Accounting for depreciation

Question 1

Define capital expenditure?

Answer 1

• Acquisition of non current assets or an improvement in their earning capacity
• Expenditure is written of in the income statement

Question 2

Define revenue expenditure?

Answer 2

• Incurred for the purposes of the business trade or to maintain the existing capacity of non current assets
• The expenses are written of income statement

Question 3

Main standard for tangible assets for sole traders is?

Answer 3

• IAS 16- property, plant and equipment

Question 4

What does DEAD CLIC stand for?

Answer 4

Debit entry will increase
Expenses
Assets
Drawings

Credit entry will increase
Liability
Income
Capital

Question 5

NetBook value

Answer 5

The cost minus accumulated depreciation

Question 6

Residual value

Answer 6

The estimated value of sale at the end of the assets useful life

Question 7

Depreciation formaula

Answer 7

(Cost - Residual value) * Number of years useful life