delllatitude wrote:obiero wrote:delllatitude wrote:obiero wrote:delllatitude wrote:The article states.....“At the time of publishing this (annual) report, the ongoing audit classified the subject line under the directors’ receivables. These amounts will be reclassified back to the profit and loss (account) in the next statements once the audit is complete,”
This is just wrong accounting and it makes me doubt the KQ numbers. How do you reclassify debtors back to profit and loss??
Bad debts recovered
But they say the amount is under receivables. A balance sheet account.So there is no recovery of bad debt. It's simply getting money from the directors, debiting bank and crediting the receivables. The profit or loss is not touched.
The unnamed director is Sebastian Mikosz. These were incurred expenses under director remuneration thus must hit the P&L
If they were incurred expenses then the entry is
Dr. P&L
Cr. Bank/Payables
But note 36 (d) page 119 mentions that in other receivables there is Kshs 54 million due from the directors. This statement means that what happened is
Dr. Receivables from directors
Cr. Bank/Payables
Simply put. KQ either paid for goods or services on behalf of the directors. Or they gave the director an advance.
When the money is recovered, it will be a reversal of transaction 2 above. So it is wrong to state that it will affect Profit or Loss
All this is falling under post p&l balance sheet adjustments
Therefore, adjustments categorised as receivables on directors renumerations to me implies an overpayment to directors that is due for recovery.
To correct the error is through p&l that took a hit since the payments were definitely accounted for as an expense to the company eating on it's profitability thus a cr on p&l
To reflect on potential increase in asset base for kq, Dr receivables from directors renumeration acct. That's completes double entry assap.
To rectify balance sheet
Net current assets in form of debtors will be increased by the figure in question. Thus accounting for the assets of kq
Normally debts may fail to be recovered and thus a provision is made most of the times for that. To effect this, cr di receivables with the figure and dr np account with the figure in quiz and then close the np account by cr-ring it followed by a Dr to the p&l account
In future when the receivables are received fully, cr receivables account and dr bank account with the sums received. To close receivables account since it will be in excess with the npeed sums, Dr receivables on di renumeration and then cr gross provisional sum on receivables.
By close of the year of receivables, the net provisions will decrease by that sum and that will by a cr on p&l.
Basic accounting for you.
In terms of cash flow statement,
****The effect will be on cash flow on operations and essentially a p&l item. So a plus at the year of adjustments. At the year of payments, no net increase in assets since an asset debt called receivables on di renumeration will be cancelled by dr bank.* Subject to arguments depending on accounting principle taken, prudence or etc.
This only happens in kq, very eager to pay every Tom, Dick and Harry but not shareholder @Obiero.
Pathetic, pathologically carcinowealth situation for shareholder's, demands more than meets the eyes, least to say.
How did that one make it to a management report to the auditors by the management. Someone be caned properly .
,Behold, a sower went forth to sow;....