Reference no: EM132707365

Task on accounting concept and Convention

You have been asked to prepare the final accounts for W Smith, a sole trader, for the year ended 31 December 2013. W Smith has forwarded to you all books of prime entry and ledgers, and besides, has given you the following information:

i) Mr Smith had taken £2,000 out of the business bank account to take his wife on holiday.

ii) Up to last year, the machinery and vehicle used in the business had been depreciated using the reducing balance method. W Smith thinks that they should now be depreciated using the straight-line method.

iii) Mr Smith is confident, given his order book, that the business will continue to operate in its present form for many years.

iv) Mr Smith had purchased ten staplers, four flip charts and four packets of whiteboard markers which will be used in the business for the next couple of years.

v) Mr Smith informs you that he has just found an unopened electricity bill for £900 which was for the quarter October to December 2013.

TASK

Problem 1: In each case, identify and then explain the main accounting concepts being highlighted and indicate how each should be treated in the final accounts.