meaning of assignment in accounting

Course Resources

Assignments.

The assignments in this course are openly licensed, and are available as-is, or can be modified to suit your students’ needs. Answer keys are available to faculty who adopt Lumen Learning courses with paid support. This approach helps us protect the academic integrity of these materials by ensuring they are shared only with authorized and institution-affiliated faculty and staff.

If you import this course into your learning management system (Blackboard, Canvas, etc.), the assignments will automatically be loaded into the assignment tool.

You can view them below or throughout the course.

Module 0: Personal Accounting— Assignment: Creating a Budget
Module 1: The Role of Accounting in Business— Assignment: Lopez Consulting
Module 2: Accounting Principles— Assignment: Accounting Principles
Module 3: Recording Business Transactions— Assignment: Recording Business Transactions
Module 4: Completing the Accounting Cycle— Assignment: Completing the Accounting Cycle
Module 5: Accounting for Cash— Assignment: Accounting for Cash
Module 6: Receivables and Revenue— Assignment: Manilow Aging Analysis
Module 7: Merchandising Operations— Assignment: Merchandising Operations
Module 8: Inventory Valuation Methods— Assignment: Inventory Valuation Methods
Module 9: Property, Plant, and Equipment— Assignment: Property, Plant, and Equipment
Module 10: Other Assets— Assignment: Other Current and Noncurrent Assets
Module 11: Current Liabilities— Assignment: Calculating Payroll at Kipley Co
Module 12: Non-Current Liabilities— Assignment: Non-Current Liabilities
Module 13: Accounting for Corporations— Assignment: Collins Mfg Stockholders’ Equity
Module 14: Statement of Cash Flows— Assignment: Kachina Sports Company Cash Flows
Module 15: Financial Statement Analysis— Assignment: Coca Cola FSA

Discussions

The following discussion assignments will also be preloaded (into the discussion-board tool) in your learning management system if you import the course. They can be used as is, modified, or removed. You can view them below or throughout the course.

Module 0: Personal Accounting— Discussion: Winning the Lottery
Module 1: The Role of Accounting in Business— Discussion: The Crafty Coffee Crook
Module 2: Accounting Principles— Discussion: SoftSheets
Module 3: Recording Business Transactions— Discussion: Baker’s Breakfast Bars
Module 4: Completing the Accounting Cycle— Discussion: Closing the Books in QuickBooks
Module 5: Accounting for Cash— Discussion: Counter Culture Cafe
Module 6: Receivables and Revenue— Discussion: Maximizing Revenue
Module 7: Merchandising Operations— Discussion: Inventory Controls
Module 8: Inventory Valuation Methods— Discussion: LIFO, FIFO, Specific Identification, and Weighted Average
Module 9: Property, Plant, and Equipment— Discussion: Cooking the Books
Module 10: Other Assets— Discussion: Other Assets
Module 11: Current Liabilities— Discussion: Current Liabilities
Module 12: Non-Current Liabilities— Discussion: Off-Balance Sheet Financing
Module 13: Accounting for Corporations— Discussion: Home Depot
Module 14: Statement of Cash Flows— Discussion: Facebook, Inc.
Module 15: Financial Statement Analysis— Discussion: Financial Statement Analysis

Alternative Excel-Based Assignments

For Modules 3–15, additional excel-based assignments are available below.

Module 3: Recording Business Transactions

Module 3 Excel Assignment A
Module 3 Excel Assignment B

Module 4: The Accounting Cycle

Module 4 Excel Assignment A
Module 4 Excel Assignment B
Module 4 Excel Assignment C
Module 4 Excel Assignment D

Module 5: Accounting for Cash

Module 5 Excel Assignment

Module 6: Receivables and Revenue

Module 6 Excel Assignment A
Module 6 Excel Assignment B

Module 7: Merchandising Operations

Module 7 Excel Assignment

Module 8: Inventory Valuation Methods

Module 8 Excel Assignment A
Module 8 Excel Assignment B
Module 8 Excel Assignment C

Module 9: Property, Plant, and Equipment

Module 9 Excel Assignment A
Module 9 Excel Assignment B

Module 10: Other Assets

Module 10 Excel Assignment

Module 11: Current Liabilities

Module 11 Excel Assignment

Module 12: Non-Current Liabilities

Module 12 Excel Assignment A
Module 12 Excel Assignment B

Module 13: Accounting for Corporations

Module 13 Excel Assignment A
Module 13 Excel Assignment B
Module 13 Excel Assignment C

Module 14: Statement of Cash Flows

Module 14 Excel Assignment A
Module 14 Excel Assignment B

Module 15: Financial Statement Analysis

Module 15 Excel Assignment

Review Problems

There are also three unit review assignments and a final review. These reviews include a document which sets up the problems and an excel worksheet.

Unit 1 Review Problem (After Module 6)

Review Problem Document

Unit 2 Review Problem (After Module 8)

Unit 3 review problem (after module 9), final review (after module 15).

Assignments. Authored by : Cindy Moore and Joe Cooke. Provided by : Lumen Learning. License : CC BY: Attribution

Receivables
Notes Receivable
Credit Terms
Cash Discount on Sales
Accounting for Bad Debts
Bad Debts Direct Write-off Method
Bad Debts Allowance Method
Bad Debts as % of Sales
Bad Debts as % of Receivables
Recovery of Bad Debts
Accounts Receivable Aging
Assignment of Accounts Receivable
Factoring of Accounts Receivable

Assignment of accounts receivable is an agreement in which a business assigns its accounts receivable to a financing company in return for a loan. It is a way to finance cash flows for a business that otherwise finds it difficult to secure a loan, because the assigned receivables serve as collateral for the loan received.

By assignment of accounts receivable, the lender i.e. the financing company has the right to collect the receivables if the borrowing company i.e. actual owner of the receivables, fails to repay the loan in time. The financing company also receives finance charges / interest and service charges.

It is important to note that the receivables are not actually sold under an assignment agreement. If the ownership of the receivables is actually transferred, the agreement would be for sale / factoring of accounts receivable . Usually, the borrowing company would itself collect the assigned receivables and remit the loan amount as per agreement. It is only when the borrower fails to pay as per agreement, that the lender gets a right to collect the assigned receivables on its own.

The assignment of accounts receivable may be general or specific. A general assignment of accounts receivable entitles the lender to proceed to collect any accounts receivable of the borrowing company whereas in case of specific assignment of accounts receivable, the lender is only entitled to collect the accounts receivable specifically assigned to the lender.

The following example shows how to record transactions related to assignment of accounts receivable via journal entries:

On March 1, 20X6, Company A borrowed $50,000 from a bank and signed a 12% one month note payable. The bank charged 1% initial fee. Company A assigned $73,000 of its accounts receivable to the bank as a security. During March 20X6, the company collected $70,000 of the assigned accounts receivable and paid the principle and interest on note payable to the bank on April 1. $3,000 of the sales were returned by the customers.

Record the necessary journal entries by Company A.

Journal Entries on March 1

Initial fee = 0.01 × 50,000 = 500

Cash received = 50,000 – 500 = 49,500

The accounts receivable don't actually change ownership. But they may be to transferred to another account as shown the following journal entry. The impact on the balance sheet is only related to presentation, so this journal entry may not actually be passed. Usually, the fact that accounts receivable have been assigned, is stated in the notes to the financial statements.

Journal Entries on April 1

Interest expense = 50,000 × 12%/12 = 500

by Irfanullah Jan, ACCA and last modified on Oct 29, 2020

All Chapters in Accounting

Intl. Financial Reporting Standards
Introduction
Accounting Principles
Business Combinations
Accounting Cycle
Financial Statements
Non-Current Assets
Fixed Assets
Investments
Revenue Recognition
Current Assets
Inventories
Shareholders' Equity
Liability Accounts
Accounting for Taxes
Employee Benefits
Accounting for Partnerships
Financial Ratios
Cost Classifications
Cost Accounting Systems
Cost Behavior
CVP Analysis
Relevant Costing
Capital Budgeting
Master Budget
Inventory Management
Cash Management
Standard Costing

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Home > Accounts Receivable > Assignment of Accounts Receivable Journal Entries

Assignment of Accounts Receivable Journal Entries

The assignment of accounts receivable journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of accounts receivable assignment.

