For some of us in this part of the world, we took the test prior to all of you, Zone B, anyways the accounting test was 1/3 easy, 1/3 medium (if you studied haphazardly you should be able to answer) and 1/3 was ridiculously hard (for me that is)
I kept emphasizing on my accounting blog, to know your financial statements, and how to fill it out:
1. Balance Sheet
2. Income Statement (sorry I'm a little old school and US centric on this one)
3. Cash Flow Statement
4. Operations Statement
Some points of the test!!!
A) Know what principles/theories, etc and the advantages and disadvantages
B) Calculation of ratios (PE, turnover, etc)
C) Compare 2 businesses and do all the formulas and advise which one is the better buy.
Bank Reconciliation
If you know how to do these at least halfway decently you should be able to pass.
If you don't know anything, at least memorize all the principles/theories and know how to fill out a Balance Sheet, Income Statement and know how to do a bank reconciliation.
If you don't know how to do those by now, you're in big trouble.
Showing posts with label univesity of london external london school of economics lse joon kang accounting. Show all posts
Showing posts with label univesity of london external london school of economics lse joon kang accounting. Show all posts
Thursday, May 7, 2009
Wednesday, April 1, 2009
Practice Question : CASH FLOW STATEMENT
Wednesday, March 4, 2009
A Prior Student's Advice on The Test
1. Double-booking accounting (CR vs. DR in the T accounts) (I am hoping that this terminology is still being used).
2. Prudent Accounting principle, e.g. if given a choice between a transaction making a profit or just break even, post break-even, or e.g. if you can depreciate in 5 years or in 3 years, assume 3 years due to say, technological obsolescence.
3. Accounting Standards (not sure if this is part of the syllabus, but in the real world is important). IFRS or US GAAP or other? It basically mean that you have to follow the same rules to similar problems, e.g. don't recognise revenue when the merchandise leaves the warehouse, if the rule for revenue recognition says that it can only be recognised when it is receptioned at the customer's warehouse with a Proof of Delivery.
4. The Going Concern concept. This is more theoretical, but basically says that you must assume the company will continue in business for the foreseeable future. This is important if you have, for example long-term debt that you have to service over more than an accounting cycle, or if you have assets that depreciate over a long period of time, i.e. buildings over 30 years, or ships over 20 years, etc.
5. Accruals. Very important in the real world (again, not sure if part of LSE syllabus). This is linked to principle 2 above, and it basically means that if you think something is going to cost you money, even if you haven't incurred the cost, nor received the invoice, then book an accrual for an estimation of that cost "as if you would have incurred it already". Silly example (again, probably repeating what you are already know): there are rumours in the market that the price of, I don't know, platinum, is going to go up, and you are a trader in exhaust filters for the automotive industry (where platinum is a key element). Instead of waiting to get the nice letter from, I don't know, Buffalo Gold Ltd, or First Nickel Inc., you decide to book an accrual for 20% of the value of the future purchases of the new exhaust filters to accomodate the potential increase in price and a potential loss of rebate for volume purchases, because you don't expect to sell as many if prices go up. If later on, the real invoice from the supplier is lower than your accrual, you "reverse" the accrual back into the P&L as a profit.
6. Materiality. This is to do with the fact that if you spend $10,000 in a fancy meeting in Las Vegas, you have to book it under the rubric "entertainment and hospitality" or whichever the name is, and not as "marketing", even if effectively it builds up ties between suppliers and customers (before they get too drunk to remember you). So all "marketing" costs are really marketing, and not full of "extras" incurred by the VP's wife on a shopping spree.
7. Financial statements. P&L, Balance Sheet and Cash Flow statement. This is very important and you mustn't mix them up, e.g. your bank loan sits in the asset part of the Balance Sheet, but the interest expense to service the loan sits in the P&L, etc.
Well, that's mostly all I can remember. I can't recommend some concepts and not others, as you need them all to do well in most cases. Of course, I haven't got the foggiest idea what the syllabus is all about, so I hope that this was of any help at all.
2. Prudent Accounting principle, e.g. if given a choice between a transaction making a profit or just break even, post break-even, or e.g. if you can depreciate in 5 years or in 3 years, assume 3 years due to say, technological obsolescence.
