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2-Investment expenditures
 Second case: External execution (Documentary credits) :
In case of the governmental unit needs some fixed assets
from aboard, this must be done through opening documentary
credits.
☺ There are four parties in a documentary credit:
a- The governmental unit (importer).
b- Bank of importer (N. investment Bank, in C.B. a/c).
c- The exporter (the trader abroad).
d- The Bank of the exporter.
☺ Steps:
1. The Governmental unit makes its needs and specifications,
and then makes contact with the exporter abroad.
2. The governmental unit demands from its bank to open for it a
documentary credit by the amount needed for import from
aboard.
3. The bank of the governmental unit opens a documentary
account and informs the exporter bank by the agreement
between the exporter in a broad and our governmental unit.
4. At same time, the exporter informs its bank in aboard by the
same agreement.
5. Then, the exporter gives the documents of the assets
exported to its banks.
6. The foreign bank informs our bank that the assets are sent
to the airports or customs ports according to the
agreements.
7. Our bank transfers the value of the documents to the
exporter bank; the foreign bank at same time puts the money
(net) in the account for the exporter aboard. After taking
commissions for these services.
8. The exporter bank sends the documents to the importer
bank.
9. The importer bank informs the governmental unit that the
documents came.
10. The governmental unit receives the documents by which
it receives its assets from the custom port or the airport.

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The entries could be as follows:

1- Record of all investment expenditures.

2- Raise investment resources.
3- Memo entry (opening).
4- Memo entry (partial closing). With the value of assets
reached in current year.
5- Addition of assets imported at current year.
6- Reducing (eliminate) investment expenditures of current year
(at end of it) by the amounts not reached. As it is in advance
payment
7- Record investment expenditures instead of the eliminated (at
beg. of New Year).
8- Memo entry (other part closing) at next year. With the value
of assets reached in next year.
9- Addition of assets imported at next year.

☺ In case of all fixed assets are reached in the current year,

there will be five entries only.

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 The entries could be as follows:
No. Details Dr. Cr.
1 Record of all investment expenditures:
Investment expenditures (items) a/c XX
N. Investment Bank in C.B. a/c XX
2 Raising investment resources:
Credit current accounts under adj. a/c XX
Investment resources a/c XX
3 Memo entry:
Sums - documentary credits a/c XX
Purchases & services - documentary credits a/c XX
4 When Assets be in our hand at current year: (close
memo entry With the value of assets reached in current year.)
Purchases & services - documentary credits a/c XX
Sums - documentary credits a/c XX
5 Adding fixed assets:
Fixed Assets (items) a/c XX
Public capital invested in fixed assets a/c XX
6 If the assets or some of assets be in our hands in
next years:
a Reducing investment expenditures of current year
(at end of it) by the amounts not reached:
Capital transfers – in advance payments a/c XX
Investments expenditures a/c (eliminations) XX
b Record investment expenditures instead of the
eliminated (at beg. of new year):
Investment expenditures a/c XX
Capital transfers – in advance payments a/c XX
c Memo entry to be reversed by the value of the assets
in next year:
Purchases & services - documentary credits a/c XX
Sums - Documentary credits a/c XX
d Adding fixed assets:
Fixed assets (items) a/c XX
Public capital invested in fixed assets a/c XX

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Example:

The following transactions took place in a certain ministry

during 2020/2021.

a) An addition inform came from the central bank included that

a sum of 5000000 added to the National Investment Bank.

b) Issuance of a cheque of 1500000 for investments expenditures

and tax of 200000.

c) Taxes are transferred to the C.B. current a/c and paid by a

cheque.

d) A documentary credit opened to import fixed assets of

3300000.

e) Investment expenditure of 3000000 were made during this

year and assets reached inside the country, while other

assets performed during next years.

You are required to make necessary entries.

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 Answer:
Internal execution

No. Details Dr. Cr.

a An addition inform came from the central
bank:
N. investment Bank in C. Bank a/c 5000000
Credit current accounts under adj. a/c 5000000
b-1 At buying of investment items (local):
Investment expenditures a/c 1700000
Cheques a/c 1500000
Taxes a/c 200000

b-2 Raising investment resources by the same

expenditures amount:
Credit current accounts under Adj. a/c 1700000
Investment resources a/c 1700000

b-3 At payment of the amount of cheques:

Cheques a/c 1500000
N. Investment Bank in C.B. a/c 1500000

c-1 Transferring Deductions To central bank

current account:
Central Bank current a/c 200000
N. Investment Bank in C.B. a/c 200000

c-2 At issuance of cheques for deductions:

Taxes a/c 200000
Cheques a/c 200000

c-3 At payment of cheques:

Cheques a/c 200000
Central bank current a/c 200000

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 External execution (Documentary credits) :

No. Details Dr. Cr.

d-1 Record of all investment expenditures (external):
Investment expenditures (items) a/c 3300000
N. Investment Bank in C.B. a/c 3300000
d-2 Raising investment resources:
Credit current accounts under adj. a/c 3300000
Investment resources a/c 3300000
d-3 Memo entry:
Sums - documentary credits a/c 3300000
Purchases & services-documentary credits a/c 3300000
e-1 When Assets be in our hand at current year:
Purchases & services - documentary credits a/c 3000000
Sums - documentary credits a/c 3000000
e-2 Adding fixed assets:
Fixed Assets (items) a/c 3000000
Public capital invested in fixed assets a/c 3000000
e-3 Reducing investment expenditures of current year
(at end of it) by the amounts not reached:
Capital transfers – in advance payments a/c 300000
Investments expenditures a/c (eliminations) 300000
e-4 Record investment expenditures instead of the
eliminated (at beg. of new year):
Investment expenditures a/c 300000
Capital transfers– in advance payments a/c 300000
e-5 Memo entry to be reversed by the value of the
assets in next year:
Purchases & services - documentary credits a/c 300000
Sums - Documentary credits a/c 300000
e-6 Adding fixed assets:
Fixed assets (items) a/c 300000
Public capital invested in fixed assets a/c 300000