prepayment is an asset, because you have prepaid an expense therefore this is a good thing and therefore gets debited to the SOFP. An Accrual is an expense as an accrual increases your expenses, this is a bad thing, therefore gets credited to the SOFP.

Allowance for doubtful debt is a liability because it's what you expect/budget to not be paid from creditors, this is a bad thing therefore credit the SOFP (do not confuse for Allowance for D/D Adjustment) Remember your SLCA + PLCA are assets and liabilities, don't confuse them as income/expenses.

Hope this helps a bit, just always try and remember if you are adjusting the allowance for D/D you are either increasing or decreasing the expense of the business. Expenses = SPL. The actual Allowance for Doubtful Debt is a liability to the business.

frenchielsa

Very helpful @Loopster thank you