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Regarding this note, I have no idea what’s going on. The examiner’s answer has no explanation, it’s just a set of numbers clattered over the page without any rationale.
Here’s the link to the paper : https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p2/exampapers/int/P2INT_2012_jun_q.pdf
First of all how is it pre determined that this is a joint operation and not a joint venture? Is it because in the note we are not told of any business being set up separately so we need to assume it’s a joint operation? What’s showing us it’s a joint operation? And what’s this thing with trade receivables and payables? Is it that in the joint operation the accounting is taking the parent’s share of all the elements and then showing them in the accounts?
Sorry to bother you, if you’re busy you can take your time to reply. I’ll check a few days later. Don’t worry
“First of all how is it pre determined that this is a joint operation”? is your question
Here’s the first few words from the question paper, note iii:
“Robby has a 40% share of a joint operation”
You ask “And what’s this thing with trade receivables and payables? Is it that in the joint operation the accounting is taking the parent’s share of all the elements and then showing them in the accounts?”
Here are two quotes from the question:
1) “Assets, liabilities, revenue and costs are apportioned on the basis of shareholding.” and
2) “The revenue and costs are receivable and payable by the other joint operator who settles amounts outstanding with Robby after the year end.”
Does that explain it – I think it does, but let me know if I’m wrong
Oh bly me it says “joint operation”
Regarding the receivable and payable, my concern was how can we work out which party is the receivable and payable as this is not clear from the above quote (in the question). Is it Robby who will give it’s other partner money and ask it to refund the expenses or vice-versa? As in the answer, Robby ask the other partner for it’s share of revenue and give the other partner some of the costs the other partner incurred on behalf of Robby so why is this the case?
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