Edexcel IGCSE Accounting: Depreciation Concepts

<p>Depreciation is an expense that represents the allocation of the asset's cost over its useful life. (A)</p> Signup and view all the answers

<p>The straight-line method depreciates the asset at a constant rate each year, while the reducing balance method uses a declining rate. (C)</p> Signup and view all the answers

<p>$3,000 (B)</p> Signup and view all the answers

<p>$6,750 (D)</p> Signup and view all the answers

<p>Original value - (Depreciation charge for year 1 + Depreciation charge for year 2 + Depreciation charge for year 3) (C)</p> Signup and view all the answers

<p>$12,000 (A)</p> Signup and view all the answers

<p>To record the depreciation charges for the non-current asset. (C)</p> Signup and view all the answers

<p>Original value x (1 - Percentage depreciation)^ Number of years (C)</p> Signup and view all the answers

<p>$9,000 (D)</p> Signup and view all the answers

<p>The journal (D)</p> Signup and view all the answers

<p>The provision for depreciation account (B)</p> Signup and view all the answers

<p>The total accumulated depreciation of the asset (C)</p> Signup and view all the answers

<p>Under the expenses section (B)</p> Signup and view all the answers

<p>Cost minus accumulated depreciation (A)</p> Signup and view all the answers

<p>The provision for depreciation account (B)</p> Signup and view all the answers

<p>Under the assets section (D)</p> Signup and view all the answers

<p>The previous year's depreciation charge (D)</p> Signup and view all the answers

<p>$20,000 (B)</p> Signup and view all the answers

<p>Debit (B)</p> Signup and view all the answers

<p>Depreciation is recorded in a separate account. (D)</p> Signup and view all the answers

<p>$25,000 (A)</p> Signup and view all the answers

<p>Credit (A)</p> Signup and view all the answers

<p>$25,000 (A)</p> Signup and view all the answers

<p>$4,000 (A)</p> Signup and view all the answers

<p>$21,000 (D)</p> Signup and view all the answers

<p>The asset loses value at a constant rate. (D)</p> Signup and view all the answers

<p>The current market value of the asset (A)</p> Signup and view all the answers

<p>It decreases to $0. (B)</p> Signup and view all the answers

<p>Fixtures and fittings are generally expected to provide a consistent level of benefit each year. (D)</p> Signup and view all the answers

<p>$3,000 (B)</p> Signup and view all the answers

<p>Disposal value (A)</p> Signup and view all the answers

<p>As a percentage of the original cost (B)</p> Signup and view all the answers

<p>Depreciation is a reduction in value over time, while depletion is the complete consumption of a resource. (C)</p> Signup and view all the answers

<p>The depreciation charged over the asset's life was insufficient. (C)</p> Signup and view all the answers

<p>Debit: Cash; Credit: Non-current Asset; Credit: Profit on Disposal. (B)</p> Signup and view all the answers

<p>A $2,000 loss on disposal. (C)</p> Signup and view all the answers

<p>Disposal Account (B)</p> Signup and view all the answers

<p>A cash sale involves immediate receipt of payment, while a credit sale involves payment at a later date. (D)</p> Signup and view all the answers

<p>Offset the cost of the new asset. (B)</p> Signup and view all the answers

<p>To accurately determine the carrying value of the asset at the time of sale. (C)</p> Signup and view all the answers

<p>The difference between the cost of the asset and the accumulated depreciation. (A)</p> Signup and view all the answers

Depreciation is the reduction in value of non-current assets over time.

To account for the estimated loss in value of an asset during a period.

The two main methods are Straight Line and Reducing Balance.

Once a method is chosen, it must be used consistently unless a valid reason exists to change.

Assets that provide value over multiple periods and depreciate over time.

The gradual using up of a non-current asset, such as natural resources.

A method where an asset loses value at a constant rate over its useful life, resulting in equal yearly expenses.

The value of an asset reported on the balance sheet, which can reach $0 when fully depreciated.

The percentage of an asset’s original value that is depreciated each year.

The estimated value of an asset at the end of its useful life, also known as disposal value.

The estimated period over which an asset is expected to be used before it is disposed.

The same amount of depreciation applied every year, characteristic of straight line depreciation.

The process of determining the annual depreciation expense based on cost, useful life, and residual value.

The reduction in value of an asset over time, expressed as an annual percentage of the carrying value.

An account used to record accumulated depreciation of a non-current asset over time.

Yearly depreciation can be calculated by multiplying the carrying value by a fixed percentage.

The initial purchase price of a non-current asset before depreciation.

The total depreciation that has been expensed against an asset over its useful life.

At year 3, the depreciation charge is 25% of the carrying value of $9,000, equal to $2,250.

To find carrying value, subtract accumulated depreciation from original cost of asset.

Depreciation is recorded by debiting the income statement and crediting the provision for depreciation account.

The income statement shows the depreciation charge for the financial year as an expense.

The closing balance represents the total accumulated depreciation of a non-current asset at year-end.

Includes Cost, Accumulated Depreciation, and Carrying Value of assets.

Cost is the original value recorded in the non-current asset account.

A ledger account that tracks the cost of equipment owned by a business.

Katrina acquires more equipment for $5,000 on December 1, 2023.

Katrina charges a full year's depreciation in the purchasing year of equipment.

The balance carried over to the new period in accounting records.

The closing balance of an account that will be brought forward to the next period.

An account that accumulates depreciation to reduce asset value on balance sheets.

Total cost of equipment minus accumulated depreciation to find its net book value.

Sum of all equipment purchases, here $20,000 + $5,000 = $25,000.

The process of selling a non-current asset when it's no longer needed by the business.

The money received from selling a non-current asset, referred to as a capital receipt.

An account created for credit sales of a non-current asset to avoid confusion with trade receivables.

When an old asset is given as part payment for a new asset, reducing the cost of the new asset.

Determined by comparing the proceeds of sale with the carrying value of the asset.

1. Calculate carrying value, 2. Find difference with proceeds, 3. Assess profit or loss.