The Cost of a Non-Current Asset

We discuss what is included in the cost of a Non-Current Asset (NCA).

The definition of a non current asset is an asset which is used for over 12 months (long term assets).

To calculate the cost of a non-current asset, we only consider capital expenditure:
- Price paid for the asset
- Any legal fees involved with the purchase
- Delivery costs
- Any spending which improves the earning capacity of the asset

We will thus not include any revenue expenditure in the cost of a NCA:
- Repair costs
- Renewal costs
- Repainting
- Day to day running costs

This is an important distinction because non-current assets are capitalised. This means that the costs of an asset are recorded over the life of the asset, rather than only in the period the expense was incurred.

We record NCAs on the statement of financial position.

We discuss a quick example to make this clearer.

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Видео The Cost of a Non-Current Asset канала Everything Econ