BALANCE SHEET ADJUSTMENTS GRADE 11 ACCOUNTING MODULE 6

BALANCE SHEET ADJUSTMENTS GRADE 11 ACCOUNTING MODULE 6 LESSON 2

FINANCIAL ASSETS DEFIN: Investments which mature after 12 months FIN Assets are found under Non-current assets Fixed Deposit: AB Bank Balance b/d 200 000 One of the fixed deposits at AB Bank valued at R 50 000 matures 3 months after year-end How would this affect the financial statements? Financial assets in the Balance sheet will be entered as R 150 000 R 200 000 – R 50 000(matured value) = R 150 000 Cash & Cash equivalents would reflect a fixed deposit with the maturing value of R 50 000

LONG-TERM LOANS DEFIN: Loans which are repayable after 12 months L-T Loans are found under Non-current Liabilities LOAN: XY Bank Balance b/d 80 000 The business repays this loan at R 2000 a month. It will another 4 years to repay this loan How will this affect the Balance sheet? Non-current Liabilties will reflect a loan as R 56 000 R 80 000 – (R 2 000 x 12 repayments) = R 56 000 Trade & other payables will reflect the repayments of R 24 000 (R 2 000 x 12 months) as a portion of a loan or short-term loan

POST-DATED CHEQUES DEFIN: Cheques which are dated for the future. The cheque may only be banked/deposited on the date specified. WHY ISSUE? The BUS may not have immediate funds to cover the value of the cheque It expects to have the available funds on the date specified on the cheque WHICH ITEMS ARE AFFECTED IN THE F/S? Creditors Control will DECREASE – as they were paid Bank(ASSET) will DECREASE – as the Creditor was paid

POST-DATED CHEQUES If the CPJ for February 2010 contains the following cheque: Cheque 265 issued to Hudson Suppliers for R 8 000 This cheque had been post-dated to 31 May 2010) How should the F/S be adjusted at year-end 2010? DR Bank The cheque only becomes valid on 31 May 2010, but the entry has been recorded in the CPJ. To represent a true state of affairs (Prudence) the entry in the CPJ is ‘reversed’ as if the amount had not yet been deducted CR Creditors Control The entry needs to be ‘reversed’ as the creditor has physically not yet received their money owed to them at year-end.