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Csec Principles of Accounts

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CSEC: May 2008 Question#1

4/6/2021

1 Comment

 
​Workings for the preparation of the Profit and Loss Account of Alvin Preston for the year ended 31st December, 2007:
​

Note 1: The bad debt of $250 must be written off using the following double entry:
              Dr Bad Debt Expense a/c
              Cr Debtors a/c
              With $250 to write of the bad debt.
Note 2: The provision for would be increased from $300 to $400 by passing the following double entry:
               Dr Profit & Loss a/c
                Cr Provision for bad debt a/c
​               With $100 to increase the provision for bad debt from $300 to $400.
Note 3: The double entry to record the cheque payment of $200 made by the debtor that has not been accounted is:
              Dr Bank a/c
              Cr Debtors a/c
              With $200 to record the cheque payment of $200.
​

Below is the updated debtor’s account for Alvin Preston based on the details of notes one (1) and three (3).
​Please note students were not required to prepare this account for the May 2008 examination. The updated account has been presented to illustrate how the notes affected the debtors’ balance.
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Note 4: The insurance expense of $150 that is owed by Preston is an accrual that will appear on the Profit and Loss Account as an expense and on the Balance Sheet under Current Liabilities.
Note 5: The current balance on the rate account must be adjusted for the prepayment of $50. The rates expense for the Profit and Loss will therefore be $750 - $50 = $700 and the prepayment of $50 will be listed on the Balance Sheet under Current Assets.
Note 6: Calculation of depreciation on motor vehicles using the reducing balance method: 
30% ($12,500 - $7,500) = $1,500 per annum.
The depreciation expense for the year ended 31st December 2007 that would appear in the Profit and Loss Account is $1,500 and the accumulated depreciation figure for the Balance Sheet would be ($7,500 + $1,500) = $9,000. 
Now that all of the workings have been completed the Profit and Loss Account for Alvin Preston can be prepared.
No. 1(a): Preparation of the Profit and Loss Account of Alvin Preston for the year ended 31st December, 2007.
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No. 1(b): Preparation of the Balance Sheet of Alvin Preston as at 31st December, 2007.
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1 Comment
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    The author holds a Bsc (Hons) Degree in Applied Accounting from Oxford Brookes University, England and enjoys a successful career as an Accounting Supervisor and a private tutor.

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