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O-Level Non-current assets

What the O-Level syllabus expects for Non-current assets, and how to practise it.

What the syllabus expects

• Weigh accounting and non-accounting information to decide whether to buy or to rent non-current assets
• Weigh accounting and non-accounting information to decide which non-current asset to purchase
  Scope: Non-accounting factors limited to purpose, features, customer reviews and warranty
• Explain how the materiality theory bears on treating capital versus revenue expenditure
• Explain why depreciation must be charged, referring to the relevant accounting theories
  Scope: Relevant theories: matching, consistency, materiality and prudence
• Explain how net book value is presented in light of the relevant accounting theories
• Define capital expenditure and revenue expenditure
• Tell capital expenditure apart from revenue expenditure
• Sort transactions into capital or revenue expenditure
  Scope: Subsequent spending is capitalised only if it raises capacity, useful life and function
• Work out how classifying and treating capital versus revenue expenditure differently affects the period's profit/loss and non-current assets
• Write the journal entries when non-current assets are bought
  Scope: By cash, on credit, or contributed by the owner
• Draw up the non-current asset ledger account capturing both purchase and sale
• Read the non-current asset ledger account
• Define depreciation and accumulated depreciation
• Give the causes of depreciation
• Name and tell apart the straight-line and reducing-balance depreciation methods
• Explain which depreciation method suits which kind of non-current asset
• Compute depreciation and accumulated depreciation under both the straight-line and reducing-balance methods
  Scope: Partial (whole-month) or full-year depreciation in the year of acquisition
• Compute the depreciation rate, useful life, yearly depreciation, accumulated depreciation and either the cost of a non-current asset or its net book value
• Write the journal entries for depreciation and accumulated depreciation
• Work out how the choice of depreciation method affects the period's profit/loss and the net book value of non-current assets
• Read the depreciation and accumulated depreciation ledger accounts
• Compute the gain or loss when a non-current asset is sold
• Write the journal entries for selling non-current assets
• Read the disposal ledger account kept for a non-current asset
  Scope: No depreciation is charged in the year of sale
• Name how non-current assets are valued in the Statement of Financial Position
  Scope: At cost less accumulated depreciation (net book value)
• Produce, from both the Statement of Financial Position and the Statement of Financial Performance, extracts that set out depreciation, accumulated depreciation and net book value
• Produce a Statement of Financial Performance extract showing the gain or loss on selling non-current assets

More O-Level Principles of Accounts topics

Roles of accounting and of accountants · Stakeholders and what they need in order to decide · Judging profitability · Judging liquidity · Judging efficiency of inventory and trade receivables management · Kinds of business · all of O-Level Principles of Accounts