The following are balances brought forward from 31 December 2018 for KC Deco Center : RM RM Motor Vehicles 100,000 Less : Provision for depreciation (20,000) 80,000 The motor vehicles were depreciated at 15% per annum using reducing balance method. KC bought a new vehicle on 1 October 2019, cost of the new vehicle was RM120,000. You are required to prepare the following accounts for financial year ending 31 December 2019 : i. The Motor Vehicle Account ii. The Provision for Depreciation Account
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.
The following are balances brought forward from 31 December 2018 for KC Deco Center :
RM RM Motor Vehicles 100,000 Less : Provision for
The motor vehicles were depreciated at 15% per annum using
i. The Motor Vehicle Account ii. The Provision for Depreciation Account
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