Professional Documents
Culture Documents
HKDSE BAFS
expense
extension
current
purchase
a
b
a
b
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useful
cost
matching
benefits
In each accounting period, a _______________ of the cost of the asset is written off
(charged to the _______________ account) as depreciation charges.
According to the _______________ concept, the amount allocated to each accounting
period (as depreciation charges) should be matched with the amount of _______________
generated in that period (which usually refers to the usage of the asset during that period).
Transfer the total of depreciation charged to the profit and loss account at the end of
the accounting period
Dr Depreciation / Profit and loss account
Cr Depreciation / Profit and loss account
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straight-line
evenly
diminishing
reducing balance
produced
constant
a
Straight-line method: a depreciation method by which the cost of a non-current asset is
written off _______________ as depreciation over its estimated useful life.
b
Under this method, the amount of depreciation charged in each period is
_______________.
The _______________ method is most appropriate for coal mines or oil wells, as
depreciation is directly related to the extraction of materials.
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loss
damaged
sold
Transfer the profit or loss on disposal to the profit and loss account at the end of the
accounting period.
(i) Profit on disposal
Dr Disposal / Profit and loss account
Cr Disposal / Profit and loss account
(ii) Loss on disposal
Dr Disposal / Profit and loss account
Cr Disposal / Profit and loss account
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Kean Enterprise started business on 1 January 2010. The following transactions were
related to subsequent years:
Purchases of non-current assets:
Machinery
2010 Jan 1
2011 Mar 1
2012 Sept 1
(No. 1)
(No. 2)
Motor vehicles
$
$
15,000 (No. 1) 20,000
46,000
(No. 2) 25,000
61,000
45,000
It is the firms policy to depreciate its machinery at 10% per annum on a reducing-balance basis
and motor vehicles at 25% per annum on cost.
On 31 December 2012, machinery (No. 1) was sold for $9,500. A full years depreciation is to
be charged in the year of acquisition and none in the year of disposal.
Required:
Prepare the following accounts for the year ended 31 December 2012:
(a) Machinery
Answer:
2012
2012
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Motor vehicles
Answer:
2012
(c)
2012
2012
Answer:
2012
(d)
Answer:
2012
2012
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(e)
Machinery disposals
Answer:
2012
2012
Workings:
$
(W1) $__________ ____% + {[$__________ ($__________ ____%)] ____%} =
$__________ ____%
=
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State which class of expenditure (revenue/capital) each of the following items belongs to.
$
(i)
Rent and rates
8,400
(ii) Costs of installing a new control room
58,000
(iii) Wages for installing a new control room
7,000
(iv) Electricity and water charges
13,000
(v) Legal fees incurred in the acquisition of new premises
4,800
(vi) Repairs to existing machines
7,800
(vii) Costs of training staff to operate machinery which was
installed a year ago
49,000
(viii) Painting the outside of a new building
28,000
(ix) Repainting the outside of a building after five years of use
19,000
(x) Transport costs of machinery purchased
400
Capital expenditure:
Revenue expenditure:
_______________________________
_______________________________
His financial year ended on 31 December 2011. On that date, certain accounts had the
following balances:
$
Rent revenue
42,000 (Cr)
Electricity
4,200 (Dr)
Advertising
4,500 (Dr)
Wages
224,800 (Dr)
You have ascertained the following information relating to the above accounts:
(i) Rent revenue the tenant owed $10,500 for rent outstanding as at 31 December 2011.
(ii) Electricity the amount accrued as at 31 December 2011 was $410.
(iii) Advertising included in the advertising account was a payment of $2,800 for
posters to be used in the next financial year.
(iv) Wages the amount accrued as at 31 December 2011 was $58,000.
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Required:
(a) Open the above accounts, enter the balances given, deal with the accruals or
prepayments as necessary and show the transfers to the profit and loss account.
Answer:
(i)
2011
(ii)
2011
(iii)
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(iv)
2011
$ 2011
(b)
Show how the balances in the above accounts (if any) would appear in the balance
sheet of Mr Poon as at 31 December 2011.
Answer:
__________________________
___________________________ as at ______________________ (extract)
Current assets
Current liabilities
($_____________ + $_____________)
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Bee Co, a trading firm, purchased a photocopier (No. 1) from overseas. Payment for the
invoice price of $50,000 was from the bank account. The photocopier was delivered on 30
November 2009 after the purchase price, plus import duty and transport costs amounting to
$5,000 and $1,200, respectively, had been paid. Installation was completed on 1 December
2009 at a further cost of $3,800.
The firm estimated that the photocopier would have a useful life of five years and a scrap
value of 10% of the cost price. The financial year ends on 31 December each year and
depreciation is to be charged on a straight-line basis. On 1 March 2011, due to the
unsatisfactory performance of the photocopier, it was traded in for a new one (No. 2) at a
price of $40,000. The trade-in value was $30,000. The depreciation method used for the
new photocopier was the same as the old one.
The accounting policy of the firm is to charge a full years depreciation in the year of
purchase and no depreciation in the year of disposal.
Required:
Prepare the following accounts to record the above:
(a) Photocopiers
_____________________
2009
Dec
2009
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2009
Dec
_____________________
2011
Mar
2011
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Wing Fung Hong is a grocery retailer. The income statement was prepared by a part-time
bookkeeper who did not possess sufficient accounting knowledge. The business owner is
now seeking your advice on how to correct the following income statement.
Wing Fung Hong
Income Statement for the year ended 31 December 2010
$
Sales
Less Cost of goods sold:
Opening inventory
Add Purchases
Less Closing inventory
Gross profit
Less Expenses:
Salaries and wages
Electricity
Carriage inwards
Discounts received
Printing and stationery
Drawings
Commissions
Depreciation: Plant and machinery
Van expenses
297,000
180,300
477,300
(132,600)
(ii)
(iii)
(iv)
(v)
(vi)
(344,700 )
155,300
25,000
3,600
6,700
2,500
4,600
3,200
24,000
21,250
13,000
Net profit
(i)
$
500,000
(103,850 )
51,450
25% of the commissions were commissions received from a wholesaler for selling a
new brand of drinks.
40% of the carriage inwards was related to the cost of delivering goods to customers.
60% of the discounts received were actually discounts granted to the customers of
Wing Fung Hong.
Included in the electricity was a $500 deposit paid to the utility company.
Plant and machinery should be charged using the reducing-balance method at 25% per
annum.
However, depreciation had been calculated using the straight-line method at the same
percentage for the year ended 31 December 2010.
Wing Fung Hong purchased its plant and machinery on 1 July 2007 at a cost of
$85,000.
A second-hand van was bought on 1 Jan 2010 at a cost of $13,000.
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___________________________
Less
_______________________________:
________________________
Add ___________________
____________________ [$__________ (_____________)]
Less ___________________
_______________________________
Add
Other revenues:
_________________________ ($____________ ______%)
____________________ [$_________ (_____________%)]
Less
Expenses:
_________________ ($______________ $____________)
__________________________ ($6,700 ______%)
__________________________ ($2,500 ______%)
__________________________
__________________________ [$24,000 (______________%)]
Depreciation: Plant and machinery (Workings)
Vans ($____________ ______%)
________________________
Workings:
$
__________________________, at ___________
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