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Accounting for Assets and Liabilities

6 dot points across 6 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

How is depreciation calculated under the straight-line and reducing-balance methods, and why is it charged at all?

Calculate depreciation using the straight-line and reducing-balance methods and explain the purpose of depreciation
A focused answer to the H2 Principles of Accounting outcome on depreciation. The straight-line and reducing-balance methods, why depreciation applies the matching concept, accumulated depreciation and carrying amount, and choosing a method.
10 min answer →

How is the profit or loss on disposing of a non-current asset calculated and recorded?

Account for the disposal of a non-current asset and calculate the resulting profit or loss on disposal
A focused answer to the H2 Principles of Accounting outcome on asset disposal. The disposal account, transferring cost and accumulated depreciation, recording the proceeds, and computing the profit or loss as proceeds less carrying amount.
9 min answer →

Why is inventory valued at the lower of cost and net realisable value, and how does the valuation affect profit?

Value inventory at the lower of cost and net realisable value and explain the effect on profit and the statement of financial position
A focused answer to the H2 Principles of Accounting outcome on inventory. The lower of cost and net realisable value rule, what cost and NRV include, the prudence and matching basis, and the profit impact of valuation errors.
9 min answer →

Which costs are capitalised into property, plant and equipment, and how is the distinction between capital and revenue expenditure made?

Identify the costs capitalised into property, plant and equipment and distinguish capital from revenue expenditure
A focused answer to the H2 Principles of Accounting outcome on property, plant and equipment. Capitalising the cost of bringing an asset into use, the capital versus revenue distinction, subsequent expenditure, and the effect on profit.
9 min answer →

When is a provision recognised as a liability, and when is an item only a contingent liability to disclose?

Distinguish provisions, contingent liabilities and contingent assets and apply the recognition rules
A focused answer to the H2 Principles of Accounting outcome on provisions and contingencies. The recognition test for a provision, when items are only disclosed as contingent liabilities, the treatment of contingent assets, and prudence.
9 min answer →

How are irrecoverable debts and the allowance for impairment of trade receivables accounted for?

Account for irrecoverable debts and the allowance for impairment of trade receivables and explain the prudence behind them
A focused answer to the H2 Principles of Accounting outcome on trade receivables. Writing off irrecoverable debts, creating and adjusting the allowance for impairment, recoveries, and the net receivables shown on the statement of financial position.
10 min answer →