1.

Determine the cost of a fixed asset

https://www.wallstreetmojo.com/net-fixed-assets/

The Net fixed asset is the asset’s residual value of the fixed asset. It is calculated using the
total price paid for all fixed assets at the time of purchase minus the total depreciation amount
already taken since the time assets were purchased.

Net Fixed Assets Formula = Gross Fixed Assets – Accumulated Depreciation

Net Fixed Assets Formula= (Total Fixed Asset Purchase Price + capital improvements) –
(Accumulated Depreciation + Fixed Asset Liabilities)

2. Are all intangible assets amortised?

Amortization applies to intangible (non-physical) assets, while depreciation applies to

tangible (physical) assets. Intangible assets may include various types of intellectual
property—patents, goodwill, trademarks, etc. Most intangibles are required to be amortized
over a 15-year period for tax purposes.

3. What are included in the cost of an item of property, plant and equipment?

The cost of property, plant, and equipment includes the purchase price of the asset and all
expenditures necessary to prepare the asset for its intended use. Land purchases often
involve real estate commissions, legal fees, bank fees, title search fees, and similar expenses.
4. Explain the different methods of depreciation.
Features of Depreciation and the Methods
Every asset has only a timely use. And with that, the value has declined accordingly. So the
measure of declination of asset value over the period is calculated with depreciation. And the
following methods; straight-line method, written down value method, production unit
method, annuity method, sinking fund method have their features making the depreciation
process unique.

The major features of depreciation are listed below:

● By the usage, obsolescence or time that have passed, there is a loss of value occurred
for the assets. And it is included in it.
● The booked value of fixed assets that have affected a declination is what depreciation
is.
● Depreciation is a continuous process until the useful life period of the asset.
● We must deduct the cost of expiration, that is depreciation before calculating the
taxable profit.
● It doesn’t involve cash flow. Hence it can be called a non-cash expense.
● The loss measured must be constant and gradual.
● In depreciation, maintenance cannot be included.

5. How do you compute depreciation for partial years?

If you only owned the item for part of the year, then you will need to make a partial-year
depreciation calculation. To make this calculation, you take your full-year depreciation,
divide it by the number of months in a year, and then multiply it by the number of
months you've owned the item.

6. How do you change your depreciation computation when there are changes in the
estimates of useful lives or residual values?

To calculate depreciation using the straight-line method, subtract the asset's salvage value
(what you expect it to be worth at the end of its useful life) from its cost. The result is the
depreciable basis or the amount that can be depreciated. Divide this amount by the number of
years in the asset's useful lifespan.
 7. What journal entries are passed upon disposal of a property, plant and equipment?

https://fitsmallbusiness.com/journal-entry-disposal-of-fixed-assets/

When an asset reaches the end of its useful life and is fully depreciated, asset disposal occurs
by means of a single entry in the general journal. The accumulated depreciation account is
debited, and the relevant asset account is credited.

The accounting for plant asset disposals requires two journal entries: One to bring
depreciation up to date and (2) a second journal entry to record the disposal. Upon
disposal, the plant asset's cost and related accumulated depreciation should be removed from
the books. Any cash received is recorded.

8. How are research costs accounted differently from development costs?

The accounting treatment for all research expenditure is to write it off to the profit and loss
account as incurred. As a basic rule, expenditure on development costs should be written
off to the profit and loss account as incurred, as with the expenditure on research.

9. Distinguish between capital and revenue expenditures

Capital expenditure is the money spent by a firm to acquire assets or to improve the quality of
existing ones.

Revenue expenditure is the money spent by business entities to maintain their everyday
operations.
 10. Illustrate the accounting for depreciation using various methods

https://www.wallstreetmojo.com/depreciation/#:~:text=Companies%20depreciate%20assets
%20using%20these,into%20the%20accumulated%20depreciation%20account.

Companies depreciate assets using these five methods: straight-line, declining balance,
double-declining balance, units of production, and sum-of-years digits. In the balance
sheet, the amount shown as a depreciation expense charged goes into the accumulated
depreciation account.

11. Illustrate the accounting for the disposal of fixed assets

https://accounting-simplified.com/financial/fixed-assets/accounting-for-disposals/

The accounting for disposal of fixed assets can be summarized as follows:

1. Record cash receive or the receivable created from the sale: Debit Cash/Receivable.
2. Remove the asset from the balance sheet. Credit Fixed Asset (Net Book Value)
3. Recognize the resulting gain or loss. Debit/Credit Gain or Loss (Income Statement)

12. Illustrate the accounting for intangible assets and its amortisation

Amortization of intangibles, also simply known as amortization, is the process of expensing

the cost of an intangible asset over the projected life of the asset for tax or accounting
purposes.

The company should subtract the residual value from the recorded cost, and then divide that
difference by the useful life of the asset. Each year, that value will be netted from the
recorded cost on the balance sheet in an account called "accumulated amortization," reducing
the value of the asset each year.
 13. Distinguish between expenditure in the research phase and the development phase

14. Describe and distinguish different financial asset investments

4 main types of financial assets: bank deposits, stocks, bonds, and loans.

Bank deposits are a savings product that customers can use to hold an amount of money
at a bank for a specified length of time. In return, the financial institution will pay the
customer the relevant amount of interest, based on how much they choose to deposit and for
how long.

In finance, stock consists of the shares of which ownership of a corporation or company is

divided. A single share of the stock means fractional ownership of the corporation in
proportion to the total number of shares.

Bonds are issued by governments and corporations when they want to raise money. By
buying a bond, you're giving the issuer a loan, and they agree to pay you back the face value
of the loan on a specific date, and to pay you periodic interest payments along the way,
usually twice a year.

