Financial Accounting Processes for Desklib Online Library

This article discusses financial accounting processes for various scenarios like financing company operations, property, plant and equipment, lease, and intangible assets. It provides detailed insights on accounting processes for each scenario along with working notes and calculations. The article also includes journal entries and schedules of lease payments and receipts. The subject covered is accounting and the course code is not mentioned. The article is relevant for students pursuing accounting courses in any college or university.

Running head: FINANCIAL ACCOUNTING PROCESSES
Financial Accounting Processes
Name of the Student
Name of the University
Author Note

1FINANCIAL ACCOUNTING PROCESSES
Table of Contents
Scenario 1- Financing company operations.....................................................................................2
Scenario 2- Property, plant and equipment......................................................................................5
Scenario 3- Lease.............................................................................................................................8
Scenario 4-Intangible Assets.........................................................................................................12
References:....................................................................................................................................13

2FINANCIAL ACCOUNTING PROCESSES
Scenario 1- Financing company operations
Date
1/7/2017
1/8/2017
1/8/2017
15/8/2017
30/8/2017
1/05/2018
15/06/201
8
15/06/201
8
15/06/201
8
Particulars
Bank A/c
To Equity Share Application A/c
(Being cash received on applications)
Equity Share Application A/c
Equity Share Allotment A/c
To Equity Share Capital
(Being 500000 shares allotted)
Equity Share Application A/c
To Equity Share Allotment A/c
To Calls in Advance A/c
(Being allocation of application across
allotment and calls in advance)
Share issue costs A/c
To Bank A/c
(Being payment done on prospectus, stamp
duty and legal fees)
Bank A/c
To Equity Share Allotment A/C
(Being cash received on allotment)
Call 1 A/c
To Equity Share Capital A/c
( Being call of $ 1.5 per share)
Calls in Advance A/c
To Call 1 A/c
( Transfer of calls received in advance)
Bank A/c
To Call 1 A/c
( Being cash received on 485000 shares)
Equity Share Capital A/c
To Call 1 A/c
Share Forfeiture A/c
(Being 15000 shares forfeited)
LF Dr
2100000
1500000
1250000
600000
36000
600000
750000
150000
727500
105000
Cr
21000000
2750000
350000
250000
36000
600000
750000
150000
727500
22500
82500

3FINANCIAL ACCOUNTING PROCESSES
15/06/201
8
1/07/2018
30/07/201
8
30/07/201
8
30/07/201
8
1/9/2018
1/9/2018
Bank A/c
Share Forfeiture A/c
To Share Capital A/c
( Reissue of shares forfeited)
Call 2 A/c
To Equity Share Capital A/c
(Being call on $ 1 per share)
Calls in Advance A/c
To Call 2 A/c
(Transfer of calls received in advance)
Bank A/c
To Call 2 A/c
(Being cash received on 48500 shares)
Equity Share Capital A/c
To Call 2 A/c
Share Forfeiture A/c
(Being 15000 shares forfeited)
Bank A/c
Share Forfeiture A/c
To Equity Share Capital A/c
(Reissue of shares forfeited)
Share Forfeiture A/c
To Bank A/c
(Refund to former shareholders)
75000
30000
500000
100000
485000
120000
90000
30000
127500
105000
500000
100000
485000
15000
105000
120000
127500

4FINANCIAL ACCOUNTING PROCESSES
Working Notes-

5FINANCIAL ACCOUNTING PROCESSES
No. of
Shares
applied for
No. of
Shares
Allotted
Money
Received
Applicatio
n
Allotment 1st Call 2nd call
100 000 100 000 800000 300000 250000 150000 100000
500 000 400 000 1300000 12000000 100000 -
600 000 500 000 2100000 $1500000 $350000 $15000 10000

6FINANCIAL ACCOUNTING PROCESSES
Scenario 2- Property, plant and equipment
Date Particulars LF Dr Cr
1/4/2017
30/06/2017
30/06/2017
31/8/2017
1/9/2017
1/3/2018
30/6/2018
30/6/2018
Truck A A/C Dr
To Cash A/c
(Being truck bought for cash $
90000)
Equipment A/c Dr
To Cash A/c
(Being equipment bought for cash)
Depreciation on Truck A A/c Dr
To Profit and Loss A/c
(Being depreciation provided at year
end)
Truck A A/c Dr
To Cash A/c
(Being expenses debited to truck)
Asset Revaluation Surplus A/c Dr
To Equipment A/c
(Being reduced value of equipment
transferred to asset revaluation A/c)
Truck A A/c Dr
To Cash A/c
(Being truck A sold in cash)
Equipment A/c Dr
To Asset Revaluation Surplus A/c
(Being increased value of equipment
transferred to asset revaluation)
Depreciation on Equipment A/c Dr
To Profit and Loss A/c
(Being Depreciation provided at
year end)
90000
140000
4000
2500
22667
59000
16979
11979
90000
140000
4000
2500
22667
59000
16979
119379

