What are non-current assets? Giving examples?
Non-current assets are divided into two categories:
Fixed assets: These are the assets that are purchased with the aim of using them for several accounting periods, and the aim of purchasing them is not to make a profit from them, such as the purchase of lands, buildings, cars, furniture, computers, and others.
Intangible Assets: These are the assets that the company owns and lacks a tangible physical entity, such as the patent, the goodwill of the shop, the key allowance, copyrights, and others.
What is the difference between depreciation expense and compound depreciation?
Consumption Expense: It is the amount of decrease in the book value of the asset during the current financial period, and it appears in the income statement deducted from the revenues of the current period as other expenses.
Accumulated depreciation: It is the sum of the depreciation expense for the current fiscal period and the previous fiscal periods, and it appears in the statement of financial position deducted from the cost of fixed assets
What are the factors that determine the consumption premium?
The useful life of the asset
Its value after the end of its useful life (scrap)
What are the costs of acquiring the original?
Expenses that are charged to the cost of the asset until the asset is ready for use.
What is the difference between revenue expenditures and capital expenditures?
Revenue expenses: These are the expenses that the establishment pays and the establishment benefits from for one fiscal year or less. It is called revenue because it contributes to achieving revenue during one fiscal year, so it appears in the income statement deducted from the period’s revenues, such as asset maintenance expenses, salary expenses, telephone and electricity expenses, advertising and others.
Capital Expenses: These are the expenses that the facility pays and the facility benefits from for more than one fiscal year, such as the expenses of building restoration and car engine replacement. These expenses that are spent on the asset will cover its benefit for a period exceeding one year or will increase the useful life of the asset. This type of expense is charged to the cost of the asset. Not on current period income.
Fixed assets are presented in the balance sheet at historical cost less accumulated depreciation to appear net as follows:
List of financial position for the year ..
The amount of assets, the amount of liabilities, and equity
xxx The name of the fixed asset
(xxx) Accumulated depreciation of the fixed asset
xxx fixed original net
xxx total assets xxx total liabilities and equity
Why are fixed assets depreciated?
Because the fixed asset, when used, will decrease in value with the passage of time, and in order for the financial statements to appear correctly and accurately, the cost of the asset must be shown at the historical cost less accumulated depreciation.
Why does the cost of a fixed asset appear at historical cost when presented in the budget?
Because it is difficult to evaluate the used asset in the market at the end of the financial period, but it is easy to verify the value of the asset when it is shown at the historical cost, which is equal to the purchase price shown on the invoice, in addition to the expenses incurred until the asset is ready for use.