3. Accounting Standards (not sure if this is part of the syllabus, but in the real world is important). IFRS or US GAAP or other? It basically mean that you have to follow the same rules to similar problems, e.g. don't recognise revenue when the merchandise leaves the warehouse, if the rule for revenue recognition says that it can only be recognised when it is receptioned at the customer's warehouse with a Proof of Delivery.
4. The Going Concern concept. This is more theoretical, but basically says that you must assume the company will continue in business for the foreseeable future. This is important if you have, for example long-term debt that you have to service over more than an accounting cycle, or if you have assets that depreciate over a long period of time, i.e. buildings over 30 years, or ships over 20 years, etc.
5. Accruals. Very important in the real world (again, not sure if part of LSE syllabus). This is linked to principle 2 above, and it basically means that if you think something is going to cost you money, even if you haven't incurred the cost, nor received the invoice, then book an accrual for an estimation of that cost "as if you would have incurred it already". Silly example (again, probably repeating what you are already know): there are rumours in the market that the price of, I don't know, platinum, is going to go up, and you are a trader in exhaust filters for the automotive industry (where platinum is a key element). Instead of waiting to get the nice letter from, I don't know, Buffalo Gold Ltd, or First Nickel Inc., you decide to book an accrual for 20% of the value of the future purchases of the new exhaust filters to accomodate the potential increase in price and a potential loss of rebate for volume purchases, because you don't expect to sell as many if prices go up. If later on, the real invoice from the supplier is lower than your accrual, you "reverse" the accrual back into the P&L as a profit.
6. Materiality. This is to do with the fact that if you spend $10,000 in a fancy meeting in Las Vegas, you have to book it under the rubric "entertainment and hospitality" or whichever the name is, and not as "marketing", even if effectively it builds up ties between suppliers and customers (before they get too drunk to remember you). So all "marketing" costs are really marketing, and not full of "extras" incurred by the VP's wife on a shopping spree.
7. Financial statements. P&L, Balance Sheet and Cash Flow statement. This is very important and you mustn't mix them up, e.g. your bank loan sits in the asset part of the Balance Sheet, but the interest expense to service the loan sits in the P&L, etc.
Well, that's mostly all I can remember. I can't recommend some concepts and not others, as you need them all to do well in most cases. Of course, I haven't got the foggiest idea what the syllabus is all about, so I hope that this was of any help at all.
Thursday, February 26, 2009
Accounting Resources
Handouts for Financial and Managerial Accounting
Courtesy of Tallahassee Community CollegeDownload and print these supplements from the Math Center.
Financial Accounting
T Accounts (pdf 8.76 kB)
Debits and Credits in the Ledger Accounts (pdf 17.77 kB)
Adjusting Entries Worksheet (pdf 10.74 kB)
Steps in Preparing a Bank Reconciliation (pdf 36.39 kB)
Managerial Accounting
Chapter 2 Equations (pdf 13.26 kB)
Chapter 5: Cost Behavior -- Analysis & Use (pdf 13.53 kB)
Cost-Volume-Profit Equations (pdf 13.85 kB)
Sunday, February 8, 2009
Tuesday, January 6, 2009
Balances on both sides of a control account ??
It may happen that there is a small opening credit balance brought down on sales ledger control account , along with the usual opening debit balance . Why ? for example , if a has returned goods after paying his account or a debtor has overpaid his account . Similarly , it may happen that there is a small opening debit balance on a purchases ledger control account ,along with the usual opening credit balance . If the business has returned goods after paying the account or where a business has overpaid its accounts the purchase ledger control account will show a debit balance.
Control Account
Here's a nice layout of control account, makes it easier to comprehend and remember .
Control Account
Control Account
Friday, January 2, 2009
Suspense account - An example question
Here's a good link to an example practice question with answers . Hope it helps out
http://www.accaglobal.com/students/publications/student_accountant/archive/2003/38/964058
http://www.accaglobal.com/students/publications/student_accountant/archive/2003/38/964058
Wednesday, December 24, 2008
Suspense Account
This week’s topic is fun and unlike the previous topic , very interlinked . So if you feel you are not proficient enough with you journal entries as yet , I would suggest not to touch this topic now . If you have mastered the journal entries, can identify the nature of entries, is well acquainted with ledgers and type of ledgers – you can move on , confidently !
The topic is - suspense account, (funny name ) and a short one. According to accountingcoach.com’s definition "A suspense account is an account in the general ledger in which amounts are temporarily recorded. The suspense account is used because the proper account could not be determined at the time that the transaction was recorded.
