company, which makes up its financial statements annually to 31 December, provides for depreciation of its machinery at the rate of 15 per cent per annum using the reducing balance method. On 31 December 20X8, the machinery consisted of three items purchased
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, which makes up its financial statements annually to 31 December, provides for
On 31 December 20X8, the machinery consisted of three items purchased as shown:
On 1 January 20X6 Machine A Cost 2,000
On 1 September 20X7 Machine B Cost 4,000
On 1 May 20X8 Machine C Cost 3,000
Required:
Your calculations showing the depreciation provision for the year 20X8.
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