Archive about 'Depreciation & Provision'

Fixed Asset Register

What is the purpose of maintaining a  Fixed Asset Register?

By maintaining a proper Fixed Asset Register, it allows a company to keep track of details of each fixed asset, ensuring control and preventing misappropriation of assets
It also keeps track of the correct value of assets, which allows for computation of depreciation and for tax and […]

Accounting Test Question DEP No. 1 On Depreciation Of Fixed Assets

Accounting Test Question DEP No 1:

Question:
Johnson & Co, a building and construction firm, commenced trading on 1 January Year 6. During the three years to 31 December Year 8, the company bought and sold motor vehicles for use in the business as follows:

Date

Registration No

Cost  ($)

Date Of Disposal

Disposal Proceeds ($)

1 Feb Yr 6

E762

12,000

12 Apr Yr 8

6,000

4 […]

How To Account For Disposal Of Fixed Assets Whether It is Sold For Cash Or Traded in as Part Payment For Another Asset

Accounting Treatment For Disposal Of Fixed Asset

When a fixed asset is disposed off:
The accounting entry is to :
Step 1:
Debit : Asset Disposal Account
Credit: Asset Account at Cost
The purpose of this entry is to transfer the cost of the fixed asset to the asset disposal account
Step 2:
Debit: Provision for depreciation a/c
Credit: Asset Disposal Account
The purpose of this […]

Methods Of Accounting For Depreciation (Part 2 of 2)

In the first part, three(3) methods have been mentioned namely the Straight Line Depreciation, Reducing Balance Depreciation and the Sum of Digit method.
In this final part, we shall discuss another three(3) methods for accounting for depreciation of fixed assets:

REVALUATION METHOD

 
·      Normally used for calculating depreciation of items such as loose tools and farmers’ livestock where […]

How To Record Depreciation In The Books Of Account

Basically, there are two (2) ways of recording depreciation:

1      Depreciation Charge is recorded in Depreciation Account And Fixed Asset Account is credited with the depreciation amount.

 
Accounting entries as follows:
Step 1:
Debit: Depreciation Account
Credit: Fixed Asset Account
Being initial taking up the depreciation into a Depreciation account.
 
Step 2:
At close of accounting period,
Debit: Profit & Loss Account
Credit: Depreciation […]

Methods Of Calculating Depreciation For Assets Bought Or Sold During An Accounting Period

Basically, there are three (3) methods of doing computing depreciation for assets bought or sold during an accounting period:

1.    Full year’s Depreciation Is Charged In The Year Of Purchase ignoring the date during the year that the assets were purchased. No depreciation is charged in the year that the assets were disposed irrespective of how […]

Methods Of Accounting For Depreciation (Part 1 of 2)

Whichever method we use to account for depreciation, we must always consider the following:
 

The cost of asset,

The probable/estimated life of the asset and

The approximate residual or salvage value at the end of its life.

 
Generally there are several methods of depreciation:
 

Straight Line Method,

Reducing Balance Method,

Sum Of the Years Digits Method

STRAIGHT LINE METHOD OF FIXED INSTALLMENT METHOD […]

What Is Depreciation And Why Do We Need To Provide For Depreciation

WHAT IS DEPRECIATION?

Depreciation is the permanent and continuing diminution in the quality, quantity or value of an asset.
Depreciation Accounting deals with the allocation of costs of fixed assets over their useful lives. More simply, that part of cost of this asset which is being periodically (monthly) allocated as expense into the Income Statement to match […]