Non Current Assets And Depreciation

Question 1

What is depreciation?

What does this become?

Answer 1

Part of the asset deemed to be used

An expense

Question 2

What is depreciation with regards to:
Statement of profit and loss
Statement of financial position

What is the difference between how depreciation is shown in:
Cash
Profit and loss
with regards to accruals concept?

Answer 2

An expense
Reduction in the book value of the asset

Cash all at once, profit and loss loss of one year

Question 3

Calculating depreciation

Basic equation for amount depreciated

Answer 3

Original cost-estimated price receivable

Question 4

What are the two methods to calculate depreciation?

Answer 4

Straight line method

Reducing balance method

Question 5

What is the equation for the straight line method?

Answer 5

Initial cost-estimated disposal value/ number of years expected of use

Question 6

How does the reducing balance method work?

Answer 6

Depreciation taken from initial amount first year, the same rate take from the depreciated amount the next year and so on

Question 7

What is debited and which is credited?

Answer 7

Depreciation expense debited

Accumulated depreciation credited