ACCT2101 FINAL REVISION

Transcription

1 ACCT2101 FINAL REVISION Tpic 5: Current Assets Cntingent asset A pssible asset that arises frm past events (uncertain, nt in cntrl f the entity) Nt recgnised in financial statements - cntinually assessed Inventry Cst f inventry = cst f purchase + cst f cnversin + ther csts incurred Cst f purchase = purchase price + imprt duties and taxes + transprt trade discunts Cst f cnversin = direct and indirect csts f prductin (labur, verheads) Accunting fr Inventry Beginning inventry + Purchases COGS = Ending inventry Beginning inventry + Purchases = Gds available fr sale Gds available fr sale Ending inventry = COGS 2 types f inventry system Perpetual Current and Cntinuus update fr inventry mvements thrugh the inventry accunt Every item f inventry tracked individually COGS accunt is maintained Stck cunt used t determine any stck lss Any difference between the recrded inventry accunt and the cunt undertaken Cstly in a manual system but less s with cmputerisatin Peridic N permanent recrd f inventry thrugh the inventry accunt Physical cunt needed t determine the amunt f inventry n hand at the end f the accunting perid Can nt determine stck lsses A pssible indicatr wuld be a change in expected rati f COGS t sales Purchases accunt is nt used Less timely t maintain than the perpetual system but can be less cstly t maintain Calculate COGS using frmula abve Perpetual Jurnal Entries Inventry purchased Dr. Inventry (A) Cr. Accunts Payable Inventry sld Dr. COGS (E) Recrd stck lsses (identified by stcktake) Dr. Inventry Shrtage Expense (E) Peridic Jurnal Entries Beginning f perid inventry accunt transferred Dr. COGS Inventry Opening (E) Inventry purchased Dr. Purchases Cr. Accunts Payable *When inventry is sld there is n entry Physical cunt undertaken 1

2 Dr. Inventry Cr. COGS Inventry Clsing (E) Purchases and inventry accunts are clsed and adjusted thrugh P & L Summary. Net effect = COGS 4 inventry cst flw assumptins FIFO LIFO Weighted average (peridic system) Mving average (perpetual system) Average cst = ttal cst f gds available fr sale / ttal number f units Specific identificatin Each unit can be identified with a specific purchase invice Nte: In perids f rising prices, FIFO is mre efficient than weighted average Highest ending inventry Lwest COGS Highest net prfit Inventry write-dwn Ending inventry is reprted at lwer f cst and net realisable value (NRV) Only adjust if NRV falls belw cst Tpic 6: Nn-Current Assets (& PPE) Acquisitin f a NCA: Jurnal Entry Dr. Nn-current asset (at cst) Cr. Cash/Lan Payable Depreciatin Jurnal Entry Dr. Depreciatin Expense Cr. Accumulated Depreciatin (cntra-asset) Carrying Amunt f Asset Carrying Amunt = Asset (at cst) Accumulated Depreciatin Depreciatin Methds Straight-line methd Reducing-balance methd Cnsumptin f ecnmic benefit is higher in earlier years Depreciatin Expense = Carrying amunt x Depreciatin Rate Units f prductin methd Cnsumptin f ecnmic benefit (expense) varies accrding t yearly prductin Depreciatin Exp. = Cst Residual Value x (# units used / est. ttal units ver life) Revaluatin Carried at a revalued amunt Carrying amunt = Fair value at date f revaluatin subsequent A.D subsequent impairment lss Fair value: the amunt fr which an asset culd be exchanged Accunting fr a revaluatin Increment (increasing the value at which the asset is recrded) Fair Value > Carrying Amunt, recgnised in Revaluatin Surplus (equity) Decrement (decreasing the value at which the asset is recrded Fair Value < Carrying Amunt, recgnised as lss in prfit and lss 2

3 3 steps fr Accunting fr revaluatin 1) Recrd current perids depreciatin up t date f revaluatin recrd depreciatin fr current year Dr. Depreciatin Expense Cr. Accumulated Depreciatin 2) Write-back/clse accumulated depreciatin t the asset accunt Dr. Accumulated Depreciatin 3) Recrd revaluatin If upwards (increment) Dr. Asset Cr. Revaluatin Surplus If dwnwards (decrement write dwn buildings t fair value) Dr. Lss n revaluatin Cr. Asset Reversal f an Increment Initial Entry Dr. Asset Cr. Revaluatin Surplus New decrement entry Dr. Revaluatin surplus Reversal f a decrement Initial Entry Dr. Lss n revaluatin New increment entry Dr. Asset Cr. Gain n revaluatin 3 steps fr dispsal f asset (included in prfit r lss, nt revenue r expense) 1) [update] Recrd current perids depreciatin up t date f dispsal/sale Dr. Depreciatin Expense Cr. Accumulated Depreciatin 2) Calculate gain r lss n dispsal 3) Recrd sale including write-back f accumulated depreciatin If Prceeds > Carrying amunt GAIN ON SALE Dr. Cash (prceeds received) Dr. Accumulated Depreciatin Cr. PPE Cr. Gain n sale f PPE If Prceeds < Carrying amunt LOSS ON SALE Dr. Cash Dr. Accumulated Depreciatin Dr. Lss n sale f PPE Cr. PPE Dispsal f Revalued Assets Transfer Revaluatin Surplus included in equity t Retained Prfits when the asset is dispsed f Dr. Revaluatin Surplus Cr. Retained Prfits Tpic 7: Liabilities Current Liabilities Expected t be settled in the entity s nrmal perating cycle Due within ne year Examples Bank verdraft 3

4 Shrt term accruals (accunts payable, accrued expenses interest payable, unearned revenue) GST Payable Current prtin f lng term debt Current Liabilities jurnal entries fr payables Dr. Expense Cr. Payable E.g. Current tax payable Dr. Incme tax expense Cr. Incme tax payable Interest bearing liabilities Issuance f nte Dr. Accunts Payable Cr. Ntes Payable Payment Dr. Ntes Payable Dr. Interest Expense Cr. Cash Nn-current liabilities Lng-term brrwing exceeding 12 mnths E.g. Mrtgage payable Required equal peridic payments that include bth interest and principal Unpaid principal balance t be repaid in the next year and classified as a current liability Mrtgage jurnal entries Recrd lan Dr. Prperty Cr. Cash Cr. Mrtgage Lan Lan payment Dr. Interest expense Dr. Mrtgage Lan Cr. Cash Debentures Written prmise t pay a principal amunt at a specified time Debenture Jurnal Entries Debenture issue (recrd receipt f applicatin mney) Dr. Cash Trust Cr. Applicatin Debentures On alltment, transfer frm cash trust Dr. Cash at Bank Cr. Cash Trust Alltment f debentures Dr. Applicatin Debenture Cr. Debentures ADJUSTING ENTRY end f financial perid: Payment f accrued interest Dr. Debenture Interest Expense Cr. Debenture Interest Payable COMPLETING ENTRY first day f financial perid Cr. Debenture Interest Payable Dr. Cash Payment f debenture interest Dr. Debenture Interest expense Cr. Cash 4

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