When the proper account is determined, the amount will be moved from the suspense account to the proper account."
Before I proceed with a simple example, it’s easier if I mention errors one by one and cite examples which will be much easier to comprehend. So just to refresh up our minds – I will start off with
Error of Omission: if a transaction is completely omitted from the books there will be neither a debit entry nor a credit entry, so the trial balance will balance. For example, cash purchases not entered in the books.
Error of commission: This occurs when a transaction is entered using the correct amount and on the correct side , but in the wrong account of the same class . For example, sales on credit to C J correctly credited to the sales account, but debited to M K ‘s account instead of C J's .
Error of Principle : This occurs when a transaction is entered using the correct amount and on the correct side , but in the wrong class of account , e.g. cash paid for machinery repairs correctly credited on the cash account but debited to the machinery account instead of machinery repairs account .
Compensating Error: These occur where two or more, errors cancel each other . For example if the purchase account is added up $200 too much and the sales account is also over added by the same amount, there is an extra $200 on both the debit side and the credit side , so the trial balance will balance
Error of original entry: This occurs where an incorrect figure is used when the transaction is first entered in the accounts. The double entry will be made using this incorrect amount in both accounts. e.g. if the total of an invoice is $1010 but is incorrectly entered in the accounts as $1100 , the trial balance will balance .
Complete reversal of entries: This occurs where the correct amounts have been entered in the correct accounts, but the entry has been made on the wrong side of each account. For example, Cash purchases debited in the cash account and credited in the purchases count. This is a reversal of ht correct entry, but the trial balance will balance.
The interesting part – we will not open a suspense account if the any of these above mentioned errors occur! We will correct these errors by using journal entries using each relevant account. For example, cash drawings of $300 had been completely omitted from the books. The entry would be Drawings: Debit and Cash: Credit. We would use a suspense account in these situations, for example, the sales account was under cast by $300. Sales must be credited with $300 and the suspense account debited by the same amount. This is why it is important to identify if our situation has any of those 6 errors. In that case, we will not use a suspense account.
... For now, I hope you're staying warm, wherever you are in the world, and hope your families are happy and close, and I hope you're feeling as loved and adored as appreciated as you really and truly are. ~HappY holiDaY Wishes to All ~
Tuesday, December 9, 2008
Bank Reconciliation : clarification of some weird doubts ...!~
As I proceed through number of questions , some entires become increasingly chanlleging - one of them is 'bank errors' ! these entries are not difficult but getting it right is fundamental part of reconciling otherwise our bank or cash statement balance will never match . Here's an example of bank error entry . Credits to http://www.accountingcoach.com/ , here you will find many more answers to questions - primarily asked by students .
The best feature ? the questions are divided by individual topics .
Bank errors involve amounts that were recorded incorrectly by the bank. For example, if a company wrote a check for $89 but the bank coded the check as $98, the bank statement balance will be too low. (The bank deducted $9 too much from the account, and therefore, the bank owes the customer $9.) When the bank makes the correction, the bank balance will increase by $9.00. This adjustment should appear on the bank reconciliation as an addition to the balance per bank.
If a company deposits $97 and the bank records the deposit as $79, the bank added $18 too little into the account…the bank owes the company $18. When the bank makes the correction, the the bank statement balance will increase by $18.00. The company’s general ledger has the correct amount recorded, but the bank has the incorrect balance on the bank statement. Hence the balance per bank needs to be increased by $18.
Tip: For determining whether a bank error will be an addition or a deduction on the bank reconciliation, be sure to think in terms of the change in the balance of the bank account. Both of the bank errors described above caused the bank balance to be too low. The correction of each of these errors will result in an increase to the balance per bank.
Here's another question
Can you help me to understand credit memo and debit memo in the bank reconciliation?
A bank credit memo is an item on a company’s bank statement that increases a company’s checking account balance. A bank debit memo is an item on the bank statement that reduces the company’s checking account balance. Since these items are already on the bank statement, the only adjustment that could be required is in the company’s accounting records. The old rule for the bank reconciliation “Put it where it isn’t” means that the bank’s credit memo amount must be added to the company’s accounting records, if it is not yet in the company’s accounts. Since the bank credit memo increased the checking account balance, the company’s Cash account will have to be debited and another account will need to be credited. For example, if the bank statement shows a credit memo for $100 for interest earned, the company will need to have a debit of $100 in its Cash account and will need a credit of $100 in Interest Revenue or Interest Income.
