When preparing their financial statements of a sole traders business for the year ended 31 December 2011,
Question:
When preparing their financial statements of a sole trader’s business for the year ended 31 December 2011, the following accounting adjustments were made:
(i) £16,500 due from a customer was written off as irrecoverable.
(ii) 20% of the cost of vehicles was written off as depreciation.
(iii) An item of inventory costing £6,000 was written down to its realisable value of £4,500.
(iv) School fees paid for the proprietor’s son were debited to the Drawings account.
(v) £2,500 paid for a photocopying machine was written off (instead of being capitalised).
(vi) Insurance paid for the period after the reporting date was transferred to a Prepayments account.
(vii) Cost of inventory in hand at the year-end was determined, as usual, on a first in first out basis.
(viii) A dividend proposed for the year in respect of shares held in a limited company was not accounted for as income because it had not been received.
Required:
Identify the main accounting concepts on the basis of which the above adjustments were made.
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