What is depreciation?
The monetary value of an asset that decreases over time due to use
What is provision for depreciation?
The accumulated depreciation of an asset charged over a period of time
Name 2 causes of depreciation
Wear and Tear, Rust, Erosion, Corrosion, Depletion, Time Factor
What is depreciation classed as in accounting?
as an expense
What are the 2 methods of calculating depreciation?
Straight Line and Reducing Balance Method
What is the formula for straight line method?
cost - residual value / number of years useful
The reducing balance method charges a larger amount of depreciation in the early years and lesser amounts later on is this True or False?
True
A building was bought for $100,000 and is depreciated by 15% every year what is its depreciation using the straight line method?
$15,000 (15%x100000)
A machine costing $200,000 has a net book value of $50,000 and is depreciated at 10% every year what is its current depreciation value??
$5000 (50,000 x 10%)
A car that was bought for $30,000 and had depreciation of $15,000 was sold for $25,000 what value would be recorded and was it a profit or a loss on the sale
Profit of $10,000 (30000-15000) and then 25000-15000
Where is depreciation and provision for depreciation found in your final statements?
Depreciation - Income statement and provision for depreciation is found in the balance sheet
Define a bad debt
Bad debts are monies deemed irrecoverable from accounts receivable
What are provisions for bad debt?
Monies owed that are based off an estimate of accounts receivables
We sold some goods to a Lee Pong worth $1,000 however lee only paid us $300 and was never to be seen again how much bad debt is to be recorded?
$700 (1000-300)
Our total accounts receivables are $120,000 but we estimate 25% will not pay how much money do we expect to get ?
$90,000 (120,000 x 25%) = 30,000 then 120000-30000
