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Questions and Answers
What is depreciation?
What is depreciation?
Allocation of original cost of non-current asset over estimated useful life
Give the journal entry for non-current assets.
Give the journal entry for non-current assets.
Dr Non-current asset, Cr trade payables/ cash in hand
Why do we account for depreciation?
Why do we account for depreciation?
Matching theory requires a portion of the cost (expense) of non-current asset.
Define accumulated depreciation.
Define accumulated depreciation.
What is net book value? (FORMULA)
What is net book value? (FORMULA)
Business bought motor vehicle for $40,000. It has an estimated useful life for 5 years and with no scrap value.
Business bought motor vehicle for $40,000. It has an estimated useful life for 5 years and with no scrap value.
annual depreciation expense
annual depreciation expense
Flashcards
Depreciation
Depreciation
The process of allocating the cost of a non-current asset over its estimated useful life.
Journal entry for NCA purchase
Journal entry for NCA purchase
Debit Non-current asset; Credit Trade payables/Cash in hand
Why account for depreciation?
Why account for depreciation?
Matching theory requires you to expense a portion of the asset's cost over its useful life.
Accumulated Depreciation
Accumulated Depreciation
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Net Book Value (Formula)
Net Book Value (Formula)
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Study Notes
- Depreciation is the allocation of the original cost of a non-current asset over its estimated useful life.
- The journal entry for non-current assets involves debiting the non-current asset account and crediting trade payables or cash in hand.
- Accounting for depreciation is necessary because the matching theory requires allocating a portion of the cost (expense) of a non-current asset over its useful life.
- Accumulated depreciation represents the total depreciation of an asset.
- Accumulated depreciation is reported as a deduction from the original cost of the non-current asset in the statement of financial position.
- Net book value is calculated as the original cost of an asset less its accumulated depreciation.
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Description
Depreciation allocates the cost of assets over their life. The journal entry involves debiting the asset account and crediting trade payables or cash. Accumulated depreciation is deducted from the asset's original cost to get the net book value.
