The monetary value of an asset that decreases over time due to use
5
What is provision for depreciation?
The accumulated depreciation of an asset charged over a period of time
5
Name 2 causes of depreciation
Wear and Tear, Rust, Erosion, Corrosion, Depletion, Time Factor
10
What is depreciation classed as in accounting?
as an expense
5
What are the 2 methods of calculating depreciation?
Straight Line and Reducing Balance Method
10
What is the formula for straight line method?
cost - residual value / number of years useful
10
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
10
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)
10
A van was bought for $20,000 and had provision for depreciation as $5,000 what is the worth of the vehicle today?
$15,000 (20000-5000)
10
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%)
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
10
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
10
Define a bad debt
Bad debts are monies deemed irrecoverable from accounts receivable
5
What are provisions for bad debt?
Monies owed that are based off an estimate of accounts receivables
5
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)
5
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