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Hi
I am unsure about the treatment for derivatives. There is a question that says it entered into a contract to purchase copper in 12 months for £100k. The cost of contract is nil.
At yr end price of copper has risen and f.v of derivative is £15k. At yr end copper price falls and f.v is £5k. What is double entry to record asset?How should this be answered and I am unsure what is meant by derivative.
Hi,
To understand derivatives then you should watch the lecture.
The first increase we DR Derivative CR Profit or loss.
The second is a reduction in the asset so DR Profit or loss CR Derivative
Thanks
Hi, really sorry but I have gone through each chapter heading and can’t see one called derivatives?
Try looking in chapter 17 and the fifth video entitled ‘Financial instruments – derivatives’
Thanks
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