Oil and Gas Accounting Homework (Essay Sample)

Oil and Gas Accounting Homework
Student Name
Institution Affiliation
Oil and Gas Accounting Homework
Oil and Gas sector is one of the fundamental industries in the planet, essentially because of its premeditated role in every economy as well as the world, at large. The distinguishing features that illustrate the production are derived from the nature of crude oil, its operations, and commercial engagements.
Generally, geological and geophysical expenditures are costs sustained by an oil and gas exploration and production firm to obtain, accrue, and assess data that will serve as the foundation for the acquisition of petroleum and gas properties (Anderson, 2012). These expenditures are typically linked with a survey, such as a seismic, magnetic, or gravity survey lead by a particular service company. These expenses can also comprise the cost of obtaining well logs and core information, sometimes christened bottom-hole data, which relates to wells drilled by other corporations. Geological and geophysical studies, fruitful and unsuccessful, are capitalized for book and financial commitments. For tax reasons, prosperous geological and geophysical costs are capitalized, and unsuccessful ones are expensed (Thomson, 2007). An M-1adjustment is necessary to the amount of unsuccessful geological and geophysical costs expensed.
Geological and geophysical can be both direct as well as indirect. An instance of a direct cost would be the licensing money salaried to a dealer for the right to use a seismic study it led. Price of exploratory dry holes, geological and geophysical costs in broad-spectrum, delay rentals, and supplementary property carrying rates are expensed. Geological and geophysical seismic data assists in determining whether contractors should be obtained in an area of importance, whether and where investigative zones should be drilled.
In conclusion, the oil and gas industry affects virtually everybody in this world since all of us need gas in our houses or oil to run our vehicles (Han & Alzamora, 2011). Th...