Chapter 5 Flashcards
What may the business receive on disposal of a non-current asset?
Cash proceeds also known as scrap proceeds alternatively it may be able to part exchange an old asset for this to be recognised towards a new asset
What are the three main considerations for disposal?
The gain or loss that will arise on the disposal, the accountant entries to record the disposal, offering an asset in part exchange against the purchase of a new asset
Define gain or loss on disposal
The difference between the carrying amount of the asset at the date of disposal and the disposal proceeds
When a non-current asset is disposed of what needs to be removed from the statement of financial position
The carrying amount
What does it mean if there is a gain on a disposal?
The assets suffered too much to appreciation during its lifetime and some of this must be credited back to the statement of profit and loss
What does it mean if there is a loss on a disposal?
Then the asset was not depreciated enough during its lifetime and so an extra charge is needed on the disposal in the statement of profit loss
Define disposals account
The ledger can use to record all aspects of the disposal of non-current asset
What are the steps for a disposal of a noncurrent asset for cash?
Remove the cost of the asset, remove the accumulated depreciation charge today, account for the sales proceeds, balance off the display account to determine the gain or loss
What is again on disposal shown as in the statement of profit and loss?
Is sun dry income and a loss is an expense
Define part exchange allowance
The value assigned to the old asset being part exchange by the supplier of the new asset
What are the five steps of disposal of a noncurrent asset in part exchange for a new asset?
Open disposal account, Remove the cost of the asset, remove the accumulated depreciation charge day, account for the part exchange allowance, balance of the disposes account to determine gain or loss, record any additional payment made for the part exchange account
Define non-current assets register
A register that less all the tangible non-current assets owned by the business and includes detailed information on the cost acquisition date depreciation carrying out and ultimately the disposal details of each item
What does noncurrent asset register record?
All of the tangible non-current assets owned by the business it lists detailed information on the assets which can include item name asset type serial number depreciation policy carrying out etc
Ultimately, what does the assets register show?
The disposal date and any proceeds received on disposal of the items
What is the purpose of the non-current assets register?
Man for internal use and does not form part of the general ledger. This register can be used to find the physical location and condition of assets into check entries and balances in the general ledger.
What does reconciliation between the non-current asset and the general ledger enable?
The business to identify discrepancies and take action where necessary… The physical noncurrent asset that a business hold should be checked against the register
An accountant is likely to reconcile the non-current asset register to the normal normal ledger in order to
Confirm the accuracy of the accounting records… The frequency of the reconciliation is likely to depend on the number of non-current asset transactions in the year e.g. a year is sometimes enough
When performing the reconciliation between the non-current asset register to the nominal ledger, the accountant is looking for a differences between
Then on current asset register and the nominal ledger and to make any required connections
Each accounting. The non-current asset register must be updated to reflect
Any acquisitions of non-current assets, any disposals of noncurrent assets, depreciation
