(a) State why it is important to distinguish between capital expenditure and revenue expenditure, and briefly...

   

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(a) State why it is important to distinguish between capital expenditure and revenue expenditure, and briefly explain the accounting treatment of each type of expenditure. (b) State one example each of capital expenditure and revenue expenditure. (c) Nyamekye Limited is a trading company making up its accounts regularly to 31 December each year. At 1 January 2017 the following balances existed in the records of Nyamekye Limited Freehold land -cost Freehold buildings-cost Accumulated depreciation provided on building to 31/12/2016 Office equipment-cost Accumulated depreciation provided on office equipment to 31/12/2016 GH₂000 1,000 500 210 The company's depreciation policies are as follows: • Freehold land- no depreciation • Freehold buildings-depreciation provided at 2% per annum on cost on the straight line basis. • Office equipment- depreciation provided at 12% % per annum on the straight line basis. 5 (1) Year ended 31 December 2017 (1) 40 24 A full year's depreciation is charged in the year of acquisition of all assets and none in the year of disposal. During the two years to 31 December 2018 the following transactions took place. 10 June: Office equipment purchased for GHe 16,000. This equipment was to replace some old items which were given in part exchange. Their agreed part exchange value was GH4,000. They had originally cost GH48,000 and their carrying amount was GHe 1,000. The company paid the balance of GH 12,000 in cash. (ii) 8 October: An extension was made to the building at a cost of GH50,000. (2) Year ended 31 December 2018 (1) Office equipment which had cost GHe8,000 and with a carrying amount of GH 2,000 was sold for GH 3,000. (ii) 8 October: An extension was made to the building at a cost of GH€50,000. (2) Year ended 31 December 2018 (1) Office equipment which had cost GH8,000 and with a carrying amount of GH$2,000 was sold for GH 3,000. In preparing the financial statements at 31 December 2018 it was decided to revalue land upwards by GH 200,000 to reflect a recent survey. Required Write up the necessary ledger accounts to record these transactions for the two years ended 31 December 2018. Cost and accumulated depreciation accounts are required. (You should not combine cost and depreciation in a single account). (a) State why it is important to distinguish between capital expenditure and revenue expenditure, and briefly explain the accounting treatment of each type of expenditure. (b) State one example each of capital expenditure and revenue expenditure. (c) Nyamekye Limited is a trading company making up its accounts regularly to 31 December each year. At 1 January 2017 the following balances existed in the records of Nyamekye Limited Freehold land -cost Freehold buildings-cost Accumulated depreciation provided on building to 31/12/2016 Office equipment-cost Accumulated depreciation provided on office equipment to 31/12/2016 GH₂000 1,000 500 210 The company's depreciation policies are as follows: • Freehold land- no depreciation • Freehold buildings-depreciation provided at 2% per annum on cost on the straight line basis. • Office equipment- depreciation provided at 12% % per annum on the straight line basis. 5 (1) Year ended 31 December 2017 (1) 40 24 A full year's depreciation is charged in the year of acquisition of all assets and none in the year of disposal. During the two years to 31 December 2018 the following transactions took place. 10 June: Office equipment purchased for GHe 16,000. This equipment was to replace some old items which were given in part exchange. Their agreed part exchange value was GH4,000. They had originally cost GH48,000 and their carrying amount was GHe 1,000. The company paid the balance of GH 12,000 in cash. (ii) 8 October: An extension was made to the building at a cost of GH50,000. (2) Year ended 31 December 2018 (1) Office equipment which had cost GHe8,000 and with a carrying amount of GH 2,000 was sold for GH 3,000. (ii) 8 October: An extension was made to the building at a cost of GH€50,000. (2) Year ended 31 December 2018 (1) Office equipment which had cost GH8,000 and with a carrying amount of GH$2,000 was sold for GH 3,000. In preparing the financial statements at 31 December 2018 it was decided to revalue land upwards by GH 200,000 to reflect a recent survey. Required Write up the necessary ledger accounts to record these transactions for the two years ended 31 December 2018. Cost and accumulated depreciation accounts are required. (You should not combine cost and depreciation in a single account).

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1 Capital expenditures are those expenditures that are incurred by the entity for the future benefit which will b realized by the management over a lo... View the full answer