CH10 - NCA & Depreciation

Question 1

Profit & Loss on disposal of NCA is

Answer 1

The difference between the sale price of the asset and the carrying amount of the asset at the time of sale.

Profit/loss = Sales proceed - NBV

Question 2

NCA Register

Answer 2

Listing of all NCA owned by the organisation, broken down perhaps by department, location or asset type.

Question 3

Purpose of charging depreciation ?

Answer 3

To allocate the cost less residual value of NCA over the accounting periods expected to benefit from its use.

Question 4

What is the accounting principle which dictates that NCA should be valued at the cost, less accumulated depreciation, rather than their enforced saleable value?

Answer 4

Going Concern

Question 5

By charging depreciation, a business aims to ensure that the cost of NCA is spread over the accounting periods which benefit from their use.

Which accounting principle does this relate to?

Answer 5

Accruals

Question 6

Part - exchange value

Answer 6

List price new machine
- payment required
Part exchange value

Question 7

Profit/loss on trade in of the old machine?

Answer 7

Compare btwn NBV old machine & part - exchange value.

Part exchange < NBV = loss

Question 8

Which are correct?
1) the NCA register is part of the double entry system.
2) a NCA register is required in every organisation’s accounting system.
3) assets should be removed from the NCA register when they have been fully depreciated.

Answer 8

None of the statement

Question 9

Double entry for part exchange

Answer 9

Dr New NCA account
Cr Disposal account

Question 10

Reasons for maintaining a NCA register?

Answer 10

1) to help carrying out the physical verification of NCA
2) to calculate the profit/loss on disposal of NCA

Question 11

Should normally be recorded in a NCA register

Answer 11

Location of each asset.
Serial number of each asset.
Accumulated depreciation on each asset.

Question 12

Dr Asset disposal account
Cr NCA at cost

Answer 12

Transfer of the original cost of the old NCA on disposal.

Question 13

Accounting entries for depreciation

Answer 13

Dr Depreciation
Cr Accumulated depreciation

NBV = Cost - Accumulated depreciation

Question 14

Double entry:
Cost of asset disposed

Answer 14

Dr Disposal account
Cr NCA at cost value

Question 15

Double entry:
Accumulated depreciation on asset disposed

Answer 15

Dr Accumulated depreciation acc
Cr Disposal account

Question 16

Double entry:
Sales proceeds

Answer 16

Dr Bank
Cr Disposal account

Question 17

Disposal account

Answer 17

Balance on disposal account = Profit/loss on disposal
Balance c/d Dr Profit
Balance c/d Cr loss

Question 18

What is the accounting concept that specifies NCA should be valued at cost less accumulated depreciation, rather than at their enforced saleable value?

Answer 18

Going concern concept

Assumption to the business going to operate (take the breakup value)