Capital and revenue expenditure

Question 1

where is revenue expenditure charged to?

Answer 1

an expense in the statement off profit or loss

Question 2

where is capital expenditure charged to?

Answer 2

a non-current asset in the statement of financial position

Question 3

what factors need to be considered with capital expenditure?

Answer 3

• non current assets can be expensive
• funding options
• processes for authorisation
• level of authorisation

Question 4

what factors should you consider as part of the authorisation process?

Answer 4

• availability of finance
• overall cost of each finance method
• cash flow requirements to meet repayments
• required safety for the debt (if applicable)

Question 5

how do you work out cost?

Answer 5

purchase price + additional costs

Question 6

what are additional costs?

Answer 6

• delivery costs
• legal and professional fees
• installation costs
• test runs

Question 7

what is a tangible asset?

Answer 7

the asset has a physical form

Question 8

what is an intangible asset?

Answer 8

the asset has no physical form e.g. goodwill

Question 9

what is goodwill?

Answer 9

it is an asset from the fact that a going concern business is worth more in total that the total value of its tangible assets

Question 10

what factors does goodwill arise from?

Answer 10

• good reputation
• good location
• quality products
• client base
• quality after sales service

Question 11

what are 6 things that a non-current asset register will usually include

Answer 11

• asset description
• date of purchase
• inv no
• estimated useful life
• carrying amount
  -disposal details