The assignment of accounts receivable journal entries are based on the following information:

Accounts receivable 50,000 on 45 days terms
Assignment fee of 1% (500)
Initial advance of 80% (40,000)
Cash received from customers 6,000
Interest on advances at 9%, outstanding on average for 40 days (40,000 x 9% x 40 / 365 = 395)

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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Learn more about reviews.

Reviewed by Katheryn Zielinski, Assistant Professor, Minnesota State University Mankato on 6/14/23

Comprehensiveness rating: 5 see less

The text reading follows typical financial accounting flow. Beginning with the foundational introduction to what accounting is through the full accounting cycle, while including financial statement analysis towards the end of the book. Students will find the format helpful; the voice is student-friendly. There is online homework help for students. Instructors will find the text format friendly to semester-long class as concepts broken down into 13 chapters. The chapters explain the learning outcomes, use examples to express concepts, with chapter summary at end. The topics included are consistent with intro accounting courses.

Content Accuracy rating: 5

No issues noticed with accuracy. The text includes accurate financial accounting information.

Relevance/Longevity rating: 5

For an introductory accounting class with focus on US the concepts covered are typical.

Clarity rating: 5

The content is presented in a student friendly manner. Answers are provided. The extra information is helpful for students wanting extra practice.

Consistency rating: 5

The format and layout of the book chapters are consistent. All users will quickly understand the format as it is applied the same to each chapter. This helps provide consistency for students learning introductory accounting.

Modularity rating: 5

The content within the chapters can be broken-down and assigned as instructor plans for the course length. The manner is which the material is presented flows easily as reading.

Organization/Structure/Flow rating: 5

The text organization is consistent and coherent. Each chapter is presented in same manner.

Interface rating: 5

No observed tech issues. PDF downloaded and used with ease.

Grammatical Errors rating: 5

No grammar or language issues.

Cultural Relevance rating: 5

No cultural insensitive or offensive context noted.

This is a student friendly text. However, students might find a glossary helpful, as well as an index.

Reviewed by Lawrence Overlan, Part-time Professor, Bunker Hill Community College on 6/4/20

I appreciate how the Statement of Cash Flows has a separate chapter towards the end of the book. Might be better to wait until that chapter instead of also discussing it in Chapter One.....lots of material for opening week.... read more

Comprehensiveness rating: 4 see less

I sampled several problems...all correct.

Hard to make accounting obsolete. All the required material is present.

Problems are presented clearly and with good font size. Excellent color schemes and graphics.

Yes....no problems detected in this area. Very straightforward.

Chapters contain the right amount of content. Not too long with out breakup diagrams or examples etc.

Standard flow of chapters with excellent subdivisions.

To the contrary, the graphics and flow charts break up the material very nicely.

No issues noticed in this area.

Nice work! I will definitely consider adopting.

Reviewed by Patty Goedl, Associate Professor, University of Cincinnati Clermont College on 3/27/18

The text covers all of the topics normally found in an introductory financial accounting (principles of accounting I) text. The table of contents essentially mirrors the table of contents found in the leading texts in this field. I like that... read more

Content is error-free, accurate, and unbiased.

Relevance/Longevity rating: 4

The content is up-to-date. Introductory accounting does not change often so future updates should be minimal. The authors used the year 2015 in most of the problem and examples. This might make the text "seem" out-of-date in a few years.

The book is clear and concise. The topics are clearly explained and the technical terminology is appropriate for an introductory level.

The writing, style, and formatting are consistent throughout this text.

The text is divided into topical chapters, which is appropriate considering that the concepts build on each other. The chapters are further subdivided into sub-topics. This makes it easy for an instructor to pick which sub-topics to cover.

Excellent organization and flow. The concepts logically build upon each other and the material is presented in a clear fashion.

The HTML interface is excellent. The book has good graphics, end of chapter content, and even video examples.

I did not notice grammatical errors.

The text is not culturally insensitive or offensive in any way

Excellent book that is comparable to any of the leading financial accounting titles. The authors even provide end of chapter problems, videos, and interactive Excel problems for students. Overall, a great resource! I commend the authors for making something of this caliber freely available.

Reviewed by Margarita Maria Lenk, Associate Professor, Colorado State University on 1/7/16

The content of this textbook matches the content and organization of most introductory financial accounting textbooks. It is written by Canadian authors, but is relevant to US students. The text begins by explaining the role of financial accounting in society, and then describes the underlying structure of double entry accounting systems and the process of recording economic events that impact the value of the organization through the journals and the ledger. The records of these events are then summarized into the primary financial statements. The numeric subtotals and totals on these statements are used to calculate standard financial measures and ratios used to evaluate the organization's performance. The text's organization then proceeds sequentially through the balance sheet accounts, explaining in more detail how the accounting for each category of economic value is recorded and reported. The author's decision to move the most complex content to the end of the book matches how most faculty choose to organize their coverage of these topics.

My reviewed resulted in highest marks regarding accuracy. The only possible concern I would mention here is that the authors use a commonly used technique in chapter two which sometimes leads to students misunderstanding that revenues and expenses are not part of owners' equity until the revenues and expenses are closed at year end to retained earnings. It is my preference to teach introductory students that revenues and expenses are distinct and separate from equity, and then explain that revenues and expenses ultimately get closed to equity. So, this is not an inaccuracy by the authors, just a point that some instructors may want to know before adopting the textbook.

It is my opinion that the content of this textbook will be relevant and current for at least a decade. Any changes made to accounting principles, Canadian or International, will be very easy and straightforward to update.

It is my opinion that the clarity of this text is very high. The authors are succinct and use visuals often to highlight the theoretical structures.

This test is very consistent with the framework that is set up by the authors in the beginning of the text.

The textbook is very clearly divided into separable modules, making it easy for both students to read and for instructors to choose which modules to include in their course.

The content of this textbook matches the content and organization of most introductory financial accounting textbooks. It begins by explaining the role of financial accounting in society, and then describes the underlying structure of double entry accounting systems and the process of recording economic events that impact the value of the organization through the journals and the ledger. The records of these events are then summarized into the primary financial statements. The numeric subtotals and totals on these statements are used to calculate standard financial measures and ratios used to evaluate the organization's performance. The text's organization then proceeds sequentially through the balance sheet accounts, explaining in more detail how the accounting for each category of economic value is recorded and reported. The author's decision to move the most complex content to the end of the book matches how most faculty choose to organize their coverage of these topics.

The online text worked perfectly in my Chrome browser. The end of chapter exercises and problems are perfectly formatted on the screen. All assessment materials (quizzes, exams, etc.) are located on a different site that requires registration to have access.

I found the grammar to be very clear, concise and very effective. Because the book is written by Canadians, expenses are sometimes referred to as revenue expenditures, which does not match how US textbooks refer to expenses, but is perhaps a better learning tool, as the expenses are always recorded in the period in which they match the revenue generation, so I support the authors' choices regarding how they refer to the difference between assets (capital expenditures) and expenses (revenue expenditures).

The textbook adequately refers to the international accounting standards. That is the only cultural relevance which is relevant to introductory financial accounting.

I found this textbook and its exercises to be a useful teaching and learning tool. Instructors and students have access to pre-made PowerPoint slides, exercises and problems, and there is the option to enrol in an online service for online assessments, which seem to have student feedback capabilities in addition to assessment gathering capabilities.

