Oil & Gas
Actual Decommissioning Expenditure
Recording costs incurred to plug a well and restore the site at the end of its productive life.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Asset Retirement Obligation (Settled) | Liability (-) | 10,000,000.00 | - |
| Cash / Accounts Payable (Contractors) | Asset/Liability (-) | - | 9,500,000.00 |
| ARO Settlement Gain (Under-Spend) | Revenue (+) | - | 500,000.00 |
💡 Accountant's Note
When actual decommissioning occurs, the ARO liability is settled. If actual cost differs from the provision, the difference is a gain or loss. Effective ARO estimation can result in significant gains or losses.
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