The thing with accruals basis of accounting is that sometimes you need to accrue for some expenses. Occasions such as this arise when you need or want to close your reporting period but as it happen, your supplier is set to send you an invoice for services or goods received within the period you want to close at a later date (that is at a date after you’ve closed the period). Continue reading
Category Archives: 1 Basic Accounting
Acquisiton cost of a PPE item
Acquisition cost of a PPE item is important. It’s a value an asset is initially recognized on the face of a balance sheet and furthermore is depreciated into expenses over a period of time. As it impacts both the amount you carry within your company’s assets and your expenses over a period of time, it’s important to understand and agree on what exactly is included within the cost of the item and what not. Continue reading
Incentives to employees
Incentives (i.e. bonuses based on personal results, company’s performance etc.) aren’t things to be afraid of. Yes, they create expense within accounts; they’re an additional routine to maintain and so on, but what they actually do, if set up properly, is motivating people more. Continue reading
Writing down assets in their value
An asset is written down in value if and only if the recoverable amount identified is lower of the assets carrying value recognized within the books. On the basis of the test for an impairment you’ve identified the assets recoverable amount (as mentioned earlier it’s highest of either the ‘value in use’ or ‘fair value less costs to sell’) and now you compare it against the assets carrying amount. Provided the latter is the lower amount, you recognize an impairment charge in the amount that’s the difference between recoverable amount and the carrying value. Continue reading
Indications for when an asset could be impaired
So when is an asset, an item of property, plant and equipment impaired? When should you start questioning an assets carrying value being recoverable? Continue reading
Subsequent measurement of property, plant and equipment
Property, plant and equipment are a group of assets your company holds that are initially recognized on your balance sheet. Initially they’re measured at cost which we have defined before and that’s that. Or so you might think. Continue reading
Results from confirming receivables
So you performed receivables confirmation procedure at period end and a receivable balance for say customer A was not confirmed. A fact it was not confirmed and you didn’t receive a reply for your request in itself should indicate that there’s a possible impairment indication. More so, as the days pass, it’s also not paid. Continue reading