Course: Financial Accounting

Session: 7

 Instructor: M Faisal
 Course: Financial Accounting
 Program: BBA
 Semester: 2
 Topic: Ch 9: Plant & Intangible Assets (Cont’d)
Ch 9: Plant & Intangible Assets

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Session Contents
#
Ø Natural resources
Ø Accounting for natural
resources
Ø Depreciation of buildings
7 and equipment closely
related to natural resources
Activities
Class activity1: Discussion / Question Answer on
learning outcomes of the pre-reading assignment.
Class activity2: Concepts will be built through
lecture & discussion.
Class activity3: Handout’s End of the Chapter
practice questions -
Ex 9.11 a, b & c pg 402
Pr 9.9 from 11th Edition
Home assignment:
Revise the lecture & problem solved in the class.
Read the topic due for discussion in the next
class.
Ex 9.11 from 11th Edition
Natural Resources
Natural Resources
 Natural Resources

1. Accounting for natural resources

2. Depreciation of buildings and equipment
closely related to natural resources
3. Depreciation, amortization, and depletion—a
common goal for new ones

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 Natural Resources

 Natural Resources
 Are deposit of oil & gas, tracts of standing timber
 Leading e.g.
 Mining Properties containing coal, diamond,
minerals,
 Oil & Gas Reserves, &
 Tracts of standing timber
 The Distinguishing Characteristics
 They are removed from natural environment &
are converted into inventory

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 Natural Resources

 In B/S, mining property & other natural

resources are classified as property, plant &
equipment
 Entry for recording Depletion
 Depletion Rate = Cost of NR – Residual Value
wEstimated Reserve
 B/S Presentation of NR & its Acc Depletion

 Once the coal is removed from the ground,

this coal represent inventory

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 Depreciation of buildings and
equipment closely related to natural
resources
 Building & equipment installed at a mine or
drilling site may be useful only at that
particular location
 Such asset should be depreciated over their
normal useful lives or the life of the NR,
whichever is shorter

 Often depreciation is computed using UNIT OF

OUTPUT METHOD

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 FA-S#7-Class Activity3

End of the Chapter practice question(s)

 Ex 9.11 a, b & c pg 402
 From 11th Ed
 Pr 9.9 pg 419
Pr 9.9 pg 419 from 11th Ed
Questions & Answers