If the bank statement shows a debit memo of $25 for a service fee, the bank statement balance was decreased by $25. As part of the bank reconciliation process the following entry must be made if the item has not yet been recorded in the company’s records: debit Bank Fee Expense or Miscellaneous Expense $25 and credit Cash $25. The company’s Cash account needs to be credited because this company’s asset account decreased.
The reason the bank used “debit” to decrease the company’s checking account is that its customers’ checking account balances are liabilities for the bank. (The bank’s cash was debited when customers deposited money and the bank’s liability account Demand Deposits or Checking Account Deposits was credited.) When the bank pays a customer’s check, the bank’s cash is reduced and the bank’s liabilities are reduced. The bank records this with a credit to Cash and a debit to Demand Deposits.
This will by the my last entry of BR ....in some days I will post a new topic , if you have any doubts in mind regarding BR questions or anything - do ask away , I'll try my best to answer them .
Any queries , suggestions , critisism , are genuinely welcome :)~
The best feature ? the questions are divided by individual topics .
Bank errors involve amounts that were recorded incorrectly by the bank. For example, if a company wrote a check for $89 but the bank coded the check as $98, the bank statement balance will be too low. (The bank deducted $9 too much from the account, and therefore, the bank owes the customer $9.) When the bank makes the correction, the bank balance will increase by $9.00. This adjustment should appear on the bank reconciliation as an addition to the balance per bank.
If a company deposits $97 and the bank records the deposit as $79, the bank added $18 too little into the account…the bank owes the company $18. When the bank makes the correction, the the bank statement balance will increase by $18.00. The company’s general ledger has the correct amount recorded, but the bank has the incorrect balance on the bank statement. Hence the balance per bank needs to be increased by $18.
Tip: For determining whether a bank error will be an addition or a deduction on the bank reconciliation, be sure to think in terms of the change in the balance of the bank account. Both of the bank errors described above caused the bank balance to be too low. The correction of each of these errors will result in an increase to the balance per bank.
Here's another question
Can you help me to understand credit memo and debit memo in the bank reconciliation?
A bank credit memo is an item on a company’s bank statement that increases a company’s checking account balance. A bank debit memo is an item on the bank statement that reduces the company’s checking account balance. Since these items are already on the bank statement, the only adjustment that could be required is in the company’s accounting records. The old rule for the bank reconciliation “Put it where it isn’t” means that the bank’s credit memo amount must be added to the company’s accounting records, if it is not yet in the company’s accounts. Since the bank credit memo increased the checking account balance, the company’s Cash account will have to be debited and another account will need to be credited. For example, if the bank statement shows a credit memo for $100 for interest earned, the company will need to have a debit of $100 in its Cash account and will need a credit of $100 in Interest Revenue or Interest Income.
If the bank statement shows a debit memo of $25 for a service fee, the bank statement balance was decreased by $25. As part of the bank reconciliation process the following entry must be made if the item has not yet been recorded in the company’s records: debit Bank Fee Expense or Miscellaneous Expense $25 and credit Cash $25. The company’s Cash account needs to be credited because this company’s asset account decreased.
The reason the bank used “debit” to decrease the company’s checking account is that its customers’ checking account balances are liabilities for the bank. (The bank’s cash was debited when customers deposited money and the bank’s liability account Demand Deposits or Checking Account Deposits was credited.) When the bank pays a customer’s check, the bank’s cash is reduced and the bank’s liabilities are reduced. The bank records this with a credit to Cash and a debit to Demand Deposits.
This will by the my last entry of BR ....in some days I will post a new topic , if you have any doubts in mind regarding BR questions or anything - do ask away , I'll try my best to answer them .
Any queries , suggestions , critisism , are genuinely welcome :)~
Friday, December 5, 2008
Procedure of bank reconciliation
Many of you who are still at the begining might be thinking why have I choosen this topic and not a more 'basic topic'...Well , in accouting most of the topics are very interdependent like for example , you need to know the sales and purchase day book entry in order to do control account . But bank reconciliation is unlike that . Its not interdependent on any topic and its not even a part of double entry - This is a very important distinction that must be made . In this entry the procedure to 'reconcile' the entries are given . I personally find it easier to have the procedure in my mind and then apply it on the question so this 'technique' , followed step by step eliminates chaotic approach which often the case in bank reconciliation statement .
