Susan Pizzy, a young graduate operating as a dealer in computer software, requests your help to finalise the accounts of her shop for the year ended 31 December 2011. After you have completed the task, she writes to you making the following points:

(a) The total price paid for software in the year should be regarded as expense. There is no point showing the cost of the unsold portion as an asset in the Statement of financial position.

(b) She had deliberately avoided paying the last half year’s rent and the last quarter’s bills for gas and electricity hoping that there would be a corresponding improvement in profit in the first year.

(c) The amount of £36,000 she had received upfront on subletting a portion of her shop for three years, at £1,000 per month, should all have been treated as her income for the current year because she has no intention of repaying any portion of it even if the tenant were to leave early.

Required: 

Draft your response to the points made by Susan.