Blockbusters Ltd depreciates its forklift trucks using a reducing balance rate of 30 percent. Itsaccounting year-end is 30 September. On 30 September 2016, it owned four forklift trucks: Purchased on 1 January 2013 for $2,400Purchased on 1 May 2014 for $2,500 Purchased on 1 October 2014 for $3,200Purchased on April 2016 for $3,600 Required: 1. Calculate the depreciation for each year. 2. What is the total depreciation that would be charged in the profit and loss account for 2016? 3. Prepare the balance sheet extract for 2015 and 2016

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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.