On March 1st, 2016, a Plant and Machinery was purchased by the company at a list price of $300,000. Transportation and installation were paid $25,000 and $75,000 respectively. The company's financial year ends on June 30th each year. It was the company policy to charge depreciation on fixed assets using double declining balance method @ 20%. On August 30th ,2019 the business decided to dispose of the Plant and Machinery for $ 250,000. Required: Record the disposal of plant
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.
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