Non-current Assets Flashcards
Capital expenditure
Expenditure which results in the acquisition of long-term assets or an improvement or enhancement of their earning capacity
Revenue expenditure
Expenditure which is incurred either
- for trade purposes (includes purchases of raw materials or items for resale, expenditure on wages and salaries, selling and distribution expenses, administrative expenses and finance costs) or
- To maintain the existing earning capacity of long-term assets
Where is revenue expenditure charged to
The statement of profit or loss or a period
Capital income
Profits from the sale of non-current assets
Revenue income
Income derived from the sale of trading assets, such a goods held in inventory, the provision of services and interest and dividends received from business investments
What is the point in depreciation
Spreads cost over an asset’s useful life
Objective of depreciation
The need to depreciate non-current assets arises from the accruals principle
What is carrying amount
Cost less accumulated depreciation
When the value of a non-current asset falls to less than its carrying amount…
It has suffered an impairment loss
What is recoverable amount
An assets new value after suffering impairment loss
How to calculate impairment loss
Carrying amount less recoverable amount
Recoverable amount is calculated as…
The higher of
- fair value less costs to sell
- value in use (this is given to you in the exam)
What are some types of intangible asset
Brands, patents, licenses, goodwill and development
If a business has goodwill what does this mean
The value of the business as a going concern is greater than the carrying amount of its assets less its liabilities
Goodwill is NOT
An intangible asset, unless it is purchased goodwill
