Introduction to Financial Accounting Research Paper

Introduction to Financial Accounting - Research Paper Example Amount Opening capital 58630 Add: Net profit 38565 Less: drawing (-)24700 Bank overdraft Creditors o/s security guard wages 400 o/s telephone and e-mail 200 o/s website maintenance expenses 375 72495 2380 19670 975 95520 Debtors Cash in hand Freehold premises 60000 Less: depreciation(new) -(3000) Less: depreciation(old) - (18000) Safe 12000 Less: depreciation(new) -(2880) Less: depreciation(old) -(4800) Shop fitting 34000 Less: depreciation(new) -(3400) Less: depreciation(old) -(10200) Closing stock3400 520 390004320 20400 2788095520 Adjustment entries: (1) O/S Security guard wages 400 should be added in the liabilities side. (2) O/S Telephone and e-mail 200 should be added in the liabilities side. (3) 900*5/12= 375 is O/S of the website maintenance expenses should be added in the liabilities side. (4) 60000/20 years= 3000 for year should be deducted as new depreciation and old depreciation should be Deducted from actual cost, therefore 60000- 18000(old) - 3000(new) = 39000. (5) 12000-4800(old) =7200(new depreciation) 2880= 4320.... Coming to the next concern that, the value for your premises seems very low, though you paid more than that of them because the old depreciation is more than the new calculated premises. As we can see it separately below the balance sheet and on the balance sheet, this comes under the Asset side in the Balance Sheet and the new calculated and paid depreciation is very less that the previously calculated and paid one. Therefore, more cost was been paid earlier, which if alone calculated will be very high, that is why the value shown for your premises now are very low. As you have said that, you took  £24700 out of the business for your own personal consumption, this comes on the debit side of trading account as owner’s drawings and subtracted under the liabilities side in the balance sheet. As we know that the owner’s drawing is subtracted from the sum of net profit and opening Capital, and as the amount is not been returned, though it is taken from the profit of the business it is subtracted. In addition, counted as neither a loss or bad debt or a profit and this is why is cannot be written, calculate or charged under the profit statement. The distinction between the fixed asset and the current asset is, fixed asset is been defined as that asset which is been acquired for relatively long periods for carrying on the business of the enterprises. They are not been meant for resale. Land and building, machinery, furniture are some of the important examples of fixed Assets. Sometimes the term â€Å"Block Capital† is also been used for these terms.