Chapter 4: Depreciation Flashcards

1
Q

Name the three factors to consider when depreciating non-current assets.

A
  1. Cost of the asset
  2. Useful life (period of which the asset will be useful)
  3. Residual value (expected sale price at the end of useful life)
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2
Q

What are the two ways of calculating straight-line depreciation?

A
  1. (Cost - residual value) / useful life
  2. (Cost - residual value) x %
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3
Q

How is diminishing balance of depreciation calculated?

A

Carrying amount x diminishing balance % per annum

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4
Q

How do you calculate depreciation on a pro-rata (monthly) basis?

A

Depreciate normally using either the straight-line or diminishing balance method and then multiply the answer by the fraction of time.

E.g. multiply by 6/12 if it was bought half way through the year.

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5
Q

How is depreciation accounted for in the ledger accounts?

A

Dr Depreciation charges (SPL)
- because it’s an expense

Cr Accumulated depreciation (SPF)

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