A certain machine costs P40,000 and has a life of 4 years and a salvage value of P5,000. The production output of this machine in units per year is as follows: 14 year=1,800 units, 2nd year=2,200 units, 3rd year= 3000 units and 4th year=4000 units. If the units produced are of uniform quality, what is the depreciation on the 4th year
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A certain machine costs P40,000 and has a life of 4 years and a salvage value of P5,000. The production output of this machine in units per year is as follows: 14 year=1,800 units, 2nd year=2,200 units, 3rd year= 3000 units and 4th year=4000 units. If the units produced are of uniform quality, what is the
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