Lec 5 - depreciation non current asset Flashcards
what are the two ways to value NCA
Historical Cost Accounting
Fair Value
In historical accounting how are NCA valued
cost - aggregate/accumulated depreciation
what is accumulated depreciation
measuring loss in value of asset from the date bought to the date of SOFP total !!!
what is net book value /written down value/net carrying amount
cost - accumulated depreciation
when doing standard depreciation i.e percentage what 3 things do you make sure you include in statement
the historic cost
accuulated depreciaition total
NBV
What is the historic cost of an asset
cost when bought
all tangible assets except what are to be depreciated and why
land and property
usually go up in value
how do we say it when recording it
asset x depreciated by £A during accouting year
- recorded as an expense in the P and L Account
and say NBV INI bbalance sheet
how is accumulated depreciation shown - i.e. written as
provision for depreciation
depreciation methods
straight line
reducing balance method
what does straight line method assume
depreciated by same amount each yea throughout useful economic life
straight line calculation
historical cost - residual value
/useful economic life
or
% * the original cost
residual value
value at the end of the useful life
useful economic life
years company intends to use the asset no the amount of years it can be used for
reducing balance method is more
practical
wha t does reducing baalnce method think
and what does it use
asset dont depreciate by same amount yearly
faster depreciation in the earlier periods
uses a depreciation rate
how do you do the reducing balance method
depreciate as a percentage of the net book value
when doing the depreciation what two things to remeber
- exclusion
- focus
exclude land and buildings
only focus on assets still in the business ownership/relevant ones as the provision for depreciation shows us depreciation for all assets in use
when presented with a depreciation problem what are the three steps
calc depreciation
put in expenses
go to bs to do nbv equation
put in balance sheet
provision for depreciation is totla depreciation up to
the end of the last financial year - we’ve got to calculate from now on
what dsteps to take when doing reducing baalnce and only given cost and accum depreciation
do cost - accum depreciation * rate
i.e NBV x % of
when disposing a NCA when will you make a profit
Proceeds of sale >NBV
when disposing a NCA when will you make a loss
NBV > Proceeds of sale
if make a profit on disposal of NCCA what do we record it as
income in IS
