4. Depreciation of a non-current assets Flashcards
What’s depreciation
The measure of the cost of the economic benefits of the asset that have been consumed during the period
Whist accumulated depreciation
The total of all depreciation charged on an asset to date
What’s the carrying amount
The value at which the asset is shown in the statement of financial position, calculated as the cost of the asset less the accumulated depreciation
What never depreciates
Land
What’s the formula for the carrying amount
Carrying amount of asset = cost - accumulated depreciation
What’s the two formulas for depreciation
- Straight line method
- Diminishing balance method
What’s the straight line method (of depreciation)
A method of calculating deprecation to give the same charge each year
What’s the formula of a straight line method
Cost - Residual Value/ Useful life (years)
Or
(Cost - Residual) x %
What’s diminishing balance (of depreciation)
A method of calculating depreciation so that a larger amount is charged in the earlier years and smaller amounts in subsequent years
Whats the diminishing balance method
Depreciation = Depreciation rate (%) x Carrying amount (cost - accumulated depreciation)
What’s residual value
The amount of an asset is expected to be sold for at the end of its useful life (scrap value).
If a question doesnt provide a residual vaulue what do you assume?
0
