5.7. Contents of published accounts

Question 1

Define goodwill

Answer 1

arises when a business is valued or sold for more than the balance-sheet value of its assets

Question 2

Define intellectual property

Answer 2

an intangible asset that has been developed from human ideas and knowledge

Question 3

Define market value

Answer 3

the estimated total value of a company if it were taken over

Question 4

Define capital expenditure

Answer 4

any item bought by a business and retained for more than one year, that is the purchase of fixed/non-current assets

Question 5

Define revenue expenditure

Answer 5

any expenditure on costs other than non-current asset expenditure

Question 6

Define depreciation

Answer 6

the decline in the estimated value of a fixed asset over time

Question 7

Define straight-line depreciation

Answer 7

a constant amount of depreciation is subtracted from the value of the asset each year

(orginal cost of the asset - expected residual value)/expected useful life of asset

Question 8

Define net book value

Answer 8

the current balance sheet value of a fixed asset

orginial cost - accumulated depreciation

Question 9

Define net realisable value

Answer 9

the amount for which an asset (usually inventory) can be sold minus the cost of selling it

Only used on balance sheets when NRV is estimated to be below the historical cost