Week 5

Question 1

What is the format for the UK GAAP?

Answer 1

It has a stricter format than IFRS. It contains detailed formats that must be followed correctly. Both IFRS and UK GAAP have separate standards for SMEs

Question 2

How do you deal with opening balances (closing balances from previous year)?

Answer 2

Roll forward running balances (amounts from last years SOFP only) as opening balances

All Assets=Debits
All Liabilities=Credits

Question 3

When will an asset classified as current?

Answer 3

• when it holds the asset primarily for the purpose of trading
• the asset is cash or cash equivalent
• it expects to realize the asset within 12 months after the reporting period

An entity shall classify all other assets as non-current

Question 4

What are examples of tangible (non-current) assets?

Answer 4

Tangible assets has a physical substance
Examples include:
-land and buildings
-raw materials
-motor vehicles

Question 5

What are examples of intangible (non-current) assets?

Answer 5

Intangible assets has no physical substance.
Examples:
-Trade Marks
-Development Costs
-Goodwill
-Brands

Question 6

What are improvements after purchase?

Answer 6

Improvement expenditure may extend the assets annual output capacity

• increasing its economic life
• reducing associates running costs
• improving the quality of its output

Question 7

What are costs incurred to improve on the assets original condition?

Answer 7

Costs incurred to improve on the assets original condition:
E.g.
-extension to a building
-rebuilding shop fittings to attract new type of customer

These costs should be added to the original cost and depreciated over the remainder of its useful life

Question 8

What are costs incurred to maintain, repair or restore the asset to its original condition?

Answer 8

Costs incurred to maintain, repair or restore the asset to its original condition- treated as an expense and charged to the income statement:e.g.

• replacing roof damaged in storm
• replacing engine in bus