The following balances were extracted from the books of Billion Precision for the year ended 31 December 2020. Dr(RM) Cr(RM) Land 500,000 Building 200,000 Motor vehicles 120,00 Plant and machinery 70,000 Profit b/f as at 01.01.2020 237,650 Capital 438,000 Acc depreciation as at 1.1.2020 - Building 60,000 - Motor Vehicles 69,250 - Plant & Machinery 40,000 Returns 3,600 4,100 Revenue 800,000 Purchases 400,000 Discounts 5,000 Carriage inwards 7,700 Opening inventory 52,000 Provision for bad debts 2,000 Trade receivables/ Trade payables 66,000 43,200 Advertising 18,000 Staff training cost 4,000 Bad debts 12,500 Motor expenses 27,000 Rental 90,000 Bank 7,600 Wages and salaries 126,000 1,701,800 1,701,800 i. The provision for bad debts should be 4% of trade receivables. ii. Depreciation is to be charged as follows: - Buildings 2% on cost. - Plant and machinery 20% on cost. - Vehicles 25% on cost. iii. The closing inventories is valued at RM57,000. a) Prepare the Statement of Comprehensive Income for the year ended 31 December 2020 b) Prepare the Statement of Financial Position for the year ended 31 December 2020
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
The following balances were extracted from the books of Billion Precision for the year ended 31 December 2020.
Dr(RM) Cr(RM)
Land 500,000
Building 200,000
Motor vehicles 120,00
Plant and machinery 70,000
Profit b/f as at 01.01.2020 237,650
Capital 438,000
Acc
1.1.2020
- Building 60,000
- Motor Vehicles 69,250
- Plant & Machinery 40,000
Returns 3,600 4,100
Revenue 800,000
Purchases 400,000
Discounts 5,000
Carriage inwards 7,700
Opening inventory 52,000
Provision for bad
debts 2,000
Trade receivables/
Trade payables 66,000 43,200
Advertising 18,000
Staff training cost 4,000
Bad debts 12,500
Motor expenses 27,000
Rental 90,000
Bank 7,600
Wages and salaries 126,000
1,701,800 1,701,800
i. The provision for bad debts should be 4% of trade receivables.
ii. Depreciation is to be charged as follows:
- Buildings 2% on cost.
- Plant and machinery 20% on cost.
- Vehicles 25% on cost.
iii. The closing inventories is valued at RM57,000.
a) Prepare the Statement of Comprehensive Income for the year ended 31 December 2020
b) Prepare the
Step by step
Solved in 3 steps with 2 images
