Depreciation refers to the reduction in value of fixed assets over their useful life. Fixed assets include property, plant, equipment, and machinery used in a business for over one year. Depreciation is calculated through depreciation expense and accumulated depreciation accounts to allocate the cost of the fixed asset over its life. There are two main methods for calculating depreciation - straight-line depreciation which uses equal amounts over the asset's life, and other methods which may use accelerated amounts over time.

1. Depreciation
By. MR SN MBULI
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2. Lesson
Outcomes
· Understand what depreciation is.
· Know the accounts involved in recording depreciation.
· Know how to journalize depreciation transactions.
· Understand the different methods for calculating
depreciation.
Know how to calculate depreciation.

3. Background Information
Assets that a company owns, which are expected to last more than one year, are
called Fixed Assets. These assets include such things as automobiles, computers,
furniture, office buildings, and equipment. These fixed assets that a company
owns have a set amount of useful life. This means that a fixed asset is not
expected to last forever, and thus its value depreciates over time.

4. Definition of depreciation
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5. Continuation
Even though the rand amount of depreciation is not paid for in
cash, the loss in value of the fixed asset must be balanced out
and this is done by using two accounts:
● Depreciation Expense
● Accumulated Depreciation

6. Cont…..
The Depreciation Expense account is used to capture
the rand value of depreciation for an accounting period.
Accumulated Depreciation is used to show a running
total of how much a fixed asset has depreciated.

7. Calculating depreciation
Depreciation is calculated in two main ways:
Straight-line depreciation: This method assumes equal amounts of
depreciation over an asset’s useful life. This translates to equal
depreciation expense amounts every period.

8. Formula to
calculate depr.
Using straight line
method
ffr

9. class example
The truck that Ted’s Trucking purchased for R15,000 is
expected to be used by the company for 8 years then
calculate depreciation.

10. solution
R15000 / 8 years = R1875 Depreciation

11. Assessment
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