Depreciation
Depreciation is a method of allocating the cost of assets to the years in which they are expected to be in use.
Net book value (NBV) = Written down value = Cost - accumulated depreciation
Straight line depreciation:
Depreciation = % x Cost
Reducing balance depreciation
Depreciation = % x Written down value
To record depreciation:
|
Dr | Cr | |
Depreciation expense | xx | ||
|
xx |
|
Record proceeds
Proceeds - credit to Disposal of assets account
Transfer cost
|
Dr | Cr |
Asset- cost | xx | |
Disposals | xx |
Transfer accumulated depreciation
|
Dr | Cr |
Asset- accumulated depreciation | xx | |
Disposals | xx |
The balance in the Disposals account is the gain or loss on sale to be transferred to the profit and loss account.
less Expenses | |
Depreciation | xx |
Gain on Sale of asset | (x) |
In stating fixed assets at net book value, the following concepts, conventions and desirable qualities have been applied: