How to account for Jobs Credit?

prawns in soup

Surprisingly I received a circular from ICPAS on how to account for the grants received from Jobs Credit.

I thought we don't need guidance on something so simple. But then again, perhaps we should synchronise.

Anyway the specific directions that we should follow are:-

1. For grant received on 31 March 2009, we should recognise it for value 31 March 2009. For grant received on 30 Jun 2009, we should recognise it for value 30 Jun 2009 etc etc.
   
2. An entity should start accounting as per circular No. A7/2009 prospectively from 20 May 2009.
3. If you have chosen to apply this circular early, you are permitted to do so.
4. But if you have not applied as per Circular for the first cheque in March, you have to disclose that.

Questions

• What if we receive the cheque only after 31 March 2009? Should we then accrue for it?
• Which account should we credit the amount to?

What have you been doing for your company? Can share with me?

The End of Double Entry?

the start of Bintan golf

I am reading a couple of textbooks at the same time for the new term of 2009. I wish with you these few interesting paragraphs challenging the existence of the double-entry system.

The books that I am reading credited the first organised written thought on double entry system to this Franciscan monk called Luca Pacioli and his now famous work called "Summa de Arithmetica, Geometrica, Proportioni et Proportionalita" published in Venice back in 1494. It is simply a system of debits and credits, where the debits going to the left and credits going to the right. It is a system of subtraction-by-opposition ie. put on the opposite side if you want to minus.

Then a clever chap (possibly someone who cannot handle double entry) asked, "Why can't we use positive and negative numbers instead of T-accounts?"

So if you want to pay salary, you just add to Salary expenses and minus the same amount from the Cash/Bank.

FYI - negative numbers were only accepted in the mathematics world in 17th century while double entry has been around since 13th/14th century.

In the 21st century's classes of Edgar, both systems are used in our learning programmes.

P/S - http://accountingwithedgar.blogspot.com/2007/09/origin-of-debit-credit.html

We got to learn new names.

The terms "Balance Sheet" and "Cash Flow Statement" will be passe very soon.

In Sept 2007, IASB issued the revised IAS 1 (similar to our sFRS 1) with the main changes in the presentation of financial statements and terminology.

For international versions of CAT6, CAT8, F3, F7, F8, P2 and P7:-

• "Balance sheet" will be "statement of financial position".
• "Income statement" - no change.
• "Cash flow statement" will be " statement of cash flows".

It is effective from June 2008 sitting.

For other papers NOT mentioned above :-

• "Balance sheet" = "statement of financial position (balance sheet)" (for Jun / Dec 2008 exams).
• "Balance sheet" = "statement of financial position" (from Jun 2009 exam onwards)
• "Cash flow statement" = "statement of cash flows" (from Jun 2008 exam onwards)
• "Income statement" = "statement of comprehensive income" (from Jun 2009 exam onwards)

Depreciation policy and your bottomline

branding?

I have just completed my session on FRS16 on property, plant and equipment with F3 Financial Accounting class.

I have stressed that depreciation policy is within management's right to decide. The management may adopt a relevant method or formula to account for depreciation for the "right impact" on its bottomline.

Allow me to cite the example of this airline company managing its fleet of planes and the choice of depreciation policy.

The company chose to expense high depreciation for its young fleet. This will consequently push up the breakeven passenger load factor and cargo capacity utilisation levels. The management are thus "motivated" to think at operating its business at different levels (ie. in terms of efficiency, effectiveness, customer service etc) compared to its competitors.

After using the planes for a few years and given its expressed desire to maintain the youngest fleet for its passengers, these planes with relatively low net book values were then disposed at market prices at very handsome accounting profits.

If these gains from disposals were to be judged as non-operating profits and thus not subjected to the usual corporate tax, this would be certainly provide the icing on the cake for the overall bottomline.

Conclusion
Attentive review and consequent adoption of any accounting policies are critical first steps of a company. While the depreciation policy alone is not the magic wand in making a company successful, it will help in certain circumstances.

Accounting for Charities and Coops

The new Accounting Standards Council (ASC) will issue a separate set of accounting rules for Charities and Coops.

Donors to charities are more concerned with how the donated funds were used rather than financial performance information generally required by shareholders of companies.

The new accounting rules are still pending ie. waiting the new Council to get around to this issue.

Origin of "Debit" & "Credit"

I was curious about where and how the terms debit and credit come about.

I finally come across a brief explanation of the terms.

The words have Latin origins ie. "debitum" and "creditum". Pacioli is the name of the Italian monk who wrote about accounting in the 15th century and used these terms.

So they were NOT "debere" or "credere" as I thought they were initially. And the mystery continues ie. who was the inventor of these terms.

Well I learned something new today.

ACCA CBEs for P1.1 and P1.2 in transition

Dear friends,

The following information is courtesy of SAA on the terms of offer of CBEs during the transition from OLD to NEW syllabus.

The last date that P1.1 and P1.2 will be offered by ACCA UK for CBE is Friday 12 October 2007.

But the last date that SAA will offer ACCA CBE under the old syllabus (Papers 1.1 and 1.2) is Friday, 14 September 2007.

New Syllabus
The date from which the new ACCA qualification F1, F2 and F3 examinations will be available as CBE is Wednesday 17 October 2007.

The first month that SAA will offer ACCA CBE under the new syllabus (Papers F1 – F3) is November 2007.

Passes in P1.1 and P1.2 will be automatically converted to the equivalent passes of F3 and F2 respectively.

Paper-based exam and/or CBE?

Hi - This is the revised version as of 13 Jun 2007.

Scenario
Just finished my P1.1 exam in Jun 2007. Being not confident, I signed up for CBE in Aug 2007. Which results will ACCA take?

