File Name: depreciation straight line method questions and answers .zip
In the straight-line depreciation method, the cost of a fixed asset is reduced equally in each period of its useful life till it reaches its residual value.
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Straight line depreciation method charges cost evenly throughout the useful life of a fixed asset. Remember to adjust the depreciation expense downwards when an asset has been acquired or disposed off during the accounting period to avoid charging depreciation for the time the asset was not available for use. See Example 1 below. As the asset was available for the whole period, the annual depreciation expense is not apportioned. Alternatively, you may express useful life in months and calculate depreciation charge as follows:. The estimates of useful life or residual value of an asset may need to be revised in subsequent accounting periods in order to reflect more accurately the pattern of economic benefits in light of new information. In such cases, it will be necessary to account for the effects of revision in estimates prospectively, i.
Accelerated depreciation means that an asset will be depreciated faster than would be the case under the straight line method. Although the depreciation will be faster, the total depreciation over the life of the asset will not be greater than the total depreciation using the straight line method. As you can see, the amount of depreciation expense is declining each year. Others may choose to follow the original formula. In manual accounting or bookkeeping systems, business transactions are first recorded in a journal…hence the term journal entry.
Test your knowledge of double entry bookkeeping with our straight line method of depreciation quiz. Straight line depreciation is one method of calculating the depreciation expense on long term assets such as property, plant, and equipment. If you need a refresher course on the use of the straight line method of depreciation, take a look at our tutorial on the subject and our basics of bookkeeping tutorials. Our straight line depreciation schedule calculator is available if you need assistance in completing the quiz. For each question click on an answer to reveal whether its Right! This straight line method of depreciation quiz is one of many of our online quizzes which are used to test your knowledge of double entry bookkeeping, discover another at the links below. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries.
The straight-line depreciation method is the most popular type because it allocates the same amount of depreciation to.
As buildings, tools and equipment wear out over time, they depreciate in value. Being able to calculate depreciation is crucial for writing off the cost of expensive purchases, and for doing your taxes properly. Straight-line depreciation is a simple method for calculating how much a particular fixed asset depreciates loses value over time.
In accountancy , depreciation refers to two aspects of the same concept: first, the actual decrease of fair value of an asset , such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation in accounting statements of the original cost of the assets to periods in which the assets are used depreciation with the matching principle. Depreciation is thus the decrease in the value of assets and the method used to reallocate, or "write down" the cost of a tangible asset such as equipment over its useful life span. Businesses depreciate long-term assets for both accounting and tax purposes. The decrease in value of the asset affects the balance sheet of a business or entity, and the method of depreciating the asset, accounting-wise, affects the net income, and thus the income statement that they report. Generally, the cost is allocated as depreciation expense among the periods in which the asset is expected to be used.
Grewal Solutions for Class 11 Commerce Accountancy Chapter 11 Depreciation are provided here with simple step-by-step explanations. These solutions for Depreciation are extremely popular among Class 11 Commerce students for Accountancy Depreciation Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the T. Grewal Solutions. All T.
In accounting terms, depreciation is defined as the reduction of recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery etc.. A land is the only exception which cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue generation transaction.
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