The Difference Between Current Assets And Fixed Assets Accounting Essay

The personal businesss of a concern are to be treated as being quite separate from the non-business activities of its proprietor ( s ) .The accounting records reflect the fiscal activities of a specific corporate entity, separate and distinguishable from the people who finance it or work in it. It is one of the ‘ground regulations ‘ of accounting.Accumulations ConceptConcerned with the difference between hard currency grosss and hard currency outgo ( existent payments and grosss of money for points ) and gross and outgo.

It states that point should be recorded when used and non when paid for.Traveling Concern ConceptIt implies that the concern will go on to run for the foreseeable hereafter.Example: the premise should non be made are:If the concern is traveling to shut down in the close hereafter.Where deficit of hard currency makes it about certain that the concern will hold to discontinue trading.

Business has to shut down because of deficit of hard currency.Consistency ConceptEach house should seek to take the methods which give the most dependable image of the concern.

This can non be done if one method is used in one twelvemonth and another method is use in the following twelvemonth and so on.

degree Celsius ) State why is it of import to distinguish between capital outgo and gross outgo, and briefly explain the accounting intervention of each type of outgo.The difference between gross and capital outgo can be seen clearly with the entire cost of utilizing a motor new wave for a house.To purchase a motor new wave is capital outgo, the motor new wave will be in usage for several old ages and is, hence, a fixed assets.To pay for gasoline to utilize in the motor new wave for the following few yearss is gross outgo, this is because the outgo is used up in a few yearss and does non add to the value of fixed assets.

Capital outgo

Is made when a house spends money either to:Buy fixed assets.

Add to the value of an bing fixed plus.Included in such sums should be those spent on:Geting fixed assets.Bringing them in to the house.Legal costs of purchasing edifice.

Passenger car inwards on machinery bought.Any other cost needed to acquire the fixed plus ready for usage.

Gross outgo.

Outgo which is non for increasing the value of fixed assets, but for running the concern on a daily footing, is known as gross outgo.Accounting intervention.

Expenses – Income statement.Capital – Fixed assets – Balance sheet.vitamin D ) Plant and Machinery was purchased on 1st June 2005 for RM100, 000 and estimated disposal value of RM10, 000. Calculate the depreciation for the old ages 2005 and 2006 utilizing the cut downing balance taking the rate as 10 % method.Calculation:2005 – RM 100,000 ten 10 % x 7/12 = 5833RM 100,000 – 5833 = 94, 1672006 – RM 94, 167 ten 10 % = 9417RM 94, 167 – 9,417 = 84, 750vitamin E ) The model for the readying and presentation of fiscal statements states that in order to be utile, fiscal information should run into four aims. These are:Relevance – Relevance is one more factor that must be present in the information for it to be utile. Information that is non relevant is considered as waste of valuable clip in determination devising.

Reliability – The right determination based on set of fiscal information would besides depend on the dependability of the information. In this context, self generated information is considered to be most dependable as compared to information gather by 3rd parties. The user must be able to depend on the truthfulness of the information.

Comparability – This implies the ability for users to be able to compare similar companies in the same industry group and to do comparings of public presentation over clip. Much of the work that goes into puting accounting criterions is based around the demand for comparison.Understandability – This implies the look, with lucidity, of accounting information in such a manner that it will be apprehensible to users – who are by and large assumed to hold a sensible cognition of concern and economic activitiesdegree Fahrenheit ) Identify any five users of accounting information.BankSupplierLHDN ( Inland Revenue )DirectorPotential portion holderBibliografyEbrary, 2011, Financial Accounting, A practical attack,Retrieved 20th February& A ; lt ; hypertext transfer protocol: //www.

ebrary.com/corp/accounting.jsp & A ; gt ;Ebrary. 2011, The Basicss of Hospitality Accounting, Qualitative of fiscal information,Retrieved twentieth February,& A ; lt ; hypertext transfer protocol: //www.ebrary.

