DOWNLOAD THE COMPLETE PROJECT

816 Users found this project useful

ACCOUNTING FOR FIXED ASSETS (A Case Study Of Coca Coca Bottling Company Plc 9th Mile Corner)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Fixed Assets are those assets of a business which are of material value, like property, plant and equipment and other assets with relatively permanent life acquired by the enterprise for use in production or supply of goods or instructed with intention of being used on a continuing basis or for administrative purpose and many include items held for the resale or for conversion into cash in the ordinary source of business.
However, there are other long lived assets which we cannot see such ones are classified as in tangible assets.
They are: Goodwill, trademark. Be it tangible or intangible all fixed assets represent a bundle of future services which are paid for in advance and used subsequently in the process of generating revenue.
Basically, in a bottling company, there are only three important stages to note down in records of the company as it relates to the fixed assets in liquidation. They are:
- The stage of acquisition of the fixed assets
- The stage of provision for depreciation of fixed assets
- The third stage is the time of the period when the assets must have been useless for the company, then the management can then decide to sell if off and make replacement.For better understanding of the accounting treatment of fixed assets, its acquisition, depreciation and disposal the researcher has chosen the traditional “T” account to illustrate this point.
Whenever an assets is acquired by a firm, the cost of the assets is always debited to that asset account in the firm’s books and the corresponding entry, will be to credit the cash or bank account.
At the same time, when the asset must have been deemed useless, then it can be sold out as scrap. The cost of the disposal will be credited to the asset account while the cash or bank account of the firm will be debited. The assets depreciation account is equally created. On this, the cost of disposal is debited and the total depreciation by the assets as at the date of disposal credited.
The third account is the disposal account. On this the cost of the assets is debited while the total amount realized from the depreciation will be credited. Also to be credited is the profit and loss on the disposal.
At this point, a typical example of purchase depreciation and final disposal of an asset (machine) use din production will be illustrated using a ‘T’ account.MACHINE ACCOUNT
Jan. 2000 cost xxx Balance c/d xx
xxMACHINERY DEPRECIATION
To machinery
Disposal A/C xx 
xx Balance b/d xx
xxMACHINERY DISPOSAL A/C
Machine cost xx bank (Disposal) xx
Machine Dep (D/C) xx
Gain on disposal xx loss on disposal xx
xx xxthis ‘T’ account to a part from producing the correct figure is also extremely easy to follow.
PROPERTY, PLNT AND EQUIPMENT
The cost of an item, property, plant and equipment comprises to purchase price, including import duties and non-refundable purchase, taxes and any directly attributable costs of bringing the assets to working condition for its intended use. Usually trade discounts and rebates deducted in arising at such purchase price when a fixed assets in purchased and non-cash consideration is also given, the cost of the asset is the cash and plus the fair market value of the non-cash consideration.
Lost represents the net sacrifice made or be made whether the sacrifice is parting with cash or parting with any other things of value in acquiring the fixed asset and getting it to a condition it can be used.
The acquisition of a fixed asset in recorded simply by debiting the related fixed assets at cost account and crediting either bank or the suppliers account.
However, certain costs associated with fixed assets should be written off immediately through the profit and loss account and should never be shown as part of the cost of the fixed assets.
In the experience of the researcher, the warning sign as adopted by the Coca-Cola bottling company is the letter’s re’ 4. In other words, replacement. Repairs and renewal to fixed assets are expenses.
Thus the cost of the machine is debited to fixed assets but the cost of replacing the engine of an existing vehicle is an expense that is debited to profit and loss account of the Coca-Cola bottling company plc 9th mile corner Enugu
1.2 STATEMENT OF PROBLEMS
This study is carried out in order to ascertain and appraise the accounting methods, used in accounting for fixed assets with respect to Coca-Cola bottling company plc 9th mile corner: Bottlers of seven different flavour of soft drinks.
They are coke, fanta orange, sprite, Ginger ale, Quinine tonic, krest soda.
Some of the problems answered in this study includes:
1. What is fixed asset and what constitutes the fixed assets of a bottling company
2. How is cost of fixed assets determined
3. How should the cost of fixed assets be allocated to revenue
4. How should expenditure for repairs and maintenance be treated.
5. What problems do they encounter in accounting for fixed assets
6. What accounting method do they adopt.
7. Should financial statement include disclosure of depreciation computed on the basis of replacement costs.
8. How should disposal of fixed assets be treated
9. Could these problems be over come land be improved
1.3 OBJECTIVES OF THE STUDY