Ed asked : What if i failed my paper-based exam after the release of the exam results but passed my Aug CBE?
SAA said : Aug's CBE result. Accounted as a pass for Dec 07 exam and student can only take 3 more Papers, including CBE, for Dec 07 Exam.

Ed asked : What if I passed both paper-based exam and CBE?
SAA : Paper-based exam's result.

ACCA Paper 1.1 Exam ended a few hours ago.

Is that you? Hope not.

Hi friends,

How was the paper? The following are comments I got from some of you.

Section B consists of questions on the following topics:-

• incomplete records with sole proprietorship
• control account and reconciliation with listing total
• consolidation
• ratio theory on liquidity ratios
• FRS 38 on research and development and amortisation

"I finished my MCQs in half an hour."

"I didn't hear anybody complaining about the paper on the way out (of exam hall)."

"I did not have time to do 2 questions. Total 19 marks."

".. is this paper a bit difficult from the rest? As some never learn before..."

"ok lor"

"... inventory overstated. I minus off from the retained earnings n asset. Is it correct?"

So for the rest of you, what do you think of the paper?

I disagree - Dec 2006 Section B Q2

Hi friends,

Can help me to understand the following? I disagree with official ACCA's answer to ACCA Paper 1.1 Dec 2006 exam Section B Q2. Can review my approach?

"During the year, $8,000 interest received on a holding of loan notes had been correctly entered in the cash book but debited to interest payable account."

Required
a) Prepare journal entries to correct error.
b) What is the impact on profit given the correction?

Edgar's answer
- DR Suspense a/c $8,000
- CR Interest payable a/c $8,000
[To cancel out the wrong entry into Interest Payable a/c.]

- DR Suspense a/c $8,000
- CR Interest Income $8,000
[To correctly place the entry into Interest Income a/c.]

This would increase profit by $8,000.

--------------------------------------------------------------
ACCA's official answer
-DR Suspense a/c $16,000
- CR Interest payable $8,000
- CR Interest receivable $8,000

Profit to increase by $16,000.

* Why credit "Interest Receivable"?

A definition of Accountant

Hi friends - Share with you the sentiment of this reader who wrote to me.

====================================

Hi Edgar,

Share my thoughts with you. A practical accountant in a harsh business climate is very different from a academic accountant. I am very shocked to learn what is meant by a real life accountant from my own exposure. This is also confirmed by your article on the Auston's case.

Their life is definitely not easy. I am beginning to re-define an accountant's job. Now, I know that running a business and being an accountant is no difference. Think about this point and you will know that their stress level is no joke.

RP

Can you give some pointers to the new students?

Dear students, past and present,

Need your help to contribute some advice to the new students coming in in next academic term.

Advice on the following:-
How to manage time between work, studies, family and bfs/gfs?
How many subjects should I take?
How should I study? Read textbook or not?
How to deal with lecturers to get them to help?

Given that you guys and gals have now got the experience of going through at least one exam, let me have your views.

No right or wrong view. It is your view. - So just type :)

Place your bets! Place your bets!

Hi,

Anyone dare to guess what questions will come out for Section B in the coming ACCA Paper 1.1 (ie. Dec 2006)?

Q1 -
Q2 -
Q3 -
Q4 -
Q5 -

Come on! Give it a calculated guess!!!

Good nite...

Bonus issue of new shares

For my students.

Many are unable to tell the difference between bonus issue and rights issue of shares. I wish to present my interpretation on bonus issue to shed some light on this front.

Is this a possible exam questions? Of course, my friends.

Bonus Issue
Essentially we are issuing new shares by capitalising the reserves ie.

DR Reserve account
CR Share capital account

Any cash flow from the issue?
No money exchanged.
The company will send notices to shareholders to inform on the number of shares allocated based on the approved ratio.

Example - You were holding 1,000 shares prior to bonus issue. The company has been approved to issue bonus shares on the basis of 1:4. You would be issued 250 bonus shares for a total holding of 1,250 shares.

Are you any richer given the higher number of shares you now have?
Theoretically no. Has the company make any monies from the exercise? The answer is no. It is merely a paper exercise. Every existing shareholder maintains status quo in terms of their percentage ownership of the company.

Then why would a company do a bonus issue?
The company has essentially issued more shares to increase liquidity of the counter by reducing the absolute dollar value of each share. For example, DBS Bank may issue enough bonus shares to reduce its current share price from an "expensive and prohibitive level" of $20 to a more affordable level of $8. Then more people can "afford" to buy the shares and participate in success of DBS Bank.

Trust this helps. :)

Opening Stock and Closing Stock

For my Students.

Issues
You may have noticed that the Closing Stock figure is usually placed outside the Trial Balance. You would then use the figure in computing Cost of Sales in the Profit and Loss (P&L) Account. The figure is then presented as part of Current Assets in the Balance Sheet.

Have you ever wonder where did the Closing Stock figure come from and how it enters the accounting system? Two questions on stock were asked for Jun 2006 ACCA Paper 1.1 Preparing Financial Statement.

My views
Profit and Loss account is part of the double entry system.

Balance Sheet and Trial Balance are essentially just listing of account balances.

Closing stock balance is a factor of price and quantity.

• The quantity is tracked by the no. of deliveries in and out over the financial year and confirmed after a physical stock count after end of financial year.
• Price is determined after doing the FRS2's lower-of-cost-and-NRV exercise.

To transfer the Opening Stock to P&L account,
DR P&L account
CR Stock account

To bring Closing Stock into the accounting system,
DR Stock account
CR P&L account

Not many lecturers can or bother to explain this nowadays.
Hope it helps. Cheers :)