NCA Quiz 1

What are non-current assets?

• Resources which a business pay for which are used up within one year

• Resources that businesses own or control which are expected to provide future benefits

What is materiality theory?

• If an amount spent is insignificant to decision making, NCA can be classified as revenue expenditure.

• If an amount spent is insignificant to decision making, NCA can be classified as capital expenditure.

What is capital expenditure?

• Costs to purchase and enhance NCA

• Costs to operate, repair and maintain NCA

How is revenue expenditure classified in the books?

• Expenses

• Non-current assets

Classify this correctly:

Purchase of office

• Capital expenditure

• Revenue expenditure

Classify this correctly:

Building a new toilet for the office extension

• Capital expenditure

• Revenue expenditure

Classify this correctly:

Painting the office

• Capital expenditure

• Revenue expenditure

Installation of shelves and cabinets in the showroom

• Capital expenditure

• Revenue expenditure

If capital expenditure is wrongly classified as revenue expenditure,

• expenses will be understated

• expenses will be overstated

If revenue expenditure is wrongly classified as capital expenditure

• expenses will be overstated

• expenses will be understated