Introduction to Tangible Non-Current Assets Flashcards
What is capital expenditure?
Expenditure that results in the acquisition of long term assets or an improvement or enhancement of their earning capacity.
Where are items gained through capital expenditure found?
The statement of financial position.
What is revenue expenditure?
Expenditure incurred to maintain the existing earning capacity of long term assets. These are things like maintenance costs that can be found of the statement of profit or loss.
What is capital income?
Profits from the sale of long term assets.
What is revenue income?
Income from the sale of trading assets such as inventory, the provision of services and interest or dividends from investments.
What is the asset register?
A listing of all non-current assets owned by the organisation broken down by department, location, type and other financial and non-financial information.
What is included in the cost of a non-current asset?
The cost includes the purchasing price minus VAT. It also includes directly attributable costs to bring the asset to its intended location and for it to be ready to use.
What is depreciation?
The amount that represents the consumption of non-current assets during that period.
What is useful life?
The estimated economic life of the non-current asset.
What is residual value?
The estimated amount that the entity would currently obtain from disposing of the asset, after deducting expected disposal costs.
What is the carrying amount?
Cost less accumulated depreciation. Also known as net book value.
What are the two types of depreciation?
Straight line.
Reducing balance.
What is straight line depreciation?
Where the depreciation charge is the same every year.
What are the formulas for calculating straight line depreciation?
(Cost - Residual Value) / Useful Life
(Cost - Residual Value) / Predetermined Yearly % e.g 10% per year.
What happens with reducing balance depreciation?
The depreciation charge is higher in the early years and lower as time goes on.
