Accounting For End Of Period Adjustments: Depreciation
Übersicht
By the time a set of final accounts is being prepared, a business already knows how to calculate a depreciation charge. The harder question at the year end is what to do with it: how much of it belongs in this year's income statement, how much should sit on the statement of financial position, and what happens to both figures if an asset was sold partway through the year.
In this lesson you will learn how depreciation moves from a trial balance figure into the financial statements: the charge for the year in the income statement, the provision for depreciation and carrying value in the statement of financial position, and the adjustment needed when a non-current asset is disposed of during the period.
Ziele
- Explain the causes of depreciation
- Distinguish between straight line and reducing balance methods of depreciation
- Calculate and record depreciation in the books of account
- Calculate and record profit or loss of disposal of non-current assets
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- A trial balance shows equipment at cost $30,000 and a provision for depreciation of $10,000. What is the carrying value? A) $10,000 B) $20,000 C) $30,000 D) $40,000 Answer: B
- Which figure is reported as an expense in the income statement? A) The closing provision for depreciation B) The depreciation charge for the year only C) The asset's original cost D) The asset's carrying value Answer: B
- Non-current assets at cost $25,000 have an opening provision for depreciation of $9,000. This year's charge is $2,500. What is the closing provision for depreciation? A) $9,000 B) $11,500 C) $6,500 D) $2,500 Answer: B
- Where does a profit or loss on disposal of a non-current asset appear? A) Added to the provision for depreciation B) As a separate line in the income statement C) Deducted from trade receivables D) It does not appear in the financial statements Answer: B
- Equipment costs $12,000 and has a closing provision for depreciation of $7,500. What carrying value is shown on the statement of financial position? A) $4,500 B) $7,500 C) $12,000 D) $19,500 Answer: A
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Empfohlene Bücher
Weiterlernen mit offenen Quellen
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Lehrbuchabschnitt
Explain and Apply Depreciation Methods to Allocate Capitalized Costs
"Principles of Accounting, Volume 1: Financial Accounting: Explain and Apply Depreciation Methods to Allocate Capitalized Costs" by OpenStax, OpenStax, Rice University, licensed under CC BY-NC-SA 4.0 (https://creativecommons.org/licenses/by-nc-sa/4.0/). Source: https://openstax.org/books/principles-financial-accounting/pages/11-3-explain-and-apply-depreciation-methods-to-allocate-capitalized-costs. Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-introduction
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Lehrbuchabschnitt
Describe Some Special Issues in Accounting for Long-Term Assets
"Principles of Accounting, Volume 1: Financial Accounting: Describe Some Special Issues in Accounting for Long-Term Assets" by OpenStax, OpenStax, Rice University, licensed under CC BY-NC-SA 4.0 (https://creativecommons.org/licenses/by-nc-sa/4.0/). Source: https://openstax.org/books/principles-financial-accounting/pages/11-5-describe-some-special-issues-in-accounting-for-long-term-assets. Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-introduction
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