Banky Inc is a technology company performing research for pharmaceutical companies. The finance director has contacted your financial consulting company to discuss issues relevant to the de-recognition of a non-current asset.

Required: Prepare notes for your meeting with the finance director which explain and justify the accounting treatment of these issues. Use an illustrative example of an asset that was bought during a particular financial year and sold during the year of another financial year.

Question Two

The following is Mr Ades Sales ledger control account for July 2020

Dr

Cr

N

N

Bal b/d

48,020

Bal b/d

1,450

Credit Sales

738,430

Returns Inwards

9,100

Cash

385,290

Discount Allowed

12,000

Bad Debt Written Off

1,150

Contra/Set off

2,090

Bal c/d

375,370

786,400

786,450

Bal b/d

375,370

Required:

i. Explain the significance of control accounts?

ii. Discuss one limitation of using control account

iii. What are the implications of the contra entry and the opening credit balance in the

control account above

iv. State and briefly explain two (2) items (relevant to sales and receivables) that should

not be recorded in the Sales ledger control account