A company maintains its fixed assets at cost. Depreciation provision accounts for each asset are kept. At 31st December 2018 the position was as follows: Total cost Total depreciation to date to date Machinery 52,590 25,670 Office furniture 2,860 1,490 (1) The following additions were made during the financial year ended 31st December 2019: machinery £2,480, office furniture £320. (2) Some old machines bought in 2015 for £2,800 were sold for £800 during the year. (3) The rates of depreciation are: machinery - 10 per cent, office equipment - 5 per cent, using the straight line basis, calculated on the assets in existence at the end of each financial year irrespective of date of purchase.
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 company maintains its fixed assets at cost.
(1) The following additions were made during the financial year ended 31st December 2019: machinery ₤2,480, office furniture ₤320.
(2) Some old machines bought in 2015 for ₤2,800 were sold for ₤800 during the year.
(3) The rates of depreciation are: machinery - 10 per cent, office equipment - 5 per cent, using the straight line basis, calculated on the assets in existence at the end of each financial year irrespective of date of purchase.
Required:
Show the asset and depreciation accounts for the year ended 31st December 2019 and the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
