Depreciation of a/cs

Question 1

Reasons for Depreciation

Answer 1

• Obsolescence
• Wear and Tear
• Passage of Time
• Extraction

Question 2

Depreciation

Answer 2

the measure of the wearing away of the value of a fixed asset

Question 3

Depreciation Methods

Answer 3

• Straight-line

- Reducing Balance

Question 4

Straight- line method

Answer 4

Same amount of cost written off each year. Best for long periods and slow loss of value, e.g. buildings

Question 5

Reducing Balance

Answer 5

Fixed percentage of an asset written off each year. High initially, then reduces. Best for assets that lose the most value quickly, e.g vehicles, computers.

Question 6

Factors used to determine annual depreciation

Answer 6

• Cost of asset
• Estimated life of asset
• Estimated scrap value of asset
• Method of depreciation