21642 Chapter Notes - Chapter 2: Fiscal Year, Accelerated Depreciation, Deferral
13 Jun 2018
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Measuring and Reporting Financial Position III
Depreciation:
Factors needed to account depreciation:
-Cost or fair value of asset
-Useful life of asset
-Estimated residual value of the asset to the entity at the end of the useful life of the asset
-Depreciation method used
Methods of Depreciation:
•Straight-line depreciation - allocates equal depreciation for each year that asset is held
•Accelerated depreciation - depreciation documented as higher in early years of an asset’s life
•Reducing-balance method - fixed percentage is applied to written-down value
Written-down (net book) value - cost or fair value of an asset less the accumulated amount written-
off as depreciation to date.
Carrying amount - net book value shown in balance sheet.
Contra Asset - asset that rescues the value of another asset e.g. accumulated depreciation
(9000) = -9000
Inventory:
Costs of inventory:
-Cost of purchase
-Cost of conversion
-Other costs e.g. storage and security
Inventory assumptions:
-FIFO
-LIFO
-Weighted Average Cost (AVCO)
Inventory Recording Systems:
•Perpetual inventory system - maintains continuous records of all inventory movements at both
cost and selling price
•Physical (periodic) system - simply counts the stock at the end of a period
Net Realisable Value (NRV) - estimated selling price less any further costs.
Australian Financial Year: 1st July - 30th June
Income Statement
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Document Summary
Estimated residual value of the asset to the entity at the end of the useful life of the asset. Written-down (net book) value - cost or fair value of an asset less the accumulated amount written- off as depreciation to date. Carrying amount - net book value shown in balance sheet. Contra asset - asset that rescues the value of another asset e. g. accumulated depreciation (9000) = -9000. Inventory recording systems: perpetual inventory system - maintains continuous records of all inventory movements at both cost and selling price, physical (periodic) system - simply counts the stock at the end of a period. Net realisable value (nrv) - estimated selling price less any further costs. Australian financial year: 1st july - 30th june. Purpose of the statement of financial performance - to measure the economic performance of the. Revenues - in ow of resources, dollar amount of goods and services sold by a business.