Procedure for Bank Reconciliation
Procedure for Bank Reconciliation
Wednesday, November 26, 2008
Note to FSZ
Thank you for your kind comments, and thank you for the offer, I would like to add you as a contributor to this blog, so if you send me your email address, please email me at joonbugxx@yahoo.com I'd like to add you as a contributor
Thank you
Thank you
Tuesday, November 18, 2008
Exercise 1D
Here's Exercise 1D, to view the video click HERE
To download click HERE
ID: uolexternalstudent
p/w: lseexternal
Please see below for the answers & short explanation
Exercise 1D
To download click HERE
ID: uolexternalstudent
p/w: lseexternal
Please see below for the answers & short explanation
Exercise 1D
Get your own at Scribd or explore others:
Answers:
Exercise 1D Answers
a) It's a liability, so any liability has to be credited.
b) Accounts Receivable, based on accrual basis accounting, this is a revenue that is expected, so it's a debit to assets.
c) Cash, always a debit to assets.
d) Capital Stock is an Owner's Equity account, this makes the owner richer (well, I guess not in today's economic climate, LOL), anyways, anything that enriches the owner will be a credit.
e) Dividends is an owner's equity that has the opposite effect of enriching the owner therefore, if credit enriches an owner, any cash outlay or decrease in owner's equity will have to be debited.
f) Equipment is an asset, therefore a debit to asset.
g) Fees Earned (aka Revenue), is always a credit.
h) Rent Expense, any expenses has the opposite effect of enriching the owner therefore debit the owner's equity account.
i) Salary Expense, once again the key word is "EXPENSE", thus decreasing the owner's equity, thus debiting the OE
j) Supplies is an asset and to increase assets, we must always debit.
Answers:
Exercise 1D Answers
Publish at Scribd or explore others:
a) It's a liability, so any liability has to be credited.
b) Accounts Receivable, based on accrual basis accounting, this is a revenue that is expected, so it's a debit to assets.
c) Cash, always a debit to assets.
d) Capital Stock is an Owner's Equity account, this makes the owner richer (well, I guess not in today's economic climate, LOL), anyways, anything that enriches the owner will be a credit.
e) Dividends is an owner's equity that has the opposite effect of enriching the owner therefore, if credit enriches an owner, any cash outlay or decrease in owner's equity will have to be debited.
f) Equipment is an asset, therefore a debit to asset.
g) Fees Earned (aka Revenue), is always a credit.
h) Rent Expense, any expenses has the opposite effect of enriching the owner therefore debit the owner's equity account.
i) Salary Expense, once again the key word is "EXPENSE", thus decreasing the owner's equity, thus debiting the OE
j) Supplies is an asset and to increase assets, we must always debit.
Exercise 1C
For the accompanying video, click HERE
To download the doc, click HERE
use the following:
ID: uolexternalstudent
p/w: lseexternal
The answers are at the bottom, work it out first please!!!
Exercise 1C
To download the doc, click HERE
use the following:
ID: uolexternalstudent
p/w: lseexternal
The answers are at the bottom, work it out first please!!!
Exercise 1C
Get your own at Scribd or explore others:
Answers:
Answers to Exercise 1C
A) Income Statement
B) Balance Sheet (keyword -= inventory)
C) Balance Sheet (payable = liability)
D) Sales/Revenue = Income Statement
E) Balance Sheet (Assets)
F) Balance Sheet (Assets)
G) Income Statement (Expense - keyword)
H) Balance Sheet (payable = liability)
I) Balance Sheet (short term assets)
J) Balance Sheet (debt = liability)
K) Income Statement (expense)
L) Balance Sheet (Owner's Equity account)
M) Balance Sheet
Answers:
Answers to Exercise 1C
Publish at Scribd or explore others:
A) Income Statement
B) Balance Sheet (keyword -= inventory)
C) Balance Sheet (payable = liability)
D) Sales/Revenue = Income Statement
E) Balance Sheet (Assets)
F) Balance Sheet (Assets)
G) Income Statement (Expense - keyword)
H) Balance Sheet (payable = liability)
I) Balance Sheet (short term assets)
J) Balance Sheet (debt = liability)
K) Income Statement (expense)
L) Balance Sheet (Owner's Equity account)
M) Balance Sheet
Subscribe to:
Posts (Atom)
Posts
