Depreciation is considered as accounting policy and operational expense for the accounting period. The value to be included in the financial statement is calculated based on the decision of the Board.  (a)  You are required to:  (i) Explain the difference between capital expenditure and revenue expenditure, and how each type of expenditure will affect the financial statements of a business. (ii) Explain why it is important to distinguish between capital expenditure and revenue expenditure, and briefly explain the accounting treatment of each type of expenditure. (iii) Under what circumstances will you consider the reducing balance method as the most appropriate method in calculating depreciation?                                       (b) Does depreciation decrease cash in a business? Explain your answer.

Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter3: Accrual Accounting
Section: Chapter Questions
Problem 1MCQ: Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a...
icon
Related questions
Question

Depreciation is considered as accounting policy and operational expense for the accounting period.

The value to be included in the financial statement is calculated based on the decision of the Board. 

(a)  You are required to: 

  • (i) Explain the difference between capital expenditure and revenue expenditure, and how each type of expenditure will affect the financial statements of a business.
  • (ii) Explain why it is important to distinguish between capital expenditure and revenue expenditure, and briefly explain the accounting treatment of each type of expenditure.
  • (iii) Under what circumstances will you consider the reducing balance method as the most appropriate method in calculating depreciation?                                    

 

(b) Does depreciation decrease cash in a business? Explain your answer.    

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 3 images

Blurred answer
Knowledge Booster
Accounting for Income Taxes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Financial Reporting, Financial Statement Analysis…
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning
College Accounting (Book Only): A Career Approach
College Accounting (Book Only): A Career Approach
Accounting
ISBN:
9781337280570
Author:
Scott, Cathy J.
Publisher:
South-Western College Pub