The Accounting Process
Financial Accounting and Adjusting Entries
The Classified Balance Sheet and Related Disclosures
Accounting for the Sale of Goods
Assigning Costs to Merchandise
Cash and Receivables
Long-lived Assets
Debt Financing: Current and Long-term Liabilities
Equity Financing
The Statement of Cash Flows
Financial Statement Analysis
Proprietorships and Partnerships

Ancillary Material

About the book.

This textbook is an adaptation by Athabasca University of the original text written by D. Annand and H. Dauderis. It is intended for use in entry-level college and university courses in financial accounting. A corporate approach is utilized consistently throughout the book.

The adapted textbook includes multiple ancillary student and instructor resources. Student aids include solutions to all end-of-chapter questions and problems, and randomly-generated spreadsheet problems that cover key concepts of each chapter. These provide unlimited practice and feedback for students. Instructor aids include an exam bank, lecture slides, and a comprehensive end-of-term case assignment. This requires students to prepare 18 different year-end adjusting entries and all four types of financial statements, and to calculate and analyze 16 different financial statement ratios. Unique versions can be created for any number of individual students or groups. Tailored solutions are provided for instructors.

The original Annand/Dauderis version of the textbook including .docx files and ancillary material remains available upon request to D. Annand ([email protected]).

About the Contributors

David Annand, EdD, MBA, CA, is a Professor of Accounting in the Faculty of Business at Athabasca University. His research interests include the educational applications of computer-based instruction and computer mediated communications to distance learning, the effects of online learning on the organization of distance-based universities, and the experiences of instructors in graduate-level computer conferences.

David completed his Doctorate in Education in 1998. His thesis deals with the experiences of instructors in graduate-level computer conferences.

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What is Cost Assignment?

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Cost assignment.

Cost assignment is the process of associating costs with cost objects, such as products, services, departments, or projects. It encompasses the identification, measurement, and allocation of both direct and indirect costs to ensure a comprehensive understanding of the resources consumed by various cost objects within an organization. Cost assignment is a crucial aspect of cost accounting and management accounting, as it helps organizations make informed decisions about pricing, resource allocation, budgeting, and performance evaluation.

There are two main components of cost assignment:

Direct cost assignment: Direct costs are those costs that can be specifically traced or identified with a particular cost object. Examples of direct costs include direct materials, such as raw materials used in manufacturing a product, and direct labor, such as the wages paid to workers directly involved in producing a product or providing a service. Direct cost assignment involves linking these costs directly to the relevant cost objects, typically through invoices, timesheets, or other documentation.
Indirect cost assignment (Cost allocation): Indirect costs, also known as overhead or shared costs, are those costs that cannot be directly traced to a specific cost object or are not economically feasible to trace directly. Examples of indirect costs include rent, utilities, depreciation, insurance, and administrative expenses. Since indirect costs cannot be assigned directly to cost objects, organizations use various cost allocation methods to distribute these costs in a systematic and rational manner. Some common cost allocation methods include direct allocation, step-down allocation, reciprocal allocation, and activity-based costing (ABC).

In summary, cost assignment is the process of associating both direct and indirect costs with cost objects, such as products, services, departments, or projects. It plays a critical role in cost accounting and management accounting by providing organizations with the necessary information to make informed decisions about pricing, resource allocation, budgeting, and performance evaluation.

Example of Cost Assignment

Let’s consider an example of cost assignment at a bakery called “BreadHeaven” that produces two types of bread: white bread and whole wheat bread.

BreadHeaven incurs various direct and indirect costs to produce the bread. Here’s how the company would assign these costs to the two types of bread:

Direct cost assignment:

Direct costs can be specifically traced to each type of bread. In this case, the direct costs include:

Direct materials: BreadHeaven purchases flour, yeast, salt, and other ingredients required to make the bread. The cost of these ingredients can be directly traced to each type of bread.
Direct labor: BreadHeaven employs bakers who are directly involved in making the bread. The wages paid to these bakers can be directly traced to each type of bread based on the time spent working on each bread type.

For example, if BreadHeaven spent $2,000 on direct materials and $1,500 on direct labor for white bread, and $3,000 on direct materials and $2,500 on direct labor for whole wheat bread, these costs would be directly assigned to each bread type.

Indirect cost assignment (Cost allocation):

Indirect costs, such as rent, utilities, equipment maintenance, and administrative expenses, cannot be directly traced to each type of bread. BreadHeaven uses a cost allocation method to assign these costs to the two types of bread.

Suppose the total indirect costs for the month are $6,000. BreadHeaven decides to use the number of loaves produced as the allocation base , as it believes that indirect costs are driven by the production volume. During the month, the bakery produces 3,000 loaves of white bread and 2,000 loaves of whole wheat bread, totaling 5,000 loaves.

The allocation rate per loaf is:

Allocation Rate = Total Indirect Costs / Total Loaves Allocation Rate = $6,000 / 5,000 loaves = $1.20 per loaf

BreadHeaven allocates the indirect costs to each type of bread using the allocation rate and the number of loaves produced:

White bread: 3,000 loaves × $1.20 per loaf = $3,600
Whole wheat bread: 2,000 loaves × $1.20 per loaf = $2,400

After completing the cost assignment, BreadHeaven can determine the total costs for each type of bread:

White bread: $2,000 (direct materials) + $1,500 (direct labor) + $3,600 (indirect costs) = $7,100
Whole wheat bread: $3,000 (direct materials) + $2,500 (direct labor) + $2,400 (indirect costs) = $7,900

By assigning both direct and indirect costs to each type of bread, BreadHeaven gains a better understanding of the full cost of producing each bread type, which can inform pricing decisions, resource allocation, and performance evaluation.

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Accounting for Direct Assignment under Indian Accounting Standards (Ind AS)

By Team IFRS & Valuation Services ( [email protected] ) ([email protected])

Introduction

Direct assignment (DA) is a very popular way of achieving liquidity needs of an entity. With the motives of achieving off- balance sheet treatment accompanied by low cost of raising funds, financial sector entities enter into securitisation and direct assignment transactions involving sale of their loan portfolios. DA in the context of Indian securitisation practices involves sale of loan portfolios without the involvement of a special purpose vehicle, unlike securitisation, where setting up of an SPV is an imperative.

The term DA is unique to India, that is, only in Indian context we use the term DA for assignment of loan or lease portfolios to another entity like bank. Whereas, on a global level, a similar arrangements are known by various other names like loan sale, whole-loan sales or loan portfolio sale.

In India, the regulatory framework governing Das and securitisation transactions are laid down by the Reserve Bank of India (RBI). The guidelines for governing securitisation structures, often referred to as pass-through certificates route (PTCs) were issued for the first time in 2006, where the focus of the Guidelines was restricted to securitisation transactions only and direct assignments were nowhere in the picture. The RBI Guidelines were revised in 2012 to include provisions relating to direct assignment transactions.

Until the introduction of Indian Accounting Standards (Ind AS), there was no specific guidance regarding the accounting of direct assignment transactions, therefore, a large part of the accounting was done is accordance with the RBI Guidelines. The introduction of Ind ASes have opened up several new challenges for the financial entities.

Following issues are relevant:

Whether DA would lead to de-recogntion?
Whether there will be a gain on sale upon such de-recognition?
Whether DA should be be treated as a partial transfer of asset or transfer of the whole asset?
Continuing valuation of retained interest?

In this article, we intend to discuss those issues and suggest potential solutions for those as well.

Prior to addressing the above issues, the following is a comparison between DA and securitisation for a better understanding:

De recognition in case of Direct Assignment

Ind AS 109, provides a clear guidance as to the de recognition principles to be followed. Para 3.2.2 says that:

“3.2.2 Before evaluating whether, and to what extent, derecognition is appropriate under paragraphs 3.2.3–3.2.9, an entity determines whether those paragraphs should be applied to a part of a financial asset (or a part of a group of similar financial assets) or a financial asset (or a group of similar financial assets) in its entirety, as follows.

