Accounting for Senior Cycle 4th Edition

4th edition

ACCOUNTING FOR SENIOR CYCLE

The Educational Company of Ireland Please contact your Local Edco Representative to book a presentation or request a sample copy, Ph: 01-4500611, Email: info@edco.ie, Website: www.edco.ie

4th edition

ACCOUNTING FOR SENIOR CYCLE Accounting for Senior Cycle (4th edition), our best-selling Leaving Certificate Accounting textbook, has been revised to comprehensively cover all examinable material for Ordinary and Higher levels and is a highly engaging and exam-focused new text.

The new package for Accounting for Senior Cycle includes: • • • •

Student Textbook Student Activity Book Free Student e-book Teacher’s Solutions and Support Resources STUDENT TEXTBOOK Nov.

A payment of €1,200 was received from Dick Tate, a debtor, whose debt had previously been written off. This represents 40% of the original debt and Tate has undertaken to pay the remainder of the debt in January 2024. On the same day goods were sold to Tate for €738, which includes 23% VAT and a mark-up on cost of 25% The buildings depreciation charge for the year is to be 3% of book value calculated from the date of valuation and date of purchase.

The depreciation charges on motor vehicles and office equipment for the year are €10,600 and €2,300 respectively Required:

A fully updated textbook with new student-friendly and visually attractive colour-coded design and layout

Date

EXAM TIP

July

Tabular statements appear in both section A (60 marks) and section B (100 marks). This sample question is a section B style question.

Section A questions would be of a similar level of difficulty but with fewer transactions.

Solution

September

Special club receipts andtoassets in table 14.2. club accounts. These are shown apply only There are a number of items that and assets Table 14.2 Special club receipts

Receipts and payments account (including analysed)

Item Subscriptions

life It is normally written off to income over a stated number of years Entrance fees

Monies payable by members to join a club They are also referred to as joining or signing on fees

Levies

A levy is a payment made to a club by its members to fund a specific project. For example, the building of a new extension A levy must be used only for the purpose for which it is intended

necessary No capital items are included depreciation of Non-cash items are included, e.g.

Donations, gifts, winnings and annual grants

at the end of the A statement of financial position financial period balance sheet of Set out in a similar fashion to the

other business organisations in the financed Accumulated fund replaces capital by section

Sponsorship

Donations, gifts and grants can be small or large Donations and gifts are considered to be small if they are less than 5% of total income Businesses regularly make contributions to sporting and other organisations

Prize bonds

EXAM TIP

account and an income and between a receipts and payments Ensure you know the difference in the final accounts. where the balance of each is entered expenditure account, including

[INSERT FIGURE LCAcc_ch14_ image12]

A prize bond is an asset that can be cashed in at any time for its original amount

g organisations

Club accounts – not-for-profit-makin

LC Accounting TB_Chapter 14.indd

Bank overdraft ↑ ↓ €10,300

the income Income in the year of receipt in clubs. and expenditure account for most assume this (For leaving certificate purposes,

unless told otherwise in the question) items and add Some clubs treat them as capital in the balance them to the accumulated fund

≤ 40

≤ 250

≥ 20

information that must

be disclosed depends

must be disclosed

Disclose to

≥ 250 on the size of the

by different sized

business.

companies

Size of business

Small

Medium

Short

Short

None

Large (including all PLCs) Full

Short

Abridged Abridged

Trading account

Profit and loss account

ü

Abridged

ü

Short

û

Full

Full Abridged

ü ü ü

Balance sheet

Explanatory notes

ü

ü

ü (less detailed)

ü

ü

ü

Regulation by the accounting profes sion

Full Full

More information can be found on www.cro.ie.

