Final Project: Accounting Principles and Standards at ENEB

This accounting final project presents a comprehensive analysis of various accounting principles and standards. It begins with a detailed chart of accounts, classifying assets, liabilities, and equity with specific coding systems for easy identification and recording of transactions. The project then addresses closing entries, outlining the process of closing revenue and expense accounts to prepare the profit and loss statement, and transferring the balance to retained earnings. Furthermore, it delves into International Accounting Standards (IAS), specifically IAS 16 (Fixed Assets), IAS 36 (Impairment of Assets), and IAS 38 (Intangible Assets). For IAS 16, the project calculates the initial cost of acquisition and depreciation. Under IAS 36, it provides impairment tests for assets to determine impairment losses. Finally, for IAS 38, it presents journal entries for the revaluation of intangible assets. The project concludes with a reference list of relevant academic sources.

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FINAL PROJECT
ENEB Business School
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Table of Contents
Chart of accounts..........................................................................................................3
Closing entry..................................................................................................................7
IAS 16: Fixed assets.....................................................................................................9
IAS 36: Impairment of assets......................................................................................10
IAS 38: Intangible assets.............................................................................................10
References and bibliography......................................................................................12

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Chart of accounts
Accounting is the process of recording transactions in the books of accounts,
classifying and summarising them to prepare meaningful reports for the users of
financial information. Such reports as the output of accounting process help the
financial information users to interpret and understand the financial performance and
financial position of the business organisation. For uniformity in accounting and
reporting with an aim of increasing the comparability of the financial performance and
financial position of the company, various accounting standards have been
developed by the countries. Even the to make it worldwide comparable and
acceptable various international accounting standards have been developed and
implemented.
Based on the nature and classifications, transactions are recorded in various
separate accounts. For easy understanding and identification of such accounts at the
time of preparation of the financial records, such accounts can be coded with some
numbers classifying them in several groups. For example, for the current assets part,
the codes starts with a specific prefix number, for the noncurrent assets part it starts
with another prefix number and so on. Based on the given case study accounts as
reported in the trial balance of the company, accounts can be classified in various
groups and coded in given case study, given accounts have been classified in three
groups and coded them with the general system of coding accounts. Please refer to
the next page for detail and description of the coding.

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All the assets have been coded with the prefix number 1. Assets are further
classified into two groups, current assets and non-current assets. Current assets
have been started with 100 and the non-current assets have been started with 200.
Current assets have been coded as 110, 120 and so. Non-current assets have been
coded as 210, 220 and so on. It makes the accounts more easily identifiable and
easy for recording transactions. Following table shows the coding of the current and
non-current assets.
Chart of Accounts
Account Code Account Names
1-0000 Assets
1-0100 Current assets
1-0110 Banks
1-0120 Stock of goods
1-0130 Impairment loses
1-0140 Debtors-Client
1-0150 Short-Term investments
1-0160 Short-term investments (shares)
1-0200 Non-current assets
1-0210 Intangible fixed assets:
1-0220 Industrial Propriety
1-0230 Cumulative depreciation II
1-0240 Tangible fixed assets:
1-0250 Constructions
1-0260 ICT Equipment.
1-0270 Furniture
1-0280 Transport
1-0290 Cumulative depreciation IM

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Liabilities have been coded with the prefix 2 and it has been further classified
into two groups, one is the current liabilities and the other is the non-current liabilities.
Current liabilities have coded with 100, 110 and so on and non-current liabilities have
been coded as 200, 210 and so on. It makes accounts of the current liabilities and
non-current liabilities more easily identifiable and helpful for recording transactions.
Following table shows the codes and descriptions of the current liabilities and non-
current liabilities accounts coded as per the general rules of accounts.
Chart of Accounts
Account
Code Account Names
2-0000 Liabilities
2-0100 Current liability
2-0110 Short-term debts
2-0120 Short-term debts to institutions.
2-0130 Suppliers
2-0140 Creditors
2-0150 Liquidity:
2-0160 Banks
2-0200 Non-current liability
2-0210 Long-term debts
2-0220 Long-term debt to institutions.

