Answer to Question #113594 in Accounting for Muhammad Ali

Question

Explain the differences between non current assets and current assets. (provide appropriate examples)
b) State the THREE (3) data required to compute depreciation

d) Explain FOUR (4) causes of depreciation for non current assets. (provide relevant examples).

Answer 1

Non-current assets are commonly understood as property values ​​that are repeatedly involved in economic activity with the transfer of a part of their value to manufactured products or provided services. In other words, non-current assets include capital, which is used for a long time in kind, unchanged.

Non-current assets include: intangible assets;research and development results; fixed assets;profitable investments in material values;financial investments, the return of which is expected no earlier than in a year;Deferred tax assets;other assets with signs of non-current assets.

Current assets are assets that serve or are repaid within 12 months, or during the normal operating cycle of the organization (if it exceeds 1 year). Many current assets are used simultaneously when they are put into production (for example, raw materials).

The following current assets are distinguished: stocks; VAT on purchased assets; accounts receivable;financial investments (excluding cash equivalents);cash and cash equivalents;other assets that meet the characteristics of current assets.

b) initial cost, useful life, depreciation rate, selected depreciation method

d) Physical depreciation - depreciation of property associated with a decrease in its value as a result of the loss of its physical properties (strength, appearance, etc.) through natural physical aging in the process of using this property;

Moral (functional) depreciation - a partial loss by the fixed assets of their use value in connection with the cheapening of their reproduction or in connection with lower productivity compared to new ones;

Economic depreciation - a decrease in property value due to changes in external factors (political, economic, environmental, etc.). Damage due to accident or natural disaster