Ask Me Help Desk - Income Statement &Balance Sheet

You're correct that I'm not going to be familiar with that book because it's Australian.

However, most of the things that may have been differences of book or country, I left them out in the second post.

Pretty much the stuff I left are going to be correct either way.

Just for instance, the issue of whether you should put rent revenue and interest expense under a section called "other revenue/expense" will be dependent partly on the level you're at and the book you're using. Even in the U.S. the first few chapters of a book do not teach this concept of separating this out. For a different country, I don't even honestly know if it should be separated out.

That's just an example. But that is the type of thing I mostly ignored in my second post, because I wasn't sure about your book or if this was for another country. That means if "your way" is different, I can't possibly know what it is. I've said on a couple of items that you need to check your book, and that is all you can do. (We have some people from Australia, but I don't know if they'll take the time to essentially start this from scratch.)

However, most of what I left in the second post is just the way it is. Some of it absolutely, positively is the way it is. Some of it I'm 99% sure of. Meaning, I think you should simply pay attention to those specific items that I reiternated in the second post. (Though you may have to backtrack to the first post for original comments.)

Examples of what I'm referring to:

Bad debt - the problem says the amount in bad debt is fine as is and not to make an adjustment. I don't care about the book or international differences. The problems says don't make any adjustment. So don't.
Net income isn't capital. Capital has a beginning balance. If you add net income to it, it changes the balance. Therefore, net income (profit) isn't the same as capital, it adds to capital. Again, your book will not disagree w/this and it has nothing to do with international rules.
You have 2 notes payables. They should be separated out, one is current and one long-term. The beginning chapters in a book might not bother with long-term debt, but if the problem is giving you dates, it means they want them separated. I don't think there are any international differences on something like that.

That is just examples. But everything I listed in the second post is not related to book differences or international differences (unless I specifically said so), meaning you need to pay attention to them.

Quote:

Originally Posted by dream111

can u tell me the whole things about 5 adjusted data that was given about this question ? How 2 calculate correctly?
Thank u.

But most of your issues aren't with the adjusting entries.

The only issue with #1 is that you included it in regular Accounts Receivable. I personally would separate it into a different receivable, simply because it's not part of your "trade." (Accounts receivable is also known as trade receivables.) However, this is one of those things where your book may not have introduced this idea. That is why in the second post I said perhaps it's OK to put it in Accounts Receivable, but that it needs put somewhere. I didn't mean for you to just get rid of it. You have to debit something -- you can't just drop it. And I didn't mean for you to subtract it from Accounts Receivable.

Re-read the original post on that. I was only referring to possibly separating it into a different receivable. That doesn't mean get rid of it altogether.

As for #2 -- I've already said this like 3 times now. Just read that again. Notice the part that basically says don't make an entry. So there's two issues with that. One is that you weren't supposed to make an entry to begin with. Secondly, that you put 12 in bad debt expense and didn't balance it with anything else, thereby putting yourself out of balance.

The rest are correct. Most of the other problems aren't related to the adjusting entries.

[QUOTE=dream111;1941600]
P&L Statement for the year ended 30.Sep 2006（Parts of it)

Add: Other Incomes:
Rental Revenue 33+3

Less: Expenses:
Bad Debt expense 12

Balance Sheet at the year ended 30 Sep. 2006(Parts of it)

Current Assets:
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12

This is the new one that I hv done again... not the original one...
It that adjusted correctly?
Thanks for helping.

Quote:

P&L Statement for the year ended 30.Sep 2006（Parts of it)

Add: Other Incomes:
Rental Revenue 33+3

OK, so you got rid of the discount received from this section. But you have to do something with it. That 24 does have to count in the math somewhere.

Quote:

Less: Expenses:
Bad Debt expense 12

Sigh. You didn't CHANGE anything here. You've only isolated the one expense.

I don't know how to state this any more simply than I already have. #2 says don't make any adjustment for bad debt. That's about as plain as you can get. There is no adjusting entry for bad debt.

Quote:

Balance Sheet at the year ended 30 Sep. 2006(Parts of it)

Current Assets:
Accounts Receivable 120+3
Less: Allowance for doubtful accounts 12

That's fine.

U mean : no need to add" bad debt expenses 12" in P&L satement ? And also no need to subtract " allowance for doubtful debts12" in the Balance sheet?

Quote:

Originally Posted by dream111

u mean : no need to add" bad debt expenses 12" in P&L satement ? and also no need to subtract " allowance for doubtful debts12" in the Balance sheet?

You seem to not be getting the idea of what doing an entry means. An entry has equal debits & credits. The ENTRY has the equal debits & credits. That is not the same thing as an entry having one debit and a balance in another account having a credit in it. But that's what you're trying to do.

Entry:
Dr. Cash 1000
Cr. Acct Receivable 1000

Cash:
5000 balance in the account prior to the entry
1000 ADD the debit from the above entry
6000 balance in the account after posting the entry

Acct Receivable:
9000 balance in the account prior to the entry
(1000) SUBTRACT the credit from the above entry
8000 balance in the account after posting the entry

The entries are purple. Notice the entry has equal debits & credits. The balances are green. Notice everything else is just balances in the accounts. Those number are not relevant to the entry and have nothing to do with it. The entry changes those balances to new balances. Balances and entries are not the same thing. You don't put balances into entries, and they can't change without making an entry. Entries change balances.

Here is what you did:
Dr. Bad Debt Expense 12
NO CREDIT

Bad Debt Expense:
0 balance in the account prior to the entry
12 ADD the debit from the above entry
12 balance in the account after posting the entry

Allowance:
12 balance in the account prior to the entry
No entry cause you didn't do anything to it
12 balance in the account which is the same cause you didn't make an entry to it to change it.

You simply stuck the same 12 that already existed in the allowance account and put it in bad debt expense. But you seem to think that another account already having a prior credit balance of 12 in it is good enough. But note the entry has no credit.

I hope this illustration shows the difference between how balance and entries properly work, and what it is you did.

This is one reason you're out of balance. That entry that put 12 in bad debt expense doesn't have a credit in it. The credit that already exists in allowance is not in the entry. It simply already existed.

Now that said...

Sticking anything at all into bad debt expense should not have happened. In other words, this should never have happened to begin with:
Dr. Bad Debt Expense 12
NO CREDIT

The problem very explicitly says that no entry is needed. Please start reading more carefully. Not only is the problem coming right out and saying no entry is needed, but I've repeated it numerous times. That one-sided 'entry' up there with the bad debt expense should never have existed to begin with, cause the problem said don't do it.