The accounting profession

has brought consistency to the preparation Statements of Standard of financial information through: Accounting Practice should be treated (SSAPs) – explanation in financial statements on how certain transaction – for example, the (ii) Financial Reporting s valuation of stock Standards (FRSs) – new standards gradually new ways in which accounts are prepared replacing SSAPs and introducing – for example, the cash flow statement (i)

income in the Sponsorship is treated as annual income and expenditure account

108

or financial Entered as either a current asset asset in the balance sheet bond as an Do not treat the purchase of a prize

Regulatory framework

LC Accounting TB_Chapter

expense

There are a number

December

Depreciation ↑ Land and buildings €31,000 Vans €10,600 Office equipment €2,300

Profit and loss ↓ €43,900

None

Rent receivable ↓ €12,000 Expenses due ↑ €800 Profit and loss ↑↓ €11,200

Bank overdraft decreases by the amount actually received Profit and loss increases by the total amount of the bad debt recovered Sale price €738/1.23 = €600/1.25 = €480 cost price Debtors increases by the total amount invoiced Stock decreases by the cost price of the goods sold VAT increases by the VAT amount collected on the sale Profit and loss increases by the profit made on the sale Depreciation increases on fixed assets as follows: Land and buildings (€850,000 × 3%) + (€200,000 × 3% × 11/12) = €31,000 Motor vehicles €10,600 Office equipment €2,300 Profit and loss decreases by the total depreciation charge for the year Rent receivable decreases by the amount credited to profit and loss (€13,500/9) = (€1,500 × 8) = €12,000 Expenses due increases by the amount debited to profit and loss for 2023 (€3,200 × 3/12) = €800 Profit and loss increases by the amount of rent receivable (gain) and decreases by the refuse charges (expense) applicable for the year 2023

Name Financial Reporting Council

of accounting

(bodies)

of accounting bodies,

Table 8.7 Accounting

≤ 50

≤ 20

≥ 40

requirements

of information that

Registrar of companies

Full grants Small donations, gifts and annual the income and should be treated as income in expenditure account winnings Large donations, gifts, grants and and added to should be treated as capital items sheet accumulated fund in the balance

Profit and loss ↑ €120 VAT ↑ €138

December adjustments

≤ 10

≤6

Micro company

sheet as the Any levies due are treated as assets money is owed to the club

Debtors ↑ €738 Stock ↓ €480

The accounting profession

Average number of employees The weekly average number employed by the company

The reporting and auditing requiremen ts of a micro company other classes of companies (first established in in that they: 2017) are different from May be exempt from the full extent of the requirements relating statements to annual reporting of financial May be entitled to claim an audit exemption Are not required to prepare a directors’ report, provided that footnote to the balance the required information sheet (you will learn is included as a more about this in The financial statements chapter 13) are presumed to give a true and fair view Table 8.6 Explanation of disclosure terms

the members.

Until it is used, it is owed back to in the Therefore it is treated as a liability and balance statement of accumulated fund

November Part 2

of a company

≤ 0.35

Profit and Shareholders loss account Registrar of companies Shareholders

Balance sheet

Profit and loss ↓ €96 VAT ↓ €184

Bank overdraft ↓ €1,200 Profit and loss ↑ €3,000

Tabular statements

≤ 12

Large company

Report

Stock ↑ €640 Debtors ↓ €920

Debtors ↑ €1,800

New provision €115,000 × 4% = €4,600 Old provision €4,500 ☞ €100 ↑ (expense) Provision for bad debts increases as the new provision is greater than the old provision Profit and loss decreases as the increase in provision for bad debts is a business expense You learned about provision for bad debts in chapter 2.

Office equipment decreases by the cost desks used to pay the creditor €5,600 price of the Depreciation on these desks (a negative figure) decreases as depreciation on assets disposed of no long exists €800 Creditors decreases by the amount owed as desks were used to settle the debt €5,500 Profit and loss increases by the difference as this was a discount received (gain) €700 Stock increases by the cost price of goods returned (€984/1.23 = €800/1.25 = €640) Debtors decreases by the amount of credit given (€984 less €64 restocking charge) VAT decreases as VAT no longer applies to the sale Profit and loss decreases by the lost profit originally made on the sale inclusive of the restocking charge (€160 – €64 = €96) Debtors increases by the amount yet to be received from the debtor (60%)

430-431

≤ 0.7

Financial reporting

the statement Life membership is a liability in sheet. It is of accumulated fund and balance owes the use treated as a liability as the club for life of its facilities to these members income The amount (if any) written off to and is treated as income in the income expenditure account in the balance The amount for life membership written off to sheet is reduced by the amount income

both in Europe and

in Ireland, that regulate

bodies

the profession.

