E13.11 Apply definition and recognition criteria for liabilities. LO7 The Conceptual Framework defines liabilities and outlines a number of criteria for their recognition. a-Forden and a-Holden Custom Cars Ltd identi es the following items: (a) Purchased tyres, glass and steel on account. (b) Received $100 000 in deposits for custom cars to be built in the next nancial period.
| No. | Accounts | debit | credit |
| a | Merchandise inventory | xxx | |
| accounts payable | xxx | ||
| (this is purchase made on account | |||
| so we build liability by crediting | |||
| accounts payable account.) | |||
| b | Cash | 100000 | |
| Unearned revenue | 100000 | ||
| (this is like advance for the custom | |||
| cars to be made for the next financial | |||
| year so we book this as unearned revenue | |||
| when next year the cars are delivered | |||
| we will recognise this as revenue) | |||
Comment for any another question , i will edit answer ASAP
E13.11 Apply definition and recognition criteria for liabilities. LO7 The Conceptual Framework defines liabilities and outlines...
The Conceptual Framework defines liabilities and outlines a number of criteria for their recognition. a-Forden and a-Holden Custom Cars Ltd identifies the following items: (a) Purchased tyres, glass and steel on account. (b) Received $100 000 in deposits for custom cars to be built in the next financial period. (c) Employed two new staff members and agreed to pay them $75 000 per annum. They begin work next week. (d) One of a-Forden and a-Holden Custom Cars Ltd’s customers is...
The Conceptual Framework defines liabilities and outlines a number of criteria for their recognition. a-Forden and a-Holden Custom Cars Ltd identifies the following items: (a) Purchased tyres, glass and steel on account. (b) Received $100 000 in deposits for custom cars to be built in the next financial period. (c) Employed two new staff members and agreed to pay them $75 000 per annum. They begin work next week. (d) One of a-Forden and a-Holden Custom Cars Ltd’s customers is...
Exercise 1.12 Definition and recognition criteria Explain how T Ltd should account for the following items, justifying your answer by reference to the definitions and recognition criteria in the conceptual framework. Also state, where appropriate, which ledger accounts should be debited and credited. Required Photographs of the company’s founders, which are of great sentimental and historical value. (a) T Ltd has been sued for negligence — likely it will lose the case. (b) T Ltd has been sued for negligence...