Revision Zone Flashcards
Asset
a present economic resource controlled by the entity as a result of past events and can be measured reliably
Liability
a present obligation of the entity to transfer an economic resource as a result of past events and can be measured reliably.
Fundamental Charactersitic - Relevance
The information must be relevant to users decision making needs
Fundamental Charactersitic - Faithful Representation
The information must be complete, neutral and free from error
Enhancing Charactersitic - Comparability
The information must be comparable to other financial statements
Enhancing Charactersitic - Verifiability
The information can be verified by different independent observers
Enhancing Charactersitic - Timeliness
The information is made available to users in time to influence decision making
Enhancing Charactersitic - Understandability
The information should be understandable by users
When should a grant be recognised
When there is reasonable assurance that:
- the entity will comply with the grant conditions
- the entity will actually receive the grant
How to treat grants relating to NCA
1 - treat as deferred income
2 - reduce the carrying amount of the NCA
How to treat grants relating to income
1 - other income in SOPL
2 - reduce related expenses
Treating the grant as Deferred Income double entry
1 buying the NCA
Dr NCA
Cr Bank
2 receiving the grant
Dr Bank
Cr Deferred Income
3 Depreciation
Dr Admin Expenses
Cr NCA
4 Releasing the deferred income
Dr Deferred Income
Cr Other Income
deducting the grant from NCA double entry
1 Buying the NCA
Dr NCA
Cr Bank
2 Receiving the grant
Dr Bank
Cr NCA
3 Depreciation
Dr Admin Expenses
Cr NCA
Deducting grant from expense double entry
Dr Bank
Cr Expense
Treating the grant as other income
Dr Bank
Cr Other Income