(a) Paragraphs 3.2.3–3.2.9 are applied to a part of a financial asset (or a part of a group of similar financial assets) if, and only if, the part being considered for derecognition meets one of the following three conditions.

(i) The part comprises only specifically identified cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an interest rate strip whereby the counterparty obtains the right to the interest cash flows, but not the principal cash flows from a debt instrument, paragraphs 3.2.3–3.2.9 are applied to the interest cash flows.

(ii) The part comprises only a fully proportionate (pro rata) share of the cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an arrangement whereby the counterparty obtains the rights to a 90 per cent share of all cash flows of a debt instrument, paragraphs 3.2.3–3.2.9 are applied to 90 per cent of those cash flows. If there is more than one counterparty, each counterparty is not required to have a proportionate share of the cash flows provided that the transferring entity has a fully proportionate share.

(iii) The part comprises only a fully proportionate (pro rata) share of specifically identified cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an arrangement whereby the counterparty obtains the rights to a 90 per cent share of interest cash flows from a financial asset, paragraphs 3.2.3–3.2.9 are applied to 90 per cent of those interest cash flows. If there is more than one counterparty, each counterparty is not required to have a proportionate share of the specifically identified cash flows provided that the transferring entity has a fully proportionate share.

(b) In all other cases, paragraphs 3.2.3–3.2.9 are applied to the financial asset in its entirety (or to the group of similar financial assets in their entirety). For example, when an entity transfers (i) the rights to the first or the last 90 per cent of cash collections from a financial asset (or a group of financial assets), or (ii) the rights to 90 per cent of the cash flows from a group of receivables, but provides a guarantee to compensate the buyer for any credit losses up to 8 per cent of the principal amount of the receivables, paragraphs 3.2.3–3.2.9 are applied to the financial asset (or a group of similar financial assets) in its entirety.”

If the de recognition criteria is not met in entirety, then all the conditions mentioned in para 3.2.2(a) has to be satisfied, which talks about fully proportionate share of total cash flows from the financial asset and fully proportionate share of specifically identified cash flows of the financial asset. If these conditions are met, then partial de recognition is possible. The part that is still recognized, is not connected with de recognition and further accounting related to de recognition. However, for actually de recognizing the asset, the de recognition criteria in para 3.2.3 and para 3.2.6 has to be looked at.

Para 3.2.3 goes as follows:

“3.2.3 An entity shall derecognise a financial asset when, and only when:

(a) the contractual rights to the cash flows from the financial asset expire, or

(b) it transfers the financial asset as set out in paragraphs 3.2.4 and 3.2.5 and the transfer qualifies for derecognition in accordance with paragraph 3.2.6.”

Thus, if the contractual rights to the cashflows expire, then the asset can be de-recognized. If the condition is not met, then it has to be seen that whether the asset is transferred as per para 3.2.5 and the transfer meets the de recognition conditions set out para 3.2.6.

Para 3.2.6 states that:

“3.2.6 When an entity transfers a financial asset (see paragraph 3.2.4), it shall evaluate the extent to which it retains the risks and rewards of ownership of the financial asset. In this case:

(a) if the entity transfers substantially all the risks and rewards of ownership of the financial asset, the entity shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.

(b) if the entity retains substantially all the risks and rewards of ownership of the financial asset, the entity shall continue to recognise the financial asset.

(c) if the entity neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, the entity shall determine whether it has retained control of the financial asset. In this case:

(i) if the entity has not retained control, it shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.

(ii) if the entity has retained control, it shall continue to recognise the financial asset to the extent of its continuing involvement in the financial asset (see paragraph 3.2.16).”

Para 3.2.6 brings out that, if all the risks and rewards of ownership of financial asset is transferred, then the asset shall be de recognized. If the risks and rewards incidental to ownership of financial asset is not transferred, then obviously the asset cannot be de recognized. However, if there is a partial transfer of risks and rewards of ownership, then the surrender of control has to be evaluated. If there is surrender of control, then the asset can be de recognized. If not, there shall be partial de-recognition, that is, the asset shall be recognized in the books of the seller only to the extent of continuing involvement.

Computation of Gain on Sale

It is a general notion that a sale results in a gain or loss, be it arbitrary or anticipated, the same is required to be accounted for. In case of a direct assignment, there is a sale of the loan portfolios, however, the same completely depends upon whether the assigned loan portfolio is getting derecognised from the books of the assignor or not. If it is not derecognised from the books of the assignor, then the question of recognising a gain or loss on sale does not arise. However, if the sale qualifies for de-recognition, then the seller must book gain or loss on sale in the year of sale.

Upon reading of Ind AS 109 and study of example stated in application guidance in para B3.2.17, the way of computing the same can be derived as follows:

Gain on sale = Sale consideration – Carrying value of asset*Fair value of transferred portion/(Fair value of transferred portion + Fair value of retained portion)

This can be explained with the help of the following example:

The gain or loss on sale does not depend on the sale consideration completely. There may be cases where the carrying value of the transaction and sale consideration are same, i.e. at par transactions. As per Ind AS 109, the computation of gain on sale remains same in cases of at-par or premium structured transactions, however, even at-par transactions could lead to a gain or loss on sale..

The reason for same is that the computation of gain on sale takes into account the retained interest by the Assignor comprising of the difference between the interest on the loan portfolio and the applicable rate at which the direct assignment is entered into with the assignee, also known as the right of excess interest spread (EIS) sweep.

The above settles for the computation of the gain/loss, however, the bigger change seen in the present regime is on the part of recognition of such a gain in the books of the Assignor.

In the present scenario, Ind AS 109 prescribes that the gain on sale or de recognition be recorded upfront in the profit and loss statement.

For reference, para 3.2.12 states that:

“ 3.2.12 On derecognition of a financial asset in its entirety, the difference between:

(a) the carrying amount (measured at the date of derecognition) and

(b) the consideration received (including any new asset obtained less any new liability assumed) shall be recognised in profit or loss.”

Further in case of de recognition of a part of financial asset, para 3.2.13 states that:

“3.2.13 If the transferred asset is part of a larger financial asset (eg when an entity transfers interest cash flows that are part of a debt instrument, see paragraph 3.2.2(a)) and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset shall be allocated between the part that continues to be recognised and the part that is derecognised, on the basis of the relative fair values of those parts on the date of the transfer. For this purpose, a retained servicing asset shall be treated as a part that continues to be recognised. The difference between:

(a) the carrying amount (measured at the date of derecognition) allocated to the part derecognised and

(b) the consideration received for the part derecognised (including any new asset obtained less any new liability assumed) shall be recognised in profit or loss.”

Hence, it is clear that the gain on de recognition should be recorded in the profit and loss statement.

From a practical standpoint, the above recognition is seen as a demotivation for entering into a direct assignment transaction, since the same would result in a volatility or irregularity in the profit or loss statement of the NBFCs.

This approach is in stark contrast to what has been prescribed in the RBI Guidelines on Securitisation, which requires gain on sale to be amortised over the life of the transaction. As per the RBI Guidelines provide the following:

As per para 20.1 of RBI Guidelines on Securitisation of Standard Assets issued in 2006:

“In terms of these guidelines banks can sell assets to SPV only on cash basis and the sale consideration should be received not later than the transfer of the asset to the SPV. Hence, any loss arising on account of the sale should be accounted accordingly and reflected in the Profit & Loss account for the period during which the sale is effected and any profit/premium arising on account of sale should be amortised over the life of the securities issued or to be issued by the SPV. ”

Also, as per para 1.4.1. of RBI Guidelines on Securitisation of Standard Assets issued in 2012:

“The amount of profit in cash on direct sale of loans may be held under an accounting head styled as “Cash Profit on Loan Transfer Transactions Pending Recognition” maintained on individual transaction basis and amortised over the life of the transaction .”

