FAC1502 ACCOUNTING EVALUATION ANSWERS
AND QUESTIONS SET A+
✔✔NATURE OF AN ASSET : NON - CURRENT - ✔✔Have an operating life span of
more than one year. May be tangible; intangibe or financial assets.
✔✔NATURE OF AN ASSET: DEFERRED EXPENSE - ✔✔Incurred but not allocated as
expenses during a period if they can be recovered within a year; they are current
assets. If they are recovered after a year; they are non-current assets.
✔✔DETERMINATION OF THE COST PRICE OF PROPERTY; PLANT; AND
EQUIPMENT - ✔✔1. Purchase price
2. Installation costs
3. Any other expenses incurred in getting the asset operational.
✔✔DETERMINATION OF THE COST PRICE OF PROPERTY; PLANT; AND
EQUIPMENT: HISTORICAL COST PRICE - ✔✔Constant cost price throughout life of
asset.
✔✔SAFEGUARDING AND CONTROL OF PROPERTY; PLANT AND EQUIPMENT -
✔✔Asset register:
1. Location
2. Serial number
3. Cost price
4. Date of aquisition
5. Expected lifespan
6. Carrying amount
7. Current Year's Depreciation
8. Accumulated Depreciation
✔✔RECORDING THE PURCHASE OF PROERTY; PLANT AND EQUIPMENT -
✔✔The purchase of property; plant and equipment is recorded in the applicable asset
accounts.
, The totals of the cost prices in the assets register with regard to a specific assset
account must be equal to the balance of that asset account in the general ledger.
At the end of each period the asset account is balanced and reconciled with the amount
in the asset register.
✔✔THE CONCEPT OF DEPRECIATION - ✔✔The systematic allocation of the
depreciable amount of an asset over its useful life.
✔✔RECORDING DEPRECIATION - ✔✔Debit (Dr) depreciation expense, credit (Cr)
accumulated depreciation
✔✔NET CARRYING AMOUNT - ✔✔Debit balance of asset - Credit balance on the
accumulated depreciation
✔✔METHODS OF CALCULATING DEPRECIATION - ✔✔1. Straight-line method
2. Diminising Balance method
3. Production Unit method
✔✔METHODS OF CALCULATING DEPRECIATION : STRAIGHT-LINE METHOD -
✔✔Cost price/Lifespan in Years
✔✔METHODS OF CALCULATING DEPRECIATION : DIMINISHING METHOD - ✔✔A
fixed % of the carrying amount is written off x cost price
✔✔METHODS OF CALCULATING DEPRECIATION : PRODUCTION UNIT METHOD -
✔✔Units produced during the year/expected number of units to be produced over life
span
✔✔DISPOSAL OF PROPERTY; PLANT AND EQUIPMENT - ✔✔-Occurs when asset is
sold, traded, or discarded
-Update depreciation to the date of disposal and calculate gain or loss
- A gain occurs when the selling price of the asset exceeds its book value
- A loss occurs when the selling price of the asset is less than its book value
-Gain or loss is reported in the Other Income or Expense category of the Income
Statement
✔✔PRO RATA DERECIATION - ✔✔When an asset is sold before the end of its
expected life span and during the financial; the pro rata depreciation for the period from
the beginning of the financial year up to the date of sale must be take into account as
part of the accumulate depreciation.
AND QUESTIONS SET A+
✔✔NATURE OF AN ASSET : NON - CURRENT - ✔✔Have an operating life span of
more than one year. May be tangible; intangibe or financial assets.
✔✔NATURE OF AN ASSET: DEFERRED EXPENSE - ✔✔Incurred but not allocated as
expenses during a period if they can be recovered within a year; they are current
assets. If they are recovered after a year; they are non-current assets.
✔✔DETERMINATION OF THE COST PRICE OF PROPERTY; PLANT; AND
EQUIPMENT - ✔✔1. Purchase price
2. Installation costs
3. Any other expenses incurred in getting the asset operational.
✔✔DETERMINATION OF THE COST PRICE OF PROPERTY; PLANT; AND
EQUIPMENT: HISTORICAL COST PRICE - ✔✔Constant cost price throughout life of
asset.
✔✔SAFEGUARDING AND CONTROL OF PROPERTY; PLANT AND EQUIPMENT -
✔✔Asset register:
1. Location
2. Serial number
3. Cost price
4. Date of aquisition
5. Expected lifespan
6. Carrying amount
7. Current Year's Depreciation
8. Accumulated Depreciation
✔✔RECORDING THE PURCHASE OF PROERTY; PLANT AND EQUIPMENT -
✔✔The purchase of property; plant and equipment is recorded in the applicable asset
accounts.
, The totals of the cost prices in the assets register with regard to a specific assset
account must be equal to the balance of that asset account in the general ledger.
At the end of each period the asset account is balanced and reconciled with the amount
in the asset register.
✔✔THE CONCEPT OF DEPRECIATION - ✔✔The systematic allocation of the
depreciable amount of an asset over its useful life.
✔✔RECORDING DEPRECIATION - ✔✔Debit (Dr) depreciation expense, credit (Cr)
accumulated depreciation
✔✔NET CARRYING AMOUNT - ✔✔Debit balance of asset - Credit balance on the
accumulated depreciation
✔✔METHODS OF CALCULATING DEPRECIATION - ✔✔1. Straight-line method
2. Diminising Balance method
3. Production Unit method
✔✔METHODS OF CALCULATING DEPRECIATION : STRAIGHT-LINE METHOD -
✔✔Cost price/Lifespan in Years
✔✔METHODS OF CALCULATING DEPRECIATION : DIMINISHING METHOD - ✔✔A
fixed % of the carrying amount is written off x cost price
✔✔METHODS OF CALCULATING DEPRECIATION : PRODUCTION UNIT METHOD -
✔✔Units produced during the year/expected number of units to be produced over life
span
✔✔DISPOSAL OF PROPERTY; PLANT AND EQUIPMENT - ✔✔-Occurs when asset is
sold, traded, or discarded
-Update depreciation to the date of disposal and calculate gain or loss
- A gain occurs when the selling price of the asset exceeds its book value
- A loss occurs when the selling price of the asset is less than its book value
-Gain or loss is reported in the Other Income or Expense category of the Income
Statement
✔✔PRO RATA DERECIATION - ✔✔When an asset is sold before the end of its
expected life span and during the financial; the pro rata depreciation for the period from
the beginning of the financial year up to the date of sale must be take into account as
part of the accumulate depreciation.
