C3 Types of expenditure

Question 1

what is capital expenditure?

Answer 1

spending on items that will stay in the business for than a year e.g. machinery

Question 2

what is revenue expenditure?

Answer 2

day to day spending to fund the trading activities of the business e.g. inventory

Question 3

what are non-current assets?

Answer 3

assets that will stay in the business for more than a year.

intangible or tangible products

Question 4

what is depreciation?

Answer 4

the cost of an asset spread over its useful life.
there are 2 methods to calculate depreciation:
straight line and reducing balance

Question 5

what is straight line depreciation?

Answer 5

an assets value is reduced by the same amount each year

(value of the asset - residual value)/life of asset

Question 6

what is reducing balance depreciation?

Answer 6

an asset’s value is reduced by a set % of the net book value each year. the rate of depreciation is decided by the accounting function of the business based on expected life, residual value and standard practices.

Question 7

what is net book value?

Answer 7

the value of an asset, as shown on the statement of financial postion, after deprecition has been declared