Month: November 2009

Financial Impact of Accounting Fraud

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Many of us whether accounting or non accounting background should at least understand the financial impact of accounting fraud as this nature of fraud are getting more and more prevalent.   Financial impact of accounting fraud: Fraud losses will reduce net income $ for $ of a company: For example, if a company’s profit margin … Read more

Content Page On Hire Purchases Accounts/Accounting

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Topics On Hire Purchase Accounting Difference Between Hire Purchase And Installment System The terms: Hire Purchase, Credit Sales and Rental Agreement Accounting Treatment of Hire Purchase Agreement Of Purchaser

Joint Venture Accounts- Accounting Treatment

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In brief, a joint venture company is a partnership limited to a particular venture, does not make use of a firm’s name, all the parties agreeing to contributing capital towards the venture and to share the profit or losses. Joint ventures accounts can be handled in two ways namely: To treat the joint venture as … Read more

Accounting Entries For Consignment Accounting

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Below is a snapshot of accounting entries for consignment accounts in the form of journal entries format: ACCOUNTING ENTRIES FOR CONSIGNMENT ACCOUNTING Debit($) Credit($) Consignment Account XX Goods sent on Consignment Account XX Relate to COST of goods sent on consignment. If goods are invoiced to the consignee at selling price, only the cost price … Read more

Construction Contract Question Example To Compute The Percentage Of Completion and Disclosure/Presentation In the Income Statement And Balance Sheet.

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 On 1 st January 2007, XYZ Construction Co Ltd has signed a fixed price contract of $ 42 million to build a bridge over a period of two years. At 31st December 2007, the following information are as follows:-    $ million Cost of construction material 10 Site labor cost 9 Depreciation of plant & … Read more

Accounting Entries Using The Percentage Of Completion Method

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Under the percentage of completion method, revenue and expenses are recognized in income as the contract activities progress by reference to the stage of completion of a contract. The costs incurred in reaching the stage of completion are matched with this revenue, resulting in the reporting of revenue, expenses and profit which can be attributed … Read more

Malaysia Financial Reporting Standard (FRS) 111:Construction Contracts

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EFFECTIVE DATE

This Standard becomes operative for financial statements covering periods beginning on or after 1 July 2007.

OBJECTIVE

  • To prescribe the accounting treatment of revenue and costs associated with construction contracts. This is because the start data and complete/end date for construction contracts usually fall into different accounting period hence the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the accounting periods in which construction work is performed.

SCOPE:-

This Standard shall be applied in accounting for construction contracts in the financial statements of CONTRACTORS. This Standard supersedes FRS 1112004 Construction Contracts.

DEFINITION:

A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use.

The different type of contracts defined in FRS 111:-

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WHAT ARE THE UNDERLYING ASSUMPTIONS AND CONSTRAINTS IN THE PREPARATION OF THE FINANCIAL STATEMENT. ALSO EXPLAIN WHAT ARE THE DIFFERENCE BETWEEN ACCOUNTING POLICIES AND ACCOUNTING PRINCIPLES.

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When preparing and presenting the financial statements, there is a common understanding of the underlying assumptions and constraints. Underlying assumptions are those principles, concepts or practice that entities  are assumed to apply when preparing the company’s financial statement which are as follows: Accrual basis which requires transactions and events to be recognized when they occur. … Read more

ABOUT MALAYSIAN FINANCIAL REPORTING STANDARDS(FRS)

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In line with the objectives of converging to International Accounting Standards Board(IASB) the Malaysia Financial Reporting Standards(FRS) was incepted in 2006 which is applicable to all entities except for private entities. Compared to other counterparts like USA, China, India and others, Malaysia can be considered to have an early start. Malaysia, by ensuring the full … Read more

WHAT IS THE DIFFERENCE BETWEEN THE TERM AMORTIZE AND DEPRECIATE

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Question: Sometimes, we are confused by the term amortize and depreciate. Some even say that they are the same as both terms are used in depreciation accounting. Answer: Similarities of amortization and depreciation: Both amortization and depreciation are alike in the sense that the non-current assets are been expensed/write off systematically to the Income Statement … Read more