Fixed Assets and Depreciation Flashcards
What is the definition of depreciation in the FRS 102?
The systematic allocation of the depreciable amount of an asset over its useful life
What is the correct journal to record the purchase of a fixed asset on credit?
Debit fixed asset, credit creditors
What factors affect a fixed asset’s useful life?
Physical deterioration
Economic obsolescence
Time (e.g copyrights)
Depletion (e.g extract of physical resources)
Predetermined (e.g lease of property)
Where would fixed assets appear in the accounts of a business?
Assets
Where would the depreciation account be in the accounts of the business?
Expenses
What is the depreciable amount?
The carrying value of the asset less the residual value
Where does the depreciation account appear?
In the profit and loss account
Where does the provision for depreciation appear?
In the balance sheet
Is depreciation an allowable tax expense?
No
Does profit on disposal of fixed assets give rise to taxable income?
No because the figure is arbitrary due to the method of depreciation chosen
Does receiving a part exchange allowance on a fixed asset reduce the cost of the new asset in the accounts?
No
How is provision for depreciation shown in the value of the fixed assets of the balance sheet?
It is shown as a reduction in the value of the fixed assets in the balance sheet
How is a loss on a disposal shown in the disposals T account?
As a credit
How does a part exchange allowance get shown in a disposals T account?
As a credit
How does provision for depreciation get shown in the disposals T account?
As a credit
