Accounting procedures for Trade and other payable are the ff:

1) Refinancing agreement – replacement of an existing debts with a new one with

a different term (loan payable and interest payable).
2) Bank Reconciliation – Prepared by the management to bring the bank’s
recording into agreement with the depositor’s recording.
3) Credit Memorandum – Part of bank reconciliation which is given for a loan
approved by the bank.
Dr. Cash in Bank xxx
Interest expense xxx
Cr. Notes payable xxx
To record bank loan discounted at 18% for 60 days.
4) Voucher system – A system that uses special journals for payment using vouchers
to discourage fraud and manipulation of accounts.
Dr. Purchases xxx
Cr. Vouchers payable xxx
To record purchase of inventory through voucher.

 Provisions is an existing liability of uncertain timing or uncertain

amount

Provisions are measured

 The amount recognized as a provision should be the best estimate of the expenditure
required to settle the present obligation at the financial reporting date, that is, the
amount that an entity would rationally pay to settle the obligation at the end of the
financial reporting period or to transfer it to a third party.
 If it involves large population of items, the obligation is measured at expected value
 Midpoint of the range is used for continuous range of possible outcomes.

An entity must recognize a provision if, and only if:

(a) a present obligation (legal or constructive) has arisen as a result of a past

event (the obligating event);
(b) an outflow of economic benefit to settle the obligation is probable
(“more likely than not”); and
(c) the amount of the obligation can be estimated reliably.
Components of provisions includes:

1) Warranties – The entity provides for the estimated liability to repair or replace products
under warranty at the time the revenue is recognized.
2) Environmental damages – An obligating event where the entity has broken current
environmental legislation or environmental policy.
3) Guarantees – A commitment to honor an obligation of another party in the event
certain defined conditions are not met.
4) Onerous contracts – Contracts in which the unavoidable cost of meeting the
obligation under the contract exceed the economic benefits expected to be received.
5) Restructuring cost – Liabilities for expenses already incurred but not yet paid.
6) Court case or pending lawsuits – It can only be recognized as provision if there is
present obligation and outflow is both probable and estimable.
7) Obligations caused by an entity’s policy to make refunds to customers – Present
obligation arises from injury caused to customer provision is recognized if an outflow
is both probable and estimable.

Accounting procedures for Provisions are the ff:

5) Refinancing agreement – replacement of an existing debts with a new one with

a different term (loan payable and interest payable).
6) Bank Reconciliation – Prepared by the management to bring the bank’s
recording into agreement with the depositor’s recording.
7) Credit Memorandum – Part of bank reconciliation which is given for a loan
approved by the bank.
Dr. Cash in Bank xxx
Interest expense xxx
Cr. Notes payable xxx
To record bank loan discounted at 18% for 60 days.
8) Voucher system – A system that uses special journals for payment using vouchers
to discourage fraud and manipulation of accounts.
Dr. Purchases xxx
Cr. Vouchers payable xxx
To record purchase of inventory through voucher.
  Liabilities represents amounts an entity owes for its debts or
obligations. It is a present obligation of the entity to transfer an
economic resource as a result of past events

An obligation is either:

a. Legal Obligation – Obligation result from a contract or operation of law

b. Constructive Obligation – It results from an entity’s action or past
practice that created a valid expectation for responsibilities.

 Trade and other payables are obligation arising from purchases of

inventory that are to be sold in the ordinary course of business even if
they are not due for settlement within the end of the reporting date.

To recognize Trade and other payables like any liabilities it must have the ff:

I. The trade & other payable is the present obligation of a particular entity
(not necessary the payee whom the obligation owed be identified)
II. The obligation arises from past event
III. The settlement of the liability requires an outflow of resources
embodying economic benefits.

Trade and other payables are initially measured

 At amounts established in exchanges (amount to be paid or amount

discounted) or present value.

Trade and other payables are subsequently measured

 At amortized cost but for some is reported at face amount.

Trade and other payables composed of the ff:

1) Accounts payable – Obligation not supported by formal promises to pay by the debtor.
2) Notes payable – Obligation supported by promissory notes by the debtor.
- Non-Interest-bearing note (note is initially measured based on the prevailing
market rate of interest for a similar obligation)
- Interest bearing note
3) Dividends payable – Amount owed by a corporation to its shareholders as a result
of the board of directors’ action on the distribution of corporate earnings.
4) Loan payable – Usually used to connote bank loans.
5) Bonds payable – Obligation issued by the debtor supported by the promises made
under seal.
6) Accrued expenses – Liabilities for expenses already incurred but not yet paid.
7) Others like taxes payable, vouchers and interest payable and the like.