Depreciation (Week 7)

Question 1

What is Capital Expenditure?

Answer 1

Funds used to acquire, improve, or extend the life of non-current assets

(Amount is added to the carrying value before depreciation)

Question 2

What is Revenue Expenditure?

Answer 2

Funds spent on day-to-day expenses to maintain operations and generate revenue

Question 3

IAS 16

Answer 3

PPE is initially measured at cost, including purchase price and directly attributable expenses like preparation, delivery, and installation

Question 4

What is Depreciation?

Answer 4

The process of spreading the original cost of a non-current asset over the accounting periods in which its benefit will be consumed

Question 5

Change in Expected Life

Answer 5

If after a period of an asset’s life it is realised that the original useful life has been changed, then the depreciation charge needs to be adjusted

Revised charge at the date becomes:

Carrying Amount (Cost) at revised date / remaining useful life

Question 6

Effects of Disposals

Answer 6

An asset a profit or loss will arise depending on whether disposal proceeds are greater or less than the carrying value of the asset

–> If proceeds > CV = profit
–> If proceeds < CV = loss