Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

Reader Interactions

Comments

  1. hi sir,

    during the year end 30 November 2003 the directors of Jecy co decided to form a defined benefit pension scheme for the employees of the company and contributed cash of 160 m to it on the final day of the reportin period. details related to 30 November 2003
    present value of obligation 208 m
    fair value of plan asset 200 m
    current service cost 176 m
    interest cost 32 m
    expected return 16 m

    the only entry in the financial statement made to date is in respect of the cash contribution which has been included in trade receivables. the directors have been uncertain as to how to deal with the above pension scheme in the consolidate sfp.

    in this note the solution has an adjustment to the sfp which is
    Dr retained earnings 168 m
    Cr receivables 160 m
    Cr define benefit pension scheme liability 8 m ( 208 m – 200 m)

    could you please explain me why the amount of 160 m is debited to retained earnings and no to the benefit pension scheme asset ?

  2. Dear Sir,

    I got confused on the Benefit Paid out–what would be the double entry of Benefit Paid out:
    As I think that Benefit Paid out will be an actual payment made by the company, so I guess it will be
    CR BANK
    DR PLAN LIABILITY
    But in calculating the PLAN ASSET, Benefit Paid out also reduces the value of the PLAN ASSET. What will be the other DR that offset the CR of PLAN ASSET?
    If I am wrong, WHAT will be the Right logic to deal with Benefit Paid Out?

    Thank you ~~~~~!!!!!

    • Hi,

      When the asset is liquidated, cash is received and we would therefore DR Bank.

      It is this cash that is used to then pay the pensioners using the double entry you state above.

      The overall net effect of the two entires is to DR Liability CR Asset.

      Thanks

  6. Mr. Christopher thanks you for your efforts,

    my question is when do we creat the other component of equity (OCE) account?
    I mean when we do revaluation to the assets under IAS 16 we create this account, but do we do the same here? and if you can please outline the situations where we should create this account, OCE)

    regards
    Mansoor

    • Hi Mansoor,

      The OCE account is another reserve account that we use for any gains/losses that do no go through profit or loss. So you’re correct in that any gain on revaluation of PPE would appear in here, as well as the remeasurement component discussed in the lecture above.

      Other items found in OCE would be gains/losses on financial assets held as FVTOCI that you’ve seen in F7. There will be others that you will see as you work through the rest of the P2 lectures.

      Thanks

Leave a Reply