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Equity parts of the accounts are coded with the prefix 3. Then the account
which belongs to the equity, are coded as 100, 110, 120 and so on. Following table
shows the charts of accounts which include codes assigned for each of the accounts
under the equity section.
Chart of Accounts
3-0000 Equity
3-0100 Equity capital:
3-0110 Capital Social
3-0120 Legal reserve
3-0130 Profit and Loss
All these accounts have been coded and assigned a specific number for easy
identification and making a link with the other accounts at the time of recording the
financial transactions in the books of accounts.

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Closing entry
After all the transactions have been posted to the respective ledger accounts
and it has been balanced properly, the closing entry is passed to close all the
revenue accounts or incomes and expenses accounts to prepare the profit and loss
statement. In doing so, all the revenue accounts are debited and all the expenses are
credited. On the other hand, the profit and loss account is credited for closing the
revenue accounts and the profit and loss accounts is debited for closing the
expenses accounts. After the profit and loss account is prepared the balance in the
profit and loss account is transferred to the retained earnings accounts by a debt
entry to the profit and loss account and the credit entry to the retained earnings
account, if there is a profit, otherwise a debit to the retained earnings and a credit to
the profit and loss account is made if there is a loss (Akhmetshin & Osadchy 2015).
In the given case study, all the revenue accounts have already been closed
and there is no balance in any of the revenue accounts. The profit and loss account
has already been prepared and the balance has been shown as the surplus.
Therefore, to close the books of accounts for the current year, all the assets accounts
have been credited and all the liabilities accounts have been debited and the balance
has been transferred to the equity account. Please refer to the closing journal entry
made in the following page (Akhmetshin & Osadchy 2015).

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General Journal
Explanations Code Debit
Amount
Credit
Amount
Industrial property 1-0220 € 40.50
Construction 1-0250 € 3,900.00
ICT Equipment 1-0260 € 9.00
Furniture 1-0270 € 70.00
Transport 1-0280 € 35.00
Stock of goods 1-0120 € 62.00
Debtors client 1-0140 € 236.20
Short terms investment 1-0150 € 9.00
Bank 1-0110 € 225.00
Cumulative depreciation II 1-0230 € 5.00
Cumulative depreciation IM 1-0290 € 122.00
Impairment loss 1-0130 € 1.15
Long term debt to institutions 2-0220 € 710.00
Short term debt to institutions 2-0120 € 38.00
Suppliers 2-0130 € 200.00
Creditors 2-0140 € 3.56
Capital social 3-0110 € 3,000.00
Legal reserve 3-0120 € 348.18
Profit and loss 3-0130 € 158.81
(To record the closing entry and
transfer the balance to the equity)

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IAS 16: Fixed assets
IAS 16 is an international accounting standard, which provides guidelines for
recognition of the fixed assets, charging depreciation and amortisation of the fixed
assets. As per the IAS 16 all the expenses made initially to bring the asset into the
usable conditions should be included in the initial cost of the assets. Following the
instruction of the IAS 16, the initial cost of acquisition of the printer can be computed
as follows (Bozzolan, Laghi & Mattei 2016).
Calculation of the initial cost of acquisition
Cost of the printer € 25,000.000
Cost of installation and assembly € 3.000
Cost of transportation and delivery € 1.150
Total cost of acquisition of the printer € 25,004.150
Based on the principles of the international accounting standard 16, the annual
depreciation or the annual amortization fees and the daily maintenance costs can be
computed as follows (Bozzolan, Laghi & Mattei 2016).
Annual amortization fees:
Capitalised cost of printer € 25,004.150
Less: Cost of rehabilitation € 5,000.000
Depreciable amount € 20,004.150
Expected life of the printer 10
Annual amortization fees
(20004.150/10) € 2,000.415
Daily maintenance cost:
Cost of maintenance per month € 250.000
Daily maintenance costs (250/30) € 8.333

