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F/ACCOUNT OBJ
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(1a)
(1b)
(i) A social club is established to promote the welfare or recreational interests of its members, while a limited liability company is formed to engage in profit-making business activities.
(ii) A social club earns income through subscriptions, donations, and fundraising events, while a limited liability company generates revenue from selling goods or providing services.
(iii) A social club prepares financial statements such as the Receipts and Payments Account, Income and Expenditure Account, and Statement of Accumulated Fund, while a limited liability company prepares a Profit and Loss Account, Balance Sheet, and Cash Flow Statement.
(iv) A social club treats any surplus as an addition to its accumulated fund for future club use, while a limited liability company distributes profit to shareholders or retains it as reserves.
(v) A social club is owned and governed by its members, who are collectively accountable for its operations, while a limited liability company is owned by shareholders and managed by directors who are accountable to them.
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(2ai)
For the Seller:
(i) Keeps a legal record of the sale transaction, including details like date, quantity, price, and taxes, which is essential for bookkeeping and auditing.
(ii) Helps track payments due and manage cash flow by specifying payment terms and due dates, reducing delayed or missed payments.
(iii) Provides legal protection by serving as evidence of the agreed price and terms, useful in case of disputes or audits.
(2aii)
For the Buyer:
(i) Acts as a legal record of purchases, helping the buyer track what was bought, from whom, and when, facilitating accurate accounting and inventory management.
(ii) Enables tracking of payments made and amounts owed, aiding in financial management and budgeting.
(iii) Provides legal protection by documenting agreed prices and terms, which can protect the buyer against fraudulent claims or disputes.
(2b)
(i) Improved Organization: Separating ledgers into classes helps organize financial data clearly, making it easier to locate specific transactions.
(ii) Enhanced Control and Accuracy: Different ledgers allow for better control over different types of accounts, reducing errors and facilitating reconciliation.
(iii) Simplified Reporting and Analysis: Classifying ledgers enables more straightforward preparation of financial statements and detailed analysis of various business areas like sales, purchases, and expenses.
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(3)
(i) XYZ Ltd prepares financial statements to show profitability and returns to shareholders, while PQ Local Government prepares statements to demonstrate accountability and proper use of public funds.
(ii) XYZ Ltd produces Profit and Loss Accounts and Balance Sheets following company accounting standards, while PQ Local Government prepares Statements of Financial Position and Revenue & Expenditure based on public sector accounting standards.
(iii) XYZ Ltd follows private sector regulations like GAAP or IFRS, while PQ Local Government adheres to public sector accounting standards such as IPSAS.
(iv) XYZ Ltd’s financial statements are mainly for shareholders and investors, while PQ Local Government’s statements are for the public, government regulators, and oversight bodies.
(v) In XYZ Ltd, surpluses increase retained earnings and equity, while in PQ Local Government, surpluses affect accumulated funds without representing profit distribution.
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(4a)
Increase in Provision for Doubtful Debts:
This is an additional amount set aside to cover debts that are expected to become uncollectible (bad debts) beyond the existing provision. It reflects a higher estimate of doubtful debts based on new information or experience.
=Treatment in Final Accounts=
(i) The increase is charged as an expense in the Profit and Loss Account (debit side), reducing profit.
(ii) The provision for doubtful debts account (a contra asset account) is credited to increase the total provision.
(iii) In the Balance Sheet, the provision is deducted from the total debtors (accounts receivable) to show the net realizable value
(4b)
Decrease in Provision for Doubtful Debts:
This occurs when the estimate of doubtful debts is reduced, indicating that fewer debts are expected to be uncollectible than previously thought.
=Treatment in Final Accounts=
(i) The decrease is credited to the Profit and Loss Account (shown as income), increasing profit.
(ii) The provision for doubtful debts account is debited to reduce the provision balance.
(iii) The provision continues to be deducted from debtors in the Balance Sheet, but now by a smaller amount
(4c)
Provision for Discount on Debtors:
This is an estimated amount allowed as a discount to debtors (customers) for early payment or other reasons, reducing the amount expected to be received.
=Treatment in Final Accounts=
(i) It is shown as a deduction from debtors in the Balance Sheet to reflect the net amount expected to be collected.
(ii) Any change in the provision is adjusted in the Profit and Loss Account, affecting profit accordingly.
(iii) It is treated as a contra asset, similar to provision for doubtful debts, but specifically for discounts allowed.
(4d)
Provision for Discount on Creditors:
This is an estimated amount of discount expected to be received from creditors (suppliers) for early payment or settlement.
=Treatment in Final Accounts=
(i) It is deducted from creditors in the Balance Sheet to show the net amount payable.
(ii) Any adjustment in the provision affects the Profit and Loss Account, either as income or expense depending on increase or decrease.
(iii) It reduces the liability shown under creditors.
(4e)
Provision for Depreciation:
This is the systematic allocation of the cost of a fixed asset over its useful life, representing wear and tear or obsolescence.
=Treatment in Final Accounts=
(i) Depreciation expense is charged to the Profit and Loss Account, reducing profit.
(ii) The provision for depreciation account (a contra asset account) is credited to accumulate total depreciation.
(iii) In the Balance Sheet, the provision for depreciation is deducted from the cost of the fixed asset to show the net book value (carrying amount) of the asset
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(6)
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(7)
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(9)
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