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completed (W. Steve Albrecht, 2008). Therefore the managing director should not record any estimated profit. However the prudence concept does suggest that the managing director should take a cautious view of future problems occurring and costs of the business.

Even though sales are expected to increase in the next 2 years, such estimation is hard to measure as it more opinionated than factual.

According to FRS 12 'future costs are not present obligations of the entity resulting from past events, and therefore no provision should be made for them, if the asset is to continue to be used' (Financial reporting standard, 1998). This shows that manufacturing company has gone against the standard, as the firm managed to depreciate the asset for another 2 years while the assets has an expected remaining useful life of four years. In this circumstance, the entity should charge the expenditure of 34,000 to the profit and loss account as it is incurred according to accounting treatment.

This will therefore affect the profit of the year as the profit will be relatively low and in later years the business would be using the machine without suffering any charges in the income statement for the years.

This will result in profits being distorted, and managers would not find it easy to monitor the business performance.

Alternatively the company should turn to the accrual concept and capitalise the subsequence expenditure because it results in the restoration of the asset or replacement of some of it components (Financial reporting standard, 1998).

On the other hand, the ￡24,000 net book value should appear in the balance sheet under tangible non-current assets as it's an expense which has been capitalised and accumulated depreciation is credited according to the assets year after year, decreasing the book value of the asset and recorded in the profit and loss account (Shanker, 2010).

The reason for the modification and a 'face-life' was not specified, for this reason we must assume the building to be very old, as well as the construction to be very weak. This is the reason as to why the interior & exterior being repainted and the numbers of repair being carried out. Since the building looks much smarter as a whole, it is expected to generate more sales and once enough profit has been generated the business is then recommended to refurbish the building in order for the building to look new and having a better and stronger construction. This will then extend the life of the building by further years and increase profitability in the future.

As per FRS 15 the 8,000 will be capitalised as its enhancing the 'economical benefits of the asset in excess of its previously assessed standard of performance' (Financial reporting standard, 1999).

Since the expenditure is being capitalised the transaction will be recognised in both profit and loss account and balance sheet under assets.

The period for which the expected remaining life of the vehicle is not specified. For this reason declining balance method of calculating depreciation will be used instead on straight line method. This is due to being more realistic reflection of an asset's actual expected benefit from the use of the asset. According to accounting standard (Financial reporting standard, 1999) depreciation is therefore calculated at 10% per annum (calculation shown on 本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。