Accounting entry of future/option purchase /sale

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Dear Sir/Madam

I am working professional. Few days back I have come across a problem regarding accounting treatment of Futures/Option Purchase/sale. 

1. What will be the accounting entry for purchase of future/option.

2. What happens when above entry squared off on there expiry date or squared off by trader before there expiry.

3. What entry to be made for Profit/loss of above transaction.

4. What to do at the time of finalisation of books, when I have some open position in above transactions.

5. what will be the effect of open interest in Balance Sheet.

Need your cordial co-opration.

Thanking you.

Rahul Goyal

CFA

Replies (1)
Originally posted by : Rahul goyal

Dear Sir/Madam

I am working professional. Few days back I have come across a problem regarding accounting treatment of Futures/Option Purchase/sale. 

1. What will be the accounting entry for purchase of future/option.

2. What happens when above entry squared off on there expiry date or squared off by trader before there expiry.

3. What entry to be made for Profit/loss of above transaction.

4. What to do at the time of finalisation of books, when I have some open position in above transactions.

5. what will be the effect of open interest in Balance Sheet.

Need your cordial co-opration.

Thanking you.

Rahul Goyal

CFA


If I am not wrong purchasing futures contract will be seen as a form of investment. So,

Investment a/c Dr

          To Bank a/c Cr

 

And when squaring of,

Bank a/c Dr

        To Investment a/c Cr

I think there will not be any changes in P/L but only balance sheet will reflect changes.

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