Home  Journals  International Accounting  13(163) - 2011 April

Harmonization of legal interpretation and methods of accounting for earnest transactions

Available online: 29 March 2011

Subject Heading: Foreign experience

JEL Classification: 

Existing practice of reflecting accounting operations with earnest has been considered. In the article it has been determined that the earnest, despite the formal resemblance with advance, has significant differences, in particular: the need to harmonize the contract terms, contract form, performing the functions, the consequences of obligations violations under contract, the moment of transfer right of ownership. On the basis of generalization of accepted accounting practice of operations with earnest in the Ukraine it has been determined that there is no unified methodology of accounting for earnest by the reason of not taking into account its legal essence. The consequence of this situation is the misrepresentation of information in financial statements on structure of property belonging to the agreement parties on the basis of the ownership right. As a result, the methods of accounting operations with the earnest, taking into account the time of transfer of ownership right, resolving to increase reliability in the financial reporting information on the structure of property belonging to the ownership of the parties has been offered.

Keywords: earnest, advance, collateralization of obligations, accounting

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ISSN 2311-9381 (Online)
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