The following trial balance was extracted from the books of Simon’s Business, a sole Trader, on 31st December 2020, the end of the financial year.
Additional information as at 31st December 2020 a. Inventory as at the close of business was valued at SCR460,000 b. Outstanding (accrued) repairs and maintenance expenses SCR9,000 c. Other operating expenses are prepaid by SCR5,000 d. The allowance for receivables is to be adjusted to 2% of trade receivables e. Depreciate buildings at 2% per annum using the straight line method f. Depreciate equipment at 25% per annum using the reducing balance method. g. Tax is payable at the rate of 15% on profit
i. Income statement for the year ended 31st December 2020
(a) There are two fundamental qualities that determine the usefulness of accounting information. Briefly discuss these two fundamental qualities that would render accounting information useful to its users.
(b) Whilst preparing the final accounts for the year ending 31st December 2020, Joan noticed that there was a telephone bill for SCR 2100 for October 2020 which has not been paid and the bill was lying around in one of the drawers. She said that she will pay the bill in January 2021 and record the expense in the 2021 accounts.
Advise Joan as to whether or not, it is correct to pass this unpaid bill in the 2021 accounts by explaining to her briefly the accrual or matching concept in accounting.
ACC 933 Financial Management
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