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    Accounting For Depreciation and Disposal of Non-Current Asset

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    Grade 8A PATEL YASHVI VIPUL
    - Depreciation is an estimate of the loss in value of a non-current asset over its expected working life. - The straight line method charges the same amount of depreciation each year, while the reducing balance method charges decreasing amounts each year as the net book value decreases. - The net book value is the cost price minus total depreciation to date. The residual value is the value of an asset at the end of its useful life.

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    Accounting For Depreciation and Disposal of Non-Current Asset

    Uploaded by

    Grade 8A PATEL YASHVI VIPUL
    322 views4 pages
    - Depreciation is an estimate of the loss in value of a non-current asset over its expected working life. - The straight line method charges the same amount of depreciation each year, while the reducing balance method charges decreasing amounts each year as the net book value decreases. - The net book value is the cost price minus total depreciation to date. The residual value is the value of an asset at the end of its useful life.

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    Accounting for depreciation and disposal of non-current asset

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    - Depreciation is an estimate of the loss in value of a non-current asset over its expected working life. - The straight line method charges the same amount of depreciation each year, while the reducing balance method charges decreasing amounts each year as the net book value decreases. - The net book value is the cost price minus total depreciation to date. The residual value is the value of an asset at the end of its useful life.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    322 views4 pages

    Accounting For Depreciation and Disposal of Non-Current Asset

    Uploaded by

    Grade 8A PATEL YASHVI VIPUL
    - Depreciation is an estimate of the loss in value of a non-current asset over its expected working life. - The straight line method charges the same amount of depreciation each year, while the reducing balance method charges decreasing amounts each year as the net book value decreases. - The net book value is the cost price minus total depreciation to date. The residual value is the value of an asset at the end of its useful life.

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    Accounting for depreciation and

    disposal of non-current asset


    • Depreciation is an estimate of the loss in the
    value of a non-current asset over its expected
    working life
    • The straight line method of depreciation is
    where the same amount of depreciation is
    charged each year
    • The residual value is the value of a non-
    current asset at the end of its useful life
    • The reducing balance method of depreciation
    is where the depreciation charged each year
    decreases as t is calculated in the net book
    value rather that the cost
    • The net b00k value of a non-current asset is
    the cost price minus the total depreciation to
    date
    • The revaluation method of depreciation is
    where the opening value of a non-current asset
    are compared to determine the depreciation for
    the year
    1. Name the two books of prime entry used in
    1. Name the two books of prime entry used in
    preparing the disposal account
    Ans- 1. general journal 2. cash book

    2. State two causes of depreciation of non-current


    assets.
    Ans- 1. Economic reasons 2. Depletion

    3. Explain how charging depreciation is an


    example of the application of the principle of
    prudence.
    Ans- Ensures that non-current assets are shown
    at more realistic values in the statement of
    financial position /Ensures that the profit for the
    year is not overstated in the income statement

    4. Suggest one reason why the loose tools are


    revalued at the end of each financial year rather
    than by using the straight line (fixed
    instalment) or reducing (diminishing) balance
    method of depreciation.
    Ans- Low value items which are not easy to
    depreciate separately /Not practical to keep
    detailed records of such assets

    5. Name one method of depreciation, other than


    the straight line (equal instalment) method, and
    explain how it is calculated.
    Ans-
    Reducing (diminishing) balance method.
    Annual percentage rate is applied to the net book
    value of the asset.
    OR
    Revaluation method.
    The difference between the opening and closing
    value of the asset.
    OR
    Revaluation method.
    The difference between the opening and closing
    valuations is taken and adjusted for any
    purchases or disposals.

    6. Suggest two reasons why the straight line


    (equal instalment) method would not be a
    suitable method of depreciation to apply to the
    hand tools used in Jamil’s factory
    Ans- 1. Do not depreciate by an equal amount
    each year
    2. Principle of materiality – not practical to
    depreciate each item separately

    7. Name the financial statement in which the


    provision for depreciation appears. State in which
    section it appears.
    Ans- Statement of financial position-
    Non-current assets

    8. State how providing depreciation is an


    application of the accounting principle of accruals
    (matching)
    Ans- The cost of the non-current asset and the
    revenues arising from its use are matched in an
    accounting period.
    OR
    The cost of the non-current asset is spread over its
    useful life

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