FA C10-11 Cash, Current Investments
-
Upload
reader0505 -
Category
Documents
-
view
222 -
download
0
Transcript of FA C10-11 Cash, Current Investments
-
8/12/2019 FA C10-11 Cash, Current Investments
1/7
1
Financial Accounting
prof. Adriana Tiron Tudor- course
assist. Szilveszter Fekete- practice
att
Agenda course
1. Objectives
1. Objectives
3. Treasury instruments
3. Treasury instruments
2. Short term financial investments
2. Short term financial investments
4. Cash
4. Cash
What
Short term financial investments represent
Cash and cash equivalents represent
1. Objectives
1. Objectives
After studying this chapter, you will understand:
How to
Report short term financial investments, cashand cash equivalents,
Place in the Balance sheet
Non-current assets intangible assets
tangible assets
financial assets
Current assets inventory
receivable
short term investments
cash
Regulation assets pre-payments
short term investments
cash and cash equivalents
-
8/12/2019 FA C10-11 Cash, Current Investments
2/7
2
2. Short term financial investments
Contain
the purchased securities with the purpose of ashort term earning.
the shares and debentures held on short termwith the purpose of gaining an earning or a plusvalue at the time of their sale.
Them valuation is critical as their value and constantlychanging, thus creating potential ( unrealized) gains orlosses.
The earning or plus value is realized through thedifference between the bigger sell price and thesmaller buy price of these papers.
The difference from the non current financialinvestments whichs possession is for a period larger
than a year, consists in the fact that the liquidationperiod of the placement securities doesnt exceed oneyear.
2. Short term investments
In the category of the short term investments areincluded:
Other companys shares purchased with thepurpose of speculative operations throughoutresale;
Debentures issued and repurchased later, in orderto be amortized;
Debentures of the third parties purchased forobtaining interests or for resale.
2. Short term investments
Represent the acquisitioned securities for protecting the
cash or for realizing speculative operations.
The protection or coverage of the cash against theinflationist phenomena is realized taking intoaccount the variation of the purchase power of the
national currency (the exchange risk) and the interestrate (the interest risk).
In the category of the treasury instruments arecontained:
The treasury bills (T/B)/government bills
The substitutive certificates of the foreignexchange (f.ex./forex)
3. Treasury instruments
3. Treasury instruments
-
8/12/2019 FA C10-11 Cash, Current Investments
3/7
3
The treasury bills are used in the framework of thecredit relations between the state and the population,banks, economic agents.
The state issues these papers based on which itborrows money on short term.
The obtained treasury bills are interest carriers.
The substitutive certificates of foreign exchange are
used for the official trips outside the country (treasury ortravel bill).
Their holders benefit of foreign exchange whenthey are in another country.
3. Treasury instruments
3. Treasury instruments Short term investment accounting
Group 50 501 Shares in related parties
505 Redeemed debentures
506 Debentures
508 Other short term investments and related
receivables
509 Amounts payable for short term investments ( debts)
7642 Gains on disposal of short term investments
6642 Losses on disposal of short term investments
Example:
An entity purchases for speculative purposes a set of 1.000 sharesissued by a subsidiary at a cost of 4,3 lei/share. Later 400 shares aresold for the price of 5 lei/share and 300 shares for 4 lei/share. Allpayments are carried out by bank transfer
Purchase of shares of affil iated entities 501= 5091 4.300
Payment o f the equivalent of shares 5091=5121 4.300
Sales of shares for 5 lei/share 5121= % 2.000
501 1.720
7642 280
Sales of shares for 4 lei/share % = 501 1.290
5121 1.200
6642 90
Question:
How we record the transaction if thecompany intentions is to keep the sharesfor long time (over 1 year)
An entity purchases for speculative purposes a set of1.000 shares issued by a subsidiary at a cost of 4,3lei/share. Later 400 shares are sold for the price of 5lei/share and 300 shares for 4 lei/share after two years.
All payments are carried out by bank transfer.
-
8/12/2019 FA C10-11 Cash, Current Investments
4/7
4
Example:
800 bonds are purchased for 10 lei/bond, out of which 300 are paid incash, the rest later by bank transfer. The entity receives 200 lei interestin its bank account for the bonds held. Later the entity sells in cash 400bonds for the price of 12 and 200 for 9 lei/bond.
