‘X ltd’ is a vertically integrated garments and backward entity dealing with high class garments retailers. Very recently, all the retailers who were previously paying X ltd at sight and now, wants to pay in deferred terms. The management of X ltd approached their finance department to guide them regarding this deferred payment issue.
Draw the transaction for the deferred payment terms assuming you are the finance head of ‘X ltd’.
Solution:
Deferred payments contract (purchase long term asset on long term credit contract using notes, bonds, equipment contract).
To properly reflect the cost, account for the assets purchased on long term credits contracts at the present value of consideration exchanged at the date of transaction. The transaction can be ensured by using UPAS ( Usance L/C payable at sight)
Draw the transaction for the deferred payment terms assuming you are the finance head of ‘X ltd’.
Solution:
Deferred payments contract (purchase long term asset on long term credit contract using notes, bonds, equipment contract).
To properly reflect the cost, account for the assets purchased on long term credits contracts at the present value of consideration exchanged at the date of transaction. The transaction can be ensured by using UPAS ( Usance L/C payable at sight)