Accounting Unit 3 (QCAA)
Non-current assets – answer non-current assets are assets that are purchased by the
business and are not intended for resale, but
are to be used within the operation of the business to earn revenue, and will normally be
kept and
used for longer than one accounting period (generally a year).
Capital Expenditures - answer Expenditure resulting in the acquisition and installation of
an asset whose life will extend over more
than one accounting period is referred to as capital expenditure
Expense - answer Expenditure for property or services that will be consumed during the
current accounting period is
referred to as an expense.
Depreciation - answer Depreciation is the allocation of the depreciable amount of an
asset over its useful life. The term is
usually used in relation to physical assets.
Depreciable amount is the cost of the depreciable asset less the net amount expected
to be recovered
on disposal of the asset at the end of its useful life.
Amortisation - answerAmortisation refers to the gradual writing off of the cost of certain
assets due to the passing of time
or depletion. It usually refers to the writing off of intangible assets and natural resources
Wear and Tear - answerMany assets, particularly those of a mechanical and electrical
nature, diminish in worth
as a result of wear and tear. Repairs and maintenance can overcome this to some
extent, but eventually,
the asset will expend its useful life
obsolescence - answerIn a highly technical world, new inventions may make existing
equipment obsolete before
the end of its useful life. This is referred to as 'technical obsolescence'. Similarly,
equipment may become
obsolete because it is no longer suitable for use by the business, thereby diminishing
the worth of the
asset to the business. This is referred to as 'commercial obsolescence'. Both technical
and commercial
obsolescence may occur whether or not the assets are used.
Non-current assets – answer non-current assets are assets that are purchased by the
business and are not intended for resale, but
are to be used within the operation of the business to earn revenue, and will normally be
kept and
used for longer than one accounting period (generally a year).
Capital Expenditures - answer Expenditure resulting in the acquisition and installation of
an asset whose life will extend over more
than one accounting period is referred to as capital expenditure
Expense - answer Expenditure for property or services that will be consumed during the
current accounting period is
referred to as an expense.
Depreciation - answer Depreciation is the allocation of the depreciable amount of an
asset over its useful life. The term is
usually used in relation to physical assets.
Depreciable amount is the cost of the depreciable asset less the net amount expected
to be recovered
on disposal of the asset at the end of its useful life.
Amortisation - answerAmortisation refers to the gradual writing off of the cost of certain
assets due to the passing of time
or depletion. It usually refers to the writing off of intangible assets and natural resources
Wear and Tear - answerMany assets, particularly those of a mechanical and electrical
nature, diminish in worth
as a result of wear and tear. Repairs and maintenance can overcome this to some
extent, but eventually,
the asset will expend its useful life
obsolescence - answerIn a highly technical world, new inventions may make existing
equipment obsolete before
the end of its useful life. This is referred to as 'technical obsolescence'. Similarly,
equipment may become
obsolete because it is no longer suitable for use by the business, thereby diminishing
the worth of the
asset to the business. This is referred to as 'commercial obsolescence'. Both technical
and commercial
obsolescence may occur whether or not the assets are used.
