Managing Resources - U3T1

What are non-current assets?

• Assets that are purchased by the business and intended for resale

• Assets that are purchased by the business and used within the operation of the business to earn revenue

• Assets that are purchased by the business and kept for less than one accounting period

• Assets that are purchased by the business and used for personal purposes

How can non-current assets be classified?

• Property, plant and equipment; Intangible assets; Other financial assets (Intangibles)

• Current assets; Long-term assets; Financial assets; Tangible assets

• Fixed assets; Current assets; Tangible assets; Intangible assets

• Assets; Liabilities; Equity; Revenue

What is the difference between capital expenditure and expense?

• Capital expenditure is for long-term assets, while expense is for short-term assets

• Capital expenditure is recorded in the Statement of Financial Position, while expense is recorded in the Statement of Profit or Loss

• Capital expenditure is for assets that will be consumed during the current accounting period, while expense is for assets that will be used for longer than one accounting period

• Capital expenditure is for assets that will generate revenue, while expense is for assets that will not generate revenue

What is depreciation?

• The allocation of the depreciable amount of an asset over its useful life

• The increase in the value of an asset due to wear and tear

• The process of setting aside cash for the replacement of an asset

• The gradual writing off of the cost of an asset due to the passing of time

What factors determine the depreciation charge?

• The asset's cost price, estimated life, and residual value

• The asset's market value, estimated life, and residual value

• The asset's original cost, estimated life, and market value

• The asset's useful life, estimated residual value, and market value

What is the straight line method of calculating depreciation?

• A method where the depreciation charge is a uniform portion of the cost of the asset each accounting period

• A method where the depreciation charge is a decreasing percentage of the diminishing balance each accounting period

• A method where the depreciation charge is based on the number of units the asset is used

• A method where the depreciation charge is based on the sum of the digits of the asset's useful life

What is the diminishing balance method of calculating depreciation?

• A method where the depreciation charge is a uniform portion of the cost of the asset each accounting period

• A method where the depreciation charge is a decreasing percentage of the diminishing balance each accounting period

• A method where the depreciation charge is based on the number of units the asset is used

• A method where the depreciation charge is based on the sum of the digits of the asset's useful life

What is the purpose of depreciation?

• To set aside cash for the replacement of an asset

• To reduce the book value of an asset

• To increase the net asset structure of a business

• To accumulate cash for the replacement of an asset

What are the advantages of the diminishing balance method method of depreciation? (Choose all that apply)

• It takes into account the degree of usage, age, and efficiency of the asset

• It allows for the likelihood of greater cost of repairs in the later life of the asset

• It is suitable for use where the service rendered by the asset is greatest in the early years of its life

• It results in a lower depreciation charge as the asset becomes older

What is an advantage of the straight line method of depreciation?

• It is difficult to use.

• It is more appropriate where the benefits from the asset are roughly equal in each period, such as

  furniture and buildings.

• It does not take into account the degree of usage, age or efficiency of the asset

• It allows for the likelihood of greater cost of repairs in the later life of the asset due to wear in

  earlier accounting periods