Week 4 - Accounting for Property, Plant and Equipment

Question 1

How is property, plant and equipment defined?

Answer 1

Assets that are held for use in the production or supply of goods and services, for rental to others or for administrative purposes

Question 2

How often is PPE expected to be used?

Answer 2

Used during more than one period (usually financial year)

Question 3

What do we need to do when we first buy property, plant or equipment?

Answer 3

Measure it at its cost

Question 4

What does ‘recognise’ or ‘measure’ at its cost mean?

Answer 4

Purchase price (or cost of making it) plus any costs directly associated with bringing the asset to working condition and location

Question 5

What is the double-entry bookkeeping for buying PPE at cost?

Answer 5

Debit PPE at cost (showing increase in asset)
Credit cash/trade payable (showing decrease)

Question 6

What may PPE records be referred to as?

Answer 6

Fixed Asset Register

Question 7

What are the five common ‘classes’ of PPE?

Answer 7

• land and buildings
• freehold property
• plant and equipment
• motor vehicles
• fixtures and fittings

Question 8

What are things like brand names, newspaper titles and patents?

Answer 8

Intangible non-current assets - cannot be classed as PPE