Abbreviation Role and functions FRC

Main body regulating the preparation of accounts Oversees the preparation and implementation standards of accounting Aims to promote confidence in financial reporting and other interest for investors groups

There are six other bodies, which report directly to the FRC. These are: Accounting ASB Issues new accounting Standards Board standards (FRS) Amends or withdraws older standards (SSAPs) RP Can request companies to reissue financial statements (if they not show a true and do fair view) Can take legal action if a company fails to reissue financial statements Urgent Issues Task UITF Assists ASB where Force accounting standards are unsatisfactorily applied or interpreted Auditing Practices APB Develops auditing Board procedures and practices Ensures highest standards of auditing to meet needs of various users the different of accounts Builds confidence in the entire auditing Professional profession and process POB Monitors audits that Oversights Board take place by overseeing the regulation of the auditing profession Ensures that this regulation is carried out by the accounting bodies professional Accounting AADB Deals with situations and Actuarial where there is malpractice accountant or accountanc by an Disciplinary Board y firm The Irish situation Irish Auditing IAASA The IAASA and Accounting was set up under the Companies Act 2003 Ensures that accounts Supervisory are always prepared with adherence to the highest standards Authority Monitors that the accounts of the various classes of companies and other items comply with the Companies Acts Advises the minister on accounting and auditing matters Review Panel

DEFINITION

Corporate governance – A combination of rules, processes and manage it effectively laws by which directors while providing accountabil of a company customers, suppliers, ity government and managemen to its stakeholders including shareholder s, t.

Regulation by the European Union The European Union regulates

DEFINITION the preparation and financial statements reporting of by issuing directives.

EU Directive – A law The aim is to harmonise accounting practices that applies across member states. to all EU member states and The accounting directives which must be implemente issued to date are: d within a specified Fourth – contains time limit. details about the disclosure requirements in the Seventh – consolidatin final accounts g company accounts (group companies)

08.indd 108-109

Regulatory framework g organisations

Club accounts – not-for-profit-makin

254

Stock increases by the cost exclusive of VAT figure Creditors increases by the total amount to be paid to them by the business You learned about VAT VAT decreases by the VAT in chapter 2. amount as the business can reclaim VAT on purchases made Bank overdraft both increases and decreases – increases by the amount paid (expenses) and decreases by the amount received (gain) (net €10,000 ↑) Rent receivable increases by the amount received Expenses due decreases by the amount paid It is best practice to simply enter the amounts paid and received in the month the bank statement arrived and treat any adjustment for accruals and prepayments at the end in its own row, i.e. create a second December column.

October

November Part 1

Tabular statements

determining the size

The amount of financial Table 8.5 Summary

sheet [INSERT FIGURE LCAcc_ch14_ image9]

assets

Balance sheet

Life membership entitles a member to use the facilitates of the club for the remainder of his/her

Creditors ↑ €18,450 VAT ↓ €3,450

Creditors ↓ €5,500 Profit and loss ↑ €700

of accounting

255

109

27/01/21 8:03 PM 27/01/21 9:19 PM

254-255

The Educational Company of Ireland

Please contact your Local Edco Representative to book a presentation or request a sample copy, Ph: 01-4500611, Email: info@edco.ie, Website: www.edco.ie

Chapter 8

Income and Expenditure account

Life membership

Assets purchased increase by their cost price, e.g. debtors Creditors increases by the amount of creditors purchased in the acquisition Ordinary share capital and share premium increase as the purchase of the business was paid for by issuing shares at a premium price The difference between the net worth of the business and the price paid is goodwill (€276,000 – €253,000)

Office equipment ↓ €5,600 Depreciation office equipment ↑ €800

431

27/01/21 8:06 PM

Medium company

Chapter 14

Chapter 14

Special purpose profit and loss account

a special purpose This is an account prepared for club, usually a bar, activity being carried on by the cafe, shop or restaurant to make a Also includes other activities undertaken profit, e.g. a club lotto to these activities All income and expenses related or loss on are entered and then the final profit income and the activity is transferred to the expenditure account business a of account loss and Similar to the profit enterprise of the club It reveals the true financial performance surplus income or over the financial period, showing expenditure. and prepayments as Items are adjusted for accruals

of time

None

LC Accounting TB_Chapter 21.indd

Small company

Treatment in the accounts is income in The amount receivable for the year The amount paid each the income and expenditure account year by members of a Amounts prepaid and due are assets club to be a member of and liabilities in either the statement In return members get accumulated fund or balance sheet the use of the club’s facilities for the period

