Account Payable Definition, Recognition and Types

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“trade payables are liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier” IAS 37 Provisions, Contingent Assets & Contingent Liabilities. Payables are obligation to pay cash in the short term within 1 accounting period end. Payables are current liability of the…

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Account Receivables Definition, Recognition and Types

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Receivables are right to receive cash in the short term within 1 accounting period end. Receivables are current asset of the entity. Receivables are recognized when: It is certain that economic benefits in the form of cash will flow to the entity. Sum of money involved is known reliably. Like inventory, property, plant & equipment,…

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Accounting for Accruals & Prepayments

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At period end some goods or services are in transit and receipts and payments are outstanding. According to matching principle, revenues and expenses needs to be recorded in the period in which it is incurred rather than cash is received or paid. It gives rise to the need for accounting for accruals and prepayments at…

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IAS 37 Non-Current Intangible Assets, Amortization & Impairment

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1         Amortisation Amortisation is same as depreciation. Amortisation term used to allocate depreciable amount of intangible assets over its useful life. Reason could be for using different name for depreciating intangible assets is to communicate users of financial statements about the expense due to intangible assets separately from expense due to tangible assets. The depreciable…

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IAS 37 Non-Current Intangible Assets, Recognition

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1         Initial Recognition On initial recognition, intangible asset shall be carried at cost. Exam Support: You need to know which intangible assets are capitalised and which intangible assets are expensed. Conclusive list of intangible assets is difficult to compile; therefore, you should learn the criteria for capitalisation of intangible assets defined by IAS 38 Intangible…

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IAS 37 Research Vs. Development Expenditure,Definition,Treatment

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1       Research Phrase No intangible asset arising from research (or from the research phase of an internal project) shall be recognised. Expenditure on research (or on the research phase of an internal project) shall be recognised as an expense when it is incurred. In the research phase of an internal project, an entity cannot demonstrate…

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IAS 16 Property, Plant & Equipment, Depreciation

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1            Definition The depreciable amount of an asset shall be allocated on a systematic basis over its useful life. The residual value and the useful life of an asset shall be reviewed at least at each financial year-end and, if expectations differ from previous estimates, the change(s) shall be accounted…

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Purpose of Depreciation of Fixed Assets

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Non-current asset are used to produce, deliver goods or services and maintaining day to day operations. At the period end, non-current assets needs to be depreciated to account for economic benefits (revenue) generated from the use of assets. Exception: Land is never depreciated, as it has infinite useful life. Land & building are often brought…

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Calculation of Profit & Loss on Disposal of Revalued Assets

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$ Cost                                                                xxx Depreciation                                              (xxx) Impairment Loss                                       (xxx) Net Carrying Value                                    xxx Revaluation Surplus/(Deficit)                x/(x)    (bal fig) Revaluation                                                  xxx Disposal Proceeds                                    (xxx) (Gain) or Loss on Disposal                      (x)/x Journal & Ledger entries will be made same as for non-current asset valued at cost. Illustration: An item of plant…

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Revaluation of Non-Current Assets or Fixed Assets

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1       Calculation of Revaluation of Non-Current Assets $ Cost                                                                xxx Depreciation                                              (xxx) Carrying Value/Book Value                     xxx Revaluation Surplus/(Deficit)                x/(x)     (bal fig) Revaluated Asset                                        xxx Revaluation surplus is excess of the market value of fixed asset over carrying value. It is unrealised gain to the organization Revaluation deficit is excess of…

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