Ton 1 July 2016 Long Boards Ltd acquired a printing machine at a cost of $120000. At acquisition the machine had an expected useful life of 12 000 machine hours and was expected to be in operation for four years, after which e would have no residual value. Actual machine hours were 3000 in the vear ended 30 June 2017 and 3400 in the year ended 30 June 2018. On 1 July 2018 the machine was sold for $50000,
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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