愛恩學(xué)習(xí)共享大二bfaslides

Accounting

&Financial

DecisionMakingBFA103BernadetteSmithUnitCoordinatorBFA103_042Week4

Module1:Financialaccounting

Topic4:AccrualaccountingBFA103_043LearningobjectivesAftercompletingtheactivitiesforthistopic,youshouldbeableto:Explainthedifferencebetweenanaccrual-basedandacash-basedaccountingsystem,anddiscusswhyanaccrual-basedsystemissuperiorExplainthemeaningofdepreciationanddiscusswhyitisnecessarytodepreciatephysicalnon-currentassetsExplainthemainlimitationofaccrualbasedstatements,anddiscusswhybusinessesneedtopreparecashflowstatementsinadditiontothesestatementsRecordadjustmentswhichputintoeffectaccrualaccountingonaworksheetBFA103_044CashbasedaccountingSmallbusinessesusuallyhaveasimple,purelycashbasedaccountingsystem:revenuesareonlyrecognisedwhencashisreceivedexpensesareonlyrecordedwhencashispaidBFA103_045Accrualaccounting(應(yīng)計制會計）Asdiscussedinoursecondlecture,itisbettertorecognisearevenueintheperiodinwhichitisearned

irrespectiveofwhencashwasreceivedfromthecustomerThenprofitfortheperiodcanbedeterminedbymatching

(配比原則)

therevenuetotheexpensesthatwereneededtoearnthatrevenueirrespectiveofwhen

thepaymentsrelatedtothoseexpensesaremade

Thissystem,called“accrualaccounting”（應(yīng)計制或權(quán)責(zé)發(fā)生制會計)

,oftenrequiresadjustingentrieswhicharemadeonthelastdayofaperiod("balanceday")BFA103_046AccrualaccountingExample:Henry’sHardware:recordedrevenueatthepointofsale,anddidnotwaituntilcashwasreceivedifthesalewasoncredit.Anaccountingsystemthatrecordsrevenuesinthiswayisanaccrualbasedsystem.BFA103_047AccrualaccountingLCS:“WhitelySoundsPtyLtd”:accrualaccountingprinciples.Thisbusinessisacompany.Insteadofa“profit”columntorecordrevenuesandexpenseswewillusea“retainedprofits”column.BFA103_048LectureCaseStudyChristineWhitelyregisteredanewproprietarycompanyonJanuary12010underthenameofWhitelySoundsPtyLtd.ThefollowingtransactionstookplaceduringJanuary:(1)Christinepurchasedall20000$1sharesinthecompany,depositing$20000intoabankaccountinthenameofthenewbusiness.

BFA103_049LectureCaseStudy(2)Premiseswererented,paying3month’srentof$3000inadvancebycheque.(3)Purchasedamotorvehicleandfurnitureandfittingsforthebusiness,drawingchequesfor$12000and$16000respectivelyfromthebusinesses’bankaccount.

BFA103_0410LectureCaseStudy(4)Creditpurchasesofinventoryamountedto$60000.(5)Soldgoodsfor$15000cash,andfor$35000oncredit.Intotal,thesegoodshadcostthebusiness$45000.(6)Paidwagesof$1100forthemonthbycheque.BFA103_0411LectureCaseStudyOn31January,priortopreparingreports,theseadjustmentswererequired:a.Afurther$50wasowedtoanemployeeforworkdoneinJanuary,andabillfor$60forelectricityforJanuaryhadbeenreceivedbutnotpaid.BFA103_0412LectureCaseStudyb.Thetwonon-currentassetsmustbedepreciated.Itisestimatedthattheybothhaveausefullifetothebusinessof5years.Thefurniture&fittingshasanexpectedresidualvalueattheendofthattimeof$1000,thevehiclenone.c.Anadjustmentisalsorequiredinrelationtotheprepaidrent.BFA103_0413LectureCaseStudyRequired:Prepareworksheetentriesforthesetransactions,BFA103_0414LectureCaseStudyBFA103_0415BFA103_0416ExpensesUsuallydecidingwhentorecord(“recognise”)anexpenseiseasy.Forexample,thewagesof$1100paidinJanuary(dotpoint6)wererecognisedasanexpenseforJanuarybecausetheycontributedtoearningthesalesrevenueforJanuary.Also,theamountcanbereliablymeasuredandafutureeconomicbenefit(theasset“cashatbank”)decreasedinJanuary.WesaythatthisamountisbothacostinJanuary(sincethatiswhenitwaspaid)andisalsoanexpenseofJanuaryBFA103_0417ExpensesHowever,sometimesitismorecomplicated:the$3000rentpaidinJanuary(acostofJanuary)isactuallyanexpenseforJanuary,FebruaryandMarchbecausethebenefitofusingthepremisesandthecontributiontorevenuesisreceivedduringthese3monthsthewagesof$50tobepaidforinFebruary(acostofFebruary)isanexpenseforJanuarybecausethatiswhentheworkwasdonecontributingtorevenueinJanuaryBFA103_0418ExpensesToensureexpensesarerecordedinthecorrectperiodweuse2balancesheetitems:“Accruals”(應(yīng)計項目)-acurrentliabilitycreatedwhenexpenseshavebeenincurredinearningrevenuesduringaperiodbutpaymenthasnotyetbeenmade“Prepayments”(預(yù)付款項）–acurrentassetcreatedwhenexpenseshavebeenpaidinthepresentperiodbuttheeconomicbenefitwillnotbereceiveduntilafutureperiodBFA103_0419WorksheetBFA103_0420WorksheetBFA103_0421ExpensesCanyouseetheconnectionbetweenwhatwearediscussingandCOGSexpense?Supposeabusinesspurchasesinventoryinyear1andsellstheinventoryinyear2.Acurrentasset“inventory”isrecordedinyear1anditisnotuntiltheinventoryissoldinyear2thattheexpenseCOGSisrecognised.Inotherwords,wewaittomatch

theexpensewiththerelatedsalesrevenuewhenitisearnedandrecorded.BFA103_0422Depreciation（折舊）Allnon-currentphysicalassets(exceptland)havealimitedusefullifedueto:Wearandtear（磨損）ontheassetsCommercialobsolescence（商業(yè)上的退化）(demandfortheproductcreatedbyanassetdisappears)Technicalobsolescence（技術(shù)上的退化）(technicallysuperioralternativestoanasseteavailable)BFA103_0423DepreciationThecostofanon-currentassetisallocatedasanexpense(calleddepreciation)overitsexpectedusefullifetoreflecttheconsumptionoftheeconomicbenefitsprovidedbythatassetduringthattimeLandisnotdepreciatedbecauseitdoesnothavealimitedusefullife.Whydepreciate?ShowconsumptionofeconomicbenefitsMaintaincapacityofbusiness?onlyspreadingoriginalcostandmaintainoriginalcapitalignoreschangesinprice,technology,sizeofbusiness,orincustomerdemandMethodsofdepreciationThestraight-linemethod(直線法）(Tobeusedinthisunit)Reducing-balancemethod余額遞減法(alsocalleddeclining-balanceoracceleratedmethod加速折舊法)BFA103_0426Depreciation“straight-line”method(直線法）

whichallocatesthesameamountofcostasdepreciationexpenseeachperiodThestraight–linemethodisappropriateforanassetthatisexpectedtoprovideanevencontributiontoearningrevenuesduringitsusefullife.Thisprovidesthebestmatchingofrevenuewithdepreciationexpense.Thestraight-linemethod

ofdepreciationMicroLtdpurchasesanewcarcosting$50000withanestimatedusefullifeoffouryearsandaresidualvalueof$10000Calculatethedepreciationexpenseusingthestraight-linemethod:Thestraight-linemethod

ofdepreciation(Cost–residualvalue)Usefullife50000–100004=$10000Assumingnochangesaremadetotheestimates…Thisdepreciationexpensewillbethesameforeachofthe4yearsoftheasset’susefullife.Written-down（折余價值）

orcarryingvalue（賬面結(jié)存價值）Thisisnormally:Costofthenon-currentasset $50000LESSthetotaldepreciationtodate$20000–(eg.after2years) WDV/CV= $30000Incertaincases,usuallywithproperty,plantandequipment,theassetmightberevalued.Inthesecasesthewritten-downvalueisthevaluationlesstotaldepreciationtodateBFA103_0430DepreciationAcontraasset

（抵銷資產(chǎn)）

called"accumulateddepreciation（累計折舊）

"reflectshowmuchofanasset'scosthasbeenallocatedtodepreciationatanytime.Inthebalancesheet,theaccumulateddepreciationbalanceissubtractedfromtheasset’scosttoshowthe“writtendownvalue”

（折余價值）

or“carryingvalue”（賬面結(jié)存價值）

oftheassetSometimesalsoreferredtoas“netbookvalue”（帳面凈值）

ThisvaluereflectstheeconomicbenefitstilltobereceivedfromtheassetAllocationofcost:

4ISSUESBFA201_BS11Dep.ExpenseBase(cost)UsefulLifeResidualValueMethodBFA103_0432DepreciationThechoiceofdepreciationmethodforanassetwillhavenoimpactonthetotalprofitrecordedoverthelifeoftheassetbecausewhatevermethodisused,thetotaldepreciationexpenseoverthatperiodwillbethesameandequaltotheasset’soriginalcost.However,thechoicecanhaveaverysignificantimpactontherecordedprofitsduringthelifeofanasset,andthereforecaninfluencethedecisionsofreportusers.Itisimportantthenthatadepreciationmethodischosenfortherightaccountingreasons.BFA103_0433DepreciationItisimportanttorealisethat:bydepreciatinganassetyouarenotsettingasidefundstoreplaceitthewrittendownvalueofapartlydepreciatedassetisnotthesameasitsmarketvalueBFA103_0434

b.Depreciationcalculation:Bothassetstobeusefulfor5x12=60monthsNoresidualvalueVehicle12000/60=$200depreciationexpensepermonthFurnitureandfittings(16000–1000)/60=$250depreciationexpensepermonthBFA103_0435WorksheetBFA103_0436YourproblemWherewouldyourecorddepreciationinthecashflowstatement?BFA103_0437YourproblemWherewouldyourecorddepreciationinthecashflowstatement?Answer–NOTCASHDepreciationdoesnotappearinthecashflowstatementatall.Itisabookkeepingentrymadeattheendofaperiodtoallocatesomeoftheoriginalcostofanon-currentassetasanexpensetotheperiod.Theassociatedcashflowwhichdoesappearinacashflowstatementiswhentheassetisoriginallypaidforwhenitispurchased.c.PrepaymentsPaymentsinadvanceforservicestobereceivedHasthebenefitbeenconsumedorissomestilltobeobtained? assetsorexpenses?AdjustmentrequiredatreportingdateBFA103_0439WorksheetBFA103_0440BFA103_0441RevaluingassetsAssetrevaluations–whatarethey?Reassessmentofthecarryingamountofanon-currentassettofairvalueasataparticulardate

