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M/s AB Company decided to Start Business on 15/12/2014 for trading of Cloths . For this purpose M/s AB Company rented a warehouse for One Year from M/s WQ Company with monthly payment of $ 10000/- starting from 20/12/2014. In accordance with terms of rent agreement , M/s AB Company issued 12 Nos posted dated cheques with the amount of $ 10000/- payable at each 20th of every month, to cover the one year rent payment ( 20/12/2014 to 20/11/2015 ) .

1. How to Account the above transaction in the book of M/s AB Company for the year ended 31/12/2014 as per IFRS

2. Kindly be assumed that M/s AB company having 100% subsidiary of GK group holding and the above rent agreement has been signed between GK group and M/s WQ company , and all the post dated cheques issued by GK group . How to account above transaction in the book of GK group and M/s AB company as per IFRS
in IFRS 10 - Consolidated Financial Statements by

1 Answer

0 votes

For First Part of Question

From the perspective of the check issuer, there should be no journal entry to record the reduction in cash until the date listed on the check. From the perspective of the recipient, there should be no entry to record the increase in cash until the date listed on the check. Thus, the date on the check effectively postpones the underlying accounting transaction.

For Second Part of Question

"The Supreme Court held in Interstate Transit Lines, 319 U.S. 590 (1943), that a corporation could not deduct expenses that it paid on behalf of its wholly owned subsidiary. "(For detailed decision you can check this decision from Internet)

This Decision would be applicable only at the time of actually payment only,for Post dated Cheaques, answers is same as mentioned in first paragraph.

by Level 5 Member (11.3k points)