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Provision For Depreciation
Provision For Depreciation
Depreciation is systematic allocation the cost of a fixed
asset over its useful life. It is a way of matching the cost
of a fixed asset with the revenue (or other economic
benefits) it generates over its useful life.
Without depreciation accounting, the entire cost of a
fixed asset will be recognized in the year of purchase.
This will give a misleading view of the profitability of
the entity. The observation may be explained by way of
an example.
Fixed assets
Fixed assets, also known as Property,
Plant and Equipment, are tangible
assets held by an entity for the
production or supply of goods and
services, for rentals to others, or for
administrative purposes.
Provision For Depreciation
Assets which are
relatively permanent
in nature are fixed
assets. They are
used by the business
in its operation and
are not intended for
Provision For Depreciation
An asset is said to
be inadequate for
the business if
there is business
expansion and the
asset
can
no
longer fulfill the
needs
of
the
business.
It is said to be obsolete in the
introduction of new models or
inventions and the business
desires to replace the old
The cost of new one.
the fixed asset
asset with a

is allocated to the number
of
its
useful
life.
Depreciation is the portion
of the cost of the asset
which is already used or
consumed.
There are several methods
of depreciating assets.
However, we will only deal
with the simplest
method, the straight-line
method
of depreciation. The
following formula is
used to compute for
is the depreciation

is the original cost which includes the invoice price less
discount plus other costs incurred before the use of the asset
such as freight and installation
is the salvage value or scrap value; This is the amount
wherein the asset can be sold after its useful life.
is the number of estimated useful years
A delivery truck was purchased for P250,000. It
is estimated to last 0 years after which it shall
have a value of P5,000. Compute for the
depreciation.

P250,000 – P50,000

10 years
P20,000 / yr.
Provision For Depreciation
Depreciation, delivery truck P20,000
Accumulated depreciation, delivery
truck
P20,000
Depreciation is an expense account.
Accumulated depreciation is a contra asset
account. A contra asset account is an
account the balance of which is deducted from
a related asset to show the proper amount of
such asset. The asset account is not credited
to preserve the historical cost of the asset.
Instead, a contra asset account is credited
because depreciation is merely an estimate
and to preserve the original cost of the asset.
Provision For Depreciation
Provision For Depreciation
1. Fixed assets are
used by the
business in its
operation and are
intended for sale.
2. The value of fixed
assets, except land
increases as time
passes by.
3. An asset is said to be
adequate for the business
if there is business
expansion and the asset
can no longer fulfill the
needs of the business.
4. The cost of
the fixed asset
is allocated to
the number of
its useful life.
5. Depreciation is the
portion of the cost of
the asset which is
already used or
consumed.
6. The simplest
method of
depreciating assets
is called
_______________
_.
7. - 8. What is the
formula used to
compute for
depreciation?
9. – 10. A delivery van was
purchased for P500,000. It
is estimated to last 20
years after which it shall
have a value of P10,000.
Compute for the
depreciation.
Provision For Depreciation
Provision For Depreciation
Provision For Depreciation
Provision For Depreciation
Book:
Accounting Principles pg. 136-137

Sites:
http://accounting-simplified.com/financial/fixedassets/depreciation-methods/
http://accounting-simplified.com/financial/fixed-assets/
http://accounting-simplified.com/financial/fixed-assets/capital-andrevenue-expenditure.html
http://trans-par-en-cy.tk/
http://aplaceforart.tumblr.com/
TEH END.

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Provision For Depreciation

  • 3. Depreciation is systematic allocation the cost of a fixed asset over its useful life. It is a way of matching the cost of a fixed asset with the revenue (or other economic benefits) it generates over its useful life. Without depreciation accounting, the entire cost of a fixed asset will be recognized in the year of purchase. This will give a misleading view of the profitability of the entity. The observation may be explained by way of an example.
  • 4. Fixed assets Fixed assets, also known as Property, Plant and Equipment, are tangible assets held by an entity for the production or supply of goods and services, for rentals to others, or for administrative purposes.
  • 6. Assets which are relatively permanent in nature are fixed assets. They are used by the business in its operation and are not intended for
  • 8. An asset is said to be inadequate for the business if there is business expansion and the asset can no longer fulfill the needs of the business.
  • 9. It is said to be obsolete in the introduction of new models or inventions and the business desires to replace the old The cost of new one. the fixed asset asset with a is allocated to the number of its useful life. Depreciation is the portion of the cost of the asset which is already used or consumed.
  • 10. There are several methods of depreciating assets. However, we will only deal with the simplest method, the straight-line method of depreciation. The following formula is used to compute for
  • 11. is the depreciation is the original cost which includes the invoice price less discount plus other costs incurred before the use of the asset such as freight and installation is the salvage value or scrap value; This is the amount wherein the asset can be sold after its useful life. is the number of estimated useful years
  • 12. A delivery truck was purchased for P250,000. It is estimated to last 0 years after which it shall have a value of P5,000. Compute for the depreciation. P250,000 – P50,000 10 years
  • 15. Depreciation, delivery truck P20,000 Accumulated depreciation, delivery truck P20,000
  • 16. Depreciation is an expense account. Accumulated depreciation is a contra asset account. A contra asset account is an account the balance of which is deducted from a related asset to show the proper amount of such asset. The asset account is not credited to preserve the historical cost of the asset. Instead, a contra asset account is credited because depreciation is merely an estimate and to preserve the original cost of the asset.
  • 19. 1. Fixed assets are used by the business in its operation and are intended for sale.
  • 20. 2. The value of fixed assets, except land increases as time passes by.
  • 21. 3. An asset is said to be adequate for the business if there is business expansion and the asset can no longer fulfill the needs of the business.
  • 22. 4. The cost of the fixed asset is allocated to the number of its useful life.
  • 23. 5. Depreciation is the portion of the cost of the asset which is already used or consumed.
  • 24. 6. The simplest method of depreciating assets is called _______________ _.
  • 25. 7. - 8. What is the formula used to compute for depreciation?
  • 26. 9. – 10. A delivery van was purchased for P500,000. It is estimated to last 20 years after which it shall have a value of P10,000. Compute for the depreciation.
  • 31. Book: Accounting Principles pg. 136-137 Sites: http://accounting-simplified.com/financial/fixedassets/depreciation-methods/ http://accounting-simplified.com/financial/fixed-assets/ http://accounting-simplified.com/financial/fixed-assets/capital-andrevenue-expenditure.html http://trans-par-en-cy.tk/ http://aplaceforart.tumblr.com/