1. CHAPTER 10: GENERATING ACCOUNTS LEARNING AREA 7

2. WHAT SHOULD YOU BE ABLE TO DO? Construct Financial Statements from an unadjusted trial balance

3. TRIAL BALANCE P2 Accounting process as per first lecture Start from a TB TB = a list of accounts, totals for a period/balances at a specific time Presented as following: List of accounts with balances List of + and – numbers Two columns: debits and credits Remember: Assets and expenses: Debits Liabilities and income: Credits P3 JK plc (trial balances example page 4).docxJK plc (trial balances example page 4).docx

4. AWKWARD ITEMS PER TB P5 Depreciation Journal: Dt DepreciationR20 000 Ct Accumulated depreciationR20 000 Statement of Financial position: Non-current assets (R950 000 – R20 000)R930 000

5. AWKWARD ITEMS PER TB P5 Retained earnings Balance per TB is as at the beginning of the year Inventories Beginning of the year. All purchases for the year under ‘purchases’ IS: Cost of goods sold = Opening inv + purchases – closing inv (Ch8 p14) BS: Closing inv

6. AWKWARD ITEMS PER TB P6 Adjustments for the accruals concept Recognise: Expenses when incurred, Income when earned Adjustments for: Expenses paid in advance Expenses incurred, but not paid yet Income received in advance Income earned, but not received yet

7. AWKWARD ITEMS PER TB P6 Dividends Note at bottom of IS ‘A dividend of Rx per share… Statement of changes in equity: Deducted from retained earnings Cash flow statement Financing activities Notes to the AFS

8. INCOME STATEMENT AND BALANCE SHEET Prepare the Income statement and Balance sheet from the trial balance per p3 JK plc - Income statement page 8 & 9.docx JK plc - Balance sheet 10 & 11.docx

9. CASH FLOW STATEMENT Cash items is included, thus no adjustments for prepaid income/expenses or income received/expenses paid in advance (example: Company A paid rent in advance with cash – therefore the full amount will be included in CFS) Tax actually paid, not provided for Need Balance sheet for this year and last year As done per CH8

10. STATEMENT OF CHANGES IN EQUITY Need detail on equity transactions and opening balances As done per Chapter 8

11. HOMEWORK Question 10.3 page14