Summary FinAcc 3rd year - ASSETS

ASSETS




Lexi Shtein
THIRD YEAR
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, Table of Contents
IAS 2 INVENTORIES ........................................................................................................... 3
IAS 16: PROPERTY, PLANT & EQUIPMENT ....................................................................... 43
IAS 36: IMPAIRMENT OF ASSETS ..................................................................................... 62
IAS 38: INTANGIBLE ASSETS ............................................................................................ 77
IAS 40 INVESTMENT PROPERTY ....................................................................................... 10




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, IAS 2 INVENTORIES

inventory = assets held for sale in the ordinary course of business, in the process of production for such sale or in the form of
materials / supplies to be consumed in the production process / the rendering of services




First year revision


• PROFIT MARGINS
eg: 20% GP on cost price:
SP = 120
1) Gross Profit as % of cost price
CP = (100)
∴ cost price = 100%
GP = 20
2) Gross Profit as % of sales price
∴ sales price = 100% eg: 20% GP on sales price:
SP = 100
CP = (80)
1) Discounts GP = 20

eg: GP is 30% on sales price and there is a 5% discount:

normally sale- discount
SP = 100 x0.95 SP = 95
CP = (70) CP = (70)
GP = 30 GP = 25




• Normal losses
= normal part of the production process eg: paint spillage
- included in the cost of inventory expense (DR- Cost of Sales)

DR – Cost of Sales (P/L)
CR – Inventory (SFP)

• Abnormal losses
= not a normal part of the production process eg: fire
- separate expense

DR – Abnormal Loss (P/L)
CR – Inventory (SFP)




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, • Insurance

DR – Insurance Debtor (SFP)
CR – VAT Control (SFP)
CR – Insurance Income (P/L)


• FOB (Free On Board):
* see when to start capitalising
eg: FOB Cape Town – start capitalising once it reaches Cape Town


excluded costs:

- marketing
- advertising, admin ... profit / loss
- day-to-day servicing

* capitalisation ceases when good is in location / condition necessary for its intended use




Inventory Systems


• The two inventory system in terms of which inventory is recorded are a perpetual or a periodic system.


Perpetual Periodic
• Continuous record of inventory on hand • Physical inventory count used as the record of the closing
• Inventory account updated with every movement in INV. inventory
• Cost of inventory sold – continuously known
• Physical inventory count vs inventory account = inventory loss

In a perpetual system, just as the name suggests, inventory records In a periodic system, we are not going to constantly update the
are updated constantly – ie. with each sales transaction or sales inventory records.
return, we are going to update the inventory account and account
for cost of sales. At the end of the financial period, we will physically count the
inventory and then the inventory sold (cost of sales) will be
calculated as the balancing figure

• Sales – perpetually • Sales – periodic

DR – Debtor (SFP) sales price DR – Debtor (SFP) sales price
CR – Sales (P/L) sales price CR – Sales (P/L) sales price

DR – Cost of sales (P/L) cost price No journal for the cost price movement!
CR – Inventory (SFP) cost price Cost of sales
= opening inventory + purchases – purchase returns + other costs
part of cost price of inventory – closing inventory.

There is not a difference in the R-values between the two systems,
iro what is eventually accounted in the cost of sales, journals just
differ




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