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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

OHT 3.' rofit measurement and t#e

recognition of re!enue

The realisation convention states that revenue

should be recognised only when it has been

realised. Normally, realisation is considered to

have occurred when:

T#e amount of re!enue generated can %e o%(ecti!el)

determined

T#ere is reasona%le certaint) t#at t#e amounts

o&ing from t#e acti!ities &ill %e recei!ed

T#e acti!ities necessar) to generate t#e re!enue

are su%stantiall) complete

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

OHT 3./ rofit measurement and t#e

calculation of depreciation

T#e useful life of t#e asset

T#e residual !alue of t#e asset

T#e cost of t#e asset

To calculate a depreciation charge for a period, four

factors have to be considered:

T#e depreciation met#od

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

OHT 3.,

2ritten

do&n

!alue

4+5

*sset life 4)ears5

1

'

3

0

1 ' 3 0

6rap# of &rittendo&n !alue against

time using t#e straig#tline met#od

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

OHT 3.8 Calculating an annual depreciation

c#arge

9ear 1 9ear 39ear ' 9ear 0

and so on

"epreciation "epreciation"epreciation"epreciation

less

esidual !alue

euals

Cost

"eprecia%le amount

*sset life 4num%er of )ears5

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

OHT 3.:

;ast in- first out 4;I