resources that business own/control that are expected to provide future benefits beyond one financial year.
capital expenditure (cost bef using)
cost to buy and bring NCA to intended useenhance NCAprovide benefits for more than 1 yearie. price of NCA, installation fee
revenue expenditure (cost aft using)
costs to operate, repair and maintain NCA in working condition-provide benefits for within a yearie. cost of maintaining NCA, repairs
Materiality theory
(NCA- revenue expenditure)Relevant information should be reported in the financial statements if it is likely to make a difference to the decision-making process.
Depreciation
allocation of cost of an NCA over its estimated useful life
Matching theory
(Cost of sales, NCA)The cost incurred to buy inventory must be matched against the sales revenue earned from selling the inventory in the same accounting period to determine the gross profit for that period
Consistency theory
(NCA)once an accounting method is chosen, this method should be applied to all future accounting periods to enable meaningful comparison
Straight-line method
assume NCA provide same benefits throughout estimated useful life (ie furniture)
reducing-balance method
assumed NCA provide more benefit in the earlier years than later years (ie devices)
