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Exam Kit - CHPT 6

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26 views

Exam Kit - CHPT 6

Uploaded by

icylilit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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NCA - Chapter 6

NCA are long term in nature, are not normally acquired for resale, could be tangible/intangible, used to generate income

Tangible Intangible Asset Capitalized Expense items

Property Goodwill
Plant Patents
Equipment Trademarks
Copyrights recorded asset on
Licenses balance sheet not

Franchises expense on income

ex purchase of machinery
building construction
software development

The correct double-entry to record the purchase is


Dr NCA
CR Bank/Payables
used to generate income directly/indirectly, are not liquid assets

IAS16 PPE

Includes Excludes
Asset capitalised expenditure such as Expenses such as
purchase costs repairs and renewals
delivery costs repainting or redecorating
legal fees administration
subsequent expenditure which
enhances the asset general overheads
cost of testing to bring into op use training costs
wastage
Depreciation

Depreciation matches the cost of using a nca to the revenues generated by that asset over it's useful life

also to the pattern of use of asset

Depreciation may arise from


use
physical wear
passing of time
obsolescence through technology and market changes
depletion Straight line

same each year


benefit consumed evenly

Dep charge=(Cost-RV)/UL

RV - estimated disposal value of the asset at the end of it's useful life to the business
UL - estimated number of years during which business will use the asset

Assets bought/sold in the period


provide full year's depreciation in the year of the year of acquisition and none in the year of disposal or
monthly or pro-rata depreciation based on the exact number of months that the asset has been owned
Reducing Balance

more benefit is consumed


in earlier years

Dep charge=X% * CA

CA: original cost of the nca-Acc. Dep on the asset to date

one in the year of disposal or


at the asset has been owned
Accounting for Depreciation

Dr dep exp or Dep charge(P/L)


Cr Acc dep

the dep charge is a profit/loss expense account and therefore not accumulated

the acc. Dep is a statement of fin position account

Balance sheet

Cost X
Acc. Dep (X)

CA X

NCA Cost Acc Dep CA


A new cash register for $ 5,000 $ (375) $ 4,625
A new delivery van $ 22,000 $ (1,375) $ 20,625

Total $ 27,000 $ (1,750) $ 25,250


In aug 31, 20x5
SL
A new cash register for 5000 dec 1 2004 0.1
RB
A new delivery van 22,000 31-Mar-05 0.15

Dep charge 31 aug 2005

Dep charge Acc Dep


aug 31, 20X5 375 Profit/Loss 1750
1375 1750

1750 1750 1750 1750

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