Chapter 8

Statement of accumulated fund

of other Similar to the cash/bank account organisations Summary of daily receipts and payments is entered Every item received and paid for regardless of the nature of the transaction, i.e. capital and revenue items position of the club Does not give the true financial not taken into as accruals and prepayments are consideration to the capital of The accumulated fund corresponds a business enterprise of assets and It is a statement showing the list financial period liabilities at the beginning of the

May

Creditors ↑ €32,000 Ordinary share capital ↑ €230,000 Share premium ↑ €46,000

Factors Turnover Balance sheet total € million € million Income from normal The sum of the fixed business activities, and i.e. sale of current assets goods/services the business normally trades in

Micro company

Explanation

Description

Account

Stock ↑ €15,000

Land and buildings increases by the amount of revaluation Depreciation decreases as depreciation is to revaluation reserve. Since depreciationtransferred is negative we must in fact increase the figure to decrease its value.

A revaluation reserve is created and increases by the total revaluation amount

Provision for bad debts ↑ €100

Explanation Ordinary share capital increases by the number of shares sold (authorised less any shares already issued) Share premium increases by the difference between the nominal value of the shares issued and the amount received Bank overdraft decreases by the total amount received

Chapter 21

Chapter 21

Examples in each chapter in accordance with the best accounting practice

All non-profit-making organisations enterprises. organisation Table 14.1 The accounts of a non-profit-making

Land and buildings ↑ €200,000

April

Explanation

(if any)

Rent receivable ↑ €13,500 Expenses due ↓ €3,200

430

by other

Impact on liabilities Revaluation reserve ↑ €200,000

Motor vehicles ↑ €60,000 Debtors ↑ €25,000 Goodwill*↑ €23,000

New and enhanced emphasis on theory

similar to those prepared must prepare a set of accounts

Impact on assets Land and buildings ↑ €160,0000 Depreciation ↑ €40,000

(if any)

Uses student-friendly language perfect for mixed-ability groups

The accounts

Date January

February

Table 8.4 Factors

None

Record on a tabular statement the effect of each of the above transactions on the relevant asset and liability and ascertain the total assets and liabilities on 31/12/2023.

All aspects of the syllabus included in simplified language

Definition

Impact on liabilities (if any) Ordinary share capital ↑ €70,000 Share premium ↑ €30,000 Bank overdraft ↓ €100,000 Profit and loss ↓ €100

(if any)

Explanation of transactions

Breakdown of chapters into smaller, more manageable units

Impact on assets

June

Dec.

An updated edition of our best-selling Leaving Certificate Accounting textbook Keywords identified at the beginning of each chapter Graded exercises for: ʇ Teaching each topic at both Ordinary and Higher level ʇ Revision of each topic ʇ Testing students on each topic

(d) Drawings account

Details

Total

Details

€

Milk

€ 3,598

950

medicines

(vi) All other expenses (apart from depreciation ) should be apportioned household.

90% to the farm and 10% to (vii) During the year €9,800 worth of grain and vegetables were (viii) Provide for depreciation transferred to the shop. as follows: Buildings at 2% of cost per annum Tractors and machinery at 20% of cost per annum; a full year’s year of acquisition depreciation is to and none in the year be charged in the of disposal (ix) On 31/12/2024 there was a milk payment due from the creamery €1,800, diesel oil €400, €5,790, creditors for stock of heating oil fertilisers €800, farm stock Required: shop €1,900. (a) Prepare a statement of capital on 01/01/2024 . (b) Calculate the profit/loss on the farm shop for the year ended 31/12/2024 (c) Prepare enterprise . analysis accounts for ‘Cattle and Milk’ 31/12/2024. and ‘Grain Crops’ for the year ended (d) Prepare a general profit and loss account for the year ended (e) Prepare a balance 31/12/2024. sheet as at 31/12/2024 . (f) Advise Cormac and Jean if they should continue with both farming enterprises.