As the accounting treatment offered by Ind AS defaces the profit and loss statement by distorting the income recognition pattern of the NBFCs, NBFCs are not in favour of recording this gain upfront. The concern is aggravated due to the liquidity crunch currently faced by the NBFCs caused by recent downfall of IL&FS. The default on payment obligations of loans and deposits amounting to approximately Rs. 90,000 crore, by India’s leading infrastructure finance company, shook the confidence of the lenders and triggered a panic sentiment amongst the market lenders including NBFCs. As a result of the panic, banks are unwilling to lend to the NBFCs and their cost of funds are going up. However, the banks are showing interest in acquiring their loan portfolios instead. Therefore, the NBFCs are somewhat being forced to accept this distortion in their profit or loss statement.

Another question that arises is- whether de-recognition in books of assignor affects recognition in the books of the assignee.

As per para 3.1.1 of Ind AS 109, an entity shall recognise a financial asset or a financial liability in its balance sheet when, and only when, the entity becomes party to the contractual provisions of the instrument. Therefore, the transferee should recognise the financial asset or financial liability in its balance sheet only when he becomes a party to the contractual provisions of the instrument.

Para B3.2.15 of the same standard, provides that if a transfer of a financial asset does not qualify for de-recognition, the transferee does not recognise the transferred asset as its asset. In such a case the transferee is required to derecognise the cash or other consideration paid and recognises a receivable from the transferor. The transferee may measure the receivable at amortised cost (if it meets the criteria in paragraph 4.1.2) if the transferor has both a right and an obligation to reacquire control of the entire transferred asset for a fixed amount (such as under a repurchase agreement).

Therefore, de-recognition from the books of the seller is clearly a determinant for recognition in the books of the buyer.

Impact on GST on the gain on sale

In the last couple of years, if there is anything that has bothered the financial entities in India, other than IndAS, then it has to be GST. Therefore, it becomes pertinent to take a look at whether GST will become applicable in any manner whatsoever.

Under GST regime, assignment of loans are treated as dealing in securities and are therefore exempted from GST. Link to our detailed writeup in this regard has been provided in the footnote [1] .

Reporting of Retained Interests

A partial de-recognition is where the transferor transfers only a part of the asset and retains a part of it.

Currently, as per the RBI Guidelines, NBFCs are required to comply with the minimum retention requirement of 10%, that is, they should have a continuing interest of 10% on the loans that it intends to transfer. Therefore, if an NBFC is intending to sell of a portfolio of Rs. 100 crores, it has to retain at least 10% of the said portfolio and can sell of only Rs. 90 crores representing the remaining part.

Therefore, this becomes a classic case of partial de-recognition.

The value of retained interest should be accounted for as per the original accounting criteria as and when it was originated. For instance, if the pool recognised under FVOCI method, the retained interst must continue to be valued at FVOCI.

The manner of recognition or valuation of the retained interest will not change when a part of the pool is sold off.

Before the introduction of Indian Accounting Standards, RBI guidelines were followed for de recognizing the asset and recording the gain on sale after de recognition. There was no accounting guidance for financial instruments and their de recognition. In the absence of it, RBI guidelines were followed which talked about true sale. In case, the conditions of true sale were satisfied, then the asset was de recognized and the gain was regularised over the period by amortising the gain on de recognition.

While a well-documented piece of legislation is welcomed, however, every new thing has some shortcomings. In this case, the irregularities in the profit and loss and the complexities surrounding the de-recognition test comes as shortcomings. However, it is expected, with the passage of time, these shortcomings will also be settled.

[1] http://vinodkothari.com/2018/06/gst-on-assignment-of-receivables-wrong-path-to-the-right-destination/

Can the Originator recognise a lower upfront income by giving impact of historical pre-terminations while discounting the future cash flows? This will reduce the impact of irregular upfront income to some extent.

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Assignment of Contract

Jump to section, what is an assignment of contract.

An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.

How Does Assignment of Contract Work?

An assignment of contract is simpler than you might think.

The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.

When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement . Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer. However, the general rule is that contracts are freely assignable unless there is an explicit provision that says otherwise.

In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment ” to notify any other contract signers of the change.

The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. If the assignment is valid, the assignor is not required to obtain the consent or signature of the other parties to the original contract for the valid assignment to take place.

Check out this article to learn more about how assigning a contract works.

Contract Assignment Examples

Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:

Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.

Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.

Here is an article where you can find out more about contract assignments.

Nicholas M.

Assignment of Contract in Real Estate

Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts .

This process is called real estate wholesaling.

Real Estate Wholesaling

Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.

The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.

This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.

This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.

But how do real estate wholesalers find these properties?

It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:

Direct mailers
Place newspaper ads
Make posts in online forums
Social media posts

The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.

Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to another person, they are always upfront about during the preliminary phases of the sale.

In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.

After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.

Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.

If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.

One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.

On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.

Learn more about assignment of contract in real estate by checking out this article .

Who Handles Assignment of Contract?

The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract , post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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I graduated from the University of Illinois at Urbana-Champaign in 2006 with a degree in Political Science, Finance, and Economics. I stayed around Champaign for law school and graduated in 2009. I then worked at a big law firm in downtown Chicago. It was boring, so I quit in early 2011. I thought that I could not be happy practicing law - I was wrong. After I quit the traditional law firm life, I began representing my own clients. I realize now that I love helping normal people, small business owners, and non-profits address a variety of legal issues. I hope to hear from you.

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List of Commerce Articles
Class 11 Accountancy Chapter 1 Introduction To Accounting

Introduction to Accounting - Meaning, Objectives

Definition of accounting.

Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. The introduction of accounting helps the decision-makers of a company to make effective choices, by providing information on the financial status of the business.

The American Institute of Certified Public Accountants (AICPA) had defined accounting as the “art of recording, classifying, and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof”.

Today, accounting is used by everyone and a good understanding of it is beneficial to all. Accountancy act as a language of finance. To understand accounting efficiently, it is important to understand the aspects of accounting.

Economic Events- It is a consequence of a company has to undergo when the number of monetary transactions is involved. Such as purchasing new machinery, transportation, machine installation on-site, etc.
Identification, Measurement, Recording, and Communication- The accounting system should be outlined in such a way that the right data is identified, measured, recorded and communicated to the right individual and at the right time.
Organization- In refers to the size of activities and level of a business operation.
Interested Users of Information- It is about communicating important financial information to the customers, according to which they will make the correct decision.

Fundamentals of Accounting

Assets- The economic value of an item which is possessed by the enterprise is referred to as Assets. To put it in other words, assets are those items that can be transformed into cash or that generates income for the enterprise shortly. It is useful in paying any expenses of the business entity or debt.
Liabilities- The economic value of an obligation or debt that is payable by the enterprise to other establishment or individual is referred to as liability. To put it in other words, liabilities are the obligations that are rising out of previous transactions, which is payable by the enterprise, through the assets possessed by the enterprise.
Owner’s Equity- Owner’s equity is one of the 3 vital segments of a sole proprietorship’s balance sheet and one of the main aspects of the accounting equation: Assets = Liabilities + Owner’s Equity. It depicts the owner’s investment in the trade minus the owner’s withdrawal from the trade + the net income since the business concern commenced.

Objectives of Accounting

The main objectives of accounting are:

To maintain a systematic record of business transactions

Accounting is used to maintain a systematic record of all the financial transactions in a book of accounts.
For this, all the transactions are recorded in chronological order in Journal and then posted to principle book i.e. Ledger.

To ascertain profit and loss

Every businessman is keen to know the net results of business operations periodically.
To check whether the business has earned profits or incurred losses, we prepare a “Profit & Loss Account”.

To determine the financial position

Another important objective is to determine the financial position of the business to check the value of assets and liabilities.
For this purpose, we prepare a “Balance Sheet”.

To provide information to various users

Providing information to the various interested parties or stakeholders is one of the most important objectives of accounting.
It helps them in making good financial decisions.

