Lecture 5 Flashcards
1
Q
What are the two main depreciation methods?
A
- Straight line method
- Reducing balance method
2
Q
How is depreciation recorded in the accounting equation?
A
Depreciation expense and a contra-asset called accumulated depreciation
3
Q
In which statement would the contra-asset ‘accumulated depreciation’ appear?
A
Statement of financial position
4
Q
What is the formula for depreciation under the reducing balance method?
A
NBV x (1 - n√R/C)
5
Q
What is the term for unexpected events that drastically reduce the value of non-current assets (e.g. fire)?
A
Impairment
6
Q
What are the main inventory valuation methods?
A
- FIFO
- LIFO
- AVCO
7
Q
What does FIFO stand for?
A
First In, First Out
8
Q
What does LIFO stand for?
A
Last In, First Out
9
Q
What does AVCO stand for?
A
Average Value Cost
10
Q
Which inventory valuation method is banned by IFRS? Why?
A
LIFO due to LIFO layers/liquidation
