Accounting Concepts and Terms

Front

What is Capital Expenditure?

Back

Expenditure resulting in the acquisition and installation of an asset whose life extends over more than one accounting period.

Front

Is capital expenditure added to the cost price of the asset?

Back

Yes, it is capitalised and added to the cost price of the asset.

Front

What are the types of Capital Expenditure?

Back

Expenditure to bring the asset into a location and condition ready for use, improvements or additions to existing assets, major expenditure to extend the life of the asset.

Front

What is Other Expenditure?

Back

Expenditure for property or services that will be consumed during the current accounting period.

Front

Is other expenditure added to the cost price of the asset?

Back

No, it is treated as a normal expense.

Front

What are the types of Other Expenditure?

Back

Expenditure to maintain the asset in good condition, expenditure associated with the asset like yearly registration and insurance.

Front

What is the Historical Cost Principle?

Back

All assets are initially recorded at the amount of cash paid at the time of acquisition, providing verifiable evidence of the transaction.

Front

What is Depreciation?

Back

The allocation of the depreciable amount of an asset over its useful life, calculated on non-current assets using the historical cost.

Front

What is Amortisation?

Back

The gradual writing off of the cost of certain assets due to the passing of time or depletion, usually for intangible assets and natural resources.

Front

What factors determine the depreciation charge?

Back

The asset’s cost price, anticipated useful life, anticipated residual value, and the method of calculating the depreciation charge.