Solution

Total

650 Capital

Lamb Veterinary fees and

800

Interest (A11)

288

Repairs (A11)

480

Light and heat (A11)

430 3,598 3,598

Example 4 – Higher level 100-mark questio n

Cormac and Jean Duignan carry on a mixed farming business. on 01/01/2024 were: Included in their assets farm land and buildings and liabilities €780,000 (including machinery €160,000, land €140,000), tractors cattle €70,000, stock of grain and vegetables and farm due from creamery €5,600, electricity €12,500, diesel oil due €600, stock of €1,400, payment fertiliser €1,000, farm All fixed assets have shop stock €2,900, three years’ accumulate d depreciation on The following is a 01/01/2024. summary taken from their bank payments 31/12/2024. and lodgements books for the year ended Total

Cattle and calf sales

Sale of trailer (cost

Shop receipts

The following additional

A2 Investments

14,500

6 months interest

2,300

→ One year (12%) → 100% = €7,200 ×

23,900

Income receivable

91,200

Received

Amount received

€

€

948,890

(c)

(a)

Calculate the Deere Family’s capital on 01/01/2024.

The following is a summary of the farm’s receipts and payments for the year ended 31/12/2024.

Receipts

Total

Payments

Balance 01/01/2024

€ 21,400 Purchase of cattle

Based on this, both enterprises should be continued. It is also worth noting:

Sale of lambs

45,800 Purchase of sheep

(i)

The basic premium of €8,300 for cattle is guaranteed income

Milk

93,500 Fertiliser

(ii)

The nature of the Irish weather is unpredictable so yields from grain and vegetables is very difficult to estimate into the future.

Basic Payment Scheme

14,700 Light and heat

Total € 42,300 24,500 27,600 15,300

3,200 Repairs

Sale of wool

17,100

Chapter 16

35,600 67,400

Balance 31/12/2024 229,800

Questions – Ordinary level Payments

Total €

2,600 Purchase of cattle 45,600 Dairy wages 51,200 Purchase of sheep

Balance 01/01/2023 Milk sales Sheep sales Basic Payment Scheme

17,800

Wool sales

Closing stocks on 31/12/2024 were: value of cattle/cows €71,400, value of sheep €53,600.

The Basic Payment Scheme is to be divided (allocated) between the two enterprises in the ratio: cattle/milk 80%, sheep 20%.

(iv) Farm produce used by the family during the year: lamb €650 and milk €800.

29,500

(v)

16,000 35,600

3,400 Feeding stuffs – cattle 7,800 Feeding stuffs – sheep

Conacre

(i) (ii)

(iii) Fertiliser, light and heat, repairs and wages to be divided (allocated) equally between the enterprises.

32,100

81,300 Light and heat 14,500 General expenses

Cattle sales

Electricity due on 31/12/2024 €600.

Required:

19,000

(b) (i)

11,600 6,700

Repairs to milking machine

229,800

The following additional information is available.

The Forde family, who run a mixed farming business, provided the following information from their bank payments and lodgements book for the year ended 31/12/2023.

Total

Chapter 16

51,200 Wages

Sale of cattle

€

(ii)

Prepare an enterprise analysis account for ‘Cattle/Milk’ for the year ended 31/12/2024.

Prepare an enterprise analysis account for ‘Sheep’ for the year ended 31/12/2024.

38,100

Balance 31/12/2023 206,400

206,400

3.

The following were the assets and liabilities of the Massey family, who run a mixed farming business, on 01/01/2025: land €800,000, farm buildings €360,000, machinery €85,000, value of sheep €28,500, value of cattle/cows €79,800, electricity due €600, wages due €1,200, cash in bank €12,200.

Required: Prepare an analysed receipts and payments account for the year ended 31/12/2023 under the following headings:

Required:

Receipts: Bank, Cattle, Milk, Sheep, Other

(a)

Payments: Bank, Cattle, Milk, Sheep, Other

Calculate the Massey family’s capital on 01/01/2025.

The following is a summary of the farm’s receipts and payments for the year ended 31/12/2025.

The following information is also provided.

Receipts

(i)

Milk used by the family during the year was €400.

(ii)

Opening stocks were: cattle €13,500, sheep €18,900.

Total

Payments

Total

€

€

(iii) Closing stocks were: cattle €16,900, sheep €21,300.

Balance 01/01/2025

12,200 Purchase of sheep

29,400

(iv) Basic Payment Scheme due €1,500.