To assist the management

By analysing financial data and providing interpretations in the form of reports, accounting assists management in handling business operations effectively.

Characteristics of Accounting:

The following attributes or characteristics can be drawn from the definition of Accounting:

(1) Identifying financial transactions and events

Accounting records only those transactions and events which are of financial nature.
So, first of all, such transactions and events are identified.

(2) Measuring the transactions

Accounting measures the transactions and events in terms of money which are considered as a common unit.

(3) Recording of transactions

Accounting involves recording the financial transactions inappropriate book of accounts such as Journal or Subsidiary Books.

(4) Classifying the transactions

Transactions recorded in the books of original entry – Journal or Subsidiary books are classified and grouped according to nature and posted in separate accounts known as ‘Ledger Accounts’.

(5) Summarising the transactions

It involves presenting the classified data in a manner and in the form of statements, which are understandable by the users.
It includes Trial balance, Trading Account, Profit and Loss Account and Balance Sheet .

(6) Analysing and interpreting financial data

Results of the business are analyzed and interpreted so that users of financial statements can make a meaningful and sound judgment.

(7) Communicating the financial data or reports to the users

Communicating the financial data to the users on time is the final step of Accounting so that they can make appropriate decisions.

What are the Different Branches of Accounting?

The following are the main branches of accounting:

(a) Financial accounting:

Financial Accounting is that branch of accounting which involves identifying, measuring, recording, classifying, summarising the business transactions, i.e. it involves the steps from Identifying, Recording of transactions to Summarisation, and communicating the financial data.

(b) Cost accounting:

Cost Accounting is that branch of accounting which is concerned with the process of ascertaining and controlling the cost of products or services.

Management accounting refers to that branch of accounting which is concerned with presenting the accounting information in such a way that helps the management in planning and controlling the operations of a business and in decision making.

Also Read: What is Management Accounting?

Steps of the Accounting Process:

Accounting process is the process of collecting, recording, classifying, summarising and communicating financial information to the users for judgement and decision-making. The following steps are involved in accounting process:

(1) Identification: It is the process of identifying and analysing business transactions.

(2)Recording: For recording, we use ‘Journal’ or Subsidiary Books.

(3) Classification of transactions: Classification means segregation of transactions on the basis of nature and posting them in a format known as Ledger Account.

(4) Summarisation: It includes preparation of Trial Balance and Financial Statements .

(5) Analysis & Interpretation: It includes an assessment of the financial reports and making some meaningful conclusions.

(6) Communicating information to the users: It includes sharing the financial reports and interprets results to the users of financial statements.

What is the Difference Between Bookkeeping and Accounting?

What are the advantages of accounting.

The following are the main advantages of accounting:

1. Provide information about financial performance

Accounting provides factual information about financial performance during a given period of time
Like, profit earned or loss incurred over a period and financial position at a particular point of time.

2. Provide assistance to management

Accounting helps management in business planning, decision making and in exercising control.
For this, it provides financial information in the form of reports.

3. Facilitates comparative study

By keeping systematic records and preparation of reports at regular intervals, accounting helps in making a comparison.

4. Helps in settlement of tax liability

Systematic accounting records help in settlement of various tax liabilities. Such as – Income Tax, GST, etc.

5. Helpful in raising loan

Banks and Financial Institutions grant a loan to the firm on the basis of appraisal of the financial statement of the firm.

6. Helpful in decision making

Accounting provides useful information to the management for taking decisions.

What Are the Limitations of Accounting?

Following are the limitations of accounting:

Accounting is not precise : Accounting is not completely free from personal bias or judgment.
Accounting is done on historic values of assets: Accounting records assets at their historical cost less depreciation. It does not reflect their current market value.
Ignore the effect of price level changes: Accounting statements are prepared at historical cost. So changes in the value of money are ignored.
Ignore the qualitative information: Accounting records only monetary transactions. It ignores the qualitative aspects.
Affected by window dressing: Window dressing means manipulation in accounting to present a more favourable position of the business than the actual position.

Explain the Users of Accounting Information:

Users may be categorised into internal users and external users.

(A) Internal Users

Owners : Owners contribute capital in the business and thus they are exposed to maximum risk. So, they are always interested in the safety of their capital.
Management : Accounting information is used by management for taking various decisions.
Employees : Employees are interested in the financial statements to assess the ability of the business to pay higher wages and bonuses.

(B) External U sers

Banks and financial institutions: Banks and Financial Institutions provide loans to business. So, they are interested in financial information to ensure the safety and recovery of the loan.
Investors: Investors are interested to know the earning capacity of business and safety of the investment.
Creditors: Creditors provide the goods on credit. So they need accounting information to ascertain the financial soundness of the firm.
Government: The government needs accounting information to assess the tax liability of the business entity.
Researchers: Researchers use accounting information in their research work.
Consumers: They require accounting information for establishing good accounting control, which will reduce the cost of production.

Qualitative Characteristics of Accounting Information

Qualitative characteristics are the attributes of accounting information, which enhance its understandability and usefulness:

Reliability: Reliability implies that the information must be free from material error and personal bias.
Relevance: Accounting information must be relevant to the decision-making requirements of the users.
Understandability: Information should be disclosed in financial statements in such a manner that these are easily understandable.
Comparability: Both intra-firm and inter-firm comparison must be possible over different time periods.

Explain the System of Accounting

System of accounting

There are following two systems of recording transactions in the books of accounts:
Double Entry System
Single Entry System

Double-entry system

The double entry system is based on the Dual Aspect Principle.
Every transaction has two aspects, ‘a Debit’ and ‘a credit’ of an equal amount.
This system of accounting recognises and records both aspects of the transaction.

Single entry system

Under this system, both aspects are not recorded for all the transactions.
Either only one aspect is recorded or both the aspects are not recorded for all the transactions.

What Are the Advantages of the Double-entry System of Accounting?

Following are the main advantages of the double-entry system of accounting:

Scientific system

As compared to the other systems, this system of recording transactions is more scientific and useful to achieve the objective of accounting.

A complete record of the transaction

Since both the aspects of transactions are considered there is a complete recording of each and every transaction.
Using these records we are able to compute profit or loss easily.

Checks arithmetical accuracy of accounts

Under this system, by preparing a Trial Balance we are able to check the arithmetical accuracy of the records.

Determination of profit/loss and depiction of financial position

Under this system by preparing ‘Profit & Loss A/c’ we get to know about the profit earned or loss incurred.
By preparing the ‘Balance Sheet’ the financial position of the business can be ascertained, i.e. position of assets and liabilities is depicted.

Helpful in decision making

Administration and management are able to take decisions on the basis of factual information under the double-entry system of accounting.

The above mentioned concept ‘Introduction to Accounting’ is elucidated in detail for Commerce students. To know more, stay tuned to BYJU’S.

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Getting an Overview of the Core Terms in Margin Analysis

After completing this lesson, you will be able to:

Get an Overview of the Core Terms in Margin Analysis

Overview of the Core Terms in Margin Analysis

https://learning.sap.com/learning-journeys/outline-cost-management-and-profitability-analysis-in-sap-s-4hana/outlining-profitability-analysis_b5b7efbb-55ea-4ff5-bc70-15d39d8a14eb

Introduction to Margin Analysis

The following video provides an overview of Margin Analysis.

Master Data

Master data in margin analysis include profitability characteristics and functional areas. Functional areas break down corporate expenditure into different functions, in line with the requirements of cost of sales accounting.

These functions can include:

Production.
Administration.
Sales and Distribution.
Research and Development.

For primary postings, the functional area is derived according to fixed rules and included in the journal entries. For secondary postings, the functional area and partner functional area are derived from the sender and receiver account assignments to reflect the flow of costs from sender to receiver.

Profitability Characteristics

Profitability characteristics represent the criteria used to analyze operating results and the sales and profit plan. Multiple profitability characteristics are combined to form profitability segments. The combination of characteristic values determines the profitability segment for which the gross margin structure can be displayed. A profitability segment corresponds to a market segment.

