Cancel prepaid expenses on the new guidelines \ accrued expenses Thinking two items

[Abstract] the introduction of new guidelines of the current global epidemic of view of the assets and liabilities, prepaid expenses, accrued expenses have been from the financial statements and accounting subjects disappear. This Article discusses the new guidelines on the "two-cost" method of accounting for business and the abolition of "prepaid, accrued expenses," the beneficial effects.

[Keywords:] new accounting standards, deferred expenses accrued expenses

"Prepaid expenses" and "Accrued expenses" (hereinafter referred to as "two charges") has always been the most important embodiment of accrual accounts. In the original system, they belong to class of asset classes and liabilities accounts, their end of year In the balance sheet items are to be listed specifically. But under the new accounting standards prepaid expenses, accrued expenses have been from the financial statements and accounting subjects, completely disappeared, the fundamental reason is the introduction of new guidelines for the assets of the current global epidemic liability concept, is the international convergence of accounting standards and an important manifestation. practice, we should be through the abolition of "prepaid expenses" and "Accrued expenses" account and the balance issues at the time of the cost or profit and loss are transferred to the appropriate category subjects, to achieve convergence of old and new systems.


First, the new guidelines accrual and "prepaid, accrued expenses"

Accrual basis is the right company by revenue and expenditure attributable to the issue whether the obligation to verify the income, the cost of the standard, rather than actual income and expenditure amounts are in the current period. Prepaid expenses and accrued expenses subject settings and Applications are the product of accrual, it is all the related costs paid in advance, in the future balanced by gains to be amortized over the period, or the need to pay according to income after the period prior to extraction, so that each month the cost of equilibrium occurs, played a "reservoir" effect, so much of the enterprises welcome.

However, China promulgated in 2006, though clearly the new accounting standards and increased accrual status, but through the Application of guidelines in the draft guidelines, the draft, formally issued after several changes in the phasing out of the "prepaid expenses" "Accrued expenses" accounts. specific guidelines in individual, prepaid and accrued expenses on the treatment of some description. <"Enterprise Accounting Standards No. 31 - Cash Flow Statement>> criteria specified in Article XVI, the enterprise should net profit disclosed in the notes to the cash flow from operating activities, information, or at least should be separately disclosed on the adjusted net profit of the project, including prepaid expenses and accrued expenses items. <"Enterprise Accounting Standards No. 32 for a medium-term financial Report>> Article XIII, companies in the uneven annual costs incurred, should be recognized and the time of measurement, the interim financial statements should not be accrued or deferred, but the end of the fiscal year accrued or deferred to allow otherwise. can be seen from the above provisions, the guidelines emphasize the intention makers report that the small cost in the balance of the year there is no need to share the month, can be directly through profit or loss, so the cancellation of the prepaid expenses and accrued expenses. but leave room, if necessary, the case can also be carried out by other subjects amortization and accrued expenses.


Second, the new guidelines on the "two-cost" method of accounting for business

1. Amortization costs related to the accounting treatment of business
The original criteria, the system common in the amortization of deferred expenses are consumable, lease amortization loan packaging, prepaid insurance, prepaid rent, prepaid newspaper to pay a large amount of fees and stamp duty, etc., which is characterized the first payment, after the apportioned the cost. Prepaid expenses according to the different nature of choose the right approach.

(1) consumables amortization, amortization of lease, or lending the packaging
Application Guide under the new guidelines, consumables, packing materials should be through the "working material" accounting courses, but also can be set, "consumable", "packaging" subject. The subject may be the types of materials were to "the library", "in use", "amortization" to detailed accounting.

Using a write-off method, the recipients should be according to their book value, debit "management fees", "production cost", "selling expenses" and other subjects, credited "working material" subject. Amortization by other law, recipients should be according to their book value, debit "working material" Subject (in use), credited to "working material" Subject (in the library); amortization should be amortized over their places. Debit "management fees", "production cost", "selling expenses" and other subjects, credited to "working material" subjects (amortization). can be seen, for consumables and packaging materials, no matter what the amortization method used, are no longer remember in "prepaid expenses" account, you can directly through the "working material" Subject (amortization) accounting.

(2) prepaid insurance, prepaid rent, prepaid press charges
For the first pre-paid, post-project costs gradually formed, in theory, can "advance payment" or "other receivables' subjects accounted for. Under the new guidelines do not clearly defined circumstances. I think we can stArt by general accounting practitioners easier to understand and accept the "advance payment" accounting subjects.

