A Signed Contract Does Not Automatically Create an Asset and a Liability
Does signing a contract mean that the company must immediately recognise an asset and a liability? Not necessarily. MPERS 2025 Section 2 highlights two important concepts: Understanding these concepts helps explain why the signing of a contract does not, by itself, determine the accounting treatment. What Is a Unit of Account? A unit of account […]
Depreciation, Amortisation and Impairment: Understanding the Difference
Depreciation, amortisation and impairment all reduce the carrying amount of an asset, but they do so for different reasons. Depreciation and Amortisation Depreciation is the systematic allocation of the cost of a tangible asset over its estimated useful life. Under Malaysian financial reporting requirements: Amortisation is the systematic allocation of the cost of an intangible […]
The Five Main Categories of Accounting Accounts
Understanding the five main categories of accounting accounts is one of the first steps towards reading financial statements. A simple way to remember them is to ask five questions: 1. Assets: What Does the Company Have? Assets are resources controlled by the company. Examples include: In simple terms: Assets = What the company has or […]
WIP in Manufacturing: From Raw Materials to Cost of Sales
In manufacturing, WIP stands for Work in Progress or Work in Process. It refers to products that have entered the production process but are not yet complete. The Manufacturing Flow The production process can be understood as follows: 1. Raw Materials Raw materials are items such as: that are still in storage and have not […]
Inventory Impairment: Applying the Lower-of-Cost-and-NRV Rule
Inventory impairment is not an automatic write-off, and an impairment loss may sometimes be reversed. Under the applicable accounting requirements, inventory is measured at the lower of: Cost and Net Realisable Value (NRV) Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the […]