QUESTION 2 Below are the financial position statements of Ann\'s business, years

Question

QUESTION 2 Below are the financial position statements of Ann's business, years ending 31t of May 2016 2017 £ 000's £ 000's Non-Current Cost Cum. NBV Non-Current: Cost Cum, NBV 1500 400 1100 3000 600 2400 Current Assets Current Assets: 100 150 100 60 240 Bank Bank 0 250 Current Liabilities: Creditors Tax Due Current Liabilities Creditors 50 Bank Tax Due Dividend Due 15 100 20 25 Dividend Due 10 125 110 Net Current Assets 115 Net Current Assets 1215 2540 Less Long Term Loan Less Long Term Loan 00) 1215 2040 Financed By: Financed By Share Capital & Reserves Profit and Loss Account 1000 215 1215 Share Capital and Reserves Profit and Loss Account 1500 40 2040

Explanation / Answer

3. Depreciation is reduction in the value of asset over the period, mainly due to wear and tear or obsolence.

A non cash item is an expense that is reported on the income statement of the current accounting period, but there was no related cash payment during the period. Since no cash has flow out of the firm by charging depreciation we can name it as non cash item

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