Alpha Corporation hires a subject matter expert at a salary of Rs 5,000 per month including benefits. The subject matter expert is non-billable and is expected to help engineers with resolving their technical queries as well as assist them in development of new technology. The subject matter expert was hired on 1st of February and today is 1st of March of the same year. You have just paid him his salary. What accounts will this transaction impact? 2. The financial year has just ended for Delta Corporation and for the current financial year, Delta just announced that it would pay out a dividend of Rs 60,000 to its shareholders. Is this a transaction? If so, what are the accounts that will be used to capture this transaction? 3. Foxtrot Corporation wants to setup a factory producing tires. The factory would be constructed in two years post which it will start production. Foxtrot takes a loan to part-fund the factory construction cost for 100 cr at 10% interest with interest payable yearly in cash. At the end of the first year, the company pays Rs 10 cr as interest to the bank. At this stage, from an accounting perspective, Foxtrot has to make a choice. It can either show the interest paid as an expense in the Income Statement for year 1, or it can add the interest paid to the book value of the factory. In the latter case, the book value of Foxtrot will be increased to Rs 110 cr that will now include Rs 10 cr as interest that the company paid to the bankers? Which of the two do you think is more consistent with the principles of accounting?

Read less