[malami]

I have the problem with this exmple... can not balanse it... help :(...

thanks

Wayan has been in business for many years. His accountant has extracted the following trail balance from his book of accout as at 31 March 1995.
------------------------------------------------------------------------------$--------------$
Bank -----------------------------------------------------------------------1200
Capital -----------------------------------------------------------------------------------33000
Cash---------------------------------------------------------------------------300
Drawings--------------------------------------------------------------------6000
Insurance --------------------------------------------------------------------2000
Office Expanses-----------------------------------------------------------15000
Office furniture at cost-----------------------------------------------------5000
Office Furniture : accouted depreciation at 1 April 1994--------------------------------2000
Provision for bad and doubtful debts at 1 April 1994------------------------------------500
Purchases-------------------------------------------------------------------55000
Salaries ---------------------------------------------------------------------25000
Sales-----------------------------------------------------------------------------------------100000
Stock at 1April 1994------------------------------------------------------10000
Trade Credits -------------------------------------------------------------------------------4000
Trade debtors---------------------------------------------------------------20000
----------------------------------------------------------------------------$139500--------$139500

The following information si to be taken in to account:
1) Stock at 1 March 19X5 was valued at $15000.
2.) The insurance included $500 worth of cover which related to the year to 31 March 19X6.
3.) Depreciation is charged on the office furniture at 10% per annum of the original cost (its assumed not to have any residual value).
4) The bad debt of $1000 is included in the trade debtors account balance of $20000 is to be written off.
5) The provision for bad and doubtful debt is to be maintained at the level of 5% of outstanding of outstanding trade debtors as at 31 March 19X5. i.e. after excluding bad debt referred to the note above (4).
6. At 31 March there was an amount of owning salaries $1000.

REQUIRED: 1. TRADE AND PROFIT AND LOSS ACOUNT FOR THE YEAR TO 31.MARCH 19X5
2) BALANCE SHEET AS AT THE DATE AND INCOME STATEMENT.

[malami]

OK, first I made a balance sheet for the facts as they are... I goodt Assets 91.000 $ and Liab+Equity 91.000...

What I don't know is for exmple, how do I record step 1.Stock at 1 March 19X5 was valued at $15000.
At irst the stock was 10.000, so where do I record the difference of 5.000.

Do I just simpply add 15.OOO to the stock which is in Assets and 5.000 to Revenues in Equity??

[morgaine300]

You have six different, unrelated adjusting entries. You need to make some attempt at doing them yourself first. We aren't here to do your homework for you, and someone would have to explain six entirely different adjustments to you. If you've tried them, show us the work.

As for your attempt on the first one -- first, NEVER do anything that doesn't balance like that. That's a main rule, and you should already know that answer must be incorrect since it doesn't balance. You are also not trying to add 15,000 to the stock. Its balance is 15,000 and you have 10,000. You need to get its balance up to 15,000, not add 15,000.

I don't know where the 5000 goes on the credit side because I don't know what methods you're using. There's more than one way to deal with inventory issues. I can make three guesses:

If the books said you had 10,000 but a physical count revealed you actually had 15,000, that's a pretty huge difference. So that would be an odd thing and doesn't make sense to me, though I've seen stranger things.

You have a purchases account, implicating that you may be doing periodic method. In that case, the 10,000 might actually be the April 1, 1994 amount and you adjust at fiscal year-end. That involves two entries - one removes the balance out of the inventory and the second puts the ending balance into the inventory, and the other side of both entries would be income summary. (That could also be done in one entry, just for the 5000 difference; I just don't know if any book does that.)

Since it says it's "valued" at 15,000, that also may mean the value of it has gone up since it was recorded. Since this is non-U.S. stuff, I have no clue what you would do in a case like that, but I'm sure someone else would know.

But you see there's 3 possible scenarios. If I had to make a guess, I'd say the second one is the case: you're doing periodic and the 10,000 is actually 4/1/07 and has never been adjusted at all since then.

[malami]

I did not mean to add this 15000 to stock but to adjust stock to 15000... if it was 10.000 I would make the stock 15.000 but I don't know what else would chane. Am I suppose to add 5000 to Revenues or where else??

[morgaine300]

I already answered this as best as I could. Did you actually read it? If you didn't understand it then state what you don't understand. But if you don't bother to read what people say, we can't help you.