7FINANCIAL ACCOUNTING PROCESSES
Workings
Cost of equipment on 30th June 1,40,000
Less: Depreciation for 2 months 23333
(1,40,000/10= 14000 * 2/12)
WDV on 1st September 1,37,667
Less: Fair Value on 1st September 115000
Amount to be debited to Asset Revaluation 22667
Fair Value of Equipment on 1st September 115000
Less: Depreciation for yr end ( 10 months) 11979
WDV on 30th June 103021
Fair Value of the equipment on 30th June,2018 120000
Amount to be credited to Asset Revaluation (1,20,000-1,03,021)= 16979
Calculation of Depreciation
2017- on Truck A- (90000-10000)/5 * 3/12 = 4000
2018- on equipment- (115000)/8 * 10/12- 11979

8FINANCIAL ACCOUNTING PROCESSES
Scenario 3- Lease
a) Lease payments
PV OF Chiherbal Ltd- 8000* 3.8896 + 2160 * 0.6499= 32520
Schedule of lease payments
Date MLP Interest expense Liability
reduction
Liability
reduction
1st July 2017
1st July 2017
1st July,2018
1st July, 2019
1st July, 2020
1st July,2021
1st July, 2022
8000
8000
8000
8000
8000
2160
2207
1685
1117
498
4133
8000
5793
6315
6883
7502
(1973)
32520
24520
18727
12412
5529
(1973)

9FINANCIAL ACCOUNTING PROCESSES
Date Particulars Dr Cr
30th June,2018
30th June,2019
Leased Machine A/c Dr
To Lease Liability A/c
(Being initial recognition of finance lease)
Lease liability A/c Dr
To Cash A/c
(Being Initial lease liability recognised)
Lease liability A/c Dr
Interest expense A/c Dr
To Cash A/c
(Being first lease payment paid)
Depreciation Expense A/c Dr
To Accumulated Depreciation A/c
(Being depreciation provided at year end
between 31st December and 30th June)
Lease Liability A/c Dr
Interest expense A/c Dr
To Cash A/c
(Being second lease payment paid)
Depreciation Expense A/c Dr
To Accumulated Depreciation A/c
32520
8000
5793
2207
2069
6315
1685
4337
32520
8000
8000
2069
8000
4337
ChiHerbal Ltd
Journal entries

10FINANCIAL ACCOUNTING PROCESSES
Date MLR($) Interest
Revenue@ 9%
($)
Receivable
Reduction($)
Receivable
Balance($)
1st July 2017
1st July 2017
1st July,2018
1st July, 2019
1st July, 2020
1st July,2021
8000
8000
8000
8000
8000
2459
1960
1417
824
8000
5541
6040
6583
7176
35322
27322
21781
15741
9158
1982
Cessnock Ltd(lessor)
Schedule of Lease receipts

11FINANCIAL ACCOUNTING PROCESSES
Particulars Dr($) Cr($)
30th June, 2018
30th June,2019
Lease Receivable A/c Dr
To Sales A/c
(Being Initial recognition of lease
receivable)
Cost of Sales A/c Dr
To Inventory
(Being recording sale of machine)
Cash A/c Dr
To Lease Receivable A/c
To Interest receivable
(Being 1st payment received)
Cash A/c Dr
To Lease Receivable A/c
To Interest receivable
(Being 2nd payment received)
35322
31000
8000
8000
35322
31000
5541
2459
1960
6040
Cessnock Ltd
Journal entries

12FINANCIAL ACCOUNTING PROCESSES
Scenario 4-Intangible Assets
Total development cost incurred- 500000 + 380000= 880000
Internally generated assets can only be recognizable if they are identifiable and they are only
identifiable if they are either separate or generated from contract of agreement.The recognition
criteria under IAS 38 for internally generated intangible assets do not allow these recognizable
assets whose costs isnot reliably measured(Ertug & Castellucci,2015).If an asset cannot be
reliably measured because it does not satisfy the recognition criteria it cannot be recognized
afterwards through the revaluation model( Saunders & Brynjolfsson,2016).Expense on internally
generated software will be charged to profit or loss account as the management was not able to
demonstrate how this asset will generate economic benefits(Ertug & Castellucci,2015).Under
IAS38 an internally generated asset is required to qualify all six criteria under the said
IAS.However not being able to find a market for the software, does not fulfill one of the basic
criteria(Ertug & Castellucci,2015). Hence it is recognized as an expense.According to IAS 38
any operating cost or cost of hardware are capitalised.Hence the cost of computer equipment has
been treated as capitalized(Saunders & Brynjolfsson,2016).The consultants fees form a part of
professional fees that are arising directly from bringing the asset to its working condition.It is a
separately acquired intangible asset .It is capitalized as well(Saunders & Brynjolfsson,2016).

13FINANCIAL ACCOUNTING PROCESSES
References:
Saunders, A., & Brynjolfsson, E. (2016). Valuing Information Technology Related Intangible
Assets. Mis Quarterly, 40
Ertug, G., & Castellucci, F. (2015). Who shall get more? How intangible assets and aspiration
levels affect the valuation of resource providers. Strategic Organization, 13(1), 6-31.