ABC Ltd should record the building in its financial statements at its historic cost of £200,000. The current market value of £250,000 is irrelevant under the historic cost principle.

Advantages of adhering to historic cost:

• Objectivity: The historic cost is a verifiable and objective record of the original transaction.
• Consistency: It provides a consistent basis for accounting over time.
• Comparability: Allows for easier comparison of financial statements across different periods and companies.

Disadvantages of adhering to historic cost:

• Lack of Relevance: The historic cost may not reflect the current economic reality of the asset. In this case, the financial statements may not accurately represent the true value of the company's assets.
• Misleading Information: The financial statements may be misleading if the historic cost is significantly different from the current market value.

XYZ Company should record the patent in its financial statements at its historic cost of £10,000.

Year of Purchase (1st July 2022):

Debit: Patent (Fixed Asset) £10,000

Credit: Cash/Bank £10,000

Subsequent Years (Each year for 10 years):

Patents are typically amortized (expensed) over their useful life. The amortization expense is calculated evenly over the 10-year period. The annual amortization expense would be £10,000 / 10 years = £1,000.

The accounting entry each year would be:

• Debit: Amortization Expense £1,000
• Credit: Accumulated Amortization £1,000

Answer:

Implementing a new Enterprise Resource Planning (ERP) system is a complex undertaking, and several non-financial factors can present significant challenges. These challenges require careful planning and mitigation strategies to ensure a successful implementation. The key non-financial factors and associated challenges are:

Training requirements for staff: ERP systems are often complex and require significant training for all users. Insufficient or inadequate training can lead to errors, reduced productivity, and resistance to the new system. Challenge: Time and resources required for training can be substantial. Mitigation: Develop a comprehensive training plan, including various training methods (e.g., online tutorials, classroom sessions, hands-on exercises). Provide ongoing support and refresher courses.

Potential disruption to daily operations during implementation: Implementing an ERP system often involves significant changes to existing processes and data migration. This can lead to temporary disruptions to daily operations, impacting productivity and customer service. Challenge: Downtime and errors during data migration can be costly and frustrating. Mitigation: Phased implementation, starting with less critical modules, can minimize disruption. Thorough data cleansing and validation are essential before migration. Have contingency plans in place for potential system failures.

Changes to workflows and job roles: ERP systems often require changes to existing workflows and job roles to fully leverage their capabilities. This can lead to resistance from employees who are accustomed to the old ways of doing things. Challenge: Employee resistance can hinder adoption and reduce the system's effectiveness. Mitigation: Involve employees in the planning and implementation process to gain their buy-in. Clearly communicate the benefits of the new system and provide opportunities for feedback. Offer support and coaching to help employees adapt to the new workflows.

The need for ongoing technical support: ERP systems require ongoing technical support to address issues, perform updates, and ensure system stability. Lack of adequate technical support can lead to system downtime and reduced productivity. Challenge: Finding and retaining skilled technical support staff can be difficult and expensive. Mitigation: Establish a service level agreement (SLA) with the ERP vendor. Develop internal technical expertise through training and knowledge sharing. Ensure that the system is properly maintained and updated.

In conclusion, these non-financial factors pose significant challenges to ERP implementation. By proactively addressing these challenges through careful planning, comprehensive training, employee involvement, and ongoing support, companies can increase the likelihood of a successful ERP implementation and realize the full benefits of the system.