NCA Depreciation quiz 407 revision

Which theory states that if an amount spent on a non-current asset is insignificant to decision-making when compared to the size of the income, profit, assets or equity of the business, it does not need to be reported in the statement of financial position as a non-current asset.

• Matching theory

• Prudence theory

• Materiality theory

The below information classifies expenditure as:

Costs to buy and bring the non-current assets to their intended use, or to enhance and extend NCA's useful life.

• Revenue expenditure

• Capital expenditure

Calculate the cost of equipment:

1. Purchase price $10,000

2. Installation $5,000

3. Salary of workers to operate equipment $1,000

• $10,000

• $15,000

• $16,000

What are non-current assets?

• Resources that businesses own or control that are expected to provide future benefits beyond one year.

• Resources that businesses own or control with benefits that are used up within one financial year.

What do businesses depreciate?

• All assets

• Non-current assets

• Current assets

What is depreciation?

• Repair and maintenance of non-current assets

• Allocation of cost of non-current assets over its useful life.

What is the double entry to record depreciation?

• Dr Depreciation, Cr Non-current assets

• Dr Accumulated depreciation, Cr Depreciation

• Dr Depreciation, Cr Accumulated depreciation

How do you classify depreciation?

• Expense

• Non-current assets

Where is depreciation recorded?

• Statement of financial performance

• Statement of financial position

How do you calculate net book value?

• Cost of NCA + Accumulated depreciation

• Cost of NCA - Accumulated depreciation

• Cost of NCA - Annual Depreciation