Someone please explain to me I’m extremely confused with the concept of accrual vs provision. Can I book a provision say for example for work that has started but not completed or do I book an accrual. I thought for for an accrual the goods or service must be delivered but not invoiced so if the goods or service is not delivered/completed I would think I can book a provision.
We do have free short tests on our website. However it is essential that you buy a Revision Kit from one of the ACCA Approved Publishers (BPP or Kaplan) because they are full of past exam and other exam standard questions for practice. (You can get a 20% discount on BPP books by clicking on the link on our website.)
Thanks for this expnation But such case, we may have to account reasonable amount in spl at lrst to the percentage applicable in the secanio And this must be revied by the expertise .thanks
A company has purchased a plant for Rs. 5 million with an estimated useful life of 10 years. In order to provide funds for replacement of plant the company has decided to create provision with equal amounts for ten years. Therefore; the company debited “Plant replacement charges” and credited “Provision for Plant replacement” in current year’s financial statements. Comment and explain, whether the above provision meets the requirements of IAS 37? Please answer me
To recognise a provision, it should meet the definition of a liability. Firtly it should arise as result of a past obligating effect (contractive or legal). Wanting to replace the plant in the future is not a past obligating event. Secondly it is questionable if the cost of the plant in 10years time can be measured reliable. Unless there is an agreement (which there is not) to buy the plant at a certain price then maybe this test could have been ticked as passed. Thirdly it must be probable (greater than 50% chance) that an outflow of economic resources will occur. There is need for more information to confirm this.
When the company depreciated the plant, automatically accumulated depreciation fund i. e. Replacement fund will be created after utilizing the plant. That's why no need to be made another provision. It is out of scope IAS 37.
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Someone please explain to me I’m extremely confused with the concept of accrual vs provision. Can I book a provision say for example for work that has started but not completed or do I book an accrual. I thought for for an accrual the goods or service must be delivered but not invoiced so if the goods or service is not delivered/completed I would think I can book a provision.
Sir, how can we find some practice questions or books depending on this topic ?
We do have free short tests on our website. However it is essential that you buy a Revision Kit from one of the ACCA Approved Publishers (BPP or Kaplan) because they are full of past exam and other exam standard questions for practice. (You can get a 20% discount on BPP books by clicking on the link on our website.)
Thank you so much
Thanks for this expnation
But such case, we may have to account reasonable amount in spl at lrst to the percentage applicable in the secanio
And this must be revied by the expertise
.thanks
I got it .... thanks.... :)
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A company has purchased a plant for Rs. 5 million with an estimated useful life of 10 years. In order to provide funds for replacement of plant the company has decided to create provision with equal amounts for ten years. Therefore; the company debited “Plant replacement charges” and credited “Provision for Plant replacement” in current year’s financial statements.
Comment and explain, whether the above provision meets the requirements of IAS 37?
Please answer me
To recognise a provision, it should meet the definition of a liability.
Firtly it should arise as result of a past obligating effect (contractive or legal).
Wanting to replace the plant in the future is not a past obligating event.
Secondly it is questionable if the cost of the plant in 10years time can be measured reliable. Unless there is an agreement (which there is not) to buy the plant at a certain price then maybe this test could have been ticked as passed.
Thirdly it must be probable (greater than 50% chance) that an outflow of economic resources will occur. There is need for more information to confirm this.
When the company depreciated the plant, automatically accumulated depreciation fund i. e. Replacement fund will be created after utilizing the plant. That's why no need to be made another provision. It is out of scope IAS 37.
@@SaifulIslam-il5uz Hello sir please I have a question to ask you?