Question

At 31 December 2016, Jasa Maju Sdn. Bhd. reported the following as non-current assets. Cost Decumulared Accumulated Depreciation RM Land RM Ner Realizable Value RM 210,000 Buildings 280,500 56,100 224,400 Equipment Total non-current assets 84,000 36,000 32.400 466.800 Equipment consists of Equipment A (cost RM6,000, purchased on 1 January 2012), Equipment B (cost RM50,000, purchased on 1 January 2015) and Equipment 3 (cost RM28,000, purchased on 1 January 2015). During 2017, the following selected transactions occurred: July 1 Purchased new equipment (Equipment 4) for RM35,0000 on account from Heybart Supplies Dec 31 Retired equipment (Equipment ) that cost RM6,000 when purchased on 1 January 2012. No salvage value was received. Dec 31 Market value for land was RM215,000 The company uses the following as a month to month basis depreciation policy: Non Current Assets Buildings Equipment Salvage value Method of depreciation Useful life (year) Straight line Straight line The financial year end for JMSB is 31" December every year. Required: a) Record the adjusting entries for depreciation for 2017. (Show the workings) b) Journalize the above transactions. c) Prepare the non-current assets section of JMSB's Statement of Financial Position as at 31 December 2017 d) Explain the difference between capital expenditure and revenue expenditure.

Answer 1

Adjusting Entries and Journal entries:
Date	Accounts	Debit (RM)	Credit (RM)	Calculation
01-07-2017	Equipment Dr	350000
	To Heybart Supplies		350000
	(Being Equipment-4 purchased on account.)
31-12-2017	Accumulated Depreciation on Equipment Dr	6000
	To Equipment		6000
	(Being Equipment-1 which was fully depreciated (used for 6 years), retired and no salvage value received.)
31-12-2017	P&L Dr	5610		=280500/50
	Accumulated Depreciation on Building		5610
	(Being Depreciation for Building)
31-12-2017	P&L Dr	50600		((84000-6000)/5)+(350000/5*0.5)
	Accumulated Depreciation on Equipment		50600
	(Being Depreciation for Equipments)

Non-Current Assets Section as on 31-12-2017
	Cost (RM)	Accumulated Depreciation (RM)	Net Realizable Value (RM)
Land			215000
Buildings	280500	61710	224400
		=56100+5610
Equipment	428000	80600	382400
	=84000-6000+350000	=36000-6000+50600	=32400+350000
Total Non-Current Assets			821800

Difference between Capital Expenditure and Revenue Expenditure:

• Capital Expenditure are for Fixed Assets, being cost of fixed asset itself or cost which increase the productivity of fixed asset. Whereas Revenue Expenditure are related to revenue transactions or are period costs.
• Eg: Cost of Building is Capital Expenditure, whereas Rent paid for Building, being period cost is Revenue Expenditure.
• Capital Expenditure are charged via Depreciation over the period of Life of Fixed Asset, whereas Revenue Expenditures are charged to revenue account in the same period.
• Capital Expenditure is consumed over useful life of Fixed asset, whereas Revenue Expenditure is consumed within very short time.
• Generally, Capital Expenditure involves larger monetary amount and Revenue Expenditure are comparatively small in monetary value. However, some large expenditures can be Revenue Expenditures , if they are directly related to revenue transaction or are for specific short period of time.