Week 10 - Non Current Assests Flashcards
Depreciation
the allocation of the cost of a tangible non-current asset over its useful life
.an expense
.no transaction takes place and there is no cash impact
Depreciation
the allocation of the cost of a tangible non-current asset over its useful life
.an expense
.no transaction takes place and there is no cash impact
Accumulated depreciation
.represents the total depreciation that has been charged to date (over many periods) to the Statement of Profit or Loss for the specific asset
.contra account –> as it decreases the value of the asset on the Balance Sheet
Straight line method
Annual depreciation expense =
[Cost of asset ($) – Expected residual ($) value]
/ Expected useful life (years)
.recognises the equal amounts of depreciation per year
Reducing balance method
(Cost – Accum. Depreciation) * Rate = Depreciation p.a.
.bracket amount is carrying value
–> applies to those assets that will be used more, or contribute more to revenue initially/benefits in earlier years, compared to later
.depreciation determined by allocating a set percentage to the carrying amount of the asset
Scrapping fully depreciated asset
Accumulated depn DR (full amount of acc depn in bs)
Machinery CR
Scrapping a partially depreciated asset
Accumulated depn — machinery DR
Expense on disposal of machinery DR
Machinery CR
Scrapping a partially depreciated asset - with an expenditure incurred on removal of asset
Accumulated depn — machinery DR
Expense on disposal of machinery DR
GST receivable DR
Machinery CR
Cash at bank CR
Disposing during the year
- Depreciation expense — machinery DR
Accumulated depn— machinery CR
(Depreciation on scrapped machine to date of disposal) - Accumulated depn— machinery DR
Expense on disposal of machinery DR
Machinery CR
(Scrapping of a partially depreciated machine)
When is there a gain on a sale of a non-current asset?
When the selling price exceeds the carrying value
Sale of non current asset
- Cash at bank DR
GST Collected CR
Proceeds from Sale CR
2.
Carrying value/exp on disposal DR
Accm depn CR
Machinery CR
Exchange of asset with cash
1.
New Machine DR
GST Paid DR
Proceeds from sale CR
Cash at bank CR
2.
exp on disposal DR
Accm depn CR
Purchase of a new machinery adding on to machinery
New Machinery Device DR
GST Paid DR
Cash at bank CR
Accumulated Depn DR
Machinery CR
(accum depn so far on already owned machinery)
Revaluation of machinery to fair value
Accum depn DR
Machinery CR
Gain on revaluation CR
