A television company purchased machinery for BD20,000 in 2009. It is estimated to have a useful life of 10 years with a scrap value of BD4000.00, production unit of 40,000 and working hours of 12,000. The company also used this machinery to produce 4,400 units in 2010. Compute the depreciation of the machine using service output method.

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A: Formula working:

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A:

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Q: fund

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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.