Chapter 13 - Accounting for NCA (1) Flashcards
Depreciation definition
the allocation of the cost of a NCA over its Useful life
Depreciation expense definition
that part of the cost of a NCA that has been incurred in the current period
Which Accounting Assumption does Depreciation Uphold
Accrual Basis Assumption as depreciation recognises the expense incurred of the NCA in the current period
Historical Cost Definition
the original purchase price of the NCA
Residual Value Definition
the estimated value of the NCA at the end of its useful life
Useful life Definition
the estimated period of time for which the NCA will be used by the current entity to earn revenue
Explain the Straight Line Method for depreciation
A method of depreciation which assumes the NCA contributes evenly to revenue over its useful life.
What are the entries for Depreciation Expense
Depreciation of NCA DR
Acc.Depn of NCA CR
‘Yearly Depreciation of NCA- Straight Line method used (memo 51)’
Carrying Value Definition
the value of a NCA that is yet to be incurred/allocated as an expense, plus any residual value
What is meant by ‘cost of a Non-Current Asset’
all costs incurred in order to bring the asset into a location and condition ready for use, which will provide a benefit for the life of the asset
