CHAPTER 39 End of Year
Procedure (HL only)
Expenses due and prepaid
Gains due and prepaid
Depreciation of Fixed Asset
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Expenses Due: Summary of
Procedure
1. Calculate the full cost of that expense for the
year
2. Credit the expense account with this amount
(write in “P & L A/C”)
3. Balance the account
4. Bring the balance down on the credit side to
indicate the amount owed
5. The balance appears as a liability in the
Balance Sheet
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Q3 page 364 Textbook
€11,000 + €1,000 due
Stationery A/C
Date
Details
1/12/11
Balance b/d
31/12/11
Balance c/d
F
€
Date
Details
11,000 31/12/11 P&L A/C
F
€
12,000
1,000
_____
12,000
12,000
31/12/11 Balance b/d
1,000
The balance of €1,000 is a credit balance indicating that it is a
liability. Thus it will be shown as a current liability in the balance
sheet.
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Expenses Prepaid: Summary of
Procedure
1. Calculate the full cost of that expense for the
year
2. Credit the expense account with this amount
(write in “P & L A/C”)
3. Balance the account
4. Bring the balance down on the debit side to
indicate the amount prepaid
5. The balance appears as an asset in the
Balance Sheet
4
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Q1 Page 364 Textbook
4/12th of €2,400 = €800
Date
Details
F
1/9/11
Bank
CB1
Insurance A/C
€
Date
Details
2,400 31/12/11
P&L A/C
____ 31/12/11
Balance c/d
F
2,400
31/12/11 Balance b/d
1,600
The balance of €1,600 is a debit balance indicating that it is an
asset. Thus it will be shown as a current asset in the balance
sheet
€
800
1,600
2,400
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Gains prepaid (i.e. income received in
advance) Summary of Procedure
1. Calculate the full amount of the gain due for
the year
2. Debit the gain account with this amount (write
in “P & L A/C”)
3. Balance the account
4. Bring the balance down on the credit side to
indicate the prepayment
5. The balance appears as a liability in the
Balance Sheet.
6
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Q2 Page 364 Textbook
7/12th of €24,000 = €14,000
Rent Receivable A/C
F
€
Date
Details
Details
31/12/11
P & L A/C
14,000 1/6/11
31/12/11
Balance c/d
10,000
____
24,000
24,000
Bank
F
€
Date
CB1 24,000
31/12/11 Balance b/d
The balance of €10,000 is a credit balance indicating that it is a
liability. Thus it will be a current liability in the balance sheet
10,000
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Gains Due (i.e. income owed to the
business) Summary of Procedure
1. Calculate the full amount of the gain due for
the year
2. Debit the gain account with this amount (write
in “P & L A/C”)
3. Balance the account
4. Bring the balance down on the debit side to
indicate money owed to you
5. The Balance appears as an asset in the
Balance Sheet
8
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Q9 Workbook page 214
Let It Ltd was owed €3,000 rental income on 31/12/12. Close
off and balance the rental income account at 31/12/12. Show
clearly the amount to be transferred to the Profit and Loss
Account
€33,000 already received + €3,000 owed to Let It Ltd
Rental Income A/C
Date
Details
31/12/12 P & L A/C
F
€
36,000 1/12/12
Details
€
F
Balance b/d
33,000
_____ 31/12/12 Balance c/d
3,000
36,000
31/12/12 Balance b/d
Date
36,000
3,000
The balance of €3,000 is a debit balance indicating that it is an
asset. Thus it will be shown as a current asset in the balance
sheet
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Depreciation: Summary of
Procedure
1. Debit the Asset Account with the cost price of the
Asset. Carry down this balance each year
2. Calculate the amount of depreciation to be written
each year and Debit the “Depreciation A/C” and
Credit the “Provision for Depreciation Account”
with this amount each year
3. Close off the Depreciation Account each year, i.e.
Debit the “Profit and Loss A/C” and credit the
“Depreciation Account with the value of the
depreciation each year
4. Balance the Provision for Depreciation Account
each year and carry this balance forward to the next
year.
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Q5 Textbook page 364
Note: The asset A/C (Computer) is shown on its own on this slide.
The other 2 accounts are shown on the next slide
Computer A/C
Date
Details
F
1/1/11
Bank
CB1
1/1/12
Balance b/d
€
Date
8,000 31/12/11
Details
Balance c/d
F
€
8,000
8,000
8,000
8,000 31/12/12 Balance c/d
8,000
8,000
8,000
Depreciation A/C
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Q5 (cont)
Date
Details
31/12/11
Prov. for Depr.
Depreciation A/C
F
€
Date
1,600 31/12/11
Details
P & L A/C
1,600
31/12/12
Prov. for Depr
Date
Details
31/12/11
Balance c/d
1,600 31/12/12
P & L A/C
Depreciation A/C
1,600
31/12/12 Balance c/d
1,600
1,600
1,600
Provision for Depreciation A/C
F
€
Date
Details
1,600 31/12/11
€
F
1,600
1,600
F
€
1,600
1,600
3,200 1/12/12
Balance b/d
1,600
_____ 31/12/12
Depreciation A/C
1,600
3,200
3,200