To ask someone with accounting knowledge to please explain why this is the case?

[cinnamonfun]

Thanks so much

Immerse yourself in it then have a day off before. It will be FINE. Loving DRive and CRash as well as D EAD and C LIC, where were you guys when I was learning this stuff!

We had accounting jokes about drinking too much. Credit stomach, debit pavement

Re your question, during the course of the year you'll have already debited the BS by net profits, each time you make an entry (e.g. Credit revenue Debit debtors/cash). At the end of the year in your computer software we just need to move the current year p&l out of current year earnings (already shown within equity as a net credit) and move it into another equity account called retained earnings b/f. Therefore debit current year earnings to bring it to zero (ready for the new year's transactions) and debit b/f retained earnings.

I love T accounts. I still resort to them every now and then 20 years after doing my exams.

Good luck with the exams - hope they go well. Came on to answer, found everyone had already given you the correct answer! Drew a picture and everything

Is true that people want to get 100%. I did want to (never did obviously although wasn't too bad )

If you have got any more questions I'm (relatively) happy to try and answer them for you - am an ACA support tutor for students doing their exams

Ditto to those still using T accounts - still use them whenever I'm trying to work some complex accounting out (or when what the client has done doesn't make sense)

I'm only in my first year and stupidly excited that I helped someone else a tiny bit! I got my TB to balance perfectly in my exam (such a good feeling!) but ran out of time to perfect the extended TB question. No feedback either on the exam so I'll never know where the money went. I'm just going to suspect an employee was syphoning it off on the quiet .

Balancing is such a nice feeling .

You are all amazing! Thank you so much!

If you have a balance sheet that doesn't balance you just have.... a sheet.

I was all geared up to answer the OP and you all beat me to it! I love stuff like this. Miranda answered it better than I could have anyways.

must get job

We had accounting jokes about drinking too much. Credit stomach, debit pavement

Oh I just actually LOL. Love accounting jokes. Such a looser.

My balance sheet balanced in my FA exam. Was very happy.

Double entry is always good for amusement. And uncleared lodgements still make me giggle.

Just to say thanks again for all your help the other day, everyone. Can I be really annoying and ask another question?

With regard to this question, I can understand why it would increase net profit (as any decreases in the trade receivables allowance balance are credited to IDE, thus reducing the expense and increasing net profit)... but wouldn't it also reduce current assets on the SoFP?

It would increase current assets as the allowance for receivables reduces net assets

Reduces current assets, sorry!

Agree with peppa

Thanks - yeah that's what I thought but in answers it says (D) net profit increases by 300.

Ah, the joy when the balance sheet balances in an exam...

I work in pure tax now, but it seems they've changed all the terminology...do p&l accounts and balance sheets not exist anymore? We still use them at our firm.

I vaguely remember when sitting my exams that 'inventories' was coming in for 'stock'....

Surely it would have no effect on current assets - it would just be moving debtors (which I assume are receivables) to cash paid, so net assets would remain the same?

Current assets would increase as the allowance for bad debts ( a credit) is reduced. If you like the recoverable amount is increasing. This increases net profit - Dr balance sheet Cr P&L. outs self as former accountancy tutor

I mean, the double entry must be dr bank, cr receivables?

Ah ellie I think I read the question differently.....I was thinking it was just debtors being reduced, rather than bad debts.

Ah I get it, so current assets would increase and net profit would increase as the expense would be reduced?

Cinnamon fun yes. Gosh I remember multiple choice question banks ....

I'd
DR bad debt on BS
CR bad debt expense on IS

So increase in net assets