finance final accounts - depreciation HL

Question 1

what is it?

Answer 1

Over time, as a business produces its output, the non-current assets (fixed assets) of the business will lose value or depreciate.

Question 2

where does it go

Answer 2

statement of profit or loss as an expense
balance sheet as non current assets but u put it in brackets to show how much it is losing value

Question 3

methods?

Answer 3

straight line method
units of production method

Question 4

Causes of D?

Answer 4

wear n tear
obsolescence - not new anymore, new tech has surpassed it.

Question 5

straight line method?

Answer 5

used to calculate the fall in value of an asset EVENLY over its useful life - annually.
formula:
OG value - scrap value / estimated useful life (years)

Question 6

+ and - of straight LM

Answer 6

+
Easy to calculate and apply; comparisons over time are possible.

Assumes that the asset is used evenly throughout its life, which is not the case for most assets.

The useful life of some assets cannot be predicted and the scrap value is an estimate, so the depreciation figures are not completely accurate.

Question 7

when is slm best 2 use?

Answer 7

best for assets that work the same thruout and have a predictable life span
good for cheap shit
good for shit that doesn’t get outshined over their lifespan (obsolete).

Question 8

units of production method?

Answer 8

useful life/depreciation is dependent on how much shit that asset produces or like what it does.
method of calculating the loss in value of an asset by estimating the units produced annually.

Question 9

formula for the UOP

Answer 9

og value - scrap value / how much shit u shld produce ( Estimated total units)
multiply this by the usage per year - so the yearly units of production.

Question 10

+ and - of UOP

Answer 10

+
More realistic for many types of assets; provides a more accurate picture of the loss of value due to wear and tear.
-
More complex to calculate.

Question 11

where is uop best 2 use?

Answer 11

• more expensive shit
• shit that sees diff levels of use over time - u use it diff each time

Question 12

what is a net book value and what does it calculate?

Answer 12

looks at the depreciation of an item during a specific point in time
So, it’s basically the value of the item that’s still on the books, kind of like its “residual value” in the company’s accounting records.
on balance sheet cuz balance sheet Is made at any point not rly at end of bus year.

Question 13

formula for NBV

Answer 13

og cost - accumulated depreciation

Question 14

how to calc cost of goods sold

Answer 14

opening stock + purchase - closing stock.
Opening stock: The value of inventory at the beginning of the period.
Purchases: The total cost of sock purchases made during the period - so how much stock u bought during that time (bus yr), total.
Closing stock: The value of inventory remaining at the end of the period.

Question 15

target of profit output

Answer 15

Target profit output refers to the level of production or sales volume that a company aims to achieve in order to reach a specific profit target. It represents the quantity of goods or services that need to be sold in order to generate the desired level of profit.
basically how much shit u have to produce to get the profit u want.

Question 16

formula for target profit output

Answer 16

fixed costs + target profit / target price per unit - variable costs per unit
so ur taking ur costs that don’t change w how much shit u produce, then u subtract that by how much profit u wanna generate during that time. U then divide this value by ur contribution margin which is what u wanna sell one product for (target price) subtracted by the costs that change depending on how many products u produce.