Lec 5 - depreciation non current asset

Question 1

what are the two ways to value NCA

Answer 1

Historical Cost Accounting

Fair Value

Question 2

In historical accounting how are NCA valued

Answer 2

cost - aggregate/accumulated depreciation

Question 3

what is accumulated depreciation

Answer 3

measuring loss in value of asset from the date bought to the date of SOFP total !!!

Question 4

what is net book value /written down value/net carrying amount

Answer 4

cost - accumulated depreciation

Question 5

when doing standard depreciation i.e percentage what 3 things do you make sure you include in statement

Answer 5

the historic cost

accuulated depreciaition total

NBV

Question 6

What is the historic cost of an asset

Answer 6

cost when bought

Question 7

all tangible assets except what are to be depreciated and why

Answer 7

land and property

usually go up in value

Question 8

how do we say it when recording it

Answer 8

asset x depreciated by £A during accouting year
- recorded as an expense in the P and L Account

and say NBV INI bbalance sheet

Question 9

how is accumulated depreciation shown - i.e. written as

Answer 9

provision for depreciation

Question 10

depreciation methods

Answer 10

straight line

reducing balance method

Question 11

what does straight line method assume

Answer 11

depreciated by same amount each yea throughout useful economic life

Question 12

straight line calculation

Answer 12

historical cost - residual value

/useful economic life

or

% * the original cost

Question 13

residual value

Answer 13

value at the end of the useful life

Question 14

useful economic life

Answer 14

years company intends to use the asset no the amount of years it can be used for

Question 15

reducing balance method is more

Answer 15

practical

Question 16

wha t does reducing baalnce method think

and what does it use

Answer 16

asset dont depreciate by same amount yearly

faster depreciation in the earlier periods

uses a depreciation rate

Question 17

how do you do the reducing balance method

Answer 17

depreciate as a percentage of the net book value

Question 18

when doing the depreciation what two things to remeber

• exclusion
• focus

Answer 18

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

Question 19

when presented with a depreciation problem what are the three steps

Answer 19

calc depreciation

put in expenses

go to bs to do nbv equation

put in balance sheet

Question 20

provision for depreciation is totla depreciation up to

Answer 20

the end of the last financial year - we’ve got to calculate from now on

Question 21

what dsteps to take when doing reducing baalnce and only given cost and accum depreciation

Answer 21

do cost - accum depreciation * rate

i.e NBV x % of

Question 22

when disposing a NCA when will you make a profit

Answer 22

Proceeds of sale >NBV

Question 23

when disposing a NCA when will you make a loss

Answer 23

NBV > Proceeds of sale

Question 24

if make a profit on disposal of NCCA what do we record it as

Answer 24

income in IS

Question 25

If we make a loss on disposal of NCA what do we record it as

Answer 25

EXPENSE IN IS

Question 26

ONLY CALCULATE DEPRECIATION FOR

Answer 26

Assets still owned by the company

Question 27

its always NBV at the

Answer 27

selling point

Question 28

when w/o NBV for the still owned what two things must you make sure account for only the still owned vehicles

Answer 28

cost

accumulated depreciation

make sure you take sold vehicle away

Question 29

when company sells their assets what’s the influence on the bank account and regardless off

Answer 29

increases by selling amount

regardless of whether they made a profit or loss

Question 30

!! When you are told to use reducing baalnc but havent been given an NBV yet what do you do

Answer 30

do striaght line method first to work out depreiatiion

then from there do the reducing balance method xxx

Question 31

when doing depreciation to make w/o useful what columns should you have

Answer 31

year

depreciation

NBV