07-23-2006, 12:18 AM
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by insaan</i>
<br />trade discount & cash discount;
yup i also feel i am not clear on what trade discount and cash discount...plz clear this..
contract a/c
infact for wip a/c i also stand by your side and i also justify ur treatment by another viewpoint also,progress billing is just our sales and sales are recorded on accrual basis and not receipt basis
but wat makes me confuse are the following things
nobody among the following has followed urs treatment for contract a/c
means no1 credits contarct a/c with progress billings
javed zuberi
pac
my teacher
otherwise i myself feel dat urs treatment is da best justified
now wat i feel that more important than my concepts are my passing in exams..if i go in exams with these concepts but these are not acknowledged by the examiner than for sure i m da loser
besides WIP and amount due from customers may be the same as per IAS11
B/W i have another question what if the contract is not a long term contract...then wud its treatment be as per IAS2
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Ok, Yes definitely progress billing is not credited in T account of WIP n I also have not seen it <b>except the treatment of Zuberi while he closes WIP T account when the contract is completed</b>. <b><u>My view is that it is credited to arrive at WIP/amount due from customer in accordance with clause (b) of para 42 & 43 of IAS 11.[/</u>b] Look at this ideally it calculates ur unconsumed material/WIP. Cost incurred to date (may not tellie with ur cost recognized in P & L) + profit - progress billings (the definition of progress billing itself says "quantum of work done + share profit associated with that work, means revenue!).
[b]In exams the most important things is presentation of ur solution in accordance with IAS.</b> WIP T account is outdated n is not expected in exams. The important thing is disclosure of amount due from customer/WIP. However, if the examiner ask u to prepare WIP T account u dont credit it with progress billing, rather u make a descriptive note to the examiner drawing his attention to disclosures required by IAS 11 where it is credited to arrive at WIP balance at year end. Value added and distinctive answers r very encouraged by examiner.
Difference b/w cash n trade discount>> cash discount is awarded at the time of transaction in return for bulk purchases(say 5% discount if you purchase above specific number of quantity) or special corporate relations with ur supplier. Purchase price of stocks, assets shall always be recorded net of cash discount.
Trade discount is given like if supplier says, that 2% discount shall be given if payment is made within 1 month. Now trade discount shall be treated as other income. and in case of assets(IAS 16) it shall be deducted from the cost of asset too.
Main difference is, cash discount>>dependant upon quantity or relations with supplier and immdeiately awarded at the time of transaction. Trade discount>>dependant upon settlement terms, and time.
Tell me if u r unclear on its accounting entries.
Objective of IAS 11 is to stipulate the treatment of contracts, if the start n end date of contract falls in two different accounting years. So, if contract is short term n completed within a year its treatment id v simple. All the revenue n cost shall be recognized in P & L in accordance with IAS 18. IAS 2 has nothing to do with short term contracts becoz IAS deals with inventory n incase of short term contract there is no inventory at year end.
<br />trade discount & cash discount;
yup i also feel i am not clear on what trade discount and cash discount...plz clear this..
contract a/c
infact for wip a/c i also stand by your side and i also justify ur treatment by another viewpoint also,progress billing is just our sales and sales are recorded on accrual basis and not receipt basis
but wat makes me confuse are the following things
nobody among the following has followed urs treatment for contract a/c
means no1 credits contarct a/c with progress billings
javed zuberi
pac
my teacher
otherwise i myself feel dat urs treatment is da best justified
now wat i feel that more important than my concepts are my passing in exams..if i go in exams with these concepts but these are not acknowledged by the examiner than for sure i m da loser
besides WIP and amount due from customers may be the same as per IAS11
B/W i have another question what if the contract is not a long term contract...then wud its treatment be as per IAS2
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Ok, Yes definitely progress billing is not credited in T account of WIP n I also have not seen it <b>except the treatment of Zuberi while he closes WIP T account when the contract is completed</b>. <b><u>My view is that it is credited to arrive at WIP/amount due from customer in accordance with clause (b) of para 42 & 43 of IAS 11.[/</u>b] Look at this ideally it calculates ur unconsumed material/WIP. Cost incurred to date (may not tellie with ur cost recognized in P & L) + profit - progress billings (the definition of progress billing itself says "quantum of work done + share profit associated with that work, means revenue!).
[b]In exams the most important things is presentation of ur solution in accordance with IAS.</b> WIP T account is outdated n is not expected in exams. The important thing is disclosure of amount due from customer/WIP. However, if the examiner ask u to prepare WIP T account u dont credit it with progress billing, rather u make a descriptive note to the examiner drawing his attention to disclosures required by IAS 11 where it is credited to arrive at WIP balance at year end. Value added and distinctive answers r very encouraged by examiner.
Difference b/w cash n trade discount>> cash discount is awarded at the time of transaction in return for bulk purchases(say 5% discount if you purchase above specific number of quantity) or special corporate relations with ur supplier. Purchase price of stocks, assets shall always be recorded net of cash discount.
Trade discount is given like if supplier says, that 2% discount shall be given if payment is made within 1 month. Now trade discount shall be treated as other income. and in case of assets(IAS 16) it shall be deducted from the cost of asset too.
Main difference is, cash discount>>dependant upon quantity or relations with supplier and immdeiately awarded at the time of transaction. Trade discount>>dependant upon settlement terms, and time.
Tell me if u r unclear on its accounting entries.
Objective of IAS 11 is to stipulate the treatment of contracts, if the start n end date of contract falls in two different accounting years. So, if contract is short term n completed within a year its treatment id v simple. All the revenue n cost shall be recognized in P & L in accordance with IAS 18. IAS 2 has nothing to do with short term contracts becoz IAS deals with inventory n incase of short term contract there is no inventory at year end.
