CHAPTER 39 End of Year Procedure (HL only) Expenses due and prepaid Gains due and prepaid Depreciation of Fixed Asset

2 R. Delaney 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

3 R. Delaney Q3 page 364 Textbook Stationery A/C 1,000Balance b/d31/12/11 12,000 _____1,000Balance c/d31/12/11 12,000P&L A/C31/12/1111,000Balance b/d1/12/11 €FDetailsDate€FDetailsDate 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. €11,000 + €1,000 due

4 R. Delaney 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 Expenses Prepaid: Summary of Procedure

5 R. Delaney Q1 Page 364 Textbook Insurance A/C 1,600Balance b/d31/12/11 2,400 1,600Balance c/d31/12/11____ 800P&L A/C31/12/112,400CB1Bank1/9/11 €FDetailsDate€FDetailsDate 4/12 th of €2,400 = €800 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

6 R. Delaney 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.

7 R. Delaney Q2 Page 364 Textbook Rent Receivable A/C 10,000Balance b/d31/12/11 24,000 ____10,000Balance c/d31/12/11 24,000Bank CB11/6/1114,000P & L A/C31/12/11 €FDetailsDate€FDetailsDate 7/12 th of €24,000 = €14,000 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

8 R. Delaney 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

9 R. Delaney 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 3,000Balance b/d31/12/12 36,000 3,000Balance c/d31/12/12_____ 33,000Balance b/d1/12/1236,000P & L A/C31/12/12 €FDetailsDate€FDetailsDate Rental Income A/C €33,000 already received + €3,000 owed to Let It Ltd 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

10 R. Delaney 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.

11 R. Delaney Q5 Textbook page 364 Computer A/C 8,000 Balance c/d31/12/128,000Balance b/d1/1/12 8,000 Balance c/d31/12/118,000CB1Bank1/1/11 €FDetailsDate€FDetailsDate Note: The asset A/C (Computer) is shown on its own on this slide. The other 2 accounts are shown on the next slide

12 R. Delaney Q5 (cont) Depreciation A/C 1,600 P & L A/C31/12/121,600Prov. for Depr31/12/12 1,600 P & L A/C31/12/111,600Prov. for Depr.31/12/11 €FDetailsDate€FDetailsDate Provision for Depreciation A/C 3,200 1,600Depreciation A/C31/12/12_____ 1,600Balance b/d1/12/123,200Balance c/d31/12/12 1,600 Depreciation A/C31/12/111,600Balance c/d31/12/11 €FDetailsDate€FDetailsDate Depreciation A/C