F3 (4)

F3 (4)

1. Acquisition of non-current assets – a register is maintained in order to control these assets and keep track of what is owned and where it is kept

   • It is periodically reconisiled to the non-current asset accounts maintained I he general ledger – cost, depreciation charges
     • Included: Capital Revenue such as: purchase price, delivery costs, legal fees, subsequent expenditure which enchases the asset, trials and tests
       • Excludes Revenue Expenditure such as: repairs, renewals, repainting, administration, general overheads, training costs, wastage
         • Dr Non-current Assets CR Bank/Cash/Payables

2. Straight Line Depreciation – benefit is consumed evenly, useful for assets which provide equal benefit each year eg machinery

   • Reducing Balance – benefit is consumed in earlier years as provides more benefit in early years ie cars and IT equipment
     • Assets bought within the accounting period
       • 1. Provide a full years depreciation in the year of acquisition and none in the year of disposal 2. Monthly pro-rata depreciation based on the exact number of months the asset has been owned
         • Dr Depreciation expense Cr Accumulated depreciation

3. Disposal for Cash consideration

   • 1. Remove the original cost of the non-current asset from the non-current asset account Dr Disposals account Cr NC Asset account
     • 2. Remove accumulated depreciation on the non-current asset from the accumulated depiction account Dr Accumulated depreciation account Cr disposal account
       • 3. Record the proceeds DR cash account CR disposal account

4. Part Exchange Agreement

   • 1. Remove the original cost of the non-current asset from the non-current asset account Dr Disposals account Cr NC Asset account
     • 2. Remove accumulated depreciation on the non-current asset from the accumulated depiction account Dr Accumulated depreciation account Cr disposal account
       • 3. Record the part exchange allowance as proceeds Dr NC Asset account (part cost of new asset) CR Disposals (sale proceeds of old asset)
         • 4. Record the cash paid for the new asset Dr NC Assets Cr Cash

5. Deprecation and disposal of a revalued asset

   • When a non-current asset has been revalued the charge for the depreciation should be based on the revalued amount and the remaining useful life if the asset
     • This charge will be higher than the deprication prior to the revaluation
       • Dr revaluation surplus Cr retained earnings
         • Disposal of Revaluated Asset Dr Revelation Surplus CR Retained earnings
           • Deprecation for Statements
             • Statement of FP – aggerated CV of NC assets disclosed on the face of the statement of FP
               • Statement of P&L – depreciation charge included within the relevant expense categories
                 • Notes to the Accounts – disclosure of deprecation methods and rates used, NC assets disclosed and details of revaluations

6. Tangible NC Assets: normally have a physical substance eg land and buildings

   • Normally involve expenditure being incurred
     • Cost if the tangible NC asset is capitalised
       • Deprecation is a reflection of the wearing out of the asset

7. Intagable NC Assets: do not normally have a physical presence ie copyright

   • Can be purchased or may be created within a business ie brands
     • Purchased intangible assets are capitalised
       • Amortisation is reflection of wearing out of the capitalised asset
         • Examples: development costs, goodwill, trade marks, licences, copy right, franchise