Milk sales

52,300 Fertiliser

11,200

(v)

Sale of wool

General expenses are to be allocated equally between enterprises.

1,800 Purchase of cattle

17,300

Cost classificatio n

Farm accounts

LC Accounting TB_Chapter 16.indd 320-321

Farm accounts

Chapter

321

23

27/01/21 7:50 PM

Learning Outcomes

Gradual and clear progression to more complex topics

PowerPoint

When you have completed this chapter, you will be able to:

Keywords

Classify costs under the various headings Explain controlla ble, uncontrollable and period costs

controllable

fixed

variable uncontrollable

direct

Graphically represen t costs Separate mixed costs into fixed and variable elements using the high-low method (HL)

indirect

materials

labour

mixed

overheads

high-low method

Why do we class ify costs?

Management accountin g involves gathering information about costs. For this informati to be more useful on in the decisionmaking process, costs need to be classified.

The type of classifica tion is determined by the purpose for which it is required.

Direct This purpose is called the cost costs objective.

Manufacturing costs

Contains up-to-date information such as reporting requirements for companies and a new chapter on IT and Accounting

The total cost of manufacturing a product consists of:

Examination tips throughout each topic to aid answering exam questions

Direct

Administration

Selling and distribution

Cost

Explanation Example Raw materials used in statements Procedure fordirectly tabular Timber used in the the manufacturing process manufacturing of furniture EXAM TIP Direct manufac Special accounting stationery is provided for answering tabular statement questions. This is provided turing wages Where employee thatalong can with the standard answer booklet. be traced s are paid on to each unit a piece rate of production basis, e.g. €20 per A number of steps must be followed when preparing a tabular statement: table assembled Expenses that can bevertically traced on thePatent Step 1: Enter all assets top (upper) section of the tabular statement bearing in mind: royalties or hire Expenses directly to each unit of of pricemachines and any corresponding depreciation on these as a special production Include fixed assets at their cost , e.g. €1 per negative asset unit produced paid tofor patent Use a similar approach with debtors less any provision bad debts holder Labour

PowerPoint

Keywords tabular

Step 2: Enter all liabilities vertically on the bottom (lower) section of the tabular statement bearing in mind:

asset

Complete a tabular statement showing the effects of transactions on the balance sheet

A bank overdraft may be treated as a negative current asset

liability LC goodwill Accounting TB_Chapter

Show an understanding of the double-entry principle

depreciation

Cost

23.indd 447

revaluation

Why do we use tabular statements?

Tabular statement A document that shows the effect of transactions on the balance sheet.

Change

Then

Example 1

Example 2

Increases ↑

Asset ↓ or Liability ↑

Purchase of goods for cash Stock ↑ Cash ↓

Purchase of goods on credit Stock ↑ Creditors ↑

Asset

Asset ↓ Debtor settled account in cash or Decreases ↓ Debtors ↓ Liability ↑ Cash ↑

Paid expenses due for cash Cash ↓ Expenses due ↓

Increases ↑

Liability ↓ or Asset ↑

Paid creditors by direct debit Bank overdraft ↑ Creditors ↓

Paid rent in advance by direct debit Bank overdraft ↑ Rent prepaid ↑

Liability Decreases ↓

Liability ↑ or Asset ↓

Owners lodged money into the business bank account Bank overdraft ↓ Capital ↑

Sold a van at net value – amount lodged Bank overdraft ↓ Motor vehicles ↓

After each transaction is recorded on the tabular statement the total change in assets (top section) must equal the total change in liabilities (bottom section).

The overall change in totals could be neutral, i.e. zero – where a transaction affects only assets or liabilities.

For example, cash purchases of trading stock – cash (asset) ↓ while stock (asset) ↑ by the same amount.

Remember, a transaction may affect more than one asset or liability.

Step 4: Identify each asset and/or liability that is affected by each transaction and enter these on the 11/01/21 4:32 PM tabular statement. Use brackets ( ) or a minus sign – to indicate where an item is decreasing.

NOTE

DEFINITION

Asset

NOTE

classifica tion Step 3: When entering assets and liabilities leave two blank (spare) lines on the tabular statement 447 before entering the total for assets and liabilities. This allows for new assets/liabilities that may arise as a result of a transaction, e.g. goodwill, revaluation reserve.

