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Practical Accounting 2 Vol 2 PDF
Practical Accounting 2 Vol 2 PDF
Accounting 2
Advance Financial
Accounting Vol. 2
Advance Accounting Vol. 2
1. Home Office and Branch Accounting
– General Procedures
2. Home Office and Branch Accounting
– Special Problems
3. Business Combinations
4. Consolidated Balance Sheet – Date
of Acquisition
5. Consolidated Financial Statements
Advance Accounting Vol. 2
6. Intercompany Profit Transactions –
Inventories
7. Intercompany Gain Transactions –
Plant Assets
8. Accounting For Foreign Currency
Transactions
9. Translation of Foreign Entity
Statements
Advance Accounting Vol. 2
1. Home Office and Branch Accounting
– General Procedures
Elimination Entries:
RECONCILIATION OF RECIPROCAL
ACCOUNTS (Common Errors)
Advance Accounting Vol. 2
2. SPECIAL PROBLEMS - BRANCH
ACCOUNTING
1. Merchandise Shipments to Branch at
price in excess of cost, @ billed price
2. Inter-branch Transfers of Cash
3. Inter-branch transfer of Merchandise.
Advance Accounting Vol. 2
2. SPECIAL PROBLEMS - BRANCH
ACCOUNTING
1. Merchandise Shipments to Branch at
price in excess of cost, @ billed price
When billings to the branch exceed cost,
the profits determined by the branch will
be less than actual profits.
Inventories reported by the branch are
overstated in as much as they were
valued based on the billed price, NOT
THEIR COST.
Advance Accounting Vol. 2
Advance Accounting Vol. 2
Advance Accounting Vol. 2
Advance Accounting Vol. 2
Observation
Accounting Rule:
2 companies may be viewed as a
single reporting entity, PAS #27
mandates for a consolidated
financial statements.
PFRS #3 (2008) Business
Combination Summaries
#1. Definition of Business
Combination
It is a transaction or event in
which an acquirer obtains
control of one or more
businesses.
PFRS #3 (2008) Business
Combination Summaries
#2. Scope: It does not apply
to the following
transactions
Balance Sheet:
Illustrative Problem (Case
1)
1. Cost
2. In accordance with PAS 39 on
Financial Instruments.
Accounting for Investments in
Subsidiaries, Jointly Controlled Entities
and Associates in Separate F/S
As amended, investments in subsidiaries,
jointly controlled entities and associates that
are accounted for in separate F/S in
accordance with PAS 39, rather than at cost,
shall continue to be accounted for in
accordance with PAS 39, even if such
investments are classified as “held for sale”
under PFRS 5.
Subsequent to Date
of Acquisition
Discusses the subsequent
depreciation and amortization of
the asset and liability revaluations
in conjunction with its analysis of
working paper procedures for
preparing Consolidated Financial
Statements
Consolidated Net
Income
PARENT COMPANY APPROACH
- Consolidated net income is that part of the
total enterprise’s income that is assigned
to the parent company’s stockholders.
- For Wholly owned subsidiary,
- All income of the parent and its
subsidiaries accrues to the parent
company.
- For Partial owned subsidiary,
- A portion of its income accrues to its NCI
and is excluded from consolidated net
income.
Consolidated Net
Income
PARENT COMPANY APPROACH
Consolidated Net
Income
ENTITY APPROACH
- For Wholly owned subsidiary,
- The consolidated net income is
computed similarly as that of
the parent.
- For Partial owned subsidiary,
- The portion of its income
accruing to NCI is included in
the consolidated net income.
Consolidated Net
Income
ENTITY APPROACH
Consolidated Net
Income
OBSERVATION:
• Consolidated Net Income under
parent company approach is the
same as the income allocated to
parent company stockholders under
approach.
• Difference b/w parent company and
entity approaches lie solely in the
manner of consolidating parent and
subsidiary F/S and in reporting the B/S
and I/S.
Consolidated Net
Income
Elimination Entries:
ACCOUNTING FOR
INVESTMENT IN A
SUBSIDIARY
Cost Method Equity Method
• Used when the • Used when the
parent (acquirer) acquirer/investor
owns directly or owns 20% or more
indirectly more (less than 50%) of
than half of the the voting power of
voting power of the
an entity investee/acquiree,
(acquiree), thereby exercising
thereby significant influence
exercising control over the operations
(IAS 27) of the investees.
ACCOUNTING FOR
INVESTMENT IN A
SUBSIDIARY
EQUITY METHOD
The investment account is initially
recorded at cost and is increased or
decreased to recognize the investor’s
share of the income or loss of the
investee after the date of acquisition.