Unit 2 AOS 3 Accounting

The value of a NCA

Cost of the asset and all other costs incurred to get the asset into revenue-earning capacity

Faithful representation of the NCA

The owner needs to determine the dollar value that reflects economics events

Verifiability of a NCA

Cost of a NCA can be checked using source docs such as an invoice, a chq butt, an EFT or a written contract

Items not included in the cost of a NCA

GST, expenses that will be paid each year. Eg. insurance, service contracts and registration

Capital contribution

Owner gives assets to the business. Eg. cash or NCAs

Fair value

An estimate of the value of a NCA contributed to a business

Fair value and Q.Cs

Supports faithful representation and relevance

Breaches verifiability

Depreciation

The process of allocating the cost of a NCA over its effective useful life

Useful life

An estimate of the time a business expects to use an asset to generate revenue

Straight-line depreciation

A method of depreciation that allocates a fixed amount of cost to each reporting period

Residual value

An estimate of how much an asset will be sold for when it is disposed of at the end of its useful life

Straight-line depreciation formula

(cost - residual value) / useful life

Depreciation is classified as a/an

Expense

Accumulated depreciation

A negative asset; the total amount of depreciation allocated from the time a business acquired an asset until the present date

Carrying value

The original cost of an asset less its accumulated depreciation at a particular date

Asset register

A record of the details of a non-current asset throughout its life in the business