Financial Reporting (FR) Mar / June 2021 Examiner’s report
Question 4 What does this test?
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- Điều hướng trang này:
- What is the correct answer
- Where did candidates go wrong
| Question 4
What does this test? This question tests learning outcome B11(a) where candidates should be able to apply the provisions of relevant IFRS Standards in relation to accounting for government grants. In this question, Pootle Co has recognised the full government grant as income in the statement of profit or loss for the year ended 31 December 20X4. Candidates must realise that some of the grant should have been recorded as deferred income and an appropriate correcting journal entry is required. What is the correct answer? $60,000 / (5 years x 12 months) = $1,000 per month So, Pootle Co should have only recognised $4,000 ($1,000 x 4 months) of income in the statement of profit or loss for the year ended 31 December 20X4, with the remaining $56,000 recognised as deferred income in the statement of financial position. The correcting journal entry required is therefore: Dr Other Income $56,000 Cr Total deferred income $56,000 Examiner’s report – FR March/June 2021 8 Where did candidates go wrong? Although the most common answer selected was the correct one, there were a variety of other choices made by candidates which indicate some difficulty with the concept and approach required. There are effectively three elements that candidates must do correctly here: 1. Select the correct accounts to adjust; 2. Identify which account should be debited and which should be credited; and 3. Calculate the amount required for the correcting journal Other income must be adjusted as too much income has been recognised in the statement of profit or loss. To reduce a credit account such as other income, it must be debited. Candidates should realise that no adjustment is required to bank as this has already been accounted for correctly on receipt of the cash. Therefore, they must establish that it is deferred income (liability) that should be adjusted by crediting total deferred income rather than adjusting total accrued income (asset). The value to be included in the journal will be the same for both debit and credit. The values available to be selected were: 1. $4,000 – this is the amount of income that should have been recognised, rather than the $56,000 adjustment required to correct the error 2. $48,000 – this figure meant that a full year’s worth of income was recognised, rather than just four months 3. $56,000 – this is the correct response and means that only four months of income are recognised 4. $57,000 – this figure recognised three months of income rather than four months tải về 0.8 Mb. Chia sẻ với bạn bè của bạn:
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