com/corp/financial-information.jsp & A ; gt ;Ebrary. 2011, Accounting Concept, The of import construct in Accounting,Rretrieved twentieth February,& A ; lt ; hypertext transfer protocol: //www.ebrary.com/corp/collateral/en/Corporate/ebrary_accountingbasicsinformationconcept =OEFFFKKEPMPJ, & A ; gt ;Question 2You have been supplied with the undermentioned balance for Betsy Li, a exclusive bargainer, for the twelvemonth ended 31 December 2009:RMProperty at cost 140,000Equipment at cost 70,000Provision for depreciation at 01/01/09:-Property 4,200-Equipment 17,500Purchase 385,000Gross saless 592, 000Stock at 01/01/09 17,000Discount allowed 14,000Discount received 1,900Returns outward 17,600Wagess and wages 43,400Creditors 28,500Debtors 15,800Bank overdraft 2,900Cash in manus 520Drawings 17,950Provision for bad debt at 01/01/09 200General disbursals 11,400Long term loan 20,000Capital at 01/01/09 30,670The undermentioned accommodations need to be taken into history:Stock at 31/12/09 is $ 21,600Wagess and wages outstanding at 31/12/09 are $ 4,100General disbursals includes a prepayment for rates of $ 1,000The proviso for bad debt needs increasing to $ 280Depreciation for the twelvemonth has still to be provided as follows:Property 1.5 % per twelvemonth utilizing the consecutive line method.Equipment 25 % per twelvemonth utilizing the cut downing balance method.Loan involvement of $ 20,000

Required:

Fix a test balance for Betsy Li as at 31 December 2009/Fix the Income Statement and Balance Sheet for Betsy Li for the period stoping 31 December 2009.The Trial balance for Betsy Li as at 31 Dec 2009DebitRecognitionProperty at costRM 140,000Equipment at costRM 70,000Provision for depreciation at 01/01/09PropertyRM 4,200EquipmentRM 17, 500PurchasesRM 385,000Gross salessRM 592,000Stock at 01/01/09RM 17,400Discount allowedRM 14,000Discount receivedRM 1,900Tax returns outwardRM 17,600Wagess and wagesRM 43, 400CreditorsRM 28,500DebtorsRM 15,800Bank overdraftRM 2,900Cash in manusRM 5,200PullingRM 17,950Provision for bad debts at 01/01/09RM 200General disbursalsRM 11,400LoanRM 20,000CapitalRM 30, 670

RM 715,470

RM 715,470

Income statement for the twelvemonth stoping 31 Dec 2009RMRMRMGross saless592,000Less ) Return inwardNet gross revenuesLess ) Cost of good sold17,400Purchases385,000Less )( 17,600 )Net purchase367,400384,800Closing stock( 21,600 )( 363,200 )228,800Add ) Gross1,900Discount received230,700Less ) ExpensesDiscount allowed14,000Wagess and wages47,500General disbursals10,400Provision for bad debt80Provision for depreciation: Property2100: Equipment2000Loan involvement13,125( 89,205 )Net net income

141,495

Depreciation for the twelvemonth has still to be provided as follows:Property 1.5 % per twelvemonth utilizing the consecutive line method.1.5 % x 140,000 = 2,100.Property = 2,100Equipment 25 % per twelvemonth utilizing the cut downing balance method.70,000 – 17, 50052,500 ten 25 %= 13,125Equipment = 13,125Balance sheet as at 31 Dec 2009Fixed assetsRMRMRMProperty140,000Less ) Accumulated depreciation – belongings( 6,300 )133,700Equipment70,000Less ) Accumulated depreciation – equipment( 30,625 )39,375173,075Current assetsStock21,600Debtor15,800Less ) Provision for dubious debt( 280 )15,520Cash520Prepaid disbursals1,00038,640Less ) Current liabilitiesCreditor28,500Accrued disbursals6,100Bank overdraft2,900( 37,500 )Working capital1,140174,215Financed byCapital30,670Add ) Net net income141,475172,165Less ) Pulling( 17,950 )154,215Add ) Long term loan20,000

174,215