3. Purchases of Non-Current Assets

Question 1

What do you not Capitalise

Answer 1

Repair maintenance and servicing costs
Administrative and General Overheads

Question 2

What’s Capitalisation

Answer 2

A business has acquired an asset that can provide future economic benefit which will be presented as a non current asset on the SOFP

Question 3

What’s capital expenditure

Answer 3

Results in acquisition manufacture replacements or improvement of a non-current asset

Question 4

What’s revenue expenditure

Answer 4

For the trade of the business or to repair, maintain or service non current assets

Question 5

What’s capitalisation policy

Answer 5

A minimum level of expenditure for items to be capitalised
Items below this limit are recorded as an expense

Question 6

If the Business is VAT registered do you include the cost of VAT within the asset

Answer 6

NO

Question 7

If the business is not VAT registered do you include the cos of VAT within the asset

Answer 7

YES

Question 8

Why do you not include VAT if a in the cos of the asset if the business is VAT registered

Answer 8

It is debited to the VAT control account due to the fact it can be reclaimed back by HMRC

Question 9

Why do include VAT in the cost of the asset if the business is not VAT registered

Answer 9

Due to the VAT not being able to be reclaimed by HMRC

Question 10

Non - Current Assets (Capitalised) should initially be recorded at costs which include

Answer 10

1. Purchase price or construction costs
2. directly attributable costs to bring to asset or location and condition necessary for operation

Question 11

Give 2 examples of directly attributable costs to bring to asset or location and condition necessary for operation

Answer 11

> Initial delivery/ Handling costs
Instillation and assembly costs
Cost of site preparation
Cost of testing
Professional fees
Labour Costs