OASV accounting entries

[Former Member]

Hi,

My client is about to do the OASV , for the current year legacy transfer. Below are the details of the legacy asset.

1 . APC 12000

2. Previous year Depreciation is 600

3. Current year Depreciation is 500

As I understand after doing the AS91, asset creation and updating the takeover value, OASV has to run.

In OASV It will be like,

APC account Dr 11400

Acc Dep account Cr 500

Account XYZ Cr 900

I just wanted to know, what is this account XYZ . Is it a P&L account ? Is it maintained in AO90(asset account determination).

Please let me know.

Regards

SR

[former_member198650]

Hi Swastik,

I think you have mentioned the amount wrongly for the account XYZ. It should be 10,900. This account is your legacy balance clearing a/c. It should be a balance sheet account. And also it won't maintain in AO90. After uploading all balances the account should be 0.

Regards,

Mukthar

[Former Member]

Hi Mukhtar,

Thanks. Yes it is 10900(I have now corrected it in the original question) .

But, how the balance of this will become zero ? In the above case in OASV, it received a credit posting of 10900. At what point it gets the debit posting?

Regards

SR

[former_member198650]

Hi Swastik,

At the time of uploading the GL balances we post debit/credit postings to the GL. Once you complete uploading of the balance then automatically the GL balance is 0.

At the time of assets balance upload the accounting entry will be:

Assets A/c Dr

Legacy balance clearing A/c Cr

At the time of liabilities upload the entry will be

Legacy balance clearing A/c Dr

Liabilities Cr

Hope you are clear now.

Regards,

Mukthar

[Former Member]

HI Mukthar,

Thanks. So at the time when the company acquires a new business, the GL posting would be

Liability Cr 10900

Legacy Balance Clearing Dr 10900

at the time of OASV, it will be

APC account Dr 11400

Acc Dep account Cr 500

Legacy Balance Clearing Cr 10900

COrrect me if wrong.

But I am still wondering why this account is a balance sheet account. Cant it be a p&l acc?

Regards

SR

[former_member198650]

Hi,

Yes, you are right. You can create it as P&L account. But it is a best practice to create as a B/S account.

Regards,

Mukthar

[Former Member]

HI Mukhtar,

WHy I have told P&L is, initially when the company will acquire the other asset, it will basically purchase the asset from the other company. So its like,

Vendor Cr 10900

Purchase Dr 10900 .

Please correct me if I am worng. I though that legacy clearing acct will balance out the Puchase acct. which is an expense one.

Also, it would be great if you can let me know, the sequence of acct entries, starting from purchasing

Regards

SR

[former_member198650]

Hi,

Generally we will upload the balances of balance sheet accounts. The difference between income and expenses are transfer to reserves. We will not upload expense & revenue accounts. If you acquire other company, you will take their assets & liabilities only. Not their expenses & revenues. Because they are balanced out and transfer to reserves.

Regards,

Mukthar

[Former Member]

Hi Mukhtar ,

Thanks.

Would you please let me know, what would be the initial acctng entry, when we have acquired anther company. Say it has one asset, as I have stated below.(Just for an example sake).

The sequence of acctng entries would make it clear for me to understand. Thanks in advance.

Regards

SR

[former_member198650]

Hi Swastik,

When you acquire assets of another company, the accounting entry will be:

Assets A/c Dr

Vendor a/c (Company) Cr

Regards,

Mukthar

[Former Member]

Hi Mukthar,

Thanks. I just wanted to know, how the above entry is linked to the Legacy Balance Clearing account.

Regards

SR

[former_member198650]

Hi Swastik,

You can link it with below entry:

Assets A/c Dr

Legacy balance clearing A/c Cr

Legacy balance clearing A/c Dr

Vendor A/c Cr

So the legacy balance clearing get nullified.

Regards,

Mukthar