Why?CriticismsofHistoricalcostconventionInventory(currentasset)–similarrulecalledLowerofcost&NRVruleBFA103_0442ValuingassetsIfinaperiodtheNRVofsomeinventoryfallsbelowwhatitcost,inventoryiswrittendowntothislowervalue.Thisisanothergoodexampleoftheprudenceprinciple.WhywouldtheNRVofsomeinventoryfallbelowitscost?(a)afallinthesellingpriceoftheinventory(b)damagetotheinventory(c)theinventoryhaseout-of-dateBFA103_0443BFA103_0444BFA103_0445BFA103_0446LectureCaseStudyThefollowingtransactionstookplaceduringthesecondmonthofthecompany’slife:(1)Christinearrangeda5yearloanof$12000onbehalfofthebusiness,anddepositedthemoneyinthebusinesses’bankaccount.Interestof5%perannumispayableyearlyinarrears.(2)Paidtheamountowingforelectricitybycheque.BFA103_0447LectureCaseStudy(3)Paid$30000bychequebeingpartoftheamountowingtocreditors.(4)Received$25000fromdebtors.(5)Furthercreditpurchasesofinventoryamountedto$26000.(6)Soldgoodsfor$18000cash,andfor$30000oncredit.Intotal,thesegoodshadcostthebusiness$38000.BFA103_0448LectureCaseStudy(7)Paidwagesof$700bycheque.ThiscoveredallworkbyemployeesinFebruary,plustheamountowingfromJanuary.(8)Received$500inadvancefromacustomerforinventorythatwillnotbedelivereduntilApril.BFA103_0449LectureCaseStudyOn28February,priortopreparingreports,theseadjustmentswererequired:Itwasdecidedtowrite-offabaddebtof$90.Abillfor$70forelectricityforFebruaryhadbeenreceivedbutnotpaid.Thetwonon-currentassetsmustbedepreciated.Anadjustmentisrequiredforprepaidrentandinterestowingontheloan.BFA103_0450LectureCaseStudyRequired:Prepareworksheetentriesforthesetransactions,andprepareanestatement,abalancesheetandacashflowstatementattheendofeachmonth.(Notethatthiscompanywillpaytaxonitsprofitsbutforthefirst2months’operations,thisexpensewillbeignored.)BFA103_0451BFA103_04528Feb–Revenuereceivedinadvance….Unearnedrevenue(未實現(xiàn)收入)Unearnedrevenueisacurrentliabilityrecordedwhencashhasbeenreceivedinadvancefromacustomer,beforetherevenuehasbeenearnedandcanberecognisedbythebusiness.Untiltheserviceisperformedorgoodsdeliveredthebusinessowesthecustomerthisamount.BFA103_0453Revenuereceivedinadvance–unearnedrevenueWorksheetDebtorsAccountsreceivableDebtorsarisewhenabusinesssellsgoodsorservicestoathirdpartyoncredittermsi.e.whengoodsorservicesaresoldontheunderstandingthatpaymentswillbereceivedatalaterdateBaddebts（壞帳）NotallcreditcustomerswillpayamountsdueHowtoaccountforthis?Directwrite-offProvisionfordoubtfuldebtsInthisunit,whenabaddebtisidentified,theasset"debtors"isreducedontheworksheetandanexpense"baddebts"isrecognised(thedirectwrite-offmethod)BFA103_0456BaddebtsThereisabettermethod(theprovisionmethod).Togetthebestmatchingofrevenuesandexpenses,baddebtscanbeanticipated(somepercentageofdebtorsisestimated)andrecordedasanexpenseinthesameperiodasthesalesrevenue.Atthesametime,inthebalancesheetthisestimatedfigureissubtractedfromdebtorstogivetheactualamountexpectedtobecollectedfromdebtors.Wewillnotusethismethodinthisunit.BFA103_0457BaddebtsWorksheetBFA103_0458InterestadjustmentatReportingDateWorksheetBFA103_0459BFA103_0460YourproblemInApril,whentheinventoryalreadypaidforinFebruaryisdelivered,whatentrieswillberequiredontheworksheet?BFA103_0461YourproblemInApril,whentheinventoryalreadypaidforinFebruaryisdelivered,whatentrieswillberequiredontheworksheet?Theliability“unearnedrevenue”willdecreaseby$500andsalesrevenueof$500willberecordedintheretainedprofitscolumn.Alsotheusualcostofsalesentrywillbemade(wehaven’tbeentoldwhatthisinventorycostbecausewedidnotneedtorecordthatinFebruary)BFA103_0462BFA103_0463BFA103_0464BFA103_0465Trueorfalse?(1)The$60electricitybillreceivedattheendofJanuaryisacostofJanuarybutanexpenseofFebruary(2)Thecarryingvalueofthemotorvehicleon28Februaryis$11600(3)The$12000loanliabilityon28FebruaryincludestheinterestthatwillhavetobepaidontheloanBFA103_0466Solutions:Trueorfalse?(1)False-the$60forelectricityisanexpenseofJanuary(whenthebenefitfromtheserviceisreceivedandcontributestorevenues)b