MYTUTOR SUBJECT ANSWERS

502 views

What is depreciation and what are the 2 methods of depreciating non-current assets?

It is a way of measuring the amount of the fall in value of NCAs over a period of time. It is perceived as a measure of the consumption of the asset over its useful economic lifetime.

It is a non-cash expense.

The two most common methods of calculating depreciation are:

Straight-line

Depreciation is calculated using the following formula:

(cost of the asset-residual value)/ nr of years an asset is expected to be used for

Reducing balance method

A fixed percentage is written off the reduced balance each year.

The reduced balance is the cost of the asset less depreciation to date.

The differences between the 2 methods are:

-Depreciation amount is the same each year when using the straight line method, reducing balance method on the contrary provides us with different money amounts each year: more than the straight line in the early years, less in the later years,

-When using the straight-line method, lower depreciation percentage is required to achieve the same residual value as with the reduced balance method,

-Straight-line method is suitable for fixed assets that are likely to be kept for the whole of their expected lives, whereas reducing balance method is best used for non-current assets which appreciate more in the early years and are not kept for the whole of their expected lives.

Maria J. A Level Accounting tutor, A Level Maths tutor, GCSE Economic...

1 year ago

Answered by Maria, an A Level Accounting tutor with MyTutor

Still stuck? Get one-to-one help from a personally interviewed subject specialist

1 SUBJECT SPECIALISTS

£20 /hr

Viktoriya L.

Degree: accounting and finance (Bachelors) - LSE University

Subjects offered: Accounting, Russian+ 5 more

Accounting
Russian
Maths
Mandarin
History
Economics
-Personal Statements-

“Hello, My name is Viktoriya. I am a first year student at the London school of Economics and Poliical science studying accounting and finance. I am passionate about maths and finance in particular and wish to convey this passion to yo...”

About the author

Maria J.

Currently unavailable: for regular students

Degree: Accounting and finance (Bachelors) - Exeter University

Subjects offered: Accounting, Maths+ 1 more

Accounting
Maths
Economics

“I'm Maria and I'm a third year Accounting and Finance student at Exeter University. I'd love to help you with anything you struggle with- in the areas of A Level Accounting, Maths and GSCE Economics.”

You may also like...

Other A Level Accounting questions

What is depreciation and what are the 2 methods of depreciating non-current assets?

what are the different types of capital expenditure appraisal?

What is a liquidity ratio?

View A Level Accounting tutors

Cookies:

We use cookies to improve our service. By continuing to use this website, we'll assume that you're OK with this. Dismiss

mtw:mercury1:status:ok