For example, the combination of the characteristic values North (Sales region), Electronics (Product group) and Wholesale (Customer group) determine a profitability segment for which the gross margin structure can be displayed.

The image represents a financial snapshot of a company's performance in the North region, focusing on the Electronics product group and the Wholesale customer group. The data includes key metrics such as revenues of 800, discounts of 100, cost of goods sold (COGS) of 550, and a gross margin of 150. Additional details include a specific product (Prod1), customer (Cust2), and sales representative (Miller).

True vs Attributed Account Assignments

Each activity relevant to Margin Analysis in the SAP system, such as billing, creates line items. G/L line items can carry true or attributed account assignments to profitability segments.

Goods issue item or billing document item in a sell-from-stock scenario.
Manual FI posting to profitability segment.
Primary Costs or Revenue.
Secondary Costs.
Balance Sheet Accounts with a statistical cost element assigned.

The derivation of attributed profitability segments is based on the true account assignment object of the G/L line item. This object can be of the following types:

Cost Center.
Sales Order.
Production Order (only for Engineer-to-Order process.)
Maintenance Order.
Service Document (service order or service contract.)

After the profitability characteristics are derived, the resulting data is mapped to the G/L line item according to specific mapping rules. An attributed profitability segment is derived to fulfill the requirement of filling as many characteristics in the item as possible to enable the maximum drilldown analysis capability.

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Governmental Accounting, Auditing, and Financial Reporting (GAAFR) | 2024 Blue Book

The GAAFR is designed to serve as:

A comprehensive introduction to public sector accounting and auditing for experienced finance professionals new to state and local government;
A practical introduction to governmental accounting and auditing for new staff members;
A practical reference tool for accounting and auditing staff; and
A practice-oriented textbook for college-level classes and seminars on governmental accounting, auditing, and financial reporting.

This edition has been updated to incorporate all of the guidance of the Governmental Accounting Standards Board (GASB) through GASB Statement No. 101, as well as GFOA’s current best practices on accounting, auditing, and financial reporting. References to the GASB’s Codification of Governmental Accounting and Financial Reporting Standards (Codification) have also been updated.

LOC no. 2023942632
ISBN 978-0-89125-028-9
Editors: Todd Buikema, CPA and Michele Mark Levine
Publication date: January 2024

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Should the Definition of a Public Business Entity be Revised? FASB Mulling Topic

Denise Lugo Editor, Accounting and Compliance Alert

May 17, 2024 · 5 minute read

The FASB may be interested in revising the definition of a public business entity (PBE), according to board discussions on May 8, 2024.

Staff will hold an educational session with board members to see if there is an interest in further exploring the topic.

“I know it’s something the board looked at previously. I think what might make sense is to do some education with the board members once we get a little more information, including about the definition of PBE, non-PBE,” FASB Chair Richard Jones said. “Seems like there is some interest.”

The PBE definition determines whether a company would have to apply the full version of US GAAP or be able to take advantage of exemptions and accounting workarounds that are available to privately held firms. The issue surfaced during redeliberations of proposed disaggregation of income statement expense disclosure rules, known as “DISE” around whether non-issuer broker-dealers should be exempt from those disclosure requirements as they are scoped only for public companies. The definition of a PBE was addressed by the FASB about a decade ago.

“This is not a new question, and certainly this practitioner has asked us to reconsider the appropriateness of the definition of a public business entity but I think in this circumstance, you know, certainly they’re also questioning the usefulness of these disclosures to non-issuer broker-dealers,” FASB member Susan Cosper said. “And I would maintain the current scope as we had put forth on this project applying to public business entities,” she said. “I would support, however, looking at that PBE definition separately as a separate project. And it’s been some time since we made the cut, and maybe we need to revisit it.”

Overall, most board members said they would be interested in a separate project on the definition of a PBE.

“I do think that because we’ve heard this concern repeatedly and we’re likely to continue to hear this concern, that it may mean that we do need to go back and take another look at the definition of public business entity,” FASB member Christine Botosan said. “And we have an agenda consultation coming up,” she said. “So, we could ask, ‘is this a problem that is pervasive enough that we should take it on and gather some feedback?’ It may not just be a problem with the non-issuer broker-dealers. Maybe there are other problems with the definition of public business entity that we should be reconsidering.”

‘Non-Issuer’ Broker-Dealer?

The definition of a PBE puts non-issuer broker-dealers in a unique position, according to the discussions.

Broker-dealers registered under the Securities Exchange Act of 1934 are required to file a separate set of financial statements with the SEC on at least an annual basis. Those financial statements filed with the SEC are generally not made public because they are permitted confidential treatment if the broker-dealer also files an audited balance sheet and related disclosures. Because of the filing requirements with the SEC, a broker-dealer meets the definition of a public business entity. However, the term “non-issuer broker-dealer” is colloquially used by regulators and practitioners, but it’s not specifically defined.

In relation to “DISE” rules, FASB staff asked the board whether to provide a scope exception for non-issuer broker-dealers and create a master glossary definition for a non-issuer broker-dealer.

Another alternative would be to define a non-issuer broker-dealer, but consider providing a scope exception for all broker-dealers that file financial statements with the SEC’s divisions of trading and markets under the 1934 Act, staff suggested. However, broker-dealers that file financial statements with the SEC’s division of corporate finance, would not be eligible for the scope exception. “Providing a potential scope exception for just those broker-dealers that file financial statements with the SEC’s division of trading and markets is unique, so we’ll need to ensure that we appropriately define this population,” staff said.

This article originally appeared in the May 16, 2024, edition of Accounting & Compliance Alert , available on Checkpoint.

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Assign: What It Means, How It Works, Example

What Is Assign?

Broadly speaking, to assign is to transfer the rights or property from one person or business to another. An assignment can be any transfer of any sort of rights. In the financial markets, the term "assign" generally relates to the party that is required to deliver on an options contract . In the wider business world, it may also refer to the transfer of trademarks, banknotes, or other property rights. Mortgage assignments involve transferring mortgage deeds, while lease assignments transfer lease contracts.

Key Takeaways

To assign in the options market is to randomly match buyers and sellers for maturing or exercised options contracts.
The assigned party is required to deliver the assets underlying the options to the contract holder at the date established by the contract.
More generally, to assign is to transfer rights or property from one party to another.

Understanding Assign

To assign means one of two actions taken in transferring rights. It refers either to the transfer of property rights from one individual or entity to another individual or entity or when an options contract is exercised . When an options contract is exercised, the owner of the contract assigns an options writer to the obligation to fulfill the requirements of the contract.

In the options and futures contract markets, assign is the matching of counterparties. The process is random and carried out by clearinghouses and brokerages. Once the assignment is made, the underlying securities or commodities are delivered to the holders of maturing or exercised contracts.

For example, if one trader is looking to purchase a May futures corn contract and another trader is looking to sell a May futures corn contract, the clearinghouse would match the requests of both traders, assigning them the appropriate contracts. The traders themselves will not have to search for the corresponding contract but just execute their orders, which are then matched by the clearinghouse.

Not all options contracts will be exercised or tendered. The ones that are exercised or tendered must be settled with the delivery of the underlying security. These are randomly assigned to brokerages that, in turn, randomly select which of their clients will be assigned.

During an assignment of options or futures contracts, the clearinghouse assigns an option writer who will be the required buyer or seller of the underlying contract upon its exercise.

Assign and Options

Options offer the right but not the obligation to buy an underlying asset at a specific price. In the U.S. markets, options can be exercised anytime, while options in the European markets are exercised only on the option expiration date. If an option is exercised, the assignment will be made immediately.

When an option is exercised, the option writer, who is the call seller, in this case, must fulfill the obligations of the contract. The call writer could be obligated to sell a specific number of underlying securities for a specific price, for example.

