ACC204 | Advanced Financial Accounting Answer | Accounts

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Intangible assets

This is an asset that is not physical. Some of the common intangible assets in corporate are trademarks, intellectual property, patents, copy rights as well as business methodologies. These are defined as long-term assets of the organisation that have an important life more than one year. These assets can be created by business either internally or acquire them in the business orchestration.

Types of intangible assets

  • Good Will: This intangible asset is recognised when a business acquires other business. It presents a reputational image of the business.
  • Franchise agreements: This is another intangible asset which permits the legal right to business to operate with the name of other company or sell services generated by other organisation.
  • Copyrights: They present extensive authority to business to generate and sell software, magazines. It is involved to protect legal security by restricting others from publishing work of authorship.

Impairment testing

An impairment testing applies to both tax accounts and commercial accounts. Various countries, tax jurisdictions and accounting standards have distinct rules on what is to be verified. Impairment testing is organised at frequent intervals of year.

Good will impairment testing eventuates when the established goodwill related with attainment is higher than implied fair value. This is a common byproduct of business orchestration in which purchase expense paid for an acquiree is greater than the fair value of determined assets.

Debentures

This is termed as a most typical type of long-term loan that can be taken by an organisation. A debenture is a loan that is to be repaid on a defined date. The major benefit of debentures to the organisation is the conviction that they have less rate of interest. Interest remunerated to the debenture holders is computed as a charge against profit in the financial statement of the organisation.

Fair value of debenture

Debenture interest is computed at a defined interest rate on face value and is charged as profit as well as loss account.

Journal entries

Accounting cycle involves initial step as analysing transactions and saving them as journal entries. It commences at the start of accounting interval and continues in the complete period. Transaction analysis is the procedures that identify if a specific business scenario has an economic impact on the liabilities, assets and equity of the business. It also includes ascertaining the transaction magnitude that is currency value. Journal entries can be recorded in the below-mentioned format:

Date

Transactions

 

 

 

 

 

Gross profit

Gross profit is the profit made by the Sun City Limited company after deducting the cost linked with creating and selling the products, or costs related to delivering these services. Gross profit can be seen on the income statement of the company. This is the essential financial facets that require being learned while undertaking a new business. A tool involved to maintain gross profit is defined as markup.

Gross profit on the product is calculated as:

Gross profit=Sales-Cost of goods sold

Preparing journal entries through percentage of completion method

Percentage of completion technique is involved in calculating the cost of revenue, and hence an income is recognised by the business on a long-term project. The extent to which project is accomplished can be computed with the help of percentage of completion formula:

Percentage completion= Cost to date/ Estimated total costs

The journal entries for Anderson Pty Ltd. are engaged in the given transactions:

For example:

On Jan 2: Amount of $36,000 was contributed to progress rent for three months

On Jan 3: A cash amount of $60,000 is paid on the purchase of component costing $80,000.

On Jan 4: Costing of purchased office supplies is $17,600 on the account.

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