A loan is a financial product that allows a user to access a fixed amount of money at the
outset of the transaction, with the condition that this amount, plus the agreed interest, be
returned within a specified period. The loan is repaid in regular instalments.
 15. How are each type of financial assets accounted?

Transactions on deposit accounts are recorded in a bank's books, and the resulting
balance is recorded as a liability of the bank and represents an amount owed by the
bank to the customer. In other words, the banker-customer (depositor) relationship is one of
debtor-creditor.

Stock is an ownership share in an entity, representing a claim against its assets and
profits. The owner of stock is entitled to a proportionate share of any dividends declared by
an entity's board of directors, as well as to any residual assets if the entity is liquidated or
sold.

Interest payments in bond accounting

For the investor or buyer, interest payments are recorded in accounting as revenue.
Amortization will come into play if the bonds are issued at a discount or premium. The
difference in cost from face value (or par value) will be amortized in the books over the
bond's lifespan.

A loan is recognised on the balance sheet when the entity becomes party to a loan
agreement. Like other financial instruments, a loan is recognised on the balance sheet when
the entity becomes party to a contract that is a loan.

16. Illustrate the accounting for financial asset investments

https://corporatefinanceinstitute.com/resources/knowledge/accounting/financial-assets/
 17. Compute asset turnover and return on assets

https://www.indeed.com/career-advice/career-development/how-to-calculate-return-on-assets

Asset turnover, total asset turnover, or asset turns is a financial ratio that measures the
efficiency of a company's use of its assets in generating sales revenue or sales income to the
company.

Asset Turnover Ratio = Net Sales / Average Total Assets

Return on assets (ROA) is a ratio that tells you how much of a profit a company earns from
its resources and assets. This information is valuable to a company's owners and management
team and investors because it is an indication of how well the company uses its resources and
assets to generate a profit. Return on assets is represented as a percentage. For example, if a
company's ROA is 7.5%, this means the company earns seven and a half cents per dollar in
assets.

ROA is calculated by dividing a firm's net income by the average of its total assets. It is
then expressed as a percentage. Net profit can be found at the bottom of a company's income
statement, and assets are found on its balance sheet.

18. Illustrate the accounting for current and non-current liabilities and contingent
liabilities

Current and contingent liabilities are both important financial matters for a business. The
primary difference between the two is that a current liability is an amount that you
already owe, whereas a contingent liability refers to an amount that you could
potentially owe depending on how certain events transpire.

Current liabilities are listed on the balance sheet and are paid from the revenue generated by
the operating activities of a company. Examples of current liabilities include accounts
payables, short-term debt, accrued expenses, and dividends payable.

Non-Current Liabilities = Long term lease obligations + Long Term borrowings +

Secured / Unsecured Loans. It is supported by a borrower's strong creditworthiness and
economic stabilityread more + Provisions +Deferred Tax Liabilities + Derivative Liabilities +
Other liabilities getting due after 12 months.

Contingent liabilities require a credit to the accrued liability account and a debit to an
expense account. Once the obligation is realized, the balance sheet's liability account is
debited and the cash account is credited. Also, an entry is made in the associated expense of
the income statement.
 19. Explain the nature and classification of long-term liabilities and related interest
expense

Long-term liabilities are typically due more than a year in the future. Examples of
long-term liabilities include mortgage loans, bonds payable, and other long-term leases or
loans, except the portion due in the current year. Short-term liabilities are due within the
current year.

An interest expense is the cost incurred by an entity for borrowed funds. Interest expense is a
non-operating expense shown on the income statement.

20. Compute the debt ratio and times-interest-earned ratio

A company's debt ratio can be calculated by dividing total debt by total assets. A debt ratio
of greater than 1.0 or 100% means a company has more debt than assets while a debt ratio of
less than 100% indicates that a company has more assets than debt.

The times interest earned (TIE) ratio, also known as the interest coverage ratio, measures how
easily a company can pay its debts with its current income. To calculate this ratio, you divide
income by the total interest payable on bonds or other forms of debt.

21. Report liabilities in the financial statements

A company reports its liabilities on its balance sheet. According to the accounting equation,
the total amount of the liabilities must be equal to the difference between the total amount of
the assets and the total amount of the equity.

Liabilities are settled over time through the transfer of economic benefits including money,
goods, or services. Recorded on the right side of the balance sheet, liabilities include loans,
accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses.

Liability is generally recorded as a credit when there is an increase while recorded as a

debit when decreased or totally closed. For instance, when a company buys from suppliers
on credit, the corresponding liability that is accounts payable will be credited while the asset
received will be debited.
 22. What are the different types of liabilities and how does one account for them?

Liabilities can be classified into three categories: current, non-current and contingent.

Current liabilities are short-term debts that you pay within a year. Types of current liabilities
include employee wages, utilities, supplies, and invoices. Noncurrent liabilities, or long-term
liabilities, are debts that are not due within a year. List your long-term liabilities separately on
your balance sheet.

Businesses sort their liabilities into two categories: current and long-term. Current
liabilities are debts payable within one year, while long-term liabilities are debts payable over
a longer period. For example, if a business takes out a mortgage payable over a 15-year
period, that is a long-term liability.

Liabilities are on the right side of the accounting equation. Liability account balances
should be on the right side of the accounts. Thus liability accounts such as Accounts Payable,
Notes Payable, Wages Payable, and Interest Payable should have credit balances.

23. Are all liabilities reported on the statement of financial position?

A balance sheet is a financial statement that reports a company's assets, liabilities, and
shareholder equity.

A company reports its liabilities on its balance sheet. According to the accounting
equation, the total amount of the liabilities must be equal to the difference between
the total amount of the assets and the total amount of the equity.