Hi All, Did someone manage to know why we use 9/10 and 1/10 instead of 9/12 and 1/12. I have all the above questions, but cant seem to find the answer? Can someone please very kindly reply ?

So based on the rules… i agree that 9/12 * 500 = 375 should be capitalised. But within those 9 months, 1 month does not qualify to be capitalised due to the ceased operations.

So should the 1 month interest not be deducted from the 375 to give you capitalised interest of 333?

1st March to December are 10 months and out of 10 months one month was on strike. So in nutshell we have 9 months to capitalize and 1 month to expenditure.

Could you please explain me why did you count month instead of days? As I remember interests should always been calculated on a daily basis. And 1 month can consist of different days: October – 31, Septebmer – 30, February – 28/29

Bro igor why do you want to take complicated path see 5% is the depreciation charged per year so as we stopped the work for just 1 month we just need to look at months where the work is going on and charge depreciation for those months so if you cal “interest per day” or “interest per month” it doesn’t make much difference

Thank you very much for these lecture videos. My question is, why did we use 9/12 months to calculate amount to be capitalised and 1/12 months for amount to be expensed, instead of 9/10 and 1/10 respectively?

Thank you very much for these lecture videos. My question is, why did we use 9/12 months to calculate amount to be capitalised and 1/12 months for amounts to be expensed, instead of 9/10 and 1/10 respectively?

Hi, if both the construction and the loan commenced on the 1st march, should the interest not be based on 9/10 and 1/10 rather than 9/12 and 1/12 as the interest charged would not have been for a full 12 months in the financial period.

So Sir, is that one month expense the month when there was no construction i.e. 1 Oct to 1 Nov? and if so, that’s what we do? Expense whenever there is no construction?

saraumar123 says

Hi All,

Did someone manage to know why we use 9/10 and 1/10 instead of 9/12 and 1/12. I have all the above questions, but cant seem to find the answer? Can someone please very kindly reply ?

adam.sheehan says

Hi Chris, what are the corresponding credit entries for both scenarios

i.e

Dr Asset

Cr?

Dr SPL Finance Costs

Cr?

Thanks

gerdella says

Could you please explain this for me?

So based on the rules… i agree that 9/12 * 500 = 375 should be capitalised.

But within those 9 months, 1 month does not qualify to be capitalised due to the ceased operations.

So should the 1 month interest not be deducted from the 375 to give you capitalised interest of 333?

manojtulani says

1st March to December are 10 months and out of 10 months one month was on strike. So in nutshell we have 9 months to capitalize and 1 month to expenditure.

Ambuj11 says

Thanks

igor1989 says

Hi Chris

Could you please explain me why did you count month instead of days?

As I remember interests should always been calculated on a daily basis.

And 1 month can consist of different days: October – 31, Septebmer – 30, February – 28/29

Thanks,

Igor

tejusmanoj says

Bro igor why do you want to take complicated path see 5% is the depreciation charged per year so as we stopped the work for just 1 month we just need to look at months where the work is going on and charge depreciation for those months so if you cal “interest per day” or “interest per month” it doesn’t make much difference

mohamedismail001 says

Hello sir,

Thank you very much for these lecture videos. My question is, why did we use 9/12 months to calculate amount to be capitalised and 1/12 months for amount to be expensed, instead of 9/10 and 1/10 respectively?

kasiamat says

9 months out of 12

1 out of 12 months

ebimere says

why 12 month when the loan was from march 2015 and not January 2015

lithuania says

Hi Ebimere,

The rate of interest on the borrowing is based on 12 months’ period, also called an annual percentage rate.

Regards,

lucasf says

I have the same question. We are capitalizing 9 months and charging another as an expense. What happens with the other 2 months?

mohamedismail001 says

Hello sir,

Thank you very much for these lecture videos. My question is, why did we use 9/12 months to calculate amount to be capitalised and 1/12 months for amounts to be expensed, instead of 9/10 and 1/10 respectively?

hammmad says

Why 9/12 or 1/12 why it’s should be 1/10 , 9/10

shaneryan says

Hi, if both the construction and the loan commenced on the 1st march, should the interest not be based on 9/10 and 1/10 rather than 9/12 and 1/12 as the interest charged would not have been for a full 12 months in the financial period.

Thanks

ekhoza says

Hi Sir,

Why are we using 9/12 and 1/12 when construction started in March till December?

shouldn’t it be 9/10 and 1/10?

viethuynguyen says

If there is no additional information, u often understand the interest rate is annual rate.

So 5% per year, 12 months.

Petronella says

Easy to follow lecture . Thank you sir.

kaadence says

So Sir, is that one month expense the month when there was no construction i.e. 1 Oct to 1 Nov? and if so, that’s what we do? Expense whenever there is no construction?

P2-D2 says

Yes, that’s correct. Always keep an eye out for it in any exam question.

nokthu says

I have noticed that you calculated two answers one for sfop and I/S, is there supposed to be a double entry always?

mk says

Sir why we use 10 months instead of 12 months?

P2-D2 says

Hi,

The assumption is that the loan and construction both commenced on 1 March.

Thanks

zulma85 says

Thanks Chris.

Just one thing. Colombia in South America is written Colombia, not Columbia. I say that because it’s my country of birth. 😉

Thank you SO much for your lectures. You all guys are amazing.