According to IAS 20 the government grants are treated as incomes. The cash received will be debited in the cash account. In the financial statement the amount will be credited as revenuesCash accountDR CRDateDetailsRef. noAmountDateDetailsRef. noAmount2006JanGovernment grant_930The IAS 17 deals with lease payment. Amount paid as lease will be credited in cash account. According to the concept of dual aspect, the same amount will be debited in leased item account because this transaction has affected two accounts. Lease payment for the motor vehicle is calculated as follows: Dec 31/06Dec 31/07 Dec 31/08Dec 31/09Dec 31/10Lease AccountTOTAL: £ 275,000£55,000£55,000£55,000£55,000£55,000The interest is credited in cash account. Cash accountDR CRDateDetailsRef.
noAmountDateDetailsRef. noAmount2006Dec31““Leased itemMotor vehicleInterest90,000250,00025,000DR Leased Item CRDateDetailsRef. noAmountDateDetailsRef. noAmountDec 31/10Cash90,000DR Motor vehicle account CRDateDetailsRef. noAmountDateDetailsRef. noAmountDec 31/10Cash275,000 Total annual lease payment = £55,000 + £90,000 = £145,000The IAS 16 contains information about purchase of plant like factory. Details about cost are contained here. It guides that an asset must have a future economic benefit and its worth should be easily determined. The factory purchased is expected to have an economic benefit and therefore qualifies to be an asset.
According to the concept of dual aspect which assumes that every transaction has a dual effect, this transaction will affect cash account and factory account. Cash account will be credited and factory account debited. IAS 39 requires that a bad debt should be recognized. BST Enterprises has suffered a bad debt. The amount of bad debt will be debited as expense in the financial statement and the same amount credited in the creditors account. DR Cash account CRDateDetailsRef. noAmountDateDetailsRef. noAmountDec 31/06factory14,000DR Factory account CRDateDetailsRef. noAmountDateDetailsRef. noAmountDec 31/06Cash14,000Dec 31/06factory14,000DR Creditors account CRDateDetailsRef.
noAmountDateDetailsRef. noAmountDec 31/06Expense100The IAS 36 recognizes investment property and requires that the property should be carried with an amount not greater than their recoverable amount. The carrying amount for the investment properties is debited in properties account. Considering the business entity concept, the value of property is part of business and should be credited in the capital account. The property has gained value by £ 50,000. Considering the accounting period concept of accounting, the value of the property three years ago will not be its value for this accounting period.
The appreciated value will therefore have to be added to the initial value and the new value recorded in the properties account journal. DR Properties account CRDateDetailsRef. noAmountDateDetailsRef. noAmountDec 31/06Capital450DR Capital account CRDateDetailsRef. noAmountDateDetailsRef. noAmountDec 31/06Properties450With reference to international accounting standard 2, treatment for inventories is recognized. It provides guidance on valuing of inventories and also expenses on inventories and cost formula for valuation of inventories. The cost of repair of inventories is an expense in financial statement. The net value of the inventories is calculated as follows: Value of closing inventories – Damaged inventories + repaired inventories£ 550,000 - £ 60,000 + £ 30,000 = £ 520,000DR Inventories account CRDateDetailsRef.
noAmountDateDetailsRef. noAmountDec 31/06Balance520Considering IAS 16 paragraph 50, depreciable amount should be recorded systematically over the assets useful life. The amount which the freehold building has depreciated is an expense in the financial statement. IAS 16 paragraph 60 requires that depreciation method should show how economic benefit of asset is being consumed. Therefore for, plant and machinery, and fixtures and fittings there will be debiting of these accounts to show them as assets.