alsarhani yahya 1 CH(2) PETROLEUM ACCOUNTING

THE DEVELOPMENT OF THE FIELDS AND PREPARE FOR PRODUCTION Work in process cost are very important and divided as : 1.Drilling 2.Preparing the well. 3.Building, equipment, alsarhani yahya2

DRILLING All the cost belong to the drilling under process, whether in the form of goods or services, whether directly or indirectly, and other expenses are distributable as follows: A) Material: at the time of purchase will be first recoded in journal entries, then close this account alsarhani yahya3

1 - with the purchase of materials: Purchased Debit Bank or suppliers Credit 2 - when the requisition of material The first entry: Debit work in process – Drilling Credit Purchased Or Inventory Then post all the cost material to specific well. alsarhani yahya4

B) Labor: -- At the time of disbursement of wages: Debit wages and salaries Credit Bank Debit work in process– Drilling Credit wages and salaries Then post all the wages to specific well according to the number of employees. alsarhani yahya5

C ) Expenses: At the paid time: Debit expenses Credit / Bank Then post all the expenses to the specific well alsarhani yahya6

The basis of distributed the cost are as flowing : 1.Number of days (or hours) the operation of the rig for each well. 2.The number of feet that were drilled for each well. 3. Days taken at each well drilled. 4. Expenditure which was spent on each well, whether actual or directly. alsarhani yahya7

EXAMPLE Company Started to prepare development of filed and it drilled three wells during the fiscal year amounted to expenses as follows: Real expenditures to bring the rig Real value of contract for removal and installation rig Real business was in the stores (well, for the first half and the remaining wells for others equally). alsarhani yahya8

50000 Real procurement account (the well belonging to the first and third equal) Real wages of workers digging Real bonuses to the staff of the Department expenses Real management field. Note that the well depth of feet first, second and third feet feet alsarhani yahya9

Required: 1 – The journal entries. 2 – Ledger account for work under way - digging 3 - Ledger account accounts for the wells (1), (2), (3). Note that: Load equally well for all of the expenses of the jaw and the installation of the expenses to bring the rig and rig. alsarhani yahya10

Solution Journal entries: 1- bring the dig: In the paid time Dr Cr Bring the dig expenses cash Closing entries: work in process –drilling bring the dig expenses alsarhani yahya11

2- removal and installation rig. In the paid time Dr Cr removal and installation rig expenses cash Closing entries: work in process –drilling removal and installation rig. Expenses any materials going out of inventory so no entry for paid time because its already there in inventory,just we doing the closing entries Dr Cr Work in process-drilling inventory alsarhani yahya12

4- purchased on the account : In the paid time Dr Cr Purchased Acc.payable Closing entries: work in process –drilling purchased alsarhani yahya13

5- paid the salaries : In the paid time Dr Cr Salaries expenses Cash Closing entries: work in process –drilling salaries expenses alsarhani yahya14

6- paid the bonuses : In the paid time Dr Cr bonuses expenses Cash Closing entries: work in process –drilling bonuses expenses alsarhani yahya15

7- Administration expenses: In the paid time Dr Cr Administration expenses Cash Closing entries: work in process –drilling Administration expenses alsarhani yahya16

bring the dig expenses removal and installation rig Inventory Purchas Salaries Bonuses Administration expenses Balance Total alsarhani yahya17 WORK IN PROCESS Dr Cr

WELL 1 alsarhani yahya18 Well 1 bring the dig expenses removal and installation rig Inventory balance Purchas Salaries Bonuses Administration expenses Total

WELL 2 alsarhani yahya19 Well 2 bring the dig expenses removal and installation rig Inventory balance Salaries Bonuses Administration expenses Total

WELL 3 alsarhani yahya20 Well 3 bring the dig expenses removal and installation rig Inventory balance Purchas Salaries Bonuses Administration expenses Total