Purchase of 800 bonds 506 = % 8.000
5311 3.000
5092 5.000
Payment of the rest of 400 bonds 5092 = 5121 5.000
Recording interest 5088 = 766 200
Receiving interest in bank account 5121 = 5088 200Sales with gain of bonds 5311 = % 4.800
506 4.000
7642 800
Sales with loss of bonds % = 506 2.000
5311 1.800
6642 200
Contain the economic values which are in the form or fulfill thefunction of money.
IAS 7 states that cash comprise cash in hand ( coins, banknotes andcurrency available) and demand deposits (deposits in bankaccounts that are available on demand.
In this category are contained:
Petty cash (in RON and foreign exchange);
Cash at bank from the current accounts and deposits (inRON and FOREX);
Letters of credit;
Other treasury values etc.
4. Cash4. Cash
a. Petty cash represents the money found in the own cash deskand destined for small payments and emergencies.
b. Other treasury values
The postal and fiscal stamps;
The treatment and rest notes;
The travel tickets and vouchers;
The papers of value and lunch tickets;
Other values.
c. Cash at bank represent the money held at the bank in currentaccounts or short term deposits (under one year).
4. Cash4. Cash accounting
Group 51 Bank accounts
511 Outstanding values
512 Cash at bank
518 Interest
519 Short term bank loansGroup 53 Petty cash
531 Petty cash
532 Cash equivalents ( other values)
-
8/12/2019 FA C10-11 Cash, Current Investments
5/7
5
Example:
An entity transfers 34.000 lei in a separate account in order to purchaseeuro. 10.000 euro is purchased at the auction for 3,35 lei/euro, the chargeof operation being 40 lei. The rest of the amount is transferred back to thecurrent account in lei. At the end of the year the exchange ratedifferences are recorded, when the rate is 3,30 lei/euro.
Transferring the amount in a separate account 5125 = 5121 34.000
Purchase of euro (foreign currency) 5124 = 5125 33.500
Payment of charge 627 = 5125 40
Transferring the rest back to current account in lei 5121= 5125 460
Recording exchange rate differences at the end of the year (for theclosing balance of the account in foreign currency) 665 = 5124 500
Example:
An entity purchases fuel coupons for 100 lei, plus VAT 19%, paid incash. The coupons are used to purchase fuel (diesel oil), which isconsumed later.
Purchase of fuel coupons % = 5311 119
5328 100
4426 19
Use of coupons to buy diesel oil 3022 = 5328 100
Consumption of fuel 6022 = 3022 100
4. Cash
d. Letters of credit
represent money reserved at the bank in a differentaccount, opened at the disposal of a certain supplier.
These sums are reserved for that certain supplier fordeliveries of goods, work executions or serviceproviding.
The letters of credit guarantee their payments to thesupplier.
The letters of credit can be opened in RON or foreignexchange (FOREX).
accounting
group 54 Letters of credit
541 Letters of credit
542 Cash advances
-
8/12/2019 FA C10-11 Cash, Current Investments
6/7
6
Example:
An entity (VAT payer) concludes an agreement (contract) for import ofcommodities for 10.000 euro. A 10.000 euro letter of credit ispreviously opened for international payment on 3,5 lei/euro.Commodities are imported for 3,4 lei/euro. VAT in customs is paid bybank transfer. Payment to the foreign partner is made on 3,6 lei/euro.
Opening the letter of credit in euro on 3,5 lei/euro 581 = 5412 35.000
5124 = 581 35.000
Import of commodities (10.000 x 3,4) 371 = 401 34.000
Payment of VAT in customs (10.000 x 3,4 x 19%) 4426 = 5121 6.460Payment of foreign supplier on 3,6 lei/euro % = 401 36.000
665 34.000
5412 2.000
Recording exchange rate differences for the letter of credit in euro
5412 = 765 1.000
e. The cash advances
In the category of cash are also included the cashadvances.
These represent the money distributed and used inorder to be endorsed by the subordinated administrators
or employees of the subunits of the territorially dispersedcompany.
4. Cash4. Cash
Example:
A treasury advance is granted to an employee for the amount of lei,from which the following is paid: consumables, 100 lei ,accomodationexpenses 200 lei. Daily allowance is 100 lei. At return from delegation,the employee justifies the expenses and returns the unused treasuryadvance.
Granting the advance for delegation 542 = 5311 500
Recording justification of expenses at return:
Purchase and s ettlement of c onsumables 302 = 542 100
Settlement of accomodation 625 = 542 200
Recording daily allowance expenses 625 = 542 100
Refunding unused treasury advance 5311=542 100
-
8/12/2019 FA C10-11 Cash, Current Investments
7/7
7