A motor vehicle which cost $12,000 was bought on credit frrom Trucks Ltd on 1 January 20X9. Financial statement are prepared anually to 31 December and depreciation of vehicle is provided at 25% per annum under the reducing balance method. a. prepare the motor vehicle account and the accumulated provision for depreciation on motor vehicles account for the first two years of the motor vehicle's working life.
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 motor vehicle which cost $12,000 was bought on credit frrom Trucks Ltd on 1 January 20X9. Financial statement are prepared anually to 31 December and
a. prepare the motor vehicle account and the accumulated provision for depreciation on motor vehicles account for the first two years of the motor vehicle's working life.
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