REVIEW AND RECALL Transactions to be recorded on a tabular statement are good practise of some of the adjustments required in other topics throughout the syllabus, e.g. adjustments in all final account questions.

Step 5: Total the assets and liabilities at the end of the financial period by adding the figures across the tabular statement to ascertain the totals at the end of the period.

After each transaction is entered the total change in assets (top section) must be equal to the total change in liabilities (bottom section).

EXAM TIP Marks are awarded for some of the entries in the total at the end column. The exact marks vary and could be awarded for any of these figures. The most common ones include the figures for bank/bank overdraft, debtors, stock, creditors and profit and loss balance, but are not limited to these.

Chapter 21

Chapter 21

The purpose of a tabular statement is to show how a double-entry transaction will impact the amounts for assets and liabilities in the balance sheet. It is a continuous presentation of transactions as they occur showing the effect of each transaction on the balance sheet.

It is based on the double-entry principle. If a transaction increases an asset then there is a corresponding decrease in another asset or corresponding increase in a liability. This is explained in table 21.1.

Table 21.1 Effects of transactions of assets and liabilities

Example 1 – Ordinary level question The following balance sheet shows the financial position of a sole trader, Tom Morrow, as at 01/03/2023.

Balance sheet as at 01/03/2023

€

€

€

Fixed assets 600,000

Buildings

140,000

Delivery vans

740,000

Current assets Stock

108,000

Debtors

12,000

Bank

36,800

156,800

Less Creditors: amounts falling due within one year Creditors Expenses due

27,000 1,800

(28,800) 128,000

Net current assets

868,000

Total net assets Financed by Capital Profit and loss account Capital employed

425

Non-manufacturing

Indirect materials – e.g. paint Indirect labour – e.g. supervisor’s wages Indirect expenses – e.g. rent and rates

Materials

Tabular statements

Learning Outcomes

STUDENT ACTIVITY BOOK

Direct materials – e.g. raw materials Direct labour – e.g. manufacturing/direct wages Direct expenses – e.g. royalties

Indirect costs

Direct costs – costs that can be directly traced to each unit Indirect costs (overhea of production or ds) – costs that service provided. service provided. cannot be directly These costs must traced to each unit be included in the of product produced overall total cost. or

When you have completed this chapter, you will be able to:

Liability

Costs

Manufacturing

Direct costs

Chapter

21

Chapter 23

Past Leaving Certificate theory questions included

Theory questions - fill in spaces in the activity book

The following were the assets and liabilities of the Deere family, who run a mixed farming business, on 01/01/2024: land €500,000, farm buildings €200,000, tractors and machinery €83,800, value of sheep €45,000, value of cattle/cows €131,000, cash at bank €21,400, electricity due €400, wages due €900.

Required:

Advice The cattle and milk enterprise contributes 40% of farm income.

The contribution from grain and vegetables including the profit from the farm shop is 33% of farm income.

If the unharvested crop is actually worth the estimated value, the contribution from this enterprise to farm income will rise to 38% of farm income.

320

€12,800

Prepare an enterprise analysis account for ‘Sheep’ for the year ended 31/12/2023.

2.

948,890 948,890

Both enterprises are currently profitable.

(a)

and buildings

(d) Prepare a general profit and loss account for the year ended 31/12/2023.

(18,320)

Less Drawings (A14)

Summary of the main ratios at the end of the book

A9 Depreciation – land €640,000 × 2%

(b) Prepare an enterprise analysis account for ‘Cattle and Milk’ for the year ended 31/12/2023.

967,210

Capital employed

Step-by-step approach to difficult adjustments and related exercises

€14,200

(€300) €23,600

Required:

€

88,710

Add Net profit

Bank of colour-coded Ordinary and Higher Level exam-style questions

(€600) (€800)

€23,900 health)

Cattle and Milk

878,500

Capital 01/01/2024

Receipts

€15,600

Less electricity due 01/01/2024 Less stock heating oil

316

27/01/21 7:52 PM

Capital and reserves

1.

