Significant Differences Between Accounting and Oil and Gas Operations and the Conventional Accounting for Manufacturing or Mechanize Operation.
SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING AND OIL AND GAS OPERATIONS AND THE CONVENTIONAL ACCOUNTING FOR MANUFACTURING OR MECHANIZE OPERATION.
By
Demoore Suleman
-----------------------
Conventional Manufacturing Account
1.Definition: Manufacturing account, the term I use to describe business organizations engaged in the manufacture of goods for sale. These company maintain a manufacturing account.
2. Cost Method: Expenses are the cost of unsold products and are reported as assets. These expenses include wages, electricity in offices outside of the factory (sales and marketing, general administrative offices) are reported immediately as expenses in the accounting period that they are used cost outside of the factory do not become part o the product cost. Under the accrual method of accounting, period cost such as selling, general and administrative expenses are reported in the income statement in the accounting period in which they are used up or explore. Variances from purchase are recorded at that time the raw materials are purchased and re – classified into raw materials inventory,
Accounting for oil and gas operation
1.Definition : Oil and Gas Account: The term is used to describe the books of account of companies involved in the exploration an development of crude oil and natural gas.
2. Cost Method
Accounting for oil and gas operations follow one of two methods of financial accounting.
a. Full Cost Method: All property acquisition exploration and development cost, even dry hole cost are capitalized as oil and gas properties. These cost represent fixed asset, amortized on a country – by country basis using a unit of production method based on volume produced and remaining proved reserves. Acquisition and development activities are capitalized expenses irrespective of whether or not the activities resulted in the discovery of reserve.
b. The successful effort (SE) method: allows a company to capitalize only those expenses associated
By
Demoore Suleman
-----------------------
Conventional Manufacturing Account
1.Definition: Manufacturing account, the term I use to describe business organizations engaged in the manufacture of goods for sale. These company maintain a manufacturing account.
2. Cost Method: Expenses are the cost of unsold products and are reported as assets. These expenses include wages, electricity in offices outside of the factory (sales and marketing, general administrative offices) are reported immediately as expenses in the accounting period that they are used cost outside of the factory do not become part o the product cost. Under the accrual method of accounting, period cost such as selling, general and administrative expenses are reported in the income statement in the accounting period in which they are used up or explore. Variances from purchase are recorded at that time the raw materials are purchased and re – classified into raw materials inventory,
Accounting for oil and gas operation
1.Definition : Oil and Gas Account: The term is used to describe the books of account of companies involved in the exploration an development of crude oil and natural gas.
2. Cost Method
Accounting for oil and gas operations follow one of two methods of financial accounting.
a. Full Cost Method: All property acquisition exploration and development cost, even dry hole cost are capitalized as oil and gas properties. These cost represent fixed asset, amortized on a country – by country basis using a unit of production method based on volume produced and remaining proved reserves. Acquisition and development activities are capitalized expenses irrespective of whether or not the activities resulted in the discovery of reserve.
b. The successful effort (SE) method: allows a company to capitalize only those expenses associated
References: J. Vitalome , Accounting for Differences in Oil and Gas Accounting,http://www.investopedia.com S. Abubakar (2007), Lecture Note Oil and Gas Accounting Department of Accounting Faculty of Administration Ahmadu Bello University Zaria. Federal Government of Nigeria (1990), Company and Allied Matters Act, Lagos Government Printers NASB(1985), Information to be Disclosed in Financial Statement, Statement of Accounting Standard 2