Options buyers speculate on the future movements of stocks or other assets. Option buyers believe that the underlying asset will move one way, while option sellers, who are called writers, are betting that the asset moves in the opposite direction.

Brokerages and clearinghouses are needed to connect buyers and sellers of options contracts. The seller and writer of a call option will sell a set number of shares at a set price if the option is exercised. If the option is called, the brokerage assigns a client with a short position, again at random, to deliver the stock to another client with a long position in the same contract. The brokerage will randomly select the counterparty who must deliver the asset when the contract requires it to be delivered.

Assign and Property

In regards to property, assign refers to the transfer of rights. This can refer to any asset, whether tangible or intangible , property, or contract. The assignment is completed via an agreed-upon written document.

For example, a mortgage assignment is when the mortgage deed allows an individual interest in a property in return for payments received. Many banks that have mortgages sell their mortgages to other lenders in return for a lump payment in order to free up their balance sheet to make new mortgages. The bank would be assigning their mortgages to another lender.

Another form of property assignment includes wage assignments , where a court rules that a portion of a person's wages must be withheld in order to make specific payments, such as alimony .

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Extract Data Stores for Financials

Ledger Assignments for the Post Accounting Programs

The view object which contains the ledger assignments for the post accounting programs.

Data Store Key : FscmTopModelAM.FinExtractAM.XlaBiccExtractAM.AssignmentDefinitionExtractPVO

Primary Keys : AssignmentDefinitionProgramCode, AssignmentDefinitionAssignmentOwnerCode, AssignmentDefinitionProgramOwnerCode, AssignmentDefinitionAssignmentCode

Initial Extract Date : AssignmentDefinitionCreationDate

Incremental Extract Date : AssignmentDefinitionLastUpdateDate

This table provides the list of exposed attributes and their descriptions.

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Assignment: Definition in Finance, How It Works, and Examples
Assignment: An assignment is the transfer of an individual's rights or property to another person or business. For example, when an option contract is assigned, an option writer has an obligation ...
Assignments
Module 4: Completing the Accounting Cycle— Assignment: Completing the Accounting Cycle. Module 5: Accounting for Cash— Assignment: Accounting for Cash. Module 6: Receivables and Revenue— Assignment: Manilow Aging Analysis. Module 7: Merchandising Operations— Assignment: Merchandising Operations. Module 8: Inventory Valuation Methods ...
Assignment of accounts receivable
Under an assignment of arrangement, a pays a in exchange for the borrower assigning certain of its receivable accounts to the lender. If the borrower does not repay the , the lender has the right to collect the assigned receivables. The receivables are not actually sold to the lender, which means that the borrower retains the of not collecting ...
What is the purpose of assigning accounts receivable?
Author: Harold Averkamp, CPA, MBA. The purpose of assigning accounts receivable is to provide collateral in order to obtain a loan. To illustrate, let's assume that a corporation receives a special order from a new customer whose credit rating is superb. However, the customer pays for its purchases 90 days after it receives the goods.
Assignment of Accounts Receivable
Example. On March 1, 20X6, Company A borrowed $50,000 from a bank and signed a 12% one month note payable. The bank charged 1% initial fee. Company A assigned $73,000 of its accounts receivable to the bank as a security. During March 20X6, the company collected $70,000 of the assigned accounts receivable and paid the principle and interest on ...
Assignment of Accounts Receivable: The Essential Guide
Assigning accounts receivable is a fairly straightforward business financing option where a company receives a loan using its outstanding invoices as collateral. It is a form of asset-based financing. In general assignment, the company uses all accounts receivable as collateral. In specific assignment, the borrower only puts up select invoices ...
Assignment of Accounts Receivable Journal Entries
The assignment of accounts receivable journal entries are based on the following information: Accounts receivable 50,000 on 45 days terms. Assignment fee of 1% (500) Initial advance of 80% (40,000) Cash received from customers 6,000. Interest on advances at 9%, outstanding on average for 40 days (40,000 x 9% x 40 / 365 = 395)
Cost assignment definition
Cost assignment is the allocation of costs to the activities or objects that triggered the incurrence of the costs. The concept is heavily used in activity-based costing, where overhead costs are traced back to the actions causing the overhead to be incurred. The cost assignment is based on one or more cost drivers. Example of a Cost Assignment
Introduction to Financial Accounting
The text reading follows typical financial accounting flow. Beginning with the foundational introduction to what accounting is through the full accounting cycle, while including financial statement analysis towards the end of the book. Students will find the format helpful; the voice is student-friendly. There is online homework help for students.
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Summary: Assignment of accounts receivable is a lending arrangement where a borrower assigns their accounts receivable to a lending institution in exchange for a loan. This article delves into the intricacies of this financing method, its advantages and disadvantages, special considerations, and emerging trends in the fintech sector.
What is Cost Assignment?
In summary, cost assignment is the process of associating both direct and indirect costs with cost objects, such as products, services, departments, or projects. It plays a critical role in cost accounting and management accounting by providing organizations with the necessary information to make informed decisions about pricing, resource ...
assign definition and meaning
assign definition. In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender as collateral for a loan.
Accounting for Direct Assignment under Indian Accounting Standards (Ind
The RBI Guidelines were revised in 2012 to include provisions relating to direct assignment transactions. Until the introduction of Indian Accounting Standards (Ind AS), there was no specific guidance regarding the accounting of direct assignment transactions, therefore, a large part of the accounting was done is accordance with the RBI Guidelines.
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Debt Assignment: A transfer of debt, and all the rights and obligations associated with it, from a creditor to a third party . Debt assignment may occur with both individual debts and business ...
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Accounting is termed as the analysis, classification and recording of financial transactions, and the ascertainment of how such transactions affect the performance and financial position of a business. Accounting is therefore concerned with: recording of data. classification and summary of data. communicating what has been learned from the data.
Assignment of Contract: What Is It? How It Works
An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the ...
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Definition of Accounting. Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. The introduction of accounting helps the decision-makers of a company to make effective choices, by providing information on the financial status of the business. The American Institute of Certified Public ...
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Assignment of Accounts means the assignment of the Borrower 's bank accounts to be executed by the Borrower pursuant to paragraph 3 of Part 2 of the First Schedule; Sample 1 Sample 2. Based on 5 documents. Assignment of Accounts means the agreement so entitled to be entered into between the Borrower and the Lender; Sample 1 Sample 2.
Getting an Overview of the Core Terms in Margin Analysis
G/L line items can carry true or attributed account assignments to profitability segments. In the case of a true account assignment the profitability segment has already been determined by the sending application, and the profitability segment number has been transferred to the general ledger. Only the costs and revenues for true account ...
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What do we mean by business accounting? Business accounting refers to bookkeeping and managerial accounting completed by accounting professionals, typically for smaller businesses rather than large corporations. Small businesses may conduct their business accounting in-house or with an accounting firm, depending on their size and needs.
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To start a business, accounting is very useful to ensure that business activities run smoothly and become a growing business in the future. In doing this assignment, I believe that my friends and I in the group can learn and know in more depth about this accounting subject. My group mates and I had a lot of fun doing this assignment together.
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A practical introduction to governmental accounting and auditing for new staff members; A practical reference tool for accounting and auditing staff; and; A practice-oriented textbook for college-level classes and seminars on governmental accounting, auditing, and financial reporting.
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The FASB may be interested in revising the definition of a public business entity (PBE), according to board discussions on May 8, 2024. Staff will hold an educational session with board members to see if there is an interest in further exploring the topic.
Assign: What It Means, How It Works, Example
Assign: The act of clearing houses and brokerage s selecting short option and future contract holders to deliver underlying securities or commodities of maturing or exercised/tendered contracts.
Ledger Assignments for the Post Accounting Programs
The view object which contains the ledger assignments for the post accounting programs. Data Store Key : FscmTopModelAM.FinExtractAM.XlaBiccExtractAM ...