This case study is being conducted in order together relevant useful information regarding the accountancy for fixed assets in Coca-Cola bottling company plc, 9th mile corner, Enugu.
The main purpose of this study is to study:
1. The accounting treatment of fixed assets of the bottling company.
2. Ascertain what constitute other fixed assets of a bottling company.
3. Treatment of assets disposal
Ratio of fixed assets to capital
To identify the major problems and problem areas in accounting for fixed assets.
To make recommendations on how to improve it.
1.4. SIGNIFICANCE OF THE STUDY
This research is under taken to identify the problems encountered in accounting for fixed assets which constitutes a reasonable percentage of the total assets of a company and of course how these problems can be overcome.
The study will be of immense value to accounts department o the Cola-Cola bottling company land the entire bottling concern in Enugu state.
The result will help to improve the qualify of their financial statements it will also be useful to future students of accountancy or any person who may use it as a reference while making a study on the subject matter.
1.5 SCOPE AND LIMITATION OF THE STUDY
For effective research work a major bottling concern in Nigeria and in Enugu particles which handles a large scale production in soft drinks in Enugu state is chosen. The researcher is talking about coco-cola bottling company, Bottlers of coke fanta, orange, krest, soda water, tonic water, sprite and ginder ale. “You cant beat the dealing and its always coca cola”.
The researcher being a student couldn’t help limiting this study to the area mentioned in the scope of the study for financial reasons as research work involves a lot of money.1.6 TIME: Time also was a limiting factor as the time available to the researcher for the study was very short coupled with the fact that the study had to be combined with other pressing academic works.
The researcher is aware that the company has many depts under the control of the 9th mile plant here in Enugu, but for the purpose of clarity.
They are not included in the research work. The researcher considers the above facts worth mentioning for the sake of clarity.
Finally, most respondents will appear to be uncooperative in releasing certain information when asked certain question for fear of having some implications. This and other minor hitches will hinder the researcher from collecting a more comprehensive rate
1.7 DEFINITION OF TERMS
Assets: may be defined as anything owned by a business or by an individual which has a commercial or exchange value. They are classified according to their nature and are of various kinds. 
Fixed Assets: William Pickles refers to fixed assets as those assets of a business which are of a permanent nature and are definitely held for the purpose of earning revenue and not with as view to resale e.g. plant and machinery buildings.
It could still be sub-divided into tangible and intangible
Current Assets: pickles also refers to this as “Those assets which are made oar acquired and merely held for a short period of item with a view to selling at a profit in the ordinary course of business” that is to say, they are easily converted into cash.
CASH: According to international accounting standard No 16, the cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use.
DEPRECIATION: Expiration in the service life of a fixed assets. Other than wasting assets, attributable to wear and tear through use and lapse of time, obsolescence, inadequacy, or other physical or functional cause, the proportion of the cost of a fixed assets other than a wasting asset charged as an expense during a particular period.
GOODWILL: This represents the original cost of the assets.
HISTORICAL COST: The is the usual basis for valuing assets it is measured by the cash or cash equivalent place of containing the asset and bring to the location and condition necessary for its.
NEW VALUE OR NETBOOK VALUE
This is the gross value of he asset less the accumulated depreciation to date. It is the written down value.
OBSOLESCENCE: The process of becoming obsolete or out of date and use.
RESIDUAL VALVE: Residual value is the realizable value of the asset at the end of its economic life.
USEFUL LIFE: estimated number of years which the asset is expected to be useful in generating income.
HYPOTHESIS
In attempting to reach decisions, it is sometimes, useful to make conjectural statements of the relationships between variables or other. Such statements cannot be taken as statement of fact until they are tested.
In this regard, some hypothesis environmental below were made in course of this research in other to help the researcher achieve his objectives.
1. Hi: Adequate provision for depreciation is necessary for the 
replacement of fixed assets
Ho: Adequate provision for deprecations not necessary for the replacement of fixed assets.II. Hi: proper accounting for fixed assets will help management in decision making as regards fixed management.
Ho: Proper accounting for fixed assets will not help management in decision making as regards fixed assets management.
REFERENCES
1. J.O.OMUYA Frank Woods Accounting I, West African Edition (London, 1982) P.272. International Accounting standards (IAS) “Accounting for property, plant and Equipment . Issued by IAS No. 163. Pickles W. Study Text in accountancy (EIB Publishers 1980).

  DOWNLOAD THE COMPLETE PROJECT