1. ordinary repairs, extraordinary repairs and betterments Explain the differenc
ID: 2571066 • Letter: 1
Question
1. ordinary repairs, extraordinary repairs and betterments
Explain the difference between ordinary repairs, extraordinary repairs and betterments, be sure to give an example of each.
Which are Capital Expenditures and which are Revenue Expenditures
How is each recorded in the accounting records?
How does each affect the Income Statement?
How does each affect the Balance Sheet
2. Capital Expenditures vs Revenue Expenditures
Explain the difference between Capital Expenditures and Revenue Expenditures
How is each recorded in the accounting records?
How does each affect the Income Statement?
How does each affect the Balance Sheet
3. Land and Land Improvements
Explain the difference between between Land and Land Improvements?
How does depreciation affect Land or Land Improvements in your accounting records?
4. Amortization, Depletion, Depreciation and Impairment
Explain the difference between Amortization, Depletion, Depreciation and Impairment?
Which type of asset would each apply to?
Which depreciation methods can you apply to each?
Explanation / Answer
1.Extraordinary repairs-Infrequent expenditures that extend an asset's life such as a new engine in a car.
Betterments- Improvements that increase the efficiency of an asset by adding accessories or replacing parts with more effective powerful ones.
Payments made for ordinary maintenance of an asset or unnecessary or unreasonable situations. are revenue expenditure where as Extra ordinary & Betterments are Captial expenditure
2. the Benefit received from Capital Expenditure is not exhausted within the current accounting year it will remain for a number of years in future. whereas Revenue expenditure will last its impact in its Accounting period itself.
Capital Expenditure will affect the Balance Sheet whereas Revenue will affect the Income Statement.
3. land improvements have a limited life and are depreciated. Land is assumed to last indefinitely and will not be depreciated.
4.Amortization was used to depreciate Intangible assets where as Depreciation for tangiable assets.
Depletion was used in mining, petroleum (natural Resources) which will be depleted within some time after continous use
Impairment normally occurs when there is a sudden and large decline in the fair value of an asset below its carrying amount
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