(€2,000)

Amount paid

€5,790

Farm accounts

Financed by

Fully worked examples and explanations of topics at both levels

€5,700

€1,000 €1,800

A7 Light and heat

(€5,600) €207,690

medicines

16.indd 315-316

Total net assets

(f)

Less drawings (private

€9,500

€9,000 01/01/2024

€9,800

€207,500

Less amount due 01/01/2024 Add amount due 31/12/2024

€76,000

Add creditors 31/12/2024 Less closing stock 31/12/2024

€19,600

A8 Veterinary fees and

64,000

€91,200 €91,200

/120 × 100

Due €15,200/ 24 × 15 months Payable €15,200/24 ×9

Add opening stock

(€400)

Amount paid

741,600

Amount paid

€1,400

A6 Milk sales

€

× 2 = 20%)

A5 Fertiliser

€18,600

27,700

should be taken into (i) Closing stocks account. on 31/12/2024 were cattle cost €32,000, €8,500, market value market value €29,600 €9,000. Unharvest and grain cost crops were estimated (ii) During the year to be worth €14,500. the family consumed milk to the value of (iii) Stock of fertiliser €700 and vegetables on 31/12/2024 was €600. €2,000. (iv) General farm expenses, diesel oil and fertiliser should to ‘Grain and vegetables’. be apportioned 70% to ‘Cattle and Milk’, 30% Veterinary fees and medicines include a payment for private health insurance of Farm accounts €300.

315

€3,600

Amount paid Add opening stock 01/01/2024 Less closing stock 31/12/2024

528,900

information and instructions

→ 100% = €91,200 Interest

€3,600

21,000

(v)

LC Accounting TB_Chapter

€60,000

A4 Diesel oil

12,500

→ 120%

€7,200

18,600 109,500

Loan and interest (10%

€7,200

12 × 100

Net book value 01/01/2024

A3 Loan and loan interest

€3,600

Due

68,000

Haulage fees Pesticides for crops

528,900

31,900

15,600

Diesel oil General farm expenses Balance 31/12/2024

Cost Depreciation up to 01/01/2024 € € 780,000 (780,000 – 140,000) × 2% × 3 years = 38,400 160,000 160,000 × 20% × 3 years = 96,000

Farm land and buildings Tractors and machinery

15,600

22,000 Light and heat 3,600 Veterinary fees and medicines 10,900 Bank loan and 2 years’ annum on 30/09/2024interest at 10% per 23,500 Tractor

12% investments

Conacre

Asset

9,000

8,300 Cattle 96,100 Drawings 13,500 Repairs

€24,000)

A1 Depreciation 01/01/2024

€ 25,600 42,000

Harvesting costs

– cattle

Adjustments

Total

5,600 Seeds

126,500 Fertiliser 207,500 Dairy wages 11,400

TAMS

6 months’ income

Bank payments

€

Balance 01/01/2024

Grain sales

Milk sales

Sale of straw

Basic Payment Scheme

Tabular statements

LC Accounting TB_Chapter 21.indd 426-427

Practice questions on adjustments for final accounts, suspense accounts and other topics Blank templates designed to match questions on tabular statements and budgets Extra complete Higher Level questions for early finishers

The Educational Company of Ireland

800,000 68,000

868,000 868,000

Tabular statements

426

27/01/21 8:10 PM

Chapter 16

Chapter 16

Lodgements

Questions revised to reflect: ʇ Recent Leaving Certificate questions ʇ Updated legislation under the Companies (Accounting) Act 2017 ʇ Advances in Accounting and Information Technology ʇ A greater emphasis on accounting theory ʇ Recent examination theory

4th edition

ACCOUNTING FOR SENIOR CYCLE

TEACHER’S SOLUTIONS AND SUPPORT RESOURCES Digital Resources Teachers can access the Accounting for Senior Cycle 4th Edition interactive e-book at www.edcolearning.ie, plus a range of free digital resources, including: › PowerPoint presentations providing a summary of every topic highlighting key

terms and topics › Fully worked solutions to both textbook and student activity book questions › Full Sample Exam Papers (Ordinary and Higher level) › Test Yourself Questions for each chapter at Higher and Ordinary level to allow

assessment of student’s progress topic by topic

NEW

The Educational Company of Ireland Please contact your Local Edco Representative to book a presentation or request a sample copy, Ph: 01-4500611, Email: info@edco.ie, Website: www.edco.ie