Enterprises should be prepaid in accordance with the relevant payment from the amount actually paid, debit "prepayments" subjects, credited to "bank", while for the monthly amortization of prepayments. Amortization at their monthly amortization, Debit "management fees", "manufacturing costs" and other subjects, credited "prepayments" subjects, until the amortization is completed. Links http://www.hi138.com Research Papers Download
(3) a relatively large amount of stamp duty paid
Application Guide under the new guidelines, companies shall be calculated by determining the mineral resources compensation payable, property tax, vehicle and vessel usage tax, land use tax, stamp duty, debits "management fees" subjects, credits "tax payable" subject. It can be seen, the enterprise should pay in the calculation of stamp duty, can be directly counted as profit or loss; in the actual payment of stamp duty, directly offset the "tax payable" subject. no longer be assessed.

2. Costs accrued related to the accounting treatment of business
The original guidelines, the common system has accrued loan interest accrued expenses, insurance, rent, fixed assets, overhaul fees, according to the importance of the principle, when the small amount of these costs can be a one-time profit and loss. If a relatively large amount and there is conclusive evidence that requires withholding payments can only be credited to the project.

(1) accrued interest on short-term borrowings
In practice, banks generally charge at the end of each quArter interest on short-term loans, for which short-term borrowings of enterprises by the end of accrued interest on the general approach to accounting. I think we can refer to long-term borrowing interest installments of interest approach. By "interest payable" subject accounting.

Enterprise shall be calculated and determined in the end of the short-term borrowing by interest charges, debit, "finance charges" subjects, credited "interest payable" subject; the actual payment of interest when. Under the accrued interest, debit "interest payable" subject, according to month, accrued interest, debit, "finance charges" subjects, according to the total interest payable, credit "bank".

(2) withholding insurance premiums, rent
For such operations. The new guidelines and Application guidelines, and not clearly defined, no subject is very appropriate to account for. I propose, in the importance of the principle, the smaller the amount of insurance premiums, rent can be charged to the profit or loss, by large amounts of "other payments" subject to accounting.

Enterprise shall be calculated and determined in accordance with the end of rent or premium payable, debit subjects related costs, credited to "Other payables" account; the actual payment of rent or premium, depending on the amount has been accrued, debit "Other payables" subjects, according to monthly rent or premium payable, debit subjects related costs, rent or premium payable under the total amount of credit "bank".

(3) major repairs of fixed assets
Application of new standards guide provides follow-up of fixed assets, expenses, if the economic benefits will flow to the enterprise than the original estimates (such as extended service life of fixed assets, or to improve product quality), should be included in fixed assets book value; addition of fixed assets, cost of repairs, no matter the size of the amount of expenditures. should occur directly in the profit and loss account were no longer amortized cost of account by account.


Third, the abolition of "prepaid, accrued expenses," the beneficial effects

1. Little impact on the capital market
As the new guidelines require an annual accounting period, the enterprise "two charges" during the year amortization of the majority, they do not cause the transition before and after any change in the annual financial statements. Only a small part of the multi-year amortization, "the two charges" before amortization for the reporting period to stop, turn the cost of the project while causing little impact statements. From the last time in the balance sheet separately presented in the "two charges" to see 2006 Annual Report of Listed Companies, the end of the report included "two costs "less than total assets, total liabilities of 0.2%, less than the sum of the three charges of 0.5% during the period. so that the two charges in a report into the expenses for the period, to total assets, total liabilities and cost implications are minimal during the .

2. Effectively improve the quality of information
Before the implementation of new guidelines, "the two charges" as indicators of certain corporate profits, "Transformers." To sum up, using the "two charges" false accounts are: free to change the "two charges," the amortization period and amortization of accrued , withholding "hanging without sharing" to cover up losses; will not be a "two charges" include the contents of the "two charges", will belong to the "two charges" are not included in the contents of the "two charges"; "two charges" apportioned and withholding the object is not correct; "two charges" reflected in the financial statements is not correct (such as "two charges," the general ledger balance of direct loss) and so on. "two charges" after the transition, these irregularities will no longer exist. but can also reduce audit costs and improve the quality of accounting information.

New accounting standards system is compatible with China's national conditions, while fully converge with International Financial Reporting Standards, covering all types of enterprises of various economic activities, independent of the implementation of accounting standards, for improving the transparency and reliability of financial information to improve our quality of financial information is important. reposted elsewhere in the Research Papers Download http://www.hi138.com