Chapter 3 Flashcards
(13 cards)
What is capital expenditure?
Expenditure which results in their replacement or improvement of non-current asset
What is revenue expenditure?
Any expenditure for the trade of the business or to repair maintain and service current assets
What is capitalised?
Including the cost of a non-current asset in the statement of financial position
What does revenue expenditure resulting on the statement of profit and loss
Results in an expense
What does capital expenditure resulting on the financial statement position?
A non-current asset being shown
What is the capitalisation policy?
The businesses policy for determining when an expenditure on non-current asset is capitalise
What are most non-current assets categorised as in separate general ledger accounts?
Land and buildings, machinery, motor vehicles, furniture and fittings, computer computers
What is the cost of an item of property plant and equipment include?
It’s purchase price and any costs directly attributed to bring in an asset to the location and condition necessary for it to be capable of operating in a manner intended by management
What items are capitalised as part of the cost of non-current asset?
Cost of purchase, including delivery, cost of construction including labour costs, cost of site preparation including labour costs, cost of insulation and assembly, cost of testing, professional fees
What items cannot be capitalised as part of the cost of non-current assets?
Repair, maintenance and servicing costs as well as administration and general overheads
What happens to VAT if a business is not VAT registered when purchasing
The VAT will be capitalised along with the other relevant costs
What happens when an non-current asset is purchased for cash?
Increases the cost of non-current assets in the statement of financial position and it reduces the funds in the businesses bank account
What happens to assets which meet the criteria for capitalisation?
They will be accounted for as non-current assets
