Abnormal loss – meaning and example

Inventory Turnover Ratio - meaning and formula.

An abnormal loss is also called an uncontrollable loss. It is a loss that is not expected to occur under efficient operating conditions.

It is not considered an inherent part of the production process because it arises from inefficiencies and is not included in the process costs. An example would be incorrect mixing of ingredients or cutting of fabric.                              read more

price skimming- meaning and objectives

Variable overhead variance - meaning, causes and formula.

Price skimming refers to the strategy of selling a product or a service at a high price to gain a high profit, while sacrificing high growth in sales. A high price can be charged when an organisation has substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply read more

Revision question on the calculation of earning per share per IAS 33.

Abu Ltd had 100,000 shares in issue but then makes a 1 for 5 rights issue on 1 October 2017 at a price of TZS 1. The market value on the last day of the quotation with rights was TZS 1.60. Total earnings are TZS 50,000 in 2017, and TZS 40,000 in 2016. read more

Revision question on correction of errors and preparation of suspense account.

(a) Explain circumstances under which a suspense account may be opened.
(b) The trial balance totals of Mukunzi for the year ended 30 June 2017 were:
Debit TZS 400,000
Credit TZS 399,000

She recorded the difference in a suspense account and proceeded to prepare financial statements.  Further scrutiny of her accounting records revealed the following errors:

1 A credit sale TZS 8,000,000 was not entered the sales day book.
2 Discounts received TZS 230,000 were entered the debit side of the discounts allowed account as TZS 320,000 but properly recorded in the trade payables’ ledger account.
3 A cheque TZS 4,500,000 from Jane was wrongly recorded in Joan’s account as TZS 5,400,000 but properly recorded in the bank account.
4 Commission received TZS 160,000 and additional capital TZS 30,000,000 were all wrongly credited in the sales account but recorded properly in the corresponding ledger accounts.
5 Carriage inwards TZS 940,000 was wrongly debited in the carriage outwards account as TZS 490,000.  The corresponding account was properly treated.

REQUIRED:

Prepare for Makunzi for the year ended 30 June 2017: read more