1. alsarhani yahya 1 CH(2) PETROLEUM ACCOUNTING

2. 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

3. 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

4. 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

5. 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

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

7. 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

8. EXAMPLE Company Started to prepare development of filed and it drilled three wells during the fiscal year amounted to expenses as follows: 270000 Real expenditures to bring the rig. 150000 Real value of contract for removal and installation rig. 100000 Real business was in the stores (well, for the first half and the remaining wells for others equally). alsarhani yahya8

9. 50000 Real procurement account (the well belonging to the first and third equal). 250000 Real wages of workers digging. 50000 Real bonuses to the staff of the Department. 125000 expenses Real management field. Note that the well depth of 20000 feet first, second and third 10000 feet 20000 feet alsarhani yahya9

10. 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

11. Solution Journal entries: 1- bring the dig: In the paid time Dr Cr Bring the dig expenses 270000 cash 270000 Closing entries: work in process –drilling 270000 bring the dig expenses 270000 alsarhani yahya11

12. 2- removal and installation rig. In the paid time Dr Cr removal and installation rig expenses. 150000 cash 150000 Closing entries: work in process –drilling 150000 removal and installation rig. Expenses 150000 3- 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 100000 inventory 100000 alsarhani yahya12

13. 4- purchased on the account : In the paid time Dr Cr Purchased 50000 Acc.payable 50000 Closing entries: work in process –drilling 50000 purchased 50000 alsarhani yahya13

14. 5- paid the salaries : In the paid time Dr Cr Salaries expenses 250000 Cash 250000 Closing entries: work in process –drilling 250000 salaries expenses 250000 alsarhani yahya14

15. 6- paid the bonuses : In the paid time Dr Cr bonuses expenses 50000 Cash 50000 Closing entries: work in process –drilling 50000 bonuses expenses 50000 alsarhani yahya15

16. 7- Administration expenses: In the paid time Dr Cr Administration expenses 125000 Cash 1250000 Closing entries: work in process –drilling 1250000 Administration expenses 1250000 alsarhani yahya16

17. bring the dig expenses 270000 removal and installation rig 150000 Inventory 100000 Purchas 50000 Salaries 250000 Bonuses 50000 Administration expenses 1250000 995000 Balance Total 995000 alsarhani yahya17 WORK IN PROCESS Dr Cr

18. WELL 1 alsarhani yahya18 Well 1 bring the dig expenses 90000 removal and installation rig 50000 Inventory 50000 385000 balance Purchas 25000 Salaries 100000 Bonuses 20000 Administration expenses 50000 Total 385000

19. WELL 2 alsarhani yahya19 Well 2 bring the dig expenses 90000 removal and installation rig 50000 Inventory 25000 250000 balance Salaries 50000 Bonuses 10000 Administration expenses 25000 Total 250000

20. WELL 3 alsarhani yahya20 Well 3 bring the dig expenses 90000 removal and installation rig 50000 Inventory 25000 360000 balance Purchas 25000 Salaries 100000 Bonuses 20000 Administration expenses 50000 Total 360000