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reversal of amortization

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › reversal of amortization

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by Shanawaz33998.
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  • July 25, 2023 at 6:13 pm #688872
    Shanawaz33998
    Participant
    • Topics: 3
    • Replies: 3
    • ☆

    In a question if staff training cost has been wrongly capitalized and even amortization has been calculated…what should be the *two double entries* for reversal of capital expenditure to revenue expenditure and canceling the amortization? Like in this question:

    Darby spent $200,000 sending its staff on training courses during the year. This has already led to an improvement in the company’s efficiency and resulted in cost savings. The organizer of the course has stated that the benefits from the training should last for a minimum of four years. The assistant has therefore treated the cost of the training as an intangible asset and charged six months’ amortization based on the average date during the year on which the training courses were completed. (2009,singapore past paper)

    July 26, 2023 at 9:08 pm #688966
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    If it has been capitalised incorrectly then the cost of the training would need to be written off through profit or loss – DR SPL CR Asset

    Any amortisation would then need to be reversed too – DR Asset (Accumulated Amortisation) CR SPL (Amortisation expense)

    Thanks

    July 26, 2023 at 10:04 pm #688976
    Shanawaz33998
    Participant
    • Topics: 3
    • Replies: 3
    • ☆

    Thank you sir! I understood it!

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