Category Archives: 1 Basic Accounting

Non-refundable taxes and duties

As you purchase goods, whether they’re materials or finished items, you’re paying for various things – the base price of the item, possible enhancements made, taxes on import, purchase etc., transportation and handling, and not to forget, possible rebates or reduction in prices as well.  Continue reading →

Provision for slow moving finished goods and materials

What do you reckon, should materials be written down if they’re slow moving? The answer to this question isn’t as black and white as you may think.

When it comes to finished goods, the answer is more inclined towards “yes” since they’re first off slow moving which indicates they’re more likely to be sold lower their cost, and more so since they’re finished items from raw materials. It’s not that easy to use those goods for something else, i.e. scrap them to materials.  Continue reading →

Import and other taxes on buying goods

Similarly to transportation expenses which are included within the cost price of a stock item, so are the import and other taxes you won’t be able to get back from the state and / or tax authorities. As IAS 2 puts it: “The costs of purchase price of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities).”  Continue reading →

Releasing reserves

As you obtain information that the entity is likely to incur outflows from certain events, you treat them as provisions and recognize respective liabilities and expenses as soon as the information becomes available to you.

However, what happens if it turns out that there have been changes to the situation so that that entity is less likely to incur the expenses in the light of this new information?  Continue reading →

An asset you plan to sell

There’s an asset on your balance sheet you’re not using and you plan to sell. Say it’s carrying value is 7,500 and what you aim to get for it is close to it’s carrying value. However, as it turns out, you get serious offers for the asset for 5,000. No doubt you can see that your asset is valued higher you’re likely to get for it once you sell it.  Continue reading →

Credit invoices and reliable measurement of cost

I can see where the question arises from. You know you’ll be issued a credit invoice (or you’re fairly certain it will happen) and you question whether you should recognize the asset. Remember here that the conditions for recognizing an asset (as also referenced in IAS 16) are as follows: (1) it is probable that future economic benefits associated with the item will flow to the entity and (2) the cost of the item can be measured reliably.  Continue reading →