2.

Bought Delivery Van and paid by cheque $50000

DR. Delivery Van A/c – 50000

DEPRECIATION
CR. Bank A/c – 50000

3. Bought Furniture from TFP Ltd. $12000

NON-CURRENT ASSETS
DR. Furniture A/c – 12000
Non-current Assets are bought by the business for long term use.
Cr. TFP Ltd. A/c – 12000
They are termed as ‘capital expenditure’. They help to generate
profits. Non-current assets are recorded in order of their value in
the statement of financial position. List of non-current assets are:- W HAT IS DEPRECIATION ?
1. Property Depreciation is an estimated loss in the value of non-current assets
2. Premises
3. Motor Van over its estimated useful life.
4. Delivery Van
5. Fixtures and Fittings CAUSES OF DEPRECIATION
These assets are subject to depreciation or revaluation.
 Passage of time
 Physical deterioration
 Economic reason
ENTRIES FOR PURCHASE OF ASSETS
 Depletion
DR – Non-Current Assets A/c

E.g. : METHODS OF DEPRECIATION

1. Bought Motor Van on cash $10000
 Straight line depreciation
Dr. Motor Van A/c – 10000  Diminishing balance
Cr. Cash A/c – 10000  Revaluation
 PROVISION FOR DEPREC IATION
Formula: Dr. Income Statement

Net Book Value = Cost – Accumulated Depreciation CR. Provision for Depreciation A/c

ACCOUNTING CONCEPTS FOR DEPRECIATION DISPOSAL

 Matching concept It is the selling of non-current assets, it is a capital receipt. It is

 Consistency concept recorded in a disposal account.

 Prudence Concept
DISPOSAL A/C

ENTRIES FOR DEPRECIATION IN FINANCIAL

STATEMENTS

Income Statement for the year ended 31 Dec 2018 (extract)

Details $ $
Expenses
Depreciation of Furniture (30/100 × 15000) 4500

Statement of Financial Position as at 31 Dec 2018 (extract)

Accumulated
Non - Current Assets Cost Depreciation NBV
Furniture 15000 4500 10500
15000 4500 10500

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 Work Example

Revenue Receipt

Capital Receipt

Advantages of straight line method

 Simple method to calculate

 Shows same charge each year

Disadvantages of straight line method

Advantages of reducing balance

Disadvantages of reducing balance

 REVALUATION OF ASSET S

Straight-Line Method

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Work Example

Reducing Balance
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Work Example

Disposal
 Past Exam Questions

Question 1(S23/2)

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 Work Example

Question 3

Question 2(W17/21)
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