Page 210 - Accountancy_F5

All transactions of a capital in nature are first recorded in the books of prime entry and
then posted to the ledger accounts. The ledger accounts for non-current assets of Mbasha
Holding will appear as follows:

Solution 7.1
Mbasha Holdings Limited
FOR ONLINE READING ONLY
Dr Machinery account Cr
TZS TZS
Date Particulars Date Particulars
“000” “000”
Jan. 1, 2022 Cash 50,000 Dec. 31, Balance c/d
LANGUAGE EDITING
Feb. 1, 2022 Bank 6,000 2022
56,000 56,000
Jan. 1, 2023 Balance b/d 56,000
Dr Transit van account Cr
TZS TZS
Date Particulars Date Particulars
“000” “000”
June 30, 2022 Tony account 25,000 Dec. 31, Balance c/d 25,000
25,000 2022 25,000
Jan. 1, 2023 LANGUAGE EDITING 56,000
25,000
Balance b/d
Note the following:

(a) The purchase of plywood is not a non-current asset, so it is not shown in the above
ledger account. It will be debited to the raw materials purchase account. This is a
matter of fact unless otherwise justified.
(b) The machinery purchased in January and the drilling machine purchased in February
are recorded in the same ledger account as they are of the same class, that is machinery
whereas vehicle is recorded in a separate transit van ledger account.

Measurement of cost after initial recognition of assets
After initial recognition of an asset, an entity can choose to recognise non-current
assets using either the cost model or the revaluation model depending on its accounting
valuation policy. Whichever measurement model that will be chosen, it shall be applied
to an entire class of property, plant and equipment.
(a) Cost model: In this model, after initial recognition of a non-current asset items
such as property, plant and equipment, that asset is carried at its initial cost
less any accumulated depreciation and any accumulated impairment losses.
Accumulated depreciation means that, the amount is charged for the use of
an asset in an ordinary operating environment since its acquisition to a point

Student’s Book Form Five
197

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