Reference no: EM132850735

Question - At the management's meeting of VidPro Pte Ltd at which the draft accounts for the year ended 31 December 2020 were discussed, the Managing Director was concerned with low profitability of the company for the year. He would like to show a good performance of the company to the board of directors and would like to remove some expenses which he believes should not be in the current year income statement. He would like you, the accountant for the company, to take the following actions:

(i) The cost of the recent expenditure on the television campaign advertising the company products for the month of December 2020 will only bring in sales for the year 2021. It should not be treated as an expense in the 2020 accounts but an expense for the year 2021 instead.

(ii) Due to the restriction imposed as a result of the COVID19 pandemic, a couple of machines were not in operation for the year. However, depreciation expense was recorded for these machines. The depreciation expenses for these machines should be suspended till they are in operation again.

(iii) There was an interest expense of $1,500 recorded. The interest payment was not due till 1 May 2021. Since no payment was made, the record of the interest expense should be removed.

Required - Evaluate the instruction, making reference to any accounting standards, concepts and principles which seem appropriate. As an accountant of the company you need to explain the appropriate action to be taken to the Managing Director. You have to address the concern of the Managing Director. Appropriate references should be made to support your answer.