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IAS 36: Impairment of assets
IAS 36 applies for the impairment of assets. Impairment of assets is the
process of evaluating the recoverable amount and the excess of carrying amount
over the recoverable value is recorded as the impairment of assets. In the following
table the impairment tests have been applied for each of the assets and the
impairment loss has been ascertained (Avallone & Quagli 2015).
Particulars Camera 1 Camera 2 Camera 3
Accessorie
s
Initial cost of acquisition
of the asset € 1,750 € 3,500 € 1,950 € 4,550
Less: Depreciation for the
last 3 years € 1,050 € 2,100 € 1,170 € 2,730
Carrying amount as at the
end of 2020 € 700 € 1,400 € 780 € 1,820
Less: Recoverable
amount at the end of
2020
€ 575 € 1,500 € 750 € 2,200
Impairment loss € 125 NIL € 30 NIL
Depreciation:
Camera 1 Depreciation for the last 3 years (1750*20%*3)
Camera 2 Depreciation for the last 3 years (3500*20%*3)
Camera 3 Depreciation for the last 3 years (1950*20%*3)
Accessorie
s Depreciation for the last 3 years (4550*20%*3)

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IAS 38: Intangible assets
IAS 38 applies for the measurement, recognition and valuation of the
intangible assets. It can be applied for the revaluation and recognition of the
intangible assets in the books of accounts. Based on the transactions and fair value
of the patent at the end of each year, following journal entries can be made for
recording the effect of such revaluation in the books of accounts (Avallone & Quagli
2015).
Date Details Debit
Amount
Credit
Amount
01-Mar-16 Patent € 7,500
Bank € 7,500
(To record the acquisition of patent
for cash)
31-Dec-16 Patent € 1,500
Revaluation Surplus (9000-7500) € 1,500
(To give effect of revaluation of
patent in the books of accounts)
31-Dec-17 Revaluation Surplus (9000-8000) € 8,000
Patent € 8,000
(To give effect of revaluation of
patent in the books of accounts)

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References and bibliography
Akhmetshin, E. M., & Osadchy, E. A. (2015). New requirements to the control of the
maintenance of accounting records of the company in the conditions of the
economic insecurity. International Business Management, 9(5), 895-902.
Avallone, F., & Quagli, A. (2015). Insight into the variables used to manage the
goodwill impairment test under IAS 36. Advances in accounting, 31(1), 107-
114.
Bekemeier, B., Singh, S. R., & Schoemann, A. W. (2018). A uniform chart of
accounts for public health agencies: an “essential ingredient” for a strong
public health system. Journal of Public Health Management and
Practice, 24(3), 289-291.
Bozzolan, S., Laghi, E., & Mattei, M. (2016). Amendments to the IAS 41 and IAS 16-
implications for accounting of bearer plants. Agricultural Economics, 62(4),
160-166.
Dinh, T., Eierle, B., Schultze, W., & Steeger, L. (2015). Research and development,
uncertainty, and analysts’ forecasts: The case of IAS 38. Journal of
International Financial Management & Accounting, 26(3), 257-293.
Hassine, N. M., & Jilani, F. (2017). Earnings Management Behavior with Respect to
Goodwill Impairment Losses under IAS 36: The French Case. International
Journal of Academic Research in Accounting, Finance and Management
Sciences, 7(2), 177-196.
Honoré, P. A., Leider, J. P., Singletary, V., & Ross, D. A. (2015). Taking a step
forward in public health finance: establishing standards for a uniform chart of
accounts crosswalk. Journal of Public Health Management and
Practice, 21(5), 509-513.
Ienciu, N. M., & Matiş, D. (2014). Inflection points in the development of IAS
38. Journal of Financial Reporting and Accounting.
Siyanbola, A. A., Musa, U. M., & Wula, T. J. (2014). An assessment of compliance
with disclosure requirements of IAS 16 by listed agricultural firms in
nigeria. International Journal of Economics, Business and Finance, 2(3), 1-16.
Svoboda, P., & Bohušová, H. (2017). Amendments to IAS 16 and IAS 